Fractyl Health, Inc. (GUTS) September 2026 Conference Transcript

All right. Good afternoon, everyone, and thanks for joining us at the Morgan Stanley Global Health Care Conference. I'm Mike Goltz, one of the biotech analysts here. It's my pleasure to introduce Harith Rajagopalan, CEO of Fractal Health. Just a reminder, the format for today is a fireside chat, so if anyone has a question, please raise your hand, and we'll make sure we address it. But before we get started, I just need to read a quick disclosure. Before we get for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com backslash research disclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, I'll turn it over to you, Harith, to maybe make some introductory comments, and then we can go into the Q&A.

Sure. So my name is Harith Rajagopalan. I'm the co-founder and CEO of Fractal. Thanks for having us, Mike. We are developing Revita, duodenal mucosal resurfacing, for post-GLP1 weight maintenance. We have pivotal data coming in early Q4, just several weeks away, for potentially the first therapeutic option that has the potential to deliver a durable metabolic reset for people with obesity and type 2 diabetes. What that means is the potential for long-lasting clinical benefits in both weight and metabolic parameters, even in the absence of ongoing medical therapy. The reason this matters so much is because, as everyone knows, GLP-1s have totally transformed the treatment landscape in obesity, diabetes, and metabolic disease. We have nearly 30 million Americans on GLP-1s, but a million people discontinue GLP-1s each month, and then when they do, lose the benefits that they had worked so hard for. So the fundamental question in obesity, I think, has now shifted from how do you achieve weight loss, which we're doing very well with drugs, to how do you maintain that weight loss for the long term? And that's where we believe Revita comes in with the first potential option in the space. Revita has breakthrough device designation from the FDA and has a potential de novo registrational filing pathway. And so with pivotal data in hand in early Q4, we anticipate a potential regulatory filing later this year. So it's an exciting time with key, pivotal, potentially practice-changing data just around the corner.

So a lot going on near-term here, and you mentioned the unmet need is very high, so there's opportunity there. And I guess since Revita is a little bit different, It's a procedure, maybe describe the process, you know, kind of what patients go through and maybe how the, you know, how it works, I guess, or the mechanism.

Yeah, so Revita targets a portion of the gut called the duodenum. It's like the hunger center of your gut. And the reason that that's important is because the duodenum is the first place where nutrients are absorbed in the body. And in people with obesity and type 2 diabetes, nutrient sensing and signaling is abnormal. It doesn't work properly, and we believe that this is the very first thing that goes wrong in people when they develop obesity, and it's the reason why people have obesity and diabetes in the first place. So what we have developed is a approximately one-hour outpatient endoscopic treatment with a proprietary catheter-based delivery system that targets this dysfunctional duodenum with ablation, which is targeted energy delivery directly to this diseased tissue, to allow the removal through ablation of that unhealthy tissue and the potentially healthy regrowth or regeneration of a new lining that aims to restore the normal nutrient sensing and signaling mechanisms in the body so that people can go back to maintaining a healthier weight even in the absence of ongoing medical therapy. We believe that unlike pharmacology, which can be very effective but only works as long as you take it, Revita can actually be a durable metabolic reset by fixing whatever abnormal signaling mechanisms are causing people to have obesity in the first place. That's why we see a lot of potential for it for the million patients a month who are going to stop a GLP-1 and be at significant risk of weight and metabolic rebound. But beyond the patients, we think that this answers a problem that physicians have when their patients are asking them, okay, I've lost weight on a GLP-1 or I'm having side effects on my GLP-1. I want to stop. I need to stop, but I don't want to regain all of my weight. What do I do? And I think it answers a question for health systems that recognize the importance and the value of treating obesity, but are struggling with drugs that only work as long as people take them and the majority of people stopping them within such a short amount of time that the long-term health benefits are not actually realized in the real world. I think Revita can be a very compelling answer for all the patients, the physicians, and the health systems.

Since it's a procedure, maybe just talk about some of the side effects, you know, these patients experience.

