All right, good morning, everyone, and thanks for joining us at the Morgan Stanley Global Healthcare Conference. I'm Mike Ulz, one of the Biotech Analysts here, and it's my pleasure to introduce Harith Rajagopalan, CEO of Fractyl Health. Just a reminder, the format for today is a fireside chat, so if anyone in the audience has a question, please feel free to raise your hand and we'll address your question in our discussion. But before we get started, I just need to read a quick disclaimer. "For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley's sales representative. With that, Harith, thanks for joining us today, and I thought we could start with sort of a broader type question and to get an overview of the platform. Maybe you can just talk about, you know, the current diabesity landscape, you know, how it's evolving, where are the unmet needs, and how that informed your strategy for Fractyl. Thanks for having us, Mike. A pleasure to be here. The diabesity landscape has shifted dramatically in the past couple of years. It's hard to keep up with all of the news happening in obesity and all of the names in obesity. I would say that what's happened in the past two years is we now live in a world with incredibly potent but short-acting weight loss agents that can drive 15%-20% body weight loss. But the unmet need is very dramatically moving from how do you get weight loss to how do you keep it off? Because I think the incredible surprise is that even as effective as these drugs are, most people stop taking them very quickly. Blue Cross Blue Shield reported that more than 50% of people stopped taking GLP-1 drugs within the first 90 days. Other people are reporting persistence of six to nine months. Whatever the case is, very few people are actually staying on these drugs long enough to see the incredible benefits that the phase III studies are showing. You need to be on drug for three, four years to prevent type 2 diabetes, to have cardiovascular benefit and kidney benefit, and candidly, very few people are actually on the drug long enough to see those benefits. So the diabetes... diabesity landscape is characterized now by a lot of experimentation with highly potent drugs and a massive need for durable weight maintenance solutions. And we at Fractyl are laser-focused on providing durable weight maintenance solutions. The way that we do that, which is different from a lot of the pharmacology and development, is that we're focused on addressing root causes of the disease to change the underlying biology in the body that's driving weight higher, so that people can lead lives at a lower weight without needing to stay on pharmacology in order to maintain that, and we're excited about our prospects in the programs, Revita and Rejuva, targeting two elements of the obesity physiology that are laser-focused on solving that problem. Yep. So big opportunity out there. You've got some solutions. May we start with Revita, and maybe you can just give us a little bit of background on that, you know, procedure, and how it works and why it works. Sure. So about a decade ago, it became obvious that a segment of the small intestine called the duodenum is the hunger center of the gut and the insulin resistance center of the gut. So you can think of Revita like LASIK for obesity and type two diabetes by correcting the pathology in that hunger center of the gut, right in the lining of the duodenum, called the mucosa, where key signaling pathways communicate from the gut to the brain, and thereby drive the body's level of weight and level of insulin resistance. Chronic exposure to high fat and high sugar diet over the course of a person's lifetime causes pathology in the duodenum, and Revita endeavors to fix it, just like LASIK attempts to correct your vision by working on your eye. There are over a million people a year who would choose to undergo a LASIK procedure to correct their vision, rather than to take glasses or wear contact lenses. Similarly, we see a large opportunity for individuals who are looking to correct the thing that's driving obesity and type 2 diabetes in their body with Revita. Revita is a 40-minute, outpatient endoscopic procedure that targets this portion of the gut, and in clinical studies so far, it's been remarkably well-tolerated and fits really well both into the endoscopy workflow, but also into a patient's life. We like to say that a patient has to make one good choice to spend a half a day in order to have lasting benefit, rather than making millions of good choices every single day in order to benefit from medicines. Yep. You're not yet approved yet, but you have a German real-world registry ongoing. So maybe just talk a little bit about, you know, some of the exciting data you're seeing there. What we're seeing in Germany, in our real-world registry, is totally solidifies our confidence that Revita can offer something truly transformational that does not exist in the metabolic landscape today. To clarify, Revita is not yet approved in the United States. There are two pivotal studies underway. It is approved under a CE mark in Europe, and Revita is