Krystal Biotech, Inc. Aktie

Okay. I guess we can get going here. Thanks for joining this session with Krystal Biotech. My name is Alec Stranahan.

I'm SMID Biotech Analyst at Bank of America covering Krystal. And it's my pleasure to introduce Krish Krishnan, Chief Executive Officer; and Suma Krishnan, President and Head of Research and Development at Krystal. Thanks for being here, guys.

Thanks for having us, Alec.

Yes. Good to see you again. Maybe at a high level, just taking a flyover of the company in its current state. You've delivered 11 consecutive quarters, maybe 12 of positive EPS, I've lost count.

Gross margins consistently in the 90%, 95% range. So you've really built a good sustainable business model and a strong foundation for the company, which is this kind of financial profile is pretty unusual within biotech.

I guess, when you think about the VYJUVEK launch, this is your main asset. How is this launch going? You're expanding ex-U.S. Where do you sort of see the top line growth going? And how does that flow down in terms of your cost structure to the bottom line?

Yes. Thanks, Alec. Appreciate those comments. The global launch, which is ex-U.S. launch has exceeded our expectations to date.

As you saw from the 1Q data, we've been able to make the drug and the team have been able to make a compelling value proposition, both in France and in Germany and in Japan. And we're actually a bit ahead of schedule working to launch in Italy and Spain in the second half of this year.

While there are nuances to every country, overall, we expect ex-U.S launch to be very positive over the next year and a few years going forward. In the U.S., we're still in a growth mode as evidenced by the reimbursement approvals that we report every quarter and reimbursement approvals are a proxy for patients on drug.

And if you look at it that way, every quarter, somewhere between 40 and 50 reimbursement approvals show that U.S. continues to grow. So overall, we're very pleased with the way the VYJUVEK launch is progressing.

In terms of the impact to the cost structure, the teams in these different countries tend to be small, less than 10 per country. And so we don't see a big impact of the global launch on the cost structure.

And so we expect the financials to look like they have been over the last 11, 12 quarters moving forward. And we do guide on the 2026 operating expense and -- which has not been that much higher than it was last year.

And that's with putting new assets into the clinic, which is how you're reinvesting the VYJUVEK revenues. Maybe we can talk a little bit about the U.S. revenue trajectory for VYJUVEK and then we can get into the ex-U.S. launches, which are a growth driver we're seeing this year.

How farly penetrated are you into the U.S. population at this point? Is new patient identification kind of the primary growth lever here? Is it maintaining the compliance rate with patients?

Yes. So if you look at reimbursement approvals, we're roughly at the 60% share of the identified patients. U.S. has about 1,200 identified patients, and we expect to continue to head towards that number over time.

Definitely, as you go beyond the 60% market share, the probability of new patients coming on drug tend to be moderate and mild as opposed to severe. But that said, we feel very confident about the 1,200 number, and we're progressing towards that target as a first step.

And then once we get there, we still do believe the prevalence is 3,000. So incrementally, we're going to go try and go beyond the 1,200 once we get to that point or close to that point.

In terms of compliance, look, the drug has been launched for 3 years now. The drug has worked really well. The patient experience on the drug has been really positive. The physicians have been very happy with the way that patients are responding to the drug.

And so a lot of the patients who started early on to some extent and the moderate and the mild patients are starting to heal. We feel the stop and start in the U.S. is what keeps the patient on drug and is the tail on the drug for the long term.

So we try to make sure that when a patient is ready to come back on drug that coming back on drug is easy, simple, convenient and fast for the patient. So that trend, the stops and starts will stay in place in the U.S. going forward.

But please to bear in mind, in terms of number of patients being added in the U.S., that number continues to grow up. And so if you look not at a quarter level, but if you look out 12, 15 months, we do expect the revenue to be growing, not just in ROW, but in the U.S., too.

Okay. And obviously, having the ex-U.S. contribution this year should help smooth over that growth profile largely.

Yes. I think if you look at global launch of VYJUVEK, there should be no turbulence. The stop and start, the nuances by every European country, but they all smooth out. Overall, the growth trajectory looks pretty positive at the moment.

Okay. And Krish, I know when VYJUVEK was first approved, there was a $900,000 cap sort of in agreement with payers because honestly, they probably didn't know how much they were going to have to actually pay with a novel drug like this for a rare skin condition like DEB.

Is that cap going away? How are your recent payer conversations kind of around the reimbursement piece?

Yes. With the exception of a very small number, most of the renewals have been without the cap. So it was a good starting point to give payers reassurance on the on their contribution to VYJUVEK.

But now with the renewals, I think there may be 1 or 2 still remaining, but most -- the cap story in the U.S. is pretty much going away.

Okay. Okay. And maybe thinking about the ex-U.S. launches, I guess Japan is kind of the first stop, Germany, France coming online. Maybe just walk us through how those launches are going. And we've gotten some questions around the pricing dynamics in the early launch as well, if you want to speak to that.

Yes. So Japan launch has gone really well. That was the first outside country to launch, I mean, officially calling it like a commercial launch. In Japan, because of Cartagena, the only commercial requirement is the patient renew their prescription every 2 weeks for the first year of launch.

So that's -- and it's a calendar year. It's not the first year of the patient on drug. It's the first year of launch. So that should iron itself out going forward. Pricing has been -- pricing has exceeded -- the pricing we got has been very positive, and it reflects the value the drug brings -- the value proposition the drug brings to the patient.

In Germany and France, as also evidenced in terms of patient numbers, they continue to go really well. And we expect that in Italy and Spain, too, which will happen second half of this year. In terms of pricing, we started accruing in Germany middle of February.

And so that accrual will continue until we get a firm pricing in Germany, which should happen second half of this year. In France, we have been accruing since the beginning of launch, which is, I believe, in Q4 of last year, and that will continue until 2027.

But outside of Germany and France, there are no accrual issues at the moment because in all the other countries, we will have a price before we launch.

I've seen some investors trying to do some fancy arithmetic around the linking between the scripts or the prescriptions that -- in the ex-U.S. geographies with the revenues reported.

I guess how would you sort of help folks think through the accruals and the revenue recognition sort of as the negotiations get finalized?

We were -- we started reporting out rough patient numbers because given the privacy issues in Europe, we're guessing based on vial distribution, how many patients. So we don't have an exact number like we do in the U.S.

And we were providing that as a proxy because there were a couple of quarters where the revenue was just overall revenue and I wanted to give a sense of what piece of that could have been Europe.

Now that we're splitting out Europe and Japan from our global revenue line, then we don't want to be carrying around an approximation number for a very long time. We haven't yet decided when we would stop or what, but the patient number is just a rough approximation. I think the way to think about global revenue is simply the revenue number itself as opposed to try to make some kind of fancy arithmetic around an approximate number.

Okay. And I guess in terms of the pricing overall, how has that been playing out in Japan? And does that maybe set up expectations for what you expect in the rest of Europe, especially as you expand to Italy and Spain?

Japan pricing, we have been more -- we've been very happy with the outcome. We are in ongoing negotiations in Germany. We may have the pricing in Italy ahead of the final pricing in Germany. We don't know.

We feel good going into these negotiations. It does vary by country. Traditionally, Europe, we expect to end up in a good place based on what we saw in Japan, but it's tough for me to think about it until we get to the endpoint because there are a lot of global issues going on. But to date, the conversations have been very positive on VYJUVEK.

Great. And you've accelerated the Italy and Spain launches into, I think, potentially the second half of this year.

How have you seen physician awareness overall given the pretty established launch in the U.S. at this point? Has it made education faster or easily than it was domestically?

Much higher than it was in the U.S. has a lot to do with physicians sharing the U.S. experiences in global setting, either in scientific conferences. We find that in all these countries, the physician awareness is high. They've been able to see what the drug can do.

We were not expecting to launch in Spain this year, but there was a big -- it came because of a demand from the Spanish authorities and the physicians in Spain that their patients need to be treated that we had to quickly pivot and figure out how to launch in Spain in the second half of this year. So awareness is high.

Okay. Okay. Could you maybe walk us through, Krish, how the Italy and Spain launch model works? Is it accrual based like Germany and France? Or is it a pricing-first model? And I guess, how large are the patient populations in each of these?

Yes. About, I would say, in terms of prevalence, 275 to 350 is a good number to use in Italy. In Spain, at a prevalence level, in terms of prevalence. In terms of pricing, in both these countries, there are no accruals. We will negotiate a price before we launch in these countries.

Okay. Okay. And I guess when we think about kind of the -- where the puck is going around most favored nations and does that influence sort of your approach to the ex-U.S. launches and pricing? And is there maybe a lower bound for where you'd want to go?

No, we are very cognizant and aware and constantly thinking about MFN. There are some conversations that it may or may not apply to companies in the rare disease space, but we're proceeding with the view that it could someday come and have an impact on companies -- I mean, with rare diseases.

So we do try and bring awareness in these countries where we negotiate about the impact MFN could have, not just on the company, but also on the patients. So it's definitely a conversation that we use. But if you look at our gross margins, so it's not a financial decision. It's more like what could the long-term impact to the U.S. business be is the question we think about.

And we fully intend to -- once we know where a country is going to land on price, we'll definitely think about MFN before we decide to launch in that country.

Okay. Okay. I want to shift gears here maybe in the second half of our time to talk about the pipeline. And we can kind of go stepwise. We've got a few exciting programs in ocular DEB, neurotrophic keratitis, cystic fibrosis. So maybe we can just go down the list.

Let's start with KB803. This is your corneal abrasions in DEB. It was nice to get the, I guess, the granularity around the cadence of when we could see those updates in 4Q. It sounds like this one will maybe be first up in terms of updates later this year.

The study is fully enrolled. Maybe you could walk us through sort of the powering in the study and how big of an issue this is for DEB patients.

Thanks, Alec. I mean, again, as you said, we -- good news is we have enrolled all the patients. As you may be aware, we had a natural history study that we deployed 1.5 years ago. So we have over 100 patients in this natural history study.

So as we collected data in these patients, this is a prospectively designed study. It's just like the clinical study or in the protocol, they have weekly diaries, they fill in their symptoms in a weekly manner, and we've been able to collect very meaningful and very good quality data on these patients.

And based on the -- I mean, the -- many of these patients had to be in the natural history study to enroll into the pivotal trial, and this was -- there was a rationale behind it because we wanted to enroll the very severe patients in the study because, as you know, in these rare diseases, it's very important to get the right patient population because you're looking at the effect in a very short period of time.

So we wanted to make sure we had the severe patients into the study. So patients that were severe met the inclusion criteria to then move on and enroll into the study.

So I think this is an intra-patient study, just like the VYJUVEK study. So it's a crossover design, randomized placebo-controlled double-blinded. So patients are either randomized to either drug or placebo.

So I mean, obviously, from the natural history study helps us to understand -- I mean, the impact on these patients or the patient-reported outcomes that we are measuring. And we are hoping with -- based on that, we were able to come up with, as you said, a sample size because to see drug effect. We know from VYJUVEK that this is a corrective therapy.

The reason that these patients have these lesions or blisters in the eye is because of a defect of collagen VII. So we believe if we can see expression and we can improve those symptoms.

So we collectively with the animal studies with the corrective nature, we were able to power the study to -- for success and being an intra-patient study, we know when they're not on drug, and our natural history study, we'll be able to separate placebo versus treated.

So we feel very comfortable with the powering of the study, the intra-patient design to minimize variability. And so the statistical analysis plan that we have obviously got blessings from the agency. So we all said and we feel maximizes the chance of success.

Okay. Great. And obviously, the Collagen VII mechanism of action is pretty well validated in DEB with VYJUVEK, it's the exact same thing. Same vector, just different tissues and we already have, I guess, a single patient of data that you've shared.

What is sort of a meaningful endpoint here for patients and I guess, for regulators in terms of the alignment you achieved with the FDA? Is it, I guess, corneal abrasion? And are there any other symptoms that would increase kind of the quality of life for the patients?

Absolutely. I mean, again, you have to look at this therapy. It's more not -- I mean, unlike VYJUVEK, you have to open wound and then you're closing the wound. This is more of a prophylactic design because, again, this is something we work very closely with the agency, and this is why it's a patient-reported outcome.

It's because what are the patients -- I mean, these patients, they have -- it's not just the lesions, it's [indiscernible]. They have blisters on the eyelets, not just the cornea, but surrounding the eyes.

So I think when we put the vector into the eye, you have exposure to all of these areas that can minimize the symptoms. So again, our natural history study really -- the main focus of this study was -- I mean, DEB blisters in the eye, unlike is very well studied and very published literature.

We have patient-reported outcome measurements. So based on what was in the literature, we came up with a scale looking at different clinical complications and how you rate them. So this scale was developed from the natural history study.

Again, this is something we have -- the agency is aware of what the PRO scale is. And then we are looking at these multi-measurements and measuring number of days of events. It's number of events, days of events and treatment versus nontreatment improvement.

So it's a scale-based measurement. And then you look at placebo versus the treated cycle and see the improvement.

Okay. That makes sense. And I guess when you look at your natural history study or even just experience through the VYJUVEK launch and kind of feedback you're hearing from the field, how many of the patients that are already on VYJUVEK would be candidates for your ocular DEB program?

I mean if you look at a natural history, we have a good number of DDEB patients and RDEB patients because DDEB patients also -- I mean, they have similar eye complications.

I mean, most of the patients that are on a natural history study are also on the VYJUVEK commercially. So we do see that overlap.

I would add about half the RDEB population and the percentage of DDEB, that's true in the commercial setting. It's also true in this clinical setting.

Okay. And I guess when we think about assuming that the study reads out positive and you're advancing towards the launch of your second product, is there an opportunity to piggyback off the sales force and the commercial scale that you have for VYJUVEK with 803?

I believe so. After all, the end physician is not that different. There could be some ophthalmology overlap when we -- as we think about NK, but predominantly derms. We feel that the uptake could be quicker given that we've already identified the patients. We've gone through the genetic testing.

So we're -- I mean, fingers crossed once we get past the pivotal and the approval, on all launches are difficult, but on a relative scale, we feel it's a pretty -- the launch is in our sweet spot.

I mean also this clinical study has been done by dermatologists, like EB specialists. So it's not an ophthalmologist.

And we do not require examination of the eye. It's more of a patient-reported outcome. So based on the label and the prescribing physicians and participants in the clinical trial, we think it's the same physicians that be able to write the prescription for these patients.

Okay. And just for the sake of time, maybe we can talk about NK disease. It's a pretty well-validated market, $1 billion market at least, probably more. Some clear benefits to improve upon the existing approved therapy.

You recently upsized your study to 60 patients with daily home administration after updating the protocol. How does this kind of help the caregiver flexibility around the dosing and I guess what would KB801 need to show to support an accelerated approval here?

I just want to correct, it's not a caregiver. It's going to be patient administered. So I think this is obviously -- it's going to be like Oxervate, right? I mean you ship it to the patient's home, the patient can administer. There's no caregiver. It's going to be just like Oxervate.

The only differences obviously are we are once-a-day administration versus multiple dose administration. So in the clinical study, again, these patients -- to initiate them in the clinical study, they come to the site because you have to take imaging of the eye to -- and make sure that they meet inclusion/exclusion criteria.

We enroll them, basically train these patients how to administer in the first 2 visits and then the drug is shipped into the patient's home and they self-administer the drug. So again, we don't anticipate, unlike VYJUVEK, it's going to be off the shelf into the patient's home. prescription written shipped to the patient's home and administered by the patient.

Okay. And I guess, assuming we see the ocular DEB data first, is there any lateral reads either around the route of administration?

Absolutely. There's no lateral reads because different diseases, very different endpoints because patient-reported outcome is 803. That's more of a noisy endpoint.

Whereas with NK, I mean, I think it's very well established like if you treat it with our vector and you can produce a neurotropic protein, NGF, Oxervate has already shown that by having NGF and initiating neuronal growth that will help with healing.

So very different endpoint, you measure the lesion at the baseline and the endpoint is in 8 weeks complete healing. So it's an independent reader. It's not a patient -- we'll have patient-reported outcomes as quality of life and improvements as secondary.

The primary read is the photographic images are read by an independent reader to evaluate complete closures. So very different mechanism, different endpoints.

Okay. But similar vector and formulation.

Correct. From a safety key, read-through will be absolutely -- there will be overlap.

Okay. Okay. I want to ask about your CF program. We saw some pretty important, I guess, delivery expression type de-risking for the program. Now the next steps sound like aligning on sort of a registrational endpoint and really connecting the dots between expression and function.

What should investors look forward to sort of in the second half of this year? What are sort of the next updates from the program? Is it alignment with the FDA on the pivotal? Should we get extended follow-up with maybe some functional type of endpoints? How should we be thinking about the catalysts?

I mean, obviously, the very first thing that we showed was -- I mean, the first part of the study was the dose ranging. We had a safe, effective dose. I think the biggest achievement for us internally was basically showing that the dose that we picked with a single dose administration that we were able to bronch these patients and established molecular correction, I mean, molecular expression.

This is exactly what we did with our VYJUVEK program. If you look at it, it's the same mechanism that we followed. We showed expression. And in VYJUVEK, obviously, based on that expression, we were able to get into a registrational trial and show that expression translated into effect.

We -- it's the same thing that we are following with the CF in the CF population. I mean, obviously, we have met with the agency. We have shared the expression data. We have discussions around the data. The agency is convinced that we do so expression, this molecular correction.

What the agency's request was that since we had not established safety in CF patients with repeat dose administration, they wanted us to do a small patient population to establish safety in a repeat dose administration setting. And that's exactly that we have done.

The protocol has been approved by the agency. We are in the process of enrolling patients. We are pretty -- I think we should be enrolling that study pretty quickly, and it will be a repeat dose to establish safety.

In parallel, we have always also been discussing with the agency on a registrational trial design, the statistical analysis and sample size. I mean you can see from the data that we showed expression now that we have blessings from the TDN and the CFF foundation.

The TDN is working very closely with us and the FDA. They're actually in the meetings with the agency with us. We're coming up with a hybrid design model where we can use CFF or TDN's [indiscernible] REACH data, which is their prospectively designed natural history data, which to allow us to efficiently design our clinical study so we can effectively use this external control in our pivotal Phase III design.

So these are the discussions that we will be having with the agency. We are in the process of finalizing the study design, the protocol, the statistical analysis plan, and we intend to submit that to the agency and work very closely with the FDA.

And we are pretty confident that by end of the year, we'll have agreement with the agency and sign off on this design and the sample, and we plan to execute the pivotal trial beginning of next year.

Okay. Great. Maybe in the last minute or so, if we could just rehash sort of the next 12-month outlook for the company. What gets you most excited from the pipeline?

What are you looking for to really gauge the strength of the VYJUVEK launch? And how does your capital position sort of set you up to succeed?

From a VYJUVEK launch perspective, it's in a good place. We're excited to bring this medication to patients, not just in Germany, France, but in Italy and Spain.

Japan continues, and we are working to find a way to get beyond these countries and maybe into other nations of the world next year. With respect to the pipeline, look, it's a very important clinical year for us.

Obviously, the open-label data on the CF is kind of exciting because this is a program that we've been working on for a very long time. and being able to communicate that expression does translate to functionality would be very big for the company and for the patient long term.

NK, of course, well-established market. We know the value proposition. So if the data were to read out, that would have a very strong impact. It's tough to handicap which one is better.

But at the same time, I would think about Hailey-Hailey, which is very similar to DEB, where we have an open-label study ongoing and definitely not to forget our DEB patients, being able to provide some kind of relief in the eye is definitely a very positive thing for the DEB patients.

So overall, a very busy but super exciting year. And as I mentioned in the Q1. The next 12 to 24 months are the most exciting in the history of Krystal, although we've had a pretty remarkable 10-year look back.

Great. Well, with that, I think we'll have to end it there. So thank you so much, Krish and Suma, for the great conversation, and thanks for everyone for attending. Thank you.

Thank you, Alec.

Thank you for standing by, and welcome to the Krystal Biotech First Quarter 2026 Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to hand the conference over to your host, Stephane Paquette, Vice President of Corporate Development. Please begin.

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the first quarter of 2026. The press release is available on our website at www.krystalbio.com.

We also filed our earnings 8-K and 10-Q with the SEC earlier today.

Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development; Laurent Goux, Executive Vice President and General Manager for Europe; Christine Wilson, Senior Vice President and Head of U.S. Commercial; and Kate Romano, Chief Accounting Officer.

This conference call will and our responses to questions may contain forward-looking statements. You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings.

With that, I will turn the call over to Krish.

Good morning. It's now been 10 years since we founded Krystal. And in that time, we have worked to change the lives of depatients globally for the better, while building a durable, fully integrated company with the financial strength to continue delivering value for both patients and shareholders. We have done this with discipline. We've not accessed the capital market since 2022. 2022 is 6 years from when the company was founded.

We maintained a strong balance sheet, and we continued to generate meaningful operating leverage. Yet more importantly, somewhat ironically, we believe the next 12 to 24 months represent 1 of the most exciting periods in Krystal's history. We are positioned for 2 registrational readouts this year and 2 more next year. I sincerely want to thank our employees for their dedication and execution that have brought us to this point.

Now turning to VYJUVEK. We delivered another quarter of global revenue growth with net revenue of $116.4 million in the Q. This brings cumulative net VYJUVEK?revenue since launch to more than $846 million. We are particularly pleased with this performance, which represents a 9% sequential growth versus 4Q 2025 despite a higher-than-usual level of insurance changes, which happens, by the way, not just to us, but many biotech commercial companies in 1Q.

Gross margin was 95%, and we delivered our 11th consecutive quarter of positive EPS. Outside the U.S., we're still early in the VYJUVEK launch in Europe and Japan, and I'm pleased with the progress overseas. We're also working to add 2 additional major European markets, Italy and Spain later this year. Laurent and Christine will provide more detail on VYJUVEK?commercial dynamics and the opportunity ahead in a moment.

FDA has now granted platform technology designations to both KB407 for CF and KB111 for Hailey-Hailey. This is in addition to receiving the same designation for our NK program, KB801 last year. These designations have a profound implication for Krystal. At the program level, these designations allow us to streamline our interactions with the agency and our development plans. We've already seen the benefits with KB801 as the designation allowed us to rapidly advance KB801 into a registrational study.

The platform implications are also powerful. These designations bring a compounding advantage. Each developmental milestone on our pipeline strengthens our collective regulatory data set and reduces development risk, cost and time for the next program we bring to the clinic. This advantage is presently unique to Krystal and 1 we intend to leverage to its full potential. You'll hear more about our development plans from Suma.

I'll now turn it over to the team to provide details on the commercial launch and the clinical pipeline. Laurent?

Thank You, Krish. We are very encouraged by the progress we are seeing outside the United States, where VYJUVEK?is beginning to establish itself as an important treatment option for DEB patients in key international markets. When we think about the international launch, the story is not just 1 of geographic expansion. It is a story of building trust across cultures with physicians, with treatment centers, with payers and ultimately with the entire EB community who have been waiting for new options.

There are nuances in every country we launch and sometimes within a country by region. That said, across Europe and Japan, we have seen strong word of mouth and increasing engagement from key centers, that is raising awareness of VYJUVEK?and helping translate physician interest into real patient demand. Importantly, our prescriber base continues to broaden. This gives more patients the opportunity to stop treatment closer to home, while also creating a more durable and resilient foundation for the launch. We estimate that more than 140 DDEB patients have been prescribed by VYJUVEK? across Germany, Japan and France. We believe this reflects both strong execution by our international team and growing physician confidence in VYJUVEK in the early launch market.

This early momentum is also beginning to show financials. European market plus Japan contributed to $28.9 million in net revenue, demonstrating the meaningful role these regions can play in the growth of VYJUVEK over time. Looking ahead, our focus is clear. We are working to deepen penetration in our current launch markets, secure positive access and reimbursement outcomes and expand it to additional major European markets.

In Germany and France, pricing negotiations remain ongoing. We continue to expect a decision in Germany in the second half of 2026. In France, we continue to expect the decision in 2027, which would further support broader access and reimbursement stability. We are also advancing discussions with reimbursement authorities in Italy and are actively preparing for potential launch in the second half of 2026 during the outcome of those negotiations.

And in Spain, I'm pleased to report that our discussions with authorities have accelerated. Based on our latest interactions, we now see a potential opportunity to launch in Spain in the second half of the year. again, pending the outcome of negotiations. In the interim, we are also responding to opportunities to stop patients on VYJUVEK? through early reimbursement access pathways.

Overall, we are very encouraged by the early tractions we are seeing internationally. The launch is progressing market by market, physician by physician and patient by patient. We remain focused on disciplined execution of our global commercialization strategy and on bringing VYJUVEK to more DDEB patients around the world.

I will now hand the call of to Christine to share updates on VYJUVEK? launch in the U.S. Christine?

Thank you, Laurent. Our team has been making great progress in recent months, building on our leadership position and delivering transformational outcomes for patients across the United States. Strong sales force execution is expanding our community reach and allowing us to meet patients wherever they seek care, whether that is at the center of accidents with a pediatric, dermatologist or in the family practice office in the community. By bridging this gap, we have now been able to secure over 695 reimbursement approvals for DDEB patients nationwide. Even as access teams were navigating a higher volume of insurance.

Upstream demand metrics are even better, with over 60 new prescribers in the first quarter and were 570 unique prescribers since launch, underpinning a strong pain approval outlook for the rest of the year.

Net adviser back revenues for the United States were $87.5 million for the quarter. Revenues were impacted by insurance switchovers in the quarter, which are now behind us, as well as the start-stop treatment cadence characteristics of a patient population shifting towards maintenance treat regimen.

With VYJUVEK now on the market in the United States for nearly 3 years, a growing number of patients have been able to achieve dramatic and transformational wound closure outcomes. Patients have been able to take control of their disease and their lives, opening up new opportunities and autonomy never before possible. These quality of life gains made possible by the robust efficacy and safety profile of VYJUVEK are deeply motivating and the foundation for the long-term trust-based relationships we are building with the DDEB patient community.

These improvements are also a natural and anticipated evolution of the launch as patient motivation and support needs shift to reflect their newfound autonomy. This is where the flexibility of VYJUVEK?administration and last year's label updates are especially valuable providing patients with the option to self-administer or receive nurse support care when they want it.

To this end, we have launched patient support initiatives to communicate and educate around recent VYJUVEK?label updates, which provide greater administration flexibility and help DDEB patients and families conveniently integrate VYJUVEK?into lifelong [indiscernible] routines as part of their standard of care.

Our goal is to establish long-term relationships with VYJUVEK?patients, ensuring ongoing connectivity and ease of use throughout their lifelong treatment journey. Skin cells do turnover and wounds eventually reopen, particularly as patients get more active. As patients transition into these start and stop phases, we are focused on enabling timely access to VYJUVEK?whenever it is needed. This focus is driving continued assessment of our infrastructure to better support patients where they are in their journey and to further enhance the ease of delivering VYJUVEK?across the United States.

At the recent American Academy of Dermatology Conference, key opinion leaders underscored their appreciation for VYJUVEK and the positive outcomes achieved by their treated patients. In a patient population where prior to VYJUVEK?approval, there were no treatment options beyond palatialon care. VYJUVEK?represents a meaningful advancement and fueling an increased focus on the long-term clinical and quality of life benefits that might come with long-term VYJUVEK?therapy.

As we progress on our launch, we are excited about the opportunity ahead. There are still hundreds of known diagnosed patients we hope to bring to therapy and many more not yet identified that we believe could benefit from VYJUVEK. By driving new patient starts and maximizing convenience for patients already on therapy, we see an opportunity to deliver significant growth in the years ahead.

With that, I'll turn the call over to Suma to share the leads on our development pipeline. Suma?

Thank you, Christine, and good morning, everyone. I am excited to share that we are faced with 2 registrational study readouts expected later this year and 2 more in 2027. And with respect to the ophthalmology registrational readouts this year, we are excited to announce we completed enrollment in our registrational study, evaluating KB803 for the treatment and prevention of corneal abrasions in DDEB patients, with a total of 16 patients were enrolled in the study. IOLITE is randomized, intrapatient double-blind, decentralized placebo-controlled study with crossover design in which patients are randomized 1:1 to receive KB803, 3 times weekly for 12 weeks followed by placebo, 3 times weekly for 12 weeks or vice versa.

The primary efficacy endpoint, the change from baseline in the average number of days per month with symptoms will be assessed at 24 weeks putting us on a path for a readout in the fourth quarter of this year. This is an exciting milestone for our team and the many DDEB patients suffering from ocular complications of this terrible disease.

Our second registrational study evaluating KB801 for the treatment of neurotropic keratitis is also progressing well. Our focus here is operational supporting our trial sites, expanding our network and driving enrollment. This is an 8-week study. We expect to enroll 60 patients and are on track for a data readout later this year.

We are moving quickly on our broader pipeline as well, including the initiation of 2 open-label studies, evaluating repeat dose KB807 and KB111, which we expect to read out later this year. Based on FDA interactions, we are initiating an open-label single-arm study to evaluate safety of repeat dose KB407 for 24 weeks in 5 patients with CF who are ineligible for do not tolerate or do not benefit from modular therapy. So dosing is expected to start later this month.

With strong backing from the Cystic Fibrosis Foundation, the CFF, we expect to complete enrollment in the study later this quarter and report data by end of the year. Then concurrently, we are working closely with the FDA and the CFF on an innovative registrational study design and systical analysis plan that may include prospectively collected natural Histidata from the CFF to supplement placebo-controlled data for evaluation of KB407 treatment effect.

We will chair the design and associated statistical analysis plan of the registrational study following alignment with the FDA, which we expect in second half of 2026. We expect the registrational study to commence in first half of 2027.

Strong patient and KOL engagement is also helping us move quickly on our KB111 program for the treatment of Hailey-Hailey disease. We are making steady progress on our HD severity scale and expect to complete both the development and validation in the first half of this year.

We also plan to initiate an open-label safety KYANITE-1 to evaluate KB111 for 12 weeks in 7 patients with HHD. We expect to dose the first patient in the [indiscernible] later this month, and submit our registrational study design to FDA in the second half of the year.

Based on the current time line, we expect the registrational study to start in 2027, and then we have our KB408 program for AATD lung disease and our KB707 program for non-small cell cancer, both are advancing steadily in the clinic and on track for data updates later this year, including in the case of KB707, a data update at ASCO next month.

Altogether, this sets up for 6 potential readouts before year-end, including 2 registrational study readouts.

With that, I'll hand the call over to Kate.

Thank you, Suma and good morning, everyone. I'll now provide some highlights from our Q1 financial results reported in our press release and 10-Q filing earlier today. Net revenue from global sales of VYJUVEK was $116.4 million for the first quarter, which included sales from our commercial launches in Europe and Japan. This marked growth as compared to the prior quarter of 9% and was a 32% increase compared to the first quarter of 2025.

Cost of goods sold for the quarter was $6.3 million compared to $5 million in the prior year's first quarter. Gross margin for the quarter was 95%, slightly up from 94% in 1Q 2025. We are seeing the benefits of manufacturing process improvements related to our U.S.-approved product and are actively working to achieve similar efficiencies for our other markets.

R&D expenses for the quarter were $15.3 million compared to $14.3 million in the prior year's first quarter. This was driven mainly by payroll, materials and support costs for production runs across several product candidates. G&A expenses were $41 million compared to $32.6 million in the prior year. This $8.4 million increase was primarily due to increased head count and related compensation expense as well as higher legal consulting and launch for costs for VYJUVEK globally.

Operating expenses for the quarter included noncash stock-based compensation of $13.6 million compared to $13.5 million in the first quarter of last year. The guidance we previously issued relating to non-GAAP operating expenses remains unchanged. We anticipate approximately $175 million to $195 million in non-GAAP R&D and SG&A expenses for the full year of 2026.

Net income for the quarter was $55.9 million, which represented $1.91 per basic and $1.83 per diluted share. We are pleased to report growth as compared to the prior year's first quarter's net income of $35.7 million and EPS of $1.24 per basic and $1.20 per diluted share.

And finally, we continue to build on our strong cash position now exceeding $1 billion in combined cash and investments, which positions us well to support our pipeline and global commercial efforts.

And with that, I'd like to turn the call back over to Krish.

Thanks, Kate. I want to circle back and underscore our excitement in the global VYJUVEK launch trajectory. While there are nuances to a launch in every country, for example, prescription renewal frequency in Japan in the first year, mandatory first physician visit and ongoing pricing negotiations in Europe or the start-stop paradigm in the U.S. that we're now starting to see 3 years into launch. But taken as a whole, all these geographies, the resilience in our launch dramatically increased the number of patients able to benefit from VYJUVEK and strengthens our conviction in the long-term growth outlook.

Country level fluctuations quarter-to-quarter are inevitable but mitigated by the diversification that geographic expansion brings. I am pleased that VYJUVEK?continues to work well for patients living with DDEB, which, as you all know, is a devastating and debilitating disease. We're hearing meaningful stories from patients and families globally whose lives have improved, including patients who are now able to participate in activities they have never imagined before. Many are also able to pause weekly administration and return to treatment when wounds recur. We're deeply humbled to play a role in helping these patients and their families as they navigate a lifelong journey with this disease.