Yeah, so Revita is purpose-built to have a very selective ablation of the mucosa without damaging deeper structures. The way we do this is that we first put saline into the wall of the submucosa in order to create a thermal barrier between the mucosa that we wish to ablate and the muscle layer that we don't want to damage because that's where the pain fibers reside and the structural integrity of the duodenum as well. So our ablation is designed to ablate the mucosa and the superficial submucosa, but to prevent injury to the underlying muscle. And as a consequence, in recent randomized trials, we have seen that Revita has essentially the same treatment emergent adverse effect profile as patients who undergo a sham procedure. Most patients do not experience any symptoms at all. Those who do have mild procedure-related symptoms, maybe abdominal discomfort or throat discomfort lasting one or two days, self-limited, resolving on its own. We think it's a mild periprocedural profile that potentially supports very broad outpatient use. Because you've got to think about this as a transoral upper endoscopic procedure, and we are doing millions of these types of procedures in endoscopy suites across the country today. So what I think is compelling is that the safety profile and the scalability of the technique can actually meet the need of the very large population of potential GLP-1 discontinuers.

Can you talk a little bit about just the durability you're seeing with the procedure so far, and do you anticipate patients may need to redose in the future, rehab a procedure, and what could that look like?

Yeah, so we've done studies in type 2 diabetes for many years. We've collected data out to two years in type 2 diabetes where patients who've undergone a single Revita procedure have had two years of durable glucose improvement, metabolic benefit, and weight maintenance for that two-year period of time, we've just begun to see this summer one-year data from our post-GLP1 weight maintenance setting. We saw that in two different patient cohorts that we've been following. One is an open-label cohort called Reveal-1, roughly 20 patients. The other is in a randomized controlled setting called Remain Midpoint, where that's roughly 45 patients in whom roughly 30 were in the Revita arm. So collectively, we now have about 50 Revita patients with one year of follow-up. And the results, I must say, are very encouraging. Approximately 80% of the GLP-1 weight loss has been retained across these cohorts at one year. That's a very impressive number because when you think about what happens in natural history or in the control arm in our own trials, patients are regaining 55% to 60% of that weight, continuing to regain weight at one year, maintaining 80% weight, instead of giving up less than 20% of that weight loss is clinically meaningful, better than what we can see from other pharmacological approaches and maintenance, and we think will be very highly compelling if the pivotal trial continues to show what the pilots have already demonstrated.

Can you talk about some of the other things you've learned from your Remain, Midpoint, and Reveal open-label studies as well?

Yeah, I'll state that when we started, we started three trials in parallel. We started the Reveal open-label cohort. We started the Remain, Midpoint, which is a proof-of-concept, sham-controlled pilot study. and then we started the Remain Pivotal, which is the single registrational study that we believe is necessary for registration. For context, the Remain Pivotal is the one to focus on. That's the data that's coming in early Q4 and where we've already brought all the patients that are in follow-up have come back for their six-month visits, and so we're in data cleaning right now. In these three studies, we advised endoscopists to ablate at least 10 centimeters of the duodenum, but aim as they developed proficiency with their technique to get to the entirety of the duodenum from the ampulla of otter to the ligament of trites, which are anatomical landmarks. In most people, that's a roughly 16 to 20 centimeter length of duodenum that we advise them to work themselves to. The reason we said at least 10 is because that's where we found effectiveness in our type 2 diabetes trials, but we thought that more would be better for weight maintenance. We just didn't know how much when we started these studies. The second thing we said was we're going to enroll patients who have lost at least 15% of their body weight on the GLP-1. The reason we said you've got to lose at least 15% of your body weight on a GLP-1 is because it's now very clear from Lilly, Novo, and established literature, the more weight you lose on the GLP-1, the more risk you have of regaining weight very rapidly. So in order to see a treatment effect in maintenance, we want more weight loss. We learned from our pilots to refine our sense for those two parameters. We found that more than 14 centimeters of ablation was more effective than 10 to 14 centimeters of ablation. We learned that more run-in weight loss, such as more than 17.5% weight loss, was more effective than less than 17.5% weight loss. Here's the thing I would leave you with. The pivotal trials statistical analysis plan is now optimized for those lessons. Our per-protocol population are those individuals who have achieved more than 14 centimeters of ablation. That's well over half of our pivotal trials population. And we also have worked with the FDA to define a statistical analysis plan that takes the magnitude of run and weight loss into consideration for the primary analysis in our pivotal trial. And we believe that with these two measures, we are very well set up for a very clinically meaningful effect size from the pivotal trial, which is what we're excited to say. And I'm happy to talk more about what expectations are.

