Thank you for standing by and welcome to the Krystal Biotech Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentations, 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, Meg Dodge, Head of Investor Relations and Corporate Communications. Please begin.

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 2023. The press release is available on our website at www.krystalbio.com. Our earnings 8-K was filed earlier today, and additionally we filed a 10-K with the SEC. Joining me will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development; and Kate Romano, Chief Accounting Officer. I'd like to note that during this webcast we will be making a number of forward-looking statements about our future business plans, strategies, financial performance and projections, product candidate development plans, including statements about VYJUVEK. These forward-looking statements involve risks and uncertainties, any of which are beyond Krystal's control. Actual results could materially differ from these forward-looking statements, and such risk can materially and adversely affect the business, results of operations, and trading price of Krystal's common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review our SEC filings. The company does not undertake any obligation to publicly update its forward-looking statements, including any financial projections provided today based on subsequent events or circumstances. With that, let me now turn the call over to Krish.

Meg, thank you. Good morning and thanks for joining Krystal’s earnings call. 2023 was a spectacular year for Krystal and an inflection point for our company. With the approval and launch of VYJUVEK for the treatment of dystrophic epidermolysis bullosa, or DEB, we've now brought to market the first and only treatment that addresses the genetic cause of this debilitating disease. It has been immensely rewarding to hear from patients, families, and the entire DEB community on the positive impact VYJUVEK has had on their lives. It's also exciting to have secured this first approval for an entirely new treatment paradigm. We believe that a redosable topical off-the-shelf gene therapy that can be dosed at home by a healthcare professional holds significant potential not only for DEB patients, but for many others suffering from other rare and serious diseases. We've only just begun tapping into the power of the HSV-1 based gene therapy platform. As I will share in a moment, our US launch of VYJUVEK is in a great place, tracking closely to some of the most successful rare disease launches from recent years with over $50 million in net product revenue from VYJUVEK in the last six months since approval. We've seen rapid uptake across the US, patient compliance is high, access is almost behind us, and all these are starting to reflect in our net revenue. We're also making significant progress globally and look forward to growing the number of patients benefiting from VYJUVEK in the days, months, and years to come. Our success in 2023 allowed us to deliver another year of significant value creation for our shareholders and perhaps more importantly, set us down a path for continued growth in the years to come. Our vision for Krystal has always been to build a fully integrated, commercially established biotechnology company, developing and commercializing a portfolio of high-value genetic medicines and generating long-term shareholder returns. Thanks to a breakthrough year in 2023 and growing VYJUVEK revenue, we are positioned better than ever to deliver on that vision. We expect to have at least five clinical trials this year. We have alignment with the FDA on a development path for B-VEC, formulated as eye drops to help treat eye lesions in DEB patients, and could potentially start another clinical trial in the second half of 2024. With strong financial resources and FDA-approved redosable gene therapy platform and two commercial-scale GMP manufacturing facilities, we're uniquely positioned to develop and bring to market highly differentiated gene therapies for many rare and serious diseases. We look forward to making continued progress in 2024. As you have no doubt seen by now, our commercial launch is proceeding exceptionally well. We reported net VYJUVEK revenue of $42.1 million for the fourth quarter and $50.1 million for 2023. Gross margins were 93% for the quarter, in line with our previous guidance of margins north of 90% at launch and expected to improve to over 95% after a few years. Gross-to-net adjustments in the fourth quarter were 14%. Our long-term guidance on GTN is unchanged and we expect it will settle into the mid to high teens range, reflecting a roughly even split of their patients on commercial and government plans. With respect to future revenue, I'd like to highlight that earlier this year, a permanent J-code was assigned to VYJUVEK. The J-code is an important milestone for finalizing coverage by Medicaid as it is required for many mandatory Medicaid states. Although this is a long-term tailwind and sets us up for sustained broad access in the US, I will note that the revenue in the month of January was temporarily impacted as commercial and Medicaid coverage plans, including those that were previously covering VYJUVEK under a temporary J-code, were updated to the now-issued permanent J-code. You can also expect to see an impact this year as we accrue for patients on contracted commercial plans, potentially hitting the price cap of $900,000 gross per patient per calendar year in 2024. Before sharing details on the US launch, I'd like to highlight a revision to our outlook on the total market opportunity that exists for VYJUVEK. Now that we have the benefit of six months' launch data in the US and a clear line of sight on registrations and patient numbers in Europe and Japan, and alignment with the FDA on the development plan to get B-VEC formulated as eye drops to treat eye lesions in DEB patients, we're confident in the total global market opportunity for VYJUVEK to exceed $1 billion based on the trajectory of our launch and the feedback we are receiving from the field. Our conviction in the total US market opportunity for VYJUVEK is only growing. We have spoken before about a total DEB population of 3,000 in the US, of which 1,200 are identified. That 1,200 figure, initially based on independent third-party claims data sets from multiple sources, has been further strengthened by our latest data from the field, which includes interactions with over 1,500 unique healthcare professionals, as well as real-time claims alerts that they use to optimize field developments. We expect to close the gap between 1,200 and 3,000 in the years to come. We're already finding new patients, patients not part of the identified pool in the first few quarters of launch, and we expect this to continue, if not accelerate, as we increase our focus on patient finding in later quarters. Once we reach a meaningful threshold of 1,500 patients, we'll update our identified patient population number. Also, Christine Wilson has now joined Krystal as the Head of US Sales and Marketing reporting to me. Christine brings decades of commercial experience to Krystal, including a strong record of leading US rare disease sales teams at Travere, Reata, and Shire. Most importantly, Christine has direct experience finding and activating rare disease patients in the community and will play a critical role for us as we continue to penetrate and grow our identified patient pool in the months and years to come. Outside of the United States, we benefit from patient registries, which give us a high degree of confidence in the global market opportunity. In France, Germany, Italy, Spain, and the US alone, we believe there are over 2,200 DEB patients that could benefit from VYJUVEK, and there are hundreds more in Japan. We look forward to seeing continued growth in 2024, not only in the US, but also globally, as we make progress towards EU and Japanese approvals. As Suma will share, we're on track to launch in both regions in 2025. Now I'd like to share a few highlights on the US launch. With respect to patient start forms, we're pleased to report that we have now received start forms representing 35% of the initial 1,200 identified patient pool. We're happy to see that we're both expanding and deepening the prescriber base as we progress in our launch. We now have over 195 unique prescribers of VYJUVEK, up from the 136 unique prescribers we reported in the third quarter. We're encouraged to see the broadening of VYJUVEK prescriber base as awareness of our product grows through both our direct promotion efforts and organically through patient groups and the medical community. We're also seeing increasing depth of prescribing, as the number of physicians that had written two or more prescriptions for DEB patients increased from 37 in the third quarter to 60 as of mid-February. We believe this increase is a reflection of the growing familiarity among prescribers with VYJUVEK, and we expect this positive trend to continue as patient outcomes on VYJUVEK become more widely known. With respect to the split of patient start forms between centers of excellence and the community, trends are in line with what we saw earlier in the third quarter. 