Terns Pharmaceuticals (TERN 1.10%) is a pharmaceutical company that specializes in multiple treatments for a liver condition called non-alcoholic steatohepatitis, or NASH. Based in Foster City, Calif., since its founding in 2016, Terns is currently working on three drugs to treat NASH via different mechanisms of action.
And while it's new to the market, having had its initial public offering just last month, there are reasons to keep an eye on this business. From its IPO price of $17 per share, the stock has reached more than $21 as of this writing. According to recent developments outlined in its February investor presentation, there is reason to believe that the stock could go higher.
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What is NASH?
NASH is a form of fat buildup in the liver that can lead to hepatitis, scarring, or liver cancer if left untreated. According to the National Institute of Diabetes and Digestive and Kidney Diseases, approximately 3% to 12% of the U.S. population has NASH, and the disease is underdiagnosed.
While no medications are currently approved by the U.S. Food and Drug Administration (FDA) for treating NASH, clinical trials are ongoing. In fact, NASH is such a serious disease that in October 2019, the FDA gave a fast-track designation to TERN-101, which is done to expedite the fulfillment of an unmet medical need. The total potential market for NASH looks hazy but large, with estimates ranging from $7 billion to $35 billion among experts.
TERN-101
The company's first NASH drug is currently in phase 2 trials to treat liver symptoms including inflammation, steatosis (abnormal fat retention), and fibrosis. While traditional drugs of its kind such as Intercept Pharmaceuticals' obeticholic acid, Phenex Pharmaceuticals' and Gilead Sciences' Cilofexor, and Pfizer's and Novartis's Tropifexor have caused safety concerns regarding excessive itching, TERN-101 boasts a modification that limits local effects and maximizes therapeutic benefits.
In phase 1 trials, results of which were reported in February 2020, TERN-101 achieved all three of its targets compared with placebo -- with no reported excessive itching. Results from the current phase 2a trials and further data will be released in third-quarter 2021.
TERN-201
The second drug in the bunch, TERN-201, is a vascular adhesion protein-1 (VAP-1) inhibitor. These drugs have been used in potential treatments for NASH before, but they have traditionally been notorious for causing significant interactions with another common medication, monoamine oxidase inhibitors.
TERN-201 is currently undergoing phase 1 trials, and greater than 20% reductions were observed in an enzyme that's usually indicative of ongoing liver damage. The data also showed significant reductions in CK-18, a biomarker for colorectal cancer. A single dose of TERN-201 can inhibit VAP-1 for at least seven days after dosing. Full biomarker data will be available in the second half of 2021.
TERN-501
The final NASH drug in the pipeline, TERN-501, is a thyroid hormone receptor-beta agonist currently in phase 1 trials. Again, similar drugs have been troublesome in the past (specifically, toxic to the heart and stomach), but TERN-501 has had an isopropyl group removed such that only the liver is targeted. That means a much lower risk of toxicity compared to other, less selective agents such as Madrigal Pharmaceuticals' Resmetirom. Selectivity is important in maximizing treatment outcomes and minimizing side effects. Phase 1 data in human subjects is expected by the second half of 2021.
The verdict
With multiple specially designed drugs targeting the same disease, Terns is well positioned to find success with at least one approach. It is an early-stage company, so risks do remain. But given that there's no U.S. FDA-approved competition in the NASH treatment realm, healthcare investors with tolerance for risk should consider initiating a small position in this up-and-coming pharmaceutical company.
