Fractyl Health, Inc. Common Stock Price & Performance (GUTS)

It is now my pleasure to pass the call over to Harish. Thank you, Brian, and good afternoon, everyone. Thank you for joining us today. GLP-one drugs have undoubtedly transformed people's ability to achieve short However, real world data revealed the significant unmet need in obesity that remains. Nearly sixty five percent of patients discontinue these treatments within the first year with many experiencing wrap According to a recent study in JAMA, only a minority of individuals who stopped taking GLT one drugs reinitiate therapy within one year. So while these drugs deliver initial success, long term weight maintenance remains elusive for too many people caught in an unending pattern of loss and regain. Even as more drug options become available, it's becoming clear that non drug options will play a crucial role in long term weight maintenance. This is the single largest gap in obesity care today. Fractal is pioneering the first potentially durable solution to address the weight maintenance crisis. Not just managing symptoms, but tackling the root Unmet need is clear. And we are driving as rapidly as possible to deliver important datasets to demonstrate the potential of our solutions to address this need. Today, I'll take you through the defining milestones of 2024 and why we believe 2025 marks a pivotal step forward for Fractal as we are laser focused on our efforts to deliver long term metabolic health solutions to patients who need them.

We made tremendous strides across clinical, regulatory and financial milestones in 2024. We completed our IPO debuting on the NASDAQ under the ticker symbol GUTS strengthening our financial position. Secured FDA IDE approval for a pivotal study of RUVICA's role in weight maintenance following GLP-one drug discontinuation setting the stage for a major value inflection point as we generate the industry's first ever randomized data in weight maintenance, a completely untapped market. Earned FDA breakthrough device designation for RUVITA in weight maintenance after discontinuation of GLP-one based therapy. Initiated the REMAIN-one pivotal study with an overwhelmingly positive response from both patients and physicians reinforcing the urgent demand for an off ramp to GLP-one drugs. Advanced our Rejuva gene therapy platform nominating REJUVA-one as the first smart GLP-one type two diabetes candidate and Rejuva-two as a smart GIP GLP-one candidate for obesity. Received industry recognition with Rejuva's preclinical data being named the top abstract at ADA's eighty fourth Scientific Sessions for a head to head study that showed Rejuva prevented weight and glycemic rebound after semaglutide withdrawal. And completed key in vivo studies to support a clinical trial Apple application for RIGUVA-one laying the foundation for the next steps in this important Turning to 2025, we expect this to be a breakout year for Fractal.

Our first pivotal data readout our first regulatory filings for our gene therapy platform and our clear path to market leadership in obesity and metabolic health. We have two distinct but highly derisked event paths, one for RUVICA and weight maintenance and the other for RIGUVA001's path to first in human data in type two diabetes. We expect to achieve key clinical milestones from the REMAIN-one study in 2025, starting with open label data from the REVEAL-one cohort expected at the end of Q1, a midpoint analysis anticipated at the end of Q2 and full study enrollment breakthrough advancements in weight maintenance. We also plan to submit the first CTA module for REJUVA001 in Type two diabetes to regulators in the first half of twenty twenty five and if our CTA is authorized, we expect to report preliminary data in 2026. Now let's dive deeper into the progress we've made and what's on the horizon. In January, we made the strategic decision to focus our REVITA program exclusively on weight maintenance post GLP-one withdrawal, prioritizing the REMAIN-one pivotal study. This decision was driven by promising early insights from REVEAL-one and overwhelming demand from both patients and physicians to participate in the REMAIN-one pivotal study.

In just six months, over one hundred and eighty nine patients have enrolled across 13 clinical sites, reinforcing the urgent need for an effective offram from GLP-one therapy. In January, we also shared initial results from the first patient treated in the REVEAL-one open label cohort. This patient lost more than 15% of their total body weight on a GLP-one drug and after discontinuing per study protocol, underwent the REVITA procedure. One month post procedure, the patient successfully maintained their weight loss during the holiday season a notoriously challenging time for weight management, For context, prior studies of tirzepatad withdrawal show an average 3% weight regain within four weeks of GLP-one discontinuation. These early findings suggest RUVITA may provide a path forward for patients transitioning off GLP-1s and we look forward to sharing sharing additional patient data later this month. The financial pressures on current GLP-one treatments are becoming impossible to ignore. With over seventy percent of U. S. Adults affected by obesity driving an estimated $170,000,000,000 in annual medical costs, payers are reassessing their coverage. For example, West Virginia's Public Employees Insurance Agency discontinued GLP-one coverage, citing unsustainable monthly costs. And insurers in states like North Carolina and Colorado are following suit amplifying the need for sustainable long term solutions.

