Fractyl Health Q3 2024 Earnings Report

Fractyl Health EPS Results

• Actual EPS: -$0.48
• Consensus EPS: -$0.50
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A

Fractyl Health Revenue Results

• Actual Revenue: $0.01 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Fractyl Health Announcement Details

• Quarter: Q3 2024
• Date: 11/12/2024
• Time: After Market Closes
• Conference Call Date: Tuesday, November 12, 2024
• Conference Call Time: 4:30PM ET

Fractyl Health (NASDAQ:GUTS) is a clinical-stage medical technology company focused on the development and commercialization of minimally invasive, endoscopic therapies for metabolic diseases. Headquartered in Lexington, Massachusetts, Fractyl is advancing treatments that target the underlying physiology of conditions such as type 2 diabetes, obesity and nonalcoholic fatty liver disease (NAFLD) by modifying the duodenal mucosa to improve metabolic control.

The company’s lead product, Revita® Duodenal Mucosal Resurfacing (Revita DMR), employs a catheter-based hydrothermal ablation technique to remodel the lining of the upper small intestine. This outpatient procedure is designed to interrupt disease-driving signals between the gut and the liver, pancreas and brain, with the aim of improving glycemic control and reducing liver fat. Fractyl has conducted multiple clinical trials across North America, Europe and Asia, and holds CE mark approval in the European Union for Revita DMR.

Fractyl Health is also developing next-generation therapies and combination approaches to expand the reach of its duodenal resurfacing technology. The company has initiated pivotal studies to support U.S. regulatory filings and is preparing for broader commercial roll-out following anticipated approvals. Fractyl’s management team includes industry veterans in interventional gastroenterology, clinical development and medical device commercialization, positioning the company to address the growing global burden of metabolic disease.

Fractyl Health Q3 2024 Earnings Call Transcript

Key Takeaways

• We have completed enrollment of 45 patients for the midpoint analysis of our REMAIN-1 weight maintenance pivotal study after GLP-1 discontinuation and expect topline results in Q2 2025.
• We anticipate reporting initial data from the REVEAL-1 open-label cohort—tracking at least 10 patients with four weeks of follow-up—beginning in Q4 2024 to demonstrate durable weight maintenance off GLP-1s.
• Our REJUVA platform’s CTA-enabling studies in rodents and pigs are on track for completion by year-end, positioning us to file in early 2025 and initiate a first-in-human trial in H1 2025.
• Fractal ended Q3 with $84.7 million in cash, providing a runway through Q4 2025 while continuing to invest $19 million in R&D and $4.8 million in SG&A.
• Recent real-world data show high discontinuation and limited clinical benefit from existing GLP-1 therapies, highlighting the critical unmet need for durable weight maintenance solutions like ours.

Presentation

[Operator]

Good afternoon and welcome to Fractyl Health's third quarter financial results and business updates call. As a reminder, this conference call is being recorded. At this time, all participants are in a listen-only mode. There will be a question-and-answer session following management's prepared remarks. I will now turn the call over to Stephen Jasper. Stephen, you may now begin.

[Stephen Jasper, Head of Investor Relations at Fractyl Health]

Thank you. This afternoon, we issued a press release that outlines the topics we plan to discuss today. The release is available at www.fractyl.com under the Investors tab. Joining us on the call today are Dr. Harith Rajagopalan, Chief Executive Officer, and Lisa Davidson, Chief Financial Officer.

[Stephen Jasper, Head of Investor Relations at Fractyl Health]

Before we begin, I would like to remind everyone that statements made during this conference call do not relate to matters of historical fact, including statements about our objectives and anticipated clinical milestones, preclinical or clinical trial data, the impact of any of our product candidates, the design initiation, timing, and results of clinical enrollment in any clinical trial or readouts, the potential launch or commercialization of any of our product candidates or products, the sufficiency of our cash, cash equivalents, and investments to fund our operating activities for any specific period of time should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act.

[Stephen Jasper, Head of Investor Relations at Fractyl Health]

Actual results could differ materially from those indicated by the forward-looking statements due to the impact of risks, uncertainties, and other important factors. Participants are directed to the risk factors set forth in Fractyl's quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 12, 2024, and the company's other filings with the SEC. Any forward-looking statements made today speak only to Fractyl's operations as of today. Fractyl disclaims any duty to provide updates to its forward-looking statements, even if subsequent events cause the company's views to change. It is now my pleasure to pass the call over to Harith.

