There is nothing wrong with re-termed. (Although, as was mentioned in some comments, it might be better to say renamed instead.)
However, what struck me as odd about the sentence is there is no explicit mention of the metric being named anything in the first place. In order to re- something, it must be done at least once to start with.
As such, I would find this more natural:
Li et al.  proposed to compute relative entropy with Formula (7) and [termed it] a similarity metric. This metric was later re-termed “divergence”.
It's possible that it's this point the reviewer was raising.
Applying the suggestion for using renamed instead, and tweaking something else at the end which isn't directly relevant, I might also rephrase the sentence in this way:
Li et al.  proposed to compute relative entropy with Formula (7) and named it a "similarity metric." This was later renamed a “divergence metric.”