Fractyl Health Q1 2024 Earnings Report

Fractyl Health EPS Results

• Actual EPS: -$0.75
• Consensus EPS: -$0.30
• Beat/Miss: Missed by -$0.45
• One Year Ago EPS: N/A

Fractyl Health Revenue Results

• Actual Revenue: $0.03 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Fractyl Health Announcement Details

• Quarter: Q1 2024
• Date: 5/13/2024
• Time: N/A
• Conference Call Date: Monday, May 13, 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 Q1 2024 Earnings Call Transcript

Key Takeaways

• Real-world data from Fractal’s German CE-marked pilot show Revita delivers a median 8.1% weight loss and sustained HbA1c reductions (153 to 116 mg/dL; 9.2 to 7.6) through six months in patients with type 2 diabetes.
• Fractal received FDA IDE approval for the REMAIN-1 pivotal trial testing Revita as an “off-ramp” to maintain ≥15% weight loss after GLP-1 discontinuation, with study initiation expected in H2 2024.
• The REVITALIZE-1 study in inadequately controlled type 2 diabetes is set to complete enrollment in Q2 2024, with topline data planned for Q4 2024 to support a PMA submission.
• On the REJUVA gene therapy platform, Fractal nominated its first AAV9-based GLP-1 candidate (REJUVA001) for type 2 diabetes and aims to start IND-enabling studies by H2 2024 and first-in-human trials in H1 2025, with an obesity candidate to follow in late 2024.
• Q1 2024 results show R&D expense of $14.4 M and SG&A of $7.1 M, a net loss of $3.3 M (vs. $11.9 M a year ago), and $121.4 M in cash providing runway into 2025.

Presentation

[Operator]

Good afternoon, and welcome to Fractyl Health's first 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 Q&A 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. This release is available at www.fractyl.com under the Investors tab. Today on our call, Dr. Harith Rajagopalan, Chief Executive Officer, Lisa Davidson, Chief Financial Officer, Dr. Timothy Kieffer, Chief Scientific Officer, and Adrian Kimber, Chief Commercial Officer, will review our recent business highlights and first quarter financial results.

[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 that 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 and any clinical trial or readouts, the potential launch or commercialization of any of our product candidates or products, and 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 for the period ended March 31, 2024, and the company's other filings with the Securities and Exchange Commission. 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 for our first quarterly results call. Over 10 years ago, I co-founded Fractyl with a singular and audacious goal: to eradicate metabolic disease. As a physician, I saw firsthand how type 2 diabetes and obesity and their comorbidities impact patients and their families. I witnessed patients experience complications of disease despite following all of their doctor's advice, spouses becoming caregivers, and children losing parents far too young to diseases that should be entirely treatable. I knew that there had to be a better way to address these issues by tackling the diseases at their root cause, in the gut and in the pancreas, and thus Fractyl Health was born. We have always been clear with our vision to develop transformative therapies that can prevent and eliminate metabolic disease.

[Harith Rajagopalan, CEO at Fractyl Health]

We have never wavered in our focus because we knew that treating the underlying disease is the most patient-centered approach to better long-term health. I am pleased to be here today to present these results because we are so close to achieving the goals we set forth for ourselves a decade ago. 2024 is shaping up to be a pivotal year for Fractyl. We are executing on our strategy, we are clear about the future, and we are ready to bring Fractyl to the next level to help even more patients around the world. The treatment landscape for metabolic disease has radically changed over these last several years with the emergence of GLP-1 drugs.

[Harith Rajagopalan, CEO at Fractyl Health]

These therapies are incredibly effective and exciting developments, but they also have significant limitations: their need for chronic administration, their high discontinuation rates, and the dramatic weight regain and loss of metabolic benefits observed as soon as people stop treatment. To address this unmet need, we are developing transformative therapies that precisely target and alter the function of the diseased organs that are responsible for the development of obesity and type 2 diabetes. In a world with potent drugs that still do not eliminate disease, we believe the clinical and economic value proposition is shifting now from chronic disease management to the prevention and remission of underlying disease. Our two platforms, Revita and Rejuva, target dysfunction in the duodenum and pancreas, respectively, and are designed to provide long-term metabolic benefits from a single administration.