47% of patient start forms received as of mid-February were from centers of excellence and the balance were written by community physicians. We continue to see a steady flow of start forms from centers of excellence at a cadence correlated to EB clinic days. The split between D-DDEB and RDEB start forms is also largely consistent with what we saw in the third quarter, with a slight uptick in the proportion of prescriptions received from DDEB patients. Importantly, we are starting to see significant conversion of patients to paid drug with 228 patient reimbursement approvals secured to date. Most approvals are for six months or more, so a few have been up for reauthorization so far, but all have either been approved or are still in process. In line with our high conversion rates, access is in a great place. We have received positive coverage policies or decisions for 97% of lives covered by commercial plans and 88% of lives covered by Medicaid. With the permanent J-code now assigned, the trajectory for access and reimbursement approvals is only looking better. At-home administration demand continues to be high, now two full quarters into launch, with 98% of drug starts occurring in a home setting. Accordingly, we also continue to see strong patient compliance to once-weekly treatment while on the drug, holding at 96% in the fourth quarter. We believe that compliance is both a reflection of the significant clinical benefits that can be realized with the VYJUVEK therapy, as well as our commitment to the patient experience and ensuring a smooth process for getting on drugs. At this point in our launch, I think it's also worthwhile to reiterate and update on some of the key dynamics that shape the trajectory of the VYJUVEK uptake. Although there is a temptation to think that for a severe rare disease such as DEB, all patients would get prescriptions the day after approval, there are practical considerations that need to be understood. First, it's important to recall that COE visits occur at a steady pace around EB clinics, with only a subset of that EB patient base being seen at each visit due to the time spent on each patient and the multi-specialty care they receive in the COE setting. In addition, we are also seeing some key opinion leaders less familiar with VYJUVEK, taking a stepwise approach, starting with the more severe RDEB patients and stage-gating, particularly in the early stages of access where reimbursement was still being set up. Second, it's important to understand that DEB patients are not all clustered around centers of excellence. Prior to 2023, only palliative treatment options were available, whether offered by a COE or a community physician. As a result, there was often little reason for a patient to visit, let alone return to a COE, unless it was conveniently located. Certainly, there are some patients that are actively managed at COEs, but an equal number or more exist in the community, and many patients have relied on community physicians for many years prior to 2023. This also has implications for the launch. It means that we have to make local doctors aware of VYJUVEK, educate them on DEB, gene therapy, and sometimes both. Recall as well that prior to VYJUVEK approval, care for EB wounds did not require genetic confirmation. So even establishing this practice is an evolution in patient management. This is all addressable through physician education programs, but it does take a certain amount of time and contributes to a more gradual ramp in patient starts. Finally, there are logistical aspects of integrating at-home dosing of VYJUVEK into existing wound care and bandaging routines. As the first and only FDA-approved redosable gene therapy, providing access to and coordinating weekly home treatment of VYJUVEK is not as simple as dispensing pills at a local pharmacy for patient pickup or even one-and-done gene therapies administered at a large specialty center. Once the initial scheduling and setup is complete, which again takes a certain amount of time, what we're seeing is strong adherence, given that VYJUVEK is designed to be integrated into existing wound care routines and demonstrated efficacy. Together, these real-world dynamics influence the shape of our launch curve, which we expect to be characterized by a steady stream of prescriptions and patient conversions to drug. Recall that our own estimates for the United States are informed by multiple third-party estimates and our own real-time and boots-on-the-ground insights, and further supported by the prevalence in Europe, where robust patient registries and genetic testing indicate that prevalence rates well in excess of our US-identified patient pool. So trying to correlate the shape of the launch curve to prevalence is simply erroneous. Our conviction in the total opportunity and our ability to capture it has only been strengthened after these first few quarters of launch. Before closing on the US launch, I'd like to underscore thanks to the efforts of our team and our focus on the patient experience with changing the treatment paradigm for DEB patients. Years ago, we set out to build the necessary infrastructure to support a strong commercial launch, including our patient support program, Krystal Connect, our no-cost genetic testing program, DecodeDEB, and a network of local pharmacies to prepare and deliver VYJUVEK to a patient's home along with a trained nurse to apply the treatment each week. As I just shared, this at-home administration infrastructure has been in high demand since launch, supporting strong compliance with the therapy. As I also reported, we're broadening and deepening the prescriber base. All KOLs within centers of excellence across the US have now prescribed VYJUVEK. And outside of the centers of excellence, our field team has had tremendous success educating regional, adult, and pediatric dermatologists and community physicians as evidenced by the continued influx of community prescriptions. Sales cycles tend to be a bit longer in the community, but for 2024, with more evidence of a dispersed patient community, we expect to continue to generate demand from large EB centers, regional DEB specialists, and community physicians. And finally, our marketing team is invested and will begin deploying several social media campaigns on different channels to generate awareness among patients and families directly who we know, similar to other rare diseases, have varying levels of engagement with the healthcare system as they have learned to self-manage their DEB wounds but deserve to learn about VYJUVEK and the benefits it can provide to them. Combined with our partnership with advocacy groups, we're committed to reaching all patients and families to share the powerful wound healing that VYJUVEK can provide them. Altogether, these successes point to a strong long-term growth strategy for VYJUVEK in the US. And, in the interim, it's important to highlight that by any metric, the launch of VYJUVEK has been among the top tier of rare disease launches in recent years. Despite all the nuances that I outlined, in only two full quarters since approval, we recorded $50.7 million in revenue. And now, as of mid-February, we've secured reimbursement approvals for 228 patients and have positive coverage policies in place for over 93% of commercial and Medicaid patients. We are excited about our success to date and even more excited by the years to come as we work to change the treatment paradigm for every patient with DEB. Finally, before I turn the call over to Suma, I'd like to touch on the power of our platform and our milestone-rich clinical pipeline. The Krystal story is more than just VYJUVEK. HSV-1 is unlike any other vector system currently in development with a capacity for large genetic cargo, broad tissue tropism, redosability, and no integration risk. HSV-1 is also amenable to formulation to target multiple tissues, such as the skin, the lung, and the eye, providing us with a large number of opportunities to develop first and best-in-class genetic medicines for rare and serious diseases. Our team is hard at work leveraging these unique platform attributes and advancing our programs to and through the clinic. These include a new eye drop formulation of B-VEC to treat ocular complications of DEB, which has already been evaluated in a single patient under compassionate use, two clinical stage lung programs targeting cystic fibrosis and alpha-1 antitrypsin deficiency, an emerging oncology program that leverages our experience in skin and lung drug delivery, as well as clinical stage candidates for rare skin disease and aesthetic skin conditions. With four active clinical programs and more to come later this year, we look forward to the data readouts which will validate the breadth of our HSV-1 based gene delivery platform. I shall now turn the call over to Suma to provide a clinical and regulatory update and provide more color on the clinical programs.

