Thank you for standing by, and welcome to Krystal Biotech's First Quarter 2024 Earnings Conference Call. As a reminder, today's conference is being recorded. I would now like to hand the conference over to your host, Stéphane 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 2024. 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 & Development; Jennifer McDonough, Senior Vice President of Patient Access, Analytics and Operations; Christine Wilson, Senior Vice President and Head of U.S. Sales and Marketing; and Kate Romano, Chief Accounting Officer. This conference call 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, Stéphane, and thank you all for joining Krystal's conference call. I'm pleased to share that the momentum in 2023 continues with a strong start to 2024, driven by excellent execution across all parts of our business: commercial, clinical, and manufacturing. VYJUVEK is reaching more patients every day and is rapidly changing the treatment paradigm for patients suffering from the debilitating disease, Dystrophic Epidermolysis Bullosa or DEB. Increasingly, DEB patients are able to benefit from the durable wound healing afforded by VYJUVEK for a fundamental genetic correction and also the convenience of being administered at home as a topical treatment. As real-world experiences with VYJUVEK grow, it has been immensely rewarding to hear and see the improvements that patients have made while on therapy. As you will hear this morning, our U.S. commercial launch continues to progress well, driven by robust demand, rapid growth in reimbursement approvals, and high patient compliance. We're also moving quickly towards launching VYJUVEK outside of the U.S. We recently successfully completed the efficacy portion of our open-label extension study in Japan, putting us on track to file with the Japanese regulators before year-end. This will be our second ex-U.S. filing after submitting to the EMA last year. Global infrastructure build-out is underway in anticipation of commercial launches in both Japan and Europe next year. At the same time, we are building momentum across our clinical pipeline. With accelerating enrollment and new trial starts, we are setting up for a wave of data readouts starting later this year. With the recent initiation of KYANITE-1, our study evaluating inhaled KB707 for treatment of solid tumors of the lung, we now have five active clinical trials and expect to add a sixth ophthalmic B-VEC in the second half of this year. We expect that these studies, which span multiple tissues and target both rare and common diseases, will showcase the breadth and power of our proprietary HSV-based gene delivery platform. We also continue to build out our manufacturing infrastructure in support of global VYJUVEK commercialization and pipeline expansion, including scale-up of our current approved manufacturing process and ongoing process improvements, along with the initiation of a tech transfer of our current production process to ASTRA later this year to increase VYJUVEK yields and margins. Finally, I want to highlight that strong execution in our launch led to another profitable quarter for Krystal, even while accruing for previously settled litigation payments. Excluding litigation payment accruals, EPS this quarter would have been $0.47 per share, up sequentially from $0.31 per share in the last quarter of 2023. With a strong balance sheet, growing revenues, and two commercial scale GMP facilities, we have the resources we need to execute on our long-term growth plans and continue building shareholder value through VYJUVEK and our clinical pipeline. Before jumping into our VYJUVEK launch update, it's my pleasure to introduce Christine Wilson and Jennifer McDonough, two senior U.S. commercial leaders at Krystal who are joining me today on the call. Christine recently joined Krystal as Senior Vice President and Head of U.S. Sales and Marketing. She brings over 20 years of experience in specialty and rare disease launches and is an expert in patient finding, having previously launched multiple rare disease products with a community focus, including GATTEX, an ultra-rare condition of short bowel syndrome, and more recently, Filspari for IgA nephropathy. Jennifer McDonough is Senior Vice President of Patient Access, Patient Services, Analytics, and Ops at Krystal and has been instrumental in achieving the broad access and compliance we have today for VYJUVEK. Jennifer has over 25 years of experience in biotech and specialty pharmacy with a focus on rare diseases. We are fortunate to have them both on the team. Now turning to our results. Net VYJUVEK revenues for the quarter came in at $45.3 million. Looking back over our first three quarters since launch, total net VYJUVEK revenues now exceed $95 million, keeping us on pace with the top tier of recent rare disease launches. We're especially pleased to report revenue growth quarter-over-quarter in spite of the one-time headwinds that we faced at the start of 2024 due to the permanent J-code switch. While the permanent J-code is a huge tailwind for reimbursement, the switch negatively impacted revenues one-time in the first quarter. In order to ensure continuity of therapy, we bridged patients with free vials. In total, we estimate that approximately 400 free vials were dispensed in Q1 due to one-time disruptions. That said, the J-code issue requiring bridging patients with free drug is resolved, and the fundamentals of the launch look very good for the remainder of 2024. We are confident in our ability to meet, if not exceed, 2024 net revenue projections. Christine and Jennifer will elaborate more in their sections. Gross margins were 95% for the quarter, up 2 percentage points over the last quarter. We continue to expect margins to be above 90% in the coming quarters, gradually improving to over 95% in a couple of years. Gross to net adjustments in the first quarter were 14%, in line with the previous quarter. Our long-term guidance on gross to net is unchanged, and we expect it will settle into the high teens, reflecting a roughly even split of DEB patients between commercial and government plans. Please note that the net VYJUVEK revenues reported today also include an approval for patients on contracted commercial plans who are projected to potentially hit the cap of $900,000 gross per patient per calendar year in 2024. Overall, I'm really pleased with the growth in the underlying drivers of our commercial launch and will now hand the call over to Jennifer to share additional details on the launch, including recent successes in securing patient access to VYJUVEK. Jennifer?