[Harith Rajagopalan, CEO at Fractyl Health]

Our Revita platform is a proprietary device and delivery system that targets the duodenum to reverse pathology in the duodenal lining that is a root cause of obesity and type 2 diabetes. Revita uses heat energy to ablate dysfunctional duodenal mucosa to enable the regeneration and renewal of the duodenum and restore normal metabolic signaling from the gut. The procedure takes less than 45 minutes, and patients can immediately return to their daily lives. We have received breakthrough device designation from the FDA for Revita and have evaluated it in over 300 patients across multiple clinical studies and have observed over 500 patient years of exposure data, demonstrating favorable tolerability as well as favorable and durable impact on blood sugar and body weight.

[Harith Rajagopalan, CEO at Fractyl Health]

Focusing on obesity, despite the popularity of GLP-1 drugs, approximately half of the people who start taking them stop them within 1 year for a variety of reasons.... We believe that what the world needs now is a safe, reliable, and effective off-ramp from GLP-1s, an off-ramp that allows weight loss to persist even as people stop taking these medicines. This is where the unmet need in obesity has shifted, from how do you lose weight to how do you keep it off? The Wall Street Journal feature article last week pointed to weight regain as the major problem in obesity management today, and it featured a patient who underwent the Revita procedure approximately 1 year ago in Germany, and who still has durable improvements in body weight and blood sugar today.

[Harith Rajagopalan, CEO at Fractyl Health]

We, as a company, have always been focused on durable metabolic benefits, and we believe that we are uniquely well-positioned to become leaders in addressing this need in obesity management today. At the end of March, we received IDE approval from the FDA for Revita's Remain-1 study in patients with obesity who wish to maintain weight loss after discontinuing GLP-1 treatment. The approval from the FDA to begin this pivotal study came earlier than we had expected, and we are excited about our rapid alignment on this pivotal IDE. We believe it is a result of the growing recognition of obesity as a disease and the heightened urgency that has emerged for therapeutic alternatives that do not depend upon lifelong pharmacotherapy. We expect to initiate the study in the second half of the year. We firmly believe that freedom from disease is the ultimate aspiration for people and patients.

[Harith Rajagopalan, CEO at Fractyl Health]

If successful, the Remain-1 study would allow Revita to offer millions of people the potential for durable weight loss maintenance without the burden of ongoing medical therapy. We are also currently evaluating Revita in our Revitalize-1 pivotal trial in patients with inadequately controlled type 2 diabetes. We expect to complete enrollment in the second quarter and share top-line data in the fourth quarter of this year. In Europe, Revita has a CE mark and has secured reimbursement authorization in Germany. We have initiated a commercial pilot launch to conduct a real-world registry study in Germany as we complete our pivotal trials in the United States. We anticipate that registry data, combined with U.S. pivotal data, will be valuable tools to demonstrate the potential impact of Revita to patients and payers.

[Harith Rajagopalan, CEO at Fractyl Health]

This morning, we shared data from this real-world study at the German Diabetes Association annual meeting, and we found that Revita demonstrated substantial and sustained improvements in blood sugar and body weight through six months of follow-up so far in patients who have enrolled in the German registry. What is particularly exciting about this registry experience is the report from patients themselves. The sense that Revita has offered them a new lease on life and a new hope to live a life that is not defined by their disease. Tim will tell you more about those new data and our clinical development progress, and then Adrian will provide perspective on Revita's commercial opportunity in just a few moments. Now, turning to our Rejuva platform.

[Harith Rajagopalan, CEO at Fractyl Health]

Rejuva is our locally administered, AAV-delivered pancreatic gene therapy platform, delivering metabolic hormones, including GLP-1, and is designed to enable long-term remission of type 2 diabetes and obesity by durably altering hormone function in the pancreas. At the beginning of this year, we nominated our first Rejuva candidate for type 2 diabetes, RJVA-001, a one-time, locally administered AAV9 viral vector that expresses GLP-1 hormone with an insulin promoter that is designed to durably improve pancreatic function in type 2 diabetes. We expect to initiate our first in-human trials in type 2 diabetes in the first half of 2025. We are also working to nominate our first candidate for a one-time treatment for obesity, which we are planning to announce in the back half of 2024.

[Harith Rajagopalan, CEO at Fractyl Health]

With that, I'll now turn the call over to Tim to provide additional color on the progress we are making across both our Revita and Rejuva platforms. Tim?

