Rhythm Biosciences (ASX:RHY) is a cancer diagnostics company. Since its listing, the Company has been focused on ColoSTAT, a blood test for colorectal cancer. While ColoSTAT is still a focus of Rhythm Biosciences, and the Company is in the early commercialisation phase, the late-2024 acquisition of Genetype could change investor perception entirely.

GeneType offers further upside (and potentially earlier)

Rhythm Biosciences ceased to be a ‘one trick pony’ when it acquired Genetype. GeneType is an AI-driven test to help people know and manage their cancer risk by determining a risk profile and a personalised health management path. This may include recommending ColoSTAT where appropriate. The irony is that The Genetype business has provided revenue to Rhythm Biosciences before ColoSTAT and will serve as both a lucrative business in its own right as well as a ‘funnel’ for patients that may need ColoSTAT. Rhythm Biosciences’ total product suite could be appropriate for ~0.5bn individuals worldwide by enabling earlier and thus more effective forms of treatment.

ColoSTAT is ‘go’ in Australia, second time lucky

Rhythm Biosciences is in a far better position with ColoSTAT than it was this time two years ago. 2023 had been defined by its inability to get TGA approval, not because of any lack of efficacy, but because more independent production batches were needed than the Company possessed at that time. But Rhythm Biosciences has just entered the market, offering the test through its Melbourne lab as a clinical laboratory service which clinicians can order on their clinical judgement. The Company plans to broaden its market further in 2026, specifically once it receives NATA variation to scope assessment and this would support broader clinician use. As long-term followers of Rhythm Biosciences would know, ColoSTAT has higher sensitivity and is far less awkward, costly and time-consuming than the government-funded Faecal Immunochemical Test (FIT) used as part of the national bowel cancer screening program.

Valuation range of A$0.45-0.69 per share

We value Rhythm Biosciences at $0.45 per share in a base case scenario and $0.69 per share in an optimistic (or bull) case scenario, using a DCF methodology, valuing the Company as a unified group rather than a sum of its parts. With CY26 set to be a year of significant growth for both GeneType and ColoSTAT, investors may not have long to wait to realise upside in the stock. Please see page 19 of our note for further details on our valuation and page 22 for the key risks associated with our thesis.