Stansberry Venture Value’s hint suggests investing in a firm developing obesity treatments that has no competition but itself.
GLP-1 therapies have dominated headlines, with their top producers—Novo Nordisk, Eli Lilly —rising to become the world’s most valuable pharmaceutical companies. Eli Lilly, especially, has reached an astonishing $750 billion market cap, putting it on the verge of joining the elite group of seven leading tech giants giants and securing a spot among the S&P 500’s top ten. This rapid ascent has fueled a rush toward these equities, and, as is often the case with major breakthroughs, investors are now scouring the market for potential challengers. As a result, biotech firms aiming to carve out their place within GLP-1 space are seeing a surge in investor interest.
This isn’t my field of specialization, but it’s certainly a compelling story. From the outset in 2007, two of the biggest “unaddressed demands” in health care have stood out: a truly effective obesity treatment and a breakthrough for treating Alzheimer’s Disease. Perhaps we are entering a golden era where both become reality. If so, the companies that develop the right drugs could amass enormous wealth while reshaping health care industry. Perhaps that’s already playing out with Lilly, Novo Nordisk. Still, drug development remains an unpredictable game, with life sciences and drug development firms burning through vast sums reaching several hundred million in pursuit of those transformative breakthroughs.
I’m no biotech expert, and I tend to avoid valuing drugs that are still years away from generating revenue—especially when their developers must pour massive sums into medical testing phases without any assurance of success. The typical from 5 to10 year approval process is filled with risks, making these bets even trickier. Still, I can’t help but find some of these stories intriguing, and I’m always interested in what’s on the horizon.
Which brings me to what caught my attention today: Dave Lashmet’s latest tease about a medication for weight management.
This surfaced in a Stansberry Digest email which was sent my way. While it doesn’t seem to be a major promotional push at the moment, it likely connects to fat reduction stock pitch regarding Lashmet’s publication that was circulating last week. He now claims this shares is his latest recommendation within the sector of weight management. This is the content of the email describes it:
That doesn’t exactly scream “hard sell,” does it? At times, it can be more straightforward to digest the more measured marketing emails.
Lashmet explains that when evaluating a pharmaceutical innovator, he naturally looks at safety and efficacy—key factors during initial clinical testing. But beyond that, he focuses on two additional criteria: market size (which makes obesity an obvious contender) and the industry rivalry.
That last point is what grabbed my attention eye. At present, there are numerous GLP-1-based therapies are in development, many of which appear to be “copycat” versions. I have no idea which will prove to be the most reliable or potent—or if, one day, they might turn into so inexpensive that everyone is using them regularly. But this crowded field certainly makes assessing early-stage players even trickier.
He refers to GLP-1-based therapies as “Metabolic Winter Regulators”—suggesting that they suppress appetite and increase baseline heart rate, effectively making the body boost energy burn. The metaphor seems to draw from the way squirrels behave in winter: Their food intake is reduced due to their hunger signals are suppressed, yet they still burn through their stored energy as their heart rate rises.
But what really grabs his attention are the so-called “Hunger-Switch Drugs.” And it makes sense—If just two exist these in development, compared to 46 competing GLP-1 therapies, the competitive pressure is far lower.
So, what’s this mysterious “Hunger Switch” firm? Curious minds are dying to know.
It seems like “hunger switch” Lashmet is referring to is the MC4R. This receptor has been widely discussed—even in layman-friendly science publications—as a key regulator of hunger. The buzz around it peaked around three years back, when the initial drug designed to target this receptor received FDA approval.
That drug is setmelanotide, now marketed as Imcivree. If the name rings a bell, This is due to lashmet promoting the company behind it, Rhythm Pharmaceuticals, well before clearance. In the year 2020, he referred to it as “The Breakthrough weight Management Medication with 20X Potential”
Since then, the stock’s journey has been a mixed bag. Despite initial excitement, the commercial rollout faced hurdles. The treatment is only authorized for a niche group of patients—those with specific genetic causes of obesity—which significantly limits its immediate market potential. And even if the patient pool eventually expands, finding and diagnosing those individuals remains a costly and time-consuming challenge.
Imcivree has unmistakably struggled to gain traction compared to the far more commercially viable GLP-1 therapies. A quick look at the numbers makes that painfully obvious.
Since setmelanotide first received FDA approval in November 2020, Rhythm Pharmaceuticals has continued expanding its use for further genetic obesity conditions. But despite these regulatory wins, the company’s performance has lagged significantly behind the broader market—let alone GLP-1 giants.
A simple visual comparison tells the story. While Rhythm (purple line) has barely moved, the S&P500 (orange) has chugged along, and Novo Nordisk, Eli Lilly have skyrocketed, cementing their dominance in the weight-loss drug space.
Lashmet mentions an additional MC4R-targeting medication, available in oral form, is currently in development. currently undergoing second-phase clinical trials, there’s a catch: Rhythm Pharmaceuticals isn’t developing an oral version of its current drug, Imcivree, at this moment. Rather, the company is focused on expanding the approval of Imcivree for additional indications, primarily targeting genetic causes of severe obesity and hyperphagia, along with the development of a version requiring injections with lower frequency. However, they don’t have an oral version in development.