[Timothy Kieffer, Chief Scientific Officer at Fractyl Health]

Thank you, Harith. Prior to joining Fractyl Health as CSO, I was a professor in the Faculty of Medicine at the University of British Columbia and CSO at ViaCyte. Given my training in gastrointestinal hormones and islet biology, I'm a passionate believer in Fractyl's therapeutic approaches, targeting the gut and pancreas, the key metabolic organs where dysfunction is a root cause of diabetes and obesity. I'll begin with a review of Revita platform progress and then turn to Rejuva. As previously mentioned, we recently provided an update from our ongoing real-world German registry study of Revita in patients with type 2 diabetes at the German Diabetes Association annual meeting.

[Timothy Kieffer, Chief Scientific Officer at Fractyl Health]

In 14 participants, where we have six months of post-Revita follow-up, there was an average body weight loss of 8.1% that was generally sustained through six months thus far, and a fall from median baseline blood glucose levels of 153 milligrams per deciliter to 116, accompanied by a hemoglobin A1c dropping from 9.2 to 7.6. These are particularly exciting findings, given these are patients with advanced type 2 diabetes who have been unable to control their diabetes through the use of multiple medications or lifestyle changes. We plan to continue enrolling patients in this registry and to provide updates on an ongoing basis.

[Timothy Kieffer, Chief Scientific Officer at Fractyl Health]

In March, we received IDE approval to initiate Remain-1, a two-part parallel cohort study for weight maintenance in patients with obesity who have lost at least 15% total body weight on GLP-1 therapy and wish to discontinue GLP-1 without weight regain. Alongside, we will have our Reveal-1 open label cohort of patients, who will be managed in exactly the same way, and we expect to begin providing open label study updates in the second half of the year. With the Remain-1 study, we hope to evaluate how Revita can enable patients to maintain clinically meaningful weight loss durably after discontinuing from a GLP-1. We plan to evaluate 315 patients with a BMI of 30 or higher without diabetes, who are GLP-1 drug naive.

[Timothy Kieffer, Chief Scientific Officer at Fractyl Health]

We will have an initial run-in period where patients are placed on a GLP-1 to achieve at least 15% total body weight loss, at which point they will then discontinue the GLP-1 and be double-blinded and randomized 2-to-1 to either receive the Revita procedure or a sham treatment, and we will evaluate weight regain at 24 and 48 weeks. We also plan to look at whether cardiovascular risks or glucose levels rebound after discontinuation of the GLP-1 therapy. We expect this trial to enroll quickly as it appeals to three distinct groups of patients. First, those who are currently on a GLP-1 and losing weight, but wish to discontinue due to side effects. Second, those who are currently on a GLP-1 and losing weight and aren't experiencing side effects, but are looking for an off-ramp, so they don't have to stay on chronic medication.

[Timothy Kieffer, Chief Scientific Officer at Fractyl Health]

And third, patients who don't even want to begin GLP-1 therapy due to the chronic regimen. Now, in March 2021, we commenced our Revitalize-1 randomized double-blind crossover sham control multicenter pivotal study in patients with inadequately controlled Type 2 diabetes, despite being on up to three glucose-lowering agents and daily insulin. The study will evaluate the change from baseline in HbA1c at 24 weeks in approximately 320 patients with additional follow-up through 48 weeks. We anticipate completing enrollment in the first half of this year and will report top-line results in the fourth quarter. We have discussed this study design with the FDA and believe, if successful, the data may support a PMA for Revita to improve glycemic control in patients with Type 2 diabetes who are inadequately controlled on insulin. Now, moving on to Rejuva.

[Timothy Kieffer, Chief Scientific Officer at Fractyl Health]

We have evaluated potential GLP-1 pancreatic gene therapy candidates in large and small animal studies. In a head-to-head preclinical diet-induced obesity mouse model, we have observed our GLP-1 pancreatic gene therapy candidates to produce greater improvements in weight loss compared to semaglutide, durable improvements in weight loss compared to vehicle control, and the potential weight maintenance solution to prevent weight regain after semaglutide discontinuation. We plan to complete IND-enabling studies or its equivalent for RJVA-001 in the second half of 2024, and pending approval, initiate a first-in-human study in the first half of 2025. In addition, we plan to continue working towards nominating our first GLP-1 pancreatic gene therapy candidate for obesity. With that, I will now turn the call over to Adrian to give you an update on our commercial opportunity. Adrian?