Thank you, Krish. Moving to Slide 5. It has been exceptionally rewarding to lead the patient access and Krystal Connect team in support of this transformational product with hundreds of U.S. patients now benefiting from access to VYJUVEK. We really are changing the treatment paradigm for this terrible disease. Commercial and Medicaid access continues to improve for VYJUVEK. We now have received positive policies or decisions for roughly 96% of all covered lives. This is up from over 93% in our last report and driven mostly by an additional seven state Medicaid programs, including Texas, now providing coverage for VYJUVEK following the issuance of the permanent J-code earlier this year. As we entered the first quarter, we were prepared for the challenges of the January insurance verification season and the VYJUVEK permanent J-code reauthorization process. So we are very proud of the team's success in supporting continuing coverage for existing patients. At the same time, new patient conversions continue to progress well. And as of April, we have secured over 330 patient reimbursement approvals. We did see a one-time impact to our overall reimbursement approvals in Q1 due to a cybersecurity incident affecting our specialty pharmacy provider, but this has now been resolved. This incident is not unique to us and affected many of our other colleagues in the pharmaceutical industry. With strong payer access, the permanent J-code assigned, and ongoing operational improvements, the team is laser-focused on patient experience and optimizing time to first VYJUVEK application. With that, conversion times continue to shorten, albeit at a slower pace than we previously expected. As patients are increasingly identified in the community setting, where physicians are a bit less familiar with Dystrophic EB and the reimbursement process for rare disease medicines, we are finding that additional support is needed to navigate these patients and their physicians to access. This is, of course, exactly what the Krystal Connect patient services team is built to do. As we work through each patient case, we are seeing great results and ultimately authorizations for VYJUVEK therapy. We continue to implement additional education and tools to support the process and are still on a trajectory for conversion times to compress down to under a month later this year. With most VYJUVEK reimbursement approvals covering an initial treatment period of six months or more, we have still not encountered a large number of reauthorizations. But as with last quarter, all reauthorizations to date have been either approved or in process. As we move to Slide 6, the split between RDEB and DDEB patients at the reimbursement level is roughly in line with the start form split we reported previously and consistent with the steady progression through to conversion. We are also very happy to report that we are seeing reimbursement approvals across all ages as we continue to communicate to patients, physicians, and payers that all wounds matter and it is never too late to change the course of this disease. At the same time, it is also encouraging to see strong uptake in the pediatric segment, where establishing corrective therapy early has the potential to change the trajectory of these patients' lives. Moving to Slide 7. Moving to the patient experience and compliance, we continue to report strong patient preference for at-home administration with 97% of the weekly treatments occurring in the patient's home. Even with the increase in both the patient base and average length of therapy, we are pleased to report that compliance to weekly application remains above 90%, particularly when compared against many other chronic therapies, with compliance rates often around 50%, which we believe is a reflection of the clinical benefit VYJUVEK is bringing to patients while on drug. Although our work is just beginning, I am proud of the progress our team has made to date, rapidly growing the number of patients accessing VYJUVEK and, once started, ensuring they are able to treat their wounds conveniently at home. I will now hand it off to Christine to talk about what comes next for our U.S. VYJUVEK launch. Christine?

