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RYTM, Rhythm Pharmaceuticals Inc.

Pharmaceuticals consumer brand UnprofitableDistress / turnaround

We are a global, commercial-stage biopharmaceutical company dedicated to transforming the lives of patients living with rare neuroendocrine diseases.

IMCIVREE, our most advanced MC4R agonist for which we hold worldwide rights, is the first-ever therapy that is marketed in the United States, European Union (EU), United Kingdom, Canada and several other countries and regions for certain rare MC4R pathway diseases, including BBS.

For IMCIVREE, which was first approved in the United States in 2020, we have demonstrated success in achieving regulatory approvals and/or securing market access or named patient sales in more than 25 countries in addition to the United States, and we continue to seek access in additional markets.

Latest annual: FY2025 10-K

RYTM · Rhythm Pharmaceuticals Inc.

The business

What it sells, where the money comes from, the kind of company it is.

Revenue · FY2025

$190M

+45.8% YoY

Vital signs · TTM, with 5-yr average

Revenue $217M 5-yr avg $85M

Gross margin 89% 5-yr avg 88%

Operating margin −90.9% 5-yr avg −1338.6%

ROIC −92% 5-yr avg −161%

Owner-earnings margin −55% 5-yr avg −1141%

Free cash flow margin −55% 5-yr avg −1141%

The business in brief

read the 10-K →

What this business is and what moves its needle, from its own SEC filings.

Situation: Unprofitable. No sustained operating profit across the record; an earnings multiple has nothing to rest on. What the record does show is revenue, the gross-margin trajectory, and the burn against the cash on hand. Distress / turnaround. Thin interest coverage, or operating cash burned against real debt, across the record. The balance sheet carries this situation; the debt schedule sets the clock.
What moves the needle: Operating margin has run around −238% through the cycle on a 90% gross margin, the operating line in the red even at its best — so the lever is whether the spending below the gross line can come down enough to clear a profit: revenue growth against the cost curve, and the cash runway until it does. Stock-based pay runs about 42% of sales, a real and recurring claim on owners that the GAAP margin understates. Read this kind of business on the pipeline against the patent cliff, and pricing. On its own account, the filing leans hardest on pricing power & competition, set against the numbers in what the filing emphasizes, below.
Is it a good business?: Return on capital has rarely cleared the cost of capital (median −67%, above 15% in 0 of 9 years). Owner earnings, the cash-based check, have been thin too. This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the rest is in the 10-K.

Every line is arithmetic on the company's filings, shown in full in the sections below.

The record

Ten years of arithmetic, read across the cycle.

