- Rhythm Pharmaceuticals has a ROIC of -62.80% and a WACC of 15.89%, indicating it is not generating returns above its cost of capital.
- Deciphera Pharmaceuticals, Inc. (DCPH) shows a slightly more favorable cost structure than Rhythm Pharmaceuticals, though both operate at a loss.
- Krystal Biotech, Inc. (KRYS) is an outlier with a positive ROIC, suggesting efficient capital utilization within the biopharmaceutical industry.
Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) is a biopharmaceutical company focused on developing and commercializing therapies for rare genetic disorders of obesity. The company is in the development stage, which often involves significant investment in research and development (R&D) without immediate returns. This is reflected in its financial metrics, particularly its Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC).
Rhythm Pharmaceuticals has a ROIC of -62.80% and a WACC of 15.89%, resulting in a ROIC to WACC ratio of -3.95. This indicates that the company is not currently generating returns that exceed its cost of capital. This scenario is common in the biopharmaceutical sector, where companies invest heavily in R&D to bring new therapies to market.
In comparison, Deciphera Pharmaceuticals, Inc. (DCPH) has a ROIC of -60.55% and a WACC of 5.15%, with a ROIC to WACC ratio of -11.75. Despite a similar negative ROIC, Deciphera’s lower WACC suggests a slightly more favorable cost structure compared to Rhythm Pharmaceuticals. However, both companies are still operating at a loss relative to their cost of capital.
Krystal Biotech, Inc. (KRYS) stands out among its peers with a positive ROIC of 10.91% and a ROIC to WACC ratio of 1.39. This indicates that Krystal Biotech is generating returns above its cost of capital, suggesting efficient capital utilization. This efficiency is not common in the biopharmaceutical industry, especially for companies in the development stage.
AnaptysBio, Inc. (ANAB) has a ROIC of -26.40% and a WACC of 13.46%, resulting in a ROIC to WACC ratio of -1.96. This is the least negative ratio among the companies with negative ROIC, indicating that AnaptysBio is closer to breaking even compared to others like Deciphera Pharmaceuticals and Akero Therapeutics.