Thank you, Jen. I'm incredibly excited to have joined Krystal and to build on the great early momentum we are seeing in the VYJUVEK launch. I know firsthand the challenges that come with launching a rare disease medicine in the community setting. Patients are often undiagnosed or lost to follow-up. Genetic tests have never been run. Familiarity with innovative therapies and navigating reimbursement is low. And sadly, disillusionment with the healthcare system is all too common. Even if you would expect a patient suffering from a severe disease to proactively seek care, many of these patients have been disappointed by their treatment options in the past and have disengaged. However, none of these issues are unique, and we have at our disposal an extensive toolkit to help find and activate rare disease patients wherever they are in the U.S. We are also starting from a strong position with great early adoption of VYJUVEK, giving us plenty of success stories to amplify and disseminate. Today, I would like to touch on some of the key strategic initiatives which we are pursuing to drive sustained long-term growth of VYJUVEK in the U.S. Our commercial efforts can be grouped together into three main pillars. The first is data analysis. Our analytics hub includes real-time claims alerts to identify potential patients. Through this data, we can quickly deploy our seasoned rare disease sales team, while in parallel engaging HCPs through non-personal promotion. The combination of these two activities drives awareness and education of VYJUVEK to our targeted HCP audience and is already helping to grow our identified patient pool. There are also future opportunities to expand the scope of our analytics work to include DEB-adjacent claims codes on our path to finding all DEB patients across the U.S. Importantly, these claims-based patient finding efforts are distinct from our sponsored genetic testing program, Decode DEB, which has had great uptake and is helping clinicians identify previously undiagnosed patients. Education of HCPs is also a key strategic imperative and is being expanded through peer-to-peer programs by leading KOLs in EB as well as early VYJUVEK adopters. Peer-to-peer educational programs are the most impactful approach to bringing information to new EB treaters and early adopters who do not always practice in major centers but bring unique perspectives relevant for potential community prescribers. With over 5,000 HCPs now having been reached by the sales team, the desire for ongoing education and dialogue amongst the HCP community for better patient outcomes continues to grow. The open-label extension study demonstrating long-term safety, efficacy, and durability results will be published in the second half of this year. These top-line results were well received during a late-breaker session at the AAD meeting in March. The results solidify VYJUVEK's impact on the DEB patient population and further establish VYJUVEK's safety profile. Patient engagement is our third top priority. In-person and digital programs are providing the patient community an opportunity to hear real-world VYJUVEK experiences from other patients and their caregivers. This is a powerful approach to establishing understanding and confidence in the benefits of VYJUVEK to the patient community. Social media has become a powerful tool in reaching patients, particularly those who may not be engaged with a healthcare team. Targeted ads have been deployed on the most established social platforms, and we're expanding to other social media channels in the second half. This approach allows us to engage patients where they're at, raises awareness levels, and allows them to engage digitally to learn more and seek treatment. Altogether, by amplifying initial patient and physician experiences with VYJUVEK, we expect to drive adoption, build on a prescriber base that is already in the hundreds, and deliver on our mission of reaching as many DEB patients as possible. Before handing the call off to Suma for pipeline updates, I will also take the opportunity today to highlight a few trends that we are already seeing in the field that we expect will reinforce VYJUVEK's leadership position in DEB and sustain our launch in the long term. First, patients are seeing the compounding benefits of corrective therapy of VYJUVEK as they treat more wounds. Unlike palliative approaches, we are able to deliver the Collagen VII A1 gene directly to patient wounds and enable durable wound closure. As patients treat and close more and more wounds, they are increasingly able to get control over their disease. The positive patient experiences are building excitement amongst patients and HCPs. In addition, thanks to the work of Jennifer's team, home administration is becoming further entrenched as the standard of care for patients with DEB. Wound care in the home is an established routine for DEB patients and families. Home administration with VYJUVEK integrates into this routine, and we are seeing the overwhelming majority of patients choose it as part of their improved standard of care. Our specialty pharmacy provider and home dosing infrastructure is supporting compliance, ongoing patient progress monitoring, and integrating into a patient's lifestyle and treatment approach. Momentum continues to grow. Familiarity with VYJUVEK is rapidly increasing, and positive patient experiences are expanding utilization, including within the DDEB population. Altogether, we expect these trends to establish VYJUVEK as the standard of care for DEB in the years to come. Now I will hand it off to Suma to share pipeline highlights.

