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

Good morning and welcome to the Fractyl Health Commercial Strategy Day. [Operator Instructions] As a reminder, this call is being recorded, and a replay will be available on the Fractyl Health website following the conclusion of the event. I will now turn the call over to Brian Luque, Head of Investor Relations and Corporate Development at Fractyl Health. Please go ahead, Brian.

Good morning, everyone, and thanks for joining us. I'm Brian Luque, Head of Investor Relations and Corporate Development at Fractyl Health. Today is our Commercial Investor Day. Our purpose this morning is to walk you through how we intend to commercialize Revita, our investigational procedural therapy for post-GLP-1 weight maintenance, assuming we're successful in our pivotal trial and in our regulatory submission. Before we begin, I'll turn to the legal disclaimer. During this presentation, we'll be making forward-looking statements, including statements about the timing and results of the REMAIN-1 pivotal cohort, a regulatory strategy and the potential use of the de novo pathway, coding coverage and payment the timing and content of a potential commercial launch, our expected financial performance, the potential sales an estimated total addressable markets currently and in the future for our product candidates, the potential time line for profitability following the launch of Revita and our cash runway. These statements involve risks and uncertainties that may cause our actual results to differ materially. A discussion of those risks is included in our filings with the SEC, including the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2025, filed on March 24, 2026, and our quarterly report on Form 10-Q for the quarter ended June 30, 2026, filed on August 10, 2026, which I encourage you to review. Forward-looking statements speak only as of today's date, and we undertake no obligation to update them. I want to be clear about 2 things at the outset. Revita is an investigational device, it is for investigational use only in the U.S. and had a CE mark in the EU and the U.K. FDA pre-submission feedback is advisory and nonbinding, and there is no assurance that the FDA will accept the de novo marketing application or that Revita will receive marketing authorization and the REMAIN-1 study database has not been locked as this is an ongoing study, so the data are subject to further cleaning and validation. You will be hearing from 4 speakers this morning. Dr. Harith Rajagopalan, our Co-Founder and CEO, will start with the problem we are solving, the opportunity and the evidence we've generated those are. We are then delighted to be joined by Dr. Folahan Ayoola. Dr. Ayoola is a Medical Director of Bariatric Surgery at Texas Health. He will give you the view from inside the metabolic practice on the unmet need in post-GLP-1 patients. Mike Zumdahl, our Senior Vice President of Market Access and Commercial Strategy, will then take you through our Center of Excellence strategy and our market access plan. Mike Joined us in June from Inari Medical, where he built global reimbursement and health economic infrastructure for a breakthrough procedural therapy through its acquisition by Stryker last year for nearly $5 billion. And Lara Smith Weber, our Chief Financial Officer, will close with the commercial model and the path to profitability. Following prepared remarks, we'll be happy to take your questions. With that, it is my pleasure to hand it over to Harith.