There is an interesting emergent dynamic in that obesity has become a health equity concern for public payers and yet they are struggling to justify ongoing coverage of drugs that clearly work but where their own real world evidence shows that adherence is a significant issue. Beginning to ask what's next? He shared with me I'm excited to provide solutions for patients who otherwise have none. There is incredible interest in joining this study and in the prospect of long term durable weight maintenance solutions. Shifting focus to the REMAIN-one randomized pivotal study, this groundbreaking double blind trial is designed to evaluate the efficacy of our RUVITA procedure in sustaining weight loss after discontinuation of GLP-one drugs. As the first study of its kind, REMAIN ONE places Fractyl at cutting edge of innovation in long term weight maintenance solutions. Let's frame what is a reasonable ex expectation for a clinically meaningful weight maintenance solution. The FDA has specified that weight maintenance is defined as the achievement and maintenance of clinically meaningful weight loss for one year after the discontinuation of ongoing therapy. In their SURMAINT-four study of tirzepatide withdrawal, Eli Lilly reported that only about sixteen percent of study participants maintained at least 80% of the weight they had lost while on the drug one year afterwards.

We believe that a weight maintenance therapy should at a minimum retain at least 50% of their weight loss at one year. A home run would be for a majority of patients to [indiscernible] one year. Given the magnitude of the unmet need, we believe this range of weight loss. And despite the development of a variety of products for obesity, ranging from peptides to small molecules to siRNA approaches, we are unaware of any other products in development that have the potential to sustain metabolic benefits for more than one year after drug discontinuation like the ones we are developing at Fractal. The German real world registry study in patients with type II diabetes has given us valuable data that validates our confidence in REVEIT as a potential solution. We have seen impressive clinical results in the first tranche of seventeen patients who have achieved one year of follow-up. Despite the fact that these individuals represent a hard to treat patient segment, at twelve months post RUVITA procedure, mean weight was reduced by more than seven kilograms within one month and then sustained for one year thereafter. At twelve months post procedure, ninety four percent of participants reported they would undergo REVITA again and one hundred percent would recommend To date, no device or procedure related serious adverse events have been reported.

Think about what this means. In a hard to treat patient population, they undergo a procedure and one year later they are living their lives at a lower weight sustainably. We believe this is a very powerful clinical profile for weight maintenance therapy a real world setting. Looking beyond data and with an eye towards commercialization, we plan to leverage our relationships with GI Endoscopists who specialize in bariatric and metabolic endoscopy to build a scalable and efficient commercial model. These physicians have a built in patient base actively seeking sustainable weight management solutions and a strong referral network from primary care providers. The integration of RAVITA into these existing workflows where millions of endoscopic procedures are already performed annually for patients with obesity creates a clear high volume opportunity for broad adoption. Unlike traditional drug based approaches, RUVICA represents a durable procedure based intervention designed to fit seamlessly into the standard of care for patients transitioning off GLP therapy. We look forward to continuing to build out this targeted commercial model and discussing our path forward in future quarters. Now let's talk about Rejuva, our next generation approach to metabolic disease. Unlike traditional GLP-1s that bombard your our smart GLP-one candidates are designed for physiologically regulated More GLP-one when you need it where you need it, We believe this is the next generation of incretin therapy.

Moreover, the anticipated low viral doses can enable a low cost of goods and a new pricing model for gene therapies because a patient population at risk is so large. This is a new commercial model for gene therapies and one that we believe can overcome the challenges of commercializing gene therapies to date. At the end of last year, at the World Congress for Insulin Resistance, we presented key preclinical data demonstrating the successful targeted delivery of REJUVA-one our smart GLP-one pancreatic gene therapy in large animal models Using our proprietary endoscopic ultrasound guided system, we achieved safe and precise pancreatic delivery in Yucatan pigs at a low total viral dose, closely mirroring our planned first in human studies. Results showed therapeutically relevant GLP-one expression within pancreatic beta cells with no adverse safety effects reinforcing REJUVA-one's for type two diabetes. We recently met again with German regulators and achieved alignment on a patient population and study design for the REJUVA-one first in human study. Our primary focus will be to evaluate its safety and tolerability and the study is also designed to provide an early indication of potential efficacy to help determine the optimal dose for a future Phase three study.

