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Good afternoon, and welcome to Fractyl Health's Second Quarter 2025 Financial Results and Business Updates Call. As a reminder, this conference call is being recorded. [Operator Instructions] I'll now turn the call over to Brian Luque, Head of Investor Relations and Corporate Development at Fractyl. Brian, you may now begin.

Thank you. This afternoon, we issued a press release that outlines the topics we plan to discuss today. This release is available at www.fractyl.com under the Investors tab. Joining us on the call today are Dr. Harith Rajagopalan, Chief Executive Officer; and Lisa Davidson, 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 quarterly report on Form 10-Q 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. Good afternoon, everyone. Fractyl is tackling the next major crisis in metabolic care, weight regain after GLP-1 discontinuation. Tens of millions of people are struggling with their weight and will start a GLP-1 with the hope of achieving lasting weight loss, but most will stop the drug within a year. Nearly all will regain weight. This rebound problem is a massive unmet need because most patients cannot stay on drug therapy for weight loss for the rest of their lives. And when they stop drug therapy, not only does their weight come back, but so too does their profound hunger and all of the metabolic complications associated with obesity, including type 2 diabetes. Fractyl Health may be the first company with a scalable solution to this problem because our therapies target the root cause of disease for the very first time. Since our last earnings call, we have strengthened our balance sheet, further sharpened our strategic focus and delivered on critical milestones. This focused execution sets us up for a transformational second half of the year. Last week, we strengthened our financial position through a $23 million underwritten public offering of common stock with [ the dealers ] and proceeds. This financing was led by leading health care investors, including Nantahala Capital, ADAR1 Capital Management, Second Line Capital, 683 and SilverArc, investors who understand the significance of our upcoming catalysts and chose to scale their investments alongside them. With this capital structure in place, we positioned ourselves to fully capture the value of our clinical and strategic progress in the months ahead. With the proceeds from this primary capital raise, we expect to extend our cash runway through important REMAIN-1 midpoint cohort milestones with next month's 3-month randomized data readout as well as the 6-month randomized data from this cohort in the first quarter of 2026. We sharpened our strategic focus by reducing our burn rate from $25.4 million in Q1 to $19.8 million in Q2 as we wound down our spend on noncritical programs following the strategic reprioritization earlier in the year. Going forward, we will continue to see reduced cash burn be a key area of focus with disciplined cash management through the REMAIN-1 pivotal study milestones ahead. We have also delivered on key milestones across our Revita and Rejuva programs during this time. Revita is emerging as a foundational therapy to reset the body's metabolic set point in obesity and type 2 diabetes. Last week, we've reported new data from our German real-world registry study that reinforced Reivita's durability, showing up to two years of benefit in weight maintenance and blood sugar control following a single treatment. What is impressive about the new data from Germany is not only the duration of effect of up to two years, but also the potency of the therapy over that period of time with even greater improvements in body weight at two years than at one year. What this implies is that Revita can deliver real-world results that could get even better over time as the body accommodates to a more physiologic and healthy relationship with food. These long-term outcomes are consistent with prior Revita clinical studies and solidify its potential as a real-world non-pharmacologic solution for sustained metabolic results with a broad set of potential indications in obesity and metabolic disease. Our near-term focus is solving weight regain after GLP-1 discontinuation, a challenge that is now recognized by patients, physicians and payers alike. In June, we shared positive 3-month open-label data from the REVEAL-1 cohort. Patients who stopped tirzepatide and received a single Revita procedure demonstrated weight stability at three months with nearly half losing even more weight after stopping the drug. This stabilize weight after stopping GLP-1s. Enrollment of our REMAIN -1 pivotal study is complete and randomizations are on track. We continue to see a favorable safety profile and strong procedural consistency across sites, important indicators for study success and potential commercial scale. Next month, we expect to report 3-month randomized data from the REMAIN-1 midpoint cohort. These are people with obesity, but without type 2 diabetes who have lost 15% of their total body weight