The record, 2016–2025

realized figures from each filing · older years to the left

2016’16	2017’17	2018’18	2019’19	2020’20	2021’21	2022’22	2023’23	2024’24	2025’25	TTMTTMMar 2026
											Income statement
$0	$0	$0	$0	$0	$3M	$24M	$77M	$130M	$190M	$217M	RevenueRevenue
—	—	—	—	—	81%	91%	88%	90%	90%	89%	Gross marginGross mgn
—	—	—	—	—	n/m	389%	152%	111%	103%	101%	SG&A / revenueSG&A/rev
—	—	—	—	—	n/m	460%	174%	183%	88%	79%	R&D / revenueR&D/rev
($26M)	($32M)	($78M)	($146M)	($137M)	($170M)	($179M)	($184M)	($266M)	($192M)	($197M)	Operating incomeOp. inc.
—	—	—	—	—	n/m	−757.9%	−238.1%	−204.0%	−101.2%	−90.9%	Operating marginOp. mgn
($29M)	($34M)	($74M)	($141M)	($134M)	($70M)	($181M)	($185M)	($261M)	($197M)	($203M)	Net incomeNet inc.
											Cash flow & returns
($23M)	($29M)	($62M)	($123M)	($122M)	($146M)	($173M)	($136M)	($114M)	($116M)	($120M)	Operating cash flowOp. cash
$144K	$223K	$442K	$834K	$690K	$816K	$896K	$900K	$700K	$500K	$500K	DepreciationDeprec.
$5M	$2M	$5M	$5M	($6M)	($98M)	($13M)	$15M	$106M	$14M	$6M	Working capital & otherWC & other
$1M	$133K	$722K	$3M	$214K	$434K	$281K	$47K	$0	$953K	$953K	CapexCapex
—	—	—	—	—	13.8%	1.2%	0.1%	0.0%	0.5%	0.4%	Capex / revenueCapex/rev
($24M)	($30M)	($63M)	($126M)	($122M)	($146M)	($174M)	($136M)	($114M)	($117M)	($120M)	Owner earningsOwner earn.
—	—	—	—	—	n/m	−734.9%	−175.9%	−87.5%	−61.5%	−55.5%	Owner earnings marginOE mgn
($24M)	($30M)	($63M)	($126M)	($122M)	($146M)	($174M)	($136M)	($114M)	($117M)	($120M)	Free cash flowFCF
—	—	—	—	—	n/m	−734.9%	−175.9%	−87.5%	−61.5%	−55.5%	Free cash flow marginFCF mgn
—	-23%	-31%	-53%	-164%	-60%	-104%	-67%	-495%	-79%	-92%	ROICROIC
—	-23%	-30%	-50%	-80%	-24%	-69%	-109%	-1199%	-141%	-165%	Return on equityROE
—	−23%	−30%	−50%	−80%	−24%	−69%	−109%	n/m	−141%	−165%	Retained to equityRetained/eq
											Balance sheet
$11M	$148M	$50M	$292M	$173M	$295M	$333M	$276M	$321M	$389M	$341M	Cash & investmentsCash+inv
—	—	—	—	—	$1M	$6M	$15M	$19M	$26M	$34M	ReceivablesReceiv.
—	—	—	—	—	$111K	$3M	$9M	$19M	$26M	$29M	InventoryInvent.
$2M	$2M	$8M	$10M	$5M	$6M	$5M	$5M	$12M	$14M	$12M	Accounts payablePayables
—	—	—	—	—	($5M)	$4M	$19M	$25M	$38M	$51M	Operating working capitalOper. WC
$11M	$151M	$259M	$302M	$182M	$308M	$354M	$308M	$374M	$467M	$430M	Current assetsCur. assets
$5M	$7M	$14M	$24M	$18M	$43M	$40M	$55M	$116M	$106M	$103M	Current liabilitiesCur. liab.
2.4×	22.4×	19.0×	12.4×	10.1×	7.1×	8.9×	5.6×	3.2×	4.4×	4.2×	Current ratioCurr. ratio
$12M	$152M	$260M	$309M	$187M	$330M	$382M	$333M	$392M	$480M	$442M	Total assetsAssets
—	—	—	—	—	—	—	$106M	$110M	$108M	$108M	Total debtDebt
—	—	—	—	—	—	—	($170M)	($211M)	($281M)	($232M)	Net debt / (cash)Net debt
—	—	—	—	—	—	-34.4×	-13.3×	-12.9×	-9.3×	-10.0×	Interest coverageInt. cov.
($33M)	$145M	$246M	$281M	$167M	$284M	$264M	$170M	$22M	$139M	$123M	Shareholders’ equityEquity
—	—	—	—	—	659.6%	83.9%	42.0%	30.5%	35.2%	35.5%	Stock comp / revenueSBC/rev
											Per share
10.2M	13.3M	31.0M	36.4M	44.1M	49.6M	52.1M	57.7M	61.0M	65.0M	68.0M	Shares out (diluted)Shares
$0.00	$0.00	$0.00	$0.00	$0.00	$0.06	$0.45	$1.34	$2.13	$2.92	$3.19	Revenue / shareRev/sh
$-2.85	$-2.54	$-2.39	$-3.86	$-3.04	$-1.40	$-3.47	$-3.20	$-4.27	$-3.02	$-2.98	EPS (diluted)EPS
$-2.38	$-2.23	$-2.02	$-3.46	$-2.77	$-2.95	$-3.33	$-2.36	$-1.87	$-1.79	$-1.77	Owner earnings / shareOE/sh
$-2.38	$-2.23	$-2.02	$-3.46	$-2.77	$-2.95	$-3.33	$-2.36	$-1.87	$-1.79	$-1.77	Free cash flow / shareFCF/sh
$0.10	$0.01	$0.02	$0.09	$0.00	$0.01	$0.01	$0.00	$0.00	$0.01	$0.01	Cap. spending / shareCapex/sh
$-3.21	$10.91	$7.94	$7.72	$3.77	$5.73	$5.07	$2.94	$0.36	$2.14	$1.81	Book value / shareBVPS

