Fractyl Health, Inc.

Good afternoon and welcome to Fractal Health fourth quarter and full year 2025 financial results and business update call. As a reminder, this conference call is being recorded. At this time, all participants are in listen-only mode. There will be a Q&A session following management prepared remarks. I'll now turn the call over to Brian Luque, Head of Investor Relations and Corporate Development at Fractal. Brian, you may now begin.

Thank you. This afternoon, we issued a press release that outlines the topics we plan to discuss today. The release is available at www.fractal.com under the Investors tab. Joining us on the call today are Dr. Harith Rajagopalan, Chief Executive Officer, and Laura Smith Weber, Chief Financial Officer. During this call, we make forward-looking statements which involve risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. We provide a comprehensive list of risk factors in our SEC filings, including the annual report on Form 10-K filed today, which I encourage you to review. Any forward-looking statements on the call are subject to substantial risks and uncertainties, speak only as of the call's original date, and we undertake no obligation to update or revise any of the statements, even if subsequent events cause the company's views to change. It is now my pleasure to pass the call over to Harith.

Thank you, Brian, and good afternoon, everyone. Millions of Americans are starting GLP-1 therapy. Most of them will stop within a year. Data show that when they stop, the weight comes back approximately 10% of their body weight within six months and approximately 15% within 12 months. Every one of those patients faces a moment with no durable off ramp, no alternative to either resuming chronic pharmacotherapy or accepting the risk of regain. Revita is being built for that moment. For those of you who are new to the fractal story, Revita is our lead asset. It's like LASIK for obesity, an endoscopic procedure designed to durably maintain weight loss after GLP-1 discontinuation. And Rejuva is our smart GLP-1 platform targeting long-term metabolic remission from a single dose. Today, I want to tell you where we stand in the development of Revita for post-GLP-1 weight maintenance, what we have learned since we last spoke to you about the clinical data, and share new favorable feedback we have received from the FDA on our filing strategy. I'd like to start by naming something directly. In January, we reported six-month data from the Remain One midpoint cohort. The past several weeks of analysis have given us a level of precision about which patients benefit most from Revita and at what procedural profile that we did not have before. This clarity has strengthened our conviction in Revita and has helped us finalize the Pivotal Study's key design elements to ensure we are set up for regulatory and commercial success. Today, we will share what we now know and why the picture is both more precise and more compelling than the headline p-value initially suggested. Let me walk you through four key pillars that give us conviction in the opportunity in front of us. Number one, the clinical signal is real. Number two, the Pivotal is built to succeed. Number three, the path from data to commercial value is clearer than ever. And four, we have the runway to get to the definitive pivotal data without any planned incremental capital raise. Now let's start by discussing the clinical signal. You will recall that the midpoint cohort was a pilot randomized double-blind sham control study that enrolled 45 patients with obesity who were GLP-1 naive. They were started on terzepatide to achieve at least 15% total body weight loss, and then randomized two to one to Revita versus sham. This 45 patient study was designed as an interim read to validate the design and the powering assumptions for the remain one pivotal study, not as a powered standalone efficacy study. Nonetheless, the six month midpoint cohort data did not look as strong as the three month data. Early analysis that we shared at the time of data release was that site-level heterogeneity appeared to account for the attenuation of the clinical signal in some patients. Further investigation has revealed that the site-level heterogeneity is in fact differences in ablation length or treatment dose at early clinical sites, and that these differences in ablation length are a key driver of efficacy differences between patients. Critically, we have not identified site-level operational issues. What we did find was even better, a strong dose-response relationship between ablation length and weight maintenance after GLP-1 discontinuation. This is a strong positive signal for the Revita mechanism of action and for the potential success of the pivotal study. We have long understood from our work in type 2 diabetes that Ravida's treatment effect is proportional to the extent of duodenal resurfacing. Our first in human feasibility and dose escalation pilot study in type 2 diabetes was published in Diabetes Care in 2016 and prospectively demonstrated a clear relationship between ablation length and glucose lowering. Since that time, we have been systematically optimizing the procedure profile across successive clinical studies to deliver longer ablation lengths, from 9 centimeters in the first in human to over 16 centimeters on average in remain, and have seen greater potency in our studies without compromising patient safety. And because of this experience, our pivotal study already pre-specifies an ablation length dose response secondary endpoint. When we applied