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.

Expansion into new indications and age groups, alongside global diagnostic trends, positions Rhythm for sustained patient base and revenue growth.
Strong intellectual property and regulatory advantages ensure high margins, pricing power, and long-term resilience against competitive threats.
Heavy losses, high spending, overreliance on a single drug, regulatory risks, and early-stage global expansion threaten revenue growth, margin improvement, and long-term value.

Catalysts

About Rhythm Pharmaceuticals

A commercial-stage biopharmaceutical company, focuses on the rare neuroendocrine diseases.What are the underlying business or industry changes driving this perspective?

Rhythm is well-positioned to benefit from the rising global prevalence and improved diagnosis rates of rare genetic obesity disorders, supported by increasing physician education and advances in genetic testing-trends that are likely to drive sustained expansion of its addressable patient base and future revenue growth.
Upcoming potential regulatory approvals and launches for setmelanotide (IMCIVREE) in new indications like acquired hypothalamic obesity and Prader-Willi syndrome, alongside expansion into younger age groups, are set to materially grow Rhythm's commercial opportunity and topline over the next several years.
Extension of intellectual property protection to 2034 for the lead asset and to 2040+ for next-generation compounds, along with orphan drug exclusivity incentives in the U.S. and EU, create a multi-year window of strong pricing power and high net margins, protecting earnings from generic/biosimilar erosion.
Accelerated regulatory pathways and strong reimbursement environments for rare disease therapies, as evidenced by early access programs and favorable payor positioning in multiple countries, enhance Rhythm's ability to rapidly scale international sales and diversify revenue streams, supporting long-term earnings resiliency.
Progress in the development and potential future approval of next-generation assets (bivamelagon, RM-718) underscores Rhythm's potential to expand its rare disease pipeline, improve product lifecycle, and increase both revenue mix and long-term profitability through more specialized, higher-margin therapies.

Rhythm Pharmaceuticals Earnings and Revenue Growth

Rhythm Pharmaceuticals Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Rhythm Pharmaceuticals's revenue will grow by 68.1% annually over the next 3 years.
Analysts assume that profit margins will increase from -120.6% today to 33.8% in 3 years time.
Analysts expect earnings to reach $250.7 million (and earnings per share of $3.33) by about September 2028, up from $-188.4 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 44.3x on those 2028 earnings, up from -35.8x today. This future PE is greater than the current PE for the US Biotechs industry at 15.5x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Rhythm Pharmaceuticals Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Rhythm Pharmaceuticals continues to report operating losses despite increased revenues, and ongoing high R&D and SG&A expenses suggest persistent negative net earnings and potential future dilutive capital raises, which can pressure shareholder value and limit net margin improvement.
The company's heavy reliance on its lead asset, setmelanotide, introduces substantial risk; any safety, efficacy, or competitive challenges (e.g., from new drugs or generics post-2032/2034 patent expiration) could rapidly erode revenues and future earnings streams.
Rhythm's international expansion is still in early stages with limited commercial infrastructure; unpredictable named patient sales, reliance on country-specific reimbursement and early access programs, and variable launch timelines outside core markets may constrain revenue scaling and impact medium-term profitability.
Rising regulatory scrutiny, potential global drug pricing reforms, and movement toward value-based healthcare, particularly affecting high-cost rare disease therapies, could compress Rhythm's pricing power, threaten reimbursement terms, and put sustained revenue and long-term net margins at risk.
Emerging competition from alternative biotechnologies (e.g., gene & RNA therapies), uncertainty in advancing pipeline programs (successful Phase II/III transition rates), and the risk of shifting payer/provider preferences away from current peptide-based modalities may divert demand and reduce future earnings potential.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $112.5 for Rhythm Pharmaceuticals based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $135.0, and the most bearish reporting a price target of just $95.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $742.1 million, earnings will come to $250.7 million, and it would be trading on a PE ratio of 44.3x, assuming you use a discount rate of 6.8%.
Given the current share price of $101.69, the analyst price target of $112.5 is 9.6% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Boost Rhythm Pharmaceuticals Outlook Amid Setmelanotide Progress and Revised Valuation Metrics