Terns' oral weight-loss drug shows promise in early study, shares jump

By Mariam Sunny

(Reuters) -Terns Pharmaceuticals said its oral obesity drug reduced weight by an average of 4.9% in an early-stage study, joining drugmakers vying for a share of the lucrative weight-loss treatment market and sending its shares up 27% on Monday.

The experimental treatment, TERN-601, is part of the second generation of weight-loss drugs, which aim to offer a more convenient alternative to injections, under development by companies including Pfizer and Roche.

Market leaders Wegovy from Novo Nordisk and Zepbound from Eli Lilly are both injectable drugs. The companies are also developing pills, the market for which is expected to hit $150 billion by the early 2030s, according to some analysts.

"We're very pleased with the totality of the data... seeing in particular, no red flags," Mizuho analyst Graig Suvannavejh said about Terns' drug.

The company's stock was trading at $9.93, and including Monday's gains, was up more than 50% this year.

Terns said it plans to advance the drug into mid-stage trials next year.

"We have cash to cover next steps from this program," CFO Mark Vignola said on a conference call.

Separately, Terns announced it has commenced a proposed stock offering of $125 million of its shares. It intends to use the proceeds to fund development of TERN-601, among other experimental treatments.

TERN-601, which belongs to the GLP-1 class like Wegovy and Zepbound, met the main goals of safety and tolerability in the study, the company said.

A 740-milligram dosage of the once-daily drug led to an average weight loss of 4.9%, when adjusted for placebo rates, after four weeks of treatment.

BMO Capital Markets analyst Etzer Darout said the once-daily dose is important for the drug's competitive profile.

In July, Roche's experimental once-daily pill led to a placebo-adjusted average weight loss of 6.1% within four weeks in obese patients without diabetes in an early-stage study.

(Reporting by Mariam Sunny and Puyaan Singh in Bengaluru; Editing by Shilpi Majumdar, Sriraj Kalluvila and Shinjini Ganguli)