already authorized for reimbursement by the German government, and so the real-world registry is a true commercial pilot. It's running at a single center, and what we are seeing is that patients who are coming in for Revita are experiencing improvements in blood sugar control, reductions in body weight, and reductions in medication requirement, and tremendously improved treatment satisfaction for their diabetes and their obesity. We just reported data from the first 11 patients who are now one year out from treatment, where average hemoglobin A1c went from 9.6%- 7.2% at one year, and average weight went down by 13%, even though the BMI was only 32 at baseline, and these are people with advanced type 2 diabetes, who are typically very, very hard people to treat for weight loss, and we see all of that in the face of most patients, almost all of the patients, either reducing their medicines or keeping their medicines constant and not needing to escalate their medical therapy, and the incredible advance that this represents, in our view, is the idea that you can fix something that's wrong in the body and actually fundamentally improve someone's metabolic state with a one-time outpatient intervention. And we're excited about what that could mean if Revita is broadly available around the world to change the treatment landscape for obesity and type 2 diabetes. You previously mentioned the procedure is well-tolerated, but maybe you can just expand on that a little bit in terms of, like, the patient experience, you know, from, you know, maybe from start to finish, and can they go home right away, or what does that look like? Sure. In our clinical trials in the United States, I'll give you an example. What the education is for patients, is that they shouldn't eat or drink anything after dinner on the night before their procedure. They come into the endoscopy suite, and they get sedated, typically with propofol. And then an endoscope and our Revita catheter are introduced through the mouth, past the stomach, and then into the duodenum, which is the first part of the small intestine. And then a precise therapeutic application of heat energy is applied in order to treat the region of the gut, but this is all done while the patient is under propofol sedation. At the end of the procedure, which is roughly 40 minutes, everything is removed. The patient wakes up, goes to the recovery room for 60- 90 minutes, and then goes home and returns to their daily life. There's a couple of days of a modified diet coming out of the procedure, but what's really quite compelling about this is when the endocrinologists, who are blinded to the treatment allocation, are seeing patients in clinic or talking to them in the days after the procedure, they really do not know whether the patient underwent the procedure or not. It's the symptoms are apparently very mild, and the constant reports in Germany are that it's very well-tolerated. Yep. Gotcha. And maybe for the German real-world registry, you've given a couple updates in the past, you know? Yeah. How are you thinking about giving more updates as that program progresses? We're continuing to accrue patients and follow up. As of our last data cut-off, we had roughly 37 patients who had been treated, and we will be presenting data at three, six, and 12-month follow-up in with the cohort that we have, at the end of this quarter in a European medical meeting, and so we'll have updates on that. But we intend to continue to provide quarterly data updates- Yeah -as the data mature. Because what we're really excited to begin to understand is: What is the durability of Revita in the real world? In clinical studies, it looks like at least through two years, there's no loss of effect over that period of time. In Germany, in the first handful of patients out to one year, the weight improvement is even better at 12 months than it was at six months and three months, even though there's only the short period of a diet and diet modification. So how do we explain the fact that you're doing one intervention, let's say, in September of 2023, you're sitting here September 2024, you've lost 20-some pounds, and you're not having, you don't feel like you're having to do anything in order to make that happen? Mm-hmm. Like, that's a pretty incredible profile. Yes. So how long will that go? Right. What would a repeat treatment offer? Mm-hmm. And as we get to treat more and more patients, understanding who are the really optimal responders, and how do we ensure great outcomes for everybody? So we're really excited about continuing to provide real-world updates, where we think we're gonna learn the most- Yep -about how we deploy Revita broadly. Yep. On the, y ou mentioned durability. What do you think the ultimate durability is, and, you know, how long could it be? I think you mentioned you're out two years, but, you know, what about three, four, or five? You know, I think that there's gonna be a fraction of people who will never need a repeat treatment. They're gonna have benefit, and that benefit's gonna last for a long time. I think the earlier you intervene in type 2 