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Seeking to Cash in For Investors Again, Rhythm Pharma Files For IPO

Xconomy Boston — 

Most biotechs pursue either a sale or an IPO to reward their investors. Rhythm Pharmaceuticals is now trying to accomplish both.

A year after Rhythm funneled a stomach drug into a subsidiary and sold it to Allergan for $200 million, the Boston-based company—developing a different drug for rare forms of obesity—has filed for an IPO. Rhythm will trade on the Nasdaq under the symbol “RYTM” if it completes the offering.

Rhythm was formed in 2008 by licensing two peptide drug prospects from Paris-based Ipsen. In 2013, those two drugs diverged onto separate paths. Rhythm formed one company, Motus Therapeutics, around relamoralin, a drug for diabetic gastroparesis that was later acquired by Allergan. The second company kept the Rhythm name and has been advancing a drug called setmelanotide, an injectable peptide drug that is meant to boost the activity of a protein called melanocortin 4 receptor, or MC4, which plays a key role in weight and appetite regulation. The protein doesn’t function properly in people with the rare genetic disorders related to obesity that Rhythm is targeting. Among those diseases: pro-opiomelanocortin (POMC) deficiency; leptin receptor (LepR) deficiency; and Bardet-Biedl Syndrome.

Rhythm has already begun a Phase 3 trial in POMC deficiency, an ultra-rare disorder that affects an estimated 100 to 500 people in the U.S. Data are expected in 2019. Rhythm moved the drug into late-stage testing based on a tiny, single-arm study of just two POMC deficiency patients, but setmelanotide produced dramatic effects on weight loss in that trial—the results were published in the New England Journal of Medicine last year. Rhythm will also start a Phase 3 study in LepR deficiency, which affects 500 to 2,000 people in the U.S., in 2017. It plans to use the IPO cash to help fund these and other setmelanotide studies.

Rhythm has also been developing setmelanotide for the rare Prader-Willi Syndrome—a more prevalent obesity disorder than POMC deficiency—but the IPO prospectus shows that future plans on that front are up in the air. Setmelanotide failed a Phase 2 trial for Prader-Willi, showing no impact on weight loss and “modest” benefit on the ability to control the insatiable hunger, or hyperphagia, that characterizes the disease, the filing shows. Rhythm will decide next year whether to try another Prader-Willi study.

Should Rhythm abandon the effort, it would be another tough break for Prader-Willi patients, which saw another Boston-area company, Zafgen (NASDAQ: ZFGN), stop developing a drug for the disease after two patients died from blood clots in a Phase 3 trial. Rhythm didn’t name Zafgen specifically, but said in its IPO prospectus that “the experience by others suggests that [Prader-Willi] patients are high risk for adverse experiences and hence clinical trials in that population are extremely challenging.”

New Enterprise Associates (20.77 percent), Third Rock Ventures (18.96 percent), MPM Bioventures (12.36 percent), OrbiMed Private Investments (12.13 percent), and Pfizer (6.61 percent) hold the largest stakes in Rhythm. It is the second Boston-area biotech this month to outline plans for an IPO, following cancer drugmaker Deciphera Pharmaceuticals. Check out these stories for more on Rhythm and how biotechs have fared testing the IPO waters in 2017.