Jefferies has launched coverage of Rhythm Pharmaceuticals (RYTM) with a bullish stance, assigning a Buy rating and setting an $80 price target, as the company positions itself as a significant player in the obesity therapeutics market.
Phase III Trial Prospects and Market Potential
According to Jefferies analyst Dennis Ding, the company's ongoing Phase III trials for hypothalamic obesity treatment show promising potential, with an estimated 80-85% probability of success. This positive outlook suggests a significant expansion opportunity, potentially driving peak sales from $500 million to approximately $3 billion.
Patent Timeline Considerations
While the near-term outlook appears promising, Ding notes some timing constraints with the company's first-generation drug setmelanotide. The 2032 patent expiration presents a challenge in maximizing revenue potential, potentially limiting the drug's commercial runway.
Second-Generation Pipeline Shows Promise
The most compelling aspect of Rhythm's portfolio, according to Jefferies, lies in its second-generation hypothalamic obesity drugs. These newer compounds are expected to offer enhanced therapeutic profiles and, crucially, benefit from extended patent protection into the 2040s. The firm suggests that successful Phase III results from the first-generation setmelanotide would significantly de-risk these second-generation candidates.
Strategic Market Position
The analysis highlights Rhythm's strategic approach to the obesity market, focusing on both immediate opportunities with current-generation treatments while developing improved future therapies. This dual-track strategy positions the company to potentially capture both near-term market share and long-term growth opportunities in the expanding obesity therapeutics sector.
