Rhythm Pharmaceuticals targets rare obesity as Druckenmiller buys $7.6B biotech

Stanley Druckenmiller's Duquesne Family Office took a stake in Rhythm Pharmaceuticals, a biotech targeting rare obesity that Eli Lilly and Novo Nordisk don't address.

Rhythm Pharmaceuticals has quadrupled its addressable market to roughly 28,000 patients with a new FDA approval for acquired hypothalamic obesity, a niche that Eli Lilly and Novo Nordisk's weight-loss franchises do not target.

The company's Q2 revenue rose 47 percent year over year to $71.3 million, and Duquesne Family Office — the investment firm founded by billionaire Stanley Druckenmiller — initiated a position in the stock during the quarter, according to regulatory filings.

Imcivree, Rhythm's only approved product, was first cleared in the U.S. in 2020 for chronic weight management in patients with POMC deficiency, a rare genetic condition that causes constant hunger. The drug gained a second indication in 2022 for Bardet-Biedl syndrome, another rare genetic disorder linked to weight gain. Together, those indications covered up to 7,500 patients in the U.S. and Europe. The March approval for acquired hypothalamic obesity — weight gain caused by damage to the brain region controlling hunger — expanded the target population to between 25,000 and 28,000 patients across the U.S., Europe, and Japan.

The company is also advancing bivamegalon, an oral candidate for acquired HO, and reported positive phase 2 data in Prader-Willi syndrome, a genetic condition affecting 20,000 patients in the U.S. and roughly 400,000 worldwide. Rhythm shares trade at a market capitalization of $7.6 billion, with a 52-week range of $74.50 to $122.20.

A niche the GLP-1 giants won't touch

Eli Lilly's Zepbound and Novo Nordisk's Wegovy target common obesity, a market measured in the tens of millions of patients and generating billions in annual sales. Rhythm's focus on rare genetic and acquired forms of obesity means its total addressable population is a fraction of that — but it also means the company faces minimal competition from the pharmaceutical giants whose pipelines are built around GLP-1 receptor agonists.

The trade-off is scale. Rhythm's $71.3 million in Q2 revenue is small next to the billions generated by Lilly and Novo's weight-loss franchises. But the company's gross margin of 88.91 percent reflects the pricing power available in rare disease markets, where specialty drugs command premium reimbursement. Imcivree is administered via subcutaneous injection, and the company is developing bivamegalon as an oral alternative for patients who avoid needles — a strategy that mirrors the oral GLP-1 launches from Lilly and Novo.

Pipeline expansion and Druckenmiller's small bet

The next potential expansion is Prader-Willi syndrome, where Rhythm reported positive phase 2 results in the condition, which causes constant hunger and obesity. An approval there would add 20,000 U.S. patients and roughly 400,000 worldwide to the addressable population, though the company does not expect regulatory clearance for several years.

Druckenmiller's position is small — less than 1 percent of Duquesne Family Office's portfolio — but the billionaire's track record of identifying underappreciated biotech opportunities has drawn attention to the stock. Rhythm shares closed at $110.00, up 0.99 percent, with a market cap of $7.6 billion.

The stock carries meaningful risk. Clinical setbacks, regulatory delays, or new entrants targeting rare obesity could compress the company's valuation. Investors considering a position should weigh the concentrated pipeline against the limited competitive pressure in Rhythm's niche. A small initial position, with the option to add as the company reaches clinical and commercial milestones, mirrors the approach Druckenmiller's firm has taken.

This article is for informational purposes only and does not constitute investment advice.