diabetes, for instance, the longer the benefit may be expected to last. I do think, though, that there will be some rate of people who will need a repeat treatment, and as long as it's not every six or nine months, I think we have an incredible product, you know, and incredibly a potential for an incredibly successful product. And it clearly looks like it's gonna be more than a year, and exactly how long, we don't know. Because we think this is a repeatable procedure. Yeah And so the question is, what is that repeat cadence gonna look like? And we're gonna be running clinical studies in order to be able to understand the safety and the potential benefit of secondary procedures, and look forward to that data maturing over the course of the next several years as well. You talked about, you know, it's a single treatment, but on weight loss, you see more weight loss as you over time. Yeah. What about, HbA1c? What does the trajectory of that look like over time? HbA1c gets better by about three months, and then it seems to be pretty stable. When we look at obesity and type 2 diabetes, I mean, when I get on my own scale, I'm bouncing around a little bit here and there, right? So within a certain region, people are gonna be fluctuating. By the time that you're three months out from Revita, it seems like you sort of hit wherever your HbA1c is gonna be, and then that seems to last. For weight, it does look like there's a trend towards more and more weight loss over time, but we don't really understand exactly what that's gonna look like later on. Yep, makes sense. We've been talking a little bit about the real world registry, but maybe talk about what you've been seeing in some of your clinical studies that give you confidence in the potential for a maintenance option. Sure. We did a pooled analysis of all of our clinical studies in patients with type 2 diabetes, and looked at weight comprehensively over time in all of the patients where we treated or in the sham. And what is clear is that people who undergo Revita, even without any diet or lifestyle intervention, seem to lose body weight within the first four to eight weeks after the procedure, and then sustain that body weight loss out to one and two years afterwards. And we've known that for years, but all of a sudden, this has become, like, the most interesting profile in the world, because we're now in a world, as I mentioned earlier, where GLP-1 drugs can help you lose weight, but they can't help you keep the weight off if you stop taking them. So the question is now whether the sustained weight maintenance that we're seeing in type 2 diabetes patients will translate to sustained weight maintenance in obesity patients. Mm-hmm. We are running a pivotal study in the United States called REMAIN-1, and the design of the pivotal study is to test whether Revita can offer sustained weight maintenance after the discontinuation of GLP-1 drugs and after people have lost 15% body weight, at least, on those drugs. We're enrolling people who are obese, not diabetic. We're going to be giving them tirzepatide, which is the active agent in Mounjaro and Zepbound, to titrate them up to 15% body weight loss, and then we will stop the tirzepatide and randomize them to either undergoing Revita or a placebo procedure called the sham. Then we'll be following to see whether Revita can prevent or slow the rate of weight regain, which will inevitably happen for a majority of the people who stop taking the tirzepatide and who don't get any other treatment. Can you maybe talk a little bit more about the primary endpoint? It has to do with weight loss, but I think it's a co-primary, so maybe just talk a little bit about that. Sure. So the primary endpoint in the study is, it is a co-primary endpoint per FDA. One of the primary endpoints is a comparison against the sham, which is a clean statistical analysis at six months for prevention of weight regain in the Revita arm versus in the sham arm. The other co-primary endpoints are looking at the percentage of individuals who undergo Revita, who maintain clinically meaningful weight loss after the procedure. So take a step back. People will be coming in with a BMI between 30 and 45, and they'll be GLP-1 drug naive. They will lose 15% body weight, so their BMI will be roughly in the 25- 40 range, and then the tirzepatide will be discontinued. We anticipate that the sham arm is gonna regain about 70% of his body weight over the course of a year in a nearly linear fashion. Okay. And what we aim to do is to prevent a majority of that weight gain from occurring, and if you can do that, you can now offer something which the drugs cannot, which is sustained, clinically meaningful weight loss. If you stop taking tirzepatide or semaglutide, what the clinical studies show is that the majority of individuals regain so much weight that they no longer have clinically meaningful weight loss. When we talk to the FDA about this, their anxiety is around the ability to maintain a level of weight loss that ties to important clinical outcomes, and they're concerned that that's not happening today. Yeah. I think it's for that