The twist in the story comes from Rhythm’s recent acquisition. In January, the company spent $100 million to acquire an oral MC4R activator from LG Chem, now called LB54640. This drug is currently currently undergoing phase 2 studies for hypothalamic and PCSK1-related obesity, where the main goal outcome being a decrease in BMI over a 14-week period. As the trial results start to roll in, we can expect more updates in the next months.
So, while Rhythm is the only company with drugs that activate the MC4R receptor under progress in developing treatments targeting weight loss purposes, the main obstacle remains the target market. Setmelanotide, for instance, has been approved but is mainly used for rare cases of severe obesity linked to specific genetic traits or hypothalamic damage. These conditions typically affect only a small pool of patients—around 5,000 to 10,000 people worldwide—which limits the drug’s potential market.
Back in 2020, Lashmet promoted this drug as one that might eventually receive approval for “broad obesity treatment,” and while that’s not currently a component of the immediate strategy, it’s still a possibility down the road. For now, Rhythm Pharmaceuticals is focused on expanding the drug’s market by conducting extensive genetic testing on overweight individuals to pinpoint common traits and rare genetic disorders that might benefit from this treatment. The aim is to grow the pool of eligible patients by pinpointing more specific genetic traits. However, the potential market still falls far short of the widespread obesity treatment that Lashmet had initially envisioned. His original claim that “Two billion people could benefit from this drug” may not be realistic, at least in the near future.
That said, it’s still noteworthy that an alternative to the dominant GLP-1 therapies is making progress. Imcivree is already approved and is being used by a small group of patients. As of now, around 4,000 to 7,500 people across the US, Europe are eligible for the drug, and this could expand by approximately 60,000 additional if the ongoing stage 3 clinical trials are successful. There are also efforts underway to identify other potential candidates through ongoing trials across six new genetic groups that could increase the number of people who could benefit from the MC4R agonist.
For these rare patient groups, extended-release formulations of the drug might be more tolerable, and Rhythm is clearly hoping that the data they’ve gathered from this niche population will help them expand their reach. With the recent acquisition of an oral melanocortin receptor 4 agonist, the company is looking to eventually tap into much larger markets, though this will take time and further development.
From what I’ve gathered, the adverse reactions associated with Imcivree seem to resemble those of GLP-1 therapies, but this might change if Rhythm attempts to market the pharmaceutical treatment for a broader population. The majority of setmelanotide’s clinical studies, including the phase three trials, involved only around 100 patients or fewer — with one pediatric trial having just a dozen participants.
The strategy behind this “Begin with a rare disease treatment and broaden its application over time” approach is common in biotech — targeting a rare, extreme form of a condition, like severe obesity linked to genetic indicators or specific syndromes, where the testing process is cheaper, the FDA offers incentives for tackling diseases without adequate treatments. Once approval is obtained for the rare condition, the goal is to expand the drug’s use to a wider population, thereby increasing the patient base and potentially extending the drug’s patent life.
Will it be successful? It’s hard to say. However, Imcivree is different GLP-1 medications, which could offer Rhythm an edge in the market. The initial market launch of Imcivree hasn’t been sufficient to drive Rhythm toward profitability. They currently spend four times as much on R&D, sales, and administration as they earn from the drug’s sales. Additionally, for every a dollar in additional gross profit they generate, they incur around 0.5-0.7 dollar in SG&A expenses. So, patient acquisition and sales remain costly, and the path to profitability isn’t clear yet. However, the company continues to add new patients through each trial, and there’s a chance that if they keep growing their patient pool, they could eventually turn profitable. Rhythm has been issuing new shares annually to cover expenses, and that might continue, but their cash consumption is improving gradually, with enough runway to last until at least the latter part 2025.
Will anyone be interested in acquiring Rhythm to gain availability of their MC4R medications, hoping to develop the next big weight-loss treatment? I can’t say for sure. In my opinion, this is still too speculative to be a solid investment, but I tend to avoid biotech stocks, so I might be overlooking something — which is fine, you can’t jump into every story.
That said, there’s always the possibility that their recently obtained oral medication LB54640 could deliver impressive results in the upcoming Phase two trials, quickly move to Phase three, and demonstrate fewer side effects. If people seek alternatives to GLP-1 receptor agonists for some reason, this drug might even end up being Hollywood’s next off-label weight loss craze. More unexpected things have taken place, but since I don’t have the expertise to predict the likelihood of that happening, I’ll let it be up for you to weigh the potential.
Do you believe Rhythm can transform this drug—currently effective in only a limited group of patients—into a major player over time, potentially rivaling the leading weight loss treatments? Are there any other companies you’re watching as they attempt to enter the market for weight management dominated by Lilly, Novo over the past few years? Or do you think these efforts are ultimately futile? Share your thoughts in the comments below!
