Rhythm Revises LG Chem License Terms, Secures Loan Facility of Up to $750 Million

Key Points

• Rhythm will replace its low-to-mid-single-digit royalty structure with a 1% royalty on global net sales across its MC4R portfolio, including setmelanotide, bivamelagon and RM-718.
• In exchange, Rhythm will make $350 million in additional fixed payments through September 2029.
• The amendment adds a potential milestone payment of up to $200 million tied to annual MC4R portfolio sales reaching $3 billion.
• A five-year loan facility provides $500 million in committed capital, with another $250 million available by mutual agreement.
• The financing has no equity component, but borrowings carry interest at SOFR plus 4.60%.

Rhythm Pharmaceuticals (NASDAQ: RYTM) is restructuring its agreement with LG Chem while adding debt financing to support commercialization and development.

The central trade-off is lower future portfolio royalties in exchange for substantial fixed payments and additional financing obligations.

Lower Royalty Rate Comes With $350 Million Payment Schedule

The amended agreement replaces the original variable royalty structure with a 1% royalty on global net sales of Rhythm’s MC4R products. The new rate begins January 1, 2029, or upon bivamelagon’s first commercial sale, whichever occurs earlier.

Rhythm’s additional fixed payments to LG Chem are scheduled as follows:

• $70 million within 15 business days after the amendment’s November 2, 2026, effective date.
• $100 million in September 2027.
• $100 million in September 2028.
• $80 million in September 2029.

With LG Chem’s agreement, certain fixed-payment obligations may instead be satisfied through additional royalties.

The original potential milestone payments of up to $205 million remain. The amendment adds another potential payment of up to $200 million based on achieving $3 billion in annual global MC4R portfolio sales.

Loan Facility Separates Committed Funding From Conditional Capacity

The financing is led by KKR’s HealthCare Royalty in partnership with Blackstone-managed funds.

Of the headline $750 million capacity, $500 million is committed:

• An initial $250 million draw is expected at closing on November 6, subject to customary conditions.
• Another $250 million is available at Rhythm’s option through June 30, 2028, in two $100 million tranches and one $50 million tranche.
• The remaining $250 million requires mutual agreement.

Borrowings bear interest at SOFR plus 4.60%. There is no scheduled principal amortization before the five-year maturity, and prepayment premiums decline over the loan’s term.

The facility has no equity component, but it is debt—not royalty income or an equity investment—and carries interest and repayment obligations.

Existing Revenue Financing Terms Will Also Change

Upon the loan’s closing, Rhythm and HealthCare Royalty expect to amend their existing revenue-interest financing agreement.

The changes would remove debt-like covenants and default provisions, limit collateral and modify material-adverse-effect provisions. They do not indicate that the underlying revenue-interest obligation is being eliminated.

Investor Takeaway: Improved Royalty Economics, Greater Fixed Obligations

For RYTM investors, the amendment reduces the future royalty rate across the MC4R portfolio rather than bivamelagon alone. That could retain more sales revenue within Rhythm as the portfolio grows.

However, the benefit must be weighed against the $350 million payment schedule, contingent milestones and borrowing costs. The overall economic outcome depends on future sales, the timing of commercialization and how much debt Rhythm draws.

The agreements strengthen access to capital and revise licensing economics; they do not provide new clinical results or regulatory approval for bivamelagon.