reason that we were able to obtain Breakthrough Device Designation- Yeah -from the FDA. To our knowledge, it's the very first product in the drug or the device world to obtain breakthrough designation for a broad obesity indication. I think it's a reflection of the fact that there is a growing anxiety around the observation that the more potent weight loss is with the GLP-1 drugs, the greater the risk of rebound. And so when you have multiple players in this space who are all attempting to drive greater and greater degrees of weight loss, which is an admirable goal. Mm-hmm If people can't stay on those drugs for whatever reason, access, cost, tolerability, or other reasons, then the rapidity and the violence of the weight rebound is actually proportional to the magnitude of the weight loss initially achieved. So the flip side to a better drug with better weight loss is greater risk of rebound and the metabolic consequences of yo-yoing so rapidly like that. Yeah. That's where we think Revita may offer something that the market really desperately needs. It goes back to what I said, the unmet need is shifting from how do you get more weight loss, to how do you maintain more weight loss? Yep. And just on the endpoint, you know, I understand, right, patients that come off GLP-1s are going to rebound, and you're trying to sort of stabilize the weight after it's lost. What's the meaningful delta, and how do you define that, or what's the threshold there? Yeah. So I think that the FDA believes that a meaningful delta is if a majority of patients are able to maintain clinically meaningful weight loss in the Revita group. Yeah. And so I would say another way to think about it is, if you would expect that a sham arm would regain about 70% of their body weight, if the Revita arm can reduce that by half. Okay I think that would at one year. Yeah I think that's a pretty incredible result. Because what you're now doing is you're providing a pathway to changing the trajectory of obesity in a manner that doesn't require ongoing medical therapy. Yep, makes sense. You also have a sort of, I don't know if it's a subgroup study in REMAIN-1. Maybe just talk about that, and- Yeah -and why you're running that study. As we started to design the REMAIN-1 controlled trial, it became clear to us that there are some patients out there who can't tolerate GLP-1s, who've lost weight already, and so we've created a cohort called REVEAL-1. And this is designed for individuals who've already lost 15% body weight, who are already on either semaglutide or tirzepatide, and are now needing an off-ramp from GLP-1s, and are struggling with what that is. It became clear to us that the FDA feels concerned over people who are not tolerating GLP-1 drugs, and have achieved weight loss, and are afraid to stop it, because of what may happen when they stop. And so what we're aiming to accomplish is to answer a slightly different question than what the controlled study aims to show, and to give a slightly earlier look at what REVEAL may demonstrate in weight maintenance. By taking people who've already gone through the 15% body weight loss, seeing why they're wanting to stop, and then seeing if we can prevent weight regain, and then see if the reasons that they needed to stop the drug are now alleviated by being able to have undergone Revita. So for instance, if you're having nausea or vomiting, or feeling lack of pleasure, or some other symptoms associated with your GLP-1 sulfuric burping, which is a problem that some people experience, can you prevent that from happening, but also keep the weight off? That would be a pretty cool finding. So we anticipate showing early data, beginning at the end of this year from the REVEAL cohort. We're just getting sites up and running for REVEAL and REMAIN. We've begun to enroll and dose patients with tirzepatide in the REMAIN arm, and we're identifying patients for REVEAL. We will be presenting data in about 10 patients with at least one month of follow-up, and we're going to begin to show you what are the reasons for why people are coming off drug. Mm-hmm And what are we beginning to see? As you go from Q4 into Q1, we're going to begin to track how their weight is progressing, and be able to compare that to historical controls of what you would normally expect for someone stopping semaglutide or tirzepatide at similar time points. You mentioned 10, 10 patients, one month of follow-up. Is 10 patients across both studies or just in each? Just in the REVEAL open-label- Yeah, okay. Got it. Got it. -cohort. Yeah. -cohort. Yeah. Time point of one month, I guess. Maybe remind us how quickly, when a patient comes off a GLP-1, like, how quickly do they regain the weight? And I guess, is a month enough to start to see some separation, or is it a bit too early? It's early, there's no doubt. But I think it'll begin to be a time when you would expect to see weight regain in the sham, if there were a sham arm or a control arm associated. Okay, right. Yeah. Gotcha. Mixing up the study design. Sorry. Yeah. Um Whereas now, let's talk about REMAIN-1. Yeah. So, we're also very excited about