Jefferies starts Rhythm Pharmaceuticals with Buy on obesity potential

Jefferies analyst Dennis Ding initiated coverage of Rhythm Pharmaceuticals (RYTM) with a Buy rating and $80 price target The firm sees an 80%-85% probability of success for the company’s Phase III hypothalamic obesity data, which it notes can expand the base business from $500M in peak sales towards $3B. However, expectations are already high and there’s not enough time to fully capitalize and get to peak revenue if the intellectual property expires in 2032, the analyst tells investors in a research note. Jefferies thinks “way more upside” comes from Rhythm’s second generation hypothalamic obesity drugs with better profiles and intellectual property out to 2040s. These should be de-risked if the first generation setmelanotide works in Phase III, the firm says.