Terns Pharmaceuticals (TERN): A High-Conviction Biotech Play with a Best-in-Class CML Candidate

Terns Pharmaceuticals (TERN) has emerged as a compelling high-conviction biotech investment, driven by the exceptional clinical performance of its lead candidate, TERN-701, an allosteric BCR::ABL1 inhibitor for chronic myeloid leukemia (CML). With late-stage catalysts on the horizon and a differentiated therapeutic profile, the company is poised to disrupt the CML market dominated by Novartis' Scemblix (dasatinib). This analysis explores TERN-701's clinical progress, competitive advantages, and market potential, underscoring why TERN merits a prominent role in a risk-on biotech portfolio.

Late-Stage Clinical Catalysts: TERN-701's Path to Pivotal Trials

Terns' Phase I CARDINAL trial has delivered groundbreaking results for TERN-701, positioning it as a best-in-class candidate for CML. As of September 2025, the trial enrolled 63 patients, with 38 efficacy-evaluable individuals achieving a 64% major molecular response (MMR) rate by 24 weeks. At doses ≥320mg QD, this rate climbed to 75%, with 100% of responders maintaining MMR according to the company's latest data. These outcomes, presented at the 2025 ASH Annual Meeting, have solidified TERN-701's potential as a frontline and second-line therapy for CML, particularly in patients resistant to existing tyrosine kinase inhibitors (TKIs) like asciminib and ponatinib as reported in the ASH presentation.

The safety profile further strengthens its appeal: no dose-limiting toxicities were observed, and Grade 3 or higher adverse events occurred in only 32% of patients, a stark contrast to the hypertension and pancreatitis risks associated with Scemblix as highlighted in Biopharma Dive. Terns has selected 320mg and 500mg QD as recommended Phase 2 doses, with plans to initiate a Phase 3 trial in treatment-experienced CML patients by late 2026 as announced in investor updates. This timeline represents a critical catalyst for the stock, as positive Phase 3 data could fast-track regulatory approval and commercialization.

Competitive Differentiation: Outperforming Scemblix and Emerging Therapies

Terns' competitive edge lies in TERN-701's superior efficacy and tolerability. In cross-trial comparisons, TERN-701's 75% MMR rate far exceeds Scemblix's 25% MMR rate in similar patient populations as reported in industry analysis. Even against emerging candidates like Enliven Therapeutics' ELVN-001, which achieved a 32% MMR rate in 24 weeks, TERN-701's performance is unmatched according to pipeline data. Analysts attribute this to its novel allosteric mechanism, which targets a distinct site on the BCR::ABL protein, minimizing off-target effects and enabling long-term use without significant toxicity as detailed in Biopharma Dive.

This differentiation is not lost on investors. William Blair analysts have labeled TERN-701's profile "unprecedented," projecting peak sales of $3.4 billion-a 50% increase from prior estimates-as the drug captures market share from Scemblix and other TKIs as reported in biospace analysis. The CML market, valued at over $4 billion annually, remains underserved by therapies for refractory patients, a segment where TERN-701's data suggest it could achieve rapid adoption as noted in industry reports.

Strategic Focus and Market Positioning

Terns has further bolstered its investment case by reallocating resources to prioritize TERN-701. In 2025, the company halted development of its metabolic disease programs, including TERN-601, after suboptimal Phase 2 obesity trial results as detailed in the company's investor release. This strategic pivot underscores management's commitment to maximizing value from its oncology franchise. With a streamlined pipeline and a clear path to commercialization, TERN's market capitalization has expanded in tandem with growing analyst confidence.

However, risks remain. Delays in Phase 3 trial initiation or unexpected safety signals could temper expectations. Additionally, while TERN-701's data are robust, the absence of head-to-head trials against Scemblix means real-world performance will be closely scrutinized. That said, the drug's mechanism and early outcomes suggest it is well-positioned to become a standard of care, particularly in second-line settings.

Conclusion: A High-Conviction Play in Oncology Innovation

Terns Pharmaceuticals represents a rare combination of clinical differentiation, late-stage momentum, and a clear path to commercialization. TERN-701's ability to outperform existing CML therapies, coupled with a favorable safety profile, positions it as a potential blockbuster. For investors seeking exposure to a high-impact oncology asset with near-term catalysts, TERN offers an attractive risk-reward profile. As the company advances toward Phase 3 trials and regulatory discussions, the stock is likely to remain a focal point for those betting on the next wave of precision cancer therapies.