RYTM: March FDA Obesity Decision Will Drive Next Phase Of Share Upside

Analysts have edged their average price target for Rhythm Pharmaceuticals slightly higher to about $127 from roughly $126, reflecting confidence that strong Imcivree and bivamelagon data, along with anticipated hypothalamic obesity label expansion, can support continued growth. However, recent gains and a limited near term catalyst slate are tempering enthusiasm.

Analyst Commentary

Analyst views on Rhythm remain broadly constructive, but with a growing split between those focused on long term growth and those concerned that near term upside is already reflected in the share price.

Bullish Takeaways

• Bullish analysts highlight that strong Imcivree and daily oral bivamelagon data in hypothalamic obesity, along with continued commercial execution, support a thesis of durable revenue growth rather than a one off inflection.
• Multiple recent price target increases in the $120s to low $140s range underscore confidence that hypothalamic obesity label expansion can materially expand the addressable market and justify a premium growth multiple.
• Specialists in obesity and rare endocrine disorders view setmelanotide as likely to be broadly effective, even in patients with limited hypothalamic function, reinforcing expectations for robust uptake once the FDA decision is in hand.
• Commercial experience in Bardet Biedl syndrome is seen as a strategic advantage that should shorten the launch curve in hypothalamic obesity and reduce execution risk relative to a typical first time launch.

Bearish Takeaways

• Bearish analysts argue that the stock’s sharp year to date appreciation already discounts a positive hypothalamic obesity label expansion, limiting further rerating potential on the December PDUFA outcome.
• Some view the upcoming Prader Willi readout as offering limited catalytic value for the equity story, reducing the likelihood of incremental upside surprises in the near term.
• As expectations around label expansion and launch execution rise, there is concern that any delay, more modest adoption curve, or reimbursement friction could trigger multiple compression from elevated levels.

What's in the News

• The U.S. FDA extended the review period for Rhythm’s sNDA for IMCIVREE in acquired hypothalamic obesity by three months, moving the PDUFA goal date from December 20, 2025 to March 20, 2026 (Key Developments).
• The extension followed the FDA’s request for additional sensitivity analyses of Phase 3 clinical efficacy data, with no new data required and no concerns raised about safety or manufacturing of setmelanotide (Key Developments).
• The FDA classified Rhythm’s submission of additional analyses as a major amendment, providing the agency more time to complete its review while signaling continued focus on efficacy assessment (Key Developments).

Valuation Changes

• Fair Value: Risen slightly, with the average fair value estimate moving to approximately $127 from about $126.31.
• Discount Rate: Increased marginally to roughly 7.03% from about 7.01%, reflecting a modest uptick in perceived risk or return requirements.
• Revenue Growth: Edged higher, with long term annual growth assumptions moving to around 70.69% from approximately 70.62%.
• Net Profit Margin: Eased slightly, with projected margins now at about 35.09% versus roughly 35.14% previously.
• Future P/E: Ticked up modestly to about 39.9x from roughly 39.7x, which implies a small increase in the multiple investors may be willing to pay for future earnings.