Rhythm Pharmaceuticals: Unlocking Value as Key Lock-Up Expiry and Setmelanotide Regulatory Milestones Loom

Rhythm Pharmaceuticals (NASDAQ: RYTM) stands at a pivotal crossroads in late 2025, with a confluence of near-term catalysts poised to shape its trajectory. The company's regulatory submissions for setmelanotide in acquired hypothalamic obesity, anticipated in Q3 2025, combined with robust Phase 2 data for bivamelagon and a recent $189.2 million capital raise, create a compelling narrative for investors. However, the August 9, 2025, lock-up expiry—a date when insider selling restrictions lift—introduces volatility risks. This article evaluates how Rhythm's strategic milestones may offset short-term liquidity pressures and unlock long-term value.

Regulatory Catalysts: Setmelanotide's Expansion into Acquired Hypothalamic Obesity

Rhythm's lead product, IMCIVREE (setmelanotide), is already approved for genetic obesity disorders such as Bardet-Biedl syndrome and POMC deficiency. The company is now targeting acquired hypothalamic obesity (AHO), a rare condition marked by severe, treatment-resistant weight gain due to hypothalamic dysfunction. Regulatory submissions for this indication are on track for Q3 2025, including a supplemental New Drug Application (sNDA) to the FDA and a Type II variation to the EMA.

The clinical evidence supporting these submissions is formidable. The Phase 3 TRANSCEND trial demonstrated a 19.8% placebo-adjusted BMI reduction in AHO patients, while real-world data from French early-access programs showed a 23.0% mean BMI reduction over nine months. These results align with Rhythm's broader strategy to position setmelanotide as a first-line therapy for MC4R pathway disorders, a market with limited alternatives.

Bivamelagon: A Dual-Edged Sword for Rhythm's Pipeline

The Phase 2 trial of bivamelagon, an oral MC4R agonist, delivered statistically significant BMI reductions across all dose cohorts. The 600mg group saw a 9.3% BMI drop (p=0.0004), while the 400mg cohort achieved 7.7% (p=0.0002). These outcomes, consistent with setmelanotide's efficacy in AHO, underscore bivamelagon's potential as a complementary or alternative therapy. The drug's oral formulation could address patient adherence challenges associated with injectable setmelanotide, broadening Rhythm's market reach.

Lock-Up Expiry: A Test of Investor Resilience

The August 9 lock-up expiry could trigger selling pressure as insiders and early shareholders offload shares. Historical biotech IPO data suggests an average 1–3% post-expiry price drop due to increased supply. However, Rhythm's recent $189.2 million capital raise and strong Q2 2025 revenue growth ($48.5 million, up 29% sequentially) provide a buffer against liquidity concerns.

The company's balance sheet, bolstered by $291 million in cash and equivalents as of June 30, 2025, positions it to fund operations for at least 24 months. This financial fortitude, coupled with a projected $285–$315 million in Non-GAAP operating expenses for 2025, signals disciplined capital allocation. Analysts at HC Wainwright have raised their price target to $100 from $80, reflecting confidence in Rhythm's ability to navigate the expiry without derailing its growth story.

Market Dynamics: Catalysts vs. Catalysts

While the lock-up expiry introduces near-term volatility, Rhythm's regulatory and clinical milestones act as counterweights. The sNDA for AHO could unlock a new revenue stream, with AHO affecting an estimated 10,000–20,000 patients in the U.S. alone. Bivamelagon's Phase 3 initiation in 2026 further extends the company's pipeline, potentially creating a dual-product engine for growth.

Investment Thesis: Balancing Risks and Rewards

For investors, Rhythm presents a high-conviction opportunity. The company's focus on rare, high-unmet-need diseases—AHO, BBS, and POMC deficiency—positions it to capture premium pricing. However, risks remain: regulatory delays, competition from emerging MC4R agonists, and the inherent volatility of biotech stocks.

The lock-up expiry is a critical test. If Rhythm's share price dips post-expiry, it could present a buying opportunity for long-term investors, particularly if the company maintains its trajectory toward Q3 regulatory submissions and bivamelagon's Phase 3 launch. Conversely, a sharp decline without a clear catalyst may signal underlying concerns about the company's execution.

Conclusion: A Catalyst-Driven Play

Rhythm Pharmaceuticals is navigating a complex but promising inflection point. The lock-up expiry on August 9, 2025, will test investor confidence, but the company's regulatory and clinical milestones—setmelanotide's AHO submissions and bivamelagon's Phase 2 success—provide a strong foundation for resilience. For investors with a medium-term horizon, Rhythm offers a compelling case: a rare-disease innovator with a robust pipeline, financial discipline, and a clear path to expanding its therapeutic footprint.

As the biotech sector continues to reward innovation in niche markets, Rhythm's ability to execute on its Q3 2025 regulatory goals and advance bivamelagon will be key indicators of its long-term potential.