The diluted share count moved ×2.34 into 2018 — shares issued, not a split the totals corroborate — and the per-share figures carry the counts as filed.

Per-share growththe realized rate an owner's share compounded

	9-yr	5-yr
Capital spending / share	−19.5%/yr	+24.8%/yr
Book value / share	—	−10.7%/yr

The record, charted

FY2016–2025

Each measure over its full record; the current point and the worst year marked.

Share count

65Mpeak FY2025

ROIC

−79%low FY2024

Gross margin

90%low FY2021

Owner earnings vs. net income

Owner earningsNet income

The accountant's number, and the cash an owner can take; the gap is the tell.

($117M)owner earningsvs.($197M)net incomelow FY2022

Owner-earnings bridge

FY2021–FY2025cash-flow statement, SEC EDGAR →

Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.

In fiscal 2025 the business turned a $197M loss into ($117M) of owner earnings: more cash than the profit line showed, after the non-cash charges and the capital it put back in.

	FY2025	FY2024	FY2023	FY2022	FY2021
Reported net income	($197M)	($261M)	($185M)	($181M)	($70M)
Depreciation & amortizationnon-cash charge added back	+$500K	+$700K	+$900K	+$896K	+$816K
Stock-based compensationreal costnon-cash, but a real cost	+$67M	+$40M	+$33M	+$20M	+$21M
Working capital & othertiming of cash in and out, other non-cash items	+$14M	+$106M	+$15M	−$13M	−$98M
Cash from operations	($116M)	($114M)	($136M)	($173M)	($146M)
Capital expenditurecash put back in to keep running and to grow	−$953K	—	−$47K	−$281K	−$434K
Owner earnings	($117M)	($114M)	($136M)	($174M)	($146M)
Owner-earnings marginowner earnings ÷ revenue	-61%	-88%	-176%	-735%	-4643%

Owner earnings is the cash an owner could pull out without starving the business: operating cash less the capital it must spend to hold its position . The cash-flow statement also adds stock comp back as non-cash, but it is a real cost paid in shares; counted as the expense it is (less $67M), owner earnings is nearer ($183M).

Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.

III

Quality & stewardship

Returns, the balance sheet, capital allocation, and pay.

Owner’s Scorecard

FY2025 10-K · source on SEC EDGAR →

Material weakness in financial controls

“We previously identified a material weakness in internal control related to ineffective information technology general controls, or ITGCs, in the areas of user access and program change management over our key accounting and reporting information technology,…”

The figures below are only as sound as the controls that produced them. read the note →

Will it survive?

Can it pay its interest? -9.3×

Does not cover its interest

Operating income ($192M) ÷ interest expense $21M

What this means
A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.
How heavy is the debt, net of cash? +$281M

Net cash

Cash $54M + ST investments $335M − debt $108M

What this means
Cash and short-term investments exceed every dollar of debt by $281M, on net the company owes nothing, and can act from strength when others can't. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
How long is cash tied up? 271d

Long (60+ days)

DSO 50 + DIO 482 − DPO 261 days

What this means
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

Return on invested capital -67%

Below average through the cycle

9-yr median, range -495%–-23%; -79% latest = NOPAT ($152M) ÷ invested capital $193M

Industry peers: median -27%

What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 9 years (it ran -79% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
Owner-earnings margin -176%

Consumes cash through the cycle

5-yr median margin, range -4643%–-61%; latest ($117M) = operating cash ($116M) − maintenance capex $953K

Industry peers: median -191%

What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's -61% of revenue this year, a -176% median across 5 years. Treating stock comp as the real expense it is (less $67M of SBC) leaves ($183M).
Are earnings backed by cash? ($116M)

Loss, and burning cash

Net income ($197M) · cash from operations ($116M)

In the filing’s words The filing discloses a material weakness in its financial controls — the reported numbers here, and the record built on them, are only as reliable as the controls that produced them.