Thank you, Brian. Good morning, everyone. In July, we shared 1 year randomized data from the REMAIN-1 midpoint cohort and why we have conviction in Revita for the large post-GLP-1 weight maintenance opportunity. Today is a different conversation about the potential market opportunity for Revita in post-GLP-1 weight maintenance. Six key points. The unsolved problem in obesity is now maintenance, not weight loss, and there is no approved off-pump. We have randomized and open-label data showing a durable signal with 6-month top line from the 300-plus patient pivotal cohort expected in early Q4. That study is built to support a potential de novo filing in late in Q4 on a Class II path. The commercial build is activation, not market creation. The payment work is already in motion, and we believe a focused center of excellence launch can reach profitability 5 to 8 quarters after launch. Let me start with the problem. There are roughly 29 million people in the United States on a GLP-1 for weight loss today. These drugs work. They have changed what patients and physicians believe is possible. But look at the curve on the right. This is Lilly SURMOUNT-4 study of tirzepatide discontinuation. Patients lost about 20% of their body weight during the lead-in. Those switched to placebo went straight back up and we're still gaining at 1 year. That pattern has been consistently seen across studies with almost all weight regained by around 18 months. And because patients regain fat faster than muscle they lost, body composition worsens on the way back up. To a patient, the consequences are severe, not only weight regain, but also metabolic rebound and the psychological turmoil of having lost the weight and then gained it all back. Roughly 85% of patients regained the weight they lost. There is no FDA-approved therapy for post-GLP-1 weight maintenance. And as newer drugs become more potent and more accessible, we believe that gap will only widen. It is estimated that over 1 million patients discontinue a GLP-1 each month in the U.S. The pattern is consistent, initiation, weight loss, then discontinuation, driven by costs, side effects or access and then rapid regain with 2/3 of the lost weight back within a year of stopping. This is a systemic pattern, not individual failure, and it is the single largest unaddressed problem in obesity care today. Let's consider a typical GLP-1 patient. She lost nearly 50 pounds on a GLP-1, but her weight loss has plateaued, and she wants to recover the energy to sit on the ground and play with their grandchild. She asked their physician, do I have to stay on this forever? Will the weight come back? Unfortunately, today, the answer is yes. There is no durable nondrug off-ramp. Revita is a single onetime outpatient endoscopic procedure that ablates the duodenal mucosa like LASIK for obesity. The duodenum is where nutrient sensing goes wrong after chronic high fat, high sugar diets, and Revita is designed to ablate that damaged tissue and allow healthier mucosa to regenerate. Revita holds FDA breakthrough device designation for weight maintenance and patients discontinuing GLP-1 therapy. It is designed to complement lifestyle changes and pharmacology, not replace them and is protected by a robust IP portfolio covering thermal and nonthermal ablation approaches. The catheter is placed through the mouth over a guidewire while the patient is asleep and the length of the duodenum is treated by a repeated sequence of circumferential saline lift and then precisely controlled hydrothermal ablation at each lift site, along more than 14 centimeters of postpapillary duodenum. There are a few aspects of this procedure that make it a potentially scalable option for a broad population and attractive to positions. First, the procedure uses skills and advanced endoscopist already has. Second, and critically for patient acceptance, it does not alter the patient's structural anatomy. Nothing is resected, implanted or sutured, no restriction is created and patients go home the same day. Third, it does not close the door on any other option from diets to drugs to other procedures. Our clinical program is a stepwise validation run under a single IDE built to support a potential de novo submission late in Q4 of this year. Three cohorts, REVEAL-1 is our open-label real-world cohort, 1-year data came in Q2. The midpoint cohort is our randomized double-blinded sham-controlled pilot of 45 patients with a tirzepatide run-in randomized 2:1, we reported 1 year data in July, and the pivotal cohort is the same design, the same population and the same investigators at over 300 patients. Here's what those first 2 cohorts have shown REVEAL-1, open-label, real-world data set, 22 patients enrolled who had already lost at least 15% total body weight on a GLP-1 and wanted to come off. At 1 year after a single Revita procedure, participants retained approximately 78% of the total body weight loss achieved under GLP-1. That is open label, real-world data. But what does it look like in a randomized setting. In the midpoint cohort at 1 year, up to 84% of GLP-1 induced weight loss was retained with Revita versus 46% with sham in patients who received complete duodenal ablations. And the pivotal cohort is the box on the right. Top line 6-month data early in Q4 expected top line 1-year data in the first quarter of 2027. As an illustrative example from the midpoint cohort, a participant spent 5 months on a GLP-1 and lost 44 pounds when the drug was stopped. 1 year later with no GLP-1, a sham patient is back up at 199 pounds on average, regaining 23 pounds holding on to less than half of what she lost. The Revita patient is at 184 pounds. She has regained only 8 pounds. These are mean results in the complete ablation population. We will soon see how these results translate when we read out our pivotal cohort in early Q4. Safety is the other half of the story. Through 12 months in the midpoint cohort, there were no device-related serious adverse events, and all 4 related events were Grade 1 occurred on the day of the procedure and were transient. We have never seen a late adverse event from Revita. This is a mild periprocedural profile. It is consistent with prior studies of Revita, and it is what we believe supports outpatient use at scale. Now to the pivotal, adults with obesity, BMI 30 to 45, GLP-1 naive without type 2 diabetes randomized 2:1, Revita versus sham, double-blind, sham-controlled, tirzepatide administered to achieve at least 15% total body weight loss and then discontinued. Diet and lifestyle counseling run throughout the study. Two co-primary endpoints, percent total body weight regain versus sham at 6 months and a responder rate, the percentage of participants will maintain at least 5% total body weight loss for 12 months. The most important thing about this study is how closely it mirrors the midpoint cohort you just saw, same design, same population, same enrollment criteria, same investigators same protocol in a larger, well-powered forum. Both co-primary endpoints are very well powered for pivotal success. On first co-primary percent total body regain at 6 months, our base case is a sham regain of 11.6%, against which Revita would need to come in at or below 9%. What we observed in the midpoint cohort was 5.1%, a meaningful, statistically significant reduction in regain in the Revita arm versus sham particularly in participants with longer ablation lengths or higher run in weight loss is what we believe a successful readout looks like. On the second, the responder rate, the prespecified performance goal agreed with FDA is 50% of patients maintaining at least 5% of their total body weight loss at 12 months. In the midpoint cohort, that figure was 73% in the intent-to-treat population and over 90% in the complete ablation cohort. These are model-based estimates from an exploratory analysis of the midpoint cohort which was not powered for formal inference. Now turning to regulatory. We received favorable presubmission feedback from FDA in March. The agency indicated that the safety profile of the Revita DMR system is consistent with the Class II de novo device classification. Final determination on regulatory path will be made once the FDA has the opportunity to review the safety data from the pivotal study. We are optimistic about the de novo pathway. We see one pivotal study as a registrational package and a successful de novo makes Revita the reference device for the category creating the predicate for future 510(k)s under defined special controls. We intend to begin our de novo marketing application in late Q4 2026. Assuming the pivotal data are favorable, we believe we will be in a position to submit the regulatory package. Let's walk through its time line and milestones. After we file, there is a short acceptance review then substantive review with the clock stopping while we respond to FDA's additional information requests, then potential -- post potential clearance, roughly 4 months of launch preparation, the transitional as application, hospital contracts console placement and initial physician training happened during that time. This is illustrative. These durations are our assumptions, not FDA commitments. The timing of pass-through coverage and launch is not assured, but it governs our planning, and it is why we feel urgency to do the commercial preparation now. The post-GLP-1 weight maintenance opportunity is large, urgent and a white space. Step 1 is what we are proving out now, maintenance after GLP-1, an off-ramp that preserves weight and metabolic benefit after discontinuation. Beyond that, we see further opportunities consistent with where physicians themselves see unmet need, which is why we believe Revita can become a backbone therapy in obesity. With that, I would like to turn the microphone over to Dr. Folahan Ayoola. Dr. Ayoola is Medical Director of Bariatric Surgery at Texas Health and Flower Mound, north of Dallas. He is a fellow of the American College of Surgeons and of the American Society for Metabolic and Bariatric Surgery, and he runs an accredited metabolic program, managing large panels of patients on GLP-1 therapy and patients considering procedural intervention. We asked him to speak to the perspective of a practicing physician who sees this problem every day. He has no financial relationship with Fractyl and no prior involvement in our clinical studies. I would rather you hear about it from him than from us. Dr. Ayoola.

