Bivamelagon license deal cuts setmelanotide royalty to 1 percent

Rhythm Pharmaceuticals has rewritten the terms under which it pays LG Chem for bivamelagon, its oral MC4R agonist in development, and the bivamelagon license deal also changes what Rhythm owes on its approved peptide, setmelanotide. Under the amendment, a royalty of low to mid single digits on all Rhythm MC4R products falls to 1%, in return for $350 million in fixed payments over four years. A new loan of up to $750 million funds the switch. No clinical data came with the news, and neither drug changes stage on our pipeline board.

What Rhythm and LG Chem changed

Rhythm licensed bivamelagon in January 2024, when the compound was still called LB54640. The original terms gave LG Chem $80 million in cash and $20 million in Rhythm stock, plus up to $205 million in regulatory and sales milestones. On top of that came royalties of low to mid single digits on global net sales across Rhythm's whole MC4R portfolio, with the rate set by how many indications regulators approved. That clause mattered because the portfolio includes setmelanotide, sold as Imcivree, and not only the oral compound LG Chem discovered. Each new approved use could have lifted the rate Rhythm paid on every product. The amendment took effect on 2 November 2026 and replaces that sliding scale with one fixed rate and a set payment calendar, according to the company release.

Under the bivamelagon license deal as amended, Rhythm pays LG Chem $350 million in four fixed installments. The first $70 million is due within 15 business days of the effective date. Each September after that brings another payment, with $100 million in 2027, a further $100 million in 2028 and a final $80 million in 2029. The 1% royalty starts on 1 January 2029, or at the first commercial sale of bivamelagon if that comes sooner. Rhythm said LG Chem has agreed that some of the fixed payments may be settled through extra royalties instead of cash. The original milestones of up to $205 million stay in place, and a new milestone of up to $200 million is added, payable if annual global net sales of the MC4R portfolio reach $3 billion.

Setmelanotide royalty falls to 1 percent

The setmelanotide royalty is the part of this agreement that touches a marketed peptide today. Setmelanotide is an injected MC4R agonist. Rhythm says its US label now covers acquired hypothalamic obesity from age 4, as well as Bardet-Biedl syndrome and genetically confirmed POMC, PCSK1 or LEPR deficiency from age 2. European and UK regulators have authorized it for the same groups. Rhythm has also announced Japanese approval and a commercial launch for acquired hypothalamic obesity. Under the old formula, each of those wins could have raised the percentage owed to LG Chem on all MC4R sales, because the rate depended on the count of approved indications. The amendment caps that exposure at 1%, at the price of fixed cash owed whatever sales turn out to be.

The amendment caps that exposure at 1%, at the price of fixed cash owed whatever sales turn out to be.

Read as a trade, Rhythm has swapped an open ended cost that would grow with success for a known bill paid early. That favors Rhythm if setmelanotide and its successors sell well across many indications, and it costs Rhythm if they do not, since the $350 million is owed either way unless settled through extra royalties. The structure also ties setmelanotide's economics more closely to the oral program, because the 1% rate can start before 2029 only if bivamelagon reaches the market first. Readers who followed the earlier setmelanotide data will see why hypothalamic obesity sits at the center of both programs. Nothing in the amendment changes the label, the safety profile or patient access for the approved drug.

HealthCare Royalty term loan funds the payments

Rhythm is paying for the amendment with borrowed money through a HealthCare Royalty term loan. The five year facility offers up to $750 million and is led by HealthCare Royalty, a royalty investor majority owned by KKR, together with funds managed by Blackstone. Of that total, $500 million is committed. An initial $250 million draw is expected at closing on 6 November 2026, subject to customary conditions. Rhythm can then draw up to $250 million more through 30 June 2028 in three delayed tranches of $100 million, $100 million and $50 million. A further $250 million is available only if both sides agree. The company said the money supports the LG Chem payments, global commercialization and continued research.

Borrowings carry interest at the Secured Overnight Financing Rate plus 4.60%. The loan has no scheduled principal repayment before maturity and no equity component, so it does not dilute shareholders, though Rhythm takes on interest costs and the full principal falls due at the end of the term. Alongside the loan, Rhythm and HealthCare Royalty agreed to amend an existing revenue interest financing agreement, dropping its debt like covenants and default terms and narrowing the collateral behind it. Chief financial officer Hunter C. Smith said the terms "enhance our financial flexibility." For the pipeline, the practical point is that Rhythm now carries fixed obligations to both a lender and a licensor, which raises the stakes on setmelanotide sales growth.

Bivamelagon against the peptide in hypothalamic obesity

Bivamelagon is the reason for the deal, and its evidence base is still small. In a July 2025 Phase 2 readout, Rhythm reported a 14 week, double blind, placebo controlled trial with four arms in acquired hypothalamic obesity. The two higher dose groups lost 9.3% and 7.7% of body mass index from baseline, the lowest dose group lost 2.7%, and the placebo group gained 2.2%. Those arms held 8, 7, 6 and 7 patients, so 28 people in all. Rhythm also reported a mean fall of 2.8 points in hunger scores and limited cases of localized skin darkening. A post hoc company comparison found the BMI changes consistent with past setmelanotide trials, but cross trial comparisons of this kind cannot rank the two drugs.

That is the race the bivamelagon license deal shapes. Setmelanotide is a peptide given by injection every day, while bivamelagon is a pill, and Rhythm owns both. Chief executive David Meeker said LG Chem "succeeded where many failed in developing the first oral MC4R agonist in bivamelagon." If bivamelagon wins approval, it could compete with setmelanotide for the same patients, and Rhythm would earn on either. The November release gives no Phase 3 start date, trial size or filing plan, and the earlier Phase 2 release said Rhythm would seek an end of Phase 2 meeting with the FDA. Rhythm also lists RM-718, another investigational MC4R agonist. Our hormone pathways tracker follows the peptide side of this class.

Conclusion

The bivamelagon license deal is a financial move, not a clinical one. Rhythm trades a royalty that rose with each new indication for a 1% rate, $350 million in fixed payments and a new milestone tied to $3 billion in annual sales, funded by a loan led by HealthCare Royalty with Blackstone. Setmelanotide stays approved and on sale, with a lower royalty bill from 2029. Bivamelagon remains a Phase 2 asset with 28 patients of randomized data, and the next real signal for both drugs is a Phase 3 design for the pill.