[Adrian Kimber, Chief Commercial Officer at Fractyl Health]

Thank you, Tim, and good afternoon, everyone. Since joining the Fractyl team a few months ago, I've been consistently impressed by our people, our science, and our technology. My short tenure here has only strengthened my initial belief that Revita represents a significant opportunity, both clinically and commercially. It's evident that there's a significant issue with weight maintenance within our society. In recent times, GLP-1 therapies have been widely prescribed by physicians and adopted by patients to tackle this very issue. However, despite the widespread coverage by insurance and the observed benefits of weight loss and glucose reduction, over 50% of patients discontinue GLP-1 therapy within the first year. When examining obesity, it's staggering to note that nearly 100 million individuals in the United States suffer from obesity and prediabetes, while globally, this number surpasses 800 million.

[Adrian Kimber, Chief Commercial Officer at Fractyl Health]

Now, turning to type 2 diabetes, there are over 500 million adults grappling with this condition worldwide. Within the United States alone, 27 million individuals are on medication for type 2 diabetes, with over 4 million relying on insulin therapy for advanced type 2 diabetes. In 2022, approximately $65 billion was allocated to drugs targeting glucose control and weight management. Notably, all of these expenses were tied to medications necessitating chronic administration, yet none effectively addressed the underlying disease progression.... We perceive this as an immense opportunity, and firmly believe that Revita holds a distinctive position to capitalize on this by tackling disease progression and prevention. For individuals currently managing type 2 diabetes with medications and insulin, Revita aims to enhance glucose control and halt or slow down the disease's advancement.

[Adrian Kimber, Chief Commercial Officer at Fractyl Health]

Moreover, for those with pre-diabetes and obesity, Revita is engineered to target the metabolic dysfunction at its source, mitigating the risk of individuals progressing to type 2 diabetes and obesity. Revita is a modular system, seamlessly integrated into endoscopist workflow, typically requiring fewer than 4 cases for the endoscopist to achieve proficiency. It is tailored as an outpatient procedure, manageable by a trained therapeutic endoscopist in under an hour. In the United States alone, nearly 20 million endoscopies are conducted annually, with over 600,000 categorized as advanced endoscopic procedures, carried out by almost 10,000 gastroenterologists. The Revita procedure is specifically designed as a straightforward addition to the 4.7 million endoscopies already administered annually to patients with type 2 diabetes.

[Adrian Kimber, Chief Commercial Officer at Fractyl Health]

As Harith mentioned, Revita has a CE mark in Europe, and we initiated a limited commercial pilot program at a single site in Germany last year to gather real-world data as we complete our U.S. pivotal studies. As we progress our Revita clinical program, we plan to build out a U.S.-based direct sales force and commercial organization to support our U.S. launch ahead of Revita's potential FDA approval. Our commercialization strategy involves implementing a hub-and-spoke approach to establish Revita as an innovative procedural therapy for addressing obesity and type 2 diabetes. Initially, we'll concentrate on centers of excellence, housing advanced therapeutic endoscopists, with a primary focus on engaging participating physicians from our clinical studies. Furthermore, we'll introduce a comprehensive procedural training support program tailored for GI and endoscopists, ensuring Revita seamlessly integrates into their workflow.

[Adrian Kimber, Chief Commercial Officer at Fractyl Health]

With that, I'll now pass the call on to Lisa to give an update on our first quarter financials. Lisa?

[Lisa Davidson, CFO at Fractyl Health]

Thank you, Adrian. In the first quarter of 2024, revenue was generated from our commercial pilot in Germany, which launched in the first half of 2023. Turning to operating expenses, research and development expense in the first quarter of 2024 was $14.4 million, compared to $9.3 million for the same period in 2023. The increase during the quarter was primarily due to increased investment in the Revitalize-1 clinical study, advancement of the Rejuva program, and increased personnel-related expenses, including stock-based compensation. Selling, general, and administrative expense in the first quarter of 2024 was $7.1 million, compared to $2.8 million in the same period in 2023. The increase was primarily due to increased personnel-related expenses, including stock-based compensation and professional services expenses, and other costs associated with operating as a publicly traded company.