Thank you so much for that introduction, Harith. Good morning, everybody. Glad to be here. So as Harith said, I am a bariatric surgeon. I'm here in North Texas, DFW Metroplex, and I run a comprehensive bariatric program. What that means is we do lifestyle changes with diet and exercise. We prescribe medications, whether IV, GLP, or subcu GLP or pills. I also do surgery. I perform all operations, sleeve gastrectomy, gastric bypass, duodenum switch, et cetera. And I've been doing that for about 14, 15 years now in North Texas. The program that I run at the hospital is a center of excellence has been that for 10 years. I built that program de novo at the hospital. We're very proud of the work we've done over the last 10 years. So in my practice, we were performing anywhere from 300 to about 350 cases a year, which is typical for basic private practice surgeon in DFW. About 45% to 50% of my cases was sleeve gastrectomy, about 45% were duodenal switches and the rest were gastric bypass cases. This is relevant because when GLP came out, the cohort that suffered the most or you saw go away were the sleeve cases. And so for me, almost 50% of my volume was gastric sleeve. And so that was what kind of disappeared, honestly, once the GLP medications became mainstream. So I went from about 300-plus cases to about 150-plus cases. And I know my colleagues that only did sleeve gastrectomy basically went out of business insofar as bariatric surgery was concerned. They had to find something else to do. And so that's the impact GLP medications have had on our discipline. You saw that as well nationally. Procedures fell from 270,000 in 2023 to below 200,000 in 2024. And so some programs actually closed off because of that. We see that trend continuing patients today that come in, want GLP medication. I have about 2,000 patients on my panel alone. We will see about 50 patients every week coming in for GLP drugs and maintenance. And so that is certainly something that's continuing. The problem is when I speak to patients early on and they say, I hear about these medications, I would like to get on them. When I tell them that they have to stay on it for life to maintain their weight loss, some of them actually have their faces drop because they really didn't come in expecting that. They're going to take it, care their obesity and be able to move on. And so when I tell them, that's not what the facts bear out, some of them don't believe me. They're in denial. They just think they're different. They're going to take their meds, they will be cared and they can come off. And as you would expect, I see problems in the future. for those patients that believe that. And some of them walk out and say, "Well, I don't want a temporary solution to my weight. I want a more permanent option." I offer them surgery. Some will take me up on that and others don't. So very few understand this is something they have to take lifelong if they want the benefits. But most patients really just want to break the chains of being on weight loss drugs forever. They want to lock in the success of the GLP medications once they achieve their goal weight. This is why I got excited about Revita, the first time I heard about it because it really does address a significant need. GLP patients, patients on GLP drugs really want to lock in the weight that they've lost. And we know that it being an endoscopic procedure, we have the capacity to do 400 to 500 of these procedures a year once this is approved. We already have the endoscopy suite. We already have fluoro. We already have all these things ready. We already have the patients that are interested. And so things are already kind of set up to really segue into this. And so I got really excited when I saw it. The other thing is I feel like the same way GLP medications reduced our surgical volume but actually increased our overall clinic volume is the same way I think Revita has the potential to have more patients actually start the GLP-1 drugs, the ones that would have walked away and more patients kind of turn into this. If you think about it, the data saves 40% of U.S. adults are obese, that translates into, I believe, 100 million people. When you look at our surgical numbers, we're doing 200,000 patients procedures a year. We are doing 0.3% of the volume we will need to do. We always joke about how if every bariatric surgeon operated 24/7 every single day, every year, we don't have enough surgeons to actually scratch the surface of the problem. And the problem wasn't getting better. It was actually getting worse as the trajectory kept increasing. It's only plateaued recently with the GLP-1 medication being so mainstream. I think when you lock something like that in with Revita, you also now have the option and the opportunity to not only plateau this problem but start pushing it back down, which will be the first time we've ever done that in decades. So it's not another statement to say if everything pans out, this is very exciting and a great opportunity for our patients. So again, it's not a trade of your surgical volume, it's really expanding what we're doing. And as surgeons, we've been trying to get people to have surgery and take care of this problem, but people just push back their afraid of surgery. So having something that's endoscopic not altering, I think, will be more palatable for a lot of people and has the opportunity to grow our treatment options in treating patients suffering with obese and struggling with this problem. So again, I'll close with the fact that what we need now once this is approved, is training on it, coverage from insurance and so on and looking at our scheduling capacity and expanding that to incorporate this procedure into our practice. I think it does have a really great place in the management of obesity. And with that, I will turn back over to Harith. Thank you.