Thank you, Krish. 2023 was a milestone year for Krystal, and our development team secured the first ever FDA approval for a redosable gene therapy. It has been immensely gratifying to see a growing number of US patients benefit from VYJUVEK as our commercial launch progresses. However, our work is not yet done. Our goal has always been to enable global access for patients suffering from DEB. And I'm happy today to share we are on track for commercial launches in both Europe and Japan by 2025. For Europe, we announced in October that we filed for marketing authorization with the European Medicines Agency. Subsequently, in November, our filing was validated by the Agency, putting us on track for a decision by the European authorities in the second half of 2024. In Japan, we recently announced in December that we had received orphan drug designation by Japan's Pharmaceuticals and Medical Device Agency, a designation which confers specific benefits for orphan drug development, including priority review of applications, extended registration validity, and reduced development costs. With our open-label bridging study in Japanese patients fully enrolled, we are on track for a Japanese new drug application filing in 2024 and a decision by Japanese authorities in 2025. We are also making important progress on our broader clinical pipeline, where we have four programs in the clinic and more coming in the first half of this year. As said previously, we are committed to treating DEB comprehensively. Ocular complications are thought to affect over half of patients with recessive DEB, and to date, only supportive care and surgical interventions are available. Earlier this month, the New England Journal of Medicine published the clinical results of the first patient treated with topical B-VEC to the eye. The improvement seen in this patient was dramatic, including full healing of the corneal epithelium and improvement in visual acuity from hand motion to 20/25 by eight months. Given these outcomes, we started discussions with the FDA earlier this year regarding a potential development program to bring an ophthalmic B-VEC formulation to market and earlier this month we reached alignment with the FDA on a single-arm open-label study to enable approval of B-VEC eye drops for the treatment of lesions in the eye of DEB patients. We are now planning to initiate this study in the second half of 2024. On KB407, our redosable inhaled gene therapy for the treatment of cystic fibrosis, we completed Cohort 1 of the CORAL-1 study with no severe or serious adverse events, and initiated dosing in Cohort 2. CORAL-1 is a Phase 1 open-label dose escalation study in patients with cystic fibrosis. The primary objective of the study is to evaluate safety and tolerability of KB407, but bronchoscopies are planned for Cohort 3 to allow evaluation of airway epithelial cell transduction and expression of CFTR transcript and protein. Cohort 3 also includes a minimum enrollment threshold for patients that are not eligible for modulators, an important patient population for which no effective disease-modifying therapies exist. The pace of enrollment in CORAL-1 is improving as clinicians grow more familiar with inhaled KB407. The potential for patients to roll over into multiple cohorts is also expected to help us progress more rapidly through Cohort 2 and 3. In addition, we continue to work closely with the therapeutic development network of the Cystic Fibrosis Foundation to provide us access to the broader site network, which would enable us to accelerate enrollment. On KB408, our redosable inhaled therapy for alpha-1 antitrypsin deficiency, we just recently dosed our first patient in our SERPENTINE-1 study. SERPENTINE-1 is a Phase 1 open-label, single-dose escalation study in adult patients with AATD to allow assessment of safety, tolerability, and alpha-1 antitrypsin levels and key pharmacodynamic biomarkers. With strong support from the alpha-1 research community, we are optimistic that this study will enroll quickly in 2024. We also made several advancements in our oncology program, KB707, last quarter and earlier this year. Recall that KB707 is a modified HSV-1 vector designed to deliver genes encoding both human IL-12 and IL-2 to the tumor microenvironment and promote systemic immune-mediated tumor clearance. We have two formulations of KB707 in development, a liquid formulation for intratumoral injection and an inhaled formulation for lung delivery. In October, the first patient was dosed in the Phase 1 OPAL-1 study to evaluate intratumoral KB707 monotherapy in patients with locally advanced or metastatic solid tumor malignancies. Additionally, an amendment to the existing KB707 IND was cleared earlier this January, allowing us to evaluate inhaled KB707 in a clinical trial to treat tumors in patients' lungs. We will initiate this study, which we will be calling KYANITE-1, in the first half of 2024. It will be an open-label, multicenter dose escalation and expansion study to evaluate inhaled KB707 monotherapy in patients with advanced solid tumor malignancies affecting the lungs. And finally, we're looking forward to sharing a data update on our lead aesthetic program, KB301, later this year. KB301 is being evaluated in the PEARL-1 multi-cohort Phase 1 study. We previously announced data from Cohorts 1 and 2, which demonstrated that KB301 encoded with payload COL3A1 was expressed locally after intradermal injection and that injections to the upper and lower cheek and above the knees were generally well tolerated and associated with clinically meaningful and durable improvement in subject satisfaction. We are now running Cohorts 3 and 4 of PEARL-1 in parallel to evaluate KB301 for two potential target indications: improvement of lateral canthal lines at rest and improvement of dynamic wrinkles of the décolleté. Both were identified as potential indications based on initial data from Cohorts 1 and 2 and the high demand for effective aesthetic options in these regions. We expect to announce data in the first half of 2024. We are also progressing on our broader pipeline in dermatology. We expect to commence the Phase 2 cohort of the KB105-02 JADE-1 trial for the treatment of TGM1-ARCI later this year, subject to alignment with the FDA on study endpoints. Additional preclinical candidates are also in development, and we expect to share updates in the quarters to come. Our HSV platform has potential to yield a large number of highly differentiated redosable gene therapies. We look forward to making continued progress in 2024 and sharing data updates on our clinical pipeline later this year. With that, I would like to turn the call to Kate.

