Rhythm shares surge as setmelanotide shows 18.8% BMI reduction in obesity trial
Phase 3 TRANSCEND data supports potential first therapy for acquired hypothalamic obesity with March 20 FDA decision looming
Rhythm Pharmaceuticals shares rallied Monday after the company reported positive Phase 3 trial results showing its obesity drug setmelanotide achieved an 18.8% placebo-adjusted reduction in body mass index after 52 weeks of treatment, strengthening its position ahead of a critical regulatory decision later this month.
The results from the TRANSCEND trial, which included 142 patients with acquired hypothalamic obesity, demonstrated a statistically significant improvement in patients treated with setmelanotide compared with those receiving placebo (p<0.0001). Patients on the therapy experienced a mean 16.4% reduction in BMI from baseline, while the placebo group saw a 2.4% increase, according to data released by the company.
Acquired hypothalamic obesity is a rare condition caused by damage to the hypothalamus, often following treatment for brain tumors such as craniopharyngioma or astrocytoma, or due to traumatic brain injury, stroke, or inflammation. Rhythm estimates there are approximately 10,000 patients with the condition in the United States, 10,000 in Europe, and between 5,000 and 8,000 in Japan.
"These efficacy data further support setmelanotide's potential to become the first therapy approved for patients living with the hunger, reduced energy expenditure, accelerated weight gain, and obesity of acquired hypothalamic obesity," said David Meeker, Rhythm's chairman and chief executive officer.
The trial results come as the company approaches a March 20 Prescription Drug User Fee Act deadline for the U.S. Food and Drug Administration's decision on setmelanotide for acquired hypothalamic obesity. An approval would mark a significant expansion for Rhythm's flagship drug IMCIVREE, which is already approved for rare genetic obesities including Bardet-Biedl syndrome and deficiencies in POMC, PCSK1, or LEPR genes.
Analysts have grown increasingly bullish on Rhythm's prospects. Citizens raised its price target to $176 from $167 on February 27 while maintaining a "Market Outperform" rating, calling the company "one of its favorite names in the small and mid-cap space." The firm highlighted management's confidence in launching into the hypothalamic obesity market, noting the team has identified centers of excellence and established visibility into roughly one-third of identified patients.
RBC Capital initiated coverage on February 19 with an "Outperform" rating and $145 price target, emphasizing Rhythm's strong positioning for growth including next-generation assets in development. Guggenheim raised its target to $143 from $140, while Stifel maintained a Buy rating with a $131 target.
The company has been preparing commercially for the potential launch, expanding its U.S. sales force from 16 to 42 representatives focused on engaging healthcare professionals and payers. Financial results for 2025 showed momentum: full-year product revenue reached $194.8 million, a 50% increase from $130.1 million in 2024. Fourth-quarter revenue of $57.3 million represented a 12% sequential increase.
International expansion accelerated in 2025, with ex-U.S. revenue growing 40% sequentially to $18.3 million in the fourth quarter, driven by reimbursement agreements in Canadian provinces and final pricing arrangements in France. The company ended the year with $388.9 million in cash and short-term investments, providing ample runway for commercial investments and pipeline development.
Beyond the immediate opportunity in acquired hypothalamic obesity, analysts are eyeing the Prader-Willi syndrome indication as a potential long-term growth driver. Citizens assigns setmelanotide a 50% probability of success in Prader-Willi syndrome and models peak worldwide sales of more than $800 million across all indications. RBC Capital forecasts IMCIVREE could achieve over $2 billion in annual sales by 2030.
Rhythm is also advancing next-generation MC4R agonists, including LB54640 (bivamelagon), an oral therapy in Phase 2 trials licensed from LG Chem, and RM-718, a weekly injectable in Phase 1/2 development. These candidates are designed to maintain efficacy while addressing side effects such as skin hyperpigmentation associated with current setmelanotide treatment.
The broader obesity drug market has exploded in recent years, driven by GLP-1 therapies from companies like Novo Nordisk and Eli Lilly, with the global anti-obesity drug market estimated at $22.52 billion in 2026 and projected to reach $195.99 billion by 2036. However, Rhythm maintains a leadership position in the niche of rare genetic obesities, where few treatment options exist.
With the March 20 regulatory decision approaching, investors will be watching closely for any signals from the FDA on the likelihood of approval. A positive decision would validate Rhythm's strategy of expanding setmelanotide into broader patient populations while maintaining focus on rare diseases with high unmet medical need.