Krystal Biotech, Inc. Q3 FY2024 Earnings Call

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

Thank you, Stéphane. Good morning, and welcome to the call. As I mentioned in my press release attribution, we are well on our way to achieving the two-year target that we set at the time of the launch. In comparison to any other launch in orphan diseases or genetic therapies, we believe our launches have exceeded all expectations to date. In my mind, there are two primary drivers for this success. The first is the drug itself with all its attributes of efficacy, safety, patient convenience, etc. The second is our focused approach to patient and physician experience. We have allowed the physician and patient to drive demand at a pace they're comfortable with, which has been rewarding, particularly in an indication where the expectation is they will be on the drug for a long time. Additionally, global opportunities for VYJUVEK are beginning to take shape. The ophthalmic formulation is progressing towards a registrational study in the next few months. Therefore, we are starting to see increasing upside in the total market opportunity for the VYJUVEK franchise overall as we work toward treating DEB patients globally and comprehensively. In Europe, we are currently on track for a CHMP opinion before year-end and our recent breakthrough with HAS granting early reimbursed access in France reflects the significant demand for VYJUVEK in Europe. With our JNDA submitted last month, we are also on track for a 2025 launch in Japan. All preparations are underway for launches in the EU4, UK, and Japan sequentially next year. Meanwhile, we had a positive readout for Jeune Aesthetics KB301 in Q3, where we saw clear efficacy signals. That propels us forward to a Phase 2 study expected to start next year while we continue to work on the Jeune Aesthetics pipeline. This was the first of many upcoming data readouts from our deep clinical-stage pipeline. We're looking forward to reporting on two more programs before year-end, including our first data on HSV-1 based gene delivery to the lung, which has been difficult to reach with other approaches. So, both on the commercial and clinical fronts, we are excited and looking forward to the rest of 2024 and 2025. Finally, I am happy to report that Krystal was again profitable this quarter at $0.95 per share, up sequentially from $0.54 per share in the second quarter of 2024. In Q3, we accrued $12.5 million in litigation expenses that once again impacted our EPS as it did in our two prior quarters. This is the final accrual related to the litigation expense, and there will be no additional litigation accruals moving forward. With increasing profitability, a strong balance sheet, and upcoming expansion of our VYJUVEK franchise in the U.S. and through ex-U.S. launches and our eye drop formulation, we are very optimistic about both the near-term and long-term outlook for Krystal. Moving now to our results. Net VYJUVEK revenue for the Q came in at $83.8 million, while gross margins in GTN continued to behave as expected. Thanks to the strong growth we achieved this quarter, total net VYJUVEK revenues since launch in August 2023 have already surpassed $250 million. Achieving this milestone only a little over a year after our first sale is a tremendous achievement for our organization and a testament to the value VYJUVEK is providing to patients suffering from DEB. Also, please note that net VYJUVEK revenue reported today again includes an accrual 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. With that, I'll hand it off to Jenn and Christine to share more detail on our recent accomplishments and strong fundamentals, which we expect will sustain our launch for years to come. Jenn?

