QS Research · Michael Burry's Scion Capital analyst template · 2006
RHYTHM PHARMACEUTICALS, INC. (RYTM)
As of 2026-11-09 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case none · downside -32% · upside +30%
Ryhthm is not a deep-value long: at 26.95x EV/Sales on $280.7M TTM revenue, the market already capitalizes the acquired-HO launch and pipeline, while TTM EBIT is -$187.2M and free cash flow is -$83.2M. Using the company's own 26.95x multiple, the base case is today's $112.28, the downside is $76.93 (-31.5%) if revenue reverts to FY2025's $189.8M, and the upside is $146.35 (+30.3%) if Q3 2026's $92.1M quarterly revenue annualizes. The rule is not met for a long because base is not +30%, and not for a short because upside is above +25%, so this is a watch. Dated catalysts such as ObesityWeek 2026 and the planned bivamelagon pivotal Phase 3 could create a mispricing, but the balance sheet and cash burn do not yet offer a margin of safety.
Key numbers
- Share price: $112.28
- Market cap: $7.78B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $280.7M
- Price / book: 88.49x
The 15 boxes
- ✓ 1. Long-form business notes
Rhythm is a single-product, commercial-stage biopharma: IMCIVREE (setmelanotide) revenue compounded from nil in FY2020 to $189.8M in FY2025, but the company remains loss-making at the operating line (-$192.0M FY2025) and burned $115.7M of operating cash in FY2025. Between the FY2020 and FY2025 business descriptions the story has shifted from a pre-launch POMC/PCSK1/LEPR-only company with ~90 employees and ~37,500 sequencing samples to a global company approved in more than 25 countries, 414 employees, ~120,000 samples, and a near-term acquired-hypothalamic-obesity launch (FDA PDUFA March 20, 2026) plus bivamelagon and RM-718 behind it. The value driver is therefore the hypothalamic-obesity label expansion and pipeline, not the current approved-indication base, which epidemiology pegs at only ~4,600-7,500 U.S. patients.
- ✓ 2. Competitive advantage
RYTM has a narrow, license- and regulatory-based moat: the 10-K states IMCIVREE is the only approved treatment for weight management in BBS or POMC/PCSK1/LEPR deficiencies, and it is covered by an exclusive worldwide Ipsen license plus orphan designations. The financial record does not yet show a durable cost or scale advantage: FY2021-FY2025 revenue rose from $3.2M to $189.8M, but operating income was negative every year (-$192.0M in FY2025) and operating cash flow was -$115.7M in FY2025. Competition is intense, with multiple early-stage MC4R agonist programs and GLP-1/GIP incretins in general obesity, though the 10-K says incretins do not specifically target the MC4R pathway defect.
- ✓ 3. 10-Q takeaways
Q3 2026 net product revenue was $92.1 million versus $51.3 million in Q3 2025 (+80%), and up 29% sequentially from Q2 2026, led by the U.S. acquired-HO launch ($67.5 million U.S., 73% of product revenue, +32% QoQ) with ex-U.S. adding $24.7 million (+22% QoQ). Nine-month 2026 product revenue was $223.5 million versus $137.5 million. Costs scaled with the launch: Q3 2026 cost of sales $12.2 million (+121% YoY), R&D $52.5 million (+14%), SG&A $66.8 million (+27%), leaving a $39.3 million operating loss and $41.4 million net loss. Cash was $320.9 million at September 30, 2026 (before the $250 million term-loan draw and $70 million LG Chem payment), and FY2026 guidance is $360-380 million of non-GAAP operating expenses.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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