Investment in Talking Medicines CLNs

Tern’s new investment increases risk in a struggling asset with no near-term payoff likely.

What the company is saying

Tern Plc is positioning itself as a proactive investor in early-stage IoT technology, highlighting its commitment to supporting portfolio companies like Talking Medicines Limited. The company wants investors to believe that this new issuance of approximately £270,000 in convertible loan notes (CLNs) is a strategic move that will drive future value, emphasizing the potential for Talking Medicines to disrupt the large, over US$23bn healthcare advertising market. The announcement frames the transaction as a win-win: Tern cancels £87,000 of debt owed and adds £48,000 in new funds, resulting in a CLN position that is 'approximately double' the combined value of the cancelled debt and new cash—though this claim is not numerically substantiated. The language is upbeat and forward-looking, with management asserting that the investment 'will assist their continued growth trajectory' and 'translate into value for Tern shareholders in due course.' However, the company is careful to downplay the significance of Talking Medicines’ current financials, explicitly stating that the reported net liabilities of £1.4 million and annual loss of £0.51 million are 'not considered representative' of the business’s prospects, without offering alternative figures or evidence. The announcement is light on operational detail, omitting any discussion of revenue, cash flow, or specific milestones for Talking Medicines. The tone is confident but lacks hard evidence, relying on broad market opportunity references and generic growth language. Among notable individuals, Jane McCracken is identified as Interim Non-Executive Chair, but there is no indication of outside institutional investors or high-profile backers participating in this transaction. This narrative fits Tern’s broader strategy of presenting itself as a hands-on, value-adding investor, but the messaging has shifted to a more defensive posture regarding portfolio company performance, emphasizing future potential over current results.

What the data suggests

The disclosed numbers show that Tern has increased its exposure to Talking Medicines through the acquisition of £270,000 in new CLNs, funded by cancelling £87,000 of debt and injecting £48,000 in new cash. This brings Tern’s total convertible loan note holding in Talking Medicines to approximately £0.79 million, while its equity stake remains at 23.8%. As of 30 June 2025, the combined book value of Tern’s equity and CLN holdings in Talking Medicines is £2.1 million (unaudited). Talking Medicines itself is in a weak financial position, with unaudited net liabilities of £1.4 million and an annual loss of £0.51 million for the year ended 31 December 2024. There is no data on revenue, cash flow, or any improvement in financial performance, making it impossible to assess whether the business is stabilizing or deteriorating. The claim that the new CLNs provide 'approximately double' the exposure of the combined cancelled debt and new funds is not supported by the numbers: £270,000 is exactly double £135,000, but the announcement does not provide a calculation or context for this ratio. Prior targets or guidance are not referenced, and there is no evidence that any operational or financial milestones have been met. The financial disclosures are detailed for the transaction itself but lack the broader context needed for a full assessment—key metrics are missing, and there is no period-over-period comparison. An independent analyst would conclude that Tern is increasing its risk in a loss-making, highly leveraged asset, with no clear evidence of turnaround or near-term value creation.

Analysis

The announcement is primarily factual, detailing the issuance of new convertible loan notes and the resulting changes in Tern's exposure to Talking Medicines. Most claims are realised and supported by numerical data, such as principal values, interest rates, and equity holdings. However, the tone is notably positive, especially in statements about future growth and value creation, which are not substantiated by current financial performance—Talking Medicines remains loss-making with significant net liabilities. The forward-looking statements are aspirational and lack concrete evidence or near-term catalysts, as conversion of the CLNs depends on an exit or a substantial fundraising event that may not occur before 2029. There is no indication of a large capital outlay relative to Tern's size, and the investment is modest. The gap between narrative and evidence is moderate: while the transaction is real, the implied future benefits are speculative and not quantified.

Risk flags

• ●Operational risk is high, as Talking Medicines is loss-making (£0.51 million annual loss) and has net liabilities of £1.4 million, raising questions about its ability to continue as a going concern without further funding.
• ●Financial risk is significant: Tern is increasing its exposure to a company with no evidence of revenue growth or profitability, and the only disclosed financials are negative.
• ●Disclosure risk is present, as the announcement omits key metrics such as revenue, cash flow, and any operational milestones, making it difficult for investors to assess the true health or trajectory of Talking Medicines.
• ●Pattern-based risk arises from the company’s defensive language—management explicitly dismisses the relevance of current financials without providing alternative data, a red flag for transparency and credibility.
• ●Timeline/execution risk is acute: the CLNs only convert on an exit or a £2 million fundraising, neither of which is assured before the 2029 maturity date, so investors face a long wait with no interim catalysts.
• ●Forward-looking risk is substantial, as the majority of the value proposition is based on future events and market potential ('revolutionising' a US$23bn market) rather than current performance.
• ●Capital intensity is flagged by the need for ongoing funding—Tern’s new investment is funded from a recent Open Offer, suggesting reliance on external capital to support portfolio companies.
• ●Geographic concentration risk exists, as both Tern and Talking Medicines are based in the United Kingdom, potentially exposing investors to local market and regulatory risks without geographic diversification.

Bottom line

For investors, this announcement means Tern is doubling down on a struggling portfolio company, increasing its financial exposure through new convertible loan notes while Talking Medicines remains deeply loss-making and highly leveraged. The narrative of future growth and value creation is not matched by any evidence of operational progress or financial improvement—there are no disclosed revenues, no signs of reduced losses, and no mention of commercial traction. The only path to value realization is a significant exit or fundraising event by Talking Medicines, which is speculative and could be years away, with the CLNs maturing in late 2029 if nothing materializes. No notable institutional investors or external validation is present; the only named individual of significance is Jane McCracken as Interim Non-Executive Chair, which does not materially change the risk profile. To alter this assessment, Tern would need to disclose concrete evidence of business improvement at Talking Medicines—such as revenue growth, reduced losses, or signed commercial agreements. Investors should watch for any updates on Talking Medicines’ operational performance, fundraising progress, or evidence of commercial adoption in the next reporting period. Given the lack of near-term catalysts and the speculative nature of the forward-looking claims, this announcement is a weak signal for immediate investment action and is best monitored rather than acted upon. The single most important takeaway is that Tern’s increased investment is a high-risk, long-term bet on a turnaround that currently lacks supporting evidence.

Announcement summary

Tern Plc (AIM:TERN), an investment company specialising in early-stage IoT technology businesses, announced it has been issued approximately £270,000 of new unsecured convertible loan notes (CLNs) by Talking Medicines Limited. The CLNs were issued in exchange for Tern cancelling approximately £87,000 of existing amounts owed by Talking Medicines and investing a further approximately £48,000 of new funds. The CLNs carry a 10% per annum interest rate and are convertible on an exit or fundraising of at least £2 million by Talking Medicines, at a 20% discount to the exit or fundraising price. If neither event occurs, the CLNs mature on 21 November 2029. As of 30 June 2025, Tern's equity and convertible loan note holding in Talking Medicines had a total unaudited book value of £2.1 million, and following the new CLNs, Tern's total convertible loan note holding increases to approximately £0.79 million while its equity holding remains at approximately 23.8%. Talking Medicines had unaudited net liabilities of approximately £1.4 million and an unaudited loss of approximately £0.51 million for the year ended 31 December 2024. Tern states that these historic figures are not considered representative of Talking Medicines' current business and prospects.

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