IPOs

Rare obesity disease player Rhythm Pharma sets out in search of a $115M IPO windfall

Keith Gottesdiener

A year after the team at Boston-based Rhythm Pharmaceuticals posted some compelling but limited Phase II data on its lead rare disease drug, the biotech is joining the queue to get onto Nasdaq with an IPO designed to raise around $115 million.

Already armed with the FDA’s breakthrough therapy title for setmelanotide, Rhythm is pitching the potential for its MC4R agonist for the treatment of rare genetic disorders of obesity — though Phase II included only two patients. And it’s out to sell investors on its rapid transition into Phase III studies for POMC deficiency obesity and LepR deficiency obesity while rolling out new Phase II trials to broaden its impact.

The biotech got started back in 2008 with the help of some A-list investors, including: MPM Capital, New Enterprise Associates, Third Rock Ventures, Ipsen, Pfizer Venture Investments, OrbiMed and Deerfield Management. Late last year Allergan struck a deal to buy Motus Therapeutics, a subsidiary of Rhythm Holding which controlled its diabetic gastroparesis treatment relamorelin.

By the hallway point of this year Rhythm had burned through about $90 million. And the IPO comes about eight months after its auditors issued a “going concern” warning about its financials.

CEO Keith Gottesdiener — who holds 3.17% of the stock — earned a compensation package valued at $562,000 last year, down from close to $2 million the year before, with a base salary in 2016 of $476,500.

NEA is the lead investor, with 21% of the stock, compared to 19% held by Third Rock.

The biotech is operating in a field that’s badly damaged Zafgen in the past, though execs have insisted that they’re pursuing a different pathway with a significantly different drug. Now they get to see how investors warm up to a biotech with a new approach to obesity and rare diseases.


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