Thank you, Christine. Our development team has made great progress to start 2024 as we work towards our ultimate goal for treating DEB comprehensively and globally while simultaneously advancing a broader pipeline of redosable genetic medicines for other rare and serious diseases that lack adequate treatment options. With respect to our B-VEC development, steady progress towards European and Japanese regulatory authorization has us on track for launches in both regions by 2025. In Europe, EMA's review of our marketing authorization application continues. In February, manufacturing facility inspections were completed, and we expect to receive GMP certification in the second half of this year. Based on recent discussions, we believe EMA, like the FDA, is also supportive of home dosing. We continue to expect a decision on our marketing authorization application before the end of the year. In Japan, we have successfully completed the efficacy portion of our open-label bridging study in Japanese patients, enabling us to proceed with the Japanese new drug application, which we expect to file in the second half of the year. Having previously received orphan drug designation by Japan's Pharmaceuticals and Medical Device Agency, which confers specific benefits for orphan drug development, including priority review application, we remain on a trajectory for both a decision by Japanese authorities as well as launch in 2025. With respect to our broader clinical pipeline, there were two major themes in the first quarter: expansion and acceleration. With an expanding pipeline and accelerating enrollment, we are setting up for a number of exciting data readouts starting later this year. Our oncology program, KB707, has been progressing rapidly to start 2024. Recall that KB707 is the modified HSV-1 vector designed to deliver genes encoding both 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 nebulization and lung delivery. Our Phase I study to evaluate intratumor KB707 monotherapy is moving ahead well. Since dosing our first patient in October of last year, we have cleared the first two dose levels in our study and completed enrollment in the third. KB707 has so far been generally well-tolerated across a diverse population that includes patients with sarcomas, colon, breast, and cutaneous cancers. No patient has experienced dose-limiting toxicities or drug-related Grade 3 or greater adverse events. Based on the current pace of enrollment, we expect to be able to report interim data before the end of this year. We also recently dosed the first patient in our inhaled KB707 Phase I study, KYANITE-1, an open-label, multicenter dose escalation and expansion study evaluating inhaled KB707 monotherapy in patients with advanced solid tumor malignancies affecting the lungs. This is another exciting milestone as we look to extend the clinical utility of cytokine therapy and make a new class of medicines to treat a wide range of otherwise difficult-to-treat solid tumors. It is also gratifying to report that both intratumoral and inhaled formulations of KB707 have now received Fast Track designation by the FDA after inhaled KB707 was granted fast track earlier this year for the treatment of patients with solid tumors with pulmonary metastasis that are relapsed or refractory to standard of care therapy. Turning to our respiratory program, we are pleased to report a pickup in enrollment year as well. On KB407, our redosable inhaled gene therapy for the treatment of cystic fibrosis, we have now completed dosing in Cohort 2 of the CORAL-1 study and are on track to start dosing in the third and final cohort later this quarter. Recall that this cohort is scheduled to include bronchoscopies that will allow for evaluation of airway epithelial cell transactions and expression of CFTR transcript and protein. Cohort 3 also includes minimum enrollment thresholds for patients that are not eligible for modulators, an important patient population for which no effective disease-modifying therapies exist. KB408, our redosable inhaled therapy for alpha-1 antitrypsin deficiency, we dosed the first patient in our SERPENTINE-1 study in February of this year. SERPENTINE-1 is a Phase I open-label single-dose escalation study in adult patients with AATD to allow assessment of safety, tolerability, alpha-1 antitrypsin levels, and key pharmacodynamic biomarkers. With strong support from the Alpha-1 research community, we are on track for an interim data readout before the end of 2024. Our development activities in ophthalmology are also ramping up, working towards our goal of treating DEB comprehensively. In February, we disclosed that we had reached alignment with the FDA on a single-arm open-label study to enable the approval of B-VEC eye drops for the treatment of lesions in the eyes of DEB patients. We have since initiated clinical operations to enable the study start in the second half of the year. And finally, we look forward to reporting results from Cohorts 3 and 4 of our KB301 Phase I study later this year. Both cohorts are running concurrently to evaluate KB301 in two potential target indications. Improvement of the lateral canthal lines at rest and improvement of dynamic wrinkles of the décolletage. Following readouts from Cohorts 3 and 4, we expect to select a single indication for Phase II development. Our HSV-1 platform has the 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 this, I would like to turn the call to Kate.