And on the pipeline, we have multiple data readouts coming later this year, including 2 registrational readouts in DI, initial repeat dose data from KB407 in CF and KB111 in Hailey-Hailey?disease, along with data update for KB707 in NSCLC and KB408 in AATD. So it's turning out to be a really busy clinical and a commercial year for Krystal Biotech.

Overall, we're set up for an exciting 2026. Thank you and May the 4th be with you. Operator?

[Operator Instructions] Your first question comes from Roger Song with Jefferies.

Great. Maybe just 2 questions, 1 related to the commercial and then the pipeline. For the commercial looking at the 10-Q, so you have a U.S. 87.5% and then Europe 20.7%, Japan 8.1% seems a very strong launch ex U.S. How should we think about the growth trajectory in the U.S. for the rest of the 2026 and then how this strong trend in ex U.S., Europe and Japan will continue for the rest of the year? I know long term, I totally hear you for the outlook, how about the 2025?

And then just quickly on the pipeline. On the CF 24-week data, what would be the endpoint for that data readout? And then what will be the [indiscernible] decision before you start a pivotal?

Thanks for your question, both super relevant. Yes, on the commercial and the U.S. As you can see from the reimbursement approvals, the top line demand continues to grow very nicely. I know we've previously said there's maybe about 1,200 identified patients and we're steadily marching towards that and even hope to get to that $720 million number by next quarter, right? So we're at 60% market share. And so the top line is growing well. What is a bit difficult to predict is the start-to-stop paradigm on a Q-by-Q basis. But the point I made in the call in my script was, look, people are pretty -- patients are really happy with that experience on VYJUVEK. We've seen many instances of patients stopping and coming back on drug, which is what we had always wanted this to be that's the tail on the drug.

But on a Q-by-Q basis, it's really tough to predict the ups and downs. So you can have a down 1Q up the second Q. But overall, we expect the trend to be appointed in the positive direction.

Yes, Christine, if I may add, we're continuing to launch support programs that really educate them on the label updates that will help these patients continue to integrate this into their daily life as we look to establish lifelong partnerships with these patients and support their ongoing trajectory with VYJUVEK?as they start and stop through natural wound healing.

I can take the CF question. No, I know. I got it. Yes. And so as you guys are aware, we finished the single-dose study in these patients. And clearly, we were able to establish molecular correction, and as we discussed in our last call, we are obviously working collaboratively with the CFF Foundation and the FDA. We met with the agency. I mean, the agency is convinced with our expression data. And I mean, they seem to agree that we do see nice positive expression.

The only feedback that we got from the agency is, obviously, we don't have safety regarding repeat dose administration that was not established. So in order to satisfy that requirement, we set up this interim 5 patient study to establish safety in repeat dose administration safety in these patient population.

Obviously, in the interim, we are in discussion -- actively in discussion with the agency and the CFF Foundation. On the design of the registrational trial, I mean, obviously, we are proposing some sort of innovative trial design. And I think we have -- working with the CFF, we have really come up with a very good -- we feel confident in our study design. And we hope to sit with the agency and basically get their confidence on this design, so we can start the registrational trial early next year.

And Roger, I was looking at the question. You had a comment about global trajectory. That's the point I wanted to emphasize. We feel really good about the direction of the global trajectory launch. And the individual ones, especially in mature markets like the U.S. are tough to predict up and down. It's also difficult on a quarterly basis to think about as Japan up versus France versus Germany. But really, we feel really good about the overall global trajectory launch in 2020.

Your next question is from Alec Stranahan with Bank of America.

This is Matthew on for Alex. First, on KB803, assuming positive data in the fourth quarter of this year, can you maybe speak to how we should think about the potential launch trajectory vis-a-vis VYJUVEK?in terms of overlap with existing prescribers patients, reimbursement or site of care dynamics. And then maybe 1 on Hailey-Hailey?. I guess in terms of the data that we should expect later this year and sort of why the registration was pushed out to 2027. Just any commentary on that would be helpful.

Great. On KB803, look, you should expect a really positive launch trajectory because now that we have identified these patients, we have a good sense of who these patients are, the whole supply chain mechanism of getting the drug to a patient's home, when needed, self-administration versus needing a nurse store administer like all the things in the launch have been ironed out with JV -- with VV. And so should the drug get approved and so the label have a really strong profile. We expect the launch to be really positive.

It's tough for me to quantify to what extent about. It affects about 50% of the RD population according to publications, and maybe 10% to 15% of the dominant population, and there are evidences of many more patients having lesions in the eye, but it is positioned as somewhat like a prophylactic, and so we expect the launch to be really good. So the drug get approved.

I can take Hailey-Hailey. Yes. Hailey-Hailey, again, this is a disease that nobody has ever embarked upon. So there was a little bit of learning and understanding, and this is where we have -- we talk to the agency, we came to an agreement on a patient-reported outcome scale. So the agency wanted us to basically validate the scale. So we are in the process of validating the scale, which should be done shortly.

But in the process of validating the scale, we were able to really reach out and we have a lot of patients technically reached out and to participate in this scale. So now we have a repository of these patients where we are actually like our mini natural history sort of database, we collect the data on these patients as we are validating the scale, and we have a lot of interest from these patients to participate in the trial. But again, since we don't have any clinical data, I think the best approach for us was to do a small Phase I study, where we have 5 to 6 patients. I mean we're already the patients in our system, the scales are being validated and to just collect both safety dosing regimen and also some sort of the scale validation to really validate because before we want to go into the registration trial, we want to be really comfortable with our skills, really understand the disease. So we position ourselves for success. So that's the goal.

So I think the Phase I study in this handful of patients will allow us to really evaluate this patient population, the timing of the evaluation and the robustness of the scale. So I think all of this will be completely established by end of the year. And then we expect to get into the registration trial early. And I think the study should go pretty quickly because we have the patient population. I mean, as I said, as we with the validation of the scale, establishing these patients, we have been genetically testing them. So I think once we have this the registrational style should be pretty fast because, again, this is a decentralized study, the patient reported outcome editions, the drug is shipped to the relations house. So because of the decentralized nature and the CRO outcome of the endpoint, we expect once the registration trial that this trial could pretty much be fully enrolled pretty rapidly.

Your next question is from Joe Pantginis with H.C. Wainright.

So Chris, at the end of your prepared comments, you started to highlight some of the key factors or differences with regard to ex U.S. launch of VYJUVEK. I was hoping to get a little more color on that. So do you see any key education steps that are needed for ex U.S. doctors versus U.S.? What are some of the key negotiation points besides, say, pricing or any other factors you'd like to highlight that might be different from the U.S. launch.

Thanks, Joe. Look, given that Europe launched after the U.S. a lot of physicians in Europe, especially like Germany, France, the countries we're going after Italy, Spain are aware of the significant benefit that VYJUVEK has been affording to patients in the U.S. So in terms of bringing them up to speed, teaching them about the disease, the benefits of VYJUVEK and how it works and the application, it's been a lot easier relative to the U.S. in terms of physician education and getting them up to speed, and that's true in Japan, too.

In -- so that part, like we feel really good about what the physicians think about VYJUVEK?so and so. It's kind of helped us accelerate launches in both Spain and Italy, given the voice of the physicians in these countries. With respect to negotiations, look, that's a tough question. that beyond the nature of the drug itself, which is very powerful, the clinical benefits are great. There are also political factors that come into negotiations in these countries. They have budgets for rare diseases. But today, the negotiations have been progressing well. We've been able to make a good compelling benefit. We'll obviously know the outcome first in Germany, second half of this year, followed by maybe Italy ahead of that. So we'll have a couple of European benchmarks, which will probably dictate the direction of the French and U.K. and subsequent Spanish pricing.

But all in all, given what we were able to do in Japan, given the benefits of the drug, we feel really good about making the compelling value proposition. The question always is what are the macroeconomic factors in these countries that could potentially influence our pricing.

Your next question for today is from Ritu Baral with TD Cowen.

I've got 1 on VYJUVEK?and then a couple on CF. Krish, we have been hearing just of sort of insurance friction around the stop-start drug holidays that insurance companies are sort of coming down on patients whether it's requirements for documentation of reopened wounds or things like that and how insurance companies are sort of monitoring whether wounds are closed or not. So if you could elaborate just on insurance dynamics around stop and start and reauthorization of coverage? And then I've got a couple on CF.

Yes. Thanks, Ritu. I mean we have had -- I mean, from since the launch, we've had no issues with access to date, whether that's in terms of reimbursement, reauthorization, start and stop effect. The start and stop decisions are obviously made by the patient in consultation with their physician. But once they're ready to start, we've had no delays with respect to getting them back on drug at all. So it's been really smooth. Fingers crossed.

Okay. And then on CF, you mentioned that the patients, the patients include those that do not tolerate modulators or do not benefit from modulators. Are there sort of prescribed definitions around either liver enzyme elevations or sweat chloride changes either longer retreatment periods that the FDA wanted. If so, why? And would it be possible to get functional data from these 4-week patients ahead of pivotal?

So Ritu, I'll answer that question. Yes, we are enrolling patients that are now and that are modulator intolerant. With regards to sweat chloride, I mean, I don't think there is any marker because we are nebulizing the drug, it directly goes into the lung, and that's where the action is. So we don't have systemic levels of measurements. But yes, we are -- I mean, we have a lot of now patients ready to go on this trial in our -- the study that where we are evaluating repeat dose. So we are evaluating patients who are ineligible for modulation. Either they don't tolerate it or they cannot take these drugs. So with regarding to your second question, we never did a repeat dose administration. As was a single dose. When you see 4 dose of applications, this is something that we discussed with the agency. -- because when we made the first batch titers, I mean, the dose was not enough to deliver all of it in 1 sitting. I mean, obviously, now we have manufacturing and we have doses that can be done as a single administration. So we discussed with the agency and the agency recommended that we divide the dose over 4 days. So it was not immediately with day 1, day 2, day 3, day 4, but they're still considered as a single dose.

And the entire dose is now was between 4 days. But if you look at the study that we are proposing, it's the same dose as a single administration as a single dose, but as a repeat administration. So now we are going -- so this has never been done -- so we're going to do it weekly, the same dose, but once a day, weekly over the entire 6-month period, and we will evaluate Obviously, safety is going to be is the primary endpoint of the study. We will look at -- we will also evaluate obviously, we will be measuring FEV1. We will look at patients reported out PRO scales to see that benefit. So we are going to look at all of that in an expiatory fashion because more data that will help us so the better for us as we embark upon our base registration trial.

Your next question is from Yigal Nochomovitz with Citi.

Just a few on Europe. Could you just comment as to whether you've entered the second 6 months of the accrual phase in Germany, and then with regard to Spain and Italy, could you clarify whether this is going to be a pricing first model where there's no accrual? Or will it be an accrual model where you'll launch and then negotiate similar to Germany and France? And then I have 1 other 1 on KB-803.

Yes, Lauren you want to start.

Yes. So maybe to start with the second question on the pricing model. in Italy and Spain. What we expect is definitive reimbursement in those countries. So it will not be advanced, like the 1 in France or Germany currently. And with regard to the German situation, yes, we've entered with within the second 6 months of the launch. So that's the first semester where we start accruing for future potential pricing.

Okay. And then on 803, I'm just curious if you could comment on the natural history run-in data. Those are tracking with expectations? And if you have any comments on the diary, the blinded symptom diaries in terms of compliance with logging that during the trial?

Sure. I mean we -- as you know, we do have a natural -- it's the same diary that -- I mean, the same information or data that we are collecting in the natural history study. Once they qualify to be in the main study, at that point, we have a database where it's blinded, randomized the patients I mean the drug is randomized and the patients that are signed to either placebo or drug. And they have -- so then they start a new diary, which is, I mean, a complete different database always blinded. So the patient is blinded, the physician is blinded, we have blinded it except the pharmacy that ships the drug to the patients where they do the randomization and the blinding. So it's a completely blinded system, which is completely maintained. And then the patient is just still the diary on a weekly basis, just like the natural history. So they have the practice and experience. Obviously, the clinical operations team will help them answer or address any questions they have, or we have, I mean the external CRO that is managing the diary, if there is a patient that's missing information, then we can cross them to say make sure you feel so the data can be is there's nothing no missing information. So it's a completely blinded system.

Your next question for today is from Bill Maughan with Clear Street.

So you mentioned in the press release that your 803 trial is powered to detect at least a 25% reduction in symptom days. How conservative would you describe that bar as being? And might we see something meaningfully -- a meaningfully larger separation and I guess, how much does that delta matter in terms of supporting commercialization down the road?

I mean, again, I think any improvement in these patients because, I mean, it's such a debilitating disease. And once they have 1 of these abrasions or symptoms, it can be pretty rough on these patients, because they can open the eyes, they can be decommissioned for 3 days. And in addition to all of the other comorbidities that they have to experience. So I think from a any improvement, I think, is a benefit to these patients.

The good thing is we have this natural history study that we have been collecting over a year. So we have a ton of data that -- so as we embark upon this study will have some flexibility to even use some of this natural history as we do the analysis. So again, I think any improvement that the prospectively collected natural history, I mean a lot of the I mean, reasons that you see the agencies have issues with external control of using them as controllers because many of that data is not prospectively collected.

In our case, we have over 100 patients in this natural is very prospectively collected, which simulates exactly what they're going to do in the clinical. So I think we can leverage that data to -- in the analysis as we move forward.

And then with a large cash balance and growing, I guess, how are you looking at capital allocation right now?

Yes. Yes, a regular question for me. I'll say a couple of things, like right now, we are in a growth out, both in terms of commercial growth in the world and in terms of our pipeline. We're not planning on licensing or buying and I've said that before in different forms. So once we have visibility into the future of our pipeline, especially on the drugs that address large markets, KB408, the oncology, the aesthetics, and then when we have some visibility into the launch of our next drug, that would be a great timing to think about share buyback.

Your next question is from Gavin Clark-Gartner with Evercore ISI.

Krish, I didn't know you were Star Wars fan. Anyways, on KB 803, I just wanted to double click on the powering a little bit. So for the 16 patients that you enrolled in the study from a natural history runner, what was the average symptom is at baseline? And what was the standard deviation that you saw in the natural history portion? And then on the powering side, you noted the study is 90% powered for a 25% reduction and symptom is -- at what point does the study become 50% powered? Like what's the minimum detectable benefit you think you could tease out in this trial?

I mean, obviously, we looked at our natural history data extensively, and we know the pattern, right? I mean we know there are patients that have the severity of the disease. I mean, you can see from our natural history are a subset of patients that these abrasions are pretty frequent, right, and really over 1-year period. So the benefit we have is because of this [indiscernible], we could select those patients. So we can see a difference from a drug effect. I mean, so that was very important to us. So if you look at the patients, we have the patients that are enrolled into the 16 patients that we have meet that criteria. So hopefully, I mean, because of that, the drug effect should become evident. And I think based on that, we were -- that's how we powered it. We were able to see, okay, 25% difference with what is the least amount of difference we need to see statistical significance, what is the sample size.

And again, with the crossover design where patients -- the same patient gets either drug or placebo -- we that also improve our sample size and increases the chances. So all of that was taken into account to calculate the sample size and the powering for the stent.

Your next question is from [ Joshua Sodo ] with William Blair.

Congrats on the quarter. This is Josh on from Sami and Logan. I have questions on VYJUVEK?. The first is ever since the company gave home administration in the U.S. at the end of Q4. I was wondering what has been the impact of that on either if that has been the driver in the decrease of start-stop dynamic? Or nation adds in the U.S.

The second question was on the ex U.S. launch. I was wondering if pricing in Spain is going to be similar compared to other European territories and how many patients does the company estimate can address the territory.

Thank you for the question. In terms of the label updates in the home administration, it's been received incredibly well, both by patients and physicians as it really offers the opportunity for patients to integrate this differently. So we have seen a subset of patients who maybe didn't initiate therapy early on because they weren't comfortable with the nurse coming to their home, and now they have that flexibility and that choice.

We've also seen a subset of patients that have transitioned from home nursing into self-administration. And if you think about our goal of being able to create a scenario where this fits comfortably into their daily routines. The label updates that have allowed that flexibility, and we've seen some really positive impact of that, both from patients receptivity to VYJUVEK?and supporting their stop and start on therapy, but also the way physicians are thinking about initiating therapy for their patients.

Laurent, do you want to talk on the international question.

Yes. So if I understood the question, it was related to Spain, specifically. And the first 1 was about the pricing in Spain. We do have a pricing corridor reflecting the value of Vivek. And so we do expect Spain to be within this pricing corridor. But of course, negotiations are ongoing. So difficult to speculate at this stage.

And the number of patients in Spain, we would think, we would look at it as an equivalent prevalence to the other European countries. So there are no difference in prevalence versus the other European countries.

Thank you. We have reached the end of the question-and-answer session and today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Thank you for standing by, and welcome to the Krystal Biotech 4Q 2025 Conference Call. [Operator Instructions]. As a reminder, today's conference is being recorded. I would now like to hand the conference over to your host, Stephane Paquette, Vice President of Corporate Development.

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the fourth quarter and full year of 2025. The press release is available on our website at www.krystalbio.com. We also filed our earnings 8-K and 10-K with the SEC earlier today.

Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development, Christine Wilson, Senior Vice President and Head of U.S. Commercial, Laurent Goux Senior Vice President and General Manager for Europe; and Kate Romano, Chief Accounting Officer.

This conference call will and our responses to questions may contain forward-looking statements. You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings.

With that, I will turn the call over to Krish.

Thanks, Stephane. Before I begin, I want to recognize Suma for being named to The Innovator List. The concept of enabling repeat dosing of a genetic medicine in a home setting by the patient is truly innovative. So congrats, Suma.

Stepping back, I'm very pleased with where we are at Krystal. On the commercial side in 2025, we've made meaningful progress across all geographies. In the U.S., we added sales capacity and successfully reaccelerated demand. In Europe, despite the country by country nuances, we launched a genetic medicine that can be applied in a home setting by a patient. In Japan, we leveraged the attributes of VYJUVEK to establish a strong value proposition for patients. And we continue to broaden VYJUVEK access globally. To-date, we signed distributor agreements covering more than 20 countries and our goal is to expand to over 40 countries in 2026. More importantly, the patient stories that we continue to hear about how VYJUVEK is changing lives, remains deeply motivating for our entire team.

On the pipeline, we're currently in the middle of 2 registrational trials in NK and in treating eye lesions in DEB patients with the potential to initiate 2 additional registrational programs in CF and Hailey-Hailey later this year. Together, that positions us well for the next 5 years, and we believe that if approved, we have the capabilities to self-launch these four indications. Meanwhile, the oncology and the alpha-1 trials continue to progress well. None of this would be possible without the dedication of the Krystal team, and I'm grateful for their commitment and execution. Overall, Krystal is building a durable commercial gene therapy company with disciplined capital allocation. We're generating strong gross margins and operating profitability while expanding global access for VYJUVEK and advancing our focused pipeline.

Our operating principle is straightforward. Invest behind measurable execution milestones, compound value without relying on dilution and work diligently to get the next pipeline medicine approved.

Turning now to results. We're pleased to report another quarter of revenue growth with net VYJUVEK revenue of $107.1 million in Q4. That brings total net VYJUVEK revenue since launch to over $730 million. The net revenue reported this quarter includes contributions from Europe and Japan as we build momentum in our initial overseas markets. Christine and Laurent are both here today and will share more country-level color in a moment. Gross margin was 94% for the quarter and 94% for the full year. We continue to expect gross margins in the 90% to 95% range for the foreseeable future. With that, I'll turn it over to Christine to provide an update on the U.S. commercial performance.

Thank you, Krish. We remain very encouraged by the VYJUVEK launch and the momentum we are seeing in the U.S., which continues to support our long-term commercial outlook. I am pleased to share that we have now seen reimbursement approval acceleration for 3 consecutive quarters with over 660 since launch, reflecting strong execution by our commercial organization.

As we continue to expand our reach into the community setting, we added over 50 new prescribers in Q4 2025 and have reached over 500 unique prescribers since launch. With our expanded sales force now fully trained and deployed, we are also seeing continued improvement across key demand metrics. The impact of our expanded sales force is supporting broader patient identification across the United States, including patients with D-DEB that are being treated by local dermatologists or primary care physicians. It is encouraging to see the benefit that VYJUVEK is providing to patients across the full spectrum of disease severity, from severe cases to mild and moderate presentations. Patients are achieving durable wound closure, which, in many cases, is allowing them to transition to as needed utilization of VYJUVEK over time.

Importantly, our commitment to the DEB community remains unwavering. As the market continues to evolve, as expected through the launch, we remain focused on optimizing our processes to better support patients and providers. We continue to execute on this through strong partnerships with advocacy organizations and centers of excellence, ongoing feedback from HCPs and patients data through objective market research, and a continued focus on driving operational improvements and advancing the standard of care.

I will now hand the call off to Laurent to share updates on the VYJUVEK launch overseas. Laurent?

Thank you, Christine. It is my pleasure to share the latest on our operations outside the U.S., including an update on Japan on behalf of our colleagues. I'm proud to report that our global VYJUVEK launch continues to progress very well. The high patient demand we're seeing across our very different markets, validate the transformative impact VYJUVEK brings to the dystrophic epidemiologic [ below the ] patients and their families. We now estimate that over 90 DEB patients have been prescribed VYJUVEK across Germany, France and Japan combined.

Our launch in Germany continues to build momentum since late August of last year. We're seeing sustained prescription growth and good prescribing breadth. The initial Center of Excellence are now routinely prescribing VYJUVEK and we are expanding into the broader community setting. This geographic distribution is critical for patient access and it allows the patients to initiate therapy closer to home, reducing the burden on both patients and individual treatment centers. After initiation in the center, most of the patients are already benefiting from home administration.

In France, our launch is progressing well under the AP2 Early Access Program. The AP2 program is functioning exactly as designed providing eligible patient access to VYJUVEK while we complete our negotiations with the French health authorities. Importantly, subject to the early access conditions, physicians and patients are demonstrating strong confidence in VYJUVEK's clinical profile. Please note that pricing negotiations in Germany and France are ongoing and progressing well. We're expecting the negotiation to continue into at least the second half of 2026 in Germany, and 2027 in France.

Our colleagues are also achieving early launch successes in Japan after successfully negotiating pricing in October of last year. This includes building a unique in-country distribution model to enable home delivery while addressing the many strict regulation regarding the handling of gene therapies in Japan. Leveraging this infrastructure, our team is driving VYJUVEK adoption and patient treatment in the home setting.

Looking ahead to our next launch market, we currently expect to finalize pricing and launch in Italy in the second half of 2026. Italy represents another significant patient population, and we're working diligently to ensure timely access to these patients. Additional pricing negotiations are advancing on schedule in Europe and the U.K.

I'd like to highlight another important validation of VYJUVEK's clinical impact. In December, VYJUVEK was awarded the [indiscernible] in France for innovation and clinical impact in the treatment of dystrophic [indiscernible]. This recognition from the French medical and scientific community underscores the transformative nature of VYJUVEK and strengthen our position in ongoing reimbursement discussions across Europe. Looking beyond our direct markets. I'm also pleased to share that we have expanded our distributor network to now include Israel. This expansion demonstrates our commitment to serving DEB patients across various geographies and position us well for continued growth.

While it's still early in our commercialization journey outside the U.S. we're seeing the foundation being established for sustainable revenue growth in these markets. The successful pricing negotiations we completed in Japan have been very encouraging, and we believe provide a positive benchmark for our ongoing European discussions. Without we'll turn the call over to Suma to share the latest on pipeline development at Krystal.

Thank you, Laurent, and good morning, everyone. It is my pleasure to share today's update on our development efforts. Thanks to the hard work our dedicated R&D team, we are making rapid progress on our rare disease pipeline, generating breakthrough clinical data and moving quickly through its multiple registrational data readouts later this year. I would like to start by highlighting one such breakthrough recently achieved with our KB407 program for the treatment of cystic fibrosis.

A little over a month ago, we announced a successful delivery and expression of full-length, wild-type CFTR protein following KB407 administration to the lungs of patients with CF. Not only could we confirm full-length protein expression in CF patients with Class I mutations, we also saw that HSV-1 [indiscernible] transduction was consistent across all patient biopsies. In a [indiscernible] patient population, including four, modulator ineligible patients with uncorrected lung disease, we consistently observed transduction rates ranging from 29% to 42% and all usable biopsies were positive for transduction.

Taken together with encouraging apical CFTR expression observed in Class I patients as well as durability of expression out to at least 96 hours, these results give us high conviction in the potential of KB407 to fill the treatment gap that exists today for modulated ineligible patients. We are working closely with the CFFTDN and the FDA on a repeat dosing study design and streamlined pathways to support registration. We look forward to sharing updates once we have aligned with the agency and expect to start repeat dosing in the first half of the year. Our KB407 results also have profound implications for our platform, showcasing the versatility of HSV-1-based gene delivery to epithelial tissues beyond the skin. With upcoming readouts for KB801, KB803 and KB408, we hope to further underscore the exciting potential of HSV-1-based gene delivery to both the lung and eye.

Another important advantage of our HSV1 platform is the potential for convenient at-home dosing. Although it took us a few years, we're very proud that VYJUVEK is now approved in the United States, Europe and Japan for administration in the home setting, the option for caregiver or patient administration. This is a fantastic breakthrough for DEB patient and one we want to secure for as many of our pipeline programs as possible, including our ophthalmology program, KB801 and KB803. To that end, we have updated the protocol of EMERALD-1, our registrational study evaluating KB801 for the treatment of NK.

Our updated KB801 study protocol is briefly summarized here. To expedite the potential path to registration, we have upsized the study and now expect to enroll approximately 60 patients in the study and to enable flexible administration options from launch, while also mitigating the risk of human error, when administrating an eye drop we have updated the KB801 dosing regimen. Patients enrolled into EMERALD-1 will receive KB801 or placebo once daily. Importantly, KB801 or placebo may be administered either by HCP or by a caregiver or the patient after receiving appropriate training. We believe that this change will provide maximal flexibility to patients and their caregivers and ultimately support superior real-world outcomes.

There's also a change that is only made possible by the clean safety profile that we have observed to-date across both KB801 and KB803 programs. We do not expect these changes to meaningfully affect our timelines to data readout. Thanks to the rapid expansion of our clinical trial site network, already over half the number of sites have been activated, and we are well on our way to target 30. We continue to expect data before the end of the year.

We have made similar updates to our KB803 program. again, the goal of maximizing flexibility and real-world outcome for patients from day of launch. Our KB803 protocol is summarized here. Patients enrolled in the study will receive KB803, or placebo, 3x weekly. As with KB801, KB803, all placebo may be administered either by HCP or by a caregiver or the patient after receiving appropriate training. With our existing trial network and patients available for rollover -- from natural history study, we expect to complete enrollment in the first half and report data before end of the year.

We are also making tremendous progress across our broader pipeline, working towards our registrational study start and multiple additional clinical data readouts before year-end. Our clinical development efforts for KB111, our latest rare skin disease program for the treatment of Hailey-Hailey disease are progressing well. Our team is in the process of developing our HHD-specific scale and is on track to complete this study in the first half of the year, enabling a registrational study start in the second half. We expect many of our patients from the scale validation study to enroll into the registrational study. We are actively enrolling patients with AATD lung disease in our KB408 repeat dosing study, and expect to be able to issue a data update before year-end. This study includes multiple bronchoscopies, both at baseline and after 4 weeks, with KB408 doses, and will help us better understand the additive effects of repeat KB408 dosing on lung, AAT and bound mutable elastase levels. These are key data points that will support accelerated approval discussions with the FDA.

We are also enrolling patients on our Phase I/II KYANITE-1, evaluating inhaled KB707 in patients with advanced NSCLC. Here as well, we are on track for clinical data update later this year with an opportunity to move quickly into a registrational study having already received FDA input on a Phase III study design to support a potential filing.

Finally, I would like to make a special mention of the 2 program designations we recently received from the FDA. In January, the FDA granted us a Fast Track designation for KB111. And earlier this month, we received an RMAT designation for KB707. These designations underscore the potential of our programs to address urgent unmet needs for patients with rare and serious diseases. We also provide us important advantages to accelerate our programs, including opening the door to accelerated approvals based on surrogate or intermediate end points. Having received similar designations for VYJUVEK in the past, we are well versed in the many benefits they can provide and how to best leverage them. We look forward to working closely with the FDA to accelerate KB111, KB707 and a broader pipeline of redoseable genetic medicines. With that, I'll hand the call over to Kate.

Thank you, Suma, and good morning, everyone. I'll now provide some highlights from our fourth quarter and full year financial results reported in our press release and 10-K filing earlier this morning.

We previously announced preliminary 4Q 2025 VYJUVEK net revenue of $106 million to $107 million. Our final net revenue from global sales of VYJUVEK during the fourth quarter of 2025 was $107.1 million, which includes sales from our Q4 launches in both France and Japan. This marked growth as compared to the prior quarter of almost 10% and approximately 18% growth when compared to the prior year's fourth quarter. Year-to-date VYJUVEK net revenue was $389.1 million, an increase of approximately 34% compared to full year 2024 revenue. Gross to net revenue percentages remained consistent with prior quarters.

Cost of goods sold was $6.6 million compared to $4.3 million in the third quarter and $4.9 million in the prior year's fourth quarter. Gross margin for the quarter was 94% as compared to 96% in the third quarter and 95% in the fourth quarter of 2024. This change in gross margin is in part due to the volume of products sold outside of the U.S. increasing, which still carries a higher cost per unit ahead of our planned manufacturing process optimizations for products sold in these markets.

R&D expenses were $14.8 million compared to $13.5 million in the prior year's fourth quarter, and SG&A expenses were $41.4 million compared to $31.3 million in the prior year's fourth quarter. This increase was primarily due to increased headcount, legal and consulting services and marketing costs to support our global launches of VYJUVEK. Operating expenses for the quarter included noncash stock-based compensation of $13.8 million compared to $13.4 million in the fourth quarter of last year. Consistent with the prior year, we are providing guidance on our non-GAAP operating expenses.

For 2026, we anticipate approximately $175 million to $195 million in non-GAAP R&D and SG&A expenses. This represents an increase over year-to-date 2025 actual non-GAAP R&D and SG&A expenses of $150.3 million and is the result of our continued planned spend on VYJUVEK global launches and further development of our pipeline. As we discussed in the third quarter, we released a majority of the valuation allowance that was previously recorded against our deferred tax assets. We also benefited from the reversal of the Section 174 R&D capitalization requirement under the One Big Beautiful Bill legislation. This resulted in a onetime noncash tax benefit that increased reported EPS for this year.

Net income for the quarter was $51.4 million, which represented $1.77 per basic and $1.70 per diluted share. Net income for the year was $204.8 million, which represented $7.08 per basic and $6.84 per diluted share, reflective of the previously mentioned onetime benefits. And finally, we ended the year with $955.9 million in combined cash and investments which positions us well to support our commercial launches globally, as well as our upcoming pipeline milestones in the year ahead. And now I will turn the call back over to Krish.

Thanks, Kate. I'd like to reiterate a few key points before we open for questions. First, geographic expansion is a meaningful tailwind for VYJUVEK and for Krystal. There are more DEB patients outside the United States than within it, and we are still early in addressing global demand. In 2026, we'll continue executing on a disciplined international rollout, and we look forward to adding our third European market, Italy in the second half of the year.

With large identified patient pools, strong demand and favorable product labels in Europe and Japan, we expect our overseas expansion to be the predominant driver of revenue growth in 2026. In the U.S., demand continues to grow but we're also seeing an evolution in utilization patterns among some longer-tenured patients shifting toward more intermittent treatment cycles as their disease management stabilizes over time. Second, as we add patients overseas, it's important to note that revenue may not track linearly with [ patients ] counts this year due to accruals, timing effects and ongoing pricing negotiations. That said, having completed strong successful negotiations in Japan, we believe we have a strong value proposition to present to European payers, and we look forward to reaching final alignment on pricing.

On the clinical front, we understand the importance of our registrational programs, and we're executing methodically to drive the desired outcomes. We remain on track to move KB407 into repeat dosing in the months ahead, and we strongly believe the updates to the KB801 and KB803 profiles position these programs to deliver tangible real-world benefit, maximizing convenience and building resilience to account for the inevitable human factor that comes with cell dosing. We were also pleased to receive RMAT for KB707 and Fast Track designation of KB111, two designations we know we and that can meaningfully shorten development timelines. We're excited to advance both of those programs along with KB408 for Alpha-1 deficiency, which is progressing through the re-dosing phase of the initial study.

Overall, 2026 is shaping up to be a busy and an important year and we're approaching it with a lot of enthusiasm. With that, let's open the call for questions.

[Operator Instructions] Your first question for today is coming from Roger Song with Jefferies.

Excellent. Congrats for the successful 2025. A couple of questions from us. On VYJUVEK, Krish, I heard you said a couple of comments around the U.S. versus ex U.S. given 2 months in the 1Q, any visibility into the 1Q and then looking ahead of 2026? Particularly contribution from ex U.S. versus the U.S. on the dollar value? Because I hear you say the revenue driver predominantly will come from the ex U.S. in 2026?

Yes. Thanks, Roger. Thanks for the question. I want to clear out a couple of things. While I did say that the predominant boat driver will be from ex U.S., I do want to highlight that demand in the U.S. is accelerating. I mean you heard Christine talk about the number of reimbursement approvals being up Q-over-Q, and the [indiscernible] while demand in the U.S. is accelerating, you should also assume that patients are now starting to settle into a start-stop regime, which is kind of tough. It's nuanced and the kinetics of that is kind of a bit hard to predict.