with tirzepatide before randomization to Revita or sham. This will be the first blinded controlled data set assessing whether Revita can preserve induced weight loss and metabolic benefit. The goal of the REMAIN-1 midpoint cohort will be to establish an early efficacy signal for Revita in a rigorous sham-controlled study ahead of our pivotal cohort for which top line data are expected in the second half of next year. We believe this randomized midpoint data in September will be a key proof point for the therapy, and we are optimistic for a positive outcome. Cohort readout, including the 3-month readout next month success means showing clear separation between Revita and sham on weight regain over time. More specifically even better than what one would expect from tirzepatide withdrawal alone. Based on SURMOUNT-4 data from Eli Lilly, patients who discontinue tirzepatide typically regain 5% to 6% of their body weight by three months. If Revita-treated patients show only 3% weight regain or less at the same time point, that would not only be statistically significant, it would also be a highly meaningful result for patients, for physicians and for payers. To put this in context, we shared 3-month data from our open-label REVEAL-1 compared to the 5% to 6% body weight or 10 to 15 pounds of weight regain typically seen by this time point when patients stop tirzepatide. That early signal of weight loss maintenance was incredibly encouraging, and we believe it bodes very well and sets a strong precedent heading into the next month randomized readout from REMAIN-1. Success with REMAIN-1 could position Revita as the LASIK for obesity, a straightforward onetime intervention that targets a root cause of disease and offers a potential for a lasting alternative to chronic disease management. This is not just theoretical. Our recent field visits to clinical trial sites and multiple advisory boards have confirmed three key themes: First, GI physicians are incredibly excited about Revita and believe it can be a valuable tool in their armamentarium as they increasingly move into treating obesity and metabolic disease. Second, based on the rapidity of enrollment in REMAIN-1 and the enthusiasm they see from patients, GI physicians anticipate significant procedure volumes upon potential FDA approval. And third, GLP-1 prescribers know that most of their patients do not want to be on these drugs for the rest of their lives, either because of side effects, cost or concerns about long-term drug therapy. And with these insights in mind, we are building the foundation for commercial scale. In June, we announced a nonbinding letter of intent with Bariendo, a nationwide endoscopic obesity care platform to prepare for potential adoption of Revita pending FDA approval. This collaboration could help create a ready-made distribution channel across high-volume ambulatory and hospital endoscopy centers. The collaboration will focus on pre-commercial preparation, including workflow design, provider education, health economic analysis and the development of referral pathways. As we pioneer new therapeutic areas in metabolic medicine, we are also establishing a leadership position that is built to last. In June, we were granted two new U.S. patents reinforcing our foundational innovations in duodenal mucosal resurfacing. Today, our portfolio includes over 100 granted patents throughout the world, including 32 granted U.S. patents and nearly 40 pending applications, making Fractyl the clear innovation leader in gut-targeted metabolic therapy. Let me now turn to Rejuva. With Rejuva, we believe we've created a truly breakthrough therapy, the first potentially one-and-done smart GLP-1 platform designed to program pancreatic beta cells to secrete GLP-1 in response to nutrients, potentially delivering durable physiologic metabolic control at far lower circulating GLP-1 levels than required by injectable therapies. RJVA-001 has completed preclinical efficacy, toxicity and biodistribution studies. CMC manufacturing is progressing well and nearly complete. We reached agreement with regulators on the design of the RJVA-001 Phase I/II clinical study. It will be an open-label multicenter study that will evaluate the safety, tolerability and preliminary efficacy of RJVA-001 in adults with inadequately controlled type 2 diabetes despite multiple glucose-lowering agents. In May, we submitted the first module of our clinical trial application. Pending regulatory clearance, we expect to dose first patients and report preliminary data in 2026. RJVA-001 could redefine the risk-benefit profile of long-term GLP-1 therapy and open the door to a durable, potentially curative solution for chronic metabolic disease. We believe that the future of metabolic care lies in durability, in physiologic design and in root cause solutions that work in the real world. With Revita, we aim to be the LASIK for obesity. With Rejuva, we are reprogramming the pancreas itself for life. Our execution is tight, our focus is clear and our opportunity is substantial. Lisa will now walk through the financials.