What this means
The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did not.

How is the cash used?

Where do the earnings go? —

Not enough data

What this means
The filing data didn't include the inputs for this check.
Investing or harvesting? 1.91×

Expanding

Capex $953K ÷ depreciation $500K

What this means
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 2 of 5 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

Adequate size Miss

Revenue ≥ $2B · $190M

What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
Strong liquidity Pass

Current ratio ≥ 2× · 4.41×

What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
Conservative debt Pass

Debt ≤ working capital · $108M vs $361M WC

What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
Earnings stability Miss

A profit every year (10-yr record) · 10 loss years

What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
Dividend record Miss

Uninterrupted dividends · none paid

What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
Earnings growth —

Earnings +33% over the record · —

What this means
Earnings were negative early in the record, a growth rate isn't meaningful.
Moderate price —

P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price

What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $-3.12/share (latest year $-2.87), the averaged base the calculator's gate runs on, and book value is $2.03/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

Profitable years 0 of 10

What this means
Lost money in 10 year(s), look at what happened there before trusting the average.
Return on capital ≥ 15% 0 of 3 yrs

What this means
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
Operating margin −3075% → −153% (2-yr avg ends)

What this means
Through the cycle the operating margin widened — about −3075% early to −153% lately, median −238% — pricing power intact or improving.
Reinvestment, incremental ROIC returns capital

What this means
The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.
Worst year 2021 · −5391.9% op. margin

What this means
Operations went underwater in 2021, understand why before trusting the good years.

Does AI threaten the moat?

Low contestability

The moat is physical, regulated or balance-sheet-funded, the kind AI cuts costs within but does not contest.

In its own filing Named as a competitive risk

Its FY2025 10-K names artificial intelligence as a competitive threat.

“It is possible that new laws and regulations will be adopted in the United States and in other non-U.S. jurisdictions, or that existing laws and regulations, including competition and antitrust laws, may be interpreted in ways that would limit our ability to use AI Technologies for our business, or require us to change…”

AI is unlikely to contest a moat that is physical, regulated or balance-sheet-funded; here it reads more as a cost tool than a threat.

Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.

All figures as filed; the source filing is linked above.

Current Position

as of the latest quarter, Mar 31, 2026

Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.

Current assets$430M

Cash & short-term investments$341M
Receivables$34M
Inventory$29M
Other current assets$27M

Current liabilities$103M

Debt due within a year$10M
Accounts payable$12M
Other current liabilities$81M

Current ratio4.17×all current assets ÷ what's due · Graham looked for 2×

Quick ratio3.89×stricter: inventory excluded

Cash ratio3.30×strictest: cash alone against what's due

Working capital$327Mthe cushion left after near-term bills

Debt due this year vs. cash$10M due · $341M cash covered by cash on hand, no refinancing forced · both figures from the Mar 31, 2026 balance sheet

Cash runway2.8 yrsthe business is consuming cash; this is how long the cash on hand lasts at that rate

Revenue, latest quarter vs. a year ago+83.8%the freshest read on whether the business is still growing

Current ratio, recent quarters6.5× → 4.2×

Deeper floors

Tangible book value$118Mequity stripped of goodwill & intangibles

Net current asset value$225MGraham's net-net: current assets less all liabilities

Debt incl. operating leases$112M$4M of it operating leases

Deferred revenue$109Mcustomer cash collected before delivery; operating float

From the company's latest filing.