But in Europe, where the launch is recent definitely, it's an accelerating growth driver when you think about -- without exception. That all said, in terms of breakdown of U.S. versus ex U.S., we at the moment, pretty strongly believe that when we report 1Q, we will be breaking the [indiscernible].

Got it. Yes. And then in terms of the pipeline, I'm just noticing you are adjusting the dosing measurement for both ocular and NK, be a little bit more frequent. Just curious any data to support that? I heard you said, avoid the human error. So any data to suggest more frequent dosing may be resulting in better outcome? And any plan to test less frequent dosing later on?

Yes, I can take this. I mean, with 801, the weekly dose was deliberate, I mean, obviously, we have seen our blinded data from -- and we feel pretty confident about that data. The reason was -- initially, we started with in-clinic dosing for 801, and we realize commercially for this to be a viable product. We have to be home-administered. So again, there was interactions with the agency to get that home dosing. I mean, obviously, now it's implemented. The change was deliberate because now that the dose is being administered by the patient at their home, obviously we train the patients, I mean, there's always nuances answers with it, right?

I mean [indiscernible] I want to make sure that in the event of daily administration, there's a dose that they -- it doesn't get into the eye, they blink -- all kind of sort of an administration errors. So we thought we have a very safe profile and the drug is clean. So we figured it's better to avoid and also it's more -- it's easy for the patient to remember, right, daily one dose in the morning, you can drop it in the eye. So I think it was deliberate to make ensure that dosing is -- they comply and get the right dose in eye.

Your next question is from Sami Corwin with William Blair.

I was curious if you could provide any insight into the compliance rate so far in the EU and Japan. And then, Krish, previously, you commented on giving Krystal's growing profitability [indiscernible] could potentially explore stock buyback options. So I guess I just wanted your updated thoughts there versus increased investment in the pipeline or M&A.

Thanks, Sami. When you talked about compliance, were you referring primarily to the United States compliance number? Or was it outside?

Outside the U.S.

Yes. Look, in Europe, compliance has been, just as compliance had been in the U.S. when we first started the launch. The only comment on Japan, I would make is by law in Japan in the first year of launch, the patient has to -- the patient only gets a 2-week prescription. And so one of the things, which is a bit burdensome in the early days of the launch is for the patient to have to go back to the physician to get a new prescription every 2 weeks. To date, patients have been pretty compliant. It's the early days of launch. But when you look out over the next 6 to 9 months, one could imagine a situation where some patients may drop off on compliance purely based on this burden. But if there are any stop-outs, our expectation is by the time year 2 rolls out, which is late second half of this year, we expect compliance to come back up, to normal levels.

Okay. And for Japan that 2-week prescription burden, you said that last for the first year?

Yes. And on your second question on profitability and share buyback. Look, -- we understand -- we have a few research programs. As you know, our pipeline. We have a few rare diseases that are in resgitrational and have to launch. We have a couple of large indications, one being oncology, one being an alpha 1, one being in aesthetics. And until we kind of have a better sense of how those larger indications are going to go in terms of having a partner, having some support either in development or in commercialization, it's difficult to be very definitive on a time line for a stock buyback.

But that said, one thing I have made clear in the past is we're not intending presently to use any of our cash towards in-licensing or buying any kind of third-party technology or company at the moment.

Your next question is from Alex Stranahan with Bank of America.

Congrats on the close to the year. Two questions. Maybe first on ex-U.S. Can you just remind us what's left on the pricing negotiations? And how you expect the balance of price and volumes to trend over the course of this year into next and France, Germany and Japan?

Yes. I think our present expectation is that we would have reached some kind of pricing agreement with Germany in the second half of this year. It's tough, Alex, at this point, to say if it's a 3Q or 4Q, but our expectations sometime in 3Q.

With respect to France, clear expectation that we will not reach pricing agreement this year and probably be shifted to sometime in the first half of next year. That's our present expectation. Japan, we already have a price. The only thing to remember is in Germany, we will be accruing until the pricing is definite. We'll also be accruing in France until the pricing becomes definitive, and in general, and I've reiterated this in the past, we tend to be a bit conservative when it comes to accruing for a future press.

Okay. That makes sense. And then just maybe on ophthalmology. Curious what kind of updates you can get from these studies at this point given they're both actively enrolling. I guess just a bit more on specifically what drove the modified dosing regimens and given the protocol amendment, curious if your comfort with the study powering has changed at all as well? Either in NK or DEB.

Yes. No. As you can see, the powering and the number of patients have not changed because we clearly know that from Oxervate and [indiscernible] give us confidence from our data. With regards to, again, 801, we have 50% of our sites, I mean we are targeting 30 sites. So we can maximize and optimize -- speeding up the process of enrollment. So with 60 patients, even on an average of 2 patients per site, we should be good to go. So we have 50% of our sites up and running, and we are aggressively working on getting the other 50%, which we should be, I think, all of them done by -- in the next couple of months. So I think with all of those sites up to speed, we feel confident in our enrollment as we -- as announced, that we would enroll this complete enrollment of the study by end of the year.

And for 803 and also potentially announced, I mean, it's 8 weeks, and then we have -- hopefully, the data comes in and we can data by end of the year. For 803, again, we feel very good from what we saw in our initial blinded study. Again, same thing. Initially, it was designed to administered by clinicians in the clinic. And obviously, we realize that this has to be home administered for the study to be enrolled and patient convenience. So we shifted from in-clinic to home dosing. And as a result, against while the same logic goes beyond. We wanted to make sure that we know from the data we saw that give some flexibility for dosing for the patients because every day can be burdened. I mean, it can be -- so they have a volume and then they can administer the entire volume a couple of times a week. So that gives us some flexibility. This is what we learned from VYJUVEK. I mean there were lessons learned and that helped us optimize the dose for 803 in the clinic.

Your next question for today is from Yigal Nochomovitz with Citigroup.

Congrats on the progress. I was just curious if you could speak in a little bit more detail with respect to the 90 patients that have been prescribed VYJUVEK in Europe, how that splits out across the geographies, Germany, France and then also in Japan? And if you could speak to more specifically the cadence in terms of patient adds month-over-month in the recent quarter?

Yigal, thanks for the question. It's really difficult to estimate a number of patients in Europe. We do not -- I mean, the laws are different between U.S. and Europe and more just making an estimate based on vials being shared and pharmacies being disclosed. So while it's a closing of proxy, the number 90 itself is somewhat of an approximation and segment that further into France versus Germany versus other countries, just makes it that much more irrelevant at the moment. But it provides a directional guidance until we break out revenues.

So our expectation is starting in 1Q, we'll have an idea. I mean you will have an idea of how U.S. is doing versus the rest of the world. But until then, the only reason we provided patient estimates is to give people some sense of how launch is going. And honestly, in all these three countries, given all the different nuances and Europe is definitely a bit more burdensome in terms of figuring out supply chain logistics, getting the medication to the patient, we feel really good about the way it's gotten started. Fingers crossed hopefully, it continues to go in the right direction.

Okay. Understood. And then I was just curious, in Italy, how does the reimbursement work there? I know in Germany, you have sort of this three-phase negotiation. And then in France, you accrue from the beginning. What's the setup in Italy as far as how you do the reimbursement?

Italy, we will launch once the pricing is finalized. So we're not expecting any accrual-type situation in Italy.

Your next question is from Ritu Baral with TD Cowen.

This is Josh Fleishman on for Ritu. Congrats on the quarter. Just curious, was patient compliance also the major factor required that at home self dosing for 803 in ocular DEB? And what was the differentiating factor that resulted in the 3-week dosing schedule for 803 and the once-daily dosing schedule for 801?

Yes. I mean I think one of the main deciding factor was obviously home administration. And the reason was as we said we learned from VYJUVEK. I mean, from what we see from patient feedback, they have asked that can be administered the drug multiple times during the week. So I think we want to give them the flexibility. So we decided that, yes, let's have a volume and then give them the flexibility to administer it as a couple of times during the week. So that was the best regimen for these patients. Again, based on the data that we saw before, we feel pretty confident that this should not make any difference. So again, convenience for the patient at home, we give them a volume and they can administer that volume during the week.

Okay. Very helpful. And then I just have one follow-up, please. On the Italian discussions, we recall that the original guidance for the Italian launch was in mid-2026, now its second half. Is the delay associated more with rescheduling, or is it more on pushback than VYJUVEK efficacy?

This is -- I would not use the word delay. It's tough to predict whether it's in June or whether it's going to be in July, but I would not frame that as the kind of delay with respect to the Italian launch. Whatever we said in the past, we continue to believe that's the time line.

Your next question for today is from Gavin Clark-Gartner with Evercore ISI.

Also on the ocular modified dosing regimens, what happens to the data generated to-date on the prior regimen? Like does this all get pulled into the primary analysis of the study? And then can I just also confirm you didn't change the PFU or the volume of dose in either of the study, right? It's just the frequency.

Correct. No, none of that changes. The dose is correct. So what happens is basically, when we -- the first study goes towards safety, and then we started the Phase III protocol with the SAP. We had to go through back and forth with the agency on the statistical analysis plan, there is a couple of iterations. So this helped us do that, too. So it was a combination. Now we have the final protocol, the green statistical analysis plan with the agency, which they agree and concurred. All of this is important as we start the study. So it's all set and now it's in the process of execution.

Okay. So just to be clear, like if we just take the NK study? For 801. Like all of those 60 patients, those are all going to be enrolled on a go-forward basis at this modified regimen?

That is correct. Yes.

[Operator Instructions] Thank you. We have reached the end of the question-and-answer session and today's conference. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Good morning, everyone, and welcome I hope you enjoyed the beginning of the conference. My name is Alex Buckley. I'm with the Healthcare Investment Banking Group at JPMorgan. And it's my pleasure to introduce firstly, Krystal Biotech. And joining us is Krish Krishnan, CEO and Chairman; and Suma Krishnan, President of R&D. We'll have some time at the end for Q&A. If you could just raise your hand and a microphone will be passed around.

And with that, I will pass over to Krish and Suma to kick things off.

Good morning, everyone. Thanks for coming. Thanks, Alex and JPMorgan for having us. This presentation, roughly about 20 minutes, divided into 2 primary parts. I'll spend about 10 minutes-or-so talking about our thinking with respect to advancing Krystal over the next 5 years. And then Suma will follow-up and talk about the specific deliverables and objectives for 2026. That's how the presentation is structured.

And before I commence the presentation, I'd like you all to take a moment to look at the forward-looking statements, and spend a couple of minutes looking throughout it. We will be making forward-looking statements.

Before I talk about our ambitions for the next 5 years, it's good to spend a couple of minutes on where we are today. And I'd like to start with VYJUVEK, which we launched around September of 2023. I wanted to spend a few minutes for the treatment of patients with dystrophic epidermolysis bullosa. And I want to talk about how differentiated this product is and how it completely changed the way people thought about genetic medicines.

VYJUVEK is the first drug that was redoseable in genetic medicines, and that was the first. VYJUVEK was the first drug that could be applied at home, in a patient's home, and that was the first for gene therapy. VYJUVEK was the first. There was a topical gel that was easily conveniently applicable to a patient's wound and now to the lung and other parts as we advance our pipeline.

VYJUVEK was the first genetic medicine that could be applied by a primary care physician, a health care professional, a caregiver at a patient's home or by a patient. So -- and the reason I mentioned the attributes of VYJUVEK today and how differentiated it is, is there's a read through to a lot of products in our pipeline in terms of some of those attributes or in fact many, if not all, of those attributes.

And so it's important to understand VYJUVEK. And so we launched 2 years ago in the U.S., the launch has gone well. The patient experience, the physician experience on the drug has been really positive. The conveniences has been really good for the patients, especially to the moderate and mild patients to be able to get the drug at home, to be able to travel with the drug has provided a level of convenience, and that shows in the compliance in the drug and it reflects in the number of patients on the drug and the number of reimbursement approvals we get.

And then last year, we launched in Europe in both France and Germany and in Japan. And then are working on a bunch of distribution agreements to tackle some of the countries where Krystal has no plants to self-launch. So our -- as a company, we kind of decided that we were going to self-launch in Germany, France, I mean, the EU4 in U.K. and Japan and all the other countries with patients suffering from DEB, our strategies to use distributors to get the drug to the patients.

So that launch has gone really well and hope -- and our objective with respect to VYJUVEK is to get one other European country launched sometime during the middle of this year, and then work towards the remaining 1 or 2. So overall, we're very pleased that the drug has provided a great benefit to patients with this debilitating disease.

What the launch has done for us is kind of put us in a really good financial position also. So as you can see from the chart. Ever since the launch, we've had almost 10 consecutive quarters of positive EPS. Our balance sheet is pretty strong. And when someone says balance sheet is strong, I think the implication is that we're not planning on any kind of financing in the company over the next -- I mean, fingers crossed over the next many, many years, if not forever.

EPS is positive. But the more important thing on this slide is the 2 manufacturing facilities that you see on the top of the right side of that slide. And Krystal, even before we had our pivotal readout realized that CMC was probably the most important function when you are developing genetic medicine. And it is important not only to have control of CMC, but keep all the trade secrets in-house.

And so we built one facility, about 20,000 square feet-or-so for B-VEC, but then immediately start of construction and a much larger facility as a backup and most of the CMC was in place even before the drug was approved. And what we're doing in the launch is trying to take control of more and more functions in the supply chain. We're trying to bring packaging in-house. In fact, packaging is in-house for the most part. Our drugs to Europe and Japan are being supplied from the 2 manufacturing facilities in Pittsburgh, Pennsylvania.

And I also want to point out that the way the company -- because this idea came from Suma, and we built a lab and started with a handful of scientists working on the idea. We do not have any royalty obligations to any universities or any pharma companies, the idea was not licensed. And so Krystal has complete ownership of all its pipeline and all its products and with the CMC in hand, we feel we're really positioned to talk about ambitions over the next 5 years.

So let me get to our dreams over the next 5 years. Our vision, you got to take a stand somewhere, it's about 4 marketed rare disease products. We say a rare disease because one of the things the launch has done for us is to realize we're really good. We're really, really -- our capability competence is developing and commercializing rare diseases. I think we're very convinced of that.

And in our pipeline, any time you see a rare disease in our pipeline, you should assume the intent of Krystal is to self-launch in the U.S. in EU4 and Japan. That's how we think about our pipeline. And when you see an indication that's much larger, you should assume that at the right time there is still intense to partner with somebody to commercialize that drug.

We do have a strong balance sheet to take development as far as we have to before we get into a commercialization stage, but -- and that's why when you look at our pipeline, while it looks like a lot of items in the pipeline, you can break it down simply into 2 buckets. There's a bucket called the rare disease pipeline, which we plan to develop, commercialize and launch. There is a bucket called the expanded pipeline that we're thinking about advancing to the extent possible before we can find a partner willing to commercialize with us.

And so the focus of the 4 approved drugs and the 10,000 patients you saw is primarily based on 803 for DEB, 801 for NK, 407 for CF, KB111 for Hailey-Hailey and any potential additional rare disease program that could come over the next 4 years. We're not ignoring or talking differently about 408 or 707. In fact, we're super excited about both those programs. We just feel at this point, given where Krystal is, we would advance them to the extent we need to be, and then hopefully find a partner to get to patients worldwide.

So briefly, let me talk briefly about the 5 indications and how we get there, and it's pretty much the last 1 or 2 slides of my presentations because the story is simple. We have KB803, and Suma will get into the details. It treats lesions in the eye of DEB patients. It has a prevalence of about 1,000-plus patients in U.S. and Europe. And I kind of talk about the market potential of that drug. We feel really good about 803 because it's not that different from VYJUVEK.

And we've already had one patient with clinical data, who has had tremendous benefit over many years. While it may be a singular data point, it is a clinical data point and we do know about VYJUVEK, the way VYJUVEK operates and functions. And that ability to dose in front of the eye leads us to neurotrophic keratitis, KB801, which I know many of you are excited about.

We are also enrolling for a registrational trial. So we have 2 studies that we are enrolling registrational right now. That's a much bigger market, but it's still a rare disease. And there are -- there's a prior evidence of a company self-launching the drug. So the ability to sell-launch NK is well understood, not just in U.S. but in Europe and Japan.

And then the exciting data we announced a few days ago for CF, where for the first time a company has been able to deliver 2 full copies of functional CFTR to patients with a null mutation. Null mutation is an unmet medical need. And we're super excited about the data. We're super excited about the level of safety we saw. And again, the concept is a simple nebulizer maybe nebulize for a few minutes, potentially when the drug is approved at home in a patient, by a patient. So it affords all the conveniences that VYJUVEK enjoys for the most part, and we'll work to get there.

And the last drug on that list is Hailey-Hailey, which just phenotypically is very similar to VYJUVEK. I mean it's not the same indication. It's not the same complication on the patient, but Hailey-Hailey is a skin disease with lesions, and we feel really good about being able to tackle that. It's an unmet medical need and has a lot of the common attributes of B-VEC.

So there is -- I'll close with saying, look, the market potential is over $4 billion. The patients are over 10,000. Most of these registrational studies either have started or are planning to be started in 2026. So we feel really good about getting the drug launched over the next 4 years.

And a lot of the pricing negotiations we've had in Japan and Europe and has really helped us refine the pipeline a lot better because you start learning about how people and other countries would pay for a drug, reimburse the drug, the distribution of a drug. And so VYJUVEK global launch has been instrumental for us in figuring out how to prioritize the pipeline.

With that, I'm going to turn it over to Suma to talk about much more specifics on 2026 and what we're going to do over the next 12 months. Suma?

Thanks, Krish. So this is -- here is just basically outline of our platform. I think many of you guys who have been following us, I mean, understand our platform. I think Krish has touched upon it. Again, the advantage of HSV is it's got a large payload capacity, it's got broad tropism, as we have now recognized and as you'll see the additional indications that we are going after because of the broad tropism, flexible administration, redoseable, low immunogenicity, this is pretty important because we can repeat dose.

Now we have in commercial setting with VYJUVEK. We have dosed a large number of patients over several years, and immunogenicity is something that is, again, never comes up, pretty safe. And again, we have a very scalable manufacturing. And that's very important because CMC is one of the biggest, most important things in the gene therapy because a lot of the nuances with all of the assays, the manufacturing, the process validation, I think we've got a very good handle on this. So this makes it very easy for all our pipeline products.

Now let's start with 803. Again, Krish touched upon it. We are very excited for this particular indication. I mean, as you know, dystrophic epidermolysis bullosa even though it's recognized as skin disease, it's not that simple because, I mean, again, collagen VII is essential to hold the basement membrane zone together. So these patients not only are just impacted by the skin, but it's also the eye and internal organs like the epithelia, inside the -- in the esophageal ear regions and all of the internal organs, all of those areas get affected. So this is why this disease is very severe.

Now eye is pretty -- I mean, these patients, again, eye is impacted in these patients, it's pretty bad as much as the skin. I mean, we hear from patients that they get constant blistering and as a result of the blistering these patients, it can really impact days of their lives because they're not able to open the eye in addition to all of the skin and the other complications, this can again affect the quality of the life.

And what happens is with repeat scarring and blistering in the eyes, these patients can have extreme scoring. And in a subset of these patients, because of extreme scarring, it can lead to blindness. So this is an example of one patient that we treated on a compassionate patient -- on a basis.

This patient was 5 years old when he went completely blind in actually both his eyes. I mean he had severe scarring. He underwent surgery to remove the scarring, was treated with plasma-derived and all the other topical treatments that were available to him, but none of that helped. So right after his surgery, he would go blind again because, I mean, again, because of the underlying molecular correction was not addressed.

So for this patient, we -- after his surgery, we started treating them with B-VEC on a compassionate basis. And what we noticed was with treatment of continuous use of B-VEC. These patient's scarring was addressed, I mean his blisters did not come back and he got his vision back. And as you can see from the table, which time he got his complete vision back. And this patient is -- has been on the drug for almost 3 years and has his complete vision. So very exciting. So based on the results and outcome of this compassionate use study, we decided that we should explore using B-VEC in patient's eye prophylactically to prevent blisters.

So again, as you know, 803 is we have an ongoing registrational study where we have discussed with the agency on the study design is a patient-reported outcome. The drug is administered in the patient's home. And we look -- I mean, it's a crossover design where we start the patient with either drug or placebo, and then we look -- and the patient is -- fills out a diary and reports patient -- how many blisters is blistering during the treatment, and then we look at analysis where placebo versus treated.

And so we hope we are actively recruiting patients in the study. We expect to finished enrollment pretty soon, and we'll make an announcement once we finish enrollment, and we expect to have data from that study by end of the year.

The next program, 801, again, pretty exciting neurotrophic keratitis. Again, this can be a pretty debilitating disease. I mean, we have one approved drug called Oxervate, which is a recombinant protein. The problem with -- it's a recombinant NGF. The problem with the protein is it's got a very short half-life. So within minutes, the protein is -- it degrades.

So the outcome of using is Oxervate as a result, you have to administer very frequently. So if you look at the label for Oxervate, it's 6 times a day. And these are usually older patients, very inconvenient. They are not compliant. It's very inconvenient for them to keep applying 6 doses frequently throughout the day. So this is where we believe that our platform would really help these patients with using our platform, we could deliver in NGF in a more consistent way because -- and again, hopefully, in a durable manner, so we can avoid frequent application.

This is based on animal study where we did with a wounding study in mice, where we compared recombinant NGF with our 801 vector that again is coded for 2 copies of NGF. So we have good release of NGF, and as you can see, we see in the wounding model that you see within the -- within the first 10 hours, all of the NGF from the recombinant NGF is gone. And within -- at 34 hours, we consistently still see the same levels of NGF. So again, the main goal for this study for us is to differentiate us from Oxervate, were with infrequent administration and hopefully, with a durable response.

And so where do we stand with this study, again, this is going to be a registrational study. We have increased the number of N for the study based on the animal study. And we have had our discussions with the agency on the protocol design. We have got agreement with the agency, and we -- and this is a registrational study. So this study started out as a Phase I, Phase II study, but looking at the robustness in the pharmacokinetic profile of the data, we believe that we could translate this into the clinic, so we turn this from a Phase I, Phase II to a registrational study.

And this study is recruiting. And hopefully, we are aggressively looking at multiple sites and getting the site getting patients enrolled. The goal for this study is to finish enrollment by end of the year, and hopefully, we can announce some data by end of the year.

407 for cystic fibrosis. Again, we very recently announced our very exciting data on our null patients from this study again from our cohort III. I mean clearly, we have shown robust expression of CFTR in the lung, I mean, across the entire lung. I mean, we have biopsy these null patients top of the lung, middle -- top lobe, middle lobe and the lower lobe across all of the different lobes. Consistently in all the biopsies that was usable, we saw robust CFTR expression and the expression was in the right area.

Again, very exciting because we know that if you can produce the full-length CFTR, hopefully, we know that will translate into clinical benefit. I mean, again, this -- we have this confidence because, again, from our VYJUVEK, this is exactly what we did. We started with our Phase I study where we showed molecular correction. We were able to show full-length collagen VII and anchoring fibrils and which in our first few patients, I mean, based on that, we designed our registrational study. And obviously, Phase III study was very successful. So we believe that if you are going to express the right protein in the right location, that should translate into clinical.

So based on that, we are working with the agency to design our registrational study, so hopefully, we hope to get concurrence with the agency shortly on that study. And once we have that, we are going to proceed into the registrational study and start enrolling patients first half of this year.

Last not least, this is another exciting program, Hailey-Hailey. I think this is an exciting program because there is -- there's a real unmet need. There is no therapy available for these patients. I know as Krish mentioned, it's very similar to dystrophic epidermolysis bullosa. But the -- this is a genetic disease. The onset of disease is usually in adolescence, that's when the disease begins, and it's a dominant disease. So it's very interesting.

Usually, this disease is, if 1 member in the family has it, you'll see multiple family members have this disease. People don't talk about it. I mean there is Facebook, even for us as we explore, and we learn to understand and study this disease a little more because we are beginning to now engage with patients and try to really understand.

We realize there's a lot of patients, but they do not talk about this disease, though the -- I mean, it's estimated 10,000 to 15,000 patients in the U.S., we expect even more because, as I said, this is usually because there are areas that are affected by this disease is usually in -- where in the growing or under the arms, where there's excessive sweating.

And patients usually suffer in silence because they're a little bit embarrassed about the disease and they -- it's pretty painful, and it never goes away. It keeps recurring, and it's a constant -- just like EB, it's a constant chronic disease for these patients. Again, unmet need. Patients just -- and there's -- as you can imagine, adults with areas that's affected that can really affect the quality of life and can be pretty miserable.

So we hope with our approach, very similar. We use the HSV vector. We're going to formulate into a gel. We have learned a lot from VYJUVEK. So hopefully, we can come with even a clever, right, instead of mixing the drug with the gel, we'll hopefully come with prefilled clever ideas of prefilled syringes. So application becomes very easy.

And again, so we are pretty excited. Again, we have filed the IND. We have got clearance from the agency. We are in communication with the FDA. We have agreed upon a clinical endpoint, which is going to be a patient-reported outcome. The FDA has given us guidance on what's needed. We have -- the scale that we have presented is acceptable to the agency. Now we are in the process of validating the scale, again, because this is a pretty new indication. Again, there is nothing that's out there. The scales are not developed specifically for this indication.

So we are in the process of actively validating the scale, which we hope to finish in the first half of this year. And once the scales have been validated, we hope to get into a clinical trial. And we hope to get into -- directly into registrational trial because we know based on some of our animal model, and we can capitalize what's based on VYJUVEK, the expression profile, we hope that we can accelerate this program.

And there's a lot of patients. Again, it's -- the good thing is one person in the family has it. There's multiple people that are involved. So we hope with the nature of this disease, we will be able to enroll, make more -- create more disease awareness and enroll these patients pretty quickly.

So again, very exciting clinical program. We have potentially 3 registrational trials, 803, 801 and hopefully 407. And also 111, we think we can get into registrational trial by this year. So 4 exciting registrational trials this year. And then with 408 and with our 707, those are also exciting programs, but I think we are continuing to do additional clinical studies and hope to announce some data in the future.

I mean, again, I want to really make this point. The clinical study is one aspect, but there is the whole CMC aspect of it. And I think as you -- as we have announced with KB111, we have the platform technology, and we hope to apply for the platform technology for all of these programs. And I think it makes a big difference because, again, we interact with the same division, a lot of our manufacturing and process validations, all of that, we can really capitalize on what was done with VYJUVEK.

So we don't have to do those extensive validation and especially assays. They're very tricky. I mean we have 12 different assays to release each of these products. I know people don't understand it, sometimes underestimate CMC. Even if you have one assay that does not work or fail, you're stuck. The FDA will not clear you because they're very picky on these kinds of things.

And fortunately, there's overlap on these -- all these assays. 90% of assays are very similar across all of the programs. Again, that makes it very easy, so that we don't have to spend excessive time and effort, and we have a team that's very well versed that we can use for -- we don't have to build expertise every for every program because of the platform technology.

And so we are very excited with all our clinical programs and hope to execute all of them as we promise for this year. So 2026 is an exciting year for Krystal. I see. And that concludes my talk.

Thank you very much for the updates and fantastic to see the progress. It certainly sounds like an exciting 2026. I'll open to questions from the room. If not, I've got some here.

Maybe just to start. Could you speak a bit more about the global launch for VYJUVEK and particularly, I suppose, in the rollout in Europe? And how you expect that cadence to go?

Yes. I think -- can you hear me?

Yes.

I think we launched first in Germany and subsequently in France, somewhere, I believe, around Q3. Each country, what we learned that each country, the distribution and the reimbursement is a bit nuanced. And it takes a certain amount of time to understand how to get a generic medicine to a patient's home because across the world, like as I mentioned, VYJUVEK can be applied at home by a patient.

And some of these countries, you have to work with the existing infrastructure to make this amenable or possible. So there's a little bit of growing pains, but I think we had thought about this way before we got the approval. And so both the launch in Germany and France have gone really well. We also launched in Japan, which is a very -- which is very different from both the U.S. and in Europe.

And we also spent a lot of time negotiating a reimbursement price in Japan, which gave us a lot of insight into how to -- the clinical data of VYJUVEK, the pivotal data of VYJUVEK was really, really strong, and that helps a lot. But it's also good to understand local nuances as you negotiate a price in all these different countries. So we were fortunate to get a good price in Japan, and we hope that, that provides a window into a potential outcome in Europe, which is traditionally a bit difficult to get the extent of pricing that a sponsor usually requires.

We're on track to launch in Italy sometime mid this year, all the efforts now that we've done a couple of countries in Europe, I think we seem to have the recipe to kind of how to go about launching in all these different countries. And then our plan, obviously, the 2 remaining ones are Spain and U.K., and we'll get that in time.

So overall, the launch has gone really well. We're also aggressively going after distributors to get this medicine out to patients in countries that are outside the EU4, U.K. and Japan. And so whether countries like Eastern Europe, Israel, South America, Canada, Australia, so all these countries, there's a big effort in the company to get them generic medicines.

Fantastic. And moving maybe to the rare disease pipeline, which you spent some time speaking to. Could you maybe speak about how those indications were nominated and maybe the potential differentiation there of Krystal within those spaces?

I'll say, and I'll have Suma add a few things. Look, it's -- there's a burden and a curse with platform technology. On one hand, you could do a lot -- you get a lot of ideas. On the other hand, you got to be careful you pick the right ideas because everything in drug development takes many years to realize you made a mistake.

But I will say one of the good things at Krystal is if we start realizing that either on the clinical side or on the reimbursement side, we're not going to be successful, we stop quickly because we have a lot of ideas. And so it has taken us honestly, a couple of iterations to get at this pipeline that we showed today. That hasn't come on first guess.

For example, the CF program has been around for 6 years, but we were so convinced that it was a great program that against all odds and some odds were not our doing, we got to this point. Like we were relentless in the pursuit of CF because we believed we had a differentiated product.

We finally have arrived at a good pipeline. But the basic criteria, as Suma mentioned, large genes, we try to stay in areas where other vectors can deliver genes. We like the redosability concept. We like the idea that a patient can dose at home. And so we look for indications that have those.

Yes. I think, Krish, you covered most of it. But as Krish said, the big thing is for us is getting this -- I mean, we are the first ever gene therapy that can be home dosed by patients. I mean it took us extensive working with the agency, collecting the data. So again, once we have done that for one product, it becomes very easy. And we are a gene therapy.

So again, we need to work on indications that differentiate, right? If there are indications that this one and done, if you have an integrating virus and that can suffice, then that's not what we -- that's not the area we'll play with. Skin is a very interesting organ, again, because it turns over. So one and done solutions are almost impossible because it will turn over, unless you go into stem cells complex. So that's where we look at those indications that we can really -- our platform can work that -- and there are no other products before.

So -- and lung is another same as the skin. I mean, usually one-and-done solutions don't work for the lung. So again, that's an area that we are in. So we are very deliberate in when we pick indications, again, should they -- I mean, can we -- I mean, from platform, we can make all of them and we can scale them. That's not an issue.

And again, I work with Krish and Krish's team with [ Stephane ] to really understand the market and the competition and the landscape before we fully put our engage.

Super. And I want to open again to the room for questions.

I'm [indiscernible] from Laboratorios Sophia. For your ophthalmic assets, KB803 and KB801, have you considered any kind of global partnerships or regional partnerships. What is your strategy behind that?

Because -- as I mentioned, because 803 and 801 are rare diseases, and it's something we strongly believe we can handle -- we can self-launch. We have not looked for partnerships in either of 801 or 803 at the moment. There have been occasional inbounds on interest, but not specifically for 801, 803. Yes.

If there are no further questions, I think we can wrap up. And thank you very much again for your time.

Thank you.

Thank you.

Thank you for standing by, and welcome to Krystal Biotech's Clinical Update Call for Cystic Fibrosis program, KB407. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to hand the conference over to your host, Stephane Paquette, Vice President of Corporate Development.

Good afternoon, and thank you all for joining today's call. Earlier today, we announced positive interim clinical results for Krystal Biotech's cystic fibrosis program, KB407, including molecular confirmation of wild-type CFTR protein expression in patients' lungs. The press release is available on our website at www.krystalbio.com. Both the press release and today's presentation have also been filed as an 8-K with the SEC. Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development; Trevor Parry, Vice President of Product Development; David Sweet, Director of Clinical Development; and Dr. Jorge Lascano, Professor of Medicine, Associate Director of the Adult Cystic Fibrosis Program and Director of the Cystic Fibrosis Therapeutics Development Center at the University of Florida.

This conference call will and our responses to questions may contain forward-looking statements. You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings.

The agenda for today's call is outlined here. Krish will provide a few remarks to open the call, after which Dr. Lascano will share his perspectives as a practicing clinician and thought leader on the unmet need that remains among cystic fibrosis patients unable to benefit from modulator therapies. Suma will then provide an overview of our lung delivery platform and the potential of our KB407 program to fill this treatment gap. David Sweet, clinical lead for our KB407 program, will walk us through today's clinical update and confirmation of CFTR delivery to patients' lungs. Suma and Krish will close the call with an overview of next steps for the program and Krystal. Trevor Parry, our Head of Product Development, will join all speakers in the Q&A session.

