Goldman Sachs says it’s time for investors to put their money in Rhythm Pharmaceuticals as shares can rally nearly 40% with the success of its obesity medicine. “We believe that the outlook for Imcivree was transformed by initial [phase 2] data in patients with Hypothalamic Obesity (HO), which points to a high probability of clinical success in this indication where we also see a meaningfully higher peak sales opportunity as compared to other indications where Imcivree is in development,” analyst Corinne Jenkins wrote in a note to clients as she upgraded share to buy from a neutral rating. Hypothalamic obesity refers to weight gain that happens after injury to the hypothalamus, a critical part of the brain. Although shares have rallied more than 320% since the release of the data, Jenkins sees further upside to the stock should Rhythm continue to succeed in clinical trials and in its development of a weekly formulation of Imcivree which extends patent protections through 2038. “We also expect the cadence of European reimbursement decisions and approval in [Bardet-Biedl Syndrome] to bolster revenue over the intermediate-term, supplementing our positive view on the path for the stock higher from here,” Jenkins wrote. Bardet-Biedl is a genetic condition that impacts various parts of the body, particularly those tied to vision. Given the lack of approved therapies for patients with hypothalamic obesity, Jenkins believes Rhythm’s Imcivree medicine could hit a peak penetration of 60% in patients. Shares of Rhythm have rallied nearly 103% this year and 61% in August, but could gain another 38% from Friday’s close, according to Goldman’s fresh $28 price target. — CNBC’s Michael Bloom contributed reporting
