Stifel upgraded Rhythm Pharmaceuticals (NASDAQ:RYTM) to “buy” from “hold” but maintained its price target at $34, saying the stock is at an attractive entry point ahead of near-term Phase 3 results. The stock closed at $20.66 on July 11.
Analyst Derek Archila writes that his original “hold” thesis was predicated on the lack of stock moving catalysts and the shares seemed expensive. “However, our view of setmelanotide’s efficacy and tolerability in POMC (pro-opiomelanocortin) and LEPR (lepin receptor) obesities, overall, had been positive,” he said.
At current levels, he suggests the risk/reward is more favorable, given setmelanotide’s positive Phase 2 data in POMC and LEPR patients where it demonstrated a meaningful benefit on weight loss and hunger scores.
“We believe both Phase 3 studies (data expected in the third quarter of 2019) will be positive and think that in our ‘homerun’ scenario, the stock could move to the low $40 range,” Mr. Archila said.
In addition, a yearend update from Rhythm on its patient identification efforts and commercial strategy for POMC/LEPR remains an unappreciated catalyst,” he added.