[Harith Rajagopalan, CEO at Fractyl Health]

Thank you, Stephen, and good afternoon, everyone. Thank you for joining us on today's call. This is an exciting time for Fractyl as we approach multiple critical milestones over the next few quarters. I'm immensely proud of the progress we have made across both of our platforms, Rivita and Rejuva, as we develop transformative therapies that can prevent and reverse metabolic disease. Q3 was another quarter of excellent performance and accomplishment. A few key highlights. First, we began enrollment in our Remain-1 pivotal study for weight maintenance after GLP-1 discontinuation, and this study is progressing rapidly. Second, we anticipate reporting data from the Reveal-1 open-label cohort of this study beginning in Q4 2024. Third, we began enrollment under the expanded protocol for the Revitalize-1 pivotal study for Rivita in type 2 diabetes, and we expect to report top-line data in mid-2025.

[Harith Rajagopalan, CEO at Fractyl Health]

Fourth, we continue to present compelling weight maintenance and blood sugar data from Rivita and Rejuva at multiple medical meetings. We are confident in our ability to continue to execute against our upcoming major value drivers, and we continue to be laser-focused on demonstrating the potential for our therapies to transform the treatment landscape in obesity and diabetes. To begin, let's talk about the rapidly evolving landscape of obesity and GLP-1 drugs. These drugs have clearly had a positive impact on treatment options for people with obesity and diabetes, but they also carry significant challenges that affect both patients and healthcare systems. There are three main concerns that have emerged in the past year, and they are all intertwined.

[Harith Rajagopalan, CEO at Fractyl Health]

First, the durability of weight loss effects over time with GLP-1 drugs is beginning to be a major problem, as discontinuation rates and weight rebound are major challenges for the class. Second, there is an obvious and growing gap between the impressive phase three results from these drugs versus their substantially less impressive real-world performance. And third, despite their expense, these drugs are not delivering discernible clinical benefit to payers, leading to fundamental and crucial questions about value. No one doubts the importance of durable, clinically meaningful weight loss, but the question is, why are these drugs not delivering on their promise in the real world, and what will? We've spoken before about poor persistence or durability of therapy from the GLP-1 drugs. It's essentially the same issue that has already been seen with other drugs for every other chronic non-acute disease, including hypertension, high cholesterol, and diabetes.

[Harith Rajagopalan, CEO at Fractyl Health]

Investors were assured that in obesity, unlike in other chronic diseases, patients will want to stay on therapy because they can see the benefits. But this is not the case. Discontinuation rates from GLP-1s are high, even when controlling for cost, access, and side effects. In addition, the real-world effectiveness of GLP-1 drugs is not matching data shown in phase three trials. A study from the Cleveland Clinic published in JAMA Network Open in September 2024 showed that in nearly 2,000 patients who were prescribed semaglutide in their Ohio and Florida hospital networks, mean weight loss at one year was only 5.1%, or roughly one-third of the amount of weight loss that was seen from their registrational clinical studies. In addition, a Reuters article from October 24, 2024, highlighted data from pharmacy benefits manager Prime Therapeutics.

[Harith Rajagopalan, CEO at Fractyl Health]

Key highlights from the analysis: only one in four patients are still taking their GLP-1 drug at two years, and drug switching rates are extremely low. Despite the drop-off in utilization, the insurance costs for patients who are using Wegovy rose significantly, leading to a nearly 50% increase in the total cost of care for these individuals. Critically, this analysis found no decrease in obesity-related medical events in the patients who were prescribed GLP-1s, such as heart attacks, strokes, or new diagnoses of type 2 diabetes. So, in summary, what the data are beginning to show are poor durability, higher cost, and absence of real-world clinical benefit. In conversations with key payer stakeholders, a recurring theme has emerged. The primary concern is finding a way to de-prescribe GLP-1s because of the disparity between increased pharmacy costs and lack of consequent medical benefit.

[Harith Rajagopalan, CEO at Fractyl Health]

There are many drugs in development for obesity today, but if they all lack durability like today's GLP-1s, they will all have the same essential weaknesses as the drugs that already exist, and all of this underscores the biggest unmet need in obesity today: finding a pathway to durable, reliable weight loss maintenance. This is precisely what our therapies aim to accomplish, and we do this by offering patients therapies that are designed to provide them a durable metabolic reset. Let's move on to discuss our progress across our platforms, starting with Rivita and outpatient endoscopic procedural therapy targeting the duodenum. We recently presented compelling weight maintenance data from Rivita at two medical meetings: DGVS in Germany and ObesityWeek in San Antonio, Texas.

