Terns Pharmaceuticals, Inc. Annual Report - How They Did This Year

I’ve put together this guide to help you understand how Terns Pharmaceuticals performed this year. The company’s story has changed significantly since their last report.

1. The Big News: A Potential Acquisition

The most important update is that Terns is being acquired. On March 24, 2026, the company signed a deal to be bought by Merck Sharp & Dohme LLC, a subsidiary of Merck & Co., Inc. Merck offered to buy all shares for $53.00 each in cash. This values the company at approximately $6.1 billion.

2. What does this mean for you?

If you own shares, this deal is now the main factor driving the company’s value. The sale depends on standard closing conditions, such as getting enough shareholders to agree and clearing antitrust reviews. Until the deal closes, Terns continues its work as a clinical-stage biotech firm. They remain focused on developing drugs like TERN-701 for leukemia, though their independence is now limited by the merger agreement.

3. Financial performance and health

Terns does not yet sell products, so they have no sales revenue. They continue to spend cash to fund research and clinical trials. For the year ending December 31, 2025, the company reported a loss of about $142 million. Most of this went toward $118 million in research costs. By the end of 2025, the company held $385 million in cash and short-term investments. This was enough to fund operations into 2027 before the buyout was announced.

4. Major risks to consider

While an acquisition sounds like a win, there are real risks:

• The Deal Might Not Close: There is no guarantee the merger will finish. If regulators block the deal or shareholders don't approve it, the stock price could drop significantly. It would likely return to its lower price from before the announcement.
• Business Disruption: The buyout process can distract management and scientists. This could slow down drug research or lead to the loss of key talent.
• Clinical Uncertainty: The company’s value relies on the success of its drug pipeline, especially TERN-701. If upcoming clinical results for TERN-701 or other drugs fail, it could threaten the deal or violate the merger agreement.
• Termination Fees: If Terns backs out to accept a better offer from someone else, they may have to pay a fee to Merck. This would drain the company’s cash.

5. What happens next?

The company is moving toward a tender offer where you will be asked to sell your shares to Merck. Keep a close eye on announcements regarding the deal’s closing conditions, especially antitrust approvals. The company will file a document called a Schedule 14D-9. This will include the board’s formal recommendation and their financial advisor’s opinion on the deal.

In short, Terns is no longer just a research company; it is now an acquisition target. Your investment decision now depends on whether you believe this deal will successfully cross the finish line.