With that, I will turn the call over to Krish.

Thank you, Stephane. Good afternoon, everyone. Welcome to the call. We are very excited to share a long-awaited milestone for our cystic fibrosis program today. We have now confirmed the successful delivery and expression of wild-type CFTR protein in multiple patients with cystic fibrosis, a breakthrough for the field made possible by the unique attributes of our HSV-1 platform. With the wild-type payload and already confirmed functionality in multiple preclinical models, today's readout gives us the conviction to move rapidly into repeat dosing. We're working closely with the Cystic Fibrosis Foundation to initiate repeat dosing before midyear.

Thanks to the FDA's familiarity with our HSV-1 platform, we also believe there is an opportunity to accelerate development of KB407 towards a potential approval. As Suma will share, we are discussing study designs with the Cystic Fibrosis Foundation and the FDA to make the repeat dosing study registrational. Our urgency is driven by the clear unmet need that exists among patients with cystic fibrosis. We estimate that the number of patients ineligible or otherwise underserved by modulators is in the tens of thousands.

Dr. Lascano will expand on the burden these patients face in the absence of corrective therapy. I will also take this opportunity to flag the platform implications of today's readout. The lungs of patients with cystic fibrosis are widely regarded as some of the most difficult to access with a nebulized therapy. Successful delivery with KB407, combined with prior clinical evidence from our alpha-1 antitrypsin program, KB408 and the lung cancer program, KB707, underscore the tremendous potential of HSV-1 for the treatment of a wide range of lung diseases.

With that, I'll hand it off to Dr. Lascano to share his perspectives on the urgent unmet need that exists among modulator ineligible patients with CF. Dr. Lascano?

Hi. Good afternoon. My name is Jorge Lascano. I'm a Professor of Medicine at the University of Florida. I'm also the Associate Director for the Adult Cystic Fibrosis Program and the Director of the Cystic Fibrosis Therapeutic Development Center at UF. Thank you for the opportunity to speak today. I'm a pulmonologist by training. I have spent most of my career taking care of individuals with cystic fibrosis. My role today is to provide some clinical context on why despite all the tremendous advances in the care of CF patients, there still remains a persistent unmet medical need.

Over the next few minutes, I'll briefly review how CF treatment has evolved during the modulator therapy era and identify the population that has not benefited from these therapies. I will also discuss why nucleic acid-based approaches, despite some historical challenges, continue to remain clinically relevant today. My comments are generally based on published data, data from the registry and clinical experience, and they are intended to frame the importance of the work that you will hear about shortly. Next slide.

To begin, let me acknowledge the importance on how transformative CFTR modulators have been for many patients with CF. Data from -- for very strong clinical trials have shown how sustained improvement in terms of lung function, reduction in pulmonary exacerbations, improving nutritional status and increased survival, all these in patients who are eligible for highly effective modulator therapy. From a clinical perspective, the modulator era has literally changed the expectations for many of our patients. Individuals who previously experienced lung function decline, repeated exacerbations have now maintained or even improved their health status, including their pulmonary status over time. However, there's still a subset of patients for which modulator therapy really have not been beneficial. Next slide.

Despite the success of modulators, at least 10%, if not more, individuals with cystic fibrosis either cannot receive or cannot tolerate modulator therapy. So this population includes patients with rare or minimal function mutations, such as nonsense mutations that do not produce CFTR protein. And even if they are or they have mutations that are receptive to this therapy, some patients just don't get the meaningful benefit that other patients do. Next slide.

So for patients who do not benefit from CFTR modulators, the clinical burden of CF remains substantial. Registry data shows continuous decline in lung function, higher rates of pulmonary exacerbations and persistent chronic airway infection in this group. Many continue to require hospitalizations, prolonged antibiotic exposure and intensive daily therapies. Importantly, these patients do not share the same survival gain in modulator treatment populations. In clinical practice, this translates into early considerations for lung transplant and ongoing uncertainty regarding long-term outcomes. From a patient perspective, this group of patients experience high treatment burden with limited disease-modifying benefits and experience that contrasts sharply with the progress seen elsewhere in the CF community. In general terms, these patients feel that they have been left behind. Next slide.

So cystic fibrosis is fundamentally a monogenic disease caused by a defect in the CFTR gene. CFTR modulators work by improving the trafficking of the function of certain mutant protein, but they cannot address all mutation classes. For example, who -- mutations that do not produce a functional CFTR protein, alternative strategies are required to address these issues. Nucleic acid-based approach offer the theoretical advantage of addressing the disease upstream from protein dysfunction. Importantly, this strategy has the potential to be mutation agnostic, which is particularly relevant for patients with rare or previously unaddressed genotypes. Next slide.

Gene-based nucleic acid therapy for cystic fibrosis are not new concept, and it's important to recognize that many efforts did not result in clinically meaningful benefit. Prior programs encountered several well-documented challenges. This included difficulty delivering therapeutic material through thick infected airways mucus, limited transduction of the airway epithelium, vector cargo limitations given the size of a full-length CFTR and immune response that limit the ability to repeat dosing. That said, these efforts were not failures in the scientific sense. They generally allow us to learn more, give us critical insight into the airway biology vector design, delivery routes and clinical trial methodology. Much of what the field understands today about what does not work in CF gene therapy really came directly from these previous programs. Next slide.

The unmet medical needs for patients who do not benefit from modulators remain unchanged. At the same time, the broader field of gene therapy has evolved considerably. Advances in vector engineering, manufacturing scale and our understanding of pulmonary biology has altered the landscape compared with early attempts. From a clinical perspective, the question is no longer whether alternative disease-modifying therapies are needed for cystic fibrosis, but how the lessons learned over the past several decades can be applied to develop approaches that are safe, effective and durable.

With that context in mind, I will now turn things over to the Krystal team to discuss their gene therapy program and share an update on their progress.

Thank you, Dr. Lascano, and good afternoon, everyone. I'm very happy to be sharing today's update, which we believe significantly derisks our KB407 program for the treatment of cystic fibrosis. As Dr. Lascano just touched on, the lung has been a difficult tissue to target with gene therapy. Many gene delivery modalities are not amenable to nebulization. And if they are, they must contend with multiple barriers, which may limit access to target epithelial cells. Then there is the issue of cell turnover requiring the ability to repeat dose. Finally, in the case of cystic fibrosis, there is the additional challenge of large genetic cargo.

We have long believed that our clinically validated HSV-1 vector already FDA approved and shown to be safe, effective and suitable for repeat dosing of patients with dystrophic epidermolysis bullosa have broader potential as a gene delivery solution for other high turnover epithelial tissues, including the lung. This belief has only been strengthened with the recent clinical readouts and evidence of successful gene delivery with KB408 and KB707 in patients with alpha-1 antitrypsin deficiency and lung cancer, respectively. With today's readout, we have now also demonstrated successful gene delivery with KB407 in our patients with cystic fibrosis.

Delivery to a cystic fibrosis lung is the highest potential bar for our platform and a critical step towards our goal of bringing the first mutation-agnostic therapy to patients with cystic fibrosis. As a brief introduction, KB407 is our inhaled genetic medicine designed to deliver 2 copies of the full-length CFTR gene to the lung and thereby restore CFTR-mediated ion transport, mucus clearance and lung function. The program is supported by a robust preclinical data package in which we have shown across a variety of models that KB407 efficiently transduces clinically relevant cell populations.

KB407-encoded CFTR is full length properly localized and functional. And as demonstrated in our GLP- IND-enabling toxicology studies in NHPs, KB407 is amenable to nebulization, well tolerated and broadly distributed in the airways with payload expression persisting for at least 28 days. We saw no notable toxicity in our NHPs studies and did not reach an adverse dose, underscoring the attractive safety profile of our HSV-1 platform. Collectively, these data provided clear support for progression of KB407 into the clinic and more recently, sanctioning of our Phase I study protocol from the CFF TDN.

I will now hand it off to our KB407 clinical lead, David Sweet, to walk through our CORAL-1 phase study design and today's data update. David?

Thank you, Suma. The Phase I CORAL-1 study was designed to evaluate preliminary safety and tolerability of ascending doses of nebulized KB407. Cohort 3 also assessed molecular correction by the highest KB407 dose. The study schematic is provided on the right. We provided a safety update for Cohorts 1 and 2 previously. KB407 was well tolerated by all patients dosed in those first 2 cohorts. Today's update is focused on safety and molecular assessments from patients in Cohort 3.

The key enrollment criteria for Cohort 3 included adults with a confirmed diagnosis of CF, a lung function of 40% to 100% as assessed by percent predicted forced expiratory volume in 1 second or ppFEV1 and no more than 3 patients in this cohort being on concurrent modulator therapy. Patients received 10 to the 9 plaque-forming units of KB407 via nebulization once daily for 4 consecutive days and then underwent a post-dose bronchoscopy 1 to 4 days after last KB407 exposure. Endobronchial biopsies were examined for any aberrant histological features as well as to establish evidence of vector transduction and consequent molecular correction via immunofluorescent detection of a viral marker and/or human CFTR protein where feasible.

Patients were then followed for 8 weeks and samples were collected for vector shedding and immunogenicity analysis. Seven patients were ultimately dosed with KB407 as part of Cohort 3 and had post-dose bronchoscopy performed, 6 of which were successful, meaning the bronchoscopy yielded biopsy samples containing suitable airway histological features that allowed for substantive molecular analysis. The demographics of all 7 patients are shown here. 3 of the 7 were modulator eligible. Lung function as assessed by spirometry ranged from 45% to 82% across patients.

Endobronchial biopsies were collected from the left and right lungs of each patient with clinical sites required to collect at least 4 and up to 10 biopsies if tolerated by the patient during the procedure. As noted previously, bronchoscopies were conducted 24 to 96 hours after the last dose of KB407, allowing for flexibility to account for availability of a bronchoscopy suite and scheduling for both the physician and the patient. Biopsies were then immediately preserved in paraformaldehyde and shipped to Krystal where they were embedded in paraffin, sectioned and stained as appropriate.

For patients without confounding endogenous CFTR expression, in other words, patients with Class I mutations, biopsies were stained to detect exogenous CFTR. The remaining patients were assessed for successful vector delivery to the airways via immunofluorescent detection of a viral marker, ICP-27, which is expressed from KB407's backbone soon after cellular transduction. The key readout for this interim analysis was the percentage and distribution of KB407 transduced conducting airway cells based on expression of full-length human CFTR where possible or expression of the viral marker.

Here, we see representative CFTR protein staining via immunofluorescence and airway biopsies harvested from a healthy donor and a patient with CF harboring G542X homozygous mutations, serving as positive and negative controls, respectively, for the study. The positive control biopsy was procured commercially while the CF Foundation provided the sample used as a negative control. Additionally, the protein staining was conducted using the CFF protocol and preferred antibody for CFTR visualization, clone AB596. The data suggests that CFTR can be specifically and predictably detected via IF based on the underlying genotype. It's important to note that all patient samples from the CORAL-1 study were stained and imaged in parallel to these controls, so all results are directly comparable.

Key findings from endobronchial biopsies harvested from the first Cohort 3 patient with 2 Class I mutations are shown here. This patient is heterozygous for a frame shift mutation and premature stop codon in CFTR with a baseline lung function of 64%. A post-dose bronchoscopy was conducted 96 hours after the last day of KB407 administration and 7 biopsies with acceptable airway histology were successfully collected for CFTR protein analysis. All 7 biopsies were positive for human CFTR and when quantifying the proportion of DAPI positive cells that were co-positive with CFTR in these samples, 42.1% of cells at the conducting airway surface were found to be positive for the KB407 encoded human transgene. On the right are representative H&E and IF images of a biopsy harvested from the right middle lobe of this patient. Broadly disseminated CFTR signal across the conducting airway surface with an apical distribution pattern can be seen.

Shown here is the second set of representative histology and immunofluorescence images from a different biopsy site in this patient, demonstrating consistent apical delivery of the full-length human CFTR expressed from KB407. Parallel stained negative control samples were devoid of meaningful CFTR signal as expected. We next sought to define the cell types of human airways amenable to KB407 transduction. Previously, we showed that both ciliated and secretory cells, the cell types that express the bulk of CFTR in the airways, were positive for the vector in nonhuman primate lungs after receiving nebulized KB407. Those findings extended to humans as can be seen here. Our null patient samples were costained for human CFTR and cell type specific markers of ciliated, club and goblet cells. All 3 cell types were found to express CFTR after KB407 exposure, demonstrating a broad airway cell tropism for our vector platform technology that has positive implications for both KB407 and our pipeline of inhaled programs.

Results for our second null patient are shown here. The patient has 2 Class I CFTR mutations and is heterozygous for premature stop and start loss mutations with a baseline lung function of 45%. A post-dose bronchoscopy was again conducted 4 days after KB407 exposure and 5 usable biopsies were obtained. Again, a meaningful proportion, 29.4%, of cells at the conducting airway surface across these biopsies were found to be positive for KB407-encoded CFTR with an apical expression pattern as can be observed in the representative images shown on the right. Importantly, a broad distribution of the transgene to all tested lobes was observed in this low lung function non-modulator patient, indicating successful vector delivery to notoriously difficult to access and treat tissues.

Shown here are additional histology and immunofluorescence images from a second biopsy site in this patient, again, demonstrating consistent apical delivery of full-length human CFTR expressed from KB407. Given the potential for background CFTR expression in the remaining 4 patients, analyses of KB407 transduction were conducted based on expression of the ICP-27 viral marker. Results for each patient are briefly summarized on the following slides.

On this slide, we have the results from our third Cohort 3 patient. This patient is ineligible for modulator therapy with mutations, including polythymidine tract variation as well as polymorphism at the M470V locus, which contributed to baseline lung function of 45%. A post-dose bronchoscopy conducted 1 day after last KB407 exposure and 5 usable biopsies were obtained. Transduction in over 36.5% of conducting airway cells was observed in line with the high rates of transduction observed by CFTR staining in all patients.

Similar levels of transduction were seen throughout the lungs of patients in Cohort 3, irrespective of genetics, baseline pulmonary status or concurrent modulator use. Here, patient 4 is someone who is ineligible for modulator therapy who has a premature stop codon as well as a missense mutation leading to baseline pulmonary disease with ppFEV1 of 69%. 24 hours after their final dose of KB407, bronchoscopy revealed successful transduction of 33.8% of cells. Patient 5 is homozygous for F508del mutations who is concurrently on modulator therapy with baseline ppFEV1 of 54%. 72 hours after their last dose of KB407, they exhibited 36.8% of conducting airway cells positive for KB407 transduction. Finally, patient 6 is also homozygous for F508del on modulator therapy with baseline pulmonary function of 59%. This individual also had bronchoscopy performed 72 hours after their last dose of KB407 and had 31.4% of cells positive for KB407 transduction.

A summary of the findings from all Cohort 3 patients is provided on the next slide. Consistently, transduction of the conducting airways has been demonstrated in all biopsy patients via staining for either CFTR or a viral marker as feasible. While patient-to-patient variability in transduction efficiency was observed, as would be expected, over 29% of cells were positive post dose for all treated patients, exceeding the approximately 5% to 15% target number that is currently predicted to provide meaningful functional correction of the CFTR defect underlying lung function loss in CF. The apically localized staining pattern of CFTR in Class I patients post dose is suggestive of proper post-translational modification and successful trafficking of transgene. In addition, the vector tropism established by cell type specific staining indicates delivery to the clinically relevant cells that are known to express the bulk of CFTR in healthy patients. Finally, the favorable pharmacokinetic profile implied by robust detection of CFTR signal up to 4 days post dose is a positive indicator for potential patient-friendly weekly dosing of patients in upcoming studies.

Turning to safety. KB407 continued to exhibit a favorable tolerability profile. Importantly, we continue to note stable percent predicted FEV1 levels throughout the 8-week study period, underscoring the safety of the top dose. All KB407-related adverse events were transient with all but one being mild to moderate in severity. Of note, one serious adverse event was reported 24 hours after bronchoscopy for one patient. The independent data monitoring committee reviewed the case and deemed the adverse event as related to bronchoscopy procedure and not KB407. As with other AEs, this event was transient in nature, resolving within 5 days of onset.

Neutralizing immunity against nucleic acid-based therapies continues to be of particular interest as this can decrease efficacy of some vectors with repeat dosing, thereby affecting durability of chronically administered therapies. Consistent with data seen across Krystal's programs, no significant neutralizing antibody response has been observed after KB407 administration, suggesting that long-term administration of this inhaled therapy will not become less efficacious over time.

Finally, data from Cohort 3 continued to demonstrate that inhaled delivery of KB407 is highly localized to the lungs as evidenced by lack of systemic vector distribution. Altogether, the safety and tolerability data paired with exciting evidence of molecular correction has provided confidence in advancing KB407 into repeat dosing.

To discuss next steps, I'll pass it back to Suma.

Thank you, David. We believe that today's update clearly demonstrates that KB407 can safely and efficiently deliver CFTR to the lungs of patients with cystic fibrosis. Moreover, we saw a high degree of reproducibility, broad airway dissemination with all usable biopsies positive for CFTR or viral marker, encouraging durability with CFTR protein expression detected at least as far as 96 hours post dose and a CFTR protein distribution pattern suggests of appropriate apical localization. Building on these exciting results, we have already started working with CFF TDN on a repeat dosing CORAL 3 study design, which has been submitted to the FDA. The final study details will be disclosed once alignment with the FDA is reached, but the overarching goal will be to assess the functional impact of repeat KB407 dosing by spirometry without the confounder of bronchoscopy.

We believe we also have an opportunity to sharpen the path to a potential approval. The unmet need for modulator ineligible patients is evident. This is a debilitating and ultimately lifespan shortening disease for which no corrective therapy is available. With our HSV-1 platform already significantly derisked, we believe KB407 presents a risk-benefit profile suitable for potential accelerated development. As a result, we are working closely with CFF TDN and the agency to explore potential study designs that could support registration on success. We expect to align with the FDA on the study design in the months ahead and initiate our registrational study in the first half of this year. We also expect to file for platform technology designation for KB407, which may bring additional efficiencies to the program and potential BLA filing.

The results we are reporting today parallel our Phase I/II findings for B-VEC, where we confirm the successful delivery and expression of full length and appropriately localized Type 7 collagen in the biopsies of patients. These findings ultimately translated to profound clinical benefit in our Phase III GEM-3 study. With KB407, we have again confirmed expression and appropriate localization of our gene of interest, and we look forward to advancing KB407 into a registrational repeat dose study soon. I would like to thank our study investigators, the CFF and most importantly, our patients for their support and participation in this study. I will now hand the call back over to Krish.

Thank you, Suma. I would like to close today's call by highlighting the growing momentum in our clinical pipeline of rare disease medicines. With today's readout confirming full-length CFTR gene delivery to the lung, we are putting KB407 on an accelerated path towards a potential registrational data readout and filing. Success with KB407 would open up a $2 billion-plus market for Krystal without competing head-to-head with modulators. And alongside KB407, we also have our rare ophthalmology programs, KB803 and KB801, both of which could deliver registrational data readouts later this year. With momentum building across all 3 of these programs, plus our newly announced KB-111 program for Haley-Haley disease, we're well on our way to building a true portfolio of high-value rare disease medicines. Rare disease is an area we understand well and an area where we can unlock significant value through expedited development and our global commercial infrastructure. I look forward to sharing additional updates on all of our rare disease programs in 2026. Thanks for listening, and I'd like to now open the call for Q&A.

And the first question today is coming from Ritu Baral from TD Cowen.

Apologies for the background noise. Krish, am I putting the dots together correctly? Are you going to approach FDA with a potential approval on CFTR biomarker? It's something you and I have discussed before. Could CFTR expression serve as a biomarker for approval? And is there a way to do it without invasive bronchoscopy that would still preserve the ability to measure even on a relative basis, lung function in these patients? And also, when might we get first lung function from the repeat doses or even these patients if they are turned over to repeat doses? And my second question has to do with biofilm distribution and transduction through the biofilm or around the biofilm and how that might relate to outcomes.

Thanks, Ritu. To be very clear, I think our approach right now is we have submitted, as we mentioned in the call, we're talking to the FDA. We intend to get -- we intend to make the repeat dosing study registrational. And we're looking at an endpoint -- we're looking at an FEV1 endpoint, not a biomarker based. And I'm going to turn it over to Suma to provide some more clarity. But the objective is based on the data, working closely with the TDN and with the agency, we aligned on a study design on repeat dosing that would be registrational and looks at FEV1 as an endpoint in the study.

Yes. For clarity, again, I think expression is really important to demonstrate, and this is something what the CFF Foundation and TDN has been asking for because I think that, as you know, is a proxy for clinical benefit or clinical effect. And I think we have clearly demonstrated that in all our patients that we have biopsies across different portions of the lung, like upper lobe, middle lobe, and we consistently see expression. As you know, these biopsies are like tiny little biopsies across the large surface area of the lung, and it's pretty impressive that we see ranges of 30% to 40% of cells positive for full-length CFTR. So that's very encouraging.

And I think that also addresses your second question regarding biofilms. Remember, these patients are very sick. Some of these patients had FEV1 as low as in the 40s. So they're pretty sick and they have high thick mucus. So in spite of this, we were able to deliver through nebulization, our product and see expression. So I think we are very encouraged by that. So even with a single dose, we were able to show that. So I think with repeat dose as we keep repeat dosing, we feel that the -- with the clinical benefit improving, it's going to improve the efficiency of transduction and administration. So we're not concerned. I think this is something we are sharing this with the agency. We have shown -- we have basically demonstrated expression, function and nebulization reproducibility. So I think these are the key factors.

And obviously, this is an unmet need. We are still in negotiations with the agencies. There are several approaches that the TDN has suggested to expedite this particular program because they have -- TDN has met with the agency and has communicated the need for these patients -- a need for something for these patients because this is a patient population that's been left behind. So -- and these are severe patients. So I think we have come up with some creative study designs. I mean we are not ready to speak about it right now. But TDN has recommended and we are very confident like we have a very accelerated path for these studies. So again, once we have some agreement and clarity, we will communicate that. So along with expression, some sort of a hybrid model that we have shown expression along with some sort of clinical benefit, we will -- we are certainly exploring an accelerated pathway for the registrational trial.

And the next question will be from Roger Song from Jefferies.

Great. Congrats for the data, very impressive. Two questions from us. One is the -- I think the CFTR expression is exceeding the initial expectation at least the initial guidance, 5% to 15%, 10% threshold. My question is, how do you think about this higher expression level going to correlate with the lung function potentially down the road? Is that like proportional or they reach certain level and then every now you're reaching a certain level, you get a similar functional benefit. So that's number one question.

Number two, just clarifying the registrational path here is you used the accelerated path. Is that a correct interpretation is you are pursuing the accelerated approval path plus future confirmatory trial? Or this is we're getting the full approval -- potentially full approval?

Yes, I can take this question. With regards to CFTR expression, you have to remember these patients do not have any expression. We're going to start with the null patients. So in rare diseases, you hear numbers like even 10% is good enough. Any CFTR expressions that can aid with clinical benefit, I think, is beneficial. And we saw that even with VYJUVEK or with B-VEC. We didn't need full collagen VII. I mean we biopsy patients in a subset of anchoring fibrosis enough for them to show healing and good clinical benefit.

So you don't need 100%, but we are very impressed because even with a single administration, we see anywhere between 25%, 30% to 40%. And this is in like a very small section of the biopsy. So if we see 30% across the entire lung, I think -- I mean, we would expect to see benefit. So I think the numbers we see, we feel good. And I think the beauty of our product is that we can repeat administer, so we can sustain those levels, right, by weekly administration. We know that there is no effect -- immunological effect where the drug can -- is still effective with repeat administration. We have shown that with VYJUVEK and other products. So again, with that ability to repeat dose and sustained effect, we have -- we see this is not an issue.

With regarding to your second question on approval path, yes, obviously, we are going to -- I mean, as you know, with the agency, I mean, we've been working with this agency very closely. They're very familiar with our platform, and we have several applications with this particular division. And I think this division is sensitive to rare diseases with unmet need. And they have clearly communicated pathways for accelerated pathways for drugs that unmet need. So obviously, we are going to explore those pathways. So we will discuss with the agency. As I said, I don't want to say anything more until we get complete agreement with them, but we are going to evaluate that to see if there's some sort of a hybrid where we can get something approved and then post marketing, continue to evaluate efficacy. This is something that's on the table.

The next question will be from Alec Stranahan from Bank of America.

Congrats on the updates today. Really great to see the progress from the pipeline. Two questions from me. First, what kind of frequency do you see as being the ideal profile for a therapy such as this? Is that weekly or maybe something else? And given the good tolerability you've seen at the highest dose level, will you select one schedule and dose for the registrational study? Or would you aim to enroll a few different dosing regimens, maybe even at a higher dose in the study?

And then second, could you give us a sense of the viral fill rate for 407? Or any color around assays that you're using to ensure appropriate encapsulation? Like is there a situation where a patient could screen positive for the viral marker, but maybe not have transduced CFTR gene?

Okay. So the first question, I'm going to have David address. And the second question, Trevor, you can answer that question.

Yes. Thanks, Suma. Thanks, Alec. So yes, it's too early to say at this point or at least we can't talk too much about it about the dosing frequency ideally. What I will say is we are encouraged by the fact that in patients with -- in null patients, we're seeing expression of full-length CFTR even 96 hours after the dose of KB407. That gives us confidence that at least weekly dosing should be sufficient to kind of get these levels where we need them to be at, right, over that 5% to 15% of wild-type CFTR expression. And so I think this does give us a good launching off point on how to choose our dosing strategy very thoughtfully, and that's kind of what we're in discussion with the CFF TDN as well as the FDA. So TBD on specifics, but yes.

I'll just add to David's point. I mean, again, I think for us, the best bet is going to go weekly because I know from a safety perspective, we have done this with our 707. There is no safety concern because we have given more frequent dosing, and we see our vector is conducive to that. And again, keep in remember -- it's easy. These patients are nebulizing anyway like -- because they have constant infection and use of nebulizer is consistent with these patients. And we will -- again, just like VYJUVEK, we are targeting home dosing. We are using a nebulizer that will be conducive to home dosing and these patients will be able to, again, home dose at -- so from an administration standpoint and ease of use, this is going to be very practically if this drug gets approved for commercial purposes. So Trev, can you answer the second question?

Yes. So the second question related to the viral marker we're looking at. So that viral marker is delivered as a gene in the genome that co-packages CFTR. It's not a protein that is delivered in -- that's packaged into the virus, but it's expressed from the genome once the genome is successfully delivered to the nucleus of the target cell. So the only way that you can see viral marker expression is that you see the successful delivery of the genome into that cell and then subsequent marker expression and that genome inherently also packages full-length copies of CFTR. So we think it's clear that if the vector can express ICV 27, it will be co-expressing CFTR in the cell.

The next question will be from Gavin Clark from Evercore.

This is Gautam on for Gavin. So 2 quick questions from our side. One on the safety here. For the patient with asthma exacerbation, when was their bronch done after dosing? The idea is that if it's done longer after dosing, it could be less likely to be dose related. So I just wanted to get some clarity on that. And then on the adverse events, can you give us some more color on any signs of causing acute FEV1 declines? And if so, to what degree?

David, can you answer this question?

Yes, definitely. Thanks, Gautam. So yes, so for this patient with the asthma exacerbation, their bronchoscopy, I believe, was 72 hours after their last dose of KB407 and then they experienced that asthma exacerbation 24 hours after that bronchoscopy. Yes, as mentioned, the data monitoring committee reviewed that case pretty extensively and came to the conclusion that they did that it was related to bronchoscopy, but that was kind of the timing of things.

With regards to your second question about acute FEV1 changes, we don't see anything significant, certainly not outside of the normal variability of spirometry. We're tracking these things quite closely, obviously, and we don't see any signal that nebulization of KB407 should lead to considerable decrease in FEV1.

And the next question is coming from Sami Corwin from William Blair.

Congrats on the data. I was curious how you're thinking about the cadence of enrollment and treatment in CORAL-3. I think the CF Foundation was a limiting factor when enrolling and conducting CORAL-1. So I just wanted to get your thoughts there. And then I think this was asked a bit earlier, but I missed the answer. How are you kind of thinking about when we might see some initial functional data from CORAL-3?

Okay. Again, I'll just take the second question first, and then I'll have David answer the first one. I mean, again, we are working with the agency on this registrational trial. And as we announced that we intend to start the study second half -- sorry, first half of this year. So as soon as we -- I mean, as we are in communication, so very quickly, very soon, we should be coming to some agreement with the agency. So we intend to start the study. I think we have sites ready. We are aligned with the TDN. So I'll have David talk about enrollment. But hopefully, as soon as we enroll patients, our goal is to get the study moving as quickly as we can because, again, because of the unmet need and there's a patient population. I mean, the toughest part was getting the bronch portion of the study. Even then we had patients volunteering. We have now even more patients with bronch. But I think once the bronch portion is done, we have patients aligned to ready to do the repeat dose administration. So David, can you talk about the first question?

Yes, definitely. So yes, we've been very pleased with recent conversations with the CFF of late. We've had several really productive interactions with them, and that has really developed into getting multiple sites on board with us. We have several large academic centers that are excited to begin enrolling. Yes, to Suma's point, I think no longer requiring bronchoscopy as a requirement for CORAL-3 is certainly going to increase patient excitement and enrollment, right? And especially since we're talking about repeat dosing and the fact that we're looking for functional improvement from a spirometry standpoint, FEV1 standpoint, I think that's very appealing to patients, I would predict it would be. And so I'm anxiously looking forward to beginning that enrollment process because I think it will be much, much more efficient and fruitful once we get the ball rolling.

The next question will be from Joe Pantginis from H.C. Wainwright.

A very nice update today. So first question is, I know you said you'll be providing more of the study design criteria in the future. But I was just curious if you could disclose, are there any key factors that you consider outstanding that are still being discussed right now? That's the first question.

And then the second question is, I just want to look to push the envelope a little bit. Very encouraging to hear that you didn't really see evidence of significant neutralizing antibodies. So me pushing the envelope here is, do you have any evidence in animals for 401 or any of your pipeline assets that after repeat dosing over a decent amount of time that you see differing or no levels of neutralizing antibodies?

I can answer the second question on neutralizing. Biggest example is VYJUVEK, right? I mean VYJUVEK is -- we administer VYJUVEK into open wounds, the most immunogenic area, right, skin, open wounds, a lot. And we have dosed now over 6 -- so many patients, repeat dose over 3 years. We haven't seen any kind of safety signal from antibodies or worsening or any effect. So that's our real true testing of repeat dose administration. And obviously, as Trevor mentioned, I mean he can talk to you a little more, I mean, we do look at patients samples, blood samples to look at antibodies and neutralizing effects. Maybe, Trevor, you can talk a little bit about that in all our programs. We continue to monitor them. And I'll let Trevor talk -- provide some color on that.

Yes. So this is a question that, obviously, we're very interested in and regulators are interested in. We monitor neutralizing antibodies platform-wide in all of our clinical programs. It's something we will look at in the 407 study, but we're confident from all the human data to date, we see no meaningful neutralization of our vector upon repeat dosing kind of irrespective of route of delivery.

And the next question will be from Yigal Nochomovitz from Citigroup.

Congrats on the update. I have 2 questions. So first of all, just with respect to the primary endpoint for the Phase III trial for FEV1, do I understand correctly that ahead of that study, you're not going to have any preliminary measurements of FEV1 in some of these early patients and that you're confident that based on the CFTR expression that, that will translate in the pivotal study? That's the first question.

Yes, we are because, again, we will circle back to our VYJUVEK, we showed expression where expression of the protein translated into efficacy. I mean, obviously, these patients are missing the protein. So if we are expressing the correct protein in the right region, we expect function. I mean, obviously, with a single dose, we don't expect to see FEV1 improvement because we have to get into a repeat dose, and that's why we're going to demonstrate FEV1 improvement. So we feel good about expressing protein. And maybe Dr. Lascano can talk a little bit if Dr. Lascano are you on the call and give your opinion on this.

Yes, I'm here. So it's probably too early just for 1 dose 3 days later or so to get an improvement on the FEV1. So I think it's -- the important part is the repeating dosing is probably when you're going to see that particular change. I don't know if that answered the question, but it's just too early at this point to see that the FEV1 will jump right away.

Yigal, I will say, look, just based on one dose, I think David mentioned this prior, we were happy to be at FEV levels from a safety perspective, not only at the point of administration, but several days, weeks later. So while we are ecstatic about what we quickly saw in these 3 null patients, the real answer to your FEV question will come from the registrational study. And that's what we're talking to the FDA. We do believe, as Suma said, the molecular expression is a great proxy, at least internally to us with respect to efficacy, we saw the same thing with KB103 or B-VEC. And since we code for 2 full-length CFTR genes, we feel -- and we've seen this across multiple programs. So based on the level of expression, which was honestly much higher than we expected it to be going into the study, based on our prior experience with other encoding other genes and the protein being expressed, we're pretty excited to align with the FDA and get the repeat dose registrational study going.

Okay. No, that's super helpful. And then my other question is, obviously, you nicely showed the 29% to 42% above the 5% to 15%. I was curious if based on the imaging data or based on any of the other molecular techniques that you have at your disposal, if you could look at the amount of CFTR expression per cell and how that correlates with a nonaffected individual. Is that information you have access to? Or is the assumption that it's on the order of what you would expect in a normal individual?

