Fractyl Laboratories Inc. today announced positive clinical data for the first procedural therapy to directly treat the underlying digestive causes of insulin resistance in patients with uncontrolled type 2 diabetes. The non-invasive Revita„¢ Duodenal Mucosal Resurfacing„¢ (DMR) procedure is designed to alter the inner surface of the duodenum and change how the body absorbs and processes sugar. The Revita DMR procedure has the potential to delay the need for insulin therapy and free patients from the burdens associated with managing type 2 diabetes, particularly when oral medications have failed.

According to the results of a single-site pilot study performed in Santiago, Chile, the Revita DMR procedure led to a greater than two percentage-point drop in hemoglobin A1C levels (HbA1c, the key measure of blood glucose control) by three months after the procedure with an excellent safety record. The patients in the study who were followed for up to six months maintained their improved HbA1c levels. These clinical data were presented in late August at the 19th World Congress of International Federation for the Surgery of Obesity & Metabolic Disorders (IFSO 2014) meeting in Montreal, Canada.

Mithril Capital Management Leads Series C Financing Round

The company also announced that Mithril, a growth-stage investment firm with a global portfolio, led a new $40 million Series C funding round. Existing investors General Catalyst (Fractyl was hatched in the General Catalyst Cambridge, Mass. office), Bessemer Venture Partners, and Domain Associates joined the round which will be used to help support clinical evaluation of the procedure in the U.S. and Europe. Ajay Royan, Mithril's co-founder and managing general partner, has been named to the company's Board of Directors.

'Fractyl represents a new breed of health innovator, combining a singular mission with a sophisticated product,' Royan said. 'The company has created an easy-to-use device on the unique insight that diabetes is a treatable, digestive disease. We believe Fractyl's Revita DMR procedure will be the first solution that can scale to meet the challenges of an epidemic of this magnitude, significantly improving the lives of the 400 million people suffering from type 2 diabetes worldwide. I look forward to working with the Fractyl team to realize the potential of this revolutionary therapy.'

Royan will fill a newly-created seat on the Fractyl Board, joining Chairman Allan Will; Stan Lapidus, President, CEO and Founder of SynapDX, who was designated by General Catalyst; Chris Gabrieli, Partner at Bessemer Venture Partners; Nimesh Shah, Partner at Domain Associates; Harith Rajagopalan M.D., PhD, Fractyl CEO and Co-Founder; and Jay Caplan, Fractyl Co-Founder and President.

Diabetes as a Digestive Disease

In recent years, a significant number of clinical studies have shown an almost immediate improvement in glycemic control following bariatric surgery where the duodenum is either blocked or bypassed. The duodenum, the first portion of the intestine, is where absorption of nutrients begins and hormones that control blood sugar levels are produced.

'The gastrointestinal tract plays a critical role in the regulation of glucose metabolism,' said Francesco Rubino, M.D., Professor and Chair of Bariatric and Metabolic Surgery at King's College London. 'Chronic exposure to food-borne and environmental toxins could cause disruption to gastrointestinal physiology, possibly explaining the link between modern diets and type 2 diabetes. On the other hand, operations used in bariatric surgery, especially those that involve a bypass of the duodenum, are the only type of treatment known to cause complete and long-term remission of diabetes. This knowledge provides a compelling reason to consider the gut as a physiologic and rational target for the development of more effective therapies of type 2 diabetes.'

The company believes that the Revita DMR procedure could be a compelling option for millions of patients, particularly those who are failing oral therapy and are transitioning to complicated drug regimens that may include insulin. Many patients fear insulin injections for their inconvenience and substantial side effects, including pain, weight gain, and risk of hypoglycemia.

The Impact of Revita DMR on Glucose Control

Manoel Galvao Neto, M.D., a bariatric surgeon in Sao Paulo, Brazil, announced the results of the company's proof-of-principal study, demonstrating the safety and effectiveness of the Revita procedure, during an oral presentation at IFSO 2014 on August 29.

Under endoscopic management, Dr. Neto and his team performed thermal ablation of the duodenal mucosa with the Revita System on 30 patients with uncontrolled diabetes and HbA1c levels averaging 9.2 prior to treatment. In the 19 patients who received DMR over several centimeters of their duodenum, HbA1c levels dropped to 7.1, on average, after three months and remained stable six months after the procedure. The treatment effect appears to be dose-dependent, as those patients who received DMR over a shorter segment of their duodenum did not experience as significant of a benefit.