Thank you, Suma. We concluded 2023 with $358.3 million of cash on hand and $594.1 million of cash and investments, which positions us well for our future growth, the expansion of VYJUVEK outside of the US, and our pipeline development plans. In our second quarter since the launch, we recorded $42.1 million in net product revenues from VYJUVEK in the fourth quarter and $50.7 million for the year ended 2023. As VYJUVEK was approved by the FDA in May 2023, there were no comparative period revenues. Cost of goods sold was $2.9 million for the quarter, or about 7% of net product revenues, and $3.1 million for the year, or about 6% of net product revenues. Cost of goods sold increased on a sequential quarter basis as a portion of the initial cost associated with the manufacturing of VYJUVEK were expensed as research and development costs earlier in the year prior to approval. Research and development expenses for the quarter were $11.4 million, inclusive of stock-based compensation of $2.4 million, compared to $10.7 million for the prior year's quarter, inclusive of $2.4 million of stock-based compensation. Research and development expenses for the year were $46.4 million, inclusive of stock-based compensation of $10.1 million, compared to $42.5 million in the prior year, inclusive of $7.9 million of stock-based compensation. Higher research and development expenses in 2023 were due to increases in payroll and facility-related costs, primarily driven by an increase in personnel to support our overall growth, especially as we ramp up our KB707 program, partially offset by decreases in R&D manufacturing costs as, following our FDA approval, our costs related to the manufacturing of VYJUVEK are now recorded as part of our cost of inventory. Selling, general and administrative expenses for the quarter were $24.8 million, inclusive of stock-based compensation of $7.5 million, compared to $24 million for the prior year's quarter, inclusive of stock-based compensation of $7.2 million. Selling, general, and administrative expenses for the year were $98.4 million, inclusive of stock-based compensation of $29.9 million, compared to $77.7 million in the prior year, inclusive of $25.3 million of stock-based compensation. Higher selling, general, and administrative expenses in 2023 were largely driven by an increase in personnel, increased selling expenses related to the launch of VYJUVEK, increased IT infrastructure and software costs, as well as increases in travel, sponsorship, and professional fees. These increases were partially offset by a decrease in commercial preparation expenses, a decrease in medical affairs costs, and a decrease in business development costs. Our net income for the quarter was $8.7 million, which represented $0.31 per basic share and $0.30 per diluted share. Net income for the year ended 2023 was $10.9 million, which represented $0.40 per basic share and $0.39 per diluted share, compared to a $140 million net loss in 2022, which equated to a loss of $5.49 per share, both basic and diluted. We would also like to provide some perspective on our forecast for operating costs in 2024, given the objectives we have for the year. We expect between $150 million and $175 million in combined non-GAAP R&D and SG&A costs this year. This projection excludes stock-based compensation. This expected increase over 2023 is driven primarily by increased SG&A costs associated with our continued US launch and planned expansion for VYJUVEK outside of the US. From a research and development perspective, we expect a pickup in our clinical and regulatory costs associated with our oncology and respiratory programs, as well as for costs associated with initiating a clinical trial for the B-VEC formulation to treat lesions in the eye of DEB patients. With that being said, and given our projected revenue trajectory in 2024 and our current strong balance sheet, we are well capitalized and positioned for these growth drivers, and we look forward to reporting our progress over the next several quarters. And now, I will turn the call back over to Krish.