Thank you, Dr. Ayoola. We may get some questions for you later on. So I would appreciate you staying on the line. Over the years of our development, we've gotten to know many physicians like Dr. Ayoola, who face a similar unmet need for their patients, managing individuals who are coming to them because they are on GLP-1s are actively looking for alternatives, don't have an off ramp today, don't want surgery, but also don't want to stay on medicines for life. These physicians possess not only the patients and their panels but also the necessary procedural skills and infrastructure for Revita. Mike, over to you to discuss how we plan to fulfill this present market need in their practices.

Thank you, Harith, and thank you, Dr. Ayoola. I joined Fractyl in June from Inari Medical, where I spent over 5 years building global reimbursement and health economic infrastructure for breakthrough procedural therapies. I've seen what makes these launches successful and how reimbursement and market access and are integral components of a targeted and efficient center of excellence commercial strategy. I believe Revita has an unusually favorable profile for a new market entrant. Most new device launches are market creation exercises. You have to find a physician, convince the position build the service line, create the referral pattern and then teach a hospital how to get paid. That's a time-consuming exercise and it's expensive. Revita's opportunity in post-GLP-1 weight maintenance is not that. This is a potential market activation and market fulfillment built on several tailwinds in the market. There are 4 things that we have to do and all 4 of them start with an existing base of relationships we already possess. Number one, open high-quality centers. These high-volume metabolic centers already exist today and are built for Revita. Number two, select appropriate patients, highly motivated GLP-1 discontinuers, are already sitting in these interventionalist clinics. Patients, many of them do not want to remain on a GLP-1, but they also don't want to have anatomy-altering surgery. And right now, there's no alternative. Number three, perform great procedures. We leverage an existing interventional skill set that is commonly held among these metabolic interventionalists and a validated training program from our clinical development program that has already demonstrated consistent outcomes and technical success without significant safety concerns. And number four, secure payment. And this must align with the health economics for patients, providers, payers and for fractal. Let's walk through each of these in turn. The post-GLP-1 opportunity is massive, no matter how you slice it. Roughly 29 million U.S. adults are on a GLP-1 for weight loss, and that is from Gallup 2026, which is about 11% of the 262 million adults in the U.S. And there are similar estimates from the Kaiser Family Foundation as well, backing this up. Of those, about 65% discontinue within 12 months. And that is from the JAMA Network Open real-world persistence data that Harith referenced. That gets you to about 18.8 million people per year. Of those, we modeled 30% as having achieved at least 15% total body weight loss before they stop. That is our base case, and it comes out of a Monte Carlo simulation with existing agents in the market today. That gets you to about 5.7 million. And then the eligibility on label BMI 30 to 45 takes about 70% of that, which is about 4 million eligible patients per year. At a procedure price between $10,000 and $30,000 that is a $40 billion to $120 billion total addressable market. This TAM frames the size of the opportunity. Now let's get to how we access it. Our 2 primary constraints are how fast we can activate centers and how quickly we can establish broad coverage. Dr. Ayoola just described his ASMBS certified Center of Excellence from the inside. He has almost everything he needs, comprehensive metabolic program. He already manages thousands of GLP-1 patients, many of whom do not want to stay on a GLP-1, but also don't want bariatric surgery. He has obesity medicine and APP in his practice, who extend his reach. He has nutrition and lifestyle counseling on staff. He controls the necessary prior authorization machinery to work through reimbursement coverage. He has ample endoscopy and fluoroscopy swee time because his bariatric surgery volumes have been negatively impacted in the last several years. He spent his career developing the interventional skill set and the interventionalist mindset. He's an ASMBS Center of Excellence, and he has the clinical infrastructure to support post-marketing registry participation. All of this infrastructure exists today in hundreds of centers, just like Dr. Ayoola's all across the U.S. Now look at the right column, what's missing, one item, an approved, reimbursed, durable off-ramp procedure that enables patients to make the progress that they're trying to make in their obesity journey after GLP-1 induced weight loss. That is a whole thesis. We are not building a market. We are supplying the one missing component to a market that's already been built, staffed and accredited by the medical societies. We are planning to target and focus on a center of excellence launch into centers just like Dr. Ayoola. There are roughly 1,000 accredited centers across the U.S. listed on the ASMBS website. This is a concentrated geographically identifiable footprint, and it overlaps heavily with the metropolitan areas where post-GLP-1 population is dentist. Our early launch targets the top 10% to 20% or roughly 100 to 200 centers. The first wave includes our own REMAIN-1 clinical [ dikes ] and established centers of excellence where we already have relationships with physicians. The reason this matters commercially is that this is a nameable list. We know who they are, and we can call them by name. We won't be targeting all of these centers right from the start. We intend to go deep before we go wide. The first phase in year 1, 30 to 50 of the highest readiness centers of excellence, trial sites and centers we're already in dialogue with. The work in Phase I is training, pathway integration and economic proof. We need these sites to run the procedures well and to get paid, and we need to continue to build real-world evidence that will kick start the flywheel for broad coverage and label expansion opportunities. Next, in year 2, we expand to 60 to 90 centers. The early sites become regional training and referral hubs. This phase is replication of a proven pathway as we grow within geographic footprints defined by our commercial field sales organization. Then in year 3 and beyond, we expand the 100 to 