Excellent. Good morning, everyone. Thank you so much for joining us. My name is Whitney. I'm one of the biotech analysts here at Canaccord. It is my pleasure to be joined this morning by Fractyl Health, and I'm speaking with Harith Rajagopalan, Co-founder and Chief Executive Officer. Thank you for joining us. Thanks for having us. By way of brief background, for those who may not be as familiar, can you give a few-minute intro, kind of background on the company? I think it's interesting. I'm going to ask you to kind of talk about the founding mission and how that led you to your platforms and programs today. At Fractyl Health, we're developing therapies that can do what we are not seeing in the obesity and metabolic disease market today. We're developing therapies that have durable, long-lasting effects after a single therapeutic intervention. Given all of the excitement in the obesity space around GLP-1 drugs and all of the follow-on pharmaceuticals that are being developed, I think the reason that this is so important is because all of the drugs that exist and that are in development have relatively short-lasting effects with rebound of weight and metabolic symptoms once those medicines are stopped. This year, there's going to be 10 million people who are going to get a GLP-1 prescription. More than half of them will stop taking that GLP-1 within a year, and most of them, 85%, will regain most or all of the weight that they had lost. There is this urgent and new crisis need for a post-GLP-1 weight maintenance solution, and we're focused on trying to solve that problem. We have two strategies to do that, one of which, our lead asset, Revita, is a medical device-enabled therapeutic procedure in the gut that targets a root cause of obesity and diabetes, and which we believe can have very long-lasting effects to help people keep weight off after stopping GLP-1s. Massive opportunity. The second strategy targets a root cause of disease in the pancreas and is a smart GLP-1, a once-in-a-lifetime treatment that can offer the benefits of a GLP-1 without potentially the side effect tolerability profile or the constant ongoing dosing of the GLP-1s that are required. That we're anticipating to enter the clinic next year. Those are the, that's the company in a nutshell and the two strategies to try to offer durable remission of obesity and type 2 diabetes. Perfect. Starting with Revita, which, as you said, is a device-based platform, I'm a biotech analyst. To get a biotech analyst interested in a device platform is pretty impressive, I think. It's cool science. Can you talk us through what is it, like what is the procedure, what's happening when patients are undergoing it? Sure. The target for Revita is the mucosa of the small intestine, the first portion of the small intestine, which is the duodenum. Over the course of the last several years, the duodenal mucosa has become a validated target for the treatment, prevention, and reversal of obesity and type 2 diabetes, largely because of lessons learned from bariatric surgery. What that allowed us to do is to realize that the reason the gut plays such an important role in obesity and diabetes is because chronic exposure to high-fat and high-sugar diets in our modern lifestyle leads to changes to the lining of the gut and to changes to gut-brain signals that are driving the brain to defend a higher weight and blood sugar set point. We can take medicines to try to lower weight and lower blood sugar, but those medicines are not actually fixing what's wrong in the body that's causing that higher set point. You might think about it like the thermostat in your house. If your thermostat is set to 85 degrees, you can open all the windows that you want, but you're not actually fixing the fact that the thermostat is wrong. We believe that by targeting the duodenum, you can actually correct that thermostat. You can correct where the body believes your brain's weight should be so that you're not constantly putting Band-Aids on the problem, like turning the fan on and opening the windows, but it just regulates its own weight where it belongs. That's the idea behind Revita. Perfect. OK. What is the mechanistic rationale in the weight maintenance setting in particular? There's, I think, kind of two aspects, sort of like the initial ablation and then the durability of the effect from, I think, part two. Can you walk us through that? Yeah. Revita is in late clinical stage. It's in a pivotal trial. We've already treated over 400 patients in clinical studies in multiple geographies. What we've consistently seen across our trials is it's a single procedure conducted in under an hour with an immediate effect that can be observed within four weeks, which is sustained for two years or more after a single outpatient straightforward intervention. The results that we've seen when it's a primary therapy