Yeah, maybe expectations and a little bit more about the co-primary endpoint and kind of what the bar is on those different endpoints or combine what you need to sort of show to the FDA to get approval?

Yeah, so we have two co-primary endpoints. So just let's remind you about the pivotal study and its design, and then we'll walk through that. So over 300 patients were randomized. They all had achieved more than 15% weight loss on terzepatide over a period of 20 to 30 weeks. They discontinued their terzepatide, and then that was their baseline pre-randomization visit where their weight was measured. And then one week later, they underwent their randomization procedure. They were randomized two to one to either revita treatment of at least 10 centimeters of the duodenal mucosa or a sham procedure where the catheter is introduced but wasn't activated. Patients remain blinded to their treatment allocation, and the assessors of the primary outcome measurements of weight also remain blinded. So the only person who knew whether they got the treatment or not was the actual performing interventionalist who was not actively involved in their care after that randomization procedure. So a true double blind. The co-primary endpoints here are effectively an efficacy endpoint at six months, which is what is the rate of regain in the Revita arm compared to the sham arm at six months. That's what we're going to see in early Q4. And the second co-primary endpoint is effectively a durability responder analysis, which is what proportion of Rovita patients maintain at least 5% total body weight loss one year after the discontinuation of GLP-1. What do we need to show? We need the pivotal trial to have a statistically significant difference and the six-month efficacy endpoint. We also need the durability endpoint to demonstrate that at least 50% of the Revita patients, just in the Revita arm, maintain at least 5% total body weight loss from their pre-trasepatide levels. What we saw in the midpoint cohort when we performed our analysis in the same way as we will in the pivotal is a result that would have been highly statistically significant in a 300-patient pivotal trial. and on the efficacy endpoint and on the durability endpoint, we saw over 70% of the patients met that responder analysis at one year compared to the 50% threshold that the FDA would require.

Okay. Makes sense. I guess we talked about ablation length and the percent from baseline weight loss, which are two important factors. but anything else in terms of, like, differences in the trial design or patients enrolled in the study versus some of your prior midpoint or other endpoints that might influence the outcome?

Well, one of the benefits of starting these studies concurrently is that we are able to do them all under a single IDE, same protocol, same sites, same investigators, same inclusion-exclusion criteria, same physicians performing the procedure. So that allows us to have a lot of consistency from the pilot all the way through to the pivotal, so the lessons we believe can give true read-through. The only key difference is actually sway in the favor of the pivotal with respect to run-in weight loss, where there's more average run-in weight loss in the pivotal than there was in the pilot, and on ablation length, where there was more ablation length on average than there was in the pilot. So both of those skew in favor of Ravida's efficacy. potential. Makes sense.

So you'll share the data early 4Q and then maybe talk about next steps from there once you have the data.

Yeah, I mean, I think I would say that let me just say that the primary endpoint is in the intention to treat analysis. And the goal there is to demonstrate a statistically significant result. The enrichment subgroups are those patients who had higher run and weight loss on average and in those who had more ablation length on average. And our goal in those enrichment subgroups is to be able to show more than a 50% reduction versus sham in the rate of regain at six months. I think that would be a highly clinically impactful result. If we're able to see that, we'll have top-line data in early Q4. Our plan is to submit all of our device manufacturing, our design history file, and our six-month data by early Q4, by late Q4 with the FDA as part of the de novo pathway, and then to follow up with our 12-month data in Q1. So that leads you from Q4 to Q1. The de novo pathway is roughly a 150-day review process with some time for questions in between. So call it six to nine months of a review cadence on average. So if all goes well, that means potentially in clearance in the United States by late 2027, enabling an early 2028 launch.

Can you talk about maybe the advantages of de novo? And you touched on some of them already.