200 centers at scale, representing 10% to 20% of the potential center distribution, broader rollout as the procedure becomes routine and coverage solidifies. When I was at Inari, we launched many more centers in the span of this time than what is contemplated here because there are fewer VTE patients, and they are not as readily accessible as the GLP-1 discontinues. We believe that we are modeling for post-GLP-1 weight maintenance is conservative and achievable, but allows us to have high touch and early launch focused on the clinical success and key proof of Revita's value to the market while generating substantial revenue, which Lara will cover shortly. Now let's discuss the physicians at these centers. Our customer is the metabolic interventionalist, a proceduralist who already treats obesity with procedures and who also manages these patients in clinic. Some of them come from advanced GI endoscopy, like Dr. Thaker, who joined our data call in July, some of them, like Dr. Ayoola, come from bariatric surgery. We estimate that there are between 300 and 400 GI endoscopists with active bariatric practices and 2,000 to 3,000 bariatric surgeons. These are company estimates of the addressable operator pool, and they align with publicly available information on metabolic interventionalists and bariatric and metabolic procedural expertise. Three things follow from that. First, these physicians already have the patients in their practice who are seeking new options for their obesity. These physicians understand the patients and their wishes and can have, I believe, to be the first truly informed shared decision-making conversation with these patients about their treatment options and obesity across the continuum of care. When you ask a prescriber such as an endocrinologist, about weight maintenance, you get a prescriber's answer, and they're script, managed for life. Our customers with the patient sitting right in front of them is asking a different question. Not which medication comes next, but how do we fix the root problem and let the patients go on with their life. They already have incorporated GLP-1 management into their comprehensive practices over the past several years. These patients are actively looking for an alternative to lifelong GLP-1 meds. But they don't want something viewed as anatomy altering. Second, interventionalists are not clinically but also economically motivated with expected revenue per physician that is high and recurring. Third, and this is the commercial build consequence. This is a finite and nameable target list of physicians to get to know and to train. They all know one another intimately, and they reference one another in their buying decisions. Revita's medical education opportunities are already growing simply through word of mouth among these interventionalists. These features support a highly efficient field force of tens of people, not hundreds. We are excited by what we're hearing about anticipated volumes per center according to these physicians. 100 to 200 initial target centers, we estimate more than 2,000 GLP-1s patients per center per year already sitting in these practices. We believe roughly 50% of patients should be keenly interested in an off-ramp and 250 to 500 Revita procedures per center per year as they ramp their service offering. Note that physicians tell us they have ample time and procedure suite or OR time to perform these procedures as well. Our own modeling suggests that each center has current capacity for over 1,000 Revita procedures a year, so we are still well within the institutions capacity constraints. So if the center has 2,000 GLP-1 patients a year and 250 to 500 of them convert to a procedure, that's a conversion rate in the low double digits of a panel of patients that the center already owns. We believe that, that's a reasonable and conservative assumption that we're modeling, and it's the reason a small number of centers can support a meaningful business on its way to profitability. In the REMAIN-1 trial, the interventional training requirement was a half-day didactic session, plus approximately 4 cases with a Fractyl clinical specialist to reach physicians and staff proficiency. Protocol-defined technical success is complete ablation of the entire duodenum, more than 14 centimeters covering the post papillary duodenum. That is a measurable endpoint, which our console measures and records, which means proficiency and standardization are something that we can verify effectively. And we have the infrastructure for training already built. Site training forecasts, equipment, procedure supply list, room layout procedure workflow overview, this is not something we will develop after authorization. It exists and has been validated through our pivotal program across our trial sites and through independent testing with physicians who are new to the procedure. This validated training program is one component of our de novo authorization application, and it's ready to go now. We walked through the opening centers, selecting patients and performing procedures now on to securing payment, which is where I focus much of my time today. Coding, coverage and payment are the 3 different aspects of reimbursement and market access with 3 different decision-makers and 3 different clocks. So let's look at each one. Coding. Coverage in -- coding, we filed a CPT Category 3 application in June. We anticipate the code going into effect in 2027, and that is ahead of our potential marketing authorization. Coverage. On the Medicare side, we intend to leverage breakthrough device designation and CMS clearly stated desire to accelerate coverage for breakthrough devices through -- formerly through the TSAT and now the new Rapid Pathways to aim for early national coverage aligned in timing with FDA authorization. We believe our argument here is strong given that CMS's existing coverage for GLP-1s and existing national coverage for bariatric surgery. On the commercial side, medical policy will be informed by our value dossier and our health economics work. We plan third-party prior authorization and appeal support, to our centers and facility to facilitate early coverage with commercial payers. And lastly, payment on the facility side, potential transitional pass-through or TPT, to make hospitals whole on day 1. On the physician side, professional payment will be established through CPT valuation over time. Just remember, CPT, ambulatory payment classifications and pass-through outcomes are subject to the American Medical Association and CMS review cycles and are not assured. But all 3 tracks are moving now, and the sequencing underway on each of these 3 is something