are that it can lower blood sugar substantially, and it can lower body weight substantially because, as I said, it's fixing that thermostat, and it regulates you down. Now put that into the context of somebody who's rolling off of a GLP-1 because they don't like the muscle wasting, they don't like the side effects or the tolerability issues, they're concerned about cost, or they're concerned about access. As I said, over 5 million Americans are going to stop a GLP-1 this year, and most of them are at risk of regaining weight. On that journey, they're going to feel a lot of hunger and a lot of food noise because they haven't fixed that thermostat. What if right at the time that you stop the medicine, you fix the thermostat so that the lower weight that they are now at because of the drug can be maintained because you don't have the physiologic drive to get you back up to that higher weight again? You should not expect to experience hunger and food noise. You should expect to be able to maintain that body weight. That is the rationale for applying a metabolic reset to the post-GLP-1 weight maintenance indication. You could also do it as a primary treatment for weight and for blood sugar, but it's particularly compelling because right now the market desperately needs a solution for these 5 million people a year, and there is nothing out there like Revita. That's where we're starting. Got it. OK. In terms of how it actually works, the initial kind of immediate effect you mentioned is sort of a function of the tissue damage, I guess, the ablation procedure itself, mimicking bypass surgery, as you said, to sort of exclude calorie absorption from the duodenum. Is that right? Yeah. Let's dive into the mechanism here. The gut is not just a dumb tube that absorbs nutrients. There are hormone-producing cells in the lining of the gut that are secreting hormones into the bloodstream in order to help the body prepare and know what food is coming and how much is coming, hormones like GIP, GLP-1, CCK, et c. There are also nerve fibers from the brain through the vagus that are sitting right underneath the mucosal surface in the duodenum so that they can send a signal to the brain so the brain can quickly know, like an early warning system, whether food is coming and how much is coming. Why is that important? When you're not eating, let's say I haven't had anything to eat since last night, I'm finding energy for my liver and for my fat cells so that I'm not dropping dead from low blood sugar right now. The second that I start to eat, the brain shifts the whole body's metabolism to go from breaking down fuel to storing away the fuel that's getting absorbed. The first time that your brain knows to do that is when food hits the duodenum because that's where absorption takes place. Now, when you eat McDonald's, Coca-Cola from the age of five, and you're exposed to it for one, two, three decades, the lining of that gut responds to nutrients by proliferating more in a nutrient concentration-dependent manner. That nutrient-sensing mechanism that works normally to help you control your blood sugar and your body weight starts to become abnormal because of that over-proliferation of the gut lining caused by chronic exposure to fat and sugar. In animal models, what people have seen is that if you feed a mouse McDonald's diet for six months, which is a long fraction of that animal's life, then it will reset its weight to a higher set point, and it will defend that weight thinking that that's where it belongs. You then do a microscopic analysis on the mucosa, and that's an over-proliferated mucosa. You feed nutrients into that duodenum, and what you find is that the animal does not feel full like it should, and it's still feeling hungry and still looking for food. That's partly why that weight set point is set as high as it is. We have a therapeutic device that is designed to ablate the mucosal lining, to remove that dysfunctional tissue in a very precise manner and allow the body to regenerate a healthy new lining in its place. What we've observed is that when you follow these patients over time, they are able to maintain a lower body weight and a lower blood sugar simply by virtue of the fact that you're fixing that abnormal signal to the brain, correcting that thermostat, if you will. OK. That initial benefit that's happening is, again, coming from this calorie exclusion, basically. The reset is really the healing of the tissue over time, and that's where the durability is coming from. Am I thinking about that correctly? I think that's a fair assessment. OK. Yeah, perfect. You have a phase III trial ongoing with top-line data coming in the second half of next year. Ahead of that, we're going to be getting several interim updates, but the first one is coming in the third quarter of this year from a sub-cohort of that study that is a