[Lisa Davidson, CFO at Fractyl Health]

For the first quarter of 2024, we reported a net loss of $3.3 million, compared to a net loss of $11.9 million for the same period in 2023. The decrease in net loss was primarily related to a $17.1 million non-cash decrease in fair value of the notes payable and warrants on our balance sheet. $0.7 million increase in interest income earned, offset by an increase of $9.4 million in operating expenses. As of March 31, 2024, we had cash and cash equivalents of $121.4 million. Based on our current development plans, we believe cash and cash equivalents will be sufficient to fund our operations through expected key company milestones through 2025. I will now turn the call back to Harith.

[Harith Rajagopalan, CEO at Fractyl Health]

Thank you, Lisa. Fractyl is at a critical point in our growth trajectory. As you heard from Tim, our two platforms, Revita and Rejuva, have the potential to help us realize our vision of creating durable, disease-modifying therapies that target the organ-level root causes of obesity and type 2 diabetes, with key catalysts coming in the next several quarters across both of our programs in both disease categories. And as Adrian told you, there is significant unmet need in this market for this type of therapy. Fractyl is a different company with a different approach, which we believe meets the needs that are identified by the obesity and type 2 diabetes patient communities for better health with less medicine.

[Harith Rajagopalan, CEO at Fractyl Health]

For the remainder of 2024, we are focused on executing on our clinical studies in type two diabetes and obesity, formulating our commercialization plans to introduce Revita to the U.S. and European markets, advancing RJVA-001 through IND-enabling studies, and efficiently allocating our capital to ensure that we have the runway that we need to meet all of our objectives. It is an incredibly exciting time at Fractyl, and I would like to take a moment to thank the patients and the physicians who have supported us over the past 10 years. We deeply appreciate your trust in us and in our mission. I would also like to acknowledge the hard work and dedication of my fellow Fractylians. They spend a tremendous amount of time and energy focused on helping us achieve our mission and vision, and we truly appreciate their efforts to build something great together....

[Harith Rajagopalan, CEO at Fractyl Health]

Finally, I'd like to thank you for your continued interest and your support of Fractyl. We look forward to sharing updates on our progress as we work toward bending the curve of metabolic disease globally. And with that, we will now open the call up to questions. Thank you very much.

[Operator]

Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the question 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 Bank of America.

[Analyst at Bank of America]

Hey, this is Chi in for Jason. Thanks for taking our questions. I have two questions on the Real-World Registry study and one on Rejuva. So, curious, on the Real-World Registry study, can you talk about how similar the patient enrolled in the study relative to those enrolled in Revitalize-1? What proportion of the patients were on insulin for the registry study? Curious if the data from the Real-World Registry study can be extrapolated to Revitalize-1 study in some way. Second question on the same study is, you have provided 3-month and 6-month follow-up data from the same study. I'm curious if you can talk about durability of the data with respect to HbA1c reduction as well as weight loss.

[Analyst at Bank of America]

Are those data in line with your expectation, and do you expect the durability to translate into Revitalize-1 and Remain-1, respectively? And lastly, on Rejuva, you talk about you look to nominate your first gene therapy candidate for obesity. I'm curious, what attributes are looking for the obesity candidate? How might that be similar or different than RJVA-001 that you have selected for diabetes? Thank you.

[Harith Rajagopalan, CEO at Fractyl Health]

Thanks, Chi. I look forward to seeing you later this week at the BAML conference in Vegas. We're heading out tomorrow.

[Analyst at Bank of America]

Us, too.

[Harith Rajagopalan, CEO at Fractyl Health]

I'm not sure if you're there yet.

[Analyst at Bank of America]

We are there. Jason is traveling in, but we look forward to hosting you.

[Harith Rajagopalan, CEO at Fractyl Health]

Awesome. We're looking forward to that as well. It'll be my first time attending an investor conference in Vegas. Thanks for your questions. Let's talk about the real-world registry first. I'll tackle them, and then I'll ask Tim if he has anything that he would add. Your first question was whether it's a similar patient population to Revitalize-1, and I'll say that it is a similar patient population, but it's a larger cohort of individuals than that. In Europe, our CE mark covers patients who are inadequately controlled with type 2 diabetes, who are failing at least one glucose-lowering agent. That affords us an opportunity to have an ability to treat people across the spectrum of medical therapies. There are roughly 20% of patients with type 2 diabetes who are on insulin.

