Fractyl Health, Inc. (GUTS) Earnings Call Transcript & Summary

All right. Thanks for joining us for our next company presenter at the BofA Healthcare Conference in Vegas.

My name is Jason Gerberry. I'm one of the SMid-Cap Biotech Analyst. We've got Fractyl Health and CEO, Harith, joining us live here. So Harith is going to run through some slides, and I'll turn it over to you.

Thanks, Jason. Appreciate it. Pleasure to be here at BofA. At Fractyl, we're developing durable therapies to attempt to break the pattern of obesity. Everyone knows how big of a problem obesity is. GLP-1 drugs have emerged in the past few years and are absolutely amazing molecules, but they still leave substantial unmet need. A reasonable question that you might ask looking at how this is playing out in the real world is why should patients start on weight loss therapies only to take them for a short period of time and then be at risk of regaining all of their weight right back as soon as they stop. A vast majority of patients, who start on GLP-1-based medicines discontinue within months. I think this is now very well established. And in addition, those who stop are at very high risk of weight regain. 85% of patients, who stop GLP-1 drugs regain almost all of their weight back over the course of a 1-year period of time. We aim to solve this efficacy gap and durability gap that emerged from the GLP-1 therapies and weight loss by focusing on what we believe to be the more substantial unmet need in obesity today, which is weight maintenance. And we have 2 strategies focused on trying to provide a durable metabolic reset by addressing core pathologies in the body that are driving obesity and type 2 diabetes in the first place. Revita targets the gut with a 40-minute outpatient endoscopic procedure with positive early data in weight maintenance after GLP-1 discontinuation and we anticipate reporting open-label data from our REVEAL-1 cohort in June, as well as randomized 3-month data from REMAIN-1 in the third quarter of this year. The REMAIN-1 data in Q3 will be the first randomized controlled trial data of a weight maintenance strategy after the discontinuation of GLP-1s. We're excited about what that data are going to show. In addition, we're developing Rejuva, which is a locally administered pancreatic gene therapy platform that we think has the potential to be a best-in-class incretin therapy because the fact that we are delivering this to the pancreas enables us to develop nutrient-stimulated smart GLP-1 development candidates. The first of this is RJVA-001. We are imminently filing our first CTA module for a GLP-1 candidate in type 2 diabetes. Look forward to that news coming in the coming weeks. Let's focus on Revita. We target gut dysfunction with a first-in-class procedural therapy that is designed to durably reset metabolism by targeting pathology caused by high fat, high sugar diets that occurs in the first part of the small intestine called the duodenum. By ablating the duodenal mucosa precisely with our proprietary device system, what we are able to do is engender the re-epithelialization and regeneration of the duodenal mucosa in order to reset abnormal nutrient sensing and signaling mechanisms that are believed to be a root cause of obesity and diabetes. This is an outpatient endoscopic procedural therapy. In prior clinical trials, we have seen 2-plus years of durable improvements in weight loss maintenance and glucose control in Revita clinical studies. But perhaps one of the most impactful avenues for exploration with Revita may, in fact, be to be able to show that Revita can help preserve body weight loss after the discontinuation of weight loss medicines. In fact, we've moved incredibly rapidly towards pursuing Revita in weight maintenance over the past 6 quarters. It was only in the end of 2023 when a pooled analysis from our prior clinical studies in type 2 diabetes showed the potential for sustained weight maintenance in the absence of ongoing medical therapy after Revita, that following quarter, we filed to begin a pivotal study with the FDA. In April, 13 months ago, we announced that the FDA had approved this pivotal REMAIN-1 study for weight maintenance in obesity after the discontinuation of GLP-1-based drugs. In July, we announced breakthrough device designation for Revita in weight maintenance, which is a huge step for the regulators to agree the size of the unmet need and Revita's potential to address that unmet need. Later in the third quarter, we initiated the study in our first sites and enrolled our first patients. And we just announced yesterday in our Q1 earnings call that we completed full enrollment in the pivotal cohort about 3 months ahead of schedule. And in the intervening time, we presented positive early data from our REVEAL-1 open-label cohort, and we intend to share more 3-month open-label data next month and then midpoint randomized data in Q3, as I've already mentioned. So it's a period of acceleration and momentum into what we believe to be an incredibly exciting and brand-new therapeutic category called weight maintenance, an opportunity that would not exist if not for the gap left behind as demonstrated in the real world by the usage and the discontinuation of GLP-1 drugs. So just to give you an overview of the data sets, the patient populations and the cohorts that are under investigation for Revita and weight maintenance, you can see that the REVEAL-1 cohort is about 20 subjects intended to be enrolled. These are individuals with obesity, who've been on a GLP-1 and need to stop the GLP-1 for one reason or another. We've presented early open-label data after GLP-1 withdrawal with Revita. We'll share more in the next month. REMAIN-1 is a randomized, double-blinded, sham-controlled study. There's a midpoint cohort of 45 subjects, who've all already reached their 15% weight loss goal being randomized to Revita versus sham in a 2:1 treatment allocation, and we'll be looking at 3-month weight maintenance data post tirzepatide discontinuation in the third quarter. And lastly, we have the REMAIN-1 pivotal cohort, 315 subjects to be randomized to Revita versus sham. We just completed enrollment in the study. We have -- and we're starting those last patients on tirzepatide. We anticipate completing randomization in the first half of 2026 in these individuals and then seeing 6-month primary endpoint data in the second half of 2026. The REMAIN-1 pivotal cohort, we believe is a sufficient single registrational study for us to file for a PMA in the United States, which we intend to do once we see that 