Before we open the call up to Q&A, I'd like to underscore our excitement for 2024 as we have successfully transitioned Krystal to a fully integrated commercial biotech with a deep clinical pipeline. With a great launch underway and growing revenue to contribute to our already strong balance sheet, we believe we are well positioned to create value for our shareholders and deliver our mission for patients now and in the future. Thanks for listening and I'd like to now open the call for Q&A.

Thank you. The first question today is from Alec Stranahan from Bank of America. Alec, your line is live.

Hey guys, thanks for taking our questions and congrats on the strong close to 2023. Two questions from us. I guess what has been the roughly average conversion time between new start forms and initiating therapy in Q4? And where do you see this tracking over the next few quarters, or is this really not the metric we should be looking at anymore? And second, could you maybe walk us through the anticipated J-code impact on uptake, looking at the next couple of quarters, especially in the Medicare segment? Thanks.

Thanks, Alec. Hey, on your first question, at the end of Q3, we were tracking like at a two-month pace between start forms to patient on drug. We were making progress and presently we're about 30 days from a start form to patient on drug. Our goal, at least by the second half of this year, is to shrink it down by a few weeks, maybe two to three weeks. A lot of it has to do with single-case agreements and with access getting behind us, we expect the trend to only decrease and get to a steady state of two to three weeks in the second half of this year. With respect to the J-code, the reason I mentioned that comment, look, the J-code is a great tailwind for the company long term. I just was simply pointing out that in January, as our specialty pharmacy was transitioning people into the official J-code from a prior J-code, you should expect a few weeks of revenue hit to the story in the interim. But outside of that, we don't particularly see the J-Code having any impact going forward, especially in the positive direction.

Thank you.

Thank you. The next question is coming from an indiscernible speaker from Citi. Igor, your line is live.

Hi, Krish and team. Thank you so much for taking the question. Could you just help us clarify on the numbers? The 228 reimbursement approvals and the 35% of the 1,200, is the 228 a subset of the 420 or are they distinct populations? Just to clarify, please.

Let me answer it this way. The 35%, the 420, that's clearly the start forms that we've been mentioning in the past. The 228 talks about out of the start forms we've gotten, the exact number of reimbursement we have obtained. We like that metric because it's a much closer indicator of net revenue in the long term. And so, yes, obviously it is a subset of all the start forms we've gotten to answer that very directly. But it's a different metric in the sense that it's a more important metric as revenue becomes a much more important part of the story going forward.

Okay, thanks. And then you referenced that, I think you said 60 of the 195 were prescribed two or more. I was just trying to do a little math on that. It suggests that for those higher prescribers, it's somewhere around five patients per prescriber? Is that the correct thinking or is it different? Thanks.