Thank you, Harith. In the second quarter of 2025, we continue to invest in the execution of our clinical strategy across both the Revita and Rejuva programs. R&D expense for the quarter was $21.2 million compared to $16.8 million in the second quarter of 2024, reflecting the continued advancement of the REMAIN-1 clinical study in the Rejuva program, including personnel-related costs. SG&A expense was $4.9 million compared to $6.2 million in the same quarter last year. The reduction is primarily due to the lower stock-based compensation. Net loss for the quarter was $27.9 million compared to $17.2 million in Q2 2024, largely due to changes in noncash fair value of notes and warrants and increased operating expenses. As of June 30, we had $22.3 million in cash and cash equivalents. Based on our current operating plans and after considering the net proceeds from the underwritten public offering, we expect our current cash position to fund operations into 2026 through key upcoming data readouts from the REMAIN-1 midpoint cohort. With that, I'll turn the call back over to Harith.

Thank you, Lisa. To wrap up, we believe Fractyl is building what comes next in metabolic care. This is an exciting period of focus and execution for the business. We are entering our data-rich catalyst-heavy stretch with momentum, focus and capital in place. As a reminder, we have a rich set of clinical milestones ahead. Next month, we expect randomized 3-month data post tirzepatide discontinuation in 45 patients randomized 2:1 to Revita versus sham in the REMAIN-1 midpoint cohort. In the fourth quarter, we expect incremental 6-month open-label data from the REVEAL-1 cohort. In the first quarter of 2026, we expect 6-month randomized data from the REMAIN-1 midpoint cohort. And the 6-month time point is significant because it aligns with the time point for the registrational REMAIN-1 pivotal study. In the second quarter of 2026, we expect to see the first 1-year open-label data from the REVEAL-1 cohort, one year after stopping a GLP-1 undergoing a single treatment and then following patients to see weight maintenance over time. And in the second half of 2026, we expect the 6-month top line primary endpoint data from the REMAIN-1 pivotal cohort. Also in the second half of 2026, we anticipate submitting a Premarket Approval application, or PMA with the FDA for Revita in weight maintenance. With a stronger balance sheet to execute against these exciting milestones, sharper strategic focus and these exciting upcoming catalysts, the near-term future is bright for guts. With that, I'd like to thank the people who make this work possible. To our employees, thank you for your relentless drive and belief in our mission. To the physicians and investigators advancing our clinical programs with care and commitment, we are proud to partner with you. To the patients participating in our trials, thank you for your courage and your trust. And to our investors, thank you for your continued support and conviction. Operator, we are now ready to take questions.

[Operator Instructions] And our first question comes from the line of Jason Gerberry of Bank of America Securities.

I guess just first on the midpoint update in September. Beyond, I guess, maintenance of preservation of the weight, any other data points that you guys plan to share that you just kind of flag in terms of what you think will be important in the update just beyond sort of the main efficacy measure? And will you plan to speak to any outliers in the data set? And then on Rejuva IND clearance, any status update in terms of what are the gating items there would be helpful.

Thanks, Jason. Appreciate the question. So on the midpoint update, as a reminder, 45 patients randomized 2:1 to Revita versus sham, three months post tirzepatide discontinuation. We expect that patients who stopped tirzepatide at three months should regain 5% to 6% of their body weight. If we can cut that in half, we think we've got a blockbuster therapy on our hands. It's important for us in the midpoint data update to be able to provide people visibility into the things that will really matter for the pivotal studies readout in H2 2026 and in particular, safety, tolerability and the effectiveness of weight loss maintenance. I expect that we'll continue to see the excellent safety and tolerability signals that we've already been sharing in our REVEAL study and all of our prior clinical work and enough information on the dispersion of the weight maintenance effect in order for people to be able to get a critical appraisal of how things are shaping up for the pivotal study of 315 randomized patients, which is also already underway. And I think that should answer your question on outliers. It's going to be important for us to understand what we need to understand to believe that the pivotal will be successful. There are additional things that we're looking at in this REMAIN-1 midpoint cohort. Many of them don't occur at three months, but actually occur at six months. And so as an example, there are DEXA scans that are built into the study, but they occur at baseline 6 and 12 months, but not at three months. There's additional laboratory measures that we're also going to be looking at as well. But you can expect to see more information on those in the months ahead. But the most important thing for right now is safety, tolerability and effectiveness with enough visibility to understand how the overall population is behaving in a manner to look ahead to the pivotal. With respect to Rejuva IND, there's been tremendous progress behind the scenes. I know we just talked about like how we filed our CTA module. The bottom line is that we are weeks away from seeing the lot release of our GMP product. All of the assays look like they have gone well. And all of our other testing has gone well as well. We're wrapping up our reports, and we will update you in due course, but we remain committed to the time lines that we've publicly shared, which is first preliminary data in 2026. Thank you, Jason.

