Rhythm Pharmaceuticals is a Risky Investment Which Could Pay Off Well

Photo of author
Written By Kris Enyinnaya

Rhythm Pharmaceuticals has shown notable stock performance, appreciating by 68% since last August, despite initial concerns about its lead drug, Imcivree. The drug is indicated for obesity caused by rare genetic disorders such as POMC, PCSK1, and LEPR deficiencies.

However, given the drug’s limited application, potential side effects, and the challenges in managing genetic tests to confirm suitability, is Rhythm Pharmaceuticals still a hot investment prospect?

Strategic Acquisitions and Pipeline Expansion

Credits: DepositPhotos

In January, Rhythm Pharmaceuticals bolstered its pipeline by acquiring global licensing rights for LB54640, a Phase 2 drug targeting leptin receptor deficiency and proopiomelanocortin, for $60 million upfront, an additional $40 million within 18 months of closing, and possibly another $205 million based on clinical and regulatory milestones.

Shortly after, Rhythm announced that Phase 3 hypothalamic obesity data is expected in the first half of 2025. This rare disorder, often resulting from hypothalamic damage due to brain tumors, trauma, or surgeries, affects an estimated under 10,000 individuals in the EU and US.

Phase 2 data showed Imcivree decreased mean BMI by 14.5% at 16 weeks and 25.5% at one year for patients with 12 months of data. This indication could potentially double the total addressable population for Imcivree.

Meanwhile, the Phase 3 EMANATE trial continues to enroll patients to broaden Imcivree’s application to include heterozygous mutations in POMC, PCSK1, and LEPR, as well as other genetic conditions like SRC1 and SH2B1 deficiencies.

A successful trial could expand the total addressable population to over 50,000. However, demonstrating efficacy in heterozygous mutations, which typically have less severe phenotypes, will require robust evidence and a clear-cut benefit-risk profile.

Financial Performance and Health

In February, Rhythm reported Q4 earnings with $24.2 million in revenue, missing analysts’ estimates by $1.18 million. R&D and SG&A costs were $29.892 million and $32.374 million, respectively, resulting in a net loss of $41.6 million for the quarter.

For Q1, revenue slightly increased to $25.97 million, still missing estimates by $0.93 million. After a one-time $92.4 million cost for the LB54640 acquisition, R&D costs rose to $36.265 million, and SG&A costs increased to $34.382 million. The net loss for Q1 was $141.372 million ($48.97 million excluding acquisition costs).

As of March 31, Rhythm had $53.428 million in cash and $147.771 million in short-term investments. With a current ratio over 4, the company can meet its short-term obligations. Additionally, Rhythm raised $150 million in April through convertible preferred stock financing, extending its cash runway into 2026.

Risk/Reward Analysis and Investment Consideration

Credits: DepositPhotos

Imcivree’s current indications are unlikely to significantly impact revenue. Thus, Rhythm’s future hinges on the drug’s ability to expand its patient population.

The chances of expanding Imcivree’s label to include hypothalamic obesity are strong, given the drug’s mechanism of action and the limited efficacy of existing treatments. This expansion could notably increase revenue potential.

The EMANATE trial, targeting a broader and less understood population, poses greater uncertainty. Demonstrating efficacy will require robust data, particularly for less severe and newer genetic conditions like SRC1 and SH2B1 deficiencies.

Rhythm Pharmaceuticals presents a high-risk, high-reward investment. While there is considerable operational and financial risk, the potential for significant returns is evident.


You should read and understand this disclaimer in its entirety before joining or viewing the website or email/blog list of SmallCapStocks.com (the “Publisher”). The information (collectively the “Advertisement”) disseminated by email, text or other method by the Publisher including this publication is a paid commercial advertisement and should not be relied upon for making an investment decision or any other purpose. The Publisher is engaged in the business of marketing and advertising the securities of publicly traded companies in exchange for compensation. The track record, gains, upside, and/or losses mentioned in the Advertisement, if any, should not be considered as true or accurate or be the basis for an investment. The Publisher does not verify the accuracy or completeness of any information included in the Advertisement. While the Publisher does not charge for the SMS service, standard carrier message and data rates may apply. To unsubscribe from receiving promotional text messages to your phone sent via an autodialer, using your phone reply to the sender’s phone number with the word STOP or HELP for help.

The Advertisement is not a solicitation or recommendation to buy securities of the advertised company. An offer to buy or sell securities can be made only by a disclosure document that complies with applicable securities laws and only in the states or other jurisdictions in which the security is eligible for sale. The Advertisement is not a disclosure document. The Advertisement is only a favorable snapshot of unverified information about the advertised company. An investor considering purchasing the securities, should always do so only with the assistance of his legal, tax and investment advisors. Investors should review with his or her investment advisor, tax advisor or attorney, if and to the extent available, any information concerning a potential investment at the web sites of the U.S. Securities and Exchange Commission (the "SEC") at www.sec.gov; the Financial Industry Regulatory Authority (the "FINRA") at www.FINRA.org, and relevant State Securities Administrator website and the OTC Markets website at www.otcmarkets.com. The Publisher cautions investors to read the SEC advisory to investors concerning Internet Stock Fraud at www.sec.gov/consumer/cyberfr.htm, as well as related information published by the FINRA on how to invest carefully. Investors are responsible for verifying all information in the Advertisement. As an advertiser, we do not verify any information we publish. The Advertisement should not be considered true or complete.

The Publisher does not offer investment advice or analysis, and the Publisher further urges you to consult your own independent tax, business, financial and investment advisors concerning any investment you make in securities particularly those quoted on the OTC Markets. Investing in securities is highly speculative and carries an extremely high degree of risk. You could lose your entire investment if you invest in any company mentioned in the Advertisement. You acknowledge that we are not an investment advisory service, a broker-dealer or an investment adviser and we are not qualified to act as such. You acknowledge that you will consult with your own independent, tax, financial and/or legal advisers regarding any decisions as to any company mentioned here. We have not determined if the Advertisement is accurate, correct or truthful. The Advertisement is compiled from publicly available information, which include, but are not limited to, no cost online research, magazines, newspapers, reports filed with the SEC or information furnished by way of press releases. Because all information relied upon by us in preparing an advertisement about an issuer comes from a public source, it is not reliable, and you should not assume it is accurate or complete.

By your subscription to our profiles, the viewing of this profile and/or use of our website, you have agreed and acknowledged the terms of our full disclaimer and privacy policy which can be viewed at the following link: www.SmallCapStocks.com/Disclaimer and www.SmallCapStocks.com/Privacy-Policy

By accepting the Advertisement, you agree and acknowledge that any hyperlinks to the website of (1) a client company, (2) the party issuing or preparing the information for the company, or (3) other information contained in the Advertisement is provided only for your reference and convenience. The advertiser is not responsible for the accuracy or reliability of these external sites, nor is it responsible for the content, opinions, products or other materials on external sites or information sources. If you use, act upon or make decisions in reliance on information contained in any disseminated report/release or any hyperlink, you do so at your own risk and agree to hold us, our officers, directors, shareholders, affiliates and agents harmless. You acknowledge that you are not relying on the Publisher, and we are not liable for, any actions taken by you based on any information contained in any disseminated email or hyperlink.