[Harith Rajagopalan, CEO at Fractyl Health]

At DGVS, we presented clinical results from our German real-world registry, showing that Rivita can deliver sustainable weight loss and metabolic benefits to patients for up to one year post-procedure. These results confirm earlier observations from Rivita clinical trials of the potential for a one-time Rivita treatment to have real-world results that can actually match or exceed clinical trial results. In addition, in the presentation, we highlighted some new information on patient-reported outcomes and quality of life, which were remarkably favorable for Rivita even one year post-procedure. Last week, at the ObesityWeek medical meeting, we presented a new analysis of pooled data from five Rivita clinical studies tracking participants for one year after a Rivita procedure. These patients who had poorly controlled type 2 diabetes and advanced age typically face significant challenges in losing weight.

[Harith Rajagopalan, CEO at Fractyl Health]

The pooled data post-Rivita showed that 90% of participants lost weight one month after the procedure, with 84% maintaining weight loss for a full year, even in the absence of any prescribed diet or lifestyle changes over the course of the year. Compare this to the only 16% of patients who maintained at least 80% of their lost body weight one year after stopping tirzepatide in the SURMOUNT-4 study sponsored by Eli Lilly, even when all of the patients were prescribed a diet and lifestyle change. The data we presented at ObesityWeek, in addition to the data from our German registry, were both presented to the FDA as part of our breakthrough device designation application for Rivita, which was granted earlier this year for weight maintenance after the discontinuation of GLP-1-based drugs.

[Harith Rajagopalan, CEO at Fractyl Health]

Rivita is the only device or drug, to our knowledge, to have obtained breakthrough device designation from the FDA for a broad obesity indication. Our pivotal weight maintenance study, Remain-1, is moving rapidly. As a reminder, Remain-1 is our randomized, double-blind, sham-controlled study testing Rivita against a sham procedure. This is the first pivotal study of an intervention that aims to demonstrate durable weight maintenance after discontinuation of GLP-1-based drugs. People with obesity and a BMI between 30 and 45 kilograms per meter squared who have not been on GLP-1 drugs will be started on tirzepatide to achieve 15% total body weight loss. Once they have achieved that weight loss, they will discontinue tirzepatide and be randomized to either Rivita or sham in a two-to-one treatment allocation. All patients will be prescribed a diet and lifestyle program.

[Harith Rajagopalan, CEO at Fractyl Health]

And we believe that if the pivotal study is successful, the data from this study can support a PMA application for approval in the United States. We are announcing today that we have already completed enrollment of a sufficient number of patients for the midpoint analysis of the study, and we continue to expect to report this midpoint analysis in Q2 2025. We believe this will be a crucial catalyst for the program, marking the first demonstration of randomized data in this patient population. In addition, our enrollment rate in Remain-1 is on par with those for GLP-1 drug studies in obesity, demonstrating the substantial interest from patients and clinicians in this much-needed weight maintenance therapeutic option.

[Harith Rajagopalan, CEO at Fractyl Health]

In the Remain-1 study, we are implementing a comprehensive approach to handling the patient experience, providing GLP-1 drug to clinical trial sites, referring patients to Rivita Centers of Excellence for the endoscopic procedure, and offering a diet and lifestyle counseling program. This integrated obesity solution entails the use of, one, best-in-class pharmacology, two, a Rivita metabolic reset, and three, a diet and lifestyle program on the heels of Rivita. The combination of these elements for obesity is quite unique, and it positions us as experts in the implementation of an integrated care solution for people with obesity and related diseases. It also creates for us an exciting opportunity for a unique and compelling commercial model that can replicate the clinical pathway for Remain-1 in a real-world setting post-approval. More on this potential commercial model later. Moving to the Reveal-1 open-label cohort of the Remain-1 study.

[Harith Rajagopalan, CEO at Fractyl Health]

Reveal-1 is an open-label study that aims to enroll patients who have already lost at least 15% total body weight on GLP-1s, but who need to stop taking these drugs. Patients will discontinue their GLP-1 drug, undergo Rivita, and subsequently begin a diet and lifestyle program. The response to this study has exceeded our expectations. What we are hearing from clinical trial sites and from obesity KOLs at ObesityWeek is that there is a large and growing pool of patients on GLP-1s who are looking for an off-ramp for a variety of reasons. And this is the population that Reveal-1 aims to target. We anticipate that we will begin sharing the first tranche of Reveal-1 data at year-end. As mentioned above, we believe that one-month data, while early, will be a key leading indicator of longer-term results.

[Harith Rajagopalan, CEO at Fractyl Health]

After this initial tranche of data, we plan to provide incremental updates in this open-label cohort as longer-term follow-up accrues over the course of 2025. Moving from weight maintenance to type 2 diabetes with Rivita. In our Revitalize-1 study for type 2 diabetes, we've expanded our study criteria to include patients who are not yet on insulin. There are a large pool of patients who would rather live with poorly controlled type 2 diabetes than start on insulin, and that's who Rivita aims to target. In fact, patients with type 2 diabetes who are on two or three agents to lower their blood sugar often avoid insulin therapy for an average of five years and have an HbA1c of nearly 9% before initiating insulin, despite the high risks associated with their condition.