Thank you, Krish. I am pleased to report another quarter of strong VYJUVEK access growth across the U.S. in spite of summer seasonality headwinds as our team works tirelessly to help more and more patients gain control over this terrible disease. As of October, the number of patients with reimbursement approvals is up to over 460. Reimbursement approvals were modestly impacted by transient summer seasonality effects in this quarter. These scheduling disruptions have now resolved. More importantly, thanks to our flexible support infrastructure that adapts to patient schedules and timelines, we have kept patients and their applications for reimbursement on track to achieve positive access outcomes. Reimbursement approval splits are largely in line with recent quarters and roughly evenly split between commercial and government plans. Approvals continue to come across the entire DEB patient population, including patients of all ages and with either dominant or recessive forms of the disease. With near-complete coverage for commercial and Medicaid lives nationwide, access for VYJUVEK is strong. This has enabled us to achieve a 100% success rate on reauthorizations; all have either been approved or are in process, setting us up well for sustained success in the U.S. Our Krystal Connect team works closely with home healthcare providers, employing a patient-centric approach that focuses on patient needs and preferences. The team navigates things such as summer vacations, family activities, work, and back-to-school schedules to successfully integrate weekly treatments into the family's normal routine. Patient preference for at-home administration is effectively unchanged, and currently, 97% of the weekly treatments occur in the home setting. With now over one year of real-world experience, the team is developing and implementing strategies to ensure patients receive the best possible experience starting and staying on VYJUVEK. This includes enhanced education, tools, and resources for patients and nurses. We focus on topics such as preparing for treatment, practical considerations for wound selection, and options for hydrophobic dressings. We recognize that every patient has unique needs, and the impact of the disease varies for each patient. Our program and resources include regular touch points to support monitoring treatment progress and identifying potential issues early and addressing them promptly. While we continue to see high compliance with weekly treatment at 87% across our DEB patient population, including new starts for both recessive and dominant dystrophic EB, please note that for some patients who have been on VYJUVEK for an extended period of time, particularly those participating in our OLE study, we are seeing maintenance treatment patterns emerge. This includes cycling between periods of treatment pauses due to wound closure. While it's early and we believe it would be premature to estimate the frequency or duration of treatment pauses, we can expect reported compliance to weekly treatment across the entire patient base to trend down in upcoming quarters. As we continue our launch, the Krystal Connect team is fully focused on ensuring patients have a smooth experience starting and staying on therapy. We are developing and investing in strategies that lead to better treatment outcomes and overall satisfaction. We are building long-term patient relationships and are committed to providing sustained worry-free access to corrective therapy where and when needed. I will now hand it off to Christine to discuss recent sales and marketing activities, which have us on track to hit our most ambitious pre-launch penetration targets. Christine?

Thank you, Jenn. As Jen just mentioned, at launch, we set an ambitious target for the commercial organization. We established a goal of 60% penetration of the identified patient pool, equating to roughly 720 reimbursement approvals within two years of launch. I am happy to say that based on our progress to date, our ongoing sales and marketing efforts, and the sustained demand we are seeing in the field, we remain on track to achieve this goal. Our core commercial strategy, focused on the three pillars of claims analytics, medical education, and patient activation, is paying off. We are seeing strong demand across both key centers and in the community as we continue to drive awareness of VYJUVEK and the real-world impact on healthcare professionals, patients, and caregivers. Healthcare professional education remains a major focus. We continue to educate physicians and their support staff on how VYJUVEK is the only FDA-approved therapy that treats the genetic cause of the disease, sharing the clinical data that supports long-term use in wound healing for all patients, from localized to severe disease, and showing the stunning real-world results patients are seeing at home. Additionally, we are working with physicians, particularly those in the community who may not regularly see these DEB patients, to educate them on the streamlined process for getting their patients started on VYJUVEK. This is a high-touch, customer-centric model that delivers a positive onboarding experience for both the prescriber and the patient. The prescriber base is expanding; over 70% of the prescribers in Q3 were new writers. This demonstrates that our targeting efforts are effective and both KOLs and community physicians see the value of VYJUVEK and the ease of prescribing. We have also made significant progress in our direct-to-consumer outreach. We are now live on all planned social media channels showcasing real-world experiences for both pediatric and adult patients, some of whom have been on therapy since 2020. Since January of this year, our paid social direct-to-consumer advertising has served over 31.3 million impressions, connecting prospective patients and caregivers with VYJUVEK. The third-quarter launch into new social platforms, along with lead generation advertising on social media, will continue to drive user engagement and expand our reach. Finally, as part of our annual recognition and support of EB Awareness Week, which took place just last week, the Krystal team hosted educational webinars for our target physician audience, as well as sponsored a patient and caregiver webinar in conjunction with one of our EB advocacy partners. These live webinars featured dermatologists with real-world DEB and VYJUVEK experience as well as VYJUVEK-treated patients who shared their personal experience of the positive impact that VYJUVEK has brought to their conditions. Members of the Krystal team also attended the Deborah of America benefit during EB Awareness Week, which honors those in the EB community and champions their ongoing mission to advance EB research and patient care. These are just a few highlights of our ongoing commercial efforts to drive awareness, streamline the physician experience, and help more patients get on treatment faster. It has been deeply rewarding to see these efforts translate into reimbursement approvals, and with continued education, we are optimistic that we can achieve not only the near-term targets we have set but ultimately grow well past them in later years. Now, I will hand it off to Suma to share pipeline results.

