Fractyl Health valued at $654.6 million in tepid debut

(Reuters) - Shares of Fractyl Health fell 8.3% on their market debut on Friday, giving the obesity and diabetes drug developer a market capitalization of $654.6 million.

After a two-year lull, initial public offerings in the U.S. are expected to rebound in 2024 on firming bets of a soft landing for the world's largest economy. Investor reception to fresh stocks, however, has been uneven.

Healthcare companies CG Oncology and KKR-backed BrightSpring Health Services made contrasting market debuts on Nasdaq last week.

Fractyl, backed by investment company Mithril Capital and venture capital firm General Catalyst, debuted at $13.75 per share on the Nasdaq, below its offer price of $15 apiece. It sold 7.3 million shares in its offering and raised $110 million.

The Lexington, Massachusetts-based company develops "disease-modifying" therapies that target organ-level root causes to treat metabolic diseases such as type-2 diabetes and obesity.

The weight-loss drugs market is anticipated to reach $100 billion by the end of the decade.

Revita, a drug Fractyl is developing for type-2 diabetes, is at an enrollment stage.

Its other therapy, Rejuva PGTx, at a preclinical stage, has shown improvement in glycemic control, delayed diabetes progression, and weight reduction compared to semaglutide, an active ingredient in Novo Nordisk's Ozempic and Wegovy.

BofA Securities, Morgan Stanley and Evercore ISI were the underwriters of the offering.

(Reporting by Pritam Biswas in Bengaluru; Editing by Krishna Chandra Eluri)