Yeah. And when we started this process, this sits in the device side of the house. So this is CDRH. And CDRH for novel devices has a a de novo pathway for, it's called Class 2, for low to moderate risk, and it has a PMA pathway, or Class 3, for high risk. We started off in the PMA pathway, but the FDA has reviewed the totality of our safety evidence along the way and has given favorable feedback on that safety, gives us confidence that we should follow where the dialogue with FDA has gone. We are pursuing the de novo pathway, and we have confidence in that. That's a more efficient, faster, more streamlined process. It establishes Revita as the definition of the category, what's needed for approval through de novo special controls for anything else that might follow. But it also accelerates label expansion and product improvements relative to the PMA. So there's a lot of advantages we see in it.

So for de novo, you start the process with the six-month data, and then you need to follow it up with 12 months in order to get kind of the approval? Is that part of the process?

We think that the FDA is going to want to see both of the co-primary endpoints, and the plan will be to deliver all of that as soon as it's available. Okay, gotcha.

Let's talk a little bit about the commercial strategy and plan. You recently hosted a day of commercial day to kind of focus on the plans there, So maybe just walk us through, you know, some of those key takeaways.

Sure. We hosted an investor day, and for those who are interested in learning more, you can visit on the IR section of our website on September 1st. What we laid out, I think, is a very compelling argument for how Revita may be able to launch into established centers of excellence that have patients on a GLP-1 who are currently looking for an off-ramp, where physicians have literally everything they need to be able to offer these patients Revita other than the Revita devices and training itself. So we have a plan for a targeted and efficient center of excellence launch. In the first three years, we target 100 to 200 of the top centers out of a total of 1,000 in the United States. Each of them has roughly 2,000 patients today on GLP-1. and the metabolic interventionalists who would perform this procedure are clearly seeing that their patients are looking for a way to be able to maintain body weight loss without having to stay on these medicines for the rest of their lives. Physicians are motivated not only clinically but economically because the procedures can be profitable for them and for their hospitals and can help them fulfill a clear unmet need in the space as we've been talking about for the past 20 minutes. What's nice about it is this group of doctors are a nameable list. It's a totally manageable group of people to target with a sales force in the tens of people, not hundreds. We know many of them already well by name. They reference one another in their buying decisions, and Ruvida DMR is something that they're very well aware of, and they're excited for the data that are coming. And for those who are interested, I would point you to the transcript or the webcast of our commercial strategy day because one of these physicians based in Dallas talked about his experience caring for over 2,000 patients a year on a GLP-1 and what he is seeing that they are looking for. If you ask an obesity medicine doctor or an endocrinologist about unmet needs in obesity, you'll hear about cost and access. You'll hear about tolerability. You'll hear about potency. because those physicians prescribe medicines. But if you talk to our metabolic interventionalists, they not only prescribe medicines, but they also perform interventions to manage obesity and metabolic disease, and they offer, therefore, a much more comprehensive view on what patients are looking for. So, yes, they will name those things as unmet needs, but they will also say that most of my patients do not want to and cannot conceive of staying on these medicines to manage their weight for the rest of their lives, And they need a way to lock in those benefits without chronic pharmacotherapy. And so these physicians, and one of them was featured in the Investor Day that we held, I think clearly understand what patients want, and Ravita can really answer a huge need for them.

How do you get those patients sort of identified and then funnel them through sort of these clinics?

So let's just say there are roughly 1,000 accredited bariatric centers of excellence in the United States. They're accredited by the Medical Society, ASMBS. You can go to their website. You can see the list of those 1,000 centers. The top 100 to 200 are doing the majority of these cases, and in those 100 to 200 centers, there are already about 2,000 patients that they are managing annually within that practice, where surgeons and interventionalists, their NPs, PAs, and other associated physicians are managing weight loss journey for their patients. They're sitting right there in those clinics. And right now, there's like a six- to eight-month waiting list for them to be able to see additional patients, which I'm sure you're hearing elsewhere as well. So the core question is, how can these physicians serve more patients? and how do they solve a problem that these patients want weight loss medicine, but they don't want weight maintenance medicine. They want weight maintenance without medicine. And so this allows them to be able to really increase their throughput, to be able to offer not only an induction, but then a maintenance intervention that allows those patients to go back and lead a life that doesn't require the constant management of GLP-1 ongoing care. That allows more patients to come into the practice from the waiting list. This is not a market creation exercise. It is actually a market fulfillment exercise. These physicians already have NPs and PAs who are prescribing the GLP-1s. They have the nutritionists within their own practice. They have the prior authorization machinery in place. They have the endoscopic skill set and the endoscopic mindset to be able to intervene when patients are looking for an alternative to medicines. And they also are participating in a society-led registry for long-term outcomes in weight management outside of medicines. So literally everything that we would want in a checkbox for a center of excellence, these guys already possess.