We plan to investigate one in a patient population with uncontrolled type two diabetes who were on a GLP-one drug and between one to three other non insulin glucose lowering agents. We're very encouraged by the positive dialogue with German regulators and the favorable feedback we have received thus far on our preclinical program and data and our upcoming CTA filing. And with this critical validation and alignment in place, we are on track to submit this first CTA module to regulators in the first half of twenty twenty five and if our CTA is authorized expect to report preliminary data in 2026. We hope to show how a smart GLP-one can reshape the treatment paradigm in metabolic disease and bend the curve toward remission of obesity and type two diabetes. With that, I will now turn the call to Lisa to provide an update on our fourth quarter and full year financials. [indiscernible] Thank you, Hari. In the fourth quarter of twenty twenty four, revenue was generated from our commercial pilot in Germany and enabled patients to enroll in the German real world registry study. Turning to operating expenses. Research and development expense in the fourth quarter of twenty twenty four was 20,300,000.0 compared to $10,100,000 for the same period in 2023.

The increase during the quarter was primarily due to the progress made in our Remain one clinical study REVITALIZE-one clinical study, continued development of the REJUVA platform and increased personal related expenses including stock based compensation. Selling, general and administrative expense in the fourth quarter of twenty twenty four was $4,900,000 compared to $2,800,000 in the same period in 2023. The increase during the quarter was primarily due to the increased costs associated with operating as a publicly traded company, and increased personal related expenses, including stock based compensation. For the fourth quarter of twenty twenty four, we reported a net loss of $25,000,000 compared to a net loss of $19,200,000 for the same period in 2023.

The increase in net loss was primarily attributed to the increase in operating expenses discussed above partially offset by the non cash gain from changes in fair value of warrant liabilities as well as an increase in net interest income. As of 12/31/2024, Fractal had approximately $67,500,000 in cash and cash equivalents. Based on our current development plans, believe that our existing cash and cash equivalents will be sufficient to fund our operations through key anticipated company clinical milestones into 2026.

I will now turn the call back to Hari. Thank you, Lisa. We are not just participating in the obesity revolution, we are defining it. These are the earliest days in this market. With products that show tremendous promise and yet large unmet needs [indiscernible] This is our moment to lead. And we are moving with urgency. 2025 will be the year that we show the world that weight maintenance is possible The work we are doing today has the power to change millions of lives offering real lasting solutions beyond temporary fixes. The demand is clear, The science is strong. And our path forward is bold. It takes guts. Want to take a moment to express my deep gratitude to the patients and physicians who place their trust in us to the dedicated employees at Fractal Fractyl are relentless in their and to you, our shareholders, whose support fuels our mission. Your belief in our work drives us forward and we have never been more confident in our ability to deliver on our promises. And with that, we will now open the call up for questions. Thank you.

Our first question comes from the line of Jason Gerberry BofA Securities. Your line is open, Jason.

This is Chi on for Jason. Thanks for taking our questions. I guess the first one, I want to touch on Remain one.

So, you are expecting a twelve week point analysis late in second quarter, We are say right at the start of second quarter now. So presumably you have a line of sight on how many patients who have achieved the pre specified 15% total body weight loss and those who have subsequently been randomized two to one to [indiscernible] So I'm hoping you can elaborate if you have randomized already randomized roughly 40 patients or so are expected for the midpoint analysis.

And curious what are the dropout rates so far that is patients getting free tirzepatide but don't follow through with the randomized portion of Hi, Chi. Thank you for the call and the question. I think that as of this morning, there were nearly one hundred patients who have achieved either 15% body weight loss or close to it. A substantial Number of the proportion of forty five have been randomized and or procedures are being scheduled. What I can I don't know the exact number off the top of my head, but I can tell you is that there's not a single patient who has dropped out of the study because they have not wanted to undergo the procedure so far? So every patient who has hit 15% body weight loss and who's had a procedure who has has been scheduled has undergone that procedure. And we're gratified by that fact because as you know, there's a question about whether patients study in order to get tirzepatide and then not be interested in the procedure itself. That has not been an issue that we have observed thus far. And with respect to the exact timing of the midpoint analysis, we will be giving updates along with REVEAL-one data at the end of this month.