[Harith Rajagopalan, CEO at Fractyl Health]

There's a little bit more than that, who are on insulin, who have entered the Revitalize-1 study. I don't have an exact number for you on how many of them are on insulin. What's interesting about this is that we thought, you know, naturally, that people with more advanced disease would be more interested in undergoing Revita. And as it turns out, there is interest that seems to be very broad-based. People who are on one or two medicines seem just as interested in Revita as people who are on multiple medicines. And we might be inclined to think that this is like people are driven to choose a procedural therapy when they have exhausted all other medical, all other medical options.

[Harith Rajagopalan, CEO at Fractyl Health]

As it turns out, many people are wanting to try something that addresses a root cause, even before progressing to what might be considered advanced therapies that are already in the guidelines. That is an interesting learning for the market and speaks to the potential way direction that Revita might go in type 2 diabetes as it progresses in its development over time. You also asked about how whether it might translate to the Revitalize-1 patient population, in the results that we might expect to see. I think that our observation has always been that the hemoglobin A1c lowering, which is a primary endpoint in Revitalize-1, tracks with patients' baseline hemoglobin A1c in our prior studies and in Revitalize-1, and does not seem to depend on their background medical therapy.

[Harith Rajagopalan, CEO at Fractyl Health]

In that regard, I do think that this provides good complementary evidence to Revitalize-1. We're optimistic about sharing data from both the registry as that matures, plus Revitalize-1 with physicians, with patients, and with payers as we think about a global launch in a couple of years. Your next question about the Real-World Registry was about three and six-month follow-up. Yes, we have provided that. You can see that there's sustained improvements in blood sugar and in weight, and that is observed. We observe it within one month, and it seems sustained by three and six months so far. As we have said before, we're going to continue to give registry updates as the dataset mature, and you can expect to hear more from us on that registry dataset in Q3 and Q4 as the year progresses.

[Harith Rajagopalan, CEO at Fractyl Health]

Whether that will translate to. Well, I think that it is very reasonable to expect that HbA1c and weight results in the registry would translate. I think type two diabetes in Germany has a lot of the same features as type two diabetes in the United States. One of the things that we are very keen to understand, as I'm sure you are too, is like, what is the durability of a Revita treatment? Will retreatment be appropriate and necessary, and what will that frequency be? And we're excited about the registry to help us answer those questions as we have more patients with longer term follow-up. Now, moving to your third question on Rejuva, the obesity candidate and its similarities versus differences for type two diabetes.

[Harith Rajagopalan, CEO at Fractyl Health]

What we have stated before is that, the RJVA-001 candidate for type 2 diabetes has, the human insulin promoter driving the human GLP-1 sequence. The human GLP-1 peptide has a very short half-life in the circulation, and its actions on blood sugar are local within the pancreatic islet, as has been well described by a bunch of folks. So there's an opportunity to nominate a candidate for type 2 diabetes that has high local activity and limited systemic bioavailability in order to be able to improve blood sugar. And, we're excited about data that we presented earlier this year that showed that a short half-life GLP-1 candidate can lower blood sugar in the db/db mouse model very impressively, and that's led us to our type 2 diabetes candidate.

[Harith Rajagopalan, CEO at Fractyl Health]

We anticipate that an obesity candidate would want to get serum levels that are higher than what would be required for a type 2 diabetes candidate. And so we will be looking to nominate a candidate that's optimized for weight loss in the RJVA-002. We anticipate continuing to leverage the platform capabilities and learnings from RJVA-001 in the sense that we will be delivering it... We anticipate delivering it in the same way. We anticipate using the same type of viral vectors to deliver them, the same plasmid backbones, that would apply to one, would apply to the other, but the transgene sequences themselves may enable, more optionality.

[Harith Rajagopalan, CEO at Fractyl Health]

We're also keenly interested as we think about the evolution of this platform, not a question that you asked, but we're keenly interested in multiple concurrent mechanisms of metabolic impact, such as the use of GIP and GLP-1 to get agonism together, or other combinations that you can readily imagine, in order to achieve differentiated therapeutic impact, either in terms of efficacy or in terms of safety profiles. And that will be a lot of opportunity for exploration as we advance the program. Thanks very much for your question.