I think you're right. All we were trying to show is that people who prescribe VYJUVEK to begin with are now getting more familiar with the drug and are repeat prescribing, and that's a good metric for us because it shows the confidence in the drug. It shows they are expanding to a broader base of patients. There were a couple COEs, I've mentioned this before, who were positioning to get their most severe patients on drug before addressing their more stable patients, and we expect that metric to show increasing confidence of prescribers to continue prescribing VYJUVEK.

Okay. And then just one quick one on the eye drop, certainly very interesting early data. Can you just discuss the strategy longer term? Is that going to be provided as an adjunct to the topical for those that have the eye complications or would it be an additionally priced drug separate from the cream?

I think it's a bit too early to be definitive on the matter, but our objective is to have a separately priced product like we do right now with that single patient. We ship that patient an extra vial. So our thinking is to have a separate NDC number, a separate pricing, and send it along with the topical gel.

Okay. Thank you very much.

I just want to clarify, sorry, on the eye. As I said, we have pre-IND guidance from the Agency, so this is going to be a new IND and it's going to be a BLA, so a brand new label with a new NDC code, as Krish mentioned. Just want to clarify.

Thank you.

Thank you. The next question is coming from Debjit Chattopadhyay from Guggenheim. Debjit, your line is live.

Hey, good morning, team. This is Robert on for Debjit. Can you provide any color on the number of dominant patients on therapy as of December 31st and February 24, and also the number of recessive patients on therapy as of December 31st? And then I have a follow-up on the ocular complications.

No, I think for now, and I don't want to dig through to figure this split out, I think for now, as we mentioned in the call, 25% of the total start forms were the dominant type. We did not, just to be clear, see any big change in the trend of the dominant versus recessive at the moment.

Okay, thank you. And then on ocular, do you currently have 10 or more patients with complications identified who could quickly be enrolled? And how long is follow-up planned for the study?

I can answer this question, yes. In fact, we have a lot of patients and the reason we are accelerating is because there is a request for even off-label. So we want to avoid that. Yes, we do have enough patients who have a good natural history of their disease and as you can see it's a single-arm open-label study. So it should be pretty straightforward.

Great, Thank you.

Thank you. The next question is coming from Dae Gon Ha from Stifel. Dae Gon, your line is live.

Great. Thanks for taking our questions and let me add my congrats on the quarter as well. Krish, just going back to the roughly 136 start forms that you've reported as of February. I was just curious if you could talk about the cadence of patients. I know it's kind of a combination of Q4 and a little bit of ‘24. And you've added a lot of conviction around the sort of year-end opportunity this year. So if you could comment on that cadence? And then going back to the more than $1 billion opportunity you were talking about, I guess a little early, but if you can maybe frame for us, what exactly are you thinking because in prior, I guess, VYJUVEK approval, you've given some conservative estimates that you had to revise. So what should we be thinking in terms of B-VEC ophthalmic solution there? Thanks so much.

Great. Hey, on the cadence of patients, just to correct you, I think 35% of 1,200, I want to be clear, that's the number of start forms. I heard a number of 136 that I wasn't sure about. But that said, look, definitely the holiday period was a bit slow. Slow as in appointments were getting pushed out by a week or two, EB clinics were being rescheduled, and that was a singular cadence that we observed which is why we kind of pushed out the start form reporting to as of February. So that's the cadence on that. On the opportunity, look, there was some confusion when we first reported. When we first reported the market opportunity, all we had was an approval in the US and it felt a bit conservative. The feedback I got was strictly conservative. Now we're starting to see feedback from the MA. We're starting to see feedback from Japanese authorities. Our conviction in the drug getting approved in Europe and Japan is definitely a lot higher than it was six months ago. We’re also starting to align with the agency on the ophthalmic indication in the eye. Now that it's a single label study, and as Suma mentioned, there are people with natural history; we feel at the moment pretty good about 50% of the RDEB patients or 25% of the total DEB patients, however you want to look at it is also adding to the market opportunity. So we thought we'd take the moment to alleviate any confusion from prior and be very definitive on the market opportunity of B-VEC going forward.

I guess just to clarify on that point, are you able to give some percentage breakdown of how much would that be from B-VEC as it currently is as VYJUVEK or B-VEC formulation?

You mean the eye formulation? Look, without the eye formulation, we believe it's north of $1 billion. The eye formulation, and this is a very premature estimate from my end, probably adds another $250 million to $300 million to the opportunity itself.

Excellent. Thank you very much.

Thank you. The next question is coming from Joe Pantginis from HC Wainwright. Joe, your line is live.

Hi, everybody. Good morning. Thanks for taking the question. Of course, congrats as well, but also thank you, Krish, because of the real clarity and visibility that you're providing around the launch, so we all appreciate that. So I guess two questions. First, I guess when you come to the actual patients, do you have any data that you can share with us about the ranges of the treatment area sizes, number one? And then number two, I know there's great compliance so far as you alluded to, anything you could share with us as to the reasons for patient stops? Thanks a lot.