[Harith Rajagopalan, CEO at Fractyl Health]

What this means is that in the type 2 diabetes market, there is a huge prevalence pool of patients who have high blood sugar and are needing alternatives to insulin, alternatives that do not exist today. We estimate this prevalence pool to be approximately 10 million people in the United States. Revitalize-1 is positioned to address this critical unmet need by offering a viable and compelling treatment alternative to medication escalation and, in particular, to insulin initiation. The choice is simple. One, start insulin, gain weight, constantly manage your diabetes, or two, try Rivita and potentially improve your blood sugar, lower your body weight, and prevent the need for insulin. We are enrolling under the expanded version of our protocol and expect to report top-line data in mid-2025.

[Harith Rajagopalan, CEO at Fractyl Health]

Moving to our Rivita German commercialization plans, the past quarter has been focused on setting ourselves up for controlled expansion in Germany in 2025. The first step is to obtain German government reimbursement approval to offer Rivita at additional centers around the country. We have seen encouraging interest in Rivita from numerous hospitals and have worked with GI endoscopy clinical leaders and hospital administrators across Germany over the last several months to submit NUB applications for reimbursement approval. We are excited about the positive feedback we've received on the considerable amount of data we have accumulated in our registry and are looking forward to next steps in the German market, and we will provide further updates when we are able. Many people ask who would be a candidate for a procedure like Rivita. You can think of Rivita as like LASIK, but for obesity.

[Harith Rajagopalan, CEO at Fractyl Health]

People with poor eyesight can wear glasses or contact lenses, which are easy and necessary for proper vision, and yet nearly a million people a year undergo a one-time procedure that targets a laser to their eye in order to free themselves from the burden of managing their poor eyesight. A substantial fraction of the population simply wants freedom from ongoing disease management burden, even if that burden is simply wearing glasses. Now think about obesity. There are 10 million people in the United States with obesity who will be on a GLP-1 this year. Roughly 8% of these individuals, or 800,000 people, will also undergo an endoscopy this year for other reasons.

[Harith Rajagopalan, CEO at Fractyl Health]

Before their procedure, an endoscopy nurse will call the patient to help them prepare for their visit, and part of that preparation would be to ask them if they are already on a GLP-1 drug in order to advise them to stop taking that drug at least one week prior to endoscopy. What fraction of these 800,000 patients can be converted to Rivita to offer them an off-ramp to their GLP-1s as they are being scheduled for their otherwise already planned endoscopy? Rivita is purpose-built and developed over the past decade precisely to fit seamlessly into this high-volume, highly scalable GI endoscopy workflow.

[Harith Rajagopalan, CEO at Fractyl Health]

Given that Rivita has breakthrough device designation from the FDA, given the desire for patients for persistent and effortless weight loss without drug therapy, and given the favorable economic model for GI endoscopy practices to perform Rivita, we believe that a substantial fraction of patients and GI physicians would choose Rivita. Now let's shift our focus to Rejuva, our innovative pancreatic gene therapy platform. As a reminder, Rejuva is enabled by a proprietary endoscopic device that can precisely deliver AAV gene therapy vectors directly to the pancreas and opens the door to gene therapy medicines for the pancreas for the very first time. At the beginning of the year, we nominated Rejuva-001 for type 2 diabetes, an AAV9 vector containing the human insulin promoter driving a human GLP-1 transgene. We presented data over the past several quarters showcasing the drug candidate's innovative smart GLP-1 mechanism.

[Harith Rajagopalan, CEO at Fractyl Health]

The candidate is designed to autoregulate GLP-1 levels, amplifying normal GLP-1 signaling rather than mimicking drug action. Think of it as you, but better, making enough GLP-1 to be able to survive and thrive in our modern world. Our work to support the submission of a clinical trial application, or CTA, for Rejuva-001 is progressing well. There are three key in vivo experiments in the pipeline, all of which have been substantially de-risked already. The first study is durability in wild-type mice through 12 weeks. The second is dose-ranging efficacy in the db/db mouse model of type 2 diabetes. And the third is safety and biodistribution in Yucatan pigs. During ObesityWeek, we presented new Rejuva-001 data on sustained weight maintenance and lowering of blood sugar levels in the diet-induced mouse model. The data from Dr.