Thank you, Christine. Our development team continues to execute at a high level. Over the past few months, we have achieved key milestones to not only broaden DEB patient access but also advance our diverse pipeline of redosable genetic medicines. Leading off with an update on the global development of B-VEC, steady progress has poised for commercial launches in both Europe and Japan next year. In Europe, EMA's review of our marketing authorization application is progressing well. EU GMP certification was granted for our commercial manufacturing facility ANCORIS earlier this year, and our latest interactions with the EMA suggest support for home dosing and a broad label, including DEB patients from birth. Based on the current pace of discussions, we expect a CHMP decision before the end of the year and the first launch in Germany in the first half of 2025. In the interim, we also achieved an access breakthrough in France in September; Haute Autorite de Sante approved pre-marketing early reimbursed access to B-VEC under the Accès Précoce program. DEB patient access to B-VEC under AP1 is expected to start later this year. AP1 allows for early access to innovative therapies in France prior to European regulatory approval and is a reflection of the strongly positive benefit-risk ratio provided by B-VEC in a patient population with high unmet need. In addition to rapidly broadening patient access in France, this approval will also provide physicians with an opportunity to build clinical experience with B-VEC even before the commercial launch. In Japan, we also achieved a major milestone with the recent submission of our New Drug Application. Our application to the Japanese authorities includes the results of our open-label extension study in Japanese patients in which overall results closely mirrored doses from our registrational Phase 3 trial. Having previously received orphan drug designation from Japan's Pharmaceutical and Medical Device Agency, we expect a priority review, putting us on track for both a decision by Japanese authorities and a launch in 2025. Shifting focus to our broader pipeline, we are very excited to report the first of many upcoming data readouts last quarter. In this data readout for Jeune Aesthetics KB301, we reported clear and clinically significant improvements in not only wrinkles but many other skin attributes, including radiance, hydration, and crepiness. This robust efficacy signal, combined with our previous reports of durable benefit, positions KB301 as a potentially transformational product in the field of regenerative aesthetics. We look forward to progressing KB301 into Phase 2 next year. This is just the beginning. Before the end of the year, we expect to disclose interim updates on the KB408 and KB707 programs. KB408 is our redosable inhaled therapy for alpha-1 antitrypsin deficiency, which is currently being evaluated in a Phase 1 SERPENTINE-1 study. SERPENTINE-1 is an open-label, single-dose escalation study in adult patients with AATD to assess safety, tolerability, alpha-1 antitrypsin levels, and key pharmacodynamic biomarkers. With strong enrollment and a recent protocol amendment to include bronchoscopies in Cohort 2, we hope to provide interim molecular data before the end of the year. This readout is expected to highlight the significant potential of HSV-1 for gene delivery to the lung. 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. Two formulations, one for intratumoral injection and the other for delivery via inhalation, are being evaluated in Phase 1 dose escalation and expansion studies. Both studies are enrolling well, and with this phase, we expect to share an interim data update focused on safety and early immune profiling data before the end of the year. I'm also happy to share that intratumoral KB707 was granted a rare pediatric disease designation for the treatment of rhabdomyosarcoma; both inhaled and intratumoral KB707 have now been granted Rare Pediatric Disease Designation and Fast Track designation by the FDA. We expect additional data updates in 2025, including follow-on updates on our oncology programs as well as initial data from our ongoing Phase 1 study evaluating inhaled KB407 for cystic fibrosis. We recently activated two additional clinical sites in our Phase 1 CORAL-1 study evaluating KB407 and are now on a path to report intermolecular data for KB407 in the first half of 2025. Finally, we are on track to both start and report interim data from our registrational trial IOLITE next year. IOLITE will be a single-arm, open-label study designed to evaluate KB803, our newly developed ophthalmic formulation of B-VEC for the treatment of ocular complications in DEB patients. In the interim, we continue to enroll in a natural history study to prospectively collect data on the frequency of corneal abrasions in patients with DEB. This study will also serve as a run-in period for patients who may be eligible to participate in IOLITE and should enable us to accelerate enrollment in this registrational study. We have entered an exciting period for Krystal as we unveil trial results that we expect will highlight the versatility of our gene delivery program. We look forward to sharing these updates as they unfold and advancing our pipeline of uniquely differentiated genetic therapies. With that, I would like to turn the call to Kate.

