Rhythm Pharmaceuticals: A Post-Lock-Up Opportunity with Strong Catalysts in Q3 2025 and Beyond

Rhythm Pharmaceuticals (NASDAQ: RYTM) is navigating a pivotal inflection point as its lock-up period expires on August 9, 2025. For investors, this event raises questions about near-term liquidity risks and the stock's momentum. However, a closer look at RYTM's recent capital raise, robust cash reserves, and a pipeline of high-impact catalysts in Q3 2025 and beyond suggests the company is well-positioned to capitalize on its strategic advantages. Let's break down why RYTM could be a compelling play for those willing to stomach short-term volatility for long-term gains.

Liquidity Strengthened by a Timely Capital Raise

Rhythm's recent upsized public offering in July 2025, which raised $189.2 million, has fortified its balance sheet. Combined with existing cash, cash equivalents, and short-term investments of $291.0 million as of June 30, 2025, the company now has a war chest of approximately $480 million. This liquidity buffer ensures RYTM can fund operations for at least 24 months, even as it ramps up spending on R&D and commercialization.

The capital raise also provides flexibility to navigate the post-lock-up expiry period. While the expiration of the lock-up agreement on August 9 could temporarily increase share supply, RYTM's strong cash position and disciplined expense management—projected at $285–315 million in Non-GAAP operating expenses for 2025—should mitigate downward pressure on the stock. Investors should watch for any short-term volatility but remain focused on the company's long-term runway.

Growth Catalysts in Q3 2025 and Beyond

RYTM's near-term momentum hinges on three key catalysts:
1. Regulatory Submissions for Acquired Hypothalamic Obesity:
Rhythm is on track to submit a supplemental New Drug Application (sNDA) to the FDA and a Type II variation to the EMA for setmelanotide in acquired hypothalamic obesity by Q3 2025. Approval would unlock a new revenue stream for IMCIVREE, which already generated $48.5 million in Q2 2025—a 29% sequential increase. The global commercial launch of this indication could drive sales growth of 30–40% in 2026.

1. Phase 3 Trial Readouts for Bivamelagon:
   The Phase 2 results for bivamelagon—a next-gen MC4R agonist—showed a 9.3% BMI reduction in the highest-dose cohort, validating its potential as a blockbuster. RYTM plans to initiate a pivotal Phase 3 trial in 2026, pending regulatory alignment. Success here could position bivamelagon as a follow-on therapy to IMCIVREE, expanding RYTM's market share in the rare obesity space.

2. Pipeline Advancement for RM-718:
   The weekly-administered RM-718 is entering Part C of its Phase 1 trial, with enrollment expected to conclude in Q1 2026. A favorable safety profile and efficacy data could differentiate RYTM's portfolio and reduce patient burden, enhancing commercial appeal.

Financial Discipline and Path to Profitability

Despite being in a loss-making position, RYTM's debt-to-equity ratio of 82% is manageable given its cash reserves and revenue growth. The company's management team, led by CEO David Meeker, has demonstrated a knack for capital allocation, leveraging equity raises and in-licensing deals to fund high-impact projects. Analysts project RYTM will turn a profit of $79 million in 2027, assuming it maintains a 67% annual growth rate. While ambitious, this trajectory is achievable given the current momentum in its pipeline and commercial operations.

Risks to Consider

The lock-up expiry could lead to short-term selling pressure, especially if insiders or early investors offload shares. Additionally, regulatory delays or underwhelming trial data for bivamelagon or RM-718 could dampen investor sentiment. However, RYTM's diversified pipeline and strong cash position provide a margin of safety.

Investment Takeaway

Rhythm Pharmaceuticals is a high-conviction play for investors who can stomach near-term volatility. The post-lock-up period may test the stock's resilience, but the company's robust liquidity, regulatory milestones, and pipeline advancements in Q3 2025 and beyond offer a clear path to value creation. For those with a 12–18 month time horizon, RYTM's combination of near-term catalysts and long-term growth potential makes it a compelling addition to a biotech portfolio.

In conclusion, RYTM's strategic positioning post-lock-up expiry, bolstered by a recent capital raise and a pipeline of high-impact catalysts, suggests the stock has the momentum to outperform in the coming quarters. While risks exist, the company's disciplined approach to capital allocation and its focus on unmet medical needs in rare diseases position it as a standout in the biotech sector.