Fractyl Health Aims For $100 Million IPO Raise (Pending:GUTS)

A Quick Take On Fractyl Health, Inc.

Fractyl Health, Inc. (GUTS) has filed to raise $100 million in an IPO of its common stock, according to an SEC S-1 registration statement.

The firm is developing treatments for Type 2 Diabetes and for obesity.

Its lead procedural approach is already approved in Europe, and management has plans for additional submission activities.

I’ll provide an update when we learn more about the IPO from management.

Fractyl Overview

Lexington, Massachusetts-based Fractyl Health, Inc. was founded to develop procedural therapies to foster the restoration of metabolic health.

Management is headed by co-founder and CEO Mr. Harith Rajagopalan, M.D., PhD., who has been with the firm since its inception in 2010 and was previously trained in internal medicine and clinical cardiology at Brigham and Women’s Hospital in Boston, MA and received his M.D. and Ph.D from Johns Hopkins University School of Medicine.

The firm’s lead candidate is Revita DMR System, an outpatient procedural therapy that modifies duodenal dysfunction via hydrothermal ablation.

Revita is already approved in Europe for treating patients with inadequately controlled Type 2 Diabetes.

Below is the current status of the company’s procedural and drug development pipeline:

Fractyl has booked fair market value investment of $307.6 million as of September 30, 2023, from investors, including Mithril, General Catalyst, Bessemer Venture Partners, Domain Associates and CVF.

Fractyl’s Market & Competition

According to a 2022 market research report by Precedence Research, the global market for Type 2 diabetes drug treatments was an estimated $29.8 billion in 2021 and is forecast to reach $61.6 billion by 2030.

This represents a forecast CAGR (Compound Annual Growth Rate) of CAGR (Compound Annual Growth Rate) of 8.4% from 2022 to 2030.

Key elements driving this expected growth are an aging global population coupled with increasingly sedentary behaviors and worsening eating habits.

Also, according to the Centers for Disease Control and Prevention, an estimated 130 million Americans suffer from either diabetes or prediabetic conditions.

Major competitive vendors that provide or are developing related treatments include the following companies:

• Oral GLP-1 drugs

• Other medical treatment drugs and types of treatments

Fractyl Health, Inc. Financial Status

The firm’s recent financial results are typical of a development-stage company in that they feature little or no revenue and significant R&D and G&A expenses.

Below are the company’s financial results for the period indicated:

As of September 30, 2023, the company had $44.5 million in cash and $76.6 million in total liabilities.

Fractyl Health, Inc. IPO Details

Fractyl intends to raise $100 million in gross proceeds from an IPO of its common stock, although the final figure may differ.

No existing shareholders have indicated an interest in purchasing shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

to complete the ongoing Revitalize-1 pivotal clinical study;

to fund the planned Remain-1 study;

to fund the continued preclinical development of our Rejuva gene therapy candidates; and

the remainder for working capital and other general corporate purposes, including medical education and other commercial readiness activities.

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management says the firm is not involved in any material legal proceedings.

Listed bookrunners of the IPO are BofA Securities, Morgan Stanley and Evercore ISI.

Commentary About Fractyl’s IPO

GUTS is seeking U.S. public capital market investment to fund further development of its treatment candidates.

The firm’s lead candidate, the Revita DMR System, is an outpatient procedural therapy that modifies duodenal dysfunction via hydrothermal ablation.

It is notable that the firm’s lead system has been approved for marketing in Europe, yet the company has very little revenue to date.

This is likely due to it receiving reimbursement only in Germany and not until the first half of 2023.

Management expects to nominate its ‘first GLP-1 PGTx candidate for T2D [Type 2 Diabetes] in the first quarter of 2024 and expects to submit an Investigational New Drug application, or IND, or IND-equivalent for our nominated candidate in the second half of 2024.’

It isn’t clear whether this nomination will be for the US or the European market.

The market opportunity for treating obesity and Type 2 diabetes is large and likely to continue to grow materially as the global population ages, and the incidence of these conditions rises.

Management hasn’t disclosed any major pharma firm collaboration relationships or agreements.

The company’s investor syndicate includes a number of well-known institutional life science venture capital firms, and it is reasonably well-capitalized.

When we learn more IPO details from management, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.