Out Of Rhythm: Setmelanotide Lacks Proper Placebo Controls And Has Plenty Of Adverse Events

About: Rhythm Pharmaceuticals, Inc. (RYTM)
by: Miguel Costa Coelho
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Miguel Costa Coelho
Special situations, contrarian, biotech, small-cap

Rhythm Pharmaceuticals is developing Setmelanotide, a drug that targets rare forms of genetic obesity by controlling hunger.

Setmelanotide’s target in the brain controls multiple functions causing serious side effects (skin lesions, darkening, nausea, erections and depression).

The market is focused on response rates of the POMC trial (80%), overlooking that response drops below 50% over the 5 clinical trials sharing the same mechanism of action.

Another market oversight is that less than 1/3 of the estimated patient population is efficiently targetable with Setmelanotide.

Absence of a true placebo control (no blind side-by-side comparison) and the presence of numerous adverse events will likely result in FDA rejection, tanking RYTM share value.

Investment thesis: Reduced treatable patient population, lack of placebo and numerous side effects will tank RYTM

Diseases with a common genetic origin can be addressed with a single bullet drug or gene-therapy. Rhythm Pharmaceuticals (