Can you talk a little bit about just the training involved since it is a procedure? What's the time frame on that?

Yeah. So, Revita has several advantages as a procedure by design. The first is it leverages the skill set that these physicians have already gathered through other procedures that they have either routinely do and or have trained in. So, we're not asking them to do something that is complicated that they are learning to do for the first time. We're asking them to apply familiar techniques to a portion of anatomy where they have not applied that technique before. That's why it takes about four to five cases in our pivotal trial for patients to get, for physicians to get comfortable performing the procedure, ramping up to that full ablation length that we talked about earlier. And that's why we believe that this is a highly scalable intervention as well, leveraging existing skills. Now, what makes it attractive to patients is that it doesn't alter their anatomy. They don't think of this as surgery. We're not rerouting things. We're not suturing things. We're not putting an implant in their body. We are merely treating a diseased section of their gut and allowing their physiology to improve. That's highly attractive because it feels to patients like you are actually targeting a root cause of their disease for the very first time.

Makes sense. Can you talk a little bit about just your thoughts on pricing and how you came to those sort of thoughts?

Sure. Well, we think about it, it's too early for us to disclose a price, obviously, but we think about the pricing corridor in which we reside. There is a particular endoscopic intervention called ESG that's reimbursed at roughly $11,000 today. And then you have bariatric surgeries that are reimbursed at up to like $33,000. So the way we think about our ASP is within that corridor. Let's call it $10,000 to $30,000 of an ASP. We hired in June Mike Zumdahl, who's a head of commercial strategy and market access. He took the 50 patients that we have at one year, plugged it into a health economic model, started to build out the health economic value proposition, which we will, of course, refine with full pivotal data over the coming quarters. What we are seeing so far is highly encouraging. At the lower end of that corridor, we see Revita as being potentially cost savings to the system. Even at the upper end of that corridor, we see it as being highly cost-effective compared to bariatric surgery and other interventions that are otherwise already reimbursed by payers. So we feel like there's a strong justification across that entire pricing corridor.

Makes sense. Maybe we can shift gears a little bit to Rejuva. Maybe give us a little bit of background there, where you are in that program.

Yeah, I mean, as a company, we believe very deeply in how do you provide patients the potential for lasting metabolic benefit, because I believe that that is really what the market needs desperately. There's a lot of therapies out there that work while you take them, but most people don't take them long enough or well enough for it to actually give them long-term benefit. So what do you do for people who need to stop or want to stop a GLP-1? That's where Ravita comes in. But what about people who want long-term GLP-1 and are benefiting from it? We have Rejuva, which is a potentially once-in-a-lifetime GLP-1, and it's a smart GLP-1. It's nutrient-responsive, delivered via a local administration of gene therapy into the pancreas. And just to set the stage appropriately, this is still preclinical, but a CTA has now been cleared in Europe, and we have ethics committee approvals in Australia. Four sites have been activated. Patients are now being enrolled. We anticipate dosing the first patients and seeing preliminary feasibility and safety by the end of the year. The simple idea is what if you could allow the pancreas to make GLP-1 at the site where it's needed most to treat type 2 diabetes to help keep the beta cell alive, but to be released locally at low doses in a nutrient-responsive manner. Can we achieve durable remission of type 2 diabetes with a single administration of this therapy? That's the target product profile we're going after. We think it will be highly attractive to patients who are otherwise facing the need for chronic medication escalation and disease progression. We're trying to turn the disease around. And if successful in type 2 diabetes, as we pursue the profile optimization, can it also begin to wait as a durable solution? Can it also serve as a durable solution for obesity as well? That's something we'll be excited to see in the coming quarters.

Great. Maybe you can talk about the current cash position, kind of the runway and how you think about that.