randomized controlled cohort. Can you run through the design of that study briefly and kind of help set expectations for what to expect? We are super excited about the post-GLP-1 weight maintenance opportunity. This is a brand new therapeutic area. It did not exist two years ago. The only reason it emerged is because Eli Lilly realized that they had this fantastic drug called tirzepatide. As fantastic as it was, most patients don't want to have to take it for the rest of their lives. It's not that they want to switch to an oral. They just want a metabolic reset. That's what people came and told us, that patients do not want to be on a medicine to control their body weight for the rest of their lives. They want to live a healthy life at a normal weight. Each one of you can understand that very obviously, right? You do not want to be craving high-fat, high-sugar foods, and you don't want to be at risk of not having access to your medicine anymore and then feeling profound hunger, so much hunger that in some of these trials of some of these drugs, the clinical trialists are telling us that patients, when they stop taking the medicine at the end of the study, they've lost 30, 40 lbs. They are so hungry that they've eaten everything in their pantry. They're eating the dog food and the cat food too when they run out of the human food in their pantry. That's how hungry they feel. They obviously know it's wrong, but that is the problem of post-GLP-1 weight regain. It is a drug withdrawal symptomology today. That's why the FDA gave us breakthrough device designation for post-GLP-1 weight maintenance. That image of a person eating dog food and cat food, I guarantee you, you will never forget because when I heard it, I haven't been able to put it out of my head. The problem that we are trying to solve is how do we help people who are living a normal life in a modern society live a normal, healthy weight without needing to be dependent on a medicine whose disappearance for one reason or another could cause all of these withdrawal symptoms. The pivotal study that we're running is called REMAIN-1. We're taking people with obesity who are not type 2 diabetic, who have not been taking a GLP-1. We're giving them tirzepatide. We're getting them to lose 15% body weight on tirzepatide. That takes us about seven months. That's an open-label run-in phase. We stop the tirzepatide, and we randomize them a week later to an endoscopic procedure. During the endoscopic procedure, they will either undergo the Revita treatment in the duodenum or a sham treatment where the catheter is introduced, but the procedure is not conducted. At the end of that procedure, they will be woken up, and they will be sent back to their treating physician who gave them the tirzepatide. Neither the patient nor the tirzepatide prescriber knows whether they got Revita or a sham. That is a randomized double-blind sham-controlled trial. We have three patient cohorts in this study. One of them is an open-label group where we are taking people who are already on tirzepatide, stopping it, doing the Revita procedure. We've presented some amazing three-month data from that group we can talk about. There is a pilot randomized sham-controlled cohort called the midpoint cohort. That is going to have unblinding of the first randomized double-blind data in the month of just next month, in September. That will be 45 patients who've already lost 15% body weight on tirzepatide where the drug was stopped. They've already been randomized. Those randomizations were completed in May. 45 patients coming back at the end of August. In September, we will be able to share the randomized double-blind data. If Revita demonstrates efficacy in that midpoint cohort, I think it would be very reasonable to assume that the pivotal study of 315 patients, which is also already fully enrolled, is much more likely to be positive. That de-risking is part of the sequencing of the clinical catalyst. We already saw open-label data, three months, looks really good. De-risk the upcoming randomized three-month data. This randomized three-month data we'll see in September. By early Q1, we'll see six-month randomized data from these 45 patients. By around this time next year, we'll see the full 315-patient registrational study. One study required for registration. By the end of next year, we'll be filing for approval. Perfect. You talked about the open-label three-month data a couple of months ago now. That was really good. Can you tell us what did you observe there? We observed, first and foremost, that there are a lot of people out there who are wanting to stop their GLP-1, even though they've had a lot of success on weight loss. We've learned a lot about this market, probably more than anybody else, about why people on GLP-1s don't want to take their medicines anymore. There's a 63-year-old woman who wanted