Rhythm Pharmaceuticals is Monday's pick for IBD 50 Stocks To Watch as the biotech stock attempts to stop the bleeding from a five day sell-off. The stock is back in a buy zone after rebounding off a critical chart level.
Shares rose more than 2% Monday in light volume, after two weeks of heavier-than-average trading.
Rhythm Pharmaceuticals makes a treatment for patients with hyperphagia, a condition of insatiable hunger, and obesity.
On Aug. 26, the company announced the U.S. Food and Drug Administration accepted the supplemental New Drug Application for its Imcivree injection. The drug is used for chronic weight management in adult and pediatric patients six years of age and older with Bardet-Biedl syndrome, a rare genetic disorder.
It is also developing drugs for other rare diseases, including a congenital condition that causes the pancreas to secrete too much insulin.
Biotech Stock Revisits Buy Zone
The biotech stock started its climb in earnest Nov. 4, following its release of data that was presented at ObesityWeek 2024 in San Antonio, Texas, the next day.
The stock jumped after the company reported a smaller-than-expected third-quarter loss and higher sales than expected, on Nov. 5. Shares broke out of a base with an official buy point of 55.64. It also topped an alternative entry at 52.47.
The biotech stock quickly soared to a record high Nov. 11, but closed the day lower. That reversal started the sell-off. Shares gave back a gain of more than 23% from the buy point, triggering a round-trip sell signal.
Rhythm pulled back to its 21-day exponential moving average Friday, which is near the 55.64 point. The bounce at that price level is a hopeful sign, but investors should watch for shares to continue rebounding. Shares are back in a buy zone that goes up to 58.42.
Rhythm Pharmaceuticals Sales Climb
Rhythm Pharmaceuticals is not yet profitable. It reported a net loss of 73 cents per share in Q3. Quarterly estimates call for losses ranging from 72 to 77 cents per share over the next four quarters.
The obesity-drug maker reported its revenue grew 48% following a 51% gain in Q2 and six quarters of triple-digit growth prior to that.
Its 1.7 up/down volume ratio indicates positive demand for the biotech stock over the last 50 days. And its Accumulation/Distribution Rating of B+ shows fairly heavy institutional buying over the last 13 weeks.
Mutual funds own 74% of shares, while management holds 4%.
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