[Analyst at Bank of America]

Great. Thanks so much. Great. Thanks so much.

[Operator]

Thank you. Our next question comes from the line of Mike DiFiore of Evercore.

[Michael DiFiore, Analyst at Evercore ISI]

Hi, guys. This is Mike DiFiore in for Umar. Thanks for taking my question, and congrats on all the progress. A few from me. One is on the Remain-1 trial. The question is, how will you ensure compliance post-procedure in terms of having patients stick to a uniform, reduced-calorie diet throughout the entire trial? And how will the stat plan handle dropouts? And then I have a follow-up.

[Harith Rajagopalan, CEO at Fractyl Health]

Okay, great question. So the Remain-1 trial, just for those people who may not be familiar with it, is our pivotal study that just got IDE approval at the beginning of April, end of March, beginning of April, for weight maintenance. The plan will be to take people who are obese, not type 2 diabetic, who are GLP-1 drug naive, initiate tirzepatide therapy, which is the active agent in Zepbound, the obesity drug, and then to up titrate them over a period of several weeks to a maximum tolerated dose and achieving 15% body weight loss.

[Harith Rajagopalan, CEO at Fractyl Health]

At that time, we're going to discontinue the tirzepatide, and then we are going to randomize them to Revita treatment or a sham, and everyone is going to get, from the initiation of the study all the way through to follow-up, a recommendation for a diet that matches diets that have been used in similar studies of GLP-1 drugs for weight loss. So the idea is to really try to mimic the same kind of nutritional advice that they have gotten from other studies that have been targeting a similar patient population. And we're going to have visibility into their ability to comply with dietary recommendations during that open label run-in phase. And I think that our expectation is that several months of adherence to that during the open label phase will then translate to adherence during the follow-up.

[Harith Rajagopalan, CEO at Fractyl Health]

You had a great question about the stat plan on dropout. We do think that if we have a therapy that is really effective, as we expect that we will, then people who are in the control arm may be more likely to drop out than the people who are in the treatment arm. And as a result, one, we have made a decision to seek a primary endpoint at 24 weeks rather than at 48 weeks. And we are considering whether to offer Revita to those patients who did not get the treatment as a crossover in order to help keep them in the study.

[Harith Rajagopalan, CEO at Fractyl Health]

But I will note that there's a lot of studies of withdrawal that have followed patients now, from, of drug GLP-1 withdrawal, that have followed patients for one year and have been able to keep patients in that study for that length of time, and so we're encouraged by that background. You had another question, Mike?

[Michael DiFiore, Analyst at Evercore ISI]

... Yeah, but before I move on, just to clarify what you said about the Remain study. Will the dropouts be censored altogether, or will it be like a last observation carried forward type of analysis for the dropouts?

[Harith Rajagopalan, CEO at Fractyl Health]

Good question. We have not yet. We have a view on what that should be. We have not yet reviewed that with the FDA, so I think it's premature to answer that. I would say that last observation carried forward is no longer the preferred statistical technique, and there are imputation techniques that tend to be preferred in this situation, but exactly how to do that will require a dialogue with the FDA that we have not yet ready to chat about.

[Michael DiFiore, Analyst at Evercore ISI]

Got it. Got it. And just a simple question on RJVA-001. Obviously, you switched to the, you know, fully humanized GLP-1 promoter versus the last year you had the GLP-1 analog in your prototype. I think in the prototype, the beta cell transduction was around 30%. Was curious to see if the transduction percentage with this humanized GLP-1 promoter is in the same ballpark or if it differs in any way?

[Harith Rajagopalan, CEO at Fractyl Health]

Great question. The transgene sequence itself might differ, but the AAV9 that delivers it, it remains the same, and we have seen levels of transduction that are very comparable between the candidate and the surrogates that we used beforehand. And so part of the dose bridging strategy, as we get ready for a human, will need to be able to demonstrate all of this with the candidate in preclinical models, in order... And when we get closer, we will walk through those data with you in order to share how we're thinking about dose bridging when we get to people.

[Michael DiFiore, Analyst at Evercore ISI]

Okay. Very helpful. Thanks so much.

[Harith Rajagopalan, CEO at Fractyl Health]

Thanks, Mike. Appreciate it.

