Fractyl Health “GUTS,” a company specializing in metabolic disorders, is launching a $110 million IPO

Fractyl Health claims that its metabolic disorder product candidates could provide long-lasting effects not achievable with popular weight loss drugs such as Wegovy and Zepbound. The company now has $110 million in IPO cash to further build this case using clinical data.

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

In its IPO filing, Fractyl touts the clinical effectiveness of GLP-1 agonists, a class of drugs that includes Novo Nordisk's Wegovy and Ozempic and Eli Lilly's Mounjaro and Zepbound. By activating the GLP-1 receptor, these drugs make patients feel full and eat less. However, Fractyl notes that patients taking GLP-1 agonists do not maintain their weight loss when the medications are stopped.

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

Fractyl says it is developing 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 is a medical device used to perform a 45-minute outpatient procedure that alters the duodenum, a part of the small intestine that regulates the metabolic response to food intake. By removing dysfunctional duodenal lining, the procedure triggers changes that result in glucose control and weight loss. Fractyl is testing Revita in a number of patient populations, such as those with prediabetes and obesity, as well as those with advanced type 2 diabetes.

A crucial trial of Revita is currently underway, examining the procedure in patients with poorly controlled type 2 diabetes, despite taking up to three antidiabetic medications and 20 to 100 units of insulin daily. Fractyl expects registration to be completed in the first half of 2024. Preliminary data is expected in the fourth quarter of this year. The data could support an application for approval of this Class III medical device under FDA premarket approval.

Fractyl is also developing a gene therapy for type 2 diabetes and obesity. This therapy, called Rejuva, is designed to alter the 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, which are a leading cause of insufficient insulin in people with type 2 diabetes, the company said in the filing. By rejuvenating the health of beta cells, gene therapy aims to restore the body's natural ability to produce insulin.

In the IPO filing, Fractyl said it expects to complete preclinical work that could support the submission of an investigational new drug application for gene therapy for type 2 diabetes in the second half of 2024. If approved, 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 has raised $287.3 million, according to the filing, the last funding of a $100 million Series F round in 2021. As of the end of the third quarter of 2023, Fractyl reported a cash balance of 44.5 million US dollars. The company said it plans to use proceeds from the IPO to complete its ongoing pivotal study on Revita. The money from the IPO will also support the preclinical development of Rejuva gene therapy.

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