[Harith Rajagopalan, CEO at Fractyl Health]

Randy Seeley's lab at the University of Michigan demonstrated significant durability in DIO mice over 13 weeks, marking the longest evidence of durability with Rejuva-001 we've recorded in an obesity model to date. These data are incredibly exciting because they show how to translate the promise of GLP-1s to the real world. This is a one-time therapy that potentially has efficacy that can exceed that of semaglutide and also offer benefit that lasts long enough to actually see effects on cardiovascular disease, kidney disease, and diabetes prevention in the real world, and this is something that we are not seeing with GLP-1 drugs today because of their high rates of discontinuation and lack of durable effect, as we discussed before.

[Harith Rajagopalan, CEO at Fractyl Health]

We plan to communicate more data on the execution of these studies at upcoming scientific meetings, but what we are seeing so far gives us confidence that we are successfully checking off key boxes for our regulatory filing. We anticipate completing these key CTA-enabling studies by the end of the year, and if the CTA is approved, we plan to initiate a first-in-human study for Rejuva-001 in the first half of 2025. Last week at ObesityWeek, we also announced the nomination of Rejuva-002 as our first smart GIP-GLP-1 dual agonist gene therapy lead candidate designed for the treatment of obesity. Rejuva-002 is a locally administered AAV9 viral vector that expresses human GLP-1 and GIP hormones from a human insulin promoter.

[Harith Rajagopalan, CEO at Fractyl Health]

Rejuva-002 is designed to activate both GIP and GLP-1 receptors, which both play crucial roles in regulating blood sugar and body weight when combined, as we have seen with many of the injectable dual agonists that are in the market or under development. The nomination of Rejuva-002 represents a significant milestone in the development of the Rejuva platform, as it reflects the ability to combine multiple therapeutic modalities within the same construct, and with that, I will now turn the call to Lisa to provide an update on our third quarter financials. Lisa?

[Lisa Davidson, CFO at Fractyl Health]

Thank you, Harith. In the third quarter of 2024, revenue was generated from our commercial pilot in Germany and enabled patients to enroll in the German real-world registry study.

[Lisa Davidson, CFO at Fractyl Health]

Turning to operating expenses, research and development expense in the third quarter of 2024 was $19 million, compared to $9.4 million for the same period in 2023. The increase during the quarter was primarily due to the progress made in our Remain-1 and Revitalize-1 clinical studies, continued development of the Rejuva program, and increased personnel-related expenses, including stock-based compensation. Selling, general, and administrative expenses in the third quarter 2024 was $4.8 million, compared to $4.5 million in the same period in 2023. The increase during the quarter was primarily due to the professional service expenses and other costs associated with operating as a publicly traded company and increased personnel-related expenses, including stock-based compensation. For the third quarter of 2024, we reported a net loss of $23.2 million, compared to a net loss of $15.7 million for the same period in 2023.

[Lisa Davidson, CFO at Fractyl Health]

The increase in net loss was primarily attributed to the increase in operating expenses discussed above and the non-cash loss from changes in fair value of notes payable, offset by a non-cash gain from changes in fair value of warrant liabilities, as well as an increase in net interest income. As of September 30, 2024, Fractyl had approximately $84.7 million in cash and cash equivalents. Based on our current development plans, we believe that our existing cash and cash equivalents will be sufficient to fund our operations through expected company milestones into the fourth quarter of 2025. I will now turn the call back to Harith.

[Harith Rajagopalan, CEO at Fractyl Health]

Thank you, Lisa. As the obesity market continues to evolve, we have found that losing weight and maintaining weight loss are two very different problems.

[Harith Rajagopalan, CEO at Fractyl Health]

The market has now largely solved the problem of short-term weight loss, but there remains an incredible need for durable weight maintenance and an off-ramp to GLP-1 drugs. Obesity is a chronic disease, but it's only a chronic disease because we do not have therapies today that can truly have durable effect on the condition, and unless we are able to address the root cause, we will never break the pattern of chronic maintenance therapy in obesity. While most next-generation GLP-1 therapies face fierce competition to improve on existing drugs, Rivita and Rejuva stand alone as we pioneer a new weight maintenance category. Since Fractyl Health began to focus on weight maintenance in the first quarter of this year, there has been a very interesting dynamic with both Rivita and Rejuva.

[Harith Rajagopalan, CEO at Fractyl Health]

The size of the problem that we are addressing is coming into focus, and the size of the opportunity is becoming clearer as major players are beginning to see how differentiated the profile of Rivita and Rejuva are. It's been encouraging to see large companies intrigued by the unique value proposition these therapies will represent in the market. Fractyl is reaching a critical inflection point. Over the next several quarters, we look forward to sharing data from our two pivotal studies of Rivita in weight maintenance and type 2 diabetes, in addition to advancing our Rejuva-001 pancreatic gene therapy candidate into the clinic. We are grateful for the continued support of our employees, our physician partners, our patients, and our shareholders as we aim to free people from the relentless pattern of metabolic disease progression. And with that, we will now open the call up for questions. Thank you very much.