Trev, can you answer the question because you have looked at it.

Yes. So that is something we've looked at previously. We've compared expression levels of CFTR from bronchial cells and small airway cells from healthy patients versus from CF patients, and we do see that the relative level of CFTR expressed from our vector is at least as high as wild-type CFTR, if not super physiologic expression. So we do expect every cell that's CFTR positive is expressing at least wild-type levels of CFTR.

The next question is coming from Andrea Newkirk from Goldman Sachs.

Maybe just a clarification point on the last question and answer. But does this suggest that you plan to engage with the FDA on a potentially registrational trial design without having the functional FEV1 data on hand? And if so, what is your level of confidence that the agency would feel comfortable aligning on such a trial design and that you could power a trial appropriately without foreseeing that key data set?

Again, our confidence comes from our interactions with TDN. I mean, I think they have worked with the agency on creative study designs, and we are aligning -- helping -- with the TDN, we are working on the design. So this is not something that -- I mean, I think has been discussed with the agency. So it's a path or a design that has been presented and the FDA is open to it.

Yes, Andrea, I'll just add, you think risk-benefit profile here, obviously, a patient population of high unmet need our vector has been very well behaved in the lung and other tissues, well tolerated, of course, in this Phase I study. You combine that with clear molecular evidence of wild-type gene delivery, we've shown function of CFTR in multiple preclinical models. We think the basis is there to push for a design that more robustly evaluates FEV because the risk with a relatively volatile endpoint is you do an underpowered study to get a directional signal. It's a little unpredictable you almost might as well go the whole way.

That does conclude today's Q&A session, and it also concludes today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.

Thank you for standing by, and welcome to the Krystal Biotech Third Quarter 2025 Earnings Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. As a reminder, today's conference is being recorded. I would now like to hand the conference over to your host, Stephane Paquette, Vice President of Corporate Development. Please begin.

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the third quarter of 2025 The press release is available on our website at www.crystalbio.com. We also filed our earnings 8-K and 10-Q with the SEC earlier today. Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development; Laurent Goux, Senior Vice President and General Manager for Europe, and Kat Romano, Chief Accounting Officer. This conference call will and our responses to questions may contain forward-looking statements.

You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings. With that, I will turn the call over to Krish.

Thank you, Stephane. Good morning, and welcome to the call. It gives me immense pride to realize that we're now in a position to help so many DEB patients within and outside the U.S. I would like to thank the entire team at Krystal for their contributions. In Q3, VYJUVEK launch continued to build momentum and the updated U.S. label clearly strengthens long-term outlook in the U.S. We're now launched in Germany, France and Japan. We successfully negotiated pricing in Japan and we believe the outcome bodes well for our payer conversations in Europe. We are looking forward to our readout in CF this quarter and we're accelerating enrollment across our pipeline, including KB801 for NK.

We are initiating a new clinical program for Hailey-Hailey disease. It is a rare genetic disease of the skin that is a strong fit with our HSV1 gene delivery platform and our commercial footprint. Suma will share more about this program later on the call. Financially, we're strong and well positioned to execute on our strategic growth plans and deliver value to shareholders. Moving now to our 3Q results. We are pleased to report another quarter of revenue growth with net base revenue coming in at $97.8 million.

The patient pausing impacts due to summer holidays that we observed earlier last quarter were mitigated by patient adds and early traction in Europe. Net VYJUVEK revenues reported here does include a contribution from Europe, following our launch in Germany in late August. This brings total net VYJUVEK revenues since launch to over $623 million. Gross margins were 96% for the quarter, gross to net dynamics were stable as with prior quarters. I'm happy to report continued acceleration in new reimbursement approvals in the U.S. Our team added over 40 new approvals since our last earnings call update, bringing the total number of reimbursement approvals in the U.S. to over 615.

This is now our second sequential quarter of reimbursement approval acceleration and a reflection of our field team's efforts as was the ongoing sales force expansion. Our expanded field force is now fully hired and being deployed as training is completed. Full impact is expected in early 2026. We're also happy to report continued expansion of our prescriber work, reflecting increased penetration into the community setting with a total number of prescribers in the U.S. now exceeding 450. I would like to highlight a recent milestone achieved in the U.S., which was the FDA approval of our updated VYJUVEK label.

This label update expanded the VYJUVEK eligible patient population to include patients from birth and also provided patients with full flexibility in how they choose to dose VYJUVEK. This change reinforces VYJUVEK's leadership position as the most flexible and convenient corrective therapy for DEB and should serve as a tailwind for adoption and compliance in the future. Compliance to weekly therapy continued the trend we reported in previous quarters coming in, in the low 80s as more patients achieve durable wound closure and more mild and moderate patients come on to therapy. While the device label change should have a positive impact to compliance in the future, we, as always, continue to expect some quarter-to-quarter waviness in the U.S. revenues as we build on our long-term growth trajectory. With that, I'll now hand it off to Laurent to share his excitement in Europe. Laurent?

Thank you, Krish. It is my pleasure to share an update on our progress in Europe. Our first European launch in Germany is off to a good start. Since launching in late August, we have seen wide expressed interest and demand across the country. Based on available aggregate level data, we estimate the number of patients prescribed VYJUVEK in Germany to be approximately 20. Just as importantly, we are seeing broad prescribing patterns across the country with prescription from over 10 centers to date. This breadth of prescribing is particularly helpful given the requirement for patients to stop therapy in a health care setting.

By growing the number of centers prescribing VYJUVEK, we can help patients to stop therapy closer to home and avoid potential single center patient visits -- based on current trends, we expect continued steady growth in patients' inclusion in the months ahead. We are also making rapid progress outside of Germany. In September, the Haute Autorité de Santé, also known as HAS, the French HTA body approved early VYJUVEK access under the post-marketing authorization accepts -- 2. And last month, we formally launched by VYJUVEK in France. Importantly, the relevant authorities in France are also allowing VYJUVEK to be dispensed outside the hospital setting.

This is the first time a gene therapy has been approved in such a setting in France, a tremendous milestone to our local team and patients across the country. Last month, HAS approved VYJUVEK under the amelioration Service Medical or ASMR classification system, a key initial steps for pricing and reimbursement discussions in France. VYJUVEK received an ICMR redesignation. This designation, which was only granted to 11% of the new drugs reviewed in 2024 acknowledged the added clinical benefit of VYJUVEK and may open up the possibility for EU priority list pricing in France. Finally, I'm also proud to report that VYJUVEK was granted the -- in Italy under the Advanced Therapy in a single product category, a prestigious award recognizing excellence in scientific innovation to improve the state of human health. This award is an important acknowledgment of the innovative and transformational nature of VYJUVEK and a helpful touch point as we start to engage with the relevant stakeholders in Italy.

With these recent achievements, we are excited about the long-term growth trajectory in Europe and maximizing VYJUVEK access to the thousands of DEB patients in the region. I now hand the call back over to Krish.

Thanks, Laurent. As I mentioned before, we have now also launched VYJUVEK in Japan. This summer, we were approved by the MHLW for the 3 patients. And late last month, we successfully completed pricing negotiations with the Japanese authorities and launched VYJUVEK. We're very pleased with our pricing in Japan, and that is a testament to the clinical benefits achieved by their patients treated with VYJUVEK. Our core Japanese team has been in place for over a year and is now fully staffed to support the VYJUVEK launch. Our Japanese medical team has also been active for over a year, mapping key centers and patients which will be the early focus of our launch. Although we expect contribution from Japan in 2025 to be modest, it will be another important revenue growth driver in 2026.

Finally, I wanted to highlight 1 more contributor to the long-term growth of VYJUVEK. In addition to our direct VYJUVEK launches in the U.S., major European markets, and Japan, we started contracting with regional specialty distributors to support the commercialization of VYJUVEK in rest of the world markets. We have executed agreements in place with multiple leading distributors covering key markets in Central and Eastern Europe, Turkey and the Middle East and expect to add more in the year ahead. Health care infrastructure and access vary significantly across rest of the world markets, but even after accounting for this variability, we estimate that a global distributor partner network could help bring VYJUVEK to thousands more DEB patients around the world and supplement our exciting growth strategy in the United States, Europe and Japan.

With that, I'll now hand it off to Suma to touch on recent pipeline progress. Suma?

Thank you, Krish. I would like to start today by acknowledging the hard work of our development team here at Krystal. In recent months, we have dramatically transformed the scope and ambition of our clinical stage pipeline expanding our clinical programs in respiratory and oncology and starting up new studies in ophthalmology and dermatology. These are all important achievements, none of which would be possible without the size contribution of each Krystal team member. Our team also achieved another important milestone in recent weeks. A platform therapy designation from the FDA.

This designation granted for our HSV1 gene delivery platform and currently applicable to our KB801 program could significantly accelerate the path to approval, providing us the opportunity for more frequent interactions with the FDA and as well as the chance to leverage manufacturing and nonclinical safety data from VYJUVEK in our filings. The FDA may also consider previous inspectional findings related to drug manufacture. The platform technology designation is applied for on a program-by-program basis and is currently only granted to KB801. Although we intend to apply for this designation for additional programs to ultimately secure the designation and associated efficiencies of our entire pipeline. I'm also excited to report that we remain on track to deliver multiple exciting readouts in the months ahead.

We expect our next readout to come from our cystic fibrosis program, KB-407 with the backing of the CFF TDM, we have expanded our clinical trial network and are now very close to study completion. We look forward to announcing interim data before year-end, including molecular data from null LCF patients to assess the ability of the AT1 to deliver full-length, wild-type CFTR to the lung. On success, we would expect to immediately move to repeat dosing study which would enable assessment of functionality, including longitudinal FEV1. With our now expanded trial network and without the requirement for bronchoscopies, we expect a repeat dosing study would enroll quickly, enabling a potential FEV1 data readout next year.

Our KB408 program for AATD lung disease is also moving ahead well. Having already confirmed successful delivery of functional AAT in our single-dose study. This program is in repeat dosing, and we expect to be able to provide an interim data update in the first half of next year. Together, with KB407, this will serve as a robust data set demonstrating our platform capabilities in the lung. In ophthalmology, strong enrollment is providing us with greater clarity on the timing of our first readout. Based on current rates, we expect to complete enrollment of our Phase III trial evaluating KB803 for corneal abrasions in DEB patients by end of the year. Enrollment in our randomized placebo-controlled study or KB801 in NK is also progressing well as we continue to onboard new sites globally, setting us for a potential data rich in 2026.

I would also like to share a quick update on our work in oncology, which is increasingly focused on the event of inhaled KB707 for the treatment of non-small cell lung cancer or NSCLC. As we shared at ASCO over the summer NSCLC is an indication where we have seen early evidence of monotherapy efficacy even in heavily pretreated and checkpoint inhibitor failed patients. Building on that readout, we were recently granted an end of Phase II meeting with the FDA to discuss potential development pathway for inhaled KB707. Based on FDA's feedback, we now expect that a single Phase III study evaluating inhaled KB707 in combination with chemotherapy versus chemotherapy alone in patients with advanced NSCLC could be sufficient to support a potential registration in combination for second-line NSCLC.

In support of this potential registration pathway, we have opened a new cohort in our ongoing Phase I/II KYANITE-1 study to evaluate a fixed dose of inhaled KB707 in combination with chemotherapy. Enrollment in KYANITE-1 is ongoing. Our current expectation is to report interim data from KYANITE-1 in the second half of 2026 at which point, we would also be able to provide an update on registrational study plans and potential for Phase III initiation. Finally, I'm also happy to introduce today a new addition to our clinical pipeline, KB111 for the treatment of Hailey-Hailey disease. Hailey-Hailey disease is a genetic blistering disease of the skin linked to the mutation in the ATP2C1 gene and low expression of its encoded caption transporting ATPS HD is a rare disease with a prevalence that's not well understood.

The most common estimate of prevalence is 1 case for 50,000 patients although underreporting is possible. HHDS is characterized by painful rash and blistering in skin folds with a relapsing remitting course, that is exacerbated by heat and sweat. Patients often report debilitating symptoms of pain, itch, burning, body odor as well as infections resulting in severe negative impact on quality of life, technological distress and intimacy issues and there are no specific therapies available for treatment of this disease.

Building on our experience and clinically validated HSV platform for skin delivery, we designed KB111 to deliver ATP2c1 directly to skin cells increased ATPS levels and hopefully change the course of this terrible disease. As with VYJUVEK, KB111 is formulated for a topical administration directly to the lesions of HHD patients. We've already confirmed in preclinical studies that KB111 can efficiently transduce skin cells, resulting in functional ATPAs, freshen and last month cleared our I&E. We expect to start an intrapatient randomized, double-blind placebo-controlled multicenter study evaluating KB111 in HHD patients in the first half of next year.

With strong execution across our pipeline and now the added benefits of the platform designation for KB801, we are well positioned to make rapid progress with multiple readouts in months ahead. With that, I'll hand the call over to Kate.

Thank you, Suma, and good morning, everyone. I'd like to provide some highlights from our third quarter financial results reported in our press release and 10-Q filing earlier this morning. VYJUVEK net product revenue for the third quarter was $97.8 million. This marks sustained growth as compared to the prior quarter, including the early sales from our German launch. Gross to net revenues remained consistent with prior quarters. Cost of goods sold was $4.3 million and gross margin was 96% for the quarter as compared to 93% last quarter. Note that the increase in gross margin this quarter was the result of U.S. product manufacturing process optimization and the benefit of lower cost bakes after FDA approval of this optimized process.

While we expect these manufacturing efficiencies to continue benefiting our U.S. operations, the optimized process has not yet been approved for products sold outside the United States. As ex U.S. sales grow over the coming quarters, we Margins will normalize towards historical levels until the optimized process is approved for products sold outside the United States. Research and development expenses were $14.6 million and general and administrative expenses were $37.6 million. Operating expenses for the quarter included noncash stock-based compensation of $13.2 million. You'll note on Slide 13 that we are revising our full year non-GAAP R&D and SG&A guidance to $145 million to $155 million compared to our prior guidance of $150 million to $175 million. This represents both a reduction and narrowing of the range to better reflect our performance so far this year as well as our continued confidence in our ability to execute with discipline for the remainder of the year.

During the quarter, we released a majority of the valuation allowance that was previously recorded against our deferred tax assets, reflecting our confidence in Krystal's future profitability. This release resulted in a onetime noncash tax benefit that increased our reported EPS. We also benefited from the reversal of the Section 174 R&D capitalization requirement under the 1 big beautiful bill legislation. This reversal was also nonrecurring. Net income for the quarter was $79.4 million, which represented $2.74 per basic and $2.66 per diluted share, reflective of these onetime benefits. And finally, our balance sheet continues to be a key point of strength for Krystal. We ended the third quarter with over $864 million in combined cash and investments and we remain well positioned to support our commercial launches globally as well as our significant pipeline programs in the upcoming quarters. And now I will turn the call back over to Krish.

Thanks, Kate. As we close today's call, I'd like to emphasize our excitement for the path ahead at Krystal in 2026. With launches in Germany, France and Japan, VYJUVEK has now truly gone global, providing us the opportunity to dramatically expand the number of patients benefiting from VYJUVEK therapy in the months ahead. The hard part of a global base launch is now behind us, and Krystal's focus in 2026 is on our clinical pipeline. We have our first readout in CF before year-end. We're working towards readouts in 801 for NK and KB803 for eye lesions in depth patients by midyear and we shall update once enrollment is complete in these programs.

These programs, along with KB111 for Hailey-Hailey fit neatly within our core global commercial capabilities. At the same time, we recognized a significant optionality that HSV1 provides as a redoseable non-integrating large-capacity gene delivery platform and the potential upside opportunities that exist in large market indications. We will continue to invest in these programs with the same operational discipline as we have in the past to ensure that we maximize the value that we believe exists in our pipeline and platform before entering into partnerships for these programs. Thanks for listening, and I'd like to now open the call for Q&A.

[Operator Instructions] Your first question for today is from Alec Stranahan with Bank of America.

This is Matthew on for Alec. Maybe just 2 from us. On the ex U.S. launch, I guess, whether your focus is on expanding the breadth of prescribers or depth of prescribers that have already made some prescriptions? And then maybe on the optimized process that led to better gross margins. Just curious what was sort of optimized in this process and whether you can speak to time lines for this optimized process to be expanded to ex U.S. markets?

Thank you, Matthew. In terms of your first question on ex U.S. launch breadth of prescribers was DEB. I mean our focus -- I mean, you know our objective in Europe is primarily to celebrate, getting a patient to meet the physician as soon as possible because the first clinical visit has to be in a physician office. Now purely, logistically, that's a lot easier if you start focusing on centers of excellence, as you heard from Laurent to begin with, but at the same time, slowly spreading out into the community.

On the question about optimized process, this is essentially moving to a larger bioreactor. It's got approved in the U.S., and we're working towards an application in Europe. I'll ask someone to comment on the timing for the approval in Europe with respect to the optimized facts.

I mean we have already started the process. We have filed feel up. I mean, it's pretty straightforward because we have a lot of data from the U.S. So we expect hopefully sometime next year to have the optimized and scaled up process approved.

Your next question is from Roger Song with Jefferies.

Great. Congrats for the quarter. Also related to the question ex U.S. launch. So I understand the contribution in 3Q probably not too much from Germany. But just curious about your expectation moving to next year, maybe 4Q and the next year, how should we think about ex U.S. versus the U.S. revenue contribution? And when on -- so will give us some breakdown data on. And then also related to this ex U.S. launches, how should we think about the pricing? I understand you need to negotiate on top of the list of price and then how this will change over time, particularly with the U.S. MSM policy?

Great, Roger. Thanks for those questions. Look, the only requirement, as I mentioned in the prior response, it's just start in a health care setting. But in spite of that, we think Germany is off to a really good start with like 10-plus centers starting to prescribe. But the only point I'll make with respect to the EU launch, I would expect it to be a steady launch upwards as opposed to expecting any kind of bolus early on in either country, whether it be Germany or France. But the demand and the physicians and the patients are pretty excited, I would say, both in Germany, France and Italy is starting to go that way too.

With respect to pricing, look, we know Germany efforts prepricing for the first 6 months. And then internally, we'll make a determination to start accruing for the next 12 months, depending on how pricing is proceeding. Negotiations are proceeding in France, obviously, we start accruing from day 1. So it's very country specific. But I will say, based on the ASMR rating, based on the pricing regarding Japan, I think it bodes well. It remains to be seen. But I think the efficacy and the debilitating nature of the disease, I think that message, we're doing a really good job of conveying that, and it's being received well by these authorities in different countries.

Your next question for today is from Ritu Baral with TD Cowen.

Apologies. I was muted. I have been getting a lot of questions on timing? And specifically, Krish, could you take us through sort of what the gating aspects of getting that trial up and going is how many sites and how difficult it is to open those sites has enrollment -- formal enrollment actually started. I think there's a lot of focus on the rapidity of getting to data and what that says about the overall NK population prevalence? And then I have a quick follow-up on CF.

But on NK, I would just say, look, I think we have started to enroll patients in the study. Maybe Suma, you could add some color on how we're proceeding.

Absolutely. I mean we have we have quite a few sites up and running. We are actively adding additional sites. So really intend not just in the U.S. but globally because there's a lot of NK patients in Europe and the rest of the world, and we want to make this a global filing. So as you know, it takes a little while to get them up and running for the global studies, but we are right in the process. I think we will have most of our sites all completely signed up and ready to go hopefully by end of the year.

And as you know, we are enrolling patients. This is 1 of our top priority projects. So we are excited to see the progress on this particular trial.

And I will add, Ritu, our internal timing target is to announce some kind of minimum data by the middle of next year.

Got it. And can you say what percentage of sales do you have the percentage of plant sites that you have been running at this point?

I mean, we have quite a few sites. I mean, within the U.S., we got most of the academic sites up and running. We have a few more to go, but I think we should have most of the U.S. sites up and running by end of the year.

Got it. And then for CF, can you tell us how many no patients that you plan to provide data on by the year-end update? And sort of what constitutes success on molecular response. What aspects of molecular response will you be reporting and what success in those patients.

Yes. We're -- Rita, thanks for that question. We are looking at a minimum 3 patients primarily focused on molecular correction because it's a single-dose study. Suma anything else?

Yes. I mean, obviously, we are branching these patients, the 3 now patients after the drug is administered and the biopsies, we will take across the different across all the different areas of the lung, and we will look for expression of CFTR by immunofluorescence across. And we will see what kind of expression we are expecting to see robust expressions. I mean, based on our NHP primate study, I mean, we -- hopefully, we can recreate that, we see expression all the way up to 28 days. We see full-length molecular CFTR expression across all of our biopsies. We think -- we feel pretty confident nobody is able to today show full length expression of CFTR. So hopefully, we can break that cycle. That's our goal.

Would you report a like percentage of normal and sort of what threshold could result in FEV changes at a later time point?

We know that you don't need much, right? Even these patients don't produce any CFTR. So even if we can produce anywhere between 5% to 10% of CFTR expression, I think that's pretty robust. So again, our intent is in these multiple biopsies across the lung, we will -- hopefully, we want to show expression in most of these biopsies and that can give us some confidence that, yes, we can express and we have enough molecular correction. So especially in these all patients don't produce any CFTR.

Your next question is from Gavin Clark Gartner with Evercore.

On NK, what makes you confident that you don't need to test any different doses and why the 1 that you picked is the right dose? And somewhat on this topic, do you think you need 2 efficacy studies for approval or may 1 be sufficient?

So the confidence for the dose comes from our animal studies. I mean we clearly see expression gave a clear pharmacokinetic profile. So we know how long the expression lasts. So that is guided us into the dosing regimen in the clinic. Yes, we are pretty sure that we just need 1 efficacy trial because this is, again, a rare disease. It meets the regulatory guidance for what the requirement is. So based on our study and the way we have powered the study based on our animal studies and what oxalate studies have achieved, we have powered it to hopefully see clinical significant improvement from placebo. So that's the goal of this study is successful, then we expect this to be the registrational trial.

And obviously, you have the platform technology. And we have guidance on what we need from a CMC perspective. So we are, I think, you're aligned. So that's -- that's something that's positive for this program.

And is there any commentary you can provide on the safety you're seeing in the Ocular Deb study or even the NK study on a blinded basis?

I mean -- I mean, so far, we have not seen any adverse events of concern. .

Your next question is from Sami Corwin with William Blair.

Congrats on the progress and also have 1 on NK. Could you remind us if you're excluding patients that have had a prior ocular HSV infection and if you think a prior HSV infection could impact the efficacy or safety of treatment? And then in terms of the initial data set, what exactly will we see in that.

Regarding your first question, no, we do not -- we do not exclude patients that had prior infection. The only requirement is they should not have an active infection. That's the only exclusion criteria. Whatever is announce, Yes, data said this is a randomized one-to-one placebo-controlled study 8 week. So we look at complete healing -- we're using I mean, complete healing with an independent reader. So if you see complete healing -- against placebo, then that's a win, just exactly like.

Got. it. Great. And then just 1 question on VYJUVEK. We expect some guidance or full year revenue guidance for VYJUVEK early next year?

No, because we have so many launches and the distribution you see land, it will take us some time to kind of get comfortable with how the different launches are going in different countries. So fortunately, Sam, we will not be guiding on revenue for 2026.

Your next question is from Josh Schimmer with Cantor Fitzgerald.

This is Alexa Deemer on for Josh Schimmer, and congrats on a great quarter. So can you please provide some more color on the contribution of U.S. and ex U.S. sales in the third quarter for VYJUVEK? More specifically, what was the percentage breakdown from the U.S. versus Germany?

Yes. Look, the decision not to break down in this particular quarter was somewhat accounting auditor driven at the coal is to establish a consistent long-term practice on segment reporting. And if you follow that thought, we will be starting to break down geographies at some point in 2026. It's just that now it is so modest contribution relative to the overall net revenues of the company.

Okay. Got it. And can you provide any more specifics on how U.S. sales were in the second quarter versus the third quarter?

Yes. Definitely, I would say that the U.S. was a bit lower than what we saw in 2Q, but not to the extent like based on my comments from the last quarter, definitely reimbursement approvals were on an uptick. And so overall, we ended up getting to a number that was higher than Q2.

Your next question for today is from Andrea Newkirk with Goldman Sachs.

This is Morgan on for Andrea. With reimbursement approvals, what do you attribute this growth to? Are you seeing more patient adds from the community setting -- and then how are you thinking about the path to 60% penetration from here?

No. Great question, Andrea. Look, like I mentioned maybe last quarter or the 1 before, it was taking us a bit longer to pull through a start form as we are getting patients more out in the community and physicians who are not -- who are far away from a center of excellence. And by just increasing the size of the sales force, I believe we have turned that issue around. We saw some acceleration last quarter. We see a continued acceleration this quarter. Would we expect that to go forward. As more reps are being trained and out into the field. In terms of 60% market share, look, that's a number around 720. We reported 615. So we're maybe a quarter or 2 from hitting that number if you just do a simple math on that metric, which -- so we feel really good about the way the launch is going and how we've been able to reverse this 1 or 2 -- 1 quarter of deceleration in RA.

Your next question is from Yigal Nochomovitz with Citi.

This is Joanne Kim on for Yigal. Maybe just 2 quick ones for -- from us. KB408, can you just talk a little bit about your expectations there, whether you're expecting a significant uptick in AAT with repeat dosing versus a single dose and what sort of boost you'd be expected to see or what you want to see?

Yes. Obviously, we're expecting an uptick, but we're not particularly talking right now about how much of an uptake.

I mean we are doing repeat dosing of even -- I mean, 40 million and we'll be collecting bronch and -- samples. So that's something that's ongoing. So once -- so we will show repeat dosing and an expression of A180.

Got it. And can you speak on whether opening up more sites is also a priority for that program to continue enrolling patients given that there are quite a number of AATP programs ongoing right now?

I mean, right now, we have a couple of sites that open because remember, again, these sites have to be able to do bronchoscopy. In case of 408, it's a little more complex because it's not just biopsies. They also need to take lung lavage fluids out to measure the A180 and the protein levels. So there's only a few sites that are capable of doing this. So we have those sites. We have the patients so hopefully, once we finish that cohort with the repeat dose administration and A180 levels, and we hope to have a meeting with the agency to potentially talk about a path forward.

There are no further questions in queue. Thank you. We've reached the end of the question-and-answer session and today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Thank you for standing by, and welcome to the Krystal Biotech Q2 2025 Earnings Call. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to hand the conference over to your host, Stephane Paquette, Vice President of Corporate Development. Please begin.

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the second quarter of 2025. The press release is available on our website at www.krystalbiocom. We also filed our earnings 8-K and 10-Q with the SEC earlier today.

Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development; Laurent Goux, Senior Vice President and General Manager for Europe, and Kate Romano, Chief Accounting Officer.

This conference call will and our responses to questions may contain forward-looking statements. You are cautioned not to rely on these forward-looking statements. which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings.

With that, I will turn the call over to Krish Krishnan.

Stephane, thank you. Good morning, everyone, and welcome to the Krystal earnings call. We'd like to touch on 4 topics in this call. First, the VYJUVEK launch, which is progressing well, and the upcoming launches in Europe and Japan are expected to significantly add to what is already a top-tier trajectory in the U.S. Second, we're expecting several clinical readouts in the upcoming months for diseases in lung and the eye, which could propel Krystal into its next stage of growth and dramatically increase our ability to deliver benefits to patients. We'll talk briefly on our recent KB304 readout, which we believe validates the platform and the opportunity that exists for our subsidiaries [indiscernible] in aesthetics. Finally, I'm proud to report that we've been able to achieve these milestones while maintaining operational discipline, we were again profitable this quarter and $1.29 fully diluted, marking now 2 years of consistently positive EPS for the company.

Moving on to our 2Q results. Q2 net VYJUVEK revenue was $96 million. This brings total net VYJUVEK revenue since launch to over $525 million. The return to growth in Q2 was due to patients who paused earlier getting back on drug, and the additional impact of our ongoing sales team expansion. It's important to note that sales force hiring is still underway. We expect the full impact of our new hires will only be felt over the next few quarters as hiring is completed, reps are trained to be fully operational in the field.

Gross margins and [ GTN ] were largely consistent with prior quarters. I'm also happy to report that we saw an increase of reimbursement approvals over the course of 2Q and we have secured over 575 reimbursement approvals for patients in the U.S. Compliance while on drug at as of the end of the second quarter came in at 82%. However, we do expect compliance to trend down in the coming quarters as severe patients who started early are now achieving durable wound closure on VYJUVEK and as the percentage of moderate and mild patients increase in the overall patient mix. But as we discussed last quarter, complete wound closure and treatment positives are fantastic outcomes for patients and exactly what we set out to do when founding this company.

It's also been rewarding to see patients grow increasingly comfortable with the pausing and restarting dynamic and gaining confidence in the fact that when wounds do open, they can easily access VYJUVEK and again achieve durable wound closure. These treatment successes, together with the tireless commitment of our Krystal Connect patient support team are what allow us to build strong trust-based patient relationships for the long term. They also help activate new patients, and together with our recent publications and digital tools, they raise awareness of what is achievable with regular VYJUVEK therapy.

This also means that we remain in a period with inherent unpredictability quarter-to-quarter. Consistent with VYJUVEK mechanism of action and skin turnover, we are seeing a growing number of patient restarts but the exact cadence at the individual patient level is highly variable and still difficult to predict. Based on the summer pausing trends, we're seeing over the first few weeks of 3Q, our current expectation is that 3Q revenues will come in below what we're reporting here today, with a return to growth in 4Q, driven by a growing patient funnel, restarts and sales expansion efforts. However, as usage patterns stabilized in the U.S., we expect this waviness to subside with transformative patient outcomes, driving long-term sustainable growth, penetration of the identified patient pool, and bringing new patients to therapy.

The growth trajectory for VYJUVEK will also benefit from global expansion and our launch overseas. Laurent Goux, our GM for Europe, will touch on the European launch dynamics and near-term activities in a moment. But before getting into the European opportunity, I want to highlight another fantastic milestone for our team. Late last month, we announced the approval of VYJUVEK by Japan's Ministry of Health, Labor and Welfare. We received a broad label from the Japanese authorities similar to the one approved in Europe earlier this year. that includes all DEB patients from birth with the option of home, self-or-family administration.

The label also provides clinicians flexibility with how to diagnose DEB patients, and does not require a genetic test facilitating onboarding and initiation of treatment. Japan is another attractive market into which Krystal can launch directly with hundreds of DEB patients in urgent need of a safe and an effective therapy. We already have our core team in place to secure a pricing decision in the upcoming months and launch before year-end. Thanks to the recently completed and published Japanese open-label extension data, key opinion leaders in Japan already have initial experience with VYJUVEK, which is a tailwind for our launch.

I'll now turn it to Laurent to share more detail on our European launch plans and latest time lines. Laurent?

Thank you, Chris. I'm pleased to present an update on the upcoming European launch of VYJUVEK. After receiving approval earlier this year, we are on track for our European launch this quarter. In the second half of 2025, we will bring this important therapy to patients in Germany and then in France. Based on our latest analysis, the identified pool of patients in each country exceeds 500 patients. These patients are supported by 4 expert centers in both Germany and France, but also 20 to 30 additional sites, usually university hospitals. Please note that the launch in France is subject to the continuity of the [indiscernible] or early access program.

We are working closely with local authorities to ensure that eligible patients can benefit from this pathway. We have already established dedicated commercial teams in both countries with roughly 8 team members on the ground in each market, supported by an additional 8 colleagues at our European headquarter and leveraging U.S. back-office resources. In Germany, we anticipate for our first commercial patient to be treated in August, making an important milestone in our efforts to bring meaningful solutions to the debt patients and the health care professionals.

To facilitate rapid and effective access, we have established comprehensive patient service and education programs. These initiatives are designed to support home administration of the therapy as well as administration by caregivers, ensuring that patients can benefit from our treatment regardless of their health care settings. These different possibilities are allowed by the very strong label approved by EMA. Since approval, the team has worked on identifying the key centers and preparing them to enroll patients. Our focus is to ensure successful launch, driving uptake at key centers and ensuring an efficient patient experience. This launch is a significant step for Krystal, reflecting both our commitment to rare disease patients and strategic execution of our international commercial plant.

I will now hand the call back over to Krish.

Thank you, Laurent. With VYJUVEK delivering transformational clinical outcome for patients, we remain as confident as ever in the blockbuster trajectory for our first approved genetic medicine. In the U.S., we're already starting to see the benefits of our sales force expansion, which we expect to drive significant penetration of the remaining identified patient pool. In Europe, with a broad label, flexible dosing options and a large identified patient pool, we see a path for steady multiyear growth as we work with key centers and launched sequentially in major markets. The broad label in Japan adds another high-value launch market which is start adding meaningfully to our top line in 2026. And increasingly, we're pursuing meaningful opportunities in rest of the world markets, accessible through distributors and partners. Altogether, these put VYJUVEK on an exciting trajectory and provide a strong financial foundation and significant optionality for the company.

I'll now hand it off to Suma to touch on recent pipeline development at Krystal.