I have deep expertise with from my prior roles. Here's why I'm not as worried about the fundamental question of whether payers will pay for an obesity procedure. They already do. UnitedHealth Elevance, Aetna, Cigna, Blue Cross Blue Shield of Illinois, Texas or HCSC, that's roughly 120 million commercial lives among them. Every one of them covers bariatric surgery today. And every one of them covers GLP-1s for obesity with either a prior authorization or an employer opt-in. And CMS with roughly 68 million beneficiaries, if you include Medicare Advantage and regular original Medicare, covers bariatric surgery under a national coverage determination and is now covering GLP-1s for obesity through the bridge program, which went into effect on July 1. That's nearly 200 million lives that sit with these 6 payers already reimbursing bariatric surgery. We expect these precedents to provide the road map of coverage decisions for Revita over time. Those are the tailwinds. We are not asking a payer to accept a new category of spend. We're asking them to accept a new lower cost onetime entrant into a category already fund on both the drug side and the procedure side. We've been engaged with CMS all through our journey and are continuing to engage actively with private payers as the coverage landscape evolves and as we approach the market. To that end, we are planning a registry to build the kind of real evidence that payers need to adopt and pay for new technologies. But we already have around 50 patients with 1 year of follow-up from REVEAL and the remain on midpoint cohort, and that number will be around 250 patients once the pivotal study reads out. The FDA has granted a protocol amendment to allow us to gather longer-term data as well and we plan to roll all of this into a prospective registry to develop more real-world evidence over time. I would like to spend a moment specifically on Medicare, because something has changed this last year, that is a significant tailwind for our opportunity, and I don't know that it's well understood yet. The 2 key features are the GLP-1 bridge program and the transitional pass-through or TPT payment pathway. The Medicare GLP-1 bridge program began on July 1, and we estimate 4 million Medicare beneficiaries will access GLP-1 through it over the next 12 months. CMS has publicly said several million, but adoption has been quick even in the last few months. The bridge program is set to expire December 31, 2027, but even the congressional budget office estimate 65% will discontinue even if the program does not expire. So $2 million to $3 million of these beneficiaries are expected to discontinue within a year. Of those, we estimate 600,000 to 970,000 will achieve a deep response before stopping, which leaves an estimated 510,000 to 830,000 CMS officiaries eligible for Revita and for transitional pass-through on the basis of the CMS GLP-1 and bariatric surgery coverage for obesity with related comorbid conditions. Said another way, a federal program is in the process right now of creating and then time limiting the exact population that Revita is designed to serve. This is an unusual alignment and why our coverage strategy is starting with CMS. Commercial payers will ask us for cost effectiveness, and we've begun our modeling with approximately 50 patients at 1 year that we already have against the interventions that are already exist in the market and that they already pay for. The green band on the right is the payers' willingness to pay range which is $100,000 to $150,000 per quality adjusted life year or quality. Anything to the left is generally considered to be highly cost-effective. Bariatric surgery sits at about $21,000 per quality over lifetime. WATCHMAN's left atrial appendage closure device at about $28,000, TAVR at $50,000 and MitraClip at $56,000. Percutaneous coronary interventions for stable angina is at $171,000 cost per quality on the far right, which is in the poor value zone and GLP-1's for obesity at net pricing are at $135,000 cost per quality right at the edge of that willingness to pay band. Revita modeled it between $10,000, $30,000 ASP sits to the left of every device intervention on this page. Revita can be highly cost-effective even at the higher end of our modeling. Two caveats. The Revita value is our internal modeling. It's not peer-reviewed and it's it is contingent on the durability that we will see in REMAIN-1. We used a Monte Carlo simulation of over 10,000 scenarios that assume some attrition in Revita's effectiveness over time and assumed declining GLP-1 prices from their current notices as well. So I don't believe that we're being overly ambitious, but we will need more long-term data and to keep a close eye on the market to be able to model more precisely. And these are cross-study comparisons, so populations comparators and time horizons do differ. Let me close by reminding you that there are 4 things that we need to do to be successful commercially. Mapped to the 4 main roles that we plan to have in our commercial organization. To open high-quality centers, we intend to hire business development managers focused on new site selection and activation. To select appropriate patients, account managers focused on site execution, patient funnel and procedural growth to perform great procedures, where clinical specialists focus on clinical excellence and outcomes and to secure payment, a team of health economics and market access people focused on payer engagement, prior authorization and billing support. Before I joined the company, I was pleased to see that Harith and the team had already built an organization with ample experience in each of these first 3 dimensions through the execution of our clinical study, which required all of these skills to be put to use. We ran the REMAIN-1 study mostly in-house with our own personnel, precisely to develop the capabilities necessary to help us prepare for commercialization. Many companies rely on CROs for these functions, but these are skills inherent within our team today. As for the 4 of these capabilities, the health economics and market access or [ hema ] team, is where my experience comes in. That is tens of people in the commercial organization over the next 2 to 3 years of ramp, not hundreds. We believe that it is possible because the target list is finite and nameable because the physicians already own the patients because medical education is spread via word of mouth and because volume comes from depth in a small number of centers rather than break across thousands. That structure is what makes the economics work. Lara is going to take you through these economics now. So Lara, over to you.