At the end of Q2, we reported a little bit less than $50 million of cash on hand. We've said that we have data coming in early Q4, a registrational filing in late Q4. We have cashed through all of that. And into early 27, we have roughly five to six months of cash on hand beyond our anticipated pivotal data readout. What the commercial strategy day allowed us to articulate is that we think it's possible to get profitable in about five to eight quarters from launch and under a wide variety of quite conservative estimates on launch scenarios. And so while there are certainly options for non-dilutive ways to be able to fund the business to be able to achieve those objectives, we also think that a relatively, like, constrained amount of capital would allow us to be able to get to profitability in five to eight quarters. And once we have pivotal data in hand, we'll be looking to explore all of it.

Yeah, that makes sense. maybe in the last few minutes here, I can ask a couple survey questions. We've been asking all of the biotech companies. It's kind of along different themes. So there's three questions here. So the first is, you know, how has the rise of China origin innovation sort of changed your competitive positioning and your R&D versus BD playbook?

We are seeing in devices what people are also seeing in the world of drugs, that there are clearly, there's a lot of innovation in China. There's a lot of support for that kind of innovation. It's expanding where we are looking in terms of potential tuck-in or other sorts of opportunities or competitive opportunities, depending on how the landscape evolves. So whereas in the past, I don't think we would have looked to China as competition, I do think we have to start paying attention to it now. Makes sense.

Second question is, are you implementing AI adoption? And if so, where has it already changed the decision, timeline, cost, or probability of success? And what measurable evidence should we expect over the next two years, let's say?

We're implementing AI. When my team saw this question, we all chuckled because I've been a strong proponent of implementing AI across the organization. I see it in two different ways. One, obviously, is in the efficiency of doing the work that we would otherwise do. Second is in enabling us to do things that we could not have otherwise done without AI. In the former category, we are all in with safeguards on using AI in order to improve the efficiency and the quality of the work product. You've heard many major pharmaceutical CEOs talking about how it's speeding up regulatory filing timelines, speeding up data analysis, and yes, we are using it in all of those ways and have been doing so now for several quarters. And I think you've seen that in the efficiency of our business and capital outlay over the course of the last several quarters. We're also using it to do things that we otherwise couldn't do. So, for instance, in our Rejuva gene therapy program, we have AI-generated DNA sequences that have shown some very interesting potential for some of the next-generation candidates that we're looking at internally. We see that the predictive nature of the leveraging of existing genetic databases allows AI to make smart choices on how to optimize genetic sequences for efficacy and safety in pretty intriguing ways. We'll have more to say about that in the future. Okay, interesting.

And then maybe third and last survey question, I guess, which policy variable, whether it's FDA, Medicare negotiation, MFN, tariffs, or global pricing, matters most to your economics, and what have you changed, if anything, because of it?

Yeah, so I would say CMS, CMS, CMS. On one hand, CMS has established this GLP-1 bridge program. As of July 1st, they are covering GLP-1s for obesity. Eli Lilly is running ads on football. I saw it yesterday and over the weekend for the GLP-1 bridge program. I anticipate 4 to 5 million Americans are going to be on GLP-1s in the CMS population by this time next year. And the Congressional Budget Office estimates that two-thirds of them will discontinue the GLP-1 within one year, 80% within two years. So I think that that push is going to mean that Medicare is going to be paying for GLP-1s for good because there is no alternative once you start putting these people on these medicines to just take it away from them if you're Medicare. What that means with all of those discontinuers, particularly in the elderly population who are at greater risk of bone loss and frailty, is that an off-ramp is going to be an essential part of the treatment armamentarium, which is where we believe we come in. So the second thing on CMS, other than the GLP-1 bridge program, is how they're working to establish early national coverage for breakthrough devices. Revita is a breakthrough device. We believe it fits an unmet need that is highly important to Medicare, as we just talked about. And so early coverage could really be a major unlock for our commercial model. It's not contemplated in what we proposed in our September 1 Investor Day, But if early coverage were to come to fruition, we believe that could be a major opportunity for us.

Okay, great. Looks like we're out of time. Why don't we end it there? Harith, thanks so much. We really appreciate it.

Thank you, Mike. Appreciate it.