BofA lifts Rhythm Pharmaceuticals stock rating to Buy, target to $63

On Monday, BofA Securities analyst Tazeen Ahmad raised the stock rating for Rhythm Pharmaceuticals (NASDAQ:RYTM) from Neutral to Buy and increased the price target to $63 from the previous $60. The upgrade comes as the stock, currently trading at $52.40, has experienced a significant 11.36% decline over the past week, according to InvestingPro data. This upgrade comes on the heels of a recent decline in the company's stock price, which Ahmad believes presents an opportunity for investors considering the company's pipeline and commercial programs.

Rhythm Pharmaceuticals has recently reported positive Phase 3 topline results for setmelanotide (set™) in treating acquired hypothalamic obesity (HO). The data met the firm's expectations and reinforced a positive outlook for the drug's program. The company's strong commercial potential is reflected in its impressive 89.73% gross profit margin and 68.06% revenue growth over the last twelve months. InvestingPro analysis reveals 8 additional key metrics and insights available for subscribers. Management at Rhythm Pharmaceuticals has indicated plans to file a supplemental New Drug Application (sNDA) in the third quarter of 2025 and anticipates a priority review due to the drug's Breakthrough Therapy Designation (BTD) status.

Despite recent changes in FDA personnel, BofA Securities maintains a 70% likelihood of success (LoS) for the program. Analysts await further details on how these changes might affect drug review timelines. Meanwhile, the need for a treatment for acquired HO remains high, as there are no approved therapies currently, and off-label GLP-1 treatments show limited efficacy.

The patient population in the United States, estimated to be between 5,000 and 10,000, is generally well-identified and integrated into the healthcare system, largely due to the disease often being the result of surgical tumor resection. Key Opinion Leaders (KOLs) have expressed a strong demand for new treatment options for their patients, which supports the potential for a swift review process.

However, BofA Securities suggests a cautious approach until there is more regulatory clarity, which could potentially provide further upside to their current estimates. The firm's analysts will be looking for additional information on how recent FDA personnel changes may impact the review timelines for new drug applications. With a beta of 2.32 and trading above its InvestingPro Fair Value, investors should note the stock's volatility while considering its strong liquidity position, evidenced by a healthy current ratio of 3.24. Discover comprehensive analysis and more insights in the exclusive Pro Research Report, available to InvestingPro subscribers.

In other recent news, Rhythm Pharmaceuticals has reported promising results from its Phase 3 TRANSCEND trial, which evaluated setmelanotide for treating acquired hypothalamic obesity. The trial met its primary endpoint, showing a significant placebo-adjusted reduction in body mass index (BMI) of about 19.8% in patients receiving the treatment. This development has led Stifel analysts to maintain a Buy rating for the company, with a price target of $78, citing the results as exceeding Wall Street expectations. Additionally, Citizens JMP has reiterated a Market Outperform rating with an $81 price target, supported by insights from a leading endocrinologist who sees potential in setmelanotide as a standard treatment for hypothalamic obesity.

Rhythm Pharmaceuticals plans to submit a supplemental New Drug Application to the FDA and a Type II variation request to the European Medicines Agency in the third quarter of 2025. Furthermore, H.C. Wainwright has reaffirmed its Buy rating and a $70 target, highlighting the recent orphan drug designation for setmelanotide in Japan. The company is conducting a global Phase 3 trial for setmelanotide, with topline data expected in the upcoming quarter. These developments underscore Rhythm Pharmaceuticals' ongoing efforts to address the unmet medical need for treatments targeting acquired hypothalamic obesity.

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