Thank you, Krish. Our R&D team has had another productive quarter as we work diligently to build a true portfolio of high-value genetic medicines. Today, I will touch on key accomplishments, including clinical data updates for oncology and aesthetic programs, progression of KB408 into repeat dosing for AATD as well as 2 new study starts that set us up for multiple near-term readouts in both the lung and eyes.

I would like to start with a few highlights on inhaled KB707. Earlier this summer, at ASCO, we shared an update on our Phase I/II study, [ KINIT-1 ], evaluating inhaled KB707 for solid tumors of the lung. This update included safety data from 39 subjects treated with inhaled KB707 as monotherapy as well as an efficacy data update for the 11 KB707 treated patients with late line and NSCLC. With an extended follow-up and new data cut of April 15, 2025, we saw deepening of the responses in the NSCLC Cohort with an improved objective response rate of 36%. Median duration of response and progression-free survival were not yet reached.

Just as importantly, inhaled KB707 continue to be safe and generally well tolerated and amenable to administration in outpatient setting. We are increasingly excited about the profile of inhaled KB707 monotherapy in the clinic. In addition, combination therapy cohorts have been opened in [ KINIT-1 ] and enrollment is ongoing. We have also made exciting progress with KB408 for the treatment of AATD lung disease. We recently completed dosing and bronchoscopy of a third AATD patient dosed with KB408 in Cohort 2. As shown on this slide, we again saw robust airway transduction, resulting in functional AATD expression as demonstrated by neutrophil elastase binding in the ELF. Please note that this patient was a background IV augmentation and yet we still detected a reduction of 3 neutrophil elastases following KB408 dosing. Across all 3 bronchoscopy patients, we have seen transaction rates in the 30% to 40% range after a single dose.

The safety profile of KB408 continues to be attractive across all 5 patients dosed in Cohort 2. Based on these data, we recently amended the [ septime ] 1 protocol and started dosing in a newly opened Cohort 2b to investigate repeat dosing in Cohort 2 dose levels. Our study objectives with this new Cohort are to evaluate safety and tolerability of repeat dosing as well as assess additive efficacy of repeat dosing and explore optimal dosing timing based on durability of effect. Design details are summarized on the slide. Patients will undergo a baseline bronchoscopy receive 4 weekly doses of KB408 and then receive a bronchoscopy, either 1 or 2 weeks after the final dose to assess expression and durability. We expect the data generated from Cohort 2b to dictate our approach with respect to the advanced clinical development of KB408, including potential accelerated approval approaches.

We are also making steady progress on KB407 with TD and sanctioning and the additional of new network sites providing expanded access to CF patients, including those that are currently ineligible for modulators. We now have our fourth patient enrolled in Cohort and expect to soon have 5 TDN sites up and running to support completion of both Cohort 3 as well as subsequent repeat dosing studies. Based on the latest patient screening and enrollment time lines, we expect to be able to share molecular data later this year. Finally, we have our recent clinical data in aesthetics, where we reported positive results from our 2:1 randomized, double-blind and placebo-controlled study evaluating our second aesthetic candidate, KB304.

KB304 is a combination aesthetic therapy encoding both collagen and elastin, to drive aesthetic improvement in the skin. As the [indiscernible] shared a few weeks ago, investigators and subjects alike reported meaningful aesthetic improvements across multiple attributes, including wrinkles and elasticity with clear and statistical significant advantages over placebo. The images shown on right highlight the improvement achieved by some of our KB304-treated subjects. The safety profile of KB304 was also in line with expectations. All adverse events were mild to moderate and transient. Based on the broad aesthetic improvement observed with KB304, in [ pearl 2 ], we have decided to progress KB304 into Phase II study for the treatment of wrinkles of tedeclitar.

In support of this goal, we also recently completed development and validation of a decrity-specific photonumeric scale, we intend to align on the Phase II protocol later this year, enabling a potential Phase II study start in the first half of 2026. Finally, I would like to add that we started 2 ophthalmology clinical trials in the last 2 months. [ Highlight ], a Phase III study evaluating KB803 for the treatment and prevention of corneal liberations in DEB patients and [ mrel 1 ], a Phase I/II study evaluating KB801 for the treatment of neurotropic keratitis. Both of these programs leverage the unique attributes of our platform and showcase what is achievable with our HSV1 based platform in the front of the eye. We are looking forward to sharing data progress, updates on those programs as they progress. Altogether, this steady execution sets up for many near-term readouts in CF, AATD, MK and DEB, that we expect will validate the breadth of opportunity that exists with our HSC 1 place platform.

With that, I would like to turn the call to Kate.

Thank you, Suma, and good morning, everyone. I'd like to provide some highlights from our second quarter financial results that were reported in our press release and filing this morning. As Krish mentioned earlier, our net product revenue for VYJUVEK was $96 million for the second quarter of 2025. This marks continued growth as compared to the second quarter of 2024, as well as 9% growth over the recent first quarter of 2025. Gross to net revenues remained consistent with prior quarters. Cost of goods sold was $7.2 million compared to $6 million in the prior year second quarter, and gross margin remained relatively consistent at 93% in 2Q 25.

Research and development expense was $14.4 million compared to $15.6 million in the prior year. The decrease quarter-over-quarter is primarily due to the timing of our various research and development manufacturing runs, offset slightly by increased clinical development costs across many of our product candidates. General and administrative expenses were $35.2 million compared to $27.6 million in the prior year second quarter, primarily due to increased professional services fees, including marketing services, consulting and legal. We also saw increased personnel-related costs compared to last year, due mainly to growth in our head count to support global commercialization and this was inclusive of increased stock-based compensation costs from new grants. Operating expenses for the quarter included noncash stock-based compensation of $14.1 million as compared to $13.2 million in the second quarter of 2024. You'll note that our non-GAAP R&D and SG&A guidance remains unchanged on Slide 14.

Net income for the quarter was $38.3 million which represented $1.33 per basic and $1.29 per diluted share. This is compared to $15.6 million in the prior year second quarter, at $0.54 per basic and $0.53 per diluted share. Finally, I am happy to comment on the sustained strength of our balance sheet. We closed the quarter with over $820 million in combined cash and investments with continued growth in our net cash provided by operating activities over previous quarters. We believe this puts us in a great position ahead of our upcoming Europe and Japan launches as well as for the significant number of research and development objectives we have set forth for the remainder of 2025 and into 2026.

with that, I'll now turn the call back over to Krish.

Thanks, Kate. With clear growth drivers for VYJUVEK in the U.S. and abroad, plus the additional upside of a potential KB803 launch for corneal abrasions over the next few years, we're excited about the path ahead for VYJUVEK and for Krystal. It's important to understand that this upward trajectory will not necessarily be linear, but looking beyond the short term, this is a multiyear growth story that has only just begun. Add a growing pipeline of clinical stage programs targeting clear unmet needs with step jump implications for Krystal, we see opportunities to build significant shareholder value in the years ahead. In the months ahead, lung readouts in CF and AATD, together with ophthalmology readouts in NK and DEB will make clear the potential of our platform across multiple tissues and open up blockbuster product opportunities. Finally, our inhaled 707 program for NSCLC continues to progress well and stay tuned for readouts in 2026.

Thanks for listening, and I'd like to now open the call for Q&A.

[Operator Instructions] Your first question for today is from Roger Song with Jefferies.

This is Fiona on for Roger. Congrats on the quarter. My first question is just to clarify, the revenue growth for this Q is not impacted by the sales force expansion. And if you think the volatility for the next quarters will be offset by the sales force expansion kicking in and the EU launch?

No. As I alluded to in my script, part of the increase in Q2 was driven by people -- patients who are causing getting back on drug and start -- and we have been hiring reps since the tail end of Q1. And so there was an incremental effect. I think the point I was trying to make is the full impact of all the hires will be felt over the next couple of quarters as they come on board, get trained and are fully functional in the field.

Your next question is from Gavin Clark-Gartner with Evercore ISI.

Could you just give us a little more quantitative commentary on the magnitude of how much slower the first few weeks of the quarter have been versus Q1? Just any rough way to think about that.

No, we're not going to get to that level of detail, Gavin. And it is early in the quarter. I was just trying to set expectations that in the summer, people take vacation in the summer holidays always has an impact on positive. But beyond that, it's stuff or me to quantify because it's such a variable thing. The quarter is just maybe 1/3 of its way in. But I just wanted to point out that summer is usually filled with more positives than usual.

Okay. Great. Just a quick follow-up. For U.S. VYJUVEK, what's the mix of RDEB versus DDEB patients either in reimbursement approvals or in start forms that are coming on to therapy?

That's a good question. I believe, as of the last quarter, that mix is more like [ 64-36 ] in that range. But I ask Stephane, Stephane if you have a clearer number, can you jump in?

Yes, it's basically in line. We didn't see really much movement at all in the breakdowns for reimbursement approvals, either RDEB DDEB age, even the insurance plan. So one of the reasons we didn't really get into it this time around, but they're largely stable. Maybe shifting as always, and we're shifting. We're very gradually [indiscernible]

Your next question for today is from Ritu Baral with TD Cowen.

This is Josh Fleishman on the line for Ritu. Congrats on the quarter. How do you expect for drug holidays to factor into the original guidance of 720 U.S. patients initiating VYJUVEK. And on Europe, how should we think about pricing? And what's important to the country's health technology assessments.

With respect to 720, Josh, as we mentioned last quarter, we're on track, but we're maybe a quarter or 2 behind sometime early next year is when we think we'll get to that number. our original ambitious goal was to get there by September, October of this year. And so I think we're still very pleased with the track we're on, and we hope to get there pretty quickly. In terms of EU pricing, I'm going to let Laurent speak to it, and I'll come back to the last question when it's time. Laurent?

Thank you, Krish. Reimbursement application processes are proceeding as planned with HTA bodies in the main countries in Europe. As you know, in Germany, we benefit from free pricing -- thanks for the question. I mean the requirement for an appointment at a specialty center is quite customary in practice in Europe to access a prescription in general and even more for specialty drugs. So it's not something unusual that you have to go through an appointment at a center. I mean this is the reason why the team has dedicated the past 3 months in notifying the centers, understanding the potential bottlenecks and ensuring their readiness to enroll patients, either through education, advanced scheduling or addressing any other needs on a case-by-case basis. So these are the main guidelines. Then with regard to the number of patients covered in Europe, when a country grants reimbursement, it will be for the entire population that will be designated in the reimbursement approval. So there is no case-by-case request once the drug is approved by the payer body, the national insurance in most cases.

Okay. If I could rephrase those questions slightly then. So is it possible for patients to do that initial appointment in a group? Or does it need to occur on a patient-by-patient basis? And then I guess, instead of a patient ramp, do you have a goal in terms of onboarding patients to drug over a particular period of time?

[Audio Gap] So unfortunately, with these academic sites, just the whole process and paperwork took more time than we anticipated. Our team really pushed, but we're getting close. So we believe once we can get the sites up and running, which we are pretty close we should be able to enroll the patients. So that pushed out. But hopefully, we can enroll multiple patients across these sites once they are up in operation.

And With respect to the data announcement, look, you know Cohort 3 is essentially 3 patients on modulator and 3 now. And what we're looking to show is molecular data on 3 NEL-mutation patients.

And again, keep in mind, now patients are harder to get by, but the TV in sites do that have them. So we have patients, but you also need patients that are willing to bronchitis not easy, but we are there. We're getting there.

Your next question for today is from Andrea Newkirk with Goldman Sachs.

This is Morgan on for Andrea Newkirk. Following up on one of the previous questions. Do you anticipate a similar dynamic will be required in Japan such that patients will need to be seen by a health care practitioner before initiating VYJUVEK. And then also, can you share some details on the fifth patient dose in Cohort 2 for AATD in terms of the percent cells that were transduced and the level of AAT expression and distribution of freight across the lungs.

On the Japan question, yes, it's very similar to Europe. It's the way all drugs like the first visit is in a physician office. So no change there. In terms of the AAT, I'd ask somebody to go back to that slide I don't know, Stephane, if you can pull up that slide on AAT, just give us a minute. Yes. And as you...

So basically, all 3 patients we saw expression in the biopsy samples. We could clearly see expression from baseline increase. Are we seeing the [ lavage ], one of the patients we had difficulty recovering the right amount of lavage because this whole procedure is pretty tricky. And it's because of some of the issues with recovery of the lavage, we were not able to get the levels. But in 2 patients, we were able to show both expression of -- in the lavage, we were able to measure AAT and show neutrophilastate and binding and reduction of the neutrophil elastic. But in all of the patients, [ INDA ] biopsies, we did see expression of AAT about the levels of baseline.

Your next question is from Joe Pantginis with HC Weinwright.

Two topics, if you don't mind. So first on VYJUVEK, Krish, you talked about 1 topic. I know it might be too early and also might include a lot of patient variability. So I don't know if it really could be answered. How would you view based on the pausing and restarting and chronic wounds being closed versus mild to moderate, how would you define if you can, steady state for a patient as around VYJUVEK over the long term with regard to starts and restarts and wound reopening?

We've said consistently even from -- at the prelaunch stage that steady state implies that the entire patient base, on average, consume about 26 vials a year. and we're not there yet. And we believe we'll get to steady state when the ratio of our depth Adida patients is about 50% each. So if you have an even split of recessive and dominant. And there -- they've been on drug a while, we expect the average consumption across the patient base to be 26 vials a year. So that is how we define steady state. And if you look at the compliance, if you look at the RDEB DDEB ratio, you look at the vials consumed, we're definitely months away from getting to that point.

Okay. That's helpful. And then I just want to switch gears to [ Jun ] right now. I'll start with the Phase II program. The prepared comments with regard to [ declete ] Phase II, you talked about a numeric scale, I guess I wanted to discuss the novelty of that and what are the key aspects of the regulatory discussions around this end point.

I mean, obviously, as you know, with 304, it's a combination of collagen and elastin, So I mean, with adding elastin and we clearly know that we can express elastin from animal models with a vector. The definition of elastin, obviously, it's not going to be -- it's going to be slightly different. You're going to see improvement is texture of the skin, skin quality et cetera, et cetera. And that's something that we captured in our 304 study. If you look at our patients feedback, I mean or they are rating, that's some of the consistent feedback that we got from consistently all the patients that were on the drug that they fill out their skin was smoother. The text just felt better. So obviously, some of that cannot be captured just by photonumeric scale. So we do want to talk to the agency about the novel mechanism, obviously, with this division, we know that we can express collagen 3 will express elastin.

And we need to -- we're going to propose some sort of quality evaluation for the patient-reported outcome of skin quality and skin texture. So this is something we're going to sit down with the agency and have that discussion. We have developed a put a numeric scale at the moment for the declete. So we have a scale that's developed and validated. So we want to do some sort of a combination and then just have that discussion with the agency.

Got it. And then just quickly on [ Jun ] again. I know, Krish, you've talked about this in the past with regard to potential options of how you aspect might play out with regard to, say, keeping it a subsidiary, part of Krystal, spinning out or what have you. Do you have any potential thoughts on when we might see visibility on potential outcomes there?

Yes. I think following the announcement on 304 and Suma is starting to have conversations with the FDA. From a development perspective, we expect to start Phase I in the upcoming months. And meanwhile Nishant, the CEO and the CFO of [ Jun ] are actively pursuing diligently working towards getting financed and spun out. And the broad timing on that is roughly before the end of Phase II. So our expectation is by the middle to the end of 2026, we're expecting in to be a separate subsidiary of [indiscernible]

Your next question is from Josh Schimmer with Cantor.

Just 2 quick ones. Krish, can you clarify that when you suggest a decline in VYJUVEK revenue quarter-over-quarter in the third quarter. Is that in the U.S. only? Or does that encompass worldwide because you do have the offsetting launch in Europe? And then second question, your R&D expense allocation, at least in the 10-Q seems very heavily weighted to the oncology program specifically. Just curious as to why that's the case and what trends do you expect to see going forward across the other programs?

On the decline, that was on the U.S. commentary, it was completely 100% U.S. specific commentary taking into account like we saw last year that in the summer months, families gone vacation and there's more disruptions in positives than usual. With respect to the R&D breakdown on cost cancer trials are expensive...

I can surely chime in. Obviously, you guys saw the monotherapy data. We are now in the process -- the study has already started being the combination. KEYTRUDA is not cheap and it's expensive. And also given agencies recent acting and other stuff, -- we believe we have very strong data. So we want to position ourselves to meet with the agency and start talking about a controlled study. So -- we -- I mean, again, this is something we have based on our discussion with the agency, but we anticipated that into the cost. What it would take if you would go into a full-blown study.

Your next question for today is from Yigal Nochomovitz with Citigroup.

2 questions. Could you talk about -- you talked a lot about the 720, the 60%, as you pointed out. I'm curious about the other 40%, the 420 to get to the full 1,200. What have you said or what can you say today above the time lines to capture that aspect of the U.S. market?

Look, the 720, it's a number like if you look at the past history of drugs that have been launched the best of the launches have gotten to about 60% market share in 2 years. So this is more of an academic benchmark than anything related to -- oh, it has nothing to do with we're going to stop at 720. We fully believe that the entire 1,200 patient base is something that we need to target. But we had set a goal in terms of the rate of launch, trying to get to like a 60% market share and compete with the best of prior launches out there. The only point I'll make is as you get past 700, the profile of patients that we get will be much more moderate to mild, much more out in the community, probably higher on the age scale. And so -- but it does not mean every wound is important for VYJUVEK to be treated, and it's by no means are we trying to convey that once we get to 720, we're on some different mode of pathway. We'll continue with the same level of diligence and effort to get to the remaining 1,200. And once we get to that point, we'll definitely start thinking about how to go after the gap between the 1,200 and the 3,000, which is a much more undiagnosed difficult to find target population.

Okay. That's helpful. And then I think you made a comment with respect to France, something about the continuity of the EAP. Can you just expand on that? Are there specific risks continuity? Or why wouldn't there be continuity of the EAP that would impact the transition to the commercial. Can you just walk through that in more detail, please?

Yes, Laurent?

Yes. I mean this is a more formal aspect to it. We had the [ Aceros ] pre-marketing authorization in France, and now we are waiting for the Aceros post authorization. It does happen, even though it's very rare, but it does happen that some companies don't. So we respect the process that we have engaged with the authorities. But we are confident that, yes, the patients will be able to have access to the drug under the Aceros in France.

Your next question is from Debjit Chattopadhyay with Guggenheim Securities.

I have got a couple of clarifications. So on the 82% compliance, could you sort of clarify what percentage of patients are currently using 4 months of [ all ] versus 321, et cetera? And how are you -- how have recessive patients evolved versus the dominant patients? And I have a follow-up.

Yes, Debjit, I was following you along. Can you just repeat the first part of your question?

So the 82% compliance rate? What percentage of these patients are on 4 files versus 321? We're just trying to get a better feel for how to calculate that 82% or how to calculate in our models rather.

Look, the way we define compliance has always been consistent and the same since the time of the launch. I mean, the easiest way to think about compliance is if you are on drug for -- if you're on drug for 10 weeks and you miss a week, you're at 90% compliance. That said, if somebody paused for an extended period and got back on drug, they kind of hurt compliance. And if you never came back on drug, you kind of helped compliance. So it's just -- so that's why it's compliance while you're on drug as opposed to if you're not on drug. But that said, debt irrespective of how one calculates compliance, whether on a quarterly basis or a 6-month basis or an annual basis, we're talking a range somewhere between 76% and 84%. Like it's not that far off with respect to -- and there could be many ways to calculate and we try not to get into and it's not that material to the overall situation.

I appreciate the clarification. Then just a follow-up then on the utilization that you're seeing in the recessive patients versus the dominance I know you mentioned month you get to 50-50, roughly 26 vols per patient. But right now, what are you seeing in the recession versus dominance?

The recessive are definitely much more consistent and have been since the beginning of the launch. I mean we even look at what is the compliance of the people who came on the drug in Q3 of 2023. How are they doing today? All the pauses and stops and starts are heavily impacted by moderate to mild patients typically adult moderate to mild patients is who make this post start difficult to figure out. The RDEB is extremely consistent on track for the most part. Some of them now are approaching a point where the wounds are fully healed. And so there is an opportunity for them to take a break and get back on drug. But the entire conversation around stops and starts is on the moderate to mild side.

Awesome. And then 1 last one. So based on the single-arm data, what kind of TPS scores are you enrolling in the combo program in non-small cell lung cancer.

EPS growth.

Okay. we are looking at -- obviously, we are agnostic, right? It doesn't matter what kind of PD-1 expression or PD-L1 expression, right? I mean we are looking for frontline failed patients. So either they failed PD-1 or PD-1 plus platinum therapy. So once they fail, we know were challenging with PD-1, the number of overall response goes down from 30% to 35% to 10%. And -- so we are agnostic. We have seen -- we looked at our data with monotherapy with patients that have failed PD-1 or with they were mutation-specific we still seem to have an impact on the work. We see stable disease or in some cases, we also see possible responses. So we feel we are pretty much agnostic. So we are going to stratify our enrollment Obviously, we look at PD-1 high patients and PD-1 0. So we -- in our recruitment study and our analysis, we will try to stratify and collect that data and see the impact of whether you use in combination with pembro, are we seeing better impact with higher PD-1 expression versus negative big on expansion?

Thank you. We have reached the end of the question-and-answer session and today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Greetings. Welcome to the Jeune Aesthetics KB304 Clinical Data Update Conference Call. [Operator Instructions] I would now like to turn the call over to your host, Nishant Saxena. Please go ahead.

Good afternoon, and thank you all for joining today's call. Earlier today, we announced positive safety and efficacy results for Jeune's KB304 Phase I PEARL-2 study. A randomized, double-blind, placebo-controlled study for moderate to severe wrinkles in the décolleté. The press release is available on the Krystal Biotech website at www.krystalbio.com and the Jeune website at www.jeuneinc.com. Both the press release and today's presentation have also been included as exhibits to Krystal Biotech's Form 8-K furnished to the SEC.

Joining me today will be Marc Forth, Chief Executive Officer of Jeune; September Riharb, Chief Marketing Officer of Jeune; and Suma Krishnan, Founder and President of Research and Development at Krystal Biotech.

This presentation will, and our responses to questions may contain forward-looking statements. You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this webcast and are subject to certain risks and uncertainties and that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in Krystal Biotech's SEC filings.

With that, I'm pleased to turn the presentation to Marc Forth, Chief Executive Officer of Jeune. Marc?

Thanks, Nishant. We are very excited to be sharing today's clinical data update on KB304, which is designed to deliver full-length human collagen III and elastin to the skin. As you will soon see, I think this update highlights the potential of our unique approach to addressing the underlying biology of aging skin.

Before sharing the data, as a reminder, I'd like to talk about how Jeune is structured and the support that Krystal currently provides to Jeune. Jeune is a wholly owned subsidiary of Krystal and leverages Krystal's proprietary technology platform in cash pay indications. It is a validated platform that to date has resulted in one approved drug VYJUVEK for the treatment of Dystrophic Epidermolysis Bullosa. Krystal provides Jeune with exceptional capabilities across R&D, regulatory, manufacturing, legal, human resources and finance. Jeune is leveraging Krystal's technology of using a modified vector designed to repeatedly deliver the appropriate genes to skin cells of interest and reverse the trend of extracellular matrix decline associated with aging.

If we turn to Slide 5. Just a few words on KB304 before we get into the data. KB304 was designed to deliver both collagen III A1 gene that encodes the pro-alpha 1 chains of type III collagen and the elastin gene that encodes elastin. As you may know, humans have plentiful amounts of collagen III when young but as age, production of collagen III diminishes. While less abundant than collagen I, collagen III is critical for skin pliability and repair and its degradation is one of the primary contributors to thin age skin.

Additionally, while elastin is estimated to only constitute 2% to 3% of the dermis, it plays a crucial function in the appearance of healthy skin. Elastin expression is highest in early development and expression decreases during adulthood. Age-related reduction in elastin production and damage to the elastin have a substantial impact on the skin's appearance, resulting in looser, sagging and fragile skin. Elastin and elastic fibers are particularly vulnerable to intrinsic and extrinsic factors such as sun damage in that there is a very low and slow turnover. The overall half-life of elastin is estimated to add more than 70 years. KB304 is designed to supplement collagen III and elastin expression from an individual's own skin cells, restoring protein levels and rejuvenating the skin.

I'll now turn the presentation to September Riharb, Chief Marketing Officer, at Jeune, who will introduce the study and share the results. September?

Thank you, Marc. PEARL-2 is a randomized, double-blind, placebo-controlled study of KB304, evaluating dynamic wrinkles in the décolleté in an adult female population. The décolleté is a target site with no approved injectables and a priority area for subjects as it is highly susceptible to premature aging and damage.

A total of 19 subjects were enrolled and treated in the study, 1 subject discontinued the study, so 18 subjects were assessed to the 3-month follow-up. The subjects enrolled in the study ranged in age from 47 to 75 years old and the median age was 62. The study was randomized 2:1 with 12 subjects receiving KB304, injected with a 33 gauge needle, and 7 subjects receiving the placebo, which was saline and was also injected with a 33 gauge needle. We evaluated KB304 safety as well as efficacy with efficacy assessed by both the investigator and the subjects utilizing the Global Aesthetic Improvement Scale or GAIS. Subjects also reported on their overall satisfaction with their wrinkle appearance using the Subject Satisfaction Questionnaire. In today's readout, we will be presenting safety and efficacy results as assessed 1, 2 and 3 months after completing 3 treatments, which were each injected 2 weeks apart.

Safety findings are summarized here. KB304 was generally well tolerated with a safety profile consistent with previous clinical studies of KB301. Injection site reactions have all been within the expected range of aesthetic injectables and with all reported as mild to moderate and transient. Adverse events were primarily related to the initial treatment and the frequency and severity of adverse events decreased with repeat treatment and we had no reported AEs in the placebo arm. We saw clear and clinically meaningful improvements in wrinkles of the décolleté for those subjects treated with KB304 and a clear separation between the active and placebo arms.

Starting with the GAIS results, the study investigator reported an improvement of 1 point or better in 100% of the subjects treated with KB304 at all 3 assessments. The subject self assessment on the GAIS also shows clear separation between the KB304 active arm and the placebo arm. The KB304 subjects reported an improvement in décolleté wrinkles of at least 1 point and 72.7% of the subjects at the first and third assessment, and. At the second assessment, 90.9% of the subjects reported at least a 1 point or better improvement in wrinkles with their décolleté.

In addition to wrinkles, the GAIS tool also captures other key skin quality attributes. As this slide shows, KB304 had a 100% responder rate by the final assessment on elasticity, crepiness, hydration, radiance and texture as reported by the investigator.

On this slide, we have highlighted subject assessments on the same skin attributes. This is an exciting finding and point to the potential benefit of KB304's unique mechanism of collagen III and elastin replenishment to meet the strong demand among injectable aesthetic users for products that go beyond wrinkles and address the overall quality of skin. The Subject Satisfaction Questionnaire includes a question that asks for the subject's willingness to recommend to a family and friend. And again, we can see clear separation between the KB304-treated subjects and those treated with placebo. We also see an increase in satisfaction and willingness to recommend increasing over time. This data supports KB304 treatment of décolleté wrinkles by directly addressing the underlying biology of aging skin. We believe KB304's unique mechanism to deliver natural skin cell produced collagen and elastin, directly to the extracellular matrix will help replenish these proteins and restore a more useful skin appearance.

Here is a before and after picture of one of the study subjects. As you can see from the area identified by the inverted triangle, there is a clear improvement in the appearance of wrinkles in the area of interest. But also a significant improvement in other skin attributes, including skin texture, hydration, crepiness, radiance and elasticity.

In Slide 14, as you can see from the image, this is an older subject with extensive wrinkling and skin crepiness at baseline. And you can see how the skin is rebuilt in this older subject by month 3. The creepy skin has completely disappeared in the middle of the chest.

And now I would like to hand off to Marc to discuss Jeune's plans for KB304 moving forward. Marc?

Thank you, September. With evidence of improvement across multiple skin attributes and high levels of subject satisfaction we believe that today's results highlight the potential of our fundamentally rejuvenative approach to replenishing native proteins and restoring youthful vibrance to the skin. We have selected the décolleté as the indication for Phase II development. As you may recall, we were developing a décolleté-specific photonumeric scale and an assessment tool for patient-reported outcomes. I'm pleased to say that we have not only completed that process, but we have also validated the scale. We plan to submit that photonumeric scale to the FDA and align on a Phase II protocol for KB304 later this year. Our goal is to initiate Phase II development in early 2026.

Turning to the current market and the potential market opportunity. Today's primary aesthetic tools manipulate the skin and are not designed to address the underlying biology of aging skin. Neurotoxins paralyzed muscles that create dynamic wrinkles and aren't helpful for areas where there are wrinkles present at rest. Fillers are designed to replace fat and bone loss as a result of the aging process. Energy-based devices purposefully injure the skin to elicit a response. As we have said, our approach is fundamentally different. We seek to replenish native proteins and restore the vibrancy and useful appearance of the skin.

If we turn to Slide 18, the ideal primary skin rejuvenation tool will address the root cause of the issue, replenishing the skin's key proteins to rebuild the skin naturally, be injected with standard syringes and be shipped and stored as other aesthetic injectables, and lastly, not require a capital investment. The Jeune technology checks every box.

Turning to Slide 19. The décolleté remains a high priority treatment area. This area is highly susceptible to premature aging and damage. There were an estimated 9.9 million cosmetic neurotoxin procedures and 6.3 million filler procedures last year in the United States alone. But to date, the FDA has not approved any aesthetic injectables for this region. We believe off-label use is minimal because of the unique challenges of treatment in this area of the skin. Lasers are sometimes used to treat this area, but they inflict injury to the skin in the hopes of producing collagen. We believe there is a significant pent-up demand as the décolleté has become an extension of the face with today's designers showcasing the beauty of the female form in their deep plunging headlines. KB304 is designed to be the ideal treatment to address this aged and pigmented skin by using the [indiscernible] natural production of collagen and elastin, and the décolleté is the perfect canvas for our first product candidate.

In addition to the significant demand from existing aesthetic patients, there are market expansion trends that could significantly expand the number of patients seeking a more natural approach to rejuvenating their skin. First, the global population spend an estimated $25 billion on skin rejuvenation products and services in '20 and '23. The market has largely been driven by the over 40 patient population. This population is expected to grow by 500 million people to 3.5 billion by 2030. Additionally, there is an increased focus on beauty, wellness, self-care and aging. We believe these trends will continue and drive greater expenditures on skin treatments.

We believe KB304 will appeal to consumers who to date have only purchased over-the-counter or physician-dispensed topical creams. KB304 is minimally invasive and natural-looking results have the potential to provide the skin rejuvenation solutions that this market segment has been and continues to seek.

Next, demand for minimally invasive procedures such as neurotoxin and filler injections is on the rise in younger demographics, including a reported 50% increase between 2015 and 2020 in the millennial age bracket. And aesthetic treatments are even more accepted and pursued by the Gen Z population in their 20s, the so-called use of baby Botox. Both the millennials and Gen Z generations believe in prejuvenation or treating their skin prior to when wrinkles and before pigmentation issues arise. They are actively looking for minimally invasive natural looking skin rejuvenation treatments.

Moreover, skin laxity has become a concern following rapid weight loss resulting from the widespread use of GLP-1. Plastic surgeons have reported that their patients who have lost weight with the GLP-1 have accelerated aging of their skin, making surgical procedures more challenging. KB304 could be used to rebuild the skin prior to or in replace of a plastic surgery procedure.

Lastly, we believe that there remains a significant untapped market potential. Only 24% of Americans have had an aesthetic or cosmetic procedure, and this number includes dental work. These figures are even lower in other countries. With the growing acceptance and public acknowledgment of celebrities that have had cosmetic procedures, we think this could drive a massive uptick in market demand.

Turning to Slide 21. We believe that the existing aesthetic patients will quickly incorporate KB304 into their treatment cycles of neurotoxins and fillers and consumers who have not advanced beyond over-the-counter or physician dispensed topical creams will seek out providers that offer the minimally invasive natural looking skin rejuvenation provided by KB304, thereby making it their first and only choice in minimally invasive aesthetic treatments.

Moving ahead, I would remind you all of the robust pipeline of other product candidates at Jeune. We have already demonstrated strong safety and efficacy data for KB301. With today's announcement, we have decided to prioritize the development of KB304 for the décolleté. Accordingly, we do not plan to move KB301 forward in Phase II development in the décolleté. Instead, we are evaluating the potential of KB301 in other indications where the expression of collagen III alone could be beneficial. We will make a determination regarding KB301, once we've completed that review.

Our Vector platform is amenable to the delivery of various payloads, including other extracellular matrix [indiscernible] that are high priorities in the field of aesthetics. In earlier stages of development, we have KB303, which is designed to deliver elastin alone. KB302, which is designed to deliver collagen I, and KB305, which is designed to deliver Collagen IV. Our goal is to continue to advance our pipeline and move an additional candidate into the clinic within the next 12 to 24 months.

Turning to the long-term vision for Jeune. As I mentioned, we plan to progress KB304 into a Phase II study. We are still evaluating the trial design, protocol and endpoints for the trial. We expect to have those discussions with the FDA later this year and initiate the Phase II study in early 2026. As we evaluate other potential indications for KB301, we will continue to evaluate other product candidates with a goal to move another product candidate into the clinic in the next 12 to 24 months. As the pipeline progresses, the need for dedicated resources will expand. Jeune is a wholly owned subsidiary of Krystal and was designed to allow the optionality to pursue and capitalize on value-creating events, whether those be a partnership or a separation from Krystal. We will continue to leverage this optionality and evaluate shareholder maximizing opportunities as we deliver on our vision of creating a new category of minimally invasive therapies addressing cash pay markets.