Thank you, Mike. You've heard how this works, the center model, the patient, the procedure, the access pathway. My job for the next few minutes is to tell you what it's worth, what it costs and when it turns profitable. Before I go to the model, I want to show you that this shape of launch has worked before. Inari, where Mike comes from in venous thromboembolism followed a center of excellence model, reaching more than 50 of about 200 targeted centers in year 1, a 30% compound revenue growth rate in the launch years and an exit driver at $4.9 billion, about 8x sales. Shockwave in high-volume PCI centers added 1 to 1.5 new accounts per territory per month, reaching the majority of its target in about 2 years with 57 compound revenue growth rate and an exit to J&J at $13.1 billion, about 14x sales. And WATCHMAN, which Boston Scientific bought preapproval, scaled past 700 programs and $1 billion a year under the commercial leadership of Fractyl Health's Board members' stamp on a way. What drove value for shareholders in all 3 cases is the same 3 things: a finite list of high-volume centers, deep utilization per site and strong growth. The indications were different, but the model was the same. That is the model we are describing to you today. On price, we are not disclosing a number today. What I can show you is the quarter the market has already established because payers are already paying at both ends. On the left, endoscopic sleep gastroplasty. It has a category 1 CPT code since January 1, 2026, and Medicare pays roughly $11,600 in the hospital setting. On the right, bariatric surgery, commercial and uninsured pricing runs $20,000 to $33,000. Revita sits in the middle. It is outpatient and under an hour. There is no resection and no anatomic change, so it is repeatable and leads to no permanent implant. And it targets the duodenum, which is a distinct mechanism from restriction. So the bracket is roughly $11,000 to $33,000, set by procedures payers already reimbursed. Unit economics have to work for providers and for fractal and we believe they will. From the hospital's view, endoscopy and bariatrics are already major drivers of hospital contribution margins. Transitional pass-through enables a positive contribution margin from day 1 by passing the disposable cost through to CMS. And there is no new capital footprint to justify because of the rooms, infrastructure, physicians and support already exist. One thing to highlight, because pass-through reimburses the device separately, the hospital's economics do not depend on our price. Our pricing is not a barrier to adoption. From Fractyl's point of view, potentially high gross margin on the disposable capital light with no high-cost long lead time sales cycle per site. And commercial costs that scales with sites rather than linearly with volumes. The potential result is recurring high-margin procedure revenue concentrated in high throughput centers, which brings me to the rent. We expect potential launch in early 2028, centers live cumulative on the left, 30 to 50 centers by the end of 2028 and 60 to 90 by the second half of 2029. Procedures on the right expected to grow to 5,000 to 10,000 annually in 2029. Two things worth noting about the shape. First, these are the same high-volume centers you've heard about earlier. Second, volume grows faster than the network does in year 2. We expect to increase procedures per center as centers get up and running. The 2028 center cohort matures through 2029, providing meaningful growth. These are management estimates. They are contingent on pivotal results and on FDA marketing authorization neither of which is assured and they are not guidance. And now putting that all together with every input on one page so you can run it yourself. Price per procedure $11,000 to $13,000, which is the benchmark range we just walked through $33,000, which is the benchmark range we just walked through. Gross margin of approximately 80% for the single-use catheter in line with single-use peers. Note that we held the margin flat across scenarios to be conservative. Higher ASP may lead to quicker cash breakeven than shown. Now solved for procedures at 80% gross margin and against a $22 million quarterly breakeven cash burn. At a $10,000 ASP, we need about 2,750 procedures of order to breakeven. At $20,000 ASP, 1,375 procedures a quarter not tens of thousands and across a range of prices, potential cash breakeven is possible in 2029. Every one of those dates assumes de novo approval in the second half of 2027 and CMS coverage and transitional pass-through in early 2028. They are contingent on de novo authorization on coverage, on financing and they are not guidance. And these are estimates only real-world results could vary. Let me put the whole sequence on one page. Today is our Commercial Strategy Day. Early Q4 2026, we expect pivotal 6 months top line from the over 300 patient randomized trial. Late Q4 2026 potential FDA de novo submission late 2027 potential FDA approval and launch preparation, early 2028 U.S. commercial launch with transitional pass-through in place and cash profitability expected in 2029. Potentially 5 to 8 quarters from launch to cash profitability on a potential high gross margin disposable into a finite set of centers that already have the patients, the physicians, the rooms and payer precedent for obesity procedures. These time lines are management estimates and forward-looking Revita is investigational and commercialization is subject to remain on results and FDA marketing authorization, neither of which is assured. Harith opened the day with this slide. What I'd say is that these were 6 claims this morning, and you've seen what sits behind each of them. The unmet need, the durability data, the regulatory path, the centers, the payment work and the economics. With that, I'll hand back to Brian for questions.