this dose response analysis to the midpoint cohort 45 patients, we observed a statistically significant P less than 0.05 monotonic and clear relationship between ablation length and weight maintenance treatment effect at six months. Participants who received more than 14 centimeters of ablation regained approximately half the weight of sham, whereas those individuals with subthreshold ablation accounted for the apparent narrowing of treatment effect between month three and month six that we saw in our January data release. This finding is consistent with our prior evaluation of ablation length on patients with type two diabetes, and it makes sense biologically. The duodenum is lined with enteroendocrine cells that drive key metabolic signaling pathways. The density of that cell population is distributed along the length of duodenal mucosa. And duodenal dysfunction from high-fat, high-sugar diets extends along the length of the entire duodenum in animal models. A longer ablation resurfaces a greater proportion of that signaling surface, producing a more complete metabolic effect, which is exactly what our dose response data confirm. In the Remain One Pivotal study, we trained physicians to ablate from the ampulla of otter to the ligament of trites. which are anatomical landmarks toward the beginning and the end of the duodenum, respectively. Based on our work in type 2 diabetes, we aimed for an ablation of at least 10 centimeters, but encouraged physicians to ablate more if they deemed it appropriate. In the pivotal study, the mean and median ablation length are more than 16 centimeters, providing ample opportunity to demonstrate an enhanced clinical signal reflecting more complete duodenal ablations. Notably, all pivotal investigators were successfully trained to achieve more than 14 centimeters of ablation, confirming procedural scalability and feasibility across diverse operators and patient anatomies. So taking a step back, what we have is a clear, monotonic dose response, which is exactly what you would expect to see from a true biological intervention. All drugs and all procedural therapies that work like drugs should show a dose-response relationship. That's what biological activity looks like. And ablation dose is a specific, measurable, controllable, and standardizable metric for repeatable outcomes in a broad population. So having established ablation length as a key procedural driver of rabidus potency, let's turn to patient selection. The scientific community has long understood that the magnitude of initial weight loss on GLP-1 is proportional to the magnitude and speed of weight regain upon discontinuation. So we designed Remain 1 with a greater than 15% total body weight loss threshold at run-in, specifically because we expected treatment effect to scale with the degree of pre-randomization weight loss. Midpoint cohort results at six months confirmed this relationship. Participants with greater than 17.5% weight loss showed an early, sustained, and compounding separation from sham through six months. The pivotal has enrolled a population that is built to capture a large effect size that scales to the magnitude of initial weight loss as well, with a mean run-in weight loss of 18.3% in the pivotal cohort. So when we now consider the right dose in the right patient, we observed the signal to be strongest among participants with higher weight loss who received longer length of duodenal ablation. And in these individuals, Rubita treated patients experienced only 2.9% weight regain at six months compared to 9.9% in the sham arm, approximately a 70% reduction in post-GLP-1 weight regain. Like ablation length, the treatment effect scaled monotonically with the magnitude of weight loss as well. Another way to think about it is that in this optimized patient cohort in the midpoint study, Patients retained about 88% of their body weight loss on Trozabitide compared to only about 60% in the sham arm at six months. We believe this degree of weight loss maintenance will be highly compelling to key commercial stakeholders. It is a prospectively definable, commercially significant population. It is the exact population that the pivotal study has enrolled and will enable efficacy endpoints in our pivotal study later this year. This is also classic translational pharmacology applied to a procedural therapy. Identification of the right patients and the right dose to optimize the clinical profile and achieve a large treatment effect. Turning now to the pivotal studies statistical analysis plan and operational progress. Our plan was always to analyze the six-month midpoint cohort to inform our understanding of the key drivers of effect size, and then to use this information to pre-specify the pivotal cohort statistical plan. The pivotal SAP, which we will file with FDA shortly, incorporates these parameters as pre-specified analyses, and this will enable clarity on effect size and durability as a function of treatment dose and patient selection in the pivotal study. I also want to provide clarity about our endpoint structure. Remain 1 has two co-primary endpoints. The first is percent body weight regain in the Revita arm versus sham at six months. This is the data we expect in early Q4. The second co-primary is the proportion of Revita-treated patients who maintain at least 5% total body weight loss at one year after GLP-1 discontinuation. Both co-primaries are required to be met at P less than 0.05 for overall study success, and we believe the pivotal is well-powered at over 90% to achieve that result even under conservative