a midpoint analysis that we've planned in the REMAIN-1 randomized trial. The midpoint analysis will look at approximately 40-45 subjects who have lost 15% body weight on tirzepatide, have been randomized two to one to Revita or a sham, and then followed for three months. And by three months, the goal will begin to demonstrate separation from the control group, and that will be a midpoint analysis that we intend to disclose in the second quarter of 2025. So then, just to clarify, you'd have half of the patients through half of the sort of treatment time frame, so three months at the most. It's not half of the patients, it's 45 patients- Okay -through half of the treatment time frame. Okay, gotcha. But if you look at our historical data around weight, like, by three months, you've got a pretty good picture on what the weight's trajectory is like. So we do believe that that would be predictive. If you're beginning to see separation, we think that's going to be predictive of anticipated separation in the six-month primary endpoint time point. Gotcha. And maybe just talk a little bit about your thinking in terms of the market opportunity here, and just because your approach is a little bit unique, it's a procedure. Yeah. Although if you can really demonstrate weight maintenance, I think there's definitely going to be interest in using it. But how do you think about that? I'm going to give you an analogy, okay? 60%-70% of adults above the age of 50 have undergone a screening colonoscopy purely as a diagnostic, and that requires going through a whole prep- Mm-hmm -and a colonoscopy. What we are describing does not require a prep and is an upper endoscopy, but what that tells you is two different things. First, a majority of Americans have undergone an endoscopy in this age group that we're talking about. So when you tell them you've got to do an endoscopy, it's not intimidating. Mm-hmm. It's not like a cardiac catheterization, and God, no, it's not anything like a bariatric surgery. I've gone through one myself. I didn't like the prep, but the endoscopy itself was no big deal. So to my, to our perspective, there's at least 50% of the patients who, if they're willing to undergo a colonoscopy, should absolutely be willing to undergo an upper endoscopy in order to treat their their weight or their diabetes, for that matter. And so I do believe there's a misperception out there around the invasiveness of this procedure and about how many people will actually do it. I think the best thing t hat I can do is say there's between 15 million and 20 million colonoscopies each year, about 60%-70% of adults have undergone a colonoscopy. Why would we expect that this would be any different from that? Makes sense. Maybe we can shift gears a little bit just to type 2 diabetes. Yeah. Your REVITALIZE-1 study, just maybe remind us of the design and the current status? Yeah. So REVITALIZE-1 is a study to demonstrate whether Revita can improve glucose control, measured as hemoglobin A1c, in a population of patients with type 2 diabetes, whose HbA1c is elevated. And we announced in the last quarter that we've worked with the FDA to expand the eligible population for that study from the four million people who are on insulin to the 25 million people who are on any glucose-lowering agent. Roughly half of those currently have inadequately controlled type 2 diabetes. And so that label expansion, I think, well, that potential label expansion represents, like, a sixfold increase in the eligible population for Revita within type 2 diabetes. Felt really compelling for us to do that when we began to discuss it with the FDA, and means that we're keeping enrollment open in order to bring in patients who are not yet on insulin. The protocol was approved by the FDA at the end of June, and we submitted the IRBs in July, and IRB approval came in in August, and so we're now enrolling patients under that. We expect midpoint analysis. Oh, sorry, top-line data from the primary endpoint in mid 2025. Got it. Maybe you can just comment on how early enrollments going so far? It's so much easier to find people who are not yet on insulin. You know, it's interesting that it's not because the people on insulin don't want it, but it's because the people on insulin are so sick that you have to be careful about enrolling them in a controlled study when there are so many comorbid conditions that are impacting their lives, and if you think about if your mom or dad were a patient with type 2 diabetes enrolling in this study, you really want to offer this to them before all of the complications of type 2 diabetes set in, before they even have to be on insulin. And so we know from an extraordinary amount of market research that the single biggest driver of failure to escalate medical therapy in diabetes, because people don't want to start injectables, and they don't want to start insulin, and I feel like no one should be on insulin in type 2 diabetes. It makes you gain weight, it has the risk of hypoglycemia, makes people feel punky for whatever reason, and most people don't have insulin insufficiency. It actually worsens insulin