Billionaire Stanley Druckenmiller's Duquesne Family Office disclosed a new stake in Rhythm Pharmaceuticals in Q2, betting on the biotech's focus on rare genetic obesity disorders. The company's single approved drug, Imcivree, just quadrupled its addressable market with a new label expansion, and a larger indication for Prader-Willi syndrome could be years away but represents a much bigger opportunity.
Stanley Druckenmiller's Duquesne Family Office built a position in Rhythm Pharmaceuticals (NASDAQ: RYTM) during the second quarter, betting on a biotech that targets rare forms of obesity the drug giants Eli Lilly and Novo Nordisk don't address.
The filing, disclosed in a quarterly 13F, showed the firm owned a stake worth less than 1% of its portfolio. For a biotech with a single approved product, the move signals confidence in a niche that could expand quickly.
Rhythm Pharmaceuticals has one marketed drug, Imcivree, approved for chronic weight management in patients with POMC deficiency, Bardet-Biedl syndrome, and, as of March, acquired hypothalamic obesity. The company estimates the first two indications cover up to 7,500 patients in the U.S. and Europe. The hypothalamic obesity label adds roughly 25,000 to 28,000 patients in the U.S., Europe, and Japan – more than quadrupling the addressable market.
Revenue reached $71.3 million in the second quarter, up 47% from a year earlier, the company said. The growth comes from the initial indications, but the hypothalamic obesity expansion is still early in its commercial rollout.
The bigger catalyst may be Prader-Willi syndrome, a genetic condition that causes constant hunger and obesity. Rhythm Pharmaceuticals reported positive phase 2 results for Imcivree in that population. The company estimates 20,000 patients in the U.S. and roughly 400,000 worldwide. A phase 3 trial is needed, so approval is several years away, but the potential market dwarfs the current one.
Rhythm Pharmaceuticals is also developing bivamegalon, an oral drug for hypothalamic obesity. Imcivree is a subcutaneous injection, so an oral option could capture patients who avoid needles, mirroring the demand for oral GLP-1 drugs from Eli Lilly and Novo Nordisk.
Eli Lilly and Novo Nordisk dominate the broader weight-loss market with drugs like Zepbound and Wegovy, but neither company targets the rare genetic and acquired obesity syndromes Rhythm Pharmaceuticals focuses on. That leaves the biotech with limited competition but also a small total addressable market. Even with the Prader-Willi indication, the patient count is in the hundreds of thousands, not millions.
By contrast, both LLY and NVO carry AlphaScala scores in the moderate range – 55 and 57 out of 100, respectively – reflecting their established market positions. Rhythm Pharmaceuticals is a much smaller, riskier bet.
The company's biggest risk is competition. If a larger drugmaker develops a treatment for one of these rare conditions, Rhythm Pharmaceuticals could lose its edge. Clinical setbacks or regulatory delays in the Prader-Willi program would also hit the stock hard.
Druckenmiller's stake is small, but it signals that a seasoned investor sees asymmetric upside. The next concrete marker is the phase 3 data for Prader-Willi syndrome, which the company has not yet scheduled.
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