[Operator]

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

[Michael Ulz, Analyst at Morgan Stanley]

Afternoon. Thanks for taking the question. Maybe just to follow up on Remain-1 study. Looks like you guys are on track to start that fairly soon. Just curious if there's any remaining steps there to getting that study going. And then maybe secondly, you mentioned sort of providing some early, you know, looks at that data set as it starts to move forward. Just, you know, thoughts on potential timing there and maybe some types of data that might be shared in the sort of interim updates. Thanks.

[Harith Rajagopalan, CEO at Fractyl Health]

Yeah, great. Thanks, Mike. Great to hear from you. We are super excited about the Remain-1 study, and now that we have an IDE approval, we've been able to talk to investigators and to sites about it, and we are incredibly encouraged by the feedback that we are getting about this trial and physicians' perception of its attractiveness to patients. So what needs to happen in order for... to get us up is standard stuff, you know, site selection, IRB approval, et cetera. We are able to leverage the fact that we have active clinical trial sites from Revitalize-1, where we have good relationships with physicians and built clinical trial networks that we intend to leverage in order to help us accelerate, Remain.

[Harith Rajagopalan, CEO at Fractyl Health]

We are enthusiastic about being able to leverage a lot of our existing infrastructure, which we've worked so hard to build. With respect to data updates, as you know, there will be an open-label cohort that we call Reveal-1, and the Reveal-1 cohort patients can be treated in exactly the same way as Remain-1, with one exception. We will allow patients to come into Reveal-1 who have already been on or are currently on a GLP-1 drug and wish to discontinue it in order to be able to see if they can maintain weight loss and not have to stay on drug.

[Harith Rajagopalan, CEO at Fractyl Health]

You may or may not have seen just today, some, a tracking poll from the Kaiser Family Foundation came out talking about how nearly 50% of the people who are taking GLP-1s are concerned about the costs of ongoing GLP-1 therapy, as one reason why people may be looking to stop. Another reason, as you know, that I know we think that the FDA is really interested in, is patients who achieve weight loss benefit but are having tolerability issues with GLP-1. And so the Reveal-1 cohort is gonna allow us to look at those people and also in drug-naive people, who will be treated in exactly the same way as in Remain. So our plan is to give you study updates starting in the fourth quarter.

[Harith Rajagopalan, CEO at Fractyl Health]

We'll get earlier efficacy data in the cohort who are already on a GLP-1, because they won't need to be titrated up on the therapy, and then we'll get... it'll take us longer to get study efficacy or effectiveness updates in the Reveal-1 cohort. But nonetheless, we think together it's gonna paint a picture for us for what we think both the Remain-1 study might look like, but also what are the motivating drivers that patients might have to select Revita for this type of an opportunity, and may inform how we would pursue the commercialization. As the year progresses, we're gonna give you ongoing updates on what we're seeing in Reveal-1 and what kind of data you're gonna get and when.

[Michael Ulz, Analyst at Morgan Stanley]

Got it. That's helpful. Thank you.

[Harith Rajagopalan, CEO at Fractyl Health]

Oh.

[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]

Thank you very much. I appreciate all of your time and attention this afternoon. As I hope you can see, we're firing on all cylinders here, working on Revita for both type 2 diabetes and for weight maintenance, Rejuva heading towards a first in human. What we are excited about is if you fast-forward over the period of, say, one year from now, what types of conversations might we be having?

[Harith Rajagopalan, CEO at Fractyl Health]

If we have Revitalize-1 data from our type 2 diabetes program in Revita, if we have some open-label data on weight maintenance after GLP-1 discontinuation from Reveal-1, and IND enablement heading to a first-in-human for Rejuva, we could be having a conversation that is vastly different than the one we are having now about what the future of type 2 diabetes and obesity might look like with disease-modifying options on the horizon. We're excited about what that could mean for patients, first and foremost, and we are motivated by the desire to accelerate that path to that future as rapidly as we possibly can. So appreciate everyone's attention today and look forward to following up.

[Operator]

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

Participants

Executives

• Adrian Kimber, Chief Commercial Officer
• Harith Rajagopalan, CEO
• Lisa Davidson, CFO
• Stephen Jasper, Head of Investor Relations
• Timothy Kieffer, Chief Scientific Officer

Analysts

• Michael DiFiore, Analyst at Evercore ISI
• Michael Ulz, Analyst at Morgan Stanley
• Analyst at Bank of America