Sprinting to the starting line: The Rhythm Biosciences (ASX: RHY) Story

After spending some time last week and over the weekend researching ASX diagnostics companies… and I kept coming back to the same uncomfortable question:

What does “commercialisation” actually mean…?

We often see blue-sky TAMs in the billions and Investor expectations that market entry = profitable business

But the reality is far from it.

In many ways, getting the blood diagnostics product to market is just the beginning.

There are a whole bunch of different gates that the company needs to pass through before it becomes a profitable business.

More data, more education, more adoption.

But the prize is big…

Late last year, one of the biggest cancer testing companies in the US, Exact Science, was acquired by Abbott for US$21 billion.

The largest biopharma deal of 2025:

So, after spending my weekend researching the industry (ha! Nerd), I may have developed a framework for thinking about these types of companies.

There are 4 pillars for building a diagnostics business: Approvals, Logistics, Adoption and Reimbursement.

With one major foundational layer underpinning it all: Clinical Evidence.

Approvals just get you to the starting line, but are necessary to bring the product to market.

(and as we saw this week with Grail’s multi-cancer test failing to meet its primary endpoint, not getting approvals can be a momentum killer)

Adoption takes extensive education for doctors and patients, as well as marketing and persuasion.

Finally, reimbursement (by the government or insurance companies) is when you get paid, particularly if there is broad insurance coverage.

The addressable market IS BIG for companies developing diagnostic tests (particularly screening tools for patient populations).

Millions of people in the western world at an age where cancer is a risk…

But each company needs to start off small.

(Normally, in a single lab-developed test)

How do you eat an elephant? One bite at a time…

Essentially, the company is seeking to build a body of evidence demonstrating clinical utility.

What’s clinical utility?

It's the fact that the test actually changes treatment decisions, AND that those changes improve patient outcomes…

With clinical utility, payers come to the table, regulators approve the tests in broader circumstances, and adoption grows.

It’s not a linear path, and there are no shortcuts.

But as I mentioned, the prize is big - and in the US there have been a number of multi-billion dollar companies built off the back of blood diagnostics products.

… Exact Sciences was once capped at US$125 million.

Today, I want to take a look at a company that is building on each of these pillars of success, with its own blood test for colorectal cancer.

Rhythm Biosciences (ASX: RHY)…

Rhythm Biosciences (ASX: RHY) first IPOd in 2017 with a simple premise.

Colonoscopies are unpleasant.

And the alternative is not great either.

People don’t want to poo in a bag and send it to a lab for colorectal cancer screening.

But colorectal cancer is one of the deadliest cancers in the world.

So, how do we change patient behaviour?

Rhythm’s answer…

A blood test, which is much more palatable to the general patient population, but has the same level of accuracy as the poo in a bag test.

Rhythm has a test that has been shown to accurately screen for colorectal cancer:

That company I mentioned above, Exact Science, is actually the brains behind the poo in a bag test, and built a multi-billion dollar business off the back of it.

Back to Rhythm…

In 2020, the company saw a significant share price run-up in anticipation of its initial market entry.

But as setbacks to approvals in Europe and Australia mounted, the company had to rethink its strategy.

(And essentially re-engineer its product).

In April 2024, a new CEO, David Atkins, was brought in to turn the business around.

The company made a strategic acquisition of the geneTYPE assets from the old Genetic Technologies (ASX: GTG), which was in administration.

A genetic testing kit on the market that provides cancer risk assessments for patients.

And over the last 12 months, Rhythm has been building significant momentum towards bringing a product to market… 

RHY is sprinting to the starting gates.

It’s a monumental effort to get a product to market, but now the real challenge begins.

How will they get people to use it AND how will they get the government to pay for it?

There are essentially two ways in which any diagnostic product can commercialise:

Here’s the breakdown:

Rhythm will be developing its test FIRST as an In-House test, with no reimbursement.

(Starting on the left)

Then, once it secures more real-world data, it will move towards a commercial IVD (on the right).

Right now, Rhythm is working through a special access program that has capped out at 20 physicians who receive free access to the tests for their patients.

These physicians will be early adopters of Rhythyms' product and will provide valuable feedback as it gathers more real-world data.

Right now, I don’t think of Rhythm as a company that will generate revenue quickly…

Even though it is at the “commercialisation” stage.

So, what does it take for Rhythm to go from this early stage to a commercial business?

Essentially, Rhythm will need to hit on all four pillars to succeed:

This is the path taken by many successful diagnostics companies. 

Have a read through the history of Exact Sciences, and how the company went from US$125 million to US$13 billion off the back of its colorectal cancer screening test.

Key to the company's success was patient adoption, and a market campaign that would make the Mad Men team proud:

UPDATE: I was about to press send, but Rhythm just entered a trading halt today due to a proposed underwriting agreement for the RHYO options.

