With the business potentially at an important milestone, we thought we'd take a closer look at Rhythm Pharmaceuticals, Inc.'s (NASDAQ:RYTM) future prospects. Rhythm Pharmaceuticals, Inc., a commercial-stage biopharmaceutical company, focuses on the rare neuroendocrine diseases. On 31 December 2023, the US$2.4b market-cap company posted a loss of US$185m for its most recent financial year. As path to profitability is the topic on Rhythm Pharmaceuticals' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Consensus from 9 of the American Biotechs analysts is that Rhythm Pharmaceuticals is on the verge of breakeven. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$7.6m in 2026. Therefore, the company is expected to breakeven roughly 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 61% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won't go into details of Rhythm Pharmaceuticals' upcoming projects, though, bear in mind that typically a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we would like to bring into light with Rhythm Pharmaceuticals is its relatively high level of debt. Generally, the rule of thumb is debt shouldn't exceed 40% of your equity, which in Rhythm Pharmaceuticals' case is 63%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of Rhythm Pharmaceuticals to cover in one brief article, but the key fundamentals for the company can all be found in one place – Rhythm Pharmaceuticals' company page on Simply Wall St. We've also compiled a list of key aspects you should look at:

1. Valuation: What is Rhythm Pharmaceuticals worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Rhythm Pharmaceuticals is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Rhythm Pharmaceuticals's board and the CEO's background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.