And our next question comes from the line of Mike Ulz of Morgan Stanley.

This is Rohit on for Mike. As the GLP-1 market evolves, can you share any new learnings or trends that you're seeing that stand out for the outlook of Revita and Rejuva?

Yes, certainly. Thank you for the question. It's a broad question, and one could take that in a lot of different ways. Let me just talk about my personal experience and conversation with key stakeholders and how they feel about it. Two years ago, the question that patients were asking their doctors is how do I get access to these medicines. And today, when I go and talk to prescribers, the single biggest question that they are telling me that they're hearing is when can I stop taking this medicine? What is amazing to me is how rapidly people have completely routineized the assumption that they can lose weight on the GLP-1 and are now asking what is next. And what I'm equally surprised about is how willingly the prescribers recognize that the patients do not want to be on GLP-1 drugs for the rest of their lives. I think that bodes incredibly well for both Revita and Rejuva, but for different reasons. When I -- the other thing that I'm noticing is that the general perception of the GLP-1 category is that they are excellent drugs, but the weaknesses are becoming more clearly apparent in the real world in a manner that would not be visible from Phase III studies. You may know that in our last call, we talked about data from Cleveland Clinic showing that the real-world effectiveness of semaglutide and tirzepatide in Cleveland Clinic patients is substantially worse than how they looked in clinical trials. I will tell you that I've now visited other clinical trial sites who read that paper, have done their own analysis and are confirming exactly that same finding. And all of these, I think, speak to the value that we can bring because that -- because the limitations that the drugs have on real-world effectiveness do not affect our disease-modifying approach. So I'll stop there. Otherwise, I could keep going. But I think the two key messages are the desire for patients to stop and a need for better real-world outcomes.

Our next question comes from the line of Michael DiFiore of Evercore ISI.

This is JP in lieu of Michael. Congrats on the quarter. The first one, among the nine patients in the 2-year follow-up in Germany, three remain on the GLP-1 therapy throughout. Could you please help us understand the relative contribution of GLP-1 to the observed outcomes? And are there any notable differences in weight loss or glycemic control between the ones that stay in GLP-1 or not? And the second question also regarding the process. Given the natural weight variability, can you walk us through your weight measurement protocols like timing, repeatability, calibration and how you account for day-to-day fluctuations? I mean it's well known that weight can vary a lot during the day. So that's what we want to understand a little bit more about the protocol.

Sure. Absolutely. So of our nine patients in Germany, three of them were on a GLP-1. They were on a GLP-1 when they entered the study. They've been on a GLP-1 for two years. We do not believe that there is a contribution from the GLP-1 to the weight loss seen in the patients in Germany because when you exclude those patients, you look at the others, there's also a consistent signal of weight loss. And the profile of weight, a single treatment early effects and sustained results has been true across our clinical work for patients who are on any other background medical therapy. And so therefore, we believe that this is sort of an important point to make because of the evolving GLP-1 landscape and its utilization, but we do not think it affects our interpretation. With respect to weight variability, I'm going to assume that the conversation we're talking about here is around the remain pivotal study. And we have been very focused on all of the potential sources of variability in the trial, measuring weight is one of them. And then we have explicit quality control protocols like other companies do that are running obesity studies where the scale that the sites are using must be appropriately calibrated on a regular basis that this is accounted for and that the manner in which the weight is being measured in patients is also consistent. Nonetheless, we all know that there is some weight variability from people from time to time. I know it when I step on the scale every morning myself. And so therefore, I think that we can do what we can to control it, but human beings are what they are.

Our next question comes from the line of Whitney Ijem of Canaccord Genuity.

Just a quick follow-up, thinking about durability. For the REMAIN-1 midpoint cohort, will you continue to track those patients and then present updates at like 9 months, 12 months beyond that? How should we be thinking about that as like an early signal for durability ahead of the larger cohort follow-up?