[Operator]

As a reminder to ask a question, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jason Gerberry of BofA. Your question, please, Jason.

[Chi Tran, Biotechnology Equity Research Analyst at BofA]

Hey, hello, everyone. This is Chi for Jason. Thanks for taking our questions and congrats on all the progress. And I have three, if I may. The first question is regarding Remain-1. You have mentioned the enrollment for the midpoint analysis has been completed. Can you remind us the sample size enrolled and also the duration of follow-up for the midpoint analysis?

[Harith Rajagopalan, CEO at Fractyl Health]

If I recall correctly, correct me if I'm wrong, I think the last time we spoke, we could be looking at around 45 subjects and two-to-one randomization between Rivita and Sham with a 12-week follow-up, and along the same line, can you also talk about expectation for the midpoint analysis? Sure, Chi. Very good to speak with you. You're correct. The sample size is 45 subjects with a two-to-one treatment allocation of Rivita to Sham, and we will follow these patients for 12 weeks after the discontinuation of tirzepatide and randomization to either Rivita or Sham. We expect that based on prior data from SURMOUNT-4 and from STEP 1 extension of tirzepatide and semaglutide, respectively, that the Sham arm should be regaining roughly 3% body weight over the course of that 12-week period of time.

[Harith Rajagopalan, CEO at Fractyl Health]

We would expect that Rivita would hold weight steady over that 12-week period of time. The objective would be to begin to demonstrate a treatment difference that is emergent between the two arms that we believe will be predictive of the likelihood of success of the full data set, which has a six-month primary endpoint. Got it. Just a quick follow-up on that. You've already completed the enrollment. It's a 12-week follow-up. Should we expect some level update early in the second quarter? Remember, Chi, the way that the study is designed, we're taking people who are de novo, not on tirzepatide yet. We are actually starting them on tirzepatide ourselves, getting them to 15% total body weight loss, and then we will be randomizing them.

[Harith Rajagopalan, CEO at Fractyl Health]

What we are accounting for is that we have to enroll enough patients that we know that we're going to have 45 of them who will have achieved 15% body weight loss by Q1 in order to be able to randomize them and then see the data in Q2. So the weight maintenance trials, because you got to get the weight loss in the first place, do have that added time at the beginning, which is what explains the difference between your understanding of completion of enrollment and when the data will actually be available.

[Chi Tran, Biotechnology Equity Research Analyst at BofA]

Got it. Thanks for the clarification. And my second question is on Reveal-1. What's the current thinking on the venue for the initial data at year-end? I'm curious, can you also talk about your latest expectation for the initial Reveal-1 data?

[Chi Tran, Biotechnology Equity Research Analyst at BofA]

I think in terms of the size and the makeup of the data, I think last time we spoke, we may be looking at initial data in the range around maybe 10 patients after four to eight weeks of follow-up. Can you talk about that? Thanks.

[Harith Rajagopalan, CEO at Fractyl Health]

Yeah, that's right. So we will have initial 10 patients at least four weeks of follow-up, and we're going to be showing you what's happening to their weight. And our aim is to demonstrate that we're able to hold weight steady. As you may know from prior studies of Rivita in type 2 diabetes, one-month results are actually pretty predictive of what happens at three, six, and 12 months afterwards. And so we feel like the one-month time point can be quite informative for us here as well.

[Harith Rajagopalan, CEO at Fractyl Health]

We think that the Reveal-1 data in general gives an open-label view on what the randomized data might look like. So it does help from that perspective as well.

[Chi Tran, Biotechnology Equity Research Analyst at BofA]

Got it. And last one from me. Just want to quickly touch upon Rejuva. How is the program tracking towards CTA filing by year-end? Are you close to wrapping up all the in vivo studies needed for the filing? And if we were to assume CTA approval by year-end, what is the typical turnaround time for CTA review and approval and setting up clinical trial sites subsequently? Curious, what level of human data can we expect from Rejuva in 2025? Thanks so much.

[Harith Rajagopalan, CEO at Fractyl Health]

Yeah. The key point here, Chi, is the key CTA enabling studies will be completed by year-end.