Thank you, Suma. In the third quarter, Krystal saw continued VYJUVEK revenue growth with net product revenue of $83.8 million, representing an increase of approximately $75.3 million over the third quarter of 2023, which was the first quarter that we had revenue following our approval in May of 2023. Cost of goods sold was $6.7 million for the quarter, or about 8% of net product revenue, resulting in a gross margin of 92%. In the third quarter of 2023, cost of goods sold was artificially low at $223,000 as a result of a significant portion of the cost of manufacture being previously expensed to research and development prior to product approval. Research and development expenses for the quarter were $13.5 million, inclusive of stock-based compensation of $2.3 million, compared to $10.6 million for the prior year's third quarter, inclusive of $2.3 million of stock-based compensation. Higher research and development expenses in the third quarter of 2024 were due to increased clinical development costs, increased R&D-related manufacturing costs for our pipeline candidates, and increased R&D facilities and equipment costs this quarter. These increases were partially offset by capitalization of direct and indirect costs of manufacture for VYJUVEK being charged to inventory following our FDA approval. Selling, general, and administrative expenses for the quarter were $28.7 million, inclusive of stock-based compensation of $11 million, compared to $23.7 million for the prior year's third quarter, inclusive of stock-based compensation of $6 million. Higher selling, general, and administrative expenses in the third quarter of 2024 compared to the prior year's third quarter were primarily the result of increased commercial-related professional service fees and VYJUVEK marketing costs. The most significant increase in SG&A is related to the increase in stock compensation expense of $5 million quarter-over-quarter. We again recorded litigation settlement expenses of $12.5 million this quarter due to our anticipation of reaching the third and final milestone payment in the PeriphaGen settlement, which is triggered at $300 million in cumulative sales payable within 30 days following the filing of our Form 10-K in which the $300 million milestone is achieved. We have now fully accrued for the entirety of this matter, and if achieved, anticipate making the final related payments in early 2025. Net income for the quarter was $27.2 million, representing $0.95 per basic and $0.91 per diluted share. We have reduced and narrowed the range of our non-GAAP R&D and SG&A expense guidance, which is now expected to be between $115 million and $125 million for the full-year ending December 31, 2024. As a reminder, this guidance excludes the non-cash impact of stock-based compensation. Finally, we ended the third quarter with $374 million in cash-on-hand and $694.2 million in total cash plus short-term and long-term investments, marking continued quarterly growth in our overall cash and investment position with an increase over our second quarter of 2024 cash and investments balance by about $65 million. And now I will turn the call back over to Krish.