assumptions. In addition to these co-primaries, we will present a comprehensive set of secondary endpoints, including a dose response analysis, a high responder population analysis, cardiometabolic markers, and patient-reported outcomes, including reduction in cravings for sugary foods. In February, we completed randomization in the full study of the Pivotal cohort with over 300 participants across more than 30 sites and over 20 operators across the United States, making this the largest sham-controlled GI endoscopy Pivotal trial ever conducted. Every operational metric that predicts Pivotal success is tracking favorably. Retention exceeds 95%. Medication resumption rates are below our model assumptions. The blinded adverse event profile remains encouragingly consistent with what we have seen in prior studies. And we remain on track to deliver top-line six-month primary endpoint data in early Q4, 2026. Turning now to regulatory progress. Earlier this month, we received favorable FDA feedback on our de novo classification request. You may remember that we aim to get that feedback in Q2, but our most recent discussion with FDA revealed that they have reviewed safety data to date, and they acknowledge that Revita's safety profile is consistent with a Class 2 device classification or a moderate-risk de novo device. With this positive feedback now in hand, ahead of schedule, we are on track for de novo submission in late Q4 2026 with six-month pivotal data in hand. There are several advantages to the de novo pathway compared to the PMA pathway. It is a more capital efficient, faster and strategically superior path. So let's turn to the commercial opportunity because the landscape is evolving in ways that reinforce the urgency of what we are building and the path from clinical data to commercial value is becoming clearer and nearer than ever. With an anticipated filing via the de novo pathway at the end of this year, we're also preparing ourselves for our potential commercial launch. There is a large and growing population on GLP-1 drugs, with estimates projecting over 30 million users in the next several years. We estimate that as newer agents become more effective, more than 50% of patients are expected to lose more than 17.5% of their total body weight on GLP-1, and more than half of these are likely to discontinue. As a result, the post-GLP-1 unmet need is intensifying rather than abating. A large study published in BMJ Medicine last week following over 330,000 patients showed that GLP-1 cardiovascular benefits erode rapidly after discontinuation, with the authors coining the term metabolic whiplash. Resuming treatment did not fully restore lost benefits, underscoring the need for durable maintenance solutions. Meanwhile, the payer landscape is shifting. CMS has expanded Medicare coverage of GLP-1s, driving a massive increase in the addressable patient population, but also intensifying the economic pressure on payers who are now grappling with the long-term cost of chronic therapy. This creates an unprecedented window for RUVIDA, the first FCA breakthrough device designed for post-GLP-1 weight maintenance. as a potentially durable, cost-effective solution that gives people an off-ramp from chronic pharmacotherapy while preserving the metabolic benefits they worked so hard to achieve. On reimbursement, we now have a clear and validated pathway. We plan to file a category three CPT code application this summer with a code expected to be effective in the summer of 2027. The payment economics work for hospitals from nearly day one. transitional pass-through payment by a CMS provides a separate incremental mechanism to cover the cost of the Revita disposable device on top of the facility rate, ensuring that hospitals can maintain a positive contribution margin while offering the procedure to patients. Revita is the only potential procedural therapy in development for post-GLP-1 weight maintenance, and we believe the commercial infrastructure will be ready to move quickly upon clearance. Briefly, let's turn to Rejuva, our smart GLP-1 platform targeting long-term metabolic remission from a single dose. We submitted clinical trial applications for Rejuva 001 in type 2 diabetes to regulators in the EU and Australia, and we anticipate regulatory feedback in Q2 2026. Expect reporting first in human dosing and preliminary data in the second half of this year. The Rejuva program is advancing within a discipline spending framework that does not compete with Revita for Capital, and we will share more on the platform at an upcoming investor day. Let me frame the anticipated catalyst-rich path ahead before I hand it to Lara. In Q2, we will see one year Reveal 1 open label data and receive CTA regulatory feedback on Rejuva 001. In Q3, we will see one year remain one midpoint cohort randomized data, and we expect to be able to demonstrate continued compounding treatment effect and durability at that time in a randomized data set. In early Q4, we will anticipate seeing top line six month randomized data from the remain one pivotal study. This is the single most important catalyst in our company's history. And in late Q4 this year, potential de novo marketing application submission for RUVIDA in post-GLP-1 weight maintenance. In the second half of this year, we will also see human dosing of RUJUVA-001 subject to CTA authorization and preliminary safety and PK data. Each of these milestones move us closer to delivering the first potential procedural therapy for maintenance of weight loss after GLP-1 discontinuation, and it is a catalyst-rich year ahead. Laura?