Thank you, Suma. We ended the first quarter with $359 million in cash on hand and $622.3 million in total cash and investments, an increase over year-end cash and investments of about $28.1 million. VYJUVEK net product revenue for the quarter was $45.3 million. As VYJUVEK was approved by the FDA in May of 2023, there was no comparative period revenue. Cost of goods sold was $2.4 million for the quarter or about 5% of net product revenue, making gross margin 95%. In the first quarter of 2023, costs associated with the manufacturing of VYJUVEK were expensed as research and development costs prior to approval, and therefore, there are no comparative period costs in the first quarter of 2023. Research and development expenses for the quarter were $11 million, inclusive of stock-based compensation of $1.9 million, compared to $12.3 million for the prior year's first quarter, inclusive of $2.5 million of stock-based compensation. Lower research and development expenses in the first quarter of 2024 were due to decreased VYJUVEK manufacturing and overhead costs, as following FDA approval, those costs are now recorded as part of our cost of inventory. This decrease was partially offset by additional clinical development costs and R&D-related depreciation expenses. Selling, general and administrative expenses for the quarter were $26.1 million, inclusive of stock-based compensation of $7.4 million, compared to $24 million for the prior year's first quarter, inclusive of stock-based compensation of $7.9 million. Higher selling, general and administrative expenses in the first quarter of 2024 compared to the prior year's first quarter were primarily the result of increased selling expenses related to the launch of VYJUVEK, in particular, an increase of about $1.5 million related to the additional patient access program costs that were incurred in light of the J-code transition that was previously discussed. Other increases included higher professional services, payroll, and other administrative costs, offset by lower marketing-related expenses compared to the prior year's first quarter. This quarter, we also recorded a litigation settlement expense of $12.5 million due to our anticipation of reaching the first milestone payment in the PeriphaGen settlement at $100 million in net product revenues. Our net income for the quarter was $932,000, which represented $0.03 per basic and diluted share. We would also like to reiterate our previously issued guidance of between $150 million to $175 million in combined non-GAAP, R&D, and SG&A costs in 2024. As a reminder, this projection excludes an estimate for stock-based compensation. We continue to expect higher research and development costs relating to our several active pipeline projects and higher selling, general, and administrative costs relating to the continued launch of VYJUVEK across the United States and our pre-commercial activities in Europe and Japan. And now I will turn the call back over to Krish.

Thanks, Kate. If there's one message that I hope you take away from today's call, it is our excitement for the path ahead at Krystal. Our U.S. launch continues to progress very well with high compliance, broad access, and a growing number of patient conversions putting us on an excellent trajectory. Momentum is also building outside of the U.S. with the rapid completion of our Japan OLE and soon to be the second regulatory filing in a major ex-U.S. market. We look forward to further expanding access to VYJUVEK here and abroad, all while progressing a deep clinical pipeline addressing urgent unmet needs in rare and serious diseases. Thanks for listening. And I'd like to now open the call for Q&A.

