Terns Pharmaceuticals (TERN) is back in focus after revising its agreement with Hansoh. The company has shifted to an exclusive, sublicensable, royalty-bearing, perpetual license for TERN-701 outside Greater China, alongside supportive interim Phase 1 data.

The agreement revision and positive interim Phase 1 data come after a sharp 90 day share price return of 102.42% and a very large 1 year total shareholder return. However, the 30 day share price return of 8.20% suggests some recent cooling in that momentum.

If this kind of clinical news has caught your attention, it could be a good moment to broaden your watchlist with other healthcare stocks that are moving on pipeline updates and trial results.

With Terns trading at US$36.82 after a huge 1 year total return and an analyst price target of US$58.13, investors may ask whether there is still mispricing or if the market is already factoring in years of future growth.

Preferred Price-to-Book of 14.1x: Is it justified?

Terns Pharmaceuticals is trading at $36.82 with a P/B ratio of 14.1x, which is meaningfully higher than both its industry and peer averages.

The P/B ratio compares a company’s market value to its book value, which is essentially net assets on the balance sheet. For an early stage, clinical biopharma name that currently reports no revenue and a net loss of $94.435m, investors often use P/B as a shorthand for how much they are paying for the asset base and pipeline potential rather than current earnings power.

Here, Terns appears expensive relative to these benchmarks. Its 14.1x P/B is well above the US Pharmaceuticals industry average of 2.5x and also above the peer average of 3.2x. This suggests the market is assigning a much richer valuation to Terns than to typical sector names with similar balance sheets. That gap indicates investors are willing to pay a premium for Terns’ oncology and obesity programs, despite the company being unprofitable and forecast to remain loss making over the next three years.

Result: Price-to-book of 14.1x (OVERVALUED)

However, the clinical pipeline is still early stage, and any setbacks in trials or further net losses could quickly challenge the premium P/B that investors are currently paying.

Build Your Own Terns Pharmaceuticals Narrative

If you see the data differently or simply want to test your own view, you can build a full Terns Pharmaceuticals narrative yourself in just a few minutes using Do it your way.

A great starting point for your Terns Pharmaceuticals research is our analysis highlighting 1 key reward and 5 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If Terns has you thinking about what else might be worth your attention, now is the time to widen your search before the next opportunities move further away.

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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.