'While early, we believe these results validate our approach and indicate the significant impact that the Revita DMR procedure could have for patients afflicted with type 2 diabetes,' said Dr. Rajagopalan, Fractyl CEO. 'We are preparing to launch our multinational study by the end of the year and working towards our clinical development efforts in the U.S., which we expect to commence during 2016. We are committed to bringing to market an innovative clinical procedure to improve the health of patients with type 2 diabetes.'

Consequences of Poor Diabetic Control

Despite significant effort and numerous drug options, nearly half of the diabetic population in the U.S. and Europe will become poorly controlled. In 2012, these complications associated with high blood sugar levels in patients with type 2 diabetes cost the U.S. healthcare system $245 billion, a 41% increase over the prior five-year period.1 These costs are expected to rise dramatically as the population ages and more people develop the disease.

About Fractyl

New physiologic lessons highlight the role of intestine hormones in contributing to insulin resistance. Fractyl has developed a device-based endoscopic procedure to directly address this intestinal hormonal impairment using an outpatient therapy. Fractyl is currently engaged in clinical trials designed to demonstrate that its endoscopic procedure can dramatically improve glucose control and potentially reduce the need for additional medications. The company's mission is to set people free from the daily burdens of type 2 diabetes management, empower physicians with a safe and reliable therapeutic treatment option, and lower the tremendous human and financial costs of diabetic complications for patients, hospitals, and payers. More information is available at www.fractyl.com or www.twitter.com/FractylLabs.

About Mithril Capital Management

Mithril is a global investment firm founded by Ajay Royan and Peter Thiel that provides capital to leading growth companies by partnering with teams who use technology to build transformative and durable businesses, often in industries long overdue for change. Each of these businesses is unique, but all face common challenges to unlocking long-term growth. Mithril helps navigate these critical inflection points by investing in size and with conviction. For more information, please visit: www.mithril.com or www.twitter.com/Ajayatmithril.

About General Catalyst Partners

General Catalyst Partners is a venture capital firm that makes early-stage and growth equity investments. The firm backs exceptional entrepreneurs who are building innovative technology companies that transform industries, including KAYAK, Demandware, Stripe, Airbnb, The Honest Company, Warby Parker, Datalogix, BigCommerce, Snapchat, HubSpot, DataGravity and Datto. The General Catalyst partnership leverages its broad experience to help founders build market-leading businesses. General Catalyst has offices in Cambridge, MA, Palo Alto, CA and New York City. For more information, visit: www.generalcatalyst.com or www.twitter.com/gcvp.

About Bessemer Venture Partners

Bessemer Venture Partners (BVP) invests in early-stage, hyper-growth startups, partnering closely with entrepreneurs to build durable businesses. BVP is a global firm with offices in Menlo Park, Cambridge, New York, Mumbai, Bangalore, Herzliya and Sao Paolo. With $4 billion under management, BVP invests anywhere from $100,000 to $75 million in innovative companies like LinkedIn, Yelp, Skype, CornerstoneOnDemand, Pinterest, Box and Twilio. Over 100 BVP companies have gone public -- last year alone BVP had 5 IPOs, 7 M&A exits, and 20 new investments. Learn more at bvp.com and www.twitter.com/BessemerVP.

About Domain Associates

Founded in 1985, Domain Associates, L.L.C. is a venture capital firm with an exclusive focus on investing in life science companies that advance human health. Domain's focused network, deep experience, and dependable reputation have made it one of the top private-equity groups participating in healthcare investing. With more than $2.7 billion in capital raised, Domain invests in three major segments: pharmaceuticals, diagnostics, and medical devices. The partners of Domain have a total of more than 270 person-years of experience among them in the healthcare and venture capital industries and have been involved in the formation and growth of more than 250 life sciences companies. Representative past investments include Amgen, Amylin Pharmaceuticals, Cerexa, Biosite, Dura Pharmaceuticals, Pharmion and Volcano. Domain has offices in Princeton, N.J. and San Diego.