But we remain on track based on what we're seeing right now.

Great. I think this that way to my second question. And thanks for the color on RemainOne. So on REVEAL-one, if data expected later this month, What sort of format and venue do you have in mind for the data disclosure? Can you remind us your expectation of the REVEAL one data I know you've referenced for septatitis three percent waking up to four weeks. So remind us what your expectation of the PDU-one first data set and do you expect a lot of data variability from the 10 patient or so worth of data? We're having some background from the operator.

But I'll go ahead and answer your question. I'll repeat your question, Chi, and then we will we will and then we'll go. So what you're asking is what is the expectation for how we're going present the data and then also the variability there? I can tell you that This is a more heterogeneous patient population than REMAIN one. As you may remember for the audience, as you may remember in REMAIN one, we're taking individuals who are obese who are GLP-one drug naive. We're providing tirzepatide, 15% body weight loss and then randomizing them. And in the process of after stopping their tirzepatide. And what that allows is a more or less homogeneous group of individuals who have lost a little bit over 15% total body weight loss. In REVEAL, we are enrolling subjects who have already been on either Simeglis or tirzepatide. The majority of them have been on tirzepatide. But they have lost varying amounts of weight relative to what you would expect to see from the REMAIN study. What we've shared already is that a single individual who lost 1718% total body weight, who was followed through her one month visit The REVITA procedure she had not regained any body weight and had not been feeling any ill health.

So what we hope to be able to show with the press release in the end of the month is a clear picture of this group of open label patients in REVEAL-one and to be able to give enough information to be able to unpack how you might translate that into what you would expect to see from remain? Got it. And just last quick one from me.

Can you talk about what are the gating items you need to complete before the CTA submission and first half twenty twenty five? I know you talked about this [indiscernible] I'm hoping you can fine tune where you are at with the process And are you still planning to initiate a first in human study in first half?

Right. So we provided additional clarity on that in our guidance today. We are going to be filing our first CTA module in the first half of the year. There are a there's a device module and a drug module. The device module is going to have certain preclinical verification testing that needs to be completed in addition to the in vivo testing on CTA enabling studies that have been done like aging and biocompatibility. So those are the sorts of things that remain on the device side of the house. And on the drug side of the house, we have some remaining CMC assay test and final testing to be completed before the drug is complete. And we are going to initiate that submission in the first half of the year as we had previously discussed.

Okay, great. Thanks so much. Thanks. Thank you. Our next question comes from Mike Oles of Morgan Stanley.

Please go ahead, Mike.

Great. Good afternoon and thanks for taking my questions. Open label portion of the study. You mentioned planning to give an update sort of end of this month. Just curious number of patients you plan to share. I think in the past you were suggesting Yes, that's still the case. We've actually just been constraining the size of that study as we've been also focusing on enrolling remain And so we are continuing to we've enrolled north of 10 patients so far and we are planning on sharing about 10 patients' worth of data by the end of the month.

Okay, great. And then maybe just Rejuva question more on two, if you could just remind us or give us an update there on the status of that program and next steps there? Thanks.

So, Rojuva-two is a smart GI GLP-one dual in protein It's the same delivery catheter that we developed for one and it is the same AAV9 backbone. The difference is that it will that it's a plasma that will express both GIP and GLP1. That's still in preclinical testing. And we have not provided guidance at this time on when that will go to the clinic. We do believe that REJUVA-two in preclinical studies has demonstrated efficacy on both blood sugar and on body weight. We are planning to enroll patients who are have obesity and type two diabetes in the first in human study. And we believe that we're going to learn a great deal about dose from REJUVA-one that will inform how we plan to dose two in patients as well. And so you'll as we make more progress on one in the clinic, or path to the clinic and then into the clinic, we'll give you guidance on two's timeline to a person human as well.

Great. Thanks again for taking my questions.

Thanks.

Thank you. Our next question comes from Michael DiCiore of Evercore ISI. Please go ahead, Michael.

Hi, guys. Thanks so much for taking my questions and congrats on all the progress Just two quick ones from me. Regarding that first patient in REVEAL, that maintained her body weight. Is there any updates on that patient? In terms of how far, how much further along she is and whether she still has maintained or not gained any weight back? And have you done any further workup or even biomark analysis on that patient to maybe shed some more light on on durability or even nicotine for that matter? Thank you.