So thanks, Whitney. If you go to our corporate deck on Page 4, you'll see our upcoming catalysts. And I'm happy to say that on the REVEAL-1 cohort, this is the open-label cohort where we've already shared 3-month data back in June. We'll share our 6-month data in Q4 and then 1-year open-label data in Q2 of 2026. For the remain midpoint cohort, we are currently projecting 3-month data in September, which is next month, and then randomized 6- month data early in Q1. We have not gone out into additional data points, but all of these patients will be followed for a year. You can reasonably expect that you will get incremental data updates over time. And all of that now helps by the time we see our 6-month primary endpoint data from the pivotal cohort, there will be an ample body of 6- and 12-month data to look at from REVEAL-1 and the midpoint cohort in order to help inform the regulatory but also the commercial value proposition of Revita and weight maintenance.

Got it. Okay. And then I guess just I was curious about longer term then, like will the -- either the midpoint or the pivotal cohort be tracked longer than that such that over time, post approval, let's say, or whatever, you could present updates on 18- and 24-month durability? Or is that not something we should expect from these studies?

Well, we're excited about the 2-year durability we're seeing in Germany and the 2-year durability we've seen from our prior REVITA-1 study and the durability we've seen in our pooled analysis in all of our type 2 diabetes studies. We think it's a major advantage of the therapy, and our intention will be to follow these patients longer and report those data as they emerge.

Okay. Perfect. That's helpful. And then on the point of the DEXA scans that you mentioned that will be coming at the 6-month time point. Can you talk about any expectations there, either preclinically or just mechanistically? Like how should we be thinking about the potential of Reivita to sort of differentiate in that regard?

There is a preclinical study that I just reviewed that showed that the muscle -- that the weight loss in duodenal bypass has -- is principally a fat mass loss rather than a muscle mass loss. That is the only preclinical work that I've seen. It's not ours. So I think that one way to think about this is what is the weight regain phenotype looking like in those who are stopping tirzepatide? And what would the weight -- what will the body composition difference be in individuals with Revita assuming that they're able to maintain that body weight loss. I have been unable to find, maybe you can tell me differently, any evidence of what happens in tirzepatide withdrawal or semaglutide withdrawal in the DEXA scans of those patients who have stopped taking those medicines. We know that those trials had DEXA scans, but I don't know what they showed after the drug was stopped. Now we'll get an answer, and I'm excited to see what it has to show.

And our next question comes from the line of Jeffrey Cohen of Ladenburg.

I wanted to expand upon the last question. Could you hypothesize a bit how the last discussion reflects upon BMIs as far as treatment groups, BMIs prior to tirzepatide or BMIs after treatment of tirzepatide?

Sure. I mean I think there's a study called SURMOUNT-4 from Eli Lilly that I think may speak to this best. These are individuals who had obesity but not type 2 diabetes. They were given tirzepatide for a period of 36 weeks, and then they were randomized to either discontinuation of the tirzepatide or ongoing treatment with tirzepatide for an additional year. Individuals who had lost body weight on tirzepatide during the open-label run-in phase over the first 36-week period of time, lost a little bit over 20% of their body weight. But by one month -- and this is true for percent total body weight, it's also true for BMI. By one month, they had regained about 3% of their body weight. By three months, they had regained 5% to 6% of their body weight. By six months, they had regained 9% to 10% of their body weight. And by one year, they had regained, I want to say about 12% of their body weight -- 11% to 12% of their body weight. And so what is true for percent total body weight is also true for BMI. And so what you can see is that these patients are losing really significant amounts of body weight. And when you tie that back to the DEXA scan, the general perception in the field is that these people are regaining mostly fat mass and not muscle mass. So that the BMI regain or the weight regain may be actually underestimating the metabolic problem caused by the weight loss and then the regain. And that's what we're hoping to be able to show we can do something about with Revita and weight maintenance.

Got it. And then one more, if I could. As far as treatment goes, what have you found to be duration time and any information you could provide on patients and their preferences and also any variations within the energy delivered and the duration of energy delivered as well as the length of the duodenum.