Thanks, Kate. So, in closing, I'd like to highlight the significant potential for value creation in the years ahead, driven both by VYJUVEK and our deep clinical-stage pipeline. Our VYJUVEK launch, having already achieved over $250 million in net revenue, is progressing very well. However, as we saw in Q4 of last year, we do anticipate some disruption over the holiday season, as life gets in the way for many families. That said, our conviction in the overall trajectory of our launch remains unchanged. More importantly, this is only the beginning of the opportunity we see for the VYJUVEK franchise. In the coming years, we expect ex-U.S. expansion, development, and launch of our eye drop formulation for KB803, both driving significant revenue growth. Meanwhile, our KB301 readout is a reminder of the significant untapped potential that we see in our pipeline. With multiple readouts coming up, we believe we are on the verge of demonstrating the true potential of our HSV-1-based gene therapy platform. With the benefit of commercial scale in-house GMP manufacturing infrastructure, growing revenues, and five quarters of positive EPS, we possess the necessary resources to pursue these opportunities efficiently and maximize value for our shareholders. Thank you for listening. I'd like to open the call for Q&A.

Your first question for today is from Alec Stranahan with BOA.

Hi, guys. Thanks for taking our questions. Just two from us. First, could you give us a sense of how many patients are at or near their annual cap currently? Is this something we should be looking for when we model sales into year-end or should the new patient adds throughout the year sort of offset this? And second, I appreciate this data is probably still evolving, but on the duration of wound closures over time, curious if there's any trends coming out of your clinical studies you could point to for duration of wound closure. Just trying to get a sense of how long a pause due to wound closure could last before a patient would need to receive therapy again. Thanks.

Hi, Alec, on your first question—this is Krish. On your first question about how many patients will hit the cap, we're not particularly disclosing that aspect of it. You can glean that the cap is in the GTN, and the purpose of accruing was to ensure there's no volatility concerning net revenues in any quarter. That's the main point. I think we're on track to ensure that net revenue growth remains smooth throughout Q1, Q2, Q3, and Q4. We'll have a much better sense as we go further into the launch on that point. Regarding the duration of wound closure, there are multiple factors to consider depending on the location of the wound and the nature of the activity; this can vary across individuals. Our thesis is still to stick with the science behind it. Given the half-life of collagen, we expect the average wound to be durable for about 90 days.

And then can I add? I agree, we are seeing substantial clinical benefits. The wounds are closing and remaining durable, but what's happening is these patients are now increasing their activity. We hear from patients that they can now do more physical activities, they can walk, etc. As a result, they see breakdown in the skin, but they want the wound to be treated because they see the benefits of VYJUVEK. So, these patients are being extra cautious. Even if their wounds are closed and open, they want the drug back on. That's the trend we observe in the commercial setting.

Makes sense. Thank you.

Hi, thanks very much. I was just curious about your broader marketing campaign. You mentioned something about a very broad footprint on social media, with 31.3 impressions. Can you comment on to what extent that's actually helping identify patients? Obviously, it's a low conversion rate given the market size, but I'm just curious how that's working as far as identifying patients and if any of that effort has translated to new starts?

Christine?

Sure. Yes, we're excited about our goal to reach patients wherever they may be. Our social media campaigns are allowing us to do just that. We are seeing benefits in finding some patients who are not yet engaged or haven't been engaged with the healthcare system for some time, allowing us to reach, educate, and engage them directly, leading them to access their PCP. So we are pleased. The volumes will vary since we operate in this ultra-rare space, but our ultimate goal is to reach every patient, and we are getting there one by one.

Okay. Thanks. And then I think, Krish, on the last call, you mentioned that you identified about 10% more patients from the 1,200 base that was forecast at launch. I'm curious if you have any updated thoughts on that number or if you're comfortable with that statement now? Thanks.

In terms of being comfortable, yes, we were comfortable when we reported the number. The trend continues to go up, and if we hit a significant milestone moving forward, we'll report again. The more VYJUVEK is utilized and the volume of patients increases, the higher the awareness, and we are starting to see the market expand beyond the original estimate.