Thank you. And the first question today is coming from Alec Stranahan from Bank of America.

Just two quick ones for me. First, can you maybe talk about patient compliance that you saw in the quarter? What has the feedback been from the field on this to date? And then, I didn't see any mention of new start forms, but any trends here that you would highlight? And I guess what else needs to happen to shorten that time to less than a month for conversion?

Thanks, Alec. On your question on compliance, I'm going to turn it over to Jennifer.

Sure. Thanks, Alec. So when it comes to compliance, we are just thrilled with the patient experience. Overall, patients continue to see the impact of VYJUVEK. And because it's dosed weekly, they understand that it's important to keep up with those weekly doses. That's definitely what we're hearing. However, there are opportunities to potentially miss a week here or there. Overall, patients are aligned with the idea that weekly dosing is important for wound healing. They are thrilled with the outcomes they are receiving with VYJUVEK, and we work with them for flexibility and understanding that life happens and they may miss a week or two here and there. But overall, compliance is just stellar.

Alec, on the Start Form question, look, we stopped talking about Start Forms last quarter. We believe reimbursement approvals are a much closer predictor of net revenue than Start Forms at this stage of the launch. But having said that, demand continues to be really good with respect to patients coming on drug, and I'll turn it over to Christine to give a sentence or two, having come into the story over the last couple of months.

Yes. Thank you, Krish. Yes, we continue to be very pleased with the volume of new starts we're seeing. We are beginning to see some of that transition from the COEs into the community base. As that awareness continues to grow and education and clinical experiences build, we intend to capitalize on the momentum that we are currently seeing.

The next question is coming from Tim Lugo from William Blair.

Krish, I believe you mentioned that you're confident in hitting revenue projections in 2024 despite what was a disruption this quarter given the J-code switch. Can you just talk a bit about the IP consensus around $255 million this year? Is that just something we are generally comfortable with?

Look, without getting into the specifics of what I think about what I see the analysts projecting and the consensus estimate, whether it be average or median, realize that Q1 was slight on the revenue side, but not on the fundamentals of the commercial launch. When the J-code issue surfaced, two things happened. I think our specialty pharmacy probably underestimated the time it would take to convert. We didn't assume that was right, but when the actual issue surfaced, because the dosing is at a weekly level, we don't have time to think about what we could have done in the past. We had to jump in quickly to provide access to free vials, and we ended up spending about 400 free vials, as I mentioned in the call. By the time we started to address such issues, the issue was well behind us. So it was very transitory and resulted in the dispensing of 400 free vials, which you can imagine is slightly north of $8 million in net revenue. We were pleased that we kept the patients on the drug and provided continuity without slipping up on that front. That's more important to us since patient experience is at the forefront of what this launch is about. But Tim, coming back to your question, we feel good about generally where we think we're going to end up in 2024.

Understood. And maybe switching to the pipeline a bit for KB407. The third cohort is about to get enrollment. Can you narrow down when we should expect first data coming out of the study given the first two cohorts are behind us now? And are there any trends in the second cohort that make you more or less confident in the program?

This is Suma. I'm going to take that question. I mean, again, we are very excited about KB407. We are working with two sites because we need sites that have the capability to perform bronchoscopy, because this is a procedure that requires specificity to increase the chances of obtaining the right tissues to show expression. So yes, we are working on that. We are looking at potentially patients that are not on modulators or correctors. We have identified patients and are actively working with the sites to get the study up and running. Our goal is to try to enroll all of them by the end of the year. We're going to work hard at it. Remember, we are looking for a specific patient population that is not on modulators or correctors. So we will be working to get those patients enrolled.

Tim, just to complete that because we're outside the TDN, we're not guiding on CF. We never have, but things are trending in a positive direction.

The next question is coming from Ritu Baral from TD Cowen.

Great. I wanted to ask about Europe and Japan, specifically what you guys are planning on commercial build-out in Europe right now? And if you can just give us an update on the MAA process, whether you're past the 180-day questions and whether you anticipate oral arguments there.

