1 New Weight Loss Drug Stock to Buy Now for $1,000 and Hold for 5 Years or More

If you have $1,000 that you don’t really need for an immediate expense or you’re not saving for a big ticket purchase, putting that amount to work by investing can be a solid option. With competition in the weight loss drug market sharply increased and only showing signs of further acceleration, now is a smart time for investors to position themselves in the most credible contenders for tomorrow’s winners.

But here’s why: Investing in tomorrow’s winners may involve a higher level of risk than investing in today’s proven winners.

On this note, Terns Pharmaceuticals (TERN -5.84%) is a biotech developing weight-loss therapies worth investing $1,000 in today, provided you’re patient enough to stick with it for at least a few years so it can (hopefully) get its first product approved for sale. That’s why it’s a compelling choice for biotech stocks.

Terns report encouraging results

On September 9, Terns reported the results of a Phase 1 clinical trial investigating whether its orally administered GLP-1 candidate for weight loss, TERN-601, is safe to use with its intended once-daily dosing schedule.

According to the results of that trial, the odds are in his favor. In just 28 days, patients treated with the highest tested dose of the candidate experienced an average weight loss of 4.9% of their mass, on average, over what was experienced by patients taking a placebo. This is a competitive amount of weight loss compared to drugs on the market and in development.

But more importantly, TERN-601 appeared to be quite tolerable for patients.

There were no patients in any of the dose cohorts tested who chose to discontinue study participation or reduce their dose as a result of the side effects they experienced. This creates a stark contrast to other investigations of drugs in the same class, which typically see high rates of patients discontinuing study participation or treatment with approved drugs because of how uncomfortable they are.

In the lowest dose group, 50% of patients reported mild side effects, while in the placebo group, 55% of patients reported the same. While the two higher doses tested appear to cause milder and also more moderate side effects than placebo, not surprisingly, none of these patients dropped their planned doses or stopped their planned doses is very encouraging.

These results point to a bright future

Although Terns’ results are early stage and will therefore be subject to further study in Phase 2, which is set to begin in 2025, there are still some takeaways that support the investment case for the stock.

First, starlings may have the most tolerable anti-obesity drug candidate right now. Therefore, it is plausible that a low dose of TERN-601 administered daily could be a highly effective maintenance therapy for patients who have already lost a large amount of weight or for patients who could lose a few pounds but would otherwise avoid more intensive therapy with harsher side effects. Both markets are likely to be huge, especially as weight loss drugs proliferate more widely and as prescribing guidelines change in light of available drugs approved for sale.

The second conclusion is that TERN-601 has no major safety or efficacy issues arising from its format as a pill, rather than as a dose, like most other drugs in its class. Since Terns is not investigating an injectable formulation of its candidate anyway, this is particularly good news because it means that research and development (R&D) resources are not being used inefficiently by testing two different formulations. Plus, it could eventually mean the therapy could be cheaper than an injection.

Don’t discount these risks

As favorable as Terns’ latest data appears to be, there are still some risks you should be aware of.

As of Q2, Terns has $225 million in cash, cash equivalents and marketable securities, which management is confident will last through 2026. Given that its net loss was only $22.7 million dollars over the same period, this estimate is reasonable. But, they may need to issue new shares or take on debt when funds start to run out.

There is also a risk that the phase 2 trial of TERN-601, which will last 12 weeks instead of 28 days, will catch problems that the phase 1 study did not have time for. A particularly devastating issue, aside from unforeseen safety concerns, would be whether the candidate’s ability to cause weight loss has significantly established after the first month of treatment. But there’s no reason to expect that right now, so don’t let that deter you from making an investment.

Given that the candidate is still in the early stages of development for its two clinical programs, there are plenty of catalysts ahead, but it will be years before there is any real revenue, if ever. As Terns develops drugs other than TERN-601, it will also be exposed to both downside and upside, which is why a $1,000 investment is a reasonable size for a starting position. If you’re impatient, this might not be the right choice for you, as biotech will need at least a few years before it has a chance to get anything approved for sale.