Before we open it up to questions, I would just like to end with what I truly believe differentiates Jeune. One, we are leveraging a derisk validated approach that directly addresses the root cause of aging skin. Second, we have generated substantial data from both KB301, and now KB304. Third, we have a deep pipeline of additional product candidates addressing large attractive cash pay markets. Fourth, we believe we have the right leadership team to move Jeune forward. And five, finally, we are fortunate to be able to leverage Krystal's validated gene delivery platform, comprehensive IP, manufacturing and operational and regulatory capabilities.

And now, operator, we would like to open the line to questions.

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] And your first question today is coming from Ritu Baral from TD Cowen.

I wanted to ask about the photonumeric scale that you've developed. Can you guys talk about the correlation between that and the GAIS or the PRO that you used? And how should we think about the -- that Phase II design as far as sizing and powering against that photonumeric scale? And as a quick follow-up on the procedure.

Okay. Thanks, Ritu, for the question. Related to the photonumeric scale and the GAIS, let's first just cover GAIS. The GAIS is the Global Aesthetic Improvement Scale. It's a very standard scale commonly used across multiple products in aesthetics. So the [indiscernible] of products currently in the market have used the scale extensively. Importantly, you can go only go up 2 points in either direction in this scale. So the way that we define responder of greater than 1 point, that's how we kind of defined it in the GAIS. So that's specific to the wrinkles and when we looked at that question. So the gate is going to be likely a secondary endpoint. You've seen it across multiple products very standard in this space.

The photonumeric scale will be specific to Jeune. So it's our Jeune décolleté wrinkle scale. We have completed and validated as we mentioned in the earlier remarks, and that we'll be meeting with FDA as it relates to the scale alignment, the endpoints and the Phase II protocol design. So early stages on what those will look like, but that will be the focus for us in Phase II is aligning on the scale of the protocol and the end points.

I proposed is the photonumeric scale, like is it an improvement scale? Or is it like a static scale?

Yes. So I'll turn it over to September, who can provide a little more detail on that. Go ahead, September.

Yes, it's a static scale. So the concept is at baseline, the subject and the investigator separately would determine the subjects grade at that point. And then at the assessments, whatever time period that is in our Phase II protocol, the same process will take place. The investigator will assess and determine the grade level of the subject at that point, and the subject separately will look at a mirror and determine her gray loves well.

And does there need to be alignment in the 2? Or are they -- are those scores combined?

So we don't have -- we haven't had discussions yet with the FDA. So it's too early for us to comment.

Got it. And then just going back to the administration. I guess like how much office time or procedure time is needed for administration across the décolleté? And how much of those AEs as presented on the slide were sort of needle related administration-related discomfort?

Sure. Yes. So it's a very tiny 33 gauge needle. So they're just tiny little pin prick that are dispersed across the décolleté, focused initially on the wrinkle and dispersed across the décolleté. And so time-wise, less than 5 minutes. And because the needle is so tiny, you really don't need to do any sort of free numbing of the area. If a patient is neophobic, you can have [ ICE ] treatment or something like that, but for the most part, it's not necessary. The AE profile was not really related to, for the most part, related to the needle poking, it's more just the standard body reaction to the treatment.

Your next question is coming from Alec Stranahan from Bank of America.

Thanks for the questions. It's been about a year, I think, since we saw the KB301 update. Maybe you could just expand a little bit on your thought process around prioritizing KB304 over KB301, given, I think, some of the GAIS scores were fairly comparable both on the 1 point and 2-point improvement. I guess what's sort of your thought process given the data you're seeing? And how does that elastin into the mix maybe help with, say, durability or sort of your impression of the overall effect going out beyond 3 months?

Yes. Alec, thanks for the question. Just recall that KB301 was an open-label study, whereas PEARL-2 with KB304 is a randomized, double-blind, placebo-controlled study. So it's very difficult to kind of compare across trials, of course. But we believe that what we're seeing in terms of all the benefits from KB301, we're seeing those in KB304, plus directionally higher improvements across the skin attributes, especially in elasticity and crepiness. We think that those 2 attributes lend themselves very nicely to the inclusion of elastin. So we think that we're seeing good signals as a result of those 2 attributes.

That and also, we have really strong preclinical data that suggests the elastin is clearly being expressed as well. So it's really based on KB304 and those attributes specific to elasticity and crepiness in addition to the animal data, we think it makes very good sense to move forward with 304.

This is Suma. I'll just add to -- yes, this is Suma, I can just expand on what Marc said. The nice thing about 304 it's a 301 vector. So we basically add elastin. So you still expect the same amount of collagen III, we've now added elastin to it. So again, what we see is, again, the sedations feedback, they feel the skin is smoother, they feel less creepiness. So I think that we see the benefits of 304 but adding the elastin, certainly, there is texture quality improvement in the skin. So I think -- we still get all the benefits because it's the same vector, same gene copies of collagen III with added elastin within the vector.

Okay. Yes, that makes sense. And maybe one quick follow-up on that point. The slide that you presented on the improving over time, 1 month, 2 months and 3 months. Is that something you also saw with 301? And I guess, what would sort of be your expectation sort of looking out beyond 3 months [indiscernible].

Yes. Perfect. I'll have September, handle that September.

Yes. We did see that continued improvement and with going back to the KB301, we did follow that group for an extended period of time, and we saw durability and we would expect the same with KB304 for the same reasons that Suma just mentioned.

Yes. And I'm just going to add to what September [indiscernible]. Keep in mind, the last one is a protein and it's come with [indiscernible] elastin and then it gets into its fiber formation. So very -- and elastin is your neogenesis I mean you don't produce elastin after the pre neutral. So it's very interesting that I mean it cannot be people try to make it express it and isolated ex-vivo are almost impossible. So I think you don't need much elastin. I think -- we hope that elastin is very durable [indiscernible] studies, we clearly show not just the pro-elastin but the fibro formation by [indiscernible] in our animal skin when we treat them.

So we're pretty excited. I think -- there will be -- I mean, obviously, we believe that this could be a prophylactic even before the skin aging. I mean, this is what we need to get into figuring out to prevent or protect the skin from skin damage and elasticity because. That's the first thing that we lose in the décolleté, right? Because exposure is skin, you see the elasticity of the skin is lost. So we truly believe now adding that elastin and able to deliver it to the air skin, even in a small amount, it's plenty to bring that into the texture.

I mean, again, this [indiscernible] said, just using straightforward photonumeric scale, we may also discuss real agency about other waste, biomarkers or whatever to add elastin into it. So this is something -- again, this is pretty novel never done before. So we will certainly have those discussions with the agency.

Great. Congrats on the progress.

Your next question is coming from Roger Song from Jefferies.

This is [ Fiona ] on for Roger. Congrats on the data. A couple of questions from us. First is how big is the décolleté segment in the overall aesthetic or rejuvenation market? And is there any potential for KB304 to be expanded to like a broader aesthetic indication?

Sure. Thanks, Fiona. Interesting about market sizing, because no product has been formally approved in the décolleté, there hasn't been a lot of formal market sizing work by other companies. So we're truly going to be a first mover in this with an approval of successful. And so I think the way to kind of think about market sizing, as I mentioned in the earlier comments, there's just under 10 million neurotoxin procedures in cosmetics, a little over $6 million in fillers. And if you look at just a simple age demographic age between 30 and 75 women in the U.S., just under 90 million women, and you take a similar market penetration of, call it 10%, or so that you see with fillers and toxins, it's very easy if you assume just similar pricing to existing options, you very quickly get to a multibillion-dollar opportunity.

So it's very, very exciting in terms of the market sizing. Specificity isn't there, but very clearly, this is a market creation opportunity for Jeune. This is really not a market share grab and certainly, but a market creation opportunity. And it doesn't take a lot of penetration in that category to get to a huge opportunity in multibillion-dollar range.

And the question to, can you repeat the second question again?

Yes, is there any potential to expand like a broader aesthetic market?

The answer is absolutely. I think this is very much a platform technology. If you just look at the neurotoxins they started in the glabellar lines and ultimately ended up in lateral [ cancel ], forehead, [ platismad ], et cetera. Based on this technology being so versatile, we absolutely anticipate many other opportunities to move into other areas of the body. We, in addition, beyond just looking at other areas of the body, have other, as I mentioned, opportunities within this vector platform to other genes that may be specific to other areas as well. So we have a lot of tools to work with as we look to customize offerings going forward.

And then September, you have something?

Yes. Just to add. The reason that we selected the décolleté initially was that it's a very, very challenging area to treat. It's typically not -- even though physicians, aesthetic physicians have the ability to use products in an off-label fashion. So they do fillers and [indiscernible] is very standard. But it's not done in the décolleté because of the thin skin, it's not a dynamic wrinkle associated wrinkle and it's the fillers are not an ideal product for that area. So we knew that from a subject enrollment standpoint, there wouldn't be issues recruiting subjects. It turned out to be the perfect canvas for us. But from a moving forward standpoint, as Marc shared, the -- there's a great opportunity for this product all over the body.

Your next question is coming from Josh Schimmer from Cantor Fitzgerald.

Okay. Great. This is [ Alex Deemer ] on for Josh Schimmer, and congrats on the great data. So what are the potential indications that you guys make for KB301?

Yes. It's as far as future indications, I got it. It's too early to tell, Alex. So we're going to undergo a process by way of evaluating where collagen III alone makes sense. And so too early to comment on that. I think as we make a determination on that, we will certainly let you know.

Got it. And then from what you can tell, what are you thinking in terms of frequency of administration for KB304?

Yes. Again, to be determined, still too early. We will follow these patients that are on active drug and this Phase I study, like we did with 301. So we will continue to do that. In terms of durability, though, I would say that we very much expect this to be in the range of existing treatment options, whether it's fillers or neurotoxins. However, we haven't honed in on a specific interval yet. So I think it's still too early to tell on that, but we very much expect it to be right in the range of existing treatments.

And we know that also -- yes, sorry, we know half life of collagen III and elastin, is pretty long. So I mean, just based on mechanism, I would expect your [indiscernible].

[Operator Instructions] And your next question today is coming from Sami Corwin from William Blair.

Congrats on the progress. I was hoping you could just clarify your proprietary JDWS scale a little bit more. I'm trying to understand if it's capturing something unique that the GAIS isn't, and if the GAIS will still be used as a secondary endpoint or if you're proposing that to FDA. And then I would also love to get your thoughts on manufacturing. And if you think Krystals in-house manufacturing could support the commercialization of KB304 or if you think you'll need to look elsewhere?

On the -- thanks, Sami, for the questions. I'll let September handle the first one and then I'll come back around on the manufacturing side, go ahead.

I'll take manufacturing. I can take manufacturing.

Perfect. So on the GAIS scale, the concept is that the investigator and the subject are comparing change relative to baseline. And by contrast, on your photonumeric scale, they are grading the area of interest at a specific time point. So can you correlate between the 2, if one is positive, likely the other one will be positive. But we are -- if you look at standard [indiscernible] out there, we are expecting that our static scale will be probably part of a primary end point. And then the GAIS will be part of a secondary exploratory sort of endpoint, which is pretty standard.

Does that answer your question?

Yes.

Perfect. Okay. Suma, do you want to handle manufacturing?

Yes, sure. I mean, keep in mind, these are platform technologies. I mean, I know why [indiscernible] product. As you know, our group here has optimized and increased [indiscernible] tighter and also scaled up so we can put multiple bioreactors scale up. So from a manufacturing perspective, with ASTRA, with a large facility in place, we can easily need capacity for supporting large productions. So that's something we, as a team, we are ready. It's just finding a product that's going to be -- they're going to cover more subjects. So I think from a manufacturing perspective, we feel pretty confident that we are ready to go with all the process improvements in scale-up steps that we have executed.

Your next question is coming from Andrea Newkirk from Goldman Sachs.

This is Morgan on for Andrea Newkirk. Maybe as a follow-up to your comments on the half [indiscernible] in collagen. Can you talk about what dose the decision to dose these patients every 2 weeks? And then also recognizing that you're planning on watching these patients, but do you expect that durability could allow for twice a year dosing as you had previously estimated with KB301?

Yes, sure. So with regard to dosing, we wanted to -- we wanted to spread -- so with KB301, we dosed every week. With KB304, we moved ahead to every other week just to have a comparison, both works great. With regard to the question of frequency, we are still of the mindset that we will be dosing likely every 6 months, which is in line with the toxin filler world for the most part.

Yes. And I'll just add, remember, we're going to the décolleté, right? So we have largest surface areas to cover. So I think if you can inject one and then follow up to make sure that we are covering most of the area in the skin. So that was the reason to front-load the dose, but we want to do it all at one time. But spreading it out over a couple of weeks and then that was the intent because of the largest surface area.

And this does conclude our question-and-answer session for today as well as today's conference call. I'd like to thank you for your participation. You may disconnect at this time, and have a wonderful day.

Thank you for standing by, and welcome to the Krystal Biotech KB801 first patient dose update call. [Operator Instructions]. As a reminder, today's conference is being recorded. I would now like to hand the conference over to your host, Stephane Paquette, Vice President of Corporate Development. Please begin.

Good morning, and thank you all for joining today's call. Earlier today, we announced dosing of the first patient in EMERALD-1, our ongoing Phase I/II study evaluating redoseable eye drop genetic medicine KB801 for the treatment of neurotrophic keratitis. The press release and today's presentation are available on our website at www.krystalbio.com. Both the press release and today's presentation have also been filed with the SEC as exhibits to a Form 8-K. Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development; Trevor Parry, Vice President of Product Development; and David Sweet, Director of Clinical Development.

This presentation will and our responses to questions may contain forward-looking statements. You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this webcast and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings. The agenda for today's call is outlined here. Krish will open the call with an introduction to neurotrophic keratitis and the limitations of currently available therapy. Suma will then discuss the platform opportunity for Krystal in the front of the eye and together with our R&D team, present an overview of our KB801 program, including key preclinical data and the design of our now ongoing EMERALD-1 Phase I/II study. Suma and Krish will close the call providing their perspectives on the longer-term development path for KB801 and upcoming pipeline milestones.

With that, I will turn the call over to Krish.

Thank you, Stephane. Good morning, everyone, and thank you for joining us. We're excited to announce an important milestone for Krystal. We dosed our first patient with KB801, which is a redosable eye drop genetic medicine for the treatment of neurotrophic keratitis or NK. As you will hear on today's call, KB801 is not only well positioned to deliver significant benefit for patients with NK, but also is a strong showcase of the versatility of our HSV-1 based gene delivery platform, which we are now advancing at full speed in 3 tissues, the skin, the lung and the eye.

The therapeutic goal of our 801 program is the treatment of NK, a serious degenerative and vision-threatening disease of the front of the eye. NK is caused by damage or loss of function in the neurons, innovating the eye that in turn compromise their roles in maintaining a healthy corneal epithelium. The disease is hetogenous, ranging in severity from punctate lesions to recurrent or persistent epithelial defects and ulcers that lead to stromal melting and corneal perforation. Vision impairment is frequently reported and unfortunately, severe cases can lead to blindness. NK is a rare disease, but awareness and diagnosis rates have increased dramatically in recent years.

And based on available claims data and third-party analysis, the estimated number of U.S. patients with an NK claim in 2024 was 68,000, up over 115% compared to 2020. As of now, there is only one specific therapy approved by the FDA for the treatment of NK. This therapy approved in 2018 and branded as Oxervate is an eye drop formulation of recombinant human nerve growth factor. Oxervate targets the underlying nerve defect in NK patients and has been shown to improve lesion healing in NK patients. However, rapid protein clearance requires intensive dosing 6 times per day dose every 2 hours for 8 weeks, which is both highly burdensome and may lead to suboptimal outcomes. This problem is further compounded by frequent reports of eye pain with this treatment as well as concerns about corneal deposit formation.

Despite these limitations, Oxervate is on a blockbuster trajectory in the United States. Based on public CMS data, the combined spend of Medicare and Medicaid on Oxervate in 2023 was over $540 million, rising sequentially each year since launch. And based on third-party claims analysis, estimate days of reimbursement Oxervate therapy in 2024 were over 410,000. We believe 801 is well suited to overcome the limitations of Oxervate, ensuring more consistent nerve growth factor exposure in the front of the eye while dramatically reducing treatment burden, all using an easy-to-use and recognizable eye drop dose format.

I'll now hand it off to Suma and the team to share more detail on our platform and KB801.

Thank you, Krish. As Krish shared, this is an exciting time for Krystal and our pipeline. With KB801 in the clinic, we now have 2 clinical stage ophthalmology programs under active evaluation, showcasing the potential of our platform in the front of the eye. The front of the eye presents unique challenges to therapeutic development. Rapid protein clearance has severely limited the utility of biologic therapies and high cell turnover has prevented the development of gene therapies using traditional vectors like AAV or lentivirus. Our redosable HSV-1 platform is particularly well suited to overcome those challenges. HSV-1 exhibits a natural tropism for epithelial cells of the eye and is compatible with eye drop formulation. More importantly, the safety and efficacy of repeat administration of our vectors to the eye have been already clinically validated by our initial experience with B-VEC eye drops in a DEB patient under compassionate use.

The large cargo capacity of HSV-1 also allows for delivery of a wide variety of biological payloads or combinations, providing additional flexibility. With these attributes, we see multiple exciting opportunities to leverage our platform and improve front-of-the-eye outcomes for patients. This includes targeting rare genetic diseases as we are doing with KB803 for the treatment of corneal abrations in DEB patients as well as diseases where a biologic therapy would be beneficial but is not feasible given the eye clearance rates. By encoding these biologic therapies in our vector platform, as we're doing with KB801, we can transduce local cell populations to drive sustained expressions with low frequency dosing in order of once or twice a week.

Before moving to KB801, I wanted to briefly touch on our other clinical stage ophthalmology program, KB803, which is already under evaluation in an ongoing Phase III study. Our excitement for KB803 is driven by the profound improvements realized by the DEB patient treated with B-VEC eye drops under compassionate use. As reported previously, repeat administration of B-VEC eye drops was well tolerated and associated with full corneal healing as well as significant visual acuity improvement, which critically was maintained with regular therapy. Based on this data, we recently initiated our Phase III to evaluate an eye drop formulation of B-VEC, KB803 for the treatment of corneal abration in DEB patient. We are excited to be progressing this program as we endeavor to treat DEB patients as comprehensively as possible.

We also expect our KB801 development program to benefit from key learnings and FDA interactions as KB803 advances towards a potential registration. Turning now to KB801, our second clinical stage ophthalmology program. KB801 is designed to leverage many of the features of our HSV-1 platform to enable superior and sustained nerve growth factor exposure in the cornea when compared to recombinant protein approaches, all while significantly reducing dosing frequency. We believe this is a high-value proposition with the potential to drastically simplify administration for patients and drive superior outcomes. KB801 is built using a proprietary non-replicating HSV-1 vector platform and encodes NGF transgene copies. Studies conducted during preclinical development are summarized here and collectively demonstrated that KB801 is able to effectively transduce corneal epithelial cells in vitro and in vivo, leading to sustained NGF production in front of the eye.

I will now hand it off to Trevor to walk you through some of our preclinical data that supports the clinical development of KB801. Trevor?

Thank you, Suma. We first set out to construct a vector encoding human NGF and to demonstrate that this product was capable of expressing and secreting its human cargo from clinically relevant cells without toxicity. On the left, we can see that KB801 efficiently transduced primary human corneal epithelial cells in vitro and expressed its transgene in a dose-dependent manner. As demonstrated by the ELISA and Western blot on the right, transduction also led to dose-dependent secretion of mature human NGF, a critical step for protein processing as NGF exerts its function extracellularly. Importantly, no cytotoxicity was observed in treated corneal epithelial cells even at the highest doses tested. We then conducted our first in vivo proof-of-concept study to examine transgene distribution in the eye after topical application of KB801 to bounded mouse corneas. In this study, we included an animal equivalent dose of recombinant human NGF protein adjusted for eye surface area to mimic a single topical dose of Oxervate.

As can be seen here, we observed uniform longitudinal deposition of human NGF protein across the entirety of the murine corneal surface that looks similar to what was achieved with the topical recombinant protein itself. This study also included a histological assessment of all major structures in the eye to ensure that KB801 did not induce any adverse effects in these sensitive tissues. Eyes collected 24 hours after KB801 dosing appeared indistinguishable from vehicle controls, showing no immune cell infiltrate, tissue damage, necrosis or other obvious histological changes that might otherwise be suggestive of poor tolerability to topical ocular KB801.

Similar findings were seen after a longer-term safety study involving 8 weeks of KB801 dosing. Here, we see results of a short-term pharmacokinetic study we performed to quantitatively compare human NGF protein kinetics in wounded mouse eyes following topical ocular administration of a single dose of KB801 or a single dose of recombinant human NGF. In this study, a 20-nanogram per eye dose of recombinant human NGF was employed to represent 1/30th the human Oxervate dose as the KB801 dose administered here is approximately 1/30 the intended human dose. Whole eyes from each treatment group were assessed by ELISA at the indicated time points post dosing to determine if KB801 treatment resulted in higher total human NGF exposure than recombinant protein therapy.

A higher peak level of NGF in the eye and a longer total NGF exposure time was seen in the KB801 treated group as compared to the recombinant protein control with NGF remaining at detectable levels in 2/3 of the dosed eyes at 7 days post treatment. Finally, a study was conducted to quantitatively compare human NGF protein kinetics in wounded corneas following a single dose of KB801 or 6 doses of recombinant human NGF given at 2-hour intervals to mimic the daily clinical regimen of oxalate. The total amount of human NGF present in treated whole mouse eyes was assessed by ELISA at 10 hours and 15 minutes, 24 and 34 hours post KB801 or first recombinant human NGF dosing, equating to 15 minutes, 14 and 24 hours, respectively, after the sixth recombinant human NGF dose.

The 10-hour 15-minute time point was included here to capture the expected peak of recombinant human NGF within the mouse eye as it was the earliest feasible sampling time point following the full recombinant protein dosing regimen. As shown here, we found that a single KB801 topical treatment resulted in higher eye NGF levels as compared to 6 doses of recombinant human NGF at all time points tested. Again, KB801 resulted in both higher peak level of NGF in the eye and a higher total NGF exposure even in comparison to the animal equivalent of the fixed-dose commercial Oxervate regimen. Together, results from these studies provided sufficient data to file and clear an IND, supporting the development of KB801 as a potential ocular topical therapy capable of achieving robust and sustained NGF delivery to the corneas of NK patients.

I will now turn it over to David to discuss our ongoing clinical program.

Thank you, Trevor. I have the pleasure of introducing the KB801 clinical program today. KB801 is currently under evaluation in our first-in-human Phase I/II study, EMERALD-1. EMERALD-1 is a double-masked, randomized, placebo-controlled study in patients with moderate to severe neurotrophic keratitis. Up to 27 adult subjects with Stage I or Stage II NK as defined by the Mackie criteria, will be enrolled and randomized 2:1 to receive either KB801 or placebo topically to the study eye twice weekly for 8 weeks. To enroll in the study, subjects will need to demonstrate persistence of a corneal epithelial defect as well as reduced corneal sensation of the affected study eye.

The primary focus of EMERALD-1 is evaluation of safety and tolerability of topically applied KB801. The study will also assess efficacy of KB801 in treating the hallmark of NK, persistent corneal epithelial defects. Images of fluorescein stained corneas will be read by independent masked readers to evaluate defect closure at various time points. Additional efficacy endpoints include change in corneal sensitivity by Cochet-Bonnet esthesiometry and change in ocular symptom severity as reported by subjects. Durability of effect will be evaluated 2 and 12 weeks after completing the treatment period where defect closure and corneal sensation will again be assessed.

I will now hand the call back to Suma to discuss the outlook for KB801 and the broader pipeline. Suma?

Thank you, David. One of the many exciting aspects of the KB801 program is the possibility of expedited development, shortening the time to registration and patient impact. The prior experience with Oxervate is one key advantage. With Oxervate approved in 2018 and on market now for 5 years, there is extensive clinical and commercial experience that significantly derisks the safety of our KB801 payload. We also have the benefit of known endpoints with a short time to readout. Taken together with the agency's experience with our platform and the fact that NK is a rare disease, we see opportunities for efficient registrational study designs, primarily focused on efficacy evaluation.

We are also pursuing the platform technology designation with the FDA, which could provide additional timing advantage and codify some of the efficiencies we are already seeing with the FDA review of programs on our HSV-1 platform. Potential advantages could include earlier expanded or accelerated FDA interactions, opportunities to leverage previous preclinical and clinical data, possibility of FDA referencing prior CMC validation of the manufacturing process, release testing assays and stability for future marketing authorizations. Collectively, these have the potential to make the clinical development of KB801 relatively short and cost effective with the additional benefits of safety, efficacy and manufacturing all being significantly derisked.

With these tailwinds, we see an opportunity to rapidly progress both of our ophthalmology programs, KB803 and KB801 with potential for registration in 2026 and 2027. I will now hand the call over to Krish.

Thank you, Suma. With KB801 now in the clinic, we have built out a broad and diversified pipeline poised to deliver multiple readouts in the months and years ahead. In the lung, we're on track to deliver KB407 molecular data readout later this summer and expect to provide additional updates on KB408, which is now in repeat dosing later this year. And with patients dosed with both KB803 and 801, we're excited to drive enrollment to completion and report data on relatively expedited time lines. This is all in addition to our ongoing programs in oncology, aesthetics and skin, each of which addresses urgent unmet needs and collectively demonstrate the breadth that we believe exists in our HSV1-based technology platform.

As you heard today, we are very excited about the future of the pipeline at Krystal. With our HSV-1 based technology, we have the ability to efficiently deliver genetic cargo to high turnover tissues repeatedly and non-invasively. The skin, lung and eye are all great tissues for us that have simultaneously proven intractable to other gene therapy modalities, setting up durable value creation opportunities. Today's announcement is an important step on what we see as a clear path to building long-term shareholder value. The VYJUVEK franchise soon to be bolstered with EU and Japan launches is poised for growth for years to come. The addition of KB803, if approved, would be highly synergistic with VYJUVEK and drive further top line and bottom growth. Our pipeline efforts in the lung and the eye are then springboards to take Krystal to the next level. Success in either would be a step jump for our organization, opening up multiproduct opportunities in blockbuster markets. We're excited about what's to come and the opportunity to build a true portfolio of diversified high-value genetic medicines for patients in need.

Thank you, and I'm going to turn over to Q&A.

[Operator Instructions] And our first question this morning is coming from Alec Stranahan from Bank of America.

Two from us. First on NGF expression. Do you think peak NGF or duration of NGF expression is maybe more important from your preclinical work? And I guess how did this influence dosing frequency selection in the Phase I? And then I've got a follow-up.

Thanks, Alex. Trevor, do you want to take that?

Sure. Thank you. I think we think of probably -- I think peak exposure is important, but do you think the duration of exposure is really important to keep a consistent level of NGF in the eye in these patients. I think one of the issues that we've seen with Oxervate is the protein turns over so quickly, and they spend so much of their day without NGF exposure to the eye just from the clearance rate of the protein itself. We expect durable expression of the protein will be critical for demonstrating success of the program.

In determining dosing interval, if you look at the PK profile, of the single-dose study that we did. We see a favorable duration of exposure to NGF at level equating to Oxervate for 3 to 4 days. So our thought was by inducing twice weekly dosing, we could keep that level at or above Oxervate kind of peak level throughout the duration of a week of dosing.

Okay. That's helpful. And then maybe just one quick one for Krish. I guess given the turnover of the FDA and the fact that there's an approved medicine for this population, I guess what sort of feeds into your confidence that maybe an accelerated pathway could be available to you guys and also around the sort of what you would expect would be an approvable endpoint. Obviously, there's precedents there, but I wonder if that maybe changes given there's an approved medicine. Any thoughts there would be great.

Yes, it's a combination of thoughts, but I'll let Suma answer this one on the FDA interaction.

I think we are pretty confident that we will get the accelerated pathway because, again, if you look at KB801 versus Oxervate, there's substantial advantage because, again, we have to dose hopefully, once or twice a week versus 6 times a day. So we're going to see some benefits. I mean, clearly, there's a dosing benefit because these are mostly older patients. And they really cannot -- basically, it is adherence to therapy with Oxervate. That's what we hear when we speak with the KOLs that these patients cannot -- I mean they are not able to adhere to the 5- or 6-day dosing, so they're not seeing the benefit or the effect in real commercial setting. I think this is something we can overcome and the data is pretty evident.

So I think from an accelerated pathway, we feel pretty confident that the FDA should still give us that path forward. And in addition, also because we are going to -- we are in the process of applying for a platform technology. Keep in mind that CMC is the biggest challenge. I mean this is something we went through with VYJUVEK and also with all of the process improvements and validation. So we believe with the platform approach, having the same manufacturing process and 90% of common assays for releasing and some of the stability that we have on the vector itself can be applied to this product. So it's basically doing the clinical study.

We know we have many sites opened up. We feel pretty confident that we can enroll these patients. So it's basically just -- for us, it's just finishing the clinical trial and the rest is very much doable. So I really see this as a very fast to Phase III and a process to filing a BLA or a registration because of just the platform technology in general and the patient population and the advantage of the dosing regimen for these patients. .

Your next question is coming from Roger Song from Jefferies.

A couple from us. Maybe start with the addressable market. Understanding the claims data is doubling for the past couple of years and then the epidemiology seem to have a range. So what's your current estimate for the addressable market? And specifically, what's the percentage of the Stage 2 and 3 among the entire NK population? And then I have a follow-up.

Stephane?

Yes. Thanks for the question, Roger. Obviously, we're doing some of that work now to scope out further the size of the NK patient population and get to the moderate and severe. I mean right now, we're getting the numbers that we've reported today, the 68,000 or so. That's all patients with an NK claim, and we're trying to get a sense of how many are on Oxervate, which may be in the high thousands kind of ballpark. So at this point, it's hard to say definitively on exactly what the moderate to severe looks like. It could be from other countries, something like 1/3 roughly, but we expect to continue to drill down on that as we progress here. I mean, either way, for us, considering the size of populations we're typically targeting, it's quite sizable and a meaningful opportunity for Krystal.

Got it. Yes. And then understanding you're pursuing the more accelerated pathway. Just curious about this Phase I/II data timing? And then what is your expectation to see the efficacy tolerability compared to Oxervate given different modality and then the dosing regimen?

Roger, on timing, look, it's an 8-week study, and we thought we would provide further guidance on timing once enrollment is complete. As you know, we're looking for some 27, 30 patients to enroll. So stay tuned in terms of data update in terms of timing update on data announcement. On the second question on what we expect coming out of the Phase I. So obviously, it's a safety study. And we actually -- if the clinical data mimics some of the preclinical data that you've seen on the poster presentation, that would be really useful to us.

And one of the things we'll be looking for is frequency of dosing, right? We're starting with twice a week based on the PK. It's an opportunity to go to once a week and also durability. If you look at our clinical study, we're measuring -- while the endpoint is 8 weeks, we're measuring at 4 and 6 and 8 and 10 and 20. That will give us an idea of how quickly the drug works and how long the durability of the drug is. So I know it's a long-winded question to what do you expect success, but I think we feel really optimistic based on the preclinical data. and the platform and the corneal and the turnover in the HSV.

Suma, do you want to add?

I'll just add, this is an efficacy trial, too. It's both safety and efficacy. So it is a placebo-controlled trial. So obviously, if you see the -- we're going to compare it to the placebo and see the benefit. So we will get very strong efficacy and safety data from this trial. So I mean that will help us design our Phase III as far as what the effect size is and what number -- how many number of patients do we need for our pivotal single Phase III study.

Your next question is from Ritu Baral from TD Cowen.

Krish, at the very beginning, you mentioned that one of the issues with Oxervate was deposits you mentioned, is that a function of the payload? And is that something that you guys are watching as well? Or is it like an excipient thing? And then I wanted to talk a little bit about end points looking at the Oxervate label and per our previous discussion Krish, you mentioned that complete corneal healing at week 8 was the pivotal endpoint. Is that what you're also considering for accelerated approval? And how does the mean corneal sensitivity, which is also in the Oxervate label, how did that factor into how FDA evaluated that drug and could evaluate your drug?

David, do you want to start on that one?

Yes, I can take the deposition question. So although the exact mechanism of those corneal depositions is not clear, what is, I think, thought to be the driving mechanism is the formulation itself and salt content and that sort of thing. There isn't a biology necessarily that suggests that NGF for any reason would be causing those depositions. And so because of that, we're relatively confident that, that wouldn't be an issue, at least from the mechanism of NGF standpoint.

In terms of endpoints 8 and 10, Suma, do you have any...

You want to talk with endpoints.

Yes, yes. So I can continue with that. So the main endpoint and efficacy is obviously going to be the healing of these corneal epithelial defects. The increased corneal sensation that was shown by Oxervate and has been shown in kind of post hoc studies as well is certainly a benefit and shows that the mechanism of NGF is what we think it is. And so demonstrating that in this study would be an added benefit, but we're really focusing on the closure of these defects because that's what is ultimately going to create the most benefit for these patients in the long run and prevent some of the complications that are seen with NK.