[Harith Rajagopalan, CEO at Fractyl Health]

And then we aim to file for that CTA in the first half of 2025, just for clarification. And what we shared earlier was that there are three key CTA enabling studies. One of them is durable demonstration of Rejuva activity in a wild-type mouse out to 12 weeks. A second one is dose-dependent efficacy in the db/db mouse model of type 2 diabetes. And then the third one is safety and biodistribution studies with our proprietary needle catheter with our route of administration in the Yucatan pigs. And what we're seeing, so all of these studies are underway or various stages of completion, but what we are seeing so far gives us a lot of encouragement that we're heading in the right direction. And we feel confident in our ability to complete these three key studies by the end of the year.

[Harith Rajagopalan, CEO at Fractyl Health]

And we'll be giving further updates as we enter into the first half of 2025 on timelines.

[Chi Tran, Biotechnology Equity Research Analyst at BofA]

Got it. Thanks so much.

[Harith Rajagopalan, CEO at Fractyl Health]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Mike Ulz of Morgan Stanley. Your question, please, Mike.

[Mike Ulz, Executive Director and Biotechnology Equity Research Analyst at Morgan Stanley]

Good afternoon. Thanks for taking the question. Maybe just to follow up on the Reveal-1 open-label update expected by the end of the year. You mentioned about 10 patients, at least four weeks of follow-up. I guess, what are you expecting for the what would you expect for sort of a control arm at four weeks? Would you expect to see any difference at that point or not?

[Harith Rajagopalan, CEO at Fractyl Health]

Yeah. I mean, looking at what you know from SURMOUNT-4 and STEP 1 extension, as I mentioned with tirzepatide and semaglutide respectively, you'd expect 3% body weight gain by the end of that four-week period of time. Importantly, the trajectory of weight will also be important. So what we're hoping to be able to show is that we're holding weight constant. You'll be able to see the trajectory of that weight from baseline out to four weeks versus what you would expect from a control. We can walk you through that as the data comes up on what prior studies have shown as a point of comparison. Of course, it's always hard to do cross-trial comparisons, but we've endeavored to do everything we can to mimic what those trials have done for those patients when they stopped GLP-1s.

[Mike Ulz, Executive Director and Biotechnology Equity Research Analyst at Morgan Stanley]

Yep. Makes sense. That's helpful. Thanks.

[Mike Ulz, Executive Director and Biotechnology Equity Research Analyst at Morgan Stanley]

And then maybe just on the controlled expansion in Germany, maybe talk a little bit more about the rationale there. Is it to generate more data or just get more experience at more centers prior to a potential launch?

[Harith Rajagopalan, CEO at Fractyl Health]

Obviously, you can satisfy both. And we are excited about the opportunity to satisfy both. Why we say it's controlled is because we're going to be careful about our spend going into 2025. But we have a list of hospitals that are eager to offer Rivita for their patients, some of whom have patients who they would like to be able to offer this for already. And we see an opportunity to be able to ensure that the stuff that we're seeing in Düsseldorf and our clinical trials, we can expand that commercial model and footprint in order to be able to penetrate the German market.

[Harith Rajagopalan, CEO at Fractyl Health]

We feel optimistic about our ability to prove out the commercial model of driving patients into Rivita centers of excellence in order to be able to give them a treatment alternative to medication escalation and diabetes. And in the process, we're obviously going to be able to generate revenue and additional clinical data.

[Mike Ulz, Executive Director and Biotechnology Equity Research Analyst at Morgan Stanley]

Got it. Thank you.

[Harith Rajagopalan, CEO at Fractyl Health]

Thanks.

[Operator]

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

[Michael DiFiore, Senior Managing Director and Analyst at Evercore ISI]

Hey, guys. Thanks so much for taking my question and congrats on all the progress. Three questions for me on Rejuva. The first one regarding the presentation at ObesityWeek. I noticed that a slightly lower dose was used in the 12-week analysis compared to the 8-week analysis.

[Michael DiFiore, Senior Managing Director and Analyst at Evercore ISI]

I think in the 12-week analysis, it was 7.5e12, whereas in the 8-week analysis, it was 1e13. I was wondering why that was done. And a similar question is that I noticed that the mean body weight reduction is maintained, but the error bars start to get really wide by 18 weeks. And curious to see if this was due to expiration of the mice over time or weeding of effect. And then I have one more follow-up. Thank you.

[Harith Rajagopalan, CEO at Fractyl Health]

Great. So this is a study conducted by Randy Seeley, a collaborator at the University of Michigan. And he selected the dose based on what we had seen from the work that we had done before, which you highlighted. And he's doing a bunch of other mechanistic work that we'll be publishing next. We're looking to present and/or publish next year.

