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Sometimes good news just isn't good enough. Fractyl Health Inc. (GUTS) learned that lesson the hard way on Friday, with shares plunging nearly 50% despite the company reporting positive six-month clinical trial results for its Revita weight-loss treatment.
The selloff comes as Fractyl faces an investor class action lawsuit over earlier trial disclosures and lingering concerns about the treatment's effectiveness.
The company revealed topline six-month findings from the Pivotal Cohort of its ongoing REMAIN-1 clinical trial of the Revita DMR System weight loss therapy.
The 308-participant study achieved its pre-specified six-month co-primary endpoint.
Patients receiving a single Revita treatment showed a statistically significant reduction in weight regain compared to sham participants (p=0.0023).
In the modified intention-to-treat group, Revita recipients maintained approximately 80% of their initial GLP-1-driven weight loss six months after a single procedure, compared to 67% for the sham arm.
Specifically, the least-squares mean weight regain stood at 5.1% for Revita versus 8.2% for sham.
Additionally, 32% of Revita patients maintained stable weight or achieved further reductions, compared to 18% in the control cohort.
The trial also demonstrated a dose-dependent relationship. Patients receiving 12 to 18 centimeters of duodenal ablation experienced 43% less weight regain than sham, while those receiving 20 centimeters or more experienced 53% less regain.
Investors are reacting as when the company released new post-hoc data from REMAIN-1 Midpoint Cohort in March, in participants with above-median GLP-1-induced weight loss who received greater than 14 cm duodenal ablation, Revita participants retained 88% of GLP-1-induced weight loss at six months compared to 60% in sham participants.
Revita remained well-tolerated through the Sept. 24 cut-off date, with zero deaths, device-related serious adverse events, or unanticipated device effects.
Management expects these findings to support a De Novo marketing application to the U.S. Food and Drug Administration in late fourth quarter of 2026.
A Category III CPT code takes effect on Jan. 1, 2027, followed by one-year Pivotal Cohort data in the first quarter of 2027.
Fractyl anticipates potential regulatory authorization in late 2027 and a commercial rollout in early 2028.
Separately, Fractyl faces a securities class action lawsuit over allegations that the company misled investors about the effectiveness of its Revita treatment and the prospects of its REMAIN-1 clinical study.
On Wednesday, Oct. 14, the Portnoy Law Firm announced that investors who purchased Fractyl securities between Jan. 13, 2025, and Jan. 29, 2026, have until Oct. 20 to seek appointment as lead plaintiff.
The lawsuit alleges that Fractyl overstated Revita's effectiveness and failed to disclose clinical site issues that affected study results.
On Jan. 29, Fractyl reported that Revita-treated patients regained 4.5% of their weight over six months, compared with 7.5% in the control group. The results fell short of investor expectations.
Following the results, Morgan Stanley downgraded Fractyl from Overweight to Equal-weight and slashed its price forecast from $8 to $2. The firm also reduced its estimated probability of success for Revita from 50% to 35%. In addition, it lowered its projected peak risk-adjusted global sales for 2035 from $700 million to approximately $490 million.
According to the complaint, Fractyl shares plunged more than 68% following the clinical results and declined more than 21% further after analysts raised concerns about the treatment's prospects.
GUTS Price Action: Fractyl Health shares were down 47.60% at $2.18 at the time of publication on Friday, according to market data.
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