Thanks, Mike. I don't have any additional information to share at this time. I don't though we will have more information in due course. And one of the nice things about the REVEAL-one open label study is that there we plan to continue to follow these patients beyond early follow-up as you know. So we're going to share one month data in a cohort, but we certainly will be following that up with three month and six month data when we have it. But I have no specific additional information to share at this time.

Got it. And just one quick follow-up.

More of a commercial type of question. Are there any plans assuming the REVEAL one and the remain midpoint analysis is stellar, can you come midyear? Are there any plan to seek potential strategic partnerships or collaborations to maybe bolster commercialization efforts? And share development costs Great question, Mike. We're talking to a lot of the major players in the space I believe that this is a study and an endpoint and an unmet need that is very much on a lot of people's minds. And I think that there are a lot of people who would be interested in this therapy and the opportunity.

Got it. Thanks so much.

Yes.

Thank you. Our next question comes from the line of William Wood of B. Riley Securities. Please go ahead, William.

Thank you so much. Congratulations on a very nice year and quarter.

A couple from us. Maybe just one brief one on or actually I guess sort of a couple combined two on the REVEAL one. I'm just kind of curious as we move throughout the year, you said you'd be providing additional data points in weight loss or weight maintenance, I guess. But when upon those readouts, would we expect sort of increasing data including biomarker possibly body composition or other events or other additional data analysis And then additionally, do you think and I understand at least in remain it's all in tirzepatide, based population, but do you or would you potentially expect differences in weight regain based on whether the patient originally took CEMA or tirzepatide just with differences in body composition after those two drugs or any other weight loss [indiscernible] follow-up. Thank you.

Thanks, William. Appreciate it. So we are collecting blood and doing lab work on assessments on blood sugar parameters, cardiovascular parameters, and also measuring leptin as a biomarker for body fat mass content. And so we will be compiling those data and then sharing them later on in the year for REVEAL and while we expect top line data for remain, at the end of Q2, we do plan to to investigate blood sugar and other assessments as well for reporting later on, although I can't guarantee that all of that will be available right upfront. With respect to the weight regain our analysis and we've looked at this extensively is that the weight regain from semaglutide and tirzepatide does not depend so much on the drug that they're on, but rather on the time course since the discontinuation of the medicine. And so that's part of what we think is important to share as we walk through the REVEAL data set so that people can understand how to think about what RUVICA may be doing from the open label cohort as a prelude to the randomized data coming thereafter.

Excellent. Appreciate that. Thanks for color. And then in terms of you mentioned that there's been an a couple of states or I guess maybe even numerous states that have either rejected insuring or covering obesity treatments and then there's been others that have sort of put it on the table and either accepted it or have been been sort of turned back the clocks on it. Have you gone to any of the states or bodies that have potentially had these sort of back and forth thoughts on obesity treatments and sort of seen what their idea is on on the on the DMR sort of treatment? And if they if this is something that they look at and they're like, oh, this is we're actually very interested in this. So sort of apart from say an FDA or or a broad insurance program? Just curious of those thoughts.

We've had some conversations with with public payers and I think we have a good their pain points to be. I think that the proof will be in the data that we generate remain in the pivotal study in order to be able to articulate a value proposition more crisply. But what I can say is that the desire to be able to address obesity in a holistic [indiscernible] I do not believe that that was perceived to be a need by payers five years ago. But I do believe that that is a ground swell that is occurring currently. And I believe that the public payers see that as much as the employers do. So what we are aiming to be able to do with the REMAIN study, which and I think it is holistic strategy for durable weight maintenance that we believe will be highly attractive, but we'll have more to say about that with data in hand as we pursue the program over the coming quarters. [indiscernible] I'll stop there. I'll hop back in the queue. Appreciate you taking our questions and congratulations again.

Thank you.

Thank you. I would now like to turn the conference back to Doctor. Raja Kapalin. For closing remarks.

Sir?

Thank you very much. Thanks to everyone for joining us this afternoon. As always, we appreciate your continued interest in and support of Fractyl, and we look forward to continuing to sharing updates on our progress as we address weight maintenance in the coming months. Look forward to speaking with you again shortly.

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