Terns Pharmaceuticals (TERN) Valuation Check After Strong Recent Share Price Run And CML Narrative Shift

Terns Pharmaceuticals (TERN) has drawn attention after recent trading, with the stock closing at US$40.92. For investors, the clinical stage focus on oncology and obesity raises questions about how current pricing reflects trial progress and cash needs.

See our latest analysis for Terns Pharmaceuticals.

While the share price slipped around 1% on the day to US$40.92, it remains on a strong short term run, with a 16.61% 1 month share price return and a 45.57% 3 month share price return, alongside a very large 1 year total shareholder return that hints at shifting expectations around trial progress and future funding needs.

If Terns’ sharp rerating has you thinking about where else high growth stories might be emerging, our screener of 29 healthcare AI stocks is a straightforward way to find other ideas in related areas of the market.

With revenue still at US$0 and a US$94.435 million loss, yet a share price that has already moved sharply, the real question is whether Terns is still mispriced or if markets are already accounting for future growth.

Most Popular Narrative: 58.5% Undervalued

At a last close of $40.92 versus a narrative fair value of $98.57, some investors are clearly thinking the current price does not fully reflect Terns Pharmaceuticals’ CML opportunity in TERN-701.

TERN-701: A Clinically Superior Drug Poised for Market Capture
The foundation of the $98.57 target is the compelling efficacy and safety seen in the Phase 1 CARDINAL trial:
• Global CML Market Size (Peak): The estimated size remains stable at $10 Billion.
• Peak Annual Sales (TERN-701): This is the core driver of the higher valuation. Based on achieving a 30% global market share (up from the previous 25% conservative estimate), the projected Peak Annual Sales for TERN-701 increase to $4.5 Billion. This capture is driven by its anticipated dominance in 2L/3L CML and its eventual entry into the massive 1L market.
• Probability of Success (PoS): The clinical data has significantly de-risked the program. The PoS is increased from 75% to a more confident 80%, reflecting the high likelihood of successful Phase 3 trials and regulatory approval.
• Net Present Value (NPV) Factor: The robust clinical de-risking and the clear blockbuster status ($1B in sales) warrant a higher valuation multiple. The Program Value is calculated using a 5.0x Peak Sales Multiple (up from 3 to 5).

Read the complete narrative.

If you want to see what is sitting behind that $98.57 figure, the narrative according to AverageSven leans heavily on long term CML sales, ambitious market share in multiple treatment lines, and a profitability profile that aims to justify a premium valuation multiple over time. Result: Fair Value of $98.57 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, this depends on successful CML trial outcomes and regulatory approvals. In addition, the company still has US$0 revenue and a US$94.435 million loss to fund.

Find out about the key risks to this Terns Pharmaceuticals narrative.

Another View: Rich Pricing On Traditional Metrics

If you step away from the narrative of fair value and look at a simple P/B comparison instead, Terns trades at 15.7x book value versus 2.3x for the wider US Pharmaceuticals group and 3.6x for peers. That is a wide gap, and without revenue or profits today, it raises the question of how much future success is already baked into the price.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If this mix of confidence and concern around Terns leaves you unsure, it is worth checking the numbers yourself and forming your own view quickly, including weighing up 1 key reward and 5 important warning signs.

Looking for more investment ideas?

If Terns has caught your eye but you want a broader watchlist, it makes sense to line up a few other candidates before the next round of news hits.

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com