Fractyl Health raises $23 million in public offering with warrants

BURLINGTON, Mass. - Fractyl Health, Inc. (NASDAQ:GUTS) has closed its previously announced underwritten public offering, raising approximately $23 million in gross proceeds, the metabolic therapeutics company announced Thursday. The announcement comes as the stock has experienced significant pressure, declining 45% in the past week according to InvestingPro data, with technical indicators suggesting oversold conditions.

The offering included 21,904,761 shares of common stock with accompanying Tranche A and Tranche B warrants, sold at a combined price of $1.05. The transaction included the full exercise of the underwriter’s option to purchase additional shares and warrants.

Several institutional investors participated in the offering, including Nantahala Capital, ADAR1 Capital Management, Second Line Capital, 683 Capital, and SilverArc Capital.

The Tranche A warrants have a two-year term while the Tranche B warrants have a five-year term and require stockholder approval pursuant to Nasdaq rules. Both warrant tranches have an exercise price of $1.05 per share. If fully exercised for cash, the warrants could generate up to an additional $46 million in gross proceeds.

Fractyl indicated that proceeds from the offering will extend its cash runway through upcoming data readouts from its REMAIN-1 pivotal study, with 3-month and 6-month randomized midpoint cohort data expected. The company plans to use the funds to support clinical development of its Revita and Rejuva platforms, as well as for working capital and general corporate purposes. With a current ratio of 2.5 and a market capitalization of approximately $49.5 million, the company maintains adequate liquidity despite reporting significant losses of $89 million in the last twelve months. Get deeper insights into Fractyl’s financial health with a comprehensive InvestingPro Research Report, part of our coverage of 1,400+ US stocks.

Ladenburg Thalmann & Co. Inc. served as the book-running manager for the offering.

Fractyl Health focuses on developing treatments for obesity and type 2 diabetes through its Revita duodenal resurfacing procedure and Rejuva gene therapy platform, according to the company’s press release statement. InvestingPro analysis identifies the company as a niche player in its industry, with analysts not anticipating profitability this year.

In other recent news, Fractyl Health announced the pricing of a $20 million public offering of common stock and warrants. The offering includes 19,047,619 shares priced at $1.05 each, with each share accompanied by a Tranche A warrant with a 2-year term and a Tranche B warrant with a 5-year term. This move is expected to generate gross proceeds of $20 million before accounting for underwriting discounts and expenses. Additionally, Fractyl Health reported that its Revita procedure has shown durable weight loss and improved glucose control over two years in patients with obesity and type 2 diabetes, according to a study in Germany. The study highlighted a median weight loss of 9.6% among participants, with significant improvements maintained throughout the follow-up period. In the realm of analyst opinions, Canaccord Genuity reiterated its Buy rating on Fractyl Health stock, maintaining a $12.00 price target. This follows the presentation of updated data from Fractyl’s Phase 3 trial of Revita at the American Diabetes Association meeting. These developments reflect Fractyl Health’s ongoing efforts in advancing its therapeutic offerings and financial strategies.

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