6-month data next year. So just to walk you through the REVEAL-1 cohort, patients, who are on a GLP-1 stop the drug, undergo Revita, and we follow them to look at their weight regain. What we have presented publicly is that 6 out of the 7 patients with 1 month of data are regaining less weight than predicted. One of them actually lost additional weight at 1 month. We'd expect people who stopped tirzepatide to regain about 3% body weight at 1 month, about 6% body weight at 3 months. What we are seeing is less than half of that amount of weight regain. And our market research suggests that if we can half the rate of weight regain that you would expect to see from tirzepatide withdrawal, we would have a very compelling product for patients and for the health system in general. The REMAIN-1 pivotal study is very much the same, except here, we will be much more homogeneous in the patient population, administer tirzepatide in patients, who are GLP-1 naive, get them to 15% body weight loss before randomizing them. And then we will be assessing 2 co-primary endpoints, the randomized double-blinded sham-controlled data at 6 months, and we will also be looking at the responder rate in the Revita cohort at 12 months. What do we expect to see? What you -- this is the first pivotal study in weight maintenance. So it's worth spending a minute just talking through what we expect to happen to these individuals. On the Y-axis, you see the percent change in body weight from the time that they enter the study and then the X-axis is time. So patients will lose 15% body weight on tirzepatide during the open-label run-in phase. Then we will withdraw the tirzepatide and randomize individuals to either Revita or a sham. And we know from Lilly's SURMOUNT-4 study that we have a certain expectation of the rate of weight regain in the sham arm over time. And Revita is designed to be able to -- the studies that we're running are designed to be able to demonstrate statistical superiority in weight loss maintenance in Revita over sham. In Q3, the first 45 patients, who are randomized will be achieving their 3-month follow-up. And the key objective will be to show that Revita prevents early weight regain compared to the sham. And the reason that this matters is because an early signal of randomized data of weight maintenance derisks the pivotal study whose data will be following in 2026. Not only will we have these 3-month data from these individuals, but a question we've been getting a lot is whether we're going to continue to follow these patients. And the answer is yes. So you can expect incremental data updates from these individuals, who will remain blinded to their treatment allocation through 6 months in the months to follow that September -- sorry that Q3 endpoint. One thing that's really surprised us is the rate of enrollment in the REMAIN-1 study exceeded all of our expectations. We enrolled the study 1 quarter ahead of our own internal schedule. The first sites were activated in August. Midpoint cohort was fully enrolled by November, and the full pivotal study was just announced to be fully enrolled yesterday. What we are observing is incredibly high site and patient enthusiasm, which all points to an unmet need and it's consistent with our own internal market research, which suggests that many patients who are on a GLP-1 are incredibly eager for an off-ramp even if they are tolerating the medicines well and are not foreseeing any access issues. And that, I think, speaks to the very strong desire for a patient with obesity to be able to live a life at a healthier weight without the need for chronic therapy, sort of a surprising observation for many when they hear this, but reflected very clearly in the rapid enrollment in the study, which we believe are key signals of the commercial uptake potential for Revita with positive data if and when approved. One other aspect of Revita, which is different than other obesity therapies is that we're targeting a readily accessible patient population through routine upper endoscopy. There are 10 million people, who will try a GLP-1 in 2025. 800,000 of them are going to be undergoing an endoscopy already for other reasons anyway. They have to stop taking a GLP-1 a week before their endoscopy. Their physicians, who are managing these individuals in endoscopy are clinically and economically motivated to want to offer patients an off-ramp to GLP-1s should one be accessible and available. And I do believe that the latent market potential for Revita just through existing patient flow through endoscopy is considerable. Now turning to Rejuva, our potentially one-and-done pancreatic gene therapy platform. The reason we're excited about the Rejuva platform is because we're targeting a large patient population with a local delivery of a small amount of virus with anticipated low cost of goods, where the payer has already ascribed high economic value. We're already at less than $10,000 COGS per patient. We see a pathway to even considerable improvement upon that. And ICER is willing to place a $10,000 price per year benchmark on semaglutide. What we see with RJVA-001 is the potential for a best-in-class GLP-1, the potential for superior durability, potency, tolerability and convenience to other GLP-1s that exist today or that are in development. What's different about our Smart GLP-1 is that it's produced and secreted in an endogenous manner that mimics the body's own PK/PD from the beta cell. It's using a vector AAV9 that is already approved for other uses, but at 2 to 3 orders of magnitude less than it's already approved for with a human native GLP-1 sequence delivered with a proprietary endoscopic delivery system. We've completed key preclinical in vivo studies and are about to file our first CTA module with this program. We see compelling results in terms of improvements in fasting glucose, fasting insulin and body weight in the DVDB mouse model. Equally exciting, we are seeing durable weight loss and weight loss maintenance with a better composition of body weight loss than what you see with semaglutide, with Rejuva shown here in red compared to semaglutide shown in blue. And you can see on day 29, when semaglutide is discontinued weight regain, which is prevented by a crossing over to the Rejuva gene therapy. So in summary, a lot of exciting catalysts coming up across both Revita and Rejuva within the next several months, an opportunity for people to engage with us on a transformational opportunity in weight maintenance and potentially a best-in-class GLP-1. Thanks very much for your time.

Thanks.