to stop because she was losing muscle mass, and she wants to be able to get on the floor and play with her grandchildren. She was having a hard time doing that. There's a 30-year-old woman who's changing jobs, and the new job covers semaglutide, but not tirzepatide, and she didn't want to have to switch from one to the other. There's another woman who said, "I'm 40 years old. I've lost 20% of my body weight. I don't want to have to take this medicine for the next four decades of my life if I'm not losing any more weight." These are the reasons of the humans in the world today who are on a GLP-1, who've lost 40, 50 lbs, and don't want to be on the drug anymore. We stopped their tirzepatide. We put them through the Revita procedure. Safety and tolerability was outstanding. Whitney can attest. I don't need to go through it, but it's like no different than a routine upper endoscopy, which 20 million people do in the United States each year. Three months afterwards, on average, these 13 patients should have regained 10 -1 5 lbs. They should be feeling tremendous hunger and food noise because they've stopped the tirzepatide. They've lost 40 - 50 lbs. They went from like 220 lbs to about 175 lbs on average. Their body should be telling them to get back to 220 lbs, but they've regained 1 lb. They went from 175 lbs to 176 lbs. Instead of what you would have normally expected from stopping tirzepatide, 175 lbs, you should be at like 185- 190 lbs by this time. That difference is further substantiated by the anecdotal stories from the investigators that these patients are not experiencing the hunger that you would expect from other patients that they have seen who have stopped their drug and are now wondering, "Oh my God, how to feel this withdrawal symptom? No. As we said in our note, that data surprised us to the upside, even though it was open-label and uncontrolled. The consistency of response across the patients was impressive for sure. It bodes well for the third quarter update and the upcoming updates, including the phase III. Assuming success there, how do you think about pricing and the market opportunity in this patient population, which could be quite large? This market opportunity is very substantial. As I mentioned already, 10 million people this year will be prescribed a GLP-1. More than half will stop. 85% of them are at risk of weight regain. We are finding that Revita has an opportunity to align the interests of all of the stakeholders, not only from a value proposition standpoint medically, but also from a health economic perspective. Patients are willing to spend a couple of thousand dollars in order to be able to get their copay covered in order to be able to undergo this procedure. GI hospitals or outpatient endoscopy centers can get paid whatever they need in order to make this make economic sense vis-à-vis other opportunities in front of them. There are roughly 2,000 - 4,000 GI endoscopy centers where this can be performed. On average, they can each commit today about 100 procedure slots a month if Revita were available. You multiply those numbers, that's real volume. Third, the payers are looking for a cost offset from GLP-1s. That's a really crucial point. When payers think about obesity, what they think is we've got this very expensive drug that works for a short period of time, and the patients really want it until they don't, and then they stop it. We are left wondering, why did we pay for this in the first place? They are looking for a cost offset from the GLP-1s. If you say 18 months of a cost of a GLP-1, that's a rough number, and then you say we're going to come in for a procedure cost that matches that, we're going to give a cut to the hospital and the endoscopy center so that they can have the economic incentive, and then we are going to price our catheter at $5,000 - $8,000. We have greater than 80% gross margins. Everyone wins. No one loses. There's a lot of free cash flow to be generated. Definitely. OK. You know, one point of pushback we get from investors, we don't get a lot of pushback on the data or kind of odds of success in this initial readout, et cetera, but we get the, orals are coming, sema will be off patent soon, the market is changing, and this sort of post-GLP-1 market demand is just not going to be there. What's your response to that? I love that question. Like orforglipron, Lilly's small molecule reported data last week. I've been spending time in the market talking to physicians and prescribers as part of the study. Let me tell you, small molecules are not the white knight that's going to solve the obesity problem. It is the very natural next thing for a drug manufacturer like Lilly to work on in order to be able to increase the people at the top of the funnel who will want to get the GLP-1 in the first place. If you talk to patients and if you talk to prescribers