[Harith Rajagopalan, CEO at Fractyl Health]

So it was his selection of dose, but I think it proves the point that we've been making, which is a low dose of virus can deliver a very meaningful clinical effect. You're right to point out that the error bars get wide. I was confident that you would ask a question about that, actually. The wild-type DIO mice really begin to have pretty variable weight when they're fed effectively a McDonald's diet for over 90 days. And so what you're seeing there is a reflection of just the dispersion that's happening as DIO mice are seeing that weight gain over time. And what we showed was placebo-adjusted weight. And that's the reason for the error bars there.

[Michael DiFiore, Senior Managing Director and Analyst at Evercore ISI]

Got it. Got it. Very helpful. And my last question is regarding the Rejuva-002 candidate that you just nominated for obesity.

[Michael DiFiore, Senior Managing Director and Analyst at Evercore ISI]

At this point in the game, Harith, are you able to comment on the relative affinities for GLP-1 versus GIP relative to the native ligands, as well as any comments on beta-arrestin recruitment?

[Harith Rajagopalan, CEO at Fractyl Health]

At this point in the game, I'm not able to comment on any of that. But of course, we're looking at these things, and we'll be able to share that with you as we get further along in development.

[Michael DiFiore, Senior Managing Director and Analyst at Evercore ISI]

Got it. Thanks so much.

[Harith Rajagopalan, CEO at Fractyl Health]

Thank you, Mike.

[Operator]

Thank you. Our next question comes from the line of William Wood of B. Riley Securities. Your line is open, William.

[William Wood, Analyst at B Riley Securities]

Thanks so much for taking our questions and congratulations on a very nice quarter. Just maybe one from us to start.

[William Wood, Analyst at B Riley Securities]

I was just kind of curious in terms of your Rejuva-002, in terms of how closely it mimics in design 001, just in terms of the machinery used, the overall design, essentially the 001 de-risks 002, and in terms that it's essentially just a plug and play now with a GIP added in.

[Harith Rajagopalan, CEO at Fractyl Health]

It's the same delivery catheter. It's the same AAV9, and it's the same insulin promoter. So yes, Rejuva-001 does de-risk Rejuva-002. It has the same smart mechanism, which is to leverage the fact that the insulin promoter allows the proportionate release of the hormones in response to the body's needs, which we think is a clear differentiator for the strategy compared to the drugs that are out there today or the other drugs that are in development.

[Harith Rajagopalan, CEO at Fractyl Health]

And I think that what you'll see as the data mature and as we reveal them publicly over the course of the next several quarters is that you're able to leverage both the GIP and the GLP-1 mechanism simultaneously with Rejuva-002. And we have conviction that based on what you see with tirzepatide and with the dual GIP-GLP-1 agonists that are in development, that you can achieve superior potency with better tolerability compared to GLP-1 alone at higher doses. And I think that that's a good reason for why we went there with obesity.

[William Wood, Analyst at B Riley Securities]

Got it. I appreciate that. And then one secondary, you've obviously got your post-market registry ongoing in Germany, and maybe I've missed this in the past.

[William Wood, Analyst at B Riley Securities]

Are there any additional plans to try to expand into other EU countries, or has there been any interest in doing that, or is this sort of a focused target with Germany and then sort of moving back into the States with your ongoing FDA studies?

[Harith Rajagopalan, CEO at Fractyl Health]

Well, we are doing work to be ready to have a global launch at the time that we're ready to launch in the United States. There's this unique opportunity in Germany to be able to generate real-world data earlier in a market that has many similarities to the U.S. market and to do so under a reimbursement schema that the German government has set up called the NUB. But we are actively working to make sure that we're set up to be able to launch in other countries in key geographies as well. But that will be more in line with the U.S. launch.

[William Wood, Analyst at B Riley Securities]

Got it. Makes sense. I appreciate you taking our questions, and I'll hop back in with you. Thank you.

[Harith Rajagopalan, CEO at Fractyl Health]

Thank you. Appreciate it.

[Operator]

Thank you. I would now like to turn the conference back to Dr. Rajagopalan for closing remarks. Sir.

[Harith Rajagopalan, CEO at Fractyl Health]

Well, thanks everyone for your time. You've been patient with us and very happy to continue to share the progress that we're making every quarter here through our earnings calls and look forward to continuing to show some very exciting results that are going to be coming in the next several months. Look forward to following up with you all then.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Stephen Jasper, Head of Investor Relations
• Lisa Davidson, CFO
• Harith Rajagopalan, CEO

Analysts

• Chi Tran, Biotechnology Equity Research Analyst at BofA
• Michael DiFiore, Senior Managing Director and Analyst at Evercore ISI
• Mike Ulz, Executive Director and Biotechnology Equity Research Analyst at Morgan Stanley
• William Wood, Analyst at B Riley Securities