Terns Pharmaceuticals (TERN) has been back in focus after the release of new Phase 1 data for its chronic myeloid leukemia candidate TERN-701, repeated conference exposure, and a large equity raise intended to fund pivotal trials.

At a recent share price of US$36.60, Terns has seen short term volatility, including a 1 day share price return of about 1% decline and a 1 month share price return of 12% decline. This is set against a very large 1 year total shareholder return that suggests momentum built sharply around the TERN-701 data and subsequent funding and conference activity.

If Terns’ story around oncology and obesity is on your radar, this could be a good moment to widen your research and scan other healthcare stocks that might fit your watchlist.

With Terns still loss making, a value score of 1, and the share price well below the average analyst target, the key question is simple: is this story misunderstood by the market or already pricing in the bullish growth case?

Price to Book of 14x: Is it justified?

With Terns Pharmaceuticals last closing at US$36.60, the current 14x P/B ratio sits far above both peers and the wider US pharmaceuticals group. This points to the market assigning a rich valuation to its equity story.

P/B compares the company’s market value to its net assets on the balance sheet. A higher multiple typically reflects strong expectations for future value creation beyond current book equity. For a clinical stage, loss making business with US$0 revenue and a net loss of US$94.4m, such a premium places significant emphasis on the potential of the oncology and obesity pipeline rather than on current financials.

Relative to the US pharmaceuticals industry average P/B of 2.6x and the peer average of 4.5x, Terns’ 14x multiple is described as expensive in the data. That is a very large gap and suggests the current price already embeds expectations well above what is implied for many comparable names.

Result: Price to book of 14x (OVERVALUED)

However, you also have to weigh the US$94.4m net loss and zero revenue, as well as the possibility that key trials or future funding plans may not play out as hoped.

Build Your Own Terns Pharmaceuticals Narrative

If this view does not align with how you see Terns, you can review the numbers yourself and shape a personalized thesis in just a few minutes: 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 you are weighing up Terns today, do not stop there. Use this moment to widen your toolkit and stress test your thinking across other themes and sectors.

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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.