Stifel launched coverage of Rhythm Pharmaceuticals (NASDAQ:RYTM) with a “hold” rating and $36 price target, saying the risk/reward for the shares is pretty balanced at current levels. The stock closed at $30.77 on Sept. 12.
Analyst Derek Archila writes that there is a high degree of success is already factored into the stock for setmelanotide, a MC4 receptor agonist, for all four ultra-rare obesity disorders it is being developed for based on robust proof-of- concept data.
“It is difficult to make a strong call on higher prevalence of these ultra-rare disorders and whether this will translate into meaningful commercial success, particularly when we believe the Street is already forecasting well north of $1-billion in peak sales for setmelanotide,” he added.
In addition, he said it is hard to advocate for a takeout premium as “we don’t view Rhythm as a platform company” and its other pipeline asset is in the preclinical stage.
“While we like the story and believe setmelanotide will work in Phase 3 studies, we would prefer to wait for a better entry point,” he added.