Got it. And then -- go ahead, Suma -- sorry.

Yes. It also be, as Krish earlier mentioned, if you look at our clinical design. We are evaluating wound closure at many different time points. So we could be sooner, again, because of the mechanism, right, because we have continuous expression of NGF versus trough and peak in these patients and there could be extended period of time where these patients don't have exposure to NGF, so which could be different with KB801. So we believe that hopefully, we look time-to-wound closure durability of the wound closure. So this particular study will really give us a window into all of those different factors that will really help us design our Phase III pivotal trial and position us for the exact success and how we can be superior to Oxervate.

Understood. And Oxervate also had in their studies, they had 2 Phase IIIs, one was in unilateral disease and the other was in patients with bilateral disease. Is there -- will you have to look at both? And if so, how different are these patients for management?

Yes, I can take that one, too. So our current study does not make a distinction between these 2 patient populations. And just looking at the epidemiology, bilateral disease is probably 10% to 20% of Stage II and Stage III NK patients. So we don't necessarily have a plan to separate that out necessarily because the mechanism is all going to be the same from our standpoint. And so for our current study, we are even in individuals with bilateral disease, given that it's a Phase I/II, only treating one of those study eyes, but it's certainly in the future, we could see inclusion of both eyes once we establish the safety profile.

Your next question is coming from Gavin Clark-Gartner from Evercore.

This is Gautam on for Gavin. Congrats on the update. So we have 2 quick questions. One is on dosing volume and formulation for 801 and how it compares to 803 for? And how much will the upcoming ocular data derisk 801 safety and tolerability? And the second question is for the registrational, would this be a placebo-controlled or an Oxervate controlled trial?

Look, in terms of safety, our vector, and we've seen the one compassionate use on 803, where a patient has been on the drug for like 1.5 years or 2 and continues to be on drug. So we feel that with respect to 801, the 803 kind of points in the direction, like we're not overly concerned about any change in formulation. The approach is the same. What's encoded is different. And so we don't -- and even the titer levels are very similar. And so we're not expecting anything on safety. On the design of the registrational trial, Gautam, -- we're not ready to make a comment yet on whether it will be blinded or head-to-head. But Suma, if you want to add?

Yes. I mean, from an FDA approval process, the -- they will not mandate a head-to-head study unless you want a superiority or something on the label. So again, this is a discussion, I mean, with the agency. I mean, a placebo-controlled study will be plenty for getting approval even as an accelerated path. And obviously, even with the placebo, it's going to tell you, I mean, we will have differences in label, right? I mean if it's once a week, single administration, we may have faster wound to closure durability. All of those will be studied against the placebo in our Phase I Phase II study, and we'll see what we see. And if that's pretty strong, then we may not -- I mean, the placebo-controlled study is plenty to get approval. So as Krish said, Phase I, Phase II will then help us decide what kind of a path we want to take with that Phase III.

Your next question is coming from Sami Corwin from William Blair.

I got two. The first is I was really struck by the rapid time from IND clearance to the first patient being treated. And so I guess I was curious if that's reflective of the overall demand and just how you're thinking about how quickly you could fully enroll this Phase I/II trial. And then there's been some mention about that KB801 could potentially lead to faster wound closure. So I guess do you still expect to use the 8-week course like Oxervate? Or could this potentially be a 4-week course? And I heard Suma kind of mentioned the potential to use once-a-week dosing. So when exactly will that be evaluated?

Look, Sami, I don't think we necessarily announced when the IND was cleared. So yes, it was really fast, but I was just trying to clarify that point, like we hadn't previously announced the IND clearance. But Suma, maybe you can talk about enrollment speed?

Absolutely. I mean we were excited about this program. So we engaged many of the KOLs with the academic sites much earlier on even before we filed the IND. So that gave us an advantage. I mean, obviously, sharing the preclinical data. And again, we are so good -- I mean, we have a platform technology. We have a good relationship with the division. They understand our HSV product. They know the safety of the product. So I think the bar for very minimal preclinical studies are required to support our IND based on the existing bolus of data that's already on file with the agency.

So that really accelerates not just IND, but I think we have the advantage for our consecutive products to accelerate quicker, as I mentioned, through a platform technology and agencies comfort with our product and safety of our product. So again, we were pretty diligent. We engaged with a lot of sites. We've got a lot of private sites engaged much earlier on. And our team has spoken with these -- all these sites, and they gave us some feedback on why there's still an unmet need for this patient population. There's a lot of patients. There are a lot of patients out there, and there is -- Oxervate is not something that we want to even get on because of the dosing regimen. So we are -- I mean, our operations and clinical team is, again, very aggressively working with all these sites. So -- and we have opened quite a few sites. So hopefully, that will help us.

Any comment on the full week versus 8 weeks?

Again, we have to -- our data will direct us in that direction, right? I mean many of these patients have different severity levels of wounding. So there's a little bit of understanding how severe, how -- what kind of -- of these patients. And I think our Phase I, Phase II data with, as I said, is very frequent evaluations will really help us understand all of that. So -- I mean, based on the data, then we have to decide how we want to design the study and endpoints from a timing perspective.

Sami, right now, based on the PK data that you saw, we're going towards twice a week application. If there is something very different we see at the end of the Phase I/II, we'll, at that point, think about once a week. But for now, we stick to twice a week administration.

And I think I just want to add because with VYJUVEK, we've worked with the agency, not only the U.S. but global regulators to administer this product at home. So I think there will be advantages. I mean, hopefully, that's going to be a big thing with this product. So home administration. So even if it's twice a week, it makes life easy for these patients compared to 6 times a day.

Your next question is coming from Andrea Newkirk from Goldman Sachs.

Suma, can you just remind us what proportion of patients are able to achieve complete durable healing of the epithelium with Oxervate? And how do you anticipate this to compare to KB801 given the profile you are seeing and the idea that it does offer more consistent NGF levels in the eye?

Do you want to take David?

Yes. So on Oxervate, was seeing around anywhere from, depending on the study, 50% to 70% of patients achieving complete closure at the 8-week time point. It's obviously too early for us to predict what our percentage or proportion of patients with complete closure is. Obviously, we're very excited about the mechanism of our drug and the ability to, hopefully, at the very least, meet that threshold. But I'll just kind of leave it at. We'll see how the data points us what direction yes.

[Operator Instructions] Your next question this morning is coming from Yigal Nochomovitz from Citi.

This is [ Joohan ] Kim on for Yigal. Congrats on the progress. Maybe just 2 quick clarifying questions. In terms of the twice a week regimen currently, I just want to clarify, is that every 3 days? Or are there certain prespecified days that the patients are currently utilizing the KB801? And in terms of enrollment for patients for the trial, are these patients that have never had been on Oxervate previously?

Yes. Thanks for the question. So for the first part, -- we are leaving some flexibility for the dosing for the twice-a-week dosing anywhere between 3 to 4 days for that second dose in a week. And that we're seeing that's going to be pretty consistent throughout our study and giving a little bit of wiggle room there.

For the second question -- so our current study is not restricting patients who have previously been on Oxervate. Currently, we have a just a 14-day washout period if an individual had previously been on Oxervate. This is almost like 100x the half-life of Oxervate just to ensure proper clearance. But Yes, there's no restriction nor are we obviously limiting to those who have "failed Oxervate in the past.". So we're leaving it pretty open from an enrollment.

Got you. And maybe just one quick follow-up. In your research, how long do these do these Oxervate patients typically stick with the 6x administration per day? I guess just wondering the average time of therapy commercially under discussions with physicians.

Yes. So that's going to be highly variable, unfortunately. So I don't have a great answer for you. It's going to be patient dependent -- and so unfortunately, I just don't have those numbers.

And again, when we speak with the KOLs of experience, I mean, who treat many of these patients, they said compliance is one of the biggest issues with these patients because these are older patients. So many of them don't comply and they don't heal. So there is an issue. There is patients that then get off Oxervate and there is an unmet need. So that's what the consistently hear from speaking with all of these different KOLs. And they're really excited about the product because I think this infrequent dosing once or maybe twice a week is going to be -- make a huge difference for this patient population.

Your next question is coming from Bill Maughan from Clear Street.

So I have 2. So just looking at the decision to go forward into this study with a single dosing regimen. Just wondering what gives you the confidence to forgo dose finding or initially out of the gate and the confidence that the FDA might not require some more extensive dose finding before a pivotal study? And my other question is just for a little more color on the difference between the Stage 2 and the Stage 3 patient. Are these generally -- do you consider them more similar than different? Or are there significant differences between Stage 2 and Stage 3 that might lead to different treatment penetrations?

Okay. I can address the FDA question. Obviously, you saw the preclinical data that Trevor presented. We have clear indications when you give Oxervate versus KB801, you can see the pharmacokinetics. So the titer that we give in the animal studies that's extrapolated to the humans, we feel confidence it's human dose converted from Oxervate to our product. So we can see from the pharmacokinetic and expressions of NGF, that gives us the confidence of the levels that we would see that Oxervate pharmacokinetics with us match for the clinical trial. And that's what we justified to the agency.

The agency seems to be satisfied. We had interactions with them. We had pre-IND meetings. We send them the protocol design. They commented on it. And -- so whatever we have designed is with extensive input from the agencies and concurrence and agreement. So whatever we have done is in agreement with the agency because again, they understand our vector. They know the profile from all our pipeline products. I think Again, the study is in agreement with the agency. So we're pretty confident that this dose is acceptable for our evaluation for both safety and efficacy.

And I can comment on the Stage 2 and Stage 3. Yes, I think Stage I and II NK are much more similar to one another than to Stage 1. Obviously, there is a spectrum even between Stage 2 and 3, but I would not expect there to be vast differences in response necessarily between those 2 severities. And I think a similar kind of trend was seen in Oxervate's studies as well. If anything, the more severe disease allows for more obvious wound closure. And so in short, I don't think we will need to change our dosing regimen or anything clinically [indiscernible] between those two population.

This does conclude today's question-and-answer session, and I will now also conclude our call. Thank you for your participation and disconnect at this time, and have a wonderful day.

Thank you, everyone, for joining us. I'm Andrea Newkirk, one of the biotech analysts here at Goldman Sachs, and I'm super excited to be joined by the team from Krystal, Krish Krishnan, Chairman and CEO; and Suma Krishnan, President of R&D. Thank you, guys, both for joining us.

Thanks for having us, Andrea.

So maybe before we dig into the pipeline, which has been having some really exciting advancements most recently on the back of ASCO and your upcoming data reads in CF and AAT. Krish, maybe we can start just on the VYJUVEK launch. What are you seeing right now in terms of where you stand in the transition from an induction to a maintenance phase? Where are we in the launch?

Yes. When we -- At the time of launch 18 months ago, we had assumed we would be at a 50% compliance by now. We're ahead of that number. We're in -- and no matter how you calculate compliance, we're in the 83%, plus or minus 5% range. So we're ahead of that. And that has to do a lot with the percentage of RDEB versus DDEB patients on the study. We're right now at 70-30.

And at some point, when that ratio heads towards equal distribution, we expect compliance to come down to 50%. But I will say our conviction in the total market opportunity is just as strong and in fact, stronger than it's ever been. We realized that some of the low-hanging fruit has been captured by VYJUVEK. And now as we go further into the community, we're proactively trying to figure out how to strengthen the commercial team in the U.S. to get those opportunities brought in a lot faster.

Can you speak to what those efforts are? You've talked about expanding the sales force, but how does that logistically improve the operations?

Yes. So we started with 17 reps across 52 states, which is about 3 reps per state. And as you're done with the low-hanging fruit, just time-wise, it takes a rep longer to drive to a physician. As awareness is low as you go into physicians further in the community, it may take a couple of cycles of visits before you help them understand a gene therapy that's herpes-based, that's dosed at home.

And so one of the first things, which a lot of rare disease companies do is to maybe have a rep focused on 2 states or 1 state per rep, which is another proxy for saying we're just increasing the effort required to pull a prescription through. So logistically, we're just trying to make it a little bit easier to get these prescriptions done faster for the patient.

On the idea that some of these physicians multiple cycles, on average, what is the number of cycles or number of visits that they need to really start to understand the value proposition of VYJUVEK.

Well, it all depends on the physician, the type of patients they have. Some of the community physicians have had exposure to KOLs for one indication or the other, and they come up to speed. There are some dermatologists in the community on whom we have to help understand that it's an episomal virus and doesn't integrate into your DNA, realize that although it's herpes-based, it's not replicating and some of the toxicities associated with herpes does not exist in the vector.

so in terms of cycles, Andrea, it's tough to say whether it's 1 or 2 or 3, but definitely longer than talking to a KOL in one of these centers of excellence or close to a center of excellence, and being able to pull a start phone through.

Makes sense. And how quickly do you think you could start to see the benefit of this expanded sales force?

My expectation is we're starting to see some benefit in Q2, a much higher benefit in Q3 and by Q4, it should stabilize. But definitely, we're looking for an impact in the Q3, Q4 time frame starting now.

Okay. So you would look to reevaluate whether or not you needed to potentially even expand even further when you get into the back half of this year?

Yes. The max we can get to is just to have one state per rep. But obviously, in a rare disease, that doesn't make too much sense, especially dealing with Alaska, Puerto Rico or Hawaii or some of those states. So the answer is somewhere between 50% more versus 75% more and we'll definite get to that point.

Got it. Let's talk about the nature of the pauses that you're seeing right now because that is probably driving some of the dynamics we're seeing in terms of the maintenance and the utilization that you referenced. Speak to us about what you're hearing from the KOLs or the patients as to how they're experiencing the benefits of VYJUVEK?

Yes. First, I want to start with pauses are really good thing for VYJUVEK. We try not to influence pauses in any way. Pauses is what leads to the drug having a long tail. And what I mean by tail is this is a chronic application. We want patients to get their wounds healed, take a break, get back on drug when they see disruption or when new wounds appear, and we want that cycle to continue for a very, very long time. And that happens when patients pause, that's a big positive for us.

A lot of patients get engaged in more physical activity, a lot of patients doing things they have never dreamt or having done before. So the #1 driver for pauses is complete wound healing. There are always a small percentage, and I would say like 90% or a very high percentage -- there's always mortality involved or some of these patients go through some other serious condition that's above and beyond the skin, whether it's blood-related or blood transfusion related, we can go on and on. In some cases, they have to leave the country for whatever reason.

And there are some adults with mild indications who probably don't like a nurse visiting them week after week and would rather apply VYJUVEK themselves, which Suma is working on trying to get the label modified for caregiver or self-administration, which is what we got in Europe. So what we try and do is to make sure the patient experience on the drug is fantastic. And so pauses, which are tough to predict because Q1 was the first time we saw a somewhat meaningful pause after patients have been on drug for 18 months and some of them in the OLE.

And we thought that was great. And we're already starting to see some of those patients get back on drug in Q2. So we love this, and this is going to continue, right? So last night in one of my described this launch is in kind of technically an upward sloping sinusoidal curve. It's the easiest for me to comprehend how our launch looks like, which means if I'm convinced of the market opportunity, and I believe the patient experience, physician experience is good, I see no reason why we wouldn't realize the opportunity to the first 1,200 and beyond in the U.S.

Perfect. How meaningful is that, Suma? Chris just talked about caregiver self-administration. You have that on the label in Europe. What activities are underway right now to bring that to the U.S. And how could that impact utilization?

I mean we had to do some human factor studies, which we completed. Unfortunately, it was not within the time of the BLA. We didn't want the BLA to get delayed to get that into the label. But all those studies were completed to support getting that in the label in Europe and soon in Japan. So we have provided that data into -- to the FDA, and we are in the process of extending the label. So the FDA is completely aware of this, and this is something we already submitted the protocol. So it's just the timing.

I would say on utilization, look, it obviously doesn't affect the young severe patients in the study. Parents are pretty good about utilization. What it will impact utilization is on 20-, 30-year-olds suffering from mild to moderate forms of the disease, which is predominantly dominant EB. We really think getting that on the label is a tailwind to compliance. While on one hand, I'm talking about compliance going from 83 to 50, getting caregiver administration of the label could make that even longer if we get that in a timely fashion.

Got it. So the path to getting to 50 just makes sense instead of dropping.

Yes. Look, trying to get a patient, especially when you're an adult and you see what a nurse does on dominant wounds, which is drop the gel and put a bandage, scheduling week after week is a bit of a chore if you're mild to moderate for them. But it's a great way to start and now that they're seeing benefits. I think trying to get this label change in a timely fashion, we're already halfway through the process right now. So we're excited that we're timely in terms of making that label change and getting them back on drug with a higher utilization.

So you mentioned that you're already starting to see some patients come back. So if you could characterize for us what the extent of these pauses has been? Do you see a variation between RDEB versus CDEB patients? And then just logistically and mechanically, how easy is it for patients to restart VYJUVEK?

Correct. I do want to say that if you are a severe patient, you're not at the point of complete wound closure yet, maybe 12, 18 months. Most of the positives we see are predominantly on the mild to moderate side. We expect the wound to be healed for about 90 days based on science because the half-life of collagen is about 30 days. That's a median average expectation to come back, but not all wounds heal at the same time.

So while a patient achieves complete wound closure, there could have been a prior wound that has been closed already for 60 days. So in terms of coming back, anywhere between 30 to 120 is fair game, depending on the severity, depending on when the wound closed. So it's tough to put a finer point on that number. Maybe over time, we'll get a better idea. But right now, it's between a month and 4 months is my best guess.

In aggregate, how many of your patients who have started VYJUVEK have paused?

You mean what percentage?

Yes. Do you have a sense as to what percentage are taking a pause that's more than just a missed weekly dose that maybe they're traveling, but have paused because their wounds are closed.

Well, the reason they hesitate, we haven't shared that information. I wouldn't characterize it as a significant impact to the revenue line today. But the problem with all these stats is they're so dynamic in nature. that any number I say is no indication of what's going to happen in the future, including on pauses, right? For a long time in Q1, we thought about, hey, should we estimate?

So investors can have a good idea of how much is the demand versus how much is the pause. But it is really difficult for us to -- especially with patients coming back, pauses are not unidirectional and which is why I talked about this upward sloping sinusoidal. But I will say we haven't had a single instance or at least to my knowledge, of somebody pausing or not being on drug either because of the safety or the efficacy of the drug.

Every reason I've heard is some kind of administrative annoyance on the nurses or some serious problem with their health, none of it. is -- and some obviously would like -- the one comment I've heard on VYJUVEK from the severe patients is, is there an opportunity to increase the weekly dose. Outside of that, I have not heard any particular criticism on the safety or the efficacy of the drug, which tells me that this could be a franchise that extends for a long time.

You mentioned earlier that you continue to have confidence in what the addressable population is, the 1,200 patients. Just help us understand what work have you done to continue to have that confidence? You're almost 2 years into the launch. What's helping that?

Look, 81.2 is the ICP-10 code for claims data. It can be analyzed through multiple data sets, and you can actually pinpoint a unique claim to a patient. I would also advise that any investor interested in doing so can obtain their own ICP-10 data and do exactly the same analysis we're doing. And we have been doing it every week, every month for the last 12, 15 months. And we're significantly convinced that the opportunity does exist.

Yes, it is true that some of the patients, it takes a bit longer, but that does not is maybe 81.9%. And if you analyze ICP 81.9%, you will also align on that while there are 1,200 identified patients, there is a definite potential of another 1,800 that we can get over time. Obviously, it will take a bit longer, but we feel very confident about the opportunity in the U.S. And I will say, when we see -- when we speak with high confidence on the 1,000 identified patients between France and Germany, or the 200 to 400 patients in Japan, it's inconceivable to believe that the U.S. market could be that much smaller.

That's a good segue to Europe and your prelaunch activities are underway ahead of launching later this year. Where do you stand with preparations? When could VYJUVEK be commercially available there?

We're looking to launch in Q3. Most of the work we're doing right now is administrative or in terms of getting the labels and the cartons and the right language and the right shipping mechanisms in place, both in France and in Germany. In France, it's technically not called a commercial launch. It's under the AP2, which is kind of like an access -- it's kind of like the access protocol you're in. while you're negotiating a price with France.

Given the broader label we have in Europe in terms of caregiver administration or self-administration, we believe compliance could be -- would take longer to get to 50% than in the U.S. So overall, we're very excited about the European launch. Based on the drug's profile, we actually believe we could get to a good price that we're comfortable with, at least in Germany and in France to begin with. The team is in place. So we look forward to a Q3 launch and then build upon that rest of the year and next year.

You've spoken in the past about some potential bottlenecks as it relates to just logistics of patients coming in, seeing their physicians starting treatment. What is Crystal doing specifically to kind of work through those bottlenecks?

Yes. Just to clarify, the hurdle is the first before the physician writes a prescription, they would like an in-office visit with the patient. And we've been aware of this issue for a while, and we've been working very hard to figure out a way to allow a lot more patient visits. To give you an example, once we pinpoint the launch date in Germany, we would have the reps detailing the physicians and work with them to find a way to get patients into the office given that launch date.

So that effort is -- will start to happen once we figure out whether the launch is on a particular day or a particular week. We're also working with the KOLs to -- one of the time-consuming parts of an appointment is the bandaging and unbandaging of the wound in a patient. And so what we work in terms of additional nursing assistance to the extent we can under compliance, make sure that we make the life easy on the physician to see a patient and write a prescription. So I know Laurent, who runs a general manager in Europe, that is -- if there is a hurdle with respect to the U.S. launch, it's getting the patient to come into the physician for the first time. And anything we can do to make that faster will significantly help with the launch dynamics.

And as you think about potential other expansion opportunities for B-VEC, most notably in the eye, maybe give us an update here on where that stands ahead of your Phase III trial?

I mean we should be dosing patients pretty soon, as we said. So that's moved along. We have a natural history study. We have collected substantial data on patients from the natural history study. So we have patients ready to go and launch. So we are -- it's a decentralized study. This is one of the first -- I think we are the first company to do decentralized studies, which is good and easy to because it's -- the drug can be taken by the Option care nurse and patients can administer at home and they don't need to come to the clinician's office quite often.

So it's great that they'll be compliant. So we have the patients ready to go. It's just getting it up and running. So we expect that to begin shortly.

And you've spoken in the past about VYJUVEK in the skin being a $1 billion-plus opportunity. When you think about the incremental opportunity afforded by expanding to patients with eye lesions, what does that represent?

It's too early to talk about pricing on VYJUVEK in the eye. But the eye -- look, you saw that New England Journal paper of a kid going from blindness to 20/20 vision. I'm not saying that all patients with lesions in the eye are blind to begin with. But the value proposition in the eye, as you can imagine, is far bigger. I wouldn't say far bigger, is bigger than the value proposition in the skin when it comes to site.

Depending on the data in the Phase III study, our objective is to make -- the first thing I want to say is we hope to get a new label and a new NDC number of B-VEC in the eye. And I think if the data supports it, we could have a value proposition to price at parity to the extent we can. That would be the objective. Obviously, it affects about half the RDEB patients and 10% to 15% of DDEB patients.

So definitely, it would take the value proposition of the VYJUVEK franchise with the eye and the skin north of $1 billion. But it remains to be seen what the impact is in other countries in Europe and Japan. Right now, what we're focused on is getting the clinical study going and getting a good result by the end of -- close to the end of the year and filing for approval.

Maybe we can focus on the pipeline here, Suma. There's been so much focus in 2025, even starting at the end of 2024 on your inhaled delivery platform. Maybe just to level set for everyone here, what have you seen across these multiple data sets that gives you the conviction in your platform's ability to go into the lung?

I mean, as you know, we have 3 programs in the lung and data from all of those 3 programs consistently that -- the message is very safe to administer the drug because there's a lot of safety concerns. when you deliver vector into their -- into your lung, does it cause pneumonitis or any kind of other lung complications. And clearly, we've demonstrated we have dosed over 50 to 55 patients or 60 across all our 3 programs, and we know it's safe across different -- I mean, different concentrations or doses from all the way from E8 to E10. We know it's safe.

So we have a good dose ranging different doses that we can play around with depending on the kind of disease or the indications. So it's certainly safe. We have also seen preliminary data of basically mechanism because we know as you -- we shared data on 408 end of last year, where we did do broncho biopsies in lavage. We clearly see expression of A1AT, and we also show that not only does it produce the protein, but it also does functionality. I mean the main reason for AAT is to neutralize neutrophil elastase because that's the one that destroys your lung tissues and is the issue.

So we know that A1 can -- A1AT we produced is functional. It's wild-type protein. It can bind to neutrophil elastase and it can reduce neutrophil elastase in the lung. So mechanistically, we're very confident with a single dose -- and at the mid-dose level that we show -- I mean, expression and functionality. So that means it does transfuse and infect the lung cells even through mucus membrane and it can produce the protein. Hopefully, our next goal is in CF to demonstrate the same because we're going to start dosing patients null patients.

And hopefully, we intend to do bronchoscopy and validate that expression of the -- that the vector can transduce the right cells. And I mean we already know that it transduces the right cell based on our monkey cells. It transfusces the globate cells, the cillory cells, for example, in CF, that's the cell type that you need infection to produce the protein because in CF, it's a membrane-bound protein.

So we feel pretty confident based on our NHP models. We hope to validate that in our mullents. And of course, 4707 in the lung with oncology. Again, we have shown that, obviously, we're delivering IL-12 IL-2 directly to the lung. So we do see immune response. And we have seen early signals of efficacy by -- we see some partial responses, some stable disease. So very promising data, which we presented into ASCO, which we feel very confident now to move that program into the next step.

As you think about those 3 data sets, 2 we've seen, is coming shortly. How do you think about prioritizing 1, 2, maybe all 3 of those programs across the respiratory portfolio?

That's a good question. I think the beauty is, I mean, the biggest -- obviously, the clinical is a challenge. I mean, enrolling patients, getting the studies going. But the biggest hurdle is CMC. So CMC is manufacturing, making the validation batches, the assays. And as you can see, many of the companies in gene therapy stall with CMC because that causes them the delay, that causes them consternations with all of the assays and CRLs because of the issue. I mean, obviously, the vector is common across all our programs.

So we -- I mean, our CMC, it's going to be a platform technology, which we are obviously going to take advantage of and file. I mean, as you know, our CMC has been audited not just by manufacturing has been audited just by FDA, twice by the FDA, by EMA, by Japan. So globally, and we have come out globally well in all of the CMC. So we're very confident in our CMC. And our CMC is across all of these programs are very similar.

So we feel that we can that should not be an issue. We should be able to -- and our assays are common across multiple of these programs. So we need to execute on the clinical side for both CF -- especially for CF in null patients. I mean I had the opportunity to meet with the leadership team at the FDA at the CEO meeting at the Silver Spring, and I was able to have discussions one-on-one and in a group forum. I feel like the new FDA leadership is very committed to specifically ultra-rare diseases.

So I mean, so much to -- so -- I mean, I've heard them say that as long as you have a drug that shows mechanism that if you have a gene that's missing and able to deliver protein and you can show expression of the protein and functionality of the protein, they're willing to approve the drug because we think these patients need them now. The -- they are okay with no clinical studies proceeding based on that and then confirmatory trials, just like what they do in oncology. So I think we have a very favorable leadership right now. I mean there was concerns with Peter Mox leaving because we worked with him on VYJUVEK getting approved. So I feel that we have a path forward. We just need to get the data, and we will have those discussions with the agency and figure out an accelerated path for some of these programs that are -- have a real unmet need for these patients.

Great. Maybe frame expectations for the CF read. What is the extent of data? Or how much can we understand from this initial tranche?

I mean, obviously, we are going to -- our goal is to show mechanism. That means we will be bronching and biopsying these patients and looking for protein expression. So that's the key. I think that's something that has not been demonstrated clearly as -- because we express -- I know in the past with AAV and other companies, they have done expression of the protein.

But in that case, the protein was mini protein. In our case, it's going to be the wild-type protein that will show expression. So at least there's no doubt that this is the real wild-type protein expression. So our intent is to show expression by biopsy by using immunofluorescence. And also we look at transcript levels to show transcript levels of the wild-type protein.

And I just want to add, I know we're dosing a combination of both null patients and patients already on modulators. Our primary focus is on showing a good level of expression in null patients. And if we -- and I don't want to get into what exactly is a good number because any -- you have to remember that we're a redosing type mechanism. And similar to what we're doing with Alpha-1, once we see expression, we're going to move into a redosing paradigm. So we're pretty excited about -- like we're eagerly awaiting results of the CF program. It shouldn't be too far, but...

I mean redoseable is a real thing, right? Because if you look at skin, it's the most immunogenic organ. The fact that we can show that we can deliver B-VEC in this highly immune -- I mean, a region that open wounds, full of immune cells that we can repeat administer and demonstrate functionality, we feel very confident about our redosability, as Krish said. And also with the double of doses, we can -- we've learned so much from B-VEC, which we can improve and use that further in our programs to make sure we get the dosing right, the frequency right. So there's a lot of lessons learned that we can adapt to a new program.

What is the relative immunogenicity of the skin versus the lung?

I mean skin is the most immunogenic organ because that's the first. So if we can -- I mean, I feel like in an open wound, I mean, lung, even it's not open, right? There's no -- I mean, yes, in CF patients, they do have mucus and infections. So -- and so is in skin. So we are able to treat skin that has infection, has stuff. So we feel like the mechanism is proven and we should be able to achieve the same in the lung.

And how much will we be able to understand on FEV1 improvement? Is that I mean is it too early?

It's too early. Because again, we have to -- I mean, it's in a single dose, you can't -- I mean FEV1 is -- there's also logistical issues, it's spirometry. There are challenges with the patients. Patients are pretty sick. You can take an FEV1 6 times within half an hour and get different readings with 10% variability. So there's complexities around it in these sick patients.

So we need to see overall improvement with time. We have to repeat administer and hopefully, we will collect that data. the time. But I think for these patients, they have nothing at the moment. And they have the challenges. I mean, morbidity is another one of the biggest concern for these patients because they're pretty sick. If we can show something that we are able to express the CFTR protein and they can tolerate the drug, I think we have a good path forward.

What does the path look like if you wanted to start redosing? What is -- is it a 1-month process?

No, it's pretty quick. I mean we already -- I mean, we finished this dose and we right away go into redosing. It should not be I mean it's just finishing up this and then amending the protocol.

I mean we're doing that with alpha-1 right now.

The same patients.

So I wouldn't say like overnight, but within a few weeks, we can get into a redosing paradigm.

And then very quickly on AAT because you are going to have additional data this year. What should our expectations be for that disclosure?

Some of the repeat of what we completed in more patients, additional patients. I mean, obviously, this was our first study, and we learned some of the challenges because in AAT is a little more complicated. Unlike CF, you just bronch any biopsy here after lavage. So there's trickiness to lavating. So we have learned some of that because of that. We had patient samples that we were not able to get. Now we've gotten better at writing the lavarge protocol. So hopefully, we can get additional patients with some more robust data, which you can reproduce some of the data that we announced last year.

Have you started dosing in the higher dose cohort?

We're working to redose first in the mid, but we are working to enroll patients in the high dose with about 0.7 micromolar that we saw in the alpha-1, we actually believe we have a good beachhead to redose. The safety profile was excellent, right? So while we could potentially get a much higher number, the internal conviction is, look, with a couple of redosing paradigm and a clear safety profile, we should not ignore the mid dose. So we're -- I think -- just in terms of steps, while both are happening, we're trying to quickly get the protocol -- like we've already got the protocol modified and go into the redosing first, while we continue to look for 1 or 2 patients just to see if the high dose is meaningfully different.

Maybe in the last couple of minutes here, I want to touch on NK since this is here. I think this is an exciting new program for you. Talk to us about what makes you so excited about the opportunity here.

We're super excited about NK because we've already shown that we can deliver to the cornea, front of the eye with our B-VEC program. Clearly, we see that in our animal studies. In our animal studies, which is a good proxy for what's going to happen in the humans. We know with a single-dose recombinant NGF protein, it's gone in minutes.

And if you give a single dose versus our vector, just topically applying to the eye, we see sustained expression for a week. So we are super excited about that because I think it's a known mechanism, well proven, and we know exactly the number of patients you need to show statistical significance.

So understanding based on what oxybate has done, which is considering that they have to administer 6 times a day in these patients and now speaking to a lot of the experts and physicians in this area, they are super excited about having a product that where these patients, especially elderly patients that you have to just put one dose, they can remember it. It's easy, they'll be compliant. They say Oxoake works, but the challenge is patients don't like it because they're not compliant. So it doesn't work the way it's supposed to. So I think knowing the mechanism, knowing a pathway, knowing -- I think it's just execution.

We're hoping to dose our first patient in the upcoming weeks. We'll definitely provide a pretty comprehensive review of the market opportunity, the number of patients across U.S. and the rest of the world and the study design that we're going into Phase I/II with. And Suma will probably talk about next steps to get the drug approved during that call.

Great. Well, looking forward to it. I mean it sounds great derisked mechanism, known regulatory pathway. That's the model at CMC.

So we don't have to debate or depend on the FDA. If you know the endpoint and you know the design should be execution.

Great. Well, thank you guys both for joining us. Thank you. Thank you, everyone.

Appreciate it.