Fantastic. Thank you. That concludes our prepared remarks. Operator, we're ready for questions.

[Operator Instructions] So our first question comes from Michael DiFiore at Evercore.

Great presentation. Two questions from me. First on pricing. I know you can't disclose the price to date, but the price of $10,000 to $30,000 per procedure is kind of a wide range. You mentioned in your presentation that you need a long-term durability data. Is that the main deciding factor in terms of where on that range the price may lie? And then I have a follow-up.

I would say this, if the 50 patients that we've seen from, REVEAL and remain our indication, we feel very comfortable across that range in pricing. We will be thinking through what this looks like once we have the full cohort from REMAIN-1 pivotal, which we've just announced will be a Q1 result. That will put into our health economic modeling and then provide granular detail. I think the fact that there's a wide range of plausibility here shows that we can straddle from truly cost effective for the market to -- sorry, cost savings for the system through to highly cost-effective across that entire range. And so some of these choices are going to be dependent upon our data and some will be dependent on conversations that we have with insurers.

I see. Very helpful. And my follow-up question is that you previously suggested that retreatment at 18 to 24 months or later would likely be acceptable. But you also said that it may not be necessary for some patients or many patients I guess my question is what percent of patients do you currently model needing a second procedure at 2, 3 or 5 years.

Go ahead.

Great question, Mike. Look, right now, the numbers that you've seen those scenarios, I think it's Page 40 for breakeven, none of those depend on retreatment. If you think about the 5,000 to 10,000 annual procedures in 2029, that's about 10th of a percentage point of the TAM of the $4 billion.

Retreatment would be upside on that.

Our next question comes from Angela Qian at Canaccord.

Maybe one for Dr. Ayoola. Understanding the threshold for approval here is maintaining that 5% total body weight loss. But from a perspective, I guess, what percent we lost maintenance is clinically significant, and I guess, like what would be meaningful to patients? And then I have a follow-up.

Thanks for that question. I think meaningful to patients. Right now, 1 year, people gained back 66% of what they've lost. That's what the data shows. In general, we want to say that if you maintain 50% that clinically is significant, but I think patients would want to see, even if you have that, if they're not getting back 66%, if they're gaining by 30%, I think they will tolerate that. I think the data Harith showed earlier, I think patients would really gravitate towards even just that.

Okay. That's very helpful. And then you also mentioned that you have some patients interested already. I guess if we could just provide a bit more color like how many patients are interested, what percentage of your total practice does that number represent?

So we just recently had these conversations, and this was something that I learned about earlier this year. So I've been informally asking patients, so I don't have hard data. I haven't kind of put this down. But virtually every patient, I brought this up to, has been excited about it. I haven't had anyone kind of say, no, I wouldn't be interested in that. They're all intrigued by it. So of the patients that I have on GLP-1 that I have just kind of gently talked to about is, hey, if we had something like this, what would you think? Their eyes typically light up, and they are very interested, especially when you describe that it's a nonsurgical procedure and we're not changing any of their anatomy, and we're not burning any bridges. I think right now, the majority of the patients I see are getting GLP meds. I would say I'm probably seeing about 20% of my patients opt for surgery and plus opt for GLP-1. It used to be that if I had 10 patients a day, it would be 70% surgery, 20%, 30% medication. And I leave that extra percentage because some people just want me to do lifestyle stuff with them. but that has completely flipped around. Now the majority of patients want GLP-1, and virtually all of them are interested in something to lock in the weight that they've lost. The last thing I'll say is that a lot of patients also are okay with coming back every few years, every 5, 6 years to kind of get a re-up. What you find is that patients, for example, when we first started doing GLP meds, I think was Saxenda, there was a once-a-day injection and nobody wanted it. and for weight loss. And then when it turned into a once-a-week injection now, people like it. And so when people know that they can have these procedures done at a longer interval, it makes it more and more appealing.

Our next question comes from Chase Knickerbocker at Craig-Hallum.

One for the company first and then a follow-up. Just trying to get a sense for how you see your early positioning with commercial payers versus Medicare, where you have potential payment clarity through pass-through maybe just over those first 5 to 8 quarters of launch where you see getting to breakeven, what do you expect your payer mix to be in that kind of breakeven time frame from a perspective of kind of commercial versus pay-for-service and Medicare Advantage?

Thanks, Chase. I'll take that. This is Mike. Well, as we said, we're focusing on CMS because of all of the mechanisms and the tailwinds that we have, the GLP-1 bridge program, transitional pass-through, there's going to be a growing number of patients looking for an offering 12 months from now. But with commercial payers, we plan to engage with them early. We've already started some of that work. We don't have a sense for payer mix quite yet because that's shifting and will shift pretty dramatically over the next year. But we are planning to focus first on CMS, but while in parallel, engaging with private payers. We plan to hire a prior off and appeals, third-party companies to do all of those kind of hand-to-hand combat with new procedures, we'll have a Category 3 code in place. And so it is still part of our strategy, but we know that, that's going to take a little bit longer as we build our CMS business.

I'll just add with a couple of points. First is our assumption built into our modeling that most of these patients are going to come from CMS in our initial launch and anything that comes from private payers would be upside. Secondly, payers are not a monolith. You've seen the 5 major players and their first policies. Our observation is that those who are self-insured employers or integrated delivery networks are tending to cover for GLP-1s and see higher costs. And conversations that we've had with them informally suggest they would be the earliest to adopt on the commercial side, and then we would grow from there over time with the registry. So assume very small private contribution early on, but growing over time.