Rhythm Pharmaceuticals formed a flat base after pulling back from a record high in early September. Rhythm Pharma develops treatments for rare neuroendocrine diseases and is Thursday's pick for IBD 50 Growth Stocks To Watch.
The biotech stock has gained around 80% so far this year and has outperformed 90% of stocks that Investor's Business Daily tracks. It was up 0.5% during Thursday's trade.
Rhythm Pharma has one product approved by the U.S. Food and Drug Administration – Imcivree – and several other treatments in clinical trials.
Its injectable medicine Imcivree is the first and only FDA-approved treatment used to target obesity and hunger in people with a rare genetic disorder called Bardet-Biedl syndrome. It is also used for several other genetic diseases causing obesity.
Rhythm Pharma is developing a drug it calls Bivamelagon, which it hopes will be used to treat acquired hypothalamic obesity. The rare condition causes constant hunger, leading to overeating and severe weight gain.
On July 9, Rhythm said its Bivamelagon Phase 2 trial met its primary endpoint, with statistically significant reductions in body mass index, or BMI, in patients with acquired hypothalamic obesity.
"This quarter, we presented strong Phase 2 and Phase 3 data that demonstrated the potential efficacy of both bivamelagon and setmelanotide, respectively, as treatment options for patients with acquired hypothalamic obesity," David Meeker, chief executive of Rhythm, said in its second-quarter earning report.
It is also researching a treatment for congenital hyperinsulinism where the pancreas produces too much insulin, leading to dangerously low blood sugar levels.
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Rhythm Pharma Stock Forms New Base
The stock shot up more than 36% on July 9 in heavy volume on the positive Phase 2 trial news on its bivamelagon treatment.
Rhythm Pharma climbed to an all-time high of 106.52 on Sept. 2, and formed a three-weeks-tight pattern, with the high as the entry point.
The stock pulled back and tested its 10-week moving average as it formed a second-stage flat base with a 106.52 buy point, according to MarketSurge pattern recognition. Shares seem to have a resistance level around 100.
Its IBD Accumulation/Distribution Rating of B- indicates more institutional buying than selling over the last 13 weeks. And its 1.3 up/down volume ratio shows positive demand over the last 50 days.
Mutual funds own 63% of shares and have added Rhythm Pharma for eight straight quarters, according to IBD Stock Checkup. Two IBD Mutual Fund Index names own shares including T. Rowe Price New Horizons Fund.
Weight Loss Drug Sales Rise
The company is not yet profitable but its bottom line is showing signs of improvement. It posted a second-quarter loss of 75 cents per share on Aug. 5, which was in line with FactSet estimates. Revenue of $48.5 million topped views.
Analysts project third-quarter sales will climb 53%, then 31% and 78% over the following two quarters.
Wall Street sees a third-quarter loss of 71 cents per share, then improvement over the following three quarters to a loss of 61 cents per share. And full-year 2025 forecasts call for a loss of $2.92 per share, followed by a smaller loss of $1.92 per share in 2026.
Rhythm Pharma stock is in the Medical-Biomed/Biotech group, which ranks a high No. 8 out of the 197 industries that IBD tracks.
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