It's a great question, Joe. In terms of ranges and area sizes, let me say, look, as the patient population grows and as the visits are weekly, we're not particularly tracking every single patient and every single wound. But that said, through feedback, through Krystal Connect, we do know that there are a good number of patients treating large wound sizes, a good number of patients choosing to start with the small ones moving into the large ones. We see no difference in the way the drug works between the current and chronic wounds. All in all, we believe that VYJUVEK has been great to treat wounds of all sizes and wounds of all cadences as in recurring versus chronic, etc. The only point that we are working on, not immediately, but in the medium term or so, is to see if we can increase the dosage per vial per week. That would be beneficial, but that's not an immediate solution. People seem very happy with the drug, and home dosing has really helped with the launch. In terms of compliance, look, when we look back at our clinical studies, just before the launch or the first few months of launch, compliance was very high. We expect compliance to continue to be high in 2024, but as wounds start to heal, one has to think about maybe a handful of patients slowing down, either taking a pause and restarting, or going from four to maybe two to two vials a month, but it's not immediate. I think our original assumption of having a patient on vials for 12 months or longer, as of today, continues to track properly.

Great, thank you. Really appreciate it.

Thank you, and the next question is coming from Andrea Tan from Goldman Sachs. Andrea, your line is live.

Good morning, thanks for taking our question. Krish, just could you speak a little bit more about the evolution of the competitive landscape as you see it and how you envision the treatment paradigm shifting if Abeona’s graft is approved?

Great. Hey, on the competitive landscape, Krystal was started in 2016 when we realized that the competitive landscape was not a very commercially viable approach to treating DEB. I appreciate anyone working in this debilitating disease. But our view right now, and this could be different, since VYJUVEK has the ability to treat larger wounds, we doubt patients would go through the inconvenience of having to graft over and over again in the same location and it takes a certain bit of time. If you look at the convenience aspect, VYJUVEK is much more convenient and amenable. So we're not presently watching or too anxious about an autologous approach to treating the disease at the moment. We feel that the convenience aspect of VYJUVEK is what stands out. Now on the competitive environment, which does not fundamentally address the cause of the disease, we're less concerned about that because at the end of the day, we believe that most patients and most physicians want an approach that fundamentally treats the nature of the disease.

And I'm just going to add another point to Abeona’s therapy. Keep in mind it's 50% wound closure. I mean we had a high bar of 100% wound closure. So we are seeing even with large wounds, pretty good closure. So I think again, as Krish mentioned, ease of application and good efficacy, again, we're not concerned.

Great. And then, Suma, maybe one question here on the pipeline, if you think about the upcoming data reads that you have across the different programs. Just wondering if you could help frame expectations into each one of those, and what would trigger either a go or no-go decision to bring those forward? Thanks so much.

We are really excited about 407. We completed Cohort 1, and we are currently enrolling patients for Cohort 2, with plans to move quickly into Cohort 3. We believe we have already established sites capable of performing bronchoscopies and have identified patients for this. By the end of the year, we anticipate being able to dose these patients and gather some positive bronchoscopy data. Additionally, we are developing preclinical models that show promise and are working to establish functionality for TDN to collaborate with us. We feel optimistic about 407. For 408, we've dosed our first patient who was not on augmentation therapy. We are measuring biomarkers, including blood levels of A1AT, neutrophil elastase, and its binding in sputum, which we believe will help us assess 408 more quickly. We are quite enthusiastic about this program, especially with the OTP division open to a biomarker approach for approval, which could position us well for discussion once we have positive data. 707 is also an exciting program. As Krish mentioned, we haven’t shared many specifics, but the intratumoral injection program is progressing, and we expect to have some outcomes and data by the end of the year. Overall, we are very excited about our lung program, and we anticipate exciting data reads across all our programs by year-end.

Thank you. The next question is from Tim Lugo from William Blair.

Congratulations on the quarter and also all the clarity. Can you give us a sense of product revenue ramping through 2024? It sounded like there was some seasonality on scheduling in Q4, and we're also two-thirds of the way through Q1. Do you have a sense of what's going to be kind of incremental increases, at least in the near term, or if there might be some lumpiness quarter to quarter?

Tim, we're not providing any guidance on revenue. Nice try. There's not much of a seasonality. I was just pointing out that the J-code transition is a one-time event, it's not a seasonal event. And with that, it's a powerful tailwind behind us. The second, as I mentioned, I mentioned about a handful of patients hitting the cap at the end of the year, and what we're trying to do is to kind of accrue for it as we move through the year, to avoid any kind of lumpiness in Q4 one way or the other. That said, I think as more and more patients come on drugs, you can start figuring out what the revenue potential of VYJUVEK is going to be this year. But no comment from us.

I understand. Maybe a question on your platform. You obviously have some unique capabilities with the platform and redosing. Are there any pipeline opportunities? You've built out a number of pipeline assets, but are there any that you looked at that might have just been too expensive to run the clinicals on that you think a partner would be appropriate for and get a sense of the kind of capacity there is within the manufacturing and development side?

Yeah, look, our position on this has stayed the same for large indications. I'll talk about alpha-1 antitrypsin, large indication. Some areas in oncology, large indication. Anytime in CF, we're primarily going up to the null mutation, so we view it much more as a rare disease than as a really large indication. I think we are always open to partnering on large indications. The company wants to stay focused on its ability to develop, manufacture, and commercialize rare diseases and definitely would like to seek partners on larger indications, but we have enough capacity manufacturing-wise to support any partnership, small or large, with the product either in the development stage or the commercial stage.