and you ask them for those individuals who've lost weight on a GLP-1 and are now plateauing, whether switching to an oral small molecule for the rest of their life solves the problem that they have that's making them want to stop in the first place, the physicians will tell you that is not the solution to the problem. While the small molecules will increase the number of people who get treated with a GLP-1, the same proportion of people will continue to believe that they do not want to be on a drug for the rest of their life. It doesn't matter whether it's an injectable or a small molecule. There is no white knight coming to solve the obesity crisis in the form of a medicine. OK. Is this something you can commercialize yourselves? What would that look like? We can commercialize this ourselves. As I mentioned, there are like 2,000 - 4,000 endoscopy centers where this can be performed, but the top 200 - 300 are incredibly high-volume centers. It would be very straightforward for us to access them. We've already built a clinical infrastructure over nearly 30 clinical trial sites in the United States. Plus, we signed earlier in Q2 a letter of intent with the nation's largest provider of bariatric and metabolic endoscopy services, an organization called Bariendo, who are doubling their clinical trial sites roughly every nine months. Between our clinical trial sites and Bariendo sites across the United States, we're covered from California to New Hampshire, from the state of Washington to Florida. I think we'll have a wonderful distribution network. We already learned what we need to learn in order to be able to do that. OK. Perfect. Sadly, we've only left two minutes to talk about the next platform, Rejuva, which is the gene therapy platform. Excuse me. Can you walk us through that approach? Is this just kind of like next-gen GLP-1, and you're looking to kind of do the same thing that GLP-1s have done, but in a more permanent way? Is it more complicated and differentiated? I'll go one step further. It is a category closer in GLP-1. It's a one-time administration. It lasts for life. It's more potent than existing GLP-1s. It's more durable in a diabetes model than existing GLP-1s. The circulating level of GLP-1 that we are seeing in our preclinical models is one order of magnitude lower than the circulating levels that semaglutide needs, which translates to an anticipated better safety and tolerability profile. If the data prove out in humans, what we have seen from the relevant predictive preclinical models, our ambition with RJVA-001, which is our first candidate, is to be able to put type 2 diabetes into durable remission. Clinical trial we anticipate will begin next year with preliminary data towards the back half of next year. Perfect. RJVA-001 is for type 2 diabetes, as you said, GIP/GLP-1. Yeah. You've got RJVA-002 coming for obesity, GLP-1. Yeah. What is the target profile difference, target product profile difference between the two? I think tirzepatide is a GIP/GLP combo. All of you know that. It's quickly becoming the sort of the standard of care for obesity. I think that it's hard to do better than the GIP/GLP combo. We've developed a GIP/GLP combo as well with RJVA-002 that would be targeting the obesity market. We've nominated a candidate, and we are running it through its preclinical paces. We love what we're seeing. We think that this is going to be able to offer very meaningful weight loss reduction, very competitive, very long-lasting, and with an excellent safety and tolerability profile that will be developed for obesity. OK. Perfect. We have 20 seconds left. Can you, in the last 20 seconds, talk about the kinetics of expression of GLP and GIP/GLP from your gene therapy relative to kind of injectables or orals? Sure. If you inject yourself with tirzepatide or semaglutide today, that level is going to go up within about four hours, and it's going to stay very high at levels that can cause nausea and vomiting and hit your brain receptors until it drops off like a cliff at about five to six days, and then you need to reinject yourself again. That's the drugs. That's why it stops working when you stop taking it. Our GLP-1 mimics endogenous, the body's own GLP-1. Relatively low levels when you don't need it, spikes on release when the body eats a meal or if your weight is high or your blood sugar is high. The levels are high, and then it comes back down again when you don't need it. Physiologic, pulsatile expression coming from the beta cell, mimicking the body's own physiology, not mimicking pharmacology. We think it's a way better way to do it. We think it closes the GLP-1 category, but it's still preclinical. You have to take that with a grain of salt. Definitely. Thank you so much. Two very interesting platforms, Revita up first, but we'll be excited for Rejuva as well. Thank you. Thank you, Whitney.