resistance to give people insulin. So for all of these reasons, we feel like we can position ourselves ahead of insulin with the REVITALIZE-1 study now. I think that'll be super compelling. Yeah, makes a lot of sense. Maybe we can shift to just Rejuva. Obviously, interesting approach there that's a little bit unique, so maybe talk to us about that and some of the advantages, or if there are any disadvantages of that approach. We've already talked about the challenge with GLP-1s in the market today. We've talked about how they can achieve incredible weight loss and all of these other ancillary benefits. But most people stop taking them, and most of the people who stop taking them aren't stopping for tolerability issues, they're stopping for other reasons. So you have this incredible mechanism that is completely under-penetrated in society because most people don't stay on the drugs long enough to benefit. We asked a different question: How can you make a best-in-class GLP-1 type drug? And to our mind, that means something that is physiologic, something that is one and done, something that is nutrient responsive, and something that has no ongoing therapeutic burden after the initial administration. So what we have developed is a ten-minute outpatient endoscopic procedure, and we've developed a gene therapy candidate that allows the pancreas to produce and make GLP-1 in a nutrient-responsive way. So that's Rejuva-1. It's a nominated candidate for type 2 diabetes, but the platform is pancreatic gene therapy, writ large, enabled by local administration with a simple endoscopic procedure, enabled by our proprietary device system. And we believe it offers the potential for a suite of metabolic medicines that can offer durable remission from obesity and type 2 diabetes, leveraging the pancreas to release the incretin hormones when you need it and to not release it when you don't. So we presented a bunch of data at the ADA in June on the effects of this on blood sugar and on body weight in head-to-head study against semaglutide, and the abstract was an oral presentation, and it was voted the number one abstract out of several thousand submissions to the ADA this year. I think even though that's preclinical data- Mm-hmm ...the fact that it was the number one abstract, I think, indicates the magnitude of the problem that Rejuva aims to solve, and the excitement around the data that we're generating. And maybe talk about the advantage of, you know, a lower dosing, 'cause you're directly injecting the pancreas, and what that looks like. Yeah. A key element to why we believe Rejuva is feasible, and safe, and rational, is because we can deliver a very low dose of virus to achieve what we believe will be a profound metabolic effect. I mean, the gene therapy field has now dosed thousands, if not tens of thousands, of individuals systemically with AAV at a variety of different doses. And I think we have a very clear understanding, as reflected in FDA guidance documents, that the toxicity or safety risk associated with gene therapy is dose-dependent. We are operating in a low-dose regime because we're delivering it locally to the pancreas, that we believe will allow us to be at least two orders of magnitude lower than what is already being demonstrated to be safe in populations with approved versions of AAV for systemic therapy. We think that local delivery is the key enabler of gene therapy in the pancreas because of that low dose, which is not only valuable for safety, but also valuable from a cost of goods standpoint, to make gene therapy actually workable as a business model. Maybe just last quick question, since, you know, directly injecting the pancreas is sort of a sort of key component here. Yeah. Maybe talk about your confidence in being able to do that consistently with your platform. We've been working with GI physicians who are performing interventions in the pancreas every single day in order to develop a procedure which we believe can be very safe and highly scalable. Putting a needle into the pancreas, to you and me, may sound intimidating, but they are doing it over 200,000x a year right now for other reasons that are less significant, in many cases, than what we're talking about, and through that, we've learned what is required in order to be able to do this safely, and we've developed a device and a procedure, working with leading physicians, that is specifically designed to be able to make that happen. And anyone who maybe have a concern about it, I'd be happy to put you in touch with 10 or 20 of the leading GI endoscopists who do these types of pancreatic procedures and can help provide reassurance that what we have done should provide what we believe will be a safe procedure. Of course, the data that we've been generating in preclinical models is entirely consistent with that, and, we plan to enter the clinic next year in order to be able to prove it out. Yeah. Okay, great. Looks like we're just about out of time. Why don't we end it there? Harith, thanks so much, and we look forward to all your upcoming data in the next 12 months. Thanks, Mike. Appreciate it.