Terns Pharmaceuticals Is "Attractively Priced" Despite Pressure From Eli Lilly's Obesity Data, Analyst Says

Tuesday, Terns Pharmaceuticals Inc TERN shares lost more than 25% of their value due to investor pressure it faced after Eli Lilly And Co LLY announced data from retatrutide that was published in the New England Journal of Medicine (NEJM).

At 24 weeks, retatrutide (1 mg, 4 mg, 8 mg, or 12 mg) met the primary endpoint for the efficacy estimand in overweight participants without diabetes, demonstrating a mean weight reduction of up to 17.5%. 

Retatrutide demonstrated a mean weight reduction of up to 24.2% at the end of the 48-week treatment duration. 

Lilly will investigate retatrutide for obesity in the TRIUMPH phase 3 clinical program, comprising four clinical trials.

JMP Securities looking across Tuesday's performance of companies in the space — Madrigal Pharmaceuticals Inc MDGL -13%, Viking Therapeutics Inc VKTX -17%, TERN -25% — says that THR-ß companies seem to bear the brunt of the competitive read-across from LLY's retatrutide results at ADA.

JMP writes that at a $400 million market cap, which is 1/3 of VKTX and only slightly greater than its NPV estimate for TERN's cancer program (TERN-701) alone, TERN shares as attractively priced ahead of 3Q23 key NASH data. It reiterates its Market Outperform rating and a price target of $17.

Also Read: Terns Pharma Has 35% Upside According To This Analyst, NASH Asset To Drive Valuation.

It says that retatrutide directly affects the liver, and a NAFLD patient analysis showed liver fat reductions reaching 80+% at 8 &12 mg, with all patients having ≥30% reductions.

Additionally, Merck Co & Inc's MRK efinopegdutide data (GLP-1/glucagon) showed a 73% reduction in liver fat.

The analyst says Eli Lilly's and Merck's data does point to additional potential NASH competition, but NASH is a continuum wherein several mechanisms of action can be used. It also says that Eli Lilly still has to define plans in NASH.

Price Action: TERN shares are up 11.50% at $8.20 on the last check Wednesday.