Rhythm Pharmaceuticals: TOP IDEA - Adding to Analyst Focus List; Driven by Valuation Disconnect at Current Levels

We are adding Rhythm Pharmaceuticals (RYTM) to the J.P. Morgan U.S. Equity Analyst Focus List (AFL; Value Strategy) driven by the valuation disconnect at current levels. RYTM shares have underperformed the Biotech markets YTD (RYTM down ~17% vs XBI up ~21% / NBI up ~20%). With the Imcivree country-specific launch in the EU beginning at the turn of the year, along with additional regulatory approvals (recently Japan and Canada), we see a disconnect between RYTM shares and the acquired HO launch, along with the probability-adjusted value of the pipeline. Shares currently trade at high $80s, while the acquired HO indication alone is valued ~$90-95/share within our model. We reiterate our Overweight rating and update our Dec 2027 price target to $145 (prior $146) with an updated POS for commercial acquired HO, updated Japan pricing, and Japan penetration ramp adjustments. We model ~$2.1B WW peak sales (in 2035) in acquired HO alone with Rhythm total WW peak sales at ~$4.2B.