Morgan Stanley downgraded Fractyl Health Inc from Overweight to Equalweight and dramatically reduced its price target to $2.00 from $8.00 after preliminary randomized six-month results for the company’s Revita treatment in weight maintenance fell short of the investment bank’s expectations.
The stock, trading at $0.58, has dropped sharply from a prior close of $2.12 and is now trading near its 52-week low. Morgan Stanley said the underwhelming six-month results raised questions about Revita’s efficacy and prompted a more cautious stance on the asset’s commercial potential.
While the bank said it was moving to the sidelines on Fractyl Health, its note also acknowledged that a successful outcome in the company’s pivotal study remains possible. Management has indicated that pivotal data are expected in the second half of 2026.
Financial and market context
- Fractyl is recording substantial operating losses, with a negative EBITDA of $97.67 million.
- The company’s shares declined 11.59% over the past week.
- Liquidity measures remain strong on a current-ratio basis at 4.27, indicating current assets exceed short-term liabilities.
- Analysts have revised earnings expectations downward for the upcoming period.
These metrics contributed to Morgan Stanley’s decision to de-risk its stance on the stock following the trial readout.
What the REMAIN-1 data showed
Fractyl reported results from its REMAIN-1 study examining Revita for weight maintenance. At six months after discontinuing GLP-1 medications, patients treated with Revita experienced a 4.5% weight regain, compared with 7.5% in the control group.
In an exploratory subgroup analysis limited to patients who achieved above-median weight loss during GLP-1 treatment, those randomized to Revita had a 4.2% weight regain versus 13.3% in the sham-procedure arm.
Despite these reported differences, Morgan Stanley characterized the six-month randomized findings as falling short of expectations, which prompted questions about the treatment’s potential to drive a robust commercial profile.
Corporate developments and capital structure moves
Fractyl announced the appointment of Lara Smith Weber as chief financial officer, effective January 2026. The company said Weber brings over 20 years of financial leadership experience.
Separately, Canaccord Genuity reiterated a Buy rating on the stock and maintained an $8.00 price target following discussions with company leadership.
Fractyl also disclosed plans to call all outstanding Tranche A Common Stock Purchase Warrants for cancellation by the end of December 2025 unless they are exercised at $1.05 per share. If exercised in full, the warrants could generate up to $17.9 million in additional gross proceeds for the company.
Analyst view and near-term outlook
Morgan Stanley’s downgrade to Equalweight and the large reduction in the firm’s price target reflect a more conservative assessment of Revita after the REMAIN-1 randomized six-month readout. The firm explicitly noted that a positive pivotal study outcome in the second half of 2026 remains a possibility, but the recent data increased uncertainty around efficacy and the commercial case.
Investors will be watching upcoming clinical milestones and the company’s cash trajectory closely, as financial performance and trial outcomes will drive near-term valuation and strategic options.