Understood. Thank you and congratulations.

Thank you. The next question is coming from Gavin Clark-Gartner from Evercore ISI. Gavin, your line is live.

Hey, thanks for taking the questions. Just had a couple clarifications and then questions. On the 228 reimbursement approvals, wanted to be clear, was this also through mid-February or was that at the end of December?

It's as of February, if I'm not mistaken, and we adhere to that. We're not trying to make too fine a distinction between mid, early, or late, but it was as of February.

Okay, that's helpful. And just trying to quantify the holiday impact a little bit, were the start forms coming in, in January, February, were those actually at a higher rate than later November or December?

Yes, it was a shift, right? And so that kind of affected the rate, shifting from say middle of December onto January, etc.

Okay. And have there been any differences in the conversion rate or the conversion time between the Medicaid and commercial patients?

That's a good question because it doesn't have a time dimension. In the past, in 2023, Medicaid definitely took a bit longer because there was no J-code; different states were at different points, and the commercial was doing pretty well. Right now, I wouldn't say starting now going forward, I don't see a measurable difference between the two. We do depend and, in fact, on the commercial side, if you end up with a single case agreement on a patient, it could take just as long as Medicaid. So, to answer your question simply, we don't see any meaningful difference in time, especially going forward. We might have seen some in the past.

Okay, great. And last one, I just wanted to ask what your latest expectations for VYJUVEK pricing in Europe was, and thanks for taking all the questions.

We don't have that yet. It's a differentiated drug. The efficacy profile is very strong. We're seeing really good demand on name patient sales from a handful of countries. Our conversations with the MA are going well. Our job is to make a case for, we know it's going to be lower, but our job is to get to less than a 50% discount if we're fortunate. Less as in, like, I hope I'm not confusing people there, something north of, say, $15,000 per vial would be great for us.

That makes sense. Thank you.

Thank you. The next question is coming from Josh Schimmer from Cantor. Josh, your line is live.

Great. Thanks for taking the questions. I have two quick ones. So, with 228 reimbursement approvals out of around 428 start forms, that's 55% conversion. For the remaining 45%, how many of those or what proportion of those do you expect to be able to capture with the new J-code and over what period of time? Second question is if you can quantify any contribution from either inventory building or named-patient access in Europe? And then last question, the annual cap of $900,000 gross, is that on a per patient basis or a per plan basis averaged across their population? Thank you.

On the first one, our internal goal is to try and get all, you talked about the gap between the start forms and the thing. We're trying to get all the patients, who we know of at the end of 2023, on to reimbursement by the end of Q1. That's the goal. So instead of answering your question as 228 versus 428, our internal goal is all the patients who we know of at the end of 2023; we want them on reimbursement by the end of Q1. In terms of, was there any inventory or NPP, hardly any yet. We're just starting to get NPP, it'll probably be reflected more going forward. And on the annual cap, look, it is the overall discount, I think I've mentioned is measured at the payer level. So it's kind of like a blended average depending on the number of patients in the plan.

Thank you.

Thank you. And the next question is coming from Ritu Baral from TD Cowen. Ritu, your line is live.

Hi, good morning, everyone. This is Ritu for today. Congratulations on the quarter. I have two questions. As you see more reauthorizations occurring, could you elaborate on the process involved and what the prescriber needs to demonstrate for a successful reauthorization? I have a follow-up after that.

Yeah, and the reauthorization happens every six months; usually you need clinical notes from a physician saying that VYJUVEK is working. Some of them certified without a patient visit, and some certified wanting a patient visit, which would be a local patient visit for the most part, and that's what it entails. Depending on the patient, it could take a certain amount of time, but usually it's pretty quick.

Could you discuss the market research efforts in the EU in preparation for a possible launch there, specifically regarding how patients are managed currently? Also, can you confirm that the launch is now anticipated for next year instead of later this year? Thank you.

Look, later, I want to be clear, it depends on when we get approved. If you saw what happened to us in the US, we're always adding three months to PDUFA date from this point on. It appears to be the norm that anything management says. Having said that, if the launch is scheduled for late in the year, like say in December, we'd probably push it out to January. In terms of launch plans, I think we're going to have a General Manager in Germany at the beginning of March to build out the team. That will be the first country of launch. In terms of market research, our current EU General Manager, Laurent, has already been talking to physicians and centers of excellence who have really strong registries, so we feel really good about the identified patient population. A lot of home dosing in Europe is handled by the hospital, so a lot of the logistical complications you see in the US, like getting home dosing in place, finding patients are not as big issues in Europe. What is important in the EU is that we get to a good place on access. If you get to a good place with respect to access, then the EU launch becomes a bit simpler logistically than the US launch; it's kind of very similar to the Japan story.

Great, very helpful. Thank you.

Thank you. There are no other questions in the queue at this time. This now concludes the call at this time. Thank you to all participants for joining the Krystal Biotech Fourth Quarter and Full Year 2023 Earnings Call. You may now disconnect.