Sure. Okay. So well, there's like four questions in there, Jeff. So number one is -- I'll start with the end, okay? Length of ablations. In the REMAIN-1 study, we are ablating an average of 16 centimeters length of the duodenum or 8 ablations of 2 centimeters each. That is slightly better than the average that we were seeing in REVEAL-1, which was an average of 7.5 of ablations per patient or 15 and definitely much better than what we had done in prior studies. This is important and relevant for two reasons. First, it's relevant because we are not seeing any signal of safety or tolerability with higher lengths of ablation. And yet, we have also seen dose-dependent effects in our earlier clinical work. And so we will be analyzing the -- in a post hoc way, the length of ablation versus the magnitude of effect in order to further substantiate the efficacy that we've already feel like we've established with the dose response in our earlier work. And the absence of any safety and tolerability suggests that we are continuing to optimize the clinical profile here without causing any harm to patients, which is highly encouraging for us with respect to the magnitude and durability of the efficacy that can be achieved. Average procedure time as people are ablating a longer length of the duodenum is still about an hour or less. And we have we're very pleased by the observation that as we go through the various clinical trial sites and the new physicians who are performing the procedure, we are seeing excellent clinical results and excellent quality and length of duodenal ablation even with new users as they are getting up to speed on the technology, which strengthens our sense for the ease of the learning curve. Now the last point that I would make is that we're not changing the actual ablation energy delivered or the time of the energy that, that ablation is delivered. So the only change that we are making is to the length of the duodenum that's ablated. And with respect to patient preference, A lot of people asked us whether they -- whether the rapid enrollment that we saw in REMAIN-1 was simply because people were getting free tirzepatide in order to be able to enter the study. And what I -- there's two things that argue that patients are really excited about Revita. The first one is that patients were choosing the Revita weight maintenance trial over other weight loss drug therapy trials being run concurrently at clinical trial sites that had both. Second one is we have lost very few patients post tirzepatide prior to endoscopic randomization to either Revita or sham. The vast majority of the patients in this trial have continued all the way through. And both of those are very encouraging empirical evidence for patient preference. I hope I got all those questions answered.

And our next question comes from the line of William Wood of B. Riley Securities.

Congrats on a very nice quarter. Just to clarify a couple sort of building on what a couple of other people asked. Specifically for the REVEAL-1, I know you sort of touched on this in regards to REMAIN. It looks like you've now treated 22 patients on REVEAL-1. When you report the 6-month data, should we expect that all patients to have completed the 6 months? Or is this going to be more of a subpopulation, say, the 13 patients that priorly treated the 3-month cut? And with that 6 month, you mentioned that we should get more data specifically DEXA, and this is where you were referencing REMAIN, but I was curious if we'll be also getting DEXA in the REVEAL trial, which could sort of tease out if there is a weight regain demonstrated what that gain is composed of. So just sort of understanding that. And then I have a very quick follow-up.

Yes. The majority of the patients in the 22 that we're mentioning were treated early enough to be able to be followed and report 6- month data in Q4. And I think it's generally in the better interest to be able to provide more data on more patients if possible. So you can expect that in the fourth quarter data. We do not have DEXA scans in the open-label cohort. We don't have anything to compare it to. And while we -- also REVEAL-1 is an open-label study, and we are tracking weight, we at least have the historical comparator of weight regain from tirzepatide withdrawal from SURMOUNT-4. But as I alluded to earlier, we don't have similar data on what happens to body composition upon tirzepatide discontinuation. So I don't have any historical comparator there. So you're going to have to wait for the randomized data for us to be able to understand what the DEXA show and how to interpret them.

Got it. And then just to quickly verify, on -- you noted at least in the PR that you expect to dose the first patients for RJVA-001 and then report preliminary data in 2026. Is that -- we should expect first dose and data in 2026 as in both occurring in 2026? Or is it the first dose could actually occur in third quarter, fourth quarter of this year and then data in '26?

Yes. As stated, expecting first doses and preliminary data, both in '26.

I would now like to turn the call back to Dr. Rajagopalan for closing remarks.

Well, thank you all for joining the call today. It's, as I said, an exciting period with a data-rich catalyst-heavy set of quarters ahead. And our team is incredibly excited by the therapies that we're developing and the prospects for the patients in front of us. And we look forward to continuing to share our updates on our progress with all of you. And thanks very much.