This is a very good result for the company and de-risks the “options dance” uncertainty. 

I’ve left my take (before the trading halt) in here for posterity…

It’s no secret (and this was discussed at the investor lunch) that Rhythm have some marginally in-the-money options that are about to expire.

There are 47 million options on issue at 20 cents, which, if exercised, would net $9.4 million to the company. 

The options are also listed.

I have written previously about how listed options are a high-risk, high-reward way to get leverage on a short-term bet: Explained: Why Options Magnify Risk and Reward

If exercised, it would be a huge boon to the company, given that Rhythm had just $1.6 million in cash at the end of December.

So close to the exercise date, the company will be doing everything in its power to get the share price up to incentivise the options conversion.

This means roadshows, lunches (like the one I attended) and newsflow.

Also, existing loyal shareholders may also soak up some of the selling to support the company in this endeavour.

IF Rhythm can secure an underwriter for the options as well, it would be a big signal to the market that this is the new benchmark for the company.

UPDATE: This happened

However, if the options go unerxercised it is still likely that Rhythm would need to raise money. This may put some downward pressure on the share price as the company will be come raise.

So the position is precarious.

Not financial advice.

Firstly, I think the CEO, David Atkins, should be commended for turning the company around in a relatively short time.

Not only from a share price perspective, but also from the perspective of actually getting the product into the market and ready for patients.

The prize is big, as we’ve seen with the success of a company like Exact Science and the US$21 billion exit.

Rhythm still has a long, long, long way to go before it gets there.

There are still a number of traditional catalysts on the horizon, most notably the results from a study in partnership with the UK National Health Service.

Positive results from this study should open up a second (very large) market for the company. 

The options trade puts the company in a precarious position, knowing that dilution is around the corner. 

Rhythm will certainly be on my watchlist, and I’ll wait to see how the options trade plays out.

UPDATE: Now that the options have been underwritten, the investment case becomes more attractive. There will be some churn, but the balance sheet is now de-risked.

A big thank you to David Atkins for sharing the story with me.

See you all tomorrow,

The Armchair Analyst

Pacific Edge (ASX: PEB) reports expert panel support for its urothelial cancer diagnostics test (Cxbladder), advocating for Medicare coverage. (PEB)

🪑 Genuinely very good news for PEB; all sounds very positive and should lead to Medicare reimbursement (which, if you see below, is my fourth pillar for any diagnostics product).

Clarity Pharmaceuticals (ASX: CU6) reports that a fifth participant in its Phase II theranostic trial for advanced prostate cancer achieved undetectable disease and negative PSMA PET after two cycles of treatment. (CU6)

🪑 A picture paints a thousand words. Click the announcement and have a look as those black dots disappear! 

Trump will impose a 15% universal tariff after losing a case on tariffs at the US Supreme Court. (AFR)

🪑 I expect a wobbly day on the market, particularly for those companies that sell into the US.

Argent BioPharma (ASX: RGT) delivers 1,000 CannEpil units, with a resale value of $783,000, fully reimbursed under the Irish National Health Insurance scheme for refractory epilepsy patients. (RGT)

🪑 RGT recently acquired the CannEpil assets from AusCann - this appears to be the first commercial activity since the acquisition.

Neurotech International’s (ASX: NTI) product demonstrated a favourable safety profile in a GLP 90-day toxicology study.

🪑 This data is important for NTI’s IND and anticipation of a Phase 3 US trial for autism. 

Micro-X (ASX: MX1) is aware that it was named as a recipient of $1.5M Australian Government technology development grant on the government website, but no contract has been finalised yet. (MX1)

🪑 It would suck to not get the grant now. 

Grail’s (NASDAQ: GRAL) trial for its multi-cancer detection test failed to meet its primary goal. (BBC)

🪑 This news landed as I was researching diagnostics companies. Takeaway? There is a strong appetite for a multi-cancer blood test… however, the science is MUCH harder in practice.

FDA announces that one pivotal trial will serve as the default standard for drug approvals, ending the two-trial requirement. (Biopharma Dive)

Biome Australia (ASX: BIO) reports a 39.9% revenue increase to $12.4M and a net profit of $1.18M for 1H FY26, driven by strong product performance and international expansion. (BIO)

🪑I think that the market might like this one, strong revenue growth backed by profits up, gross margin up, and borrowings down…

Rhythm Biosciences (ASX: RHY) goes into a trading halt pending a proposed underwriting agreement for its outstanding RHYO options. (RHY)

🪑 Nice job. But it kind of threw out the whole “options dance” part of my newsletter today.

Lumos Diagnostics (ASX: LDX) secures US$720,000 in a milestone payment under its BARDA-funded paediatric clinical study for its rapid POC test. (LDX)

🪑 Always nice to secure non-dilutive funding.