Thanks, Ritu. On the commercial side, we anticipate our first launch to be Germany, either very late this year or early next year, depending on when we get approval. We do have a German GM in place who comes from Shire, and so we're super excited about the launch in Germany. Meanwhile, we're setting up for named patient sales, expanded access, whatever, and the demand has been really good in Europe in terms of experience with the drug prior to launch and approval. Japan is maybe a little bit behind relative to Europe, around six months or so. We do have a GM in Japan in place, and I'll now turn it over to Suma to talk about our timelines and approval processes in both countries.

Thanks, Krish. Yes, we received the 120-day questions. We also had scientific discussions throughout the process, and there were no surprises in the questions. We met with the EMA recently to go over some key questions that we needed for clarification, and I think the meeting went really well. We have clarity on what the expectations are, and we expect to respond to the LOQ in a couple of months. The timeline is on track for an approval at the end of this year. Overall, we're pleased with the progress of the process. The inspection was also completed, and we had a very successful inspection. Based on the feedback, we should be getting GMP certification in a couple of months. In Japan, as Krish mentioned, we have completed the efficacy portion of the open-label Japanese patient population study. The data looks very promising. We are in the process of writing the study report, we have a meeting scheduled with the PMDA to discuss the Japanese NDA, and we are on track for filing the Japanese application. We are working with the CRO, and the process of converting the European and U.S. BLA to the Japanese NDA has begun. We anticipate filing this application by the end of this year.

Got it. And then moving back to the U.S. Can you tell us what is the current conversion time to commercial? I believe it was mentioned that it was getting a little longer than expected. Can you discuss what some of the headwinds have been to shorten that to the target of 30 days?

Let me start, and I'll turn it over to Jen for specifics. Look, there are three pieces. First, the part in the middle is access. Once you get access, it's about how quickly we can get a nurse into the home and get treatment going. The piece before access is that, once the doctor considers writing a prescription, the genetic information must be in place, whether you're in the community setting or in a COE setting, which takes time to gather. The access part is really quick, maybe less than a week. So any delays we encounter are either on the front end, depending on the patient type, or on the back end where the caregiver is particular about the nurse they want in their home and scheduling that nurse. Jen, maybe you can weigh in on that.

Yes. Just like Krish said, there are several dynamics at play in getting that patient on their first treatment. Working with the payer and submitting those clinicals takes time. As we move into the community setting, some of those offices may not have sufficient staffing, and some of the chart work or lab work may be in the center, which adds to the timeframe. However, we have a great field team working with these offices to provide education at the payer level. So we expect that to shorten as we continue that education. Once we submit to the payers, the process has been positive overall. Most of our payers are well aligned. We have great policies and understand what they need to provide approvals. That turnaround time is shortening as payers become more familiar with what's required. The final part involves scheduling with the family. Getting nurses to provide treatment necessitates trained VYJUVEK nurses who can meet the family's schedule, and that just takes time. But once we get a patient accustomed to the routine, they have a great experience, and we continue to work on reducing the time from prescription to treatment as short as possible.

The next question is coming from Benazir Ali from Stifel.

This is Benazir on for Dae Gon. Can you guys hear me okay?

Yes.

Okay. Just a couple of questions. First, Christine, based on your experience with Filspari, which one of those three priorities do you find most impactful in onboarding patients? Any sense of what kind of growth we can envision going forward?

Yes. Thanks for the question. All three of those pillars continue to be essential to this launch. There's some uniqueness in the DEB space, but also consistency in the rare space. Each of these priorities is important. We need to educate HCPs and work with the patient population to ensure we maintain the momentum generated thus far.

Okay. And then just one more question for either you or Krish. I think you mentioned about 5,000 HCPs are aware of VYJUVEK. What's the geographic distribution? Which areas are you going to focus on for the rest of 2024?

Yes, I can take that question. What’s exciting is that we are starting to identify patients not just in the COEs but also in the community. We are finding patients across the country. This DEB population often exists in more rural locations, as well as within our COE setting. That’s an exciting part of this launch, which we are beginning to understand as alerts are helping us identify patients across the country and among different specialties.

