BioPharma, Devices & Diagnostics

Metabolic Disorder-Focused Fractyl Health ‘GUTS’ Out a $110 Million IPO

Fractyl Health will use the IPO proceeds for pivotal testing of a medical device and surgical procedure intended to address root causes of diabetes and obesity. The Fractyl pipeline also includes a gene therapy for these conditions.

Fractyl Health contends its metabolic disorder product candidates could offer long-lasting effects not achievable with in-demand weight loss medications, such as Wegovy and Zepbound. It now has $110 million in IPO cash to help build that case with clinical data.

The Lexington, Massachusetts-based company late Thursday priced its offering of more than 7.3 million shares at $15 each, which was the midpoint of the price range it had set earlier in the week. Those shares now trade on the Nasdaq under the stock symbol “GUTS.”

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In its IPO filing, Fractyl acknowledges the clinical efficacy achieved by GLP-1 agonists, a class of drugs that includes Wegovy and Ozempic from Novo Nordisk as well as Mounjaro and Zepbound from Eli Lilly. By activating the GLP-1 receptor, these drugs make patients feel fuller, so they eat less. But Fractyl notes patients who take GLP-1 agonists do not maintain their weight loss once medication is stopped.

“We believe there remains a critical unmet need in obesity for a therapeutic option that provides long-term benefit even after treatment discontinuation,” Fractyl said in the IPO filing.

Fractyl says it develops treatments for the root causes of type 2 diabetes and obesity. The company’s lead product candidate, the Revita DMR System, is not a drug. It’s a medical device used to perform a 45-minute outpatient procedure that modifies the duodenum, a part of the small intestine that regulates the metabolic response to food intake. By ablating dysfunctional duodenal mucosa, the procedure sparks changes that lead to glucose control and weight loss. Fractyl is testing Revita across a range of patient groups, such as those with prediabetes and obesity as well as patients with advanced type 2 diabetes.

A pivotal test of Revita is underway evaluating the procedure in patients with inadequately controlled type 2 diabetes despite being on up to three anti-diabetic agents and 20 to 100 units of insulin daily. Fractyl anticipates completing enrollment in the first half of 2024. Preliminary data are expected in the fourth quarter of this year. The data could support a regulatory submission for this class III medical device under the FDA’s premarket approval pathway.

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Fractyl is also developing a gene therapy for type 2 diabetes and obesity. This therapy, called Rejuva, is designed to alter metabolic hormone function of the islet cells in the pancreas. These cells play a key role in endocrine function and glucose metabolism. Rejuva targets dysfunctional pancreatic beta cells that are a root cause of insufficient insulin in those with type 2 diabetes, the company said in the filing. By rejuvenating the health of beta cells, the gene therapy is intended to restore the body’s natural ability to produce insulin.

In the IPO filing, Fractyl said it anticipates completing the preclinical work that could support a second half 2024 submission of an investigational new drug application for the gene therapy in type 2 diabetes. If cleared, this therapy could begin human testing in the first half of 2025. The company expects to nominate a gene therapy candidate for obesity in the first half of this year.

In its history, Fractyl had raised $287.3 million, the most recent financing a $100 million Series F round in 2021, according to the filing. As of the end of the third quarter of 2023, Fractyl reported a $44.5 million cash position. The company said it plans to use the IPO proceeds to complete the ongoing pivotal study of Revita. The IPO cash will also support preclinical development of the Rejuva gene therapy.

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