Management, ownership & pay

read the proxy →

From the proxy: how much of the business the people running it own, and how they are paid, beside what the business earned for its owners in the same years.

Fiscal year	Chief executive	Pay, as filed	“Actually paid”	Owner earnings
2021	David P. Meeker	$6.5M	−$10.0M	($146M)
2022	David P. Meeker	$3.3M	$24.1M	($174M)
2023	David P. Meeker	$7.2M	$19.0M	($136M)
2024	David P. Meeker	$14.7M	$18.7M	($114M)
2025	David P. Meeker	$17.5M	$54.2M	($117M)

Both pay figures are the company’s own, from the pay-versus-performance table its proxy statement files. “As filed” is the Summary Compensation Table total: salary, bonus, and equity awards at their value on the day of grant. “Actually paid” is the SEC’s prescribed recalculation, which re-marks those equity awards to what they became as they vested; it can swing far above or below the filed figure in either direction, and negative years occur. Owner earnings are the whole business's, from the record above, for the same fiscal years.

Stock-based compensation$67M
The slice of the business handed to employees in shares this year, 35% of revenue. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.

What an owner would ask, FY2025

read the 10-K →

Which reported numbers are a judgment call?
Management names Revenue recognition, Income taxes, Stock compensation as critical estimates
each rests partly on management's judgment; the filing's note sets out the assumptionsverify →

The questions the record and the charts do not answer on their own; each carries the figure and the place to look.

Peers, Pharmaceuticals

The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.

Company	Revenue	Gross margin	Op. margin	ROIC	Owner earn. margin
IDYAIDEAYA Biosciences Inc.	$219M	—	-180.4%	-22%	-191%
VNDAVanda Pharmaceuticals Inc.	$216M	89%	-2.4%	-0%	9%
AMRNAmarin Corporation plc	$214M	77%	-24.3%	-15%	-18%
RYTMRhythm Pharmaceuticals Inc.	$190M	90%	-238.1%	-67%	-176%
MRVIMaravai LifeSciences Holdings Inc.	$186M	53%	16.8%	-32%	21%
STOKStoke Therapeutics Inc.	$184M	—	-559.3%	-79%	-254%
PHATPhathom Pharmaceuticals Inc.	$175M	86%	-502.2%	—	-483%
SNDXSyndax Pharmaceuticals Inc.	$172M	—	-3263.2%	-64%	-2251%
Group median	—	86%	-209.3%	-32%	-183%

The price

What a price has to assume.

What the price implies

reverse-DCF

Rhythm Pharmaceuticals Inc. is profitable, but owner earnings are negative this year because capital spending currently outruns operating cash, a build-out, so the owner-earnings reverse-DCF has no positive base to grow. We read the price from both ends instead: type a price to see the steady-state profitability it demands, then set the mature margin you would believe and weigh the two against each other. Nothing leaves your browser unless you enter it in your notebook.

Today’s price $

The assumptions Required return 9% Years to get there 10 Revenue growth 0%

Revenue, delivered97%/yr’20→’25

Mature owner-earnings margin 15%

Enter a price to run it.

Owner earnings it must reach—

Margin the price demands—

Owner-earnings margin today−55%

Two reads of one future. From your price: the owner earnings the company must reach, valued at a mature multiple and discounted back at your rate, expressed as the margin it implies on revenue grown at your rate. From your belief: the mature margin you would credit, set on the dial above. When the margin the price demands runs above the one you would believe, you are paying for a future taken on faith. For a deep cyclical at a trough, normalized through-cycle earnings are the better lens; this mode is for the genuinely unprofitable, and for the profitable business whose capital spending currently outruns its cash.

Weigh RYTM against another business →

The owners of RYTM: the meeting and the votes →

Cite: Owner Scorecard, "Rhythm Pharmaceuticals Inc. (RYTM), the owner's record," https://ownerscorecard.com/c/RYTM, data as of 2026-07-09.

Manual order: ← RYN its page in the Manual RYZ →

Industry order: ← RPRX the Pharmaceuticals chapter SDGR →