Rhythm Pharmaceuticals Delivers Mixed Q1 Results, But Clinical Momentum and Pipeline Progress Offer Long-Term Hope

Rhythm Pharmaceuticals (NASDAQ: RYTM) reported its first quarter 2025 financial results, revealing a net loss of $0.81 per share—wider than the FactSet consensus estimate of a $0.73 loss. While the miss on the bottom line may raise short-term concerns, the quarter was marked by robust revenue growth, critical clinical advancements, and a solid financial runway that positions Rhythm to capitalize on its expanding pipeline.

Revenue Growth Amid Regulatory Headwinds

The company’s flagship product, IMCIVREE® (setmelanotide), drove a 45% year-over-year surge in net product revenue to $37.7 million in Q1 2025. However, U.S. sales dipped sequentially by $7.2 million to $24.5 million due to a drop in specialty pharmacy inventory, offsetting gains from direct patient dispensed product. International revenue, by contrast, rose $3.2 million sequentially to $13.2 million, reflecting stronger adoption in global markets.

The termination of Rhythm’s 2021 licensing agreement with RareStone Group Ltd. led to a $5.0 million reduction in license revenue, but the move also reacquired commercial rights to setmelanotide in China, Hong Kong, and Macau—a strategically important step for future growth.

Clinical Progress Fuels Regulatory Optimism

The quarter’s standout achievement was the positive top-line data from the TRANSCEND Phase 3 trial for acquired hypothalamic obesity (HO). The trial met its primary endpoint, demonstrating a -19.8% placebo-adjusted BMI reduction at 52 weeks across all age groups. Notably, pediatric, adolescent, and adult cohorts all showed statistically significant results (p<0.0001). Safety data remained consistent with earlier trials, with 80% of patients achieving ≥5% BMI reduction. Rhythm now plans to submit supplemental New Drug Applications (sNDA) in the U.S. and a Type II variation in the EU by Q3 2025—a milestone that could expand setmelanotide’s addressable market.

The company also advanced its pipeline:
- Bivamelagon (oral MC4R agonist): Phase 2 data in acquired HO expected in Q3 2025.
- RM-718 (weekly MC4R agonist): Phase 1 enrollment targeted for late 2025.
- Prader-Willi Syndrome (PWS) trial: First patients dosed in April 2025, with 26-week data expected in late 2025.

Financial Outlook and Risks

Rhythm ended Q1 with $314.5 million in cash, down slightly from $320.6 million at year-end 2024. Management reaffirmed its financial runway through 2027, with 2025 non-GAAP operating expenses projected between $285 million and $315 million. While R&D spending dropped to $37.0 million (vs. $128.7 million in Q1 2024) due to one-time costs in 2024, SG&A rose to $39.1 million as the company scales commercial operations.

Conclusion: A Tale of Two Stories

Rhythm faces a delicate balancing act. In the near term, the wider-than-expected loss and sequential U.S. revenue softness may pressure its stock, especially if investors grow impatient for top-line acceleration. However, the clinical momentum—particularly the TRANSCEND results—suggests the company is on track to unlock substantial value.

The U.S. market for acquired HO alone represents ~100,000 potential patients, and the upcoming regulatory submissions could unlock $500+ million in peak sales for setmelanotide, according to management estimates. Add to that the potential for bivamelagon (an oral alternative) and RM-718 (a weekly formulation), and Rhythm’s pipeline begins to look transformative for a company with a $1.5 billion market cap.

While execution risks remain—regulatory delays, competition, and reimbursement hurdles—the data from Q1 underscores Rhythm’s scientific prowess. Investors focused on long-term catalysts, such as the Q3 regulatory filings and Phase 2 readouts, may view the current stock price as a buying opportunity. For now, Rhythm’s story is one of patience and persistence, but the data suggests the payoff could be worth the wait.