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

Krish, maybe one for you. Just as patients have been on commercial drug for quite some time, could you provide an update on what you're hearing regarding these patients' experiences with respect to wound closure? Are you starting to hear of any patients coming off therapy as their wounds close? Or do you still believe the induction phase that you had previously projected at 2 years is intact?

Yes. To start with your last question, I think we continue to see a very high level of compliance. It has been almost a year since August was the first time a patient started on VYJUVEK in a commercial setting. But compliance remains high, and we continue to expect the induction period to last around 15 to 18 months, after which patients should expect to need fewer vials as the wounds heal. Currently, at 91% or 93% compliance, considering 200 to 300 patients on drug with weekly administration to maintain that high compliance, we are talking about a handful of patients missing a week occasionally. Most patients remain on track. There have been a few instances with dominant patients where we’ve heard that all wounds appear to be healed, especially in young patients, calling to ask if they can take a pause and resume if they experience a disruption in a wound. However, this is not common and mostly occurs with young kids predominantly on dominant DEB and DDEB.

No. I think, again, in real-world experiences, we continue to hear very positive feedback from patients and see pictures showing significant improvements in their skin. The durability of the skin shows patients feeling better overall. They are excited about their progress.

The next question is from Gavin Clark-Gartner from Evercore ISI.

I have a few questions, so I'll just go one at a time. First, for the reimbursement approvals, are all these patients going on to receive paid drug? Or is there any leakage along the way?

While the majority are going on therapy, we continually work with those who are experiencing challenges as we navigate the process. But for the most part, they are all going on therapy.

Okay. And you noted that the Change Healthcare hack resulted in a lower number of reimbursement approvals in the quarter. Can you help us quantify what that impact is?

Yes. I don’t have specific quantification, but it generally slowed down the process of claims adjudication and benefit verification for our partner, as they relied on Change exclusively. Now that it has been resolved, we’re back to normal operations and are expediting those approvals as quickly as possible.

I would say that if you track something on reimbursement approvals on a weekly basis, the disruption can be quantified as about a week to two weeks of disruption.

That helps. And I wanted to clarify on the compliance metric, that 91% you provided. I think you noted it was for patients on once-weekly therapy; are the other 9% on less frequent therapy, or is there a different group of patients who have discontinued treatment altogether?

No, that measurement is actually compliant with weekly therapy. It reflects how many patients receive their treatments weekly. If they miss a dose, it could impact that figure. But in general, 91% of patients receive it weekly. There isn't another distinct group who has discontinued. It’s mainly the balance of those who missed a dose.

The next question is coming from Yigal Nochomovitz from Citigroup.

Krish and team, thank you for taking my question. I just had a question on the ophthalmic study, this small open-label study in 10 patients. Could you explain whether these patients are existing VYJUVEK patients or if the use of VYJUVEK is an exclusion criterion for those 10 patients? Regarding your inhaled technology, I don't think you've talked a lot about the delivery system. Could you explain the process and how long the inhalation session per dose takes?

This is Suma. To address your first question regarding the eyes, yes, a good portion of Phase III study patients also experience manifestations impacting their eyes. They often have severe blistering or wounding, resulting in difficulty opening their eyes, which can be very painful. We have many patients interested in the study and feel confident we can enroll them quickly. It’s a straightforward study, and we anticipate rapid enrollment. Regarding your second question about inhalation, we utilize a standard nebulizer available on the market. The beauty of our product is that, unlike some mRNA deliveries that require substantial dilution to pass through the mesh due to their viscous nature, our product can be nebulized in less than 15 minutes. It’s a rapid procedure for the patients.

Okay. One quick follow-up regarding Japan and Europe. I assume that the approvals would be for the skin application first. Could the data from the ophthalmic product be included in those submissions?

At the moment, it is all for the skin; however, we may use the U.S. data to seek approval in those two countries once we complete the U.S. study.

Thank you. And there are no further questions at this time. This concludes today's conference call. Thank you all participants for joining the Krystal Biotech first quarter 2024 earnings conference call. You may now disconnect.