Hi, guys. Thanks for taking the question. I'm going to focus on Europe with my two questions today. Have you received the 180-day questions? If so, can you comment on the topics and whether you've responded, and whether you are expecting oral arguments at this point? Then I think it was Suma who mentioned the label expectations; you indicated that it sounds like you could go down to DEB patients from birth literally, but you didn't comment on recessive versus dominant. Is that a question in Europe? The follow-up question is for Krish on pricing in Europe. What can you say about how we should be thinking about European pricing versus U.S. pricing and how to model that? Thanks.

Thanks, Ritu, for the question. Yes, we did receive the 180-day questions. Today is the response date for those queries. Most of the issues are resolved; there doesn't seem to be an oral meeting set with the EMA at the moment. Regarding the label, based on our 180-day comment on the SMBC, DEB patients from birth will be included, covering both dominant and recessive patients for the SMBC.

On pricing, Ritu, we're going to do our very best to get the maximum price possible. For pricing, for example, in Germany, we get to launch with the U.S. price for the first six months as we begin negotiations there. The actual pricing in Europe for the first country doesn’t get set until Q1 of 2026. We will have an AMNOG price given the NPP. Overall expectations for us, if you combine all of Europe, at the conservative end it would be around 50% of the U.S. price, and we'll strive to make a strong case, given all the product differentiators for VYJUVEK, to land somewhere between that 50% and the U.S. price initially.

I just want to add that we are still on track to secure home dosing in Europe. So that's something very positive for us based on the 180-day response.

Hi there. Thanks for taking my question. How do you expect the decline in compliance to impact revenue? And do you plan on giving any revenue guidance for 2025? As a follow-up, you've pointed out reimbursement approvals as a measure of the VYJUVEK launch in the U.S. What metrics should we look for as the launch progresses in Europe and Japan next year?

Hi, Sami, I missed the first half of your first question ahead of the guidance. What were you asking?

How do you expect the decline in compliance to impact revenue?

In the U.S., you mean? Look, at the time of launch, our expectation was that patients would be utilizing four vials a month, and we anticipated that there would be a drop to about two vials a month, 18 months post-launch. At the time of launch, we seemed to be ahead of that. We don't expect to get to 50% over the next three months, so we're ahead of predictions because the majority of our DEB patients are recessive and more severe in the early days of launch. With respect to revenue guidance next year, we're still discussing it internally. We expect an EU launch early in Q1, and we need to get closer to understand the rate at which the German launch progresses.

Great. Thank you.

Hi, guys. Thanks for taking the questions. I just wanted to focus on AATD and the data coming later this year. Can you just level-set on the amount of data we'll be getting? How many patients per cohort can be on augmentation therapy? Can you remind us on which cohorts the lavages are done and at what time point?

Sure. Right now, we are in the process of enrolling Cohort 2. We have finished enrolling three patients and will enroll additional patients in Cohort 2. Based on our animal study and NHP study, we feel this is a cohort worth evaluating for molecular correction because we did see nice expression at this equivalent dose in the NHP model. We have additional patients, both on and off augmentation therapy, to evaluate for molecular correction in their lung lavage. We hope to enroll a couple of patients before the end of the year and present data on that cohort by year-end regarding levels of expression and multiple biomarkers, including A1AT expression, neutrophil elastase, and binding of neutrophil elastase, to understand the inhaled molecule's effects.

That's helpful. Do you believe that the bronchoalveolar lavages or the bronchoscopies will be more informative, and what is the bar for either measure?

We're evaluating everything. Obviously, these patients were subjected to bronchoscopy, so we have their baseline bronchoscopy done. We have collected the lavage and done biopsies. So all three were taken at baseline and after dosing. We will assess all of that comprehensively to understand the findings. Regarding levels, we hope to see good expression levels of A1AT, at least one micromole in the lung lavage.

Hi, Gavin, I want to add one point. We are a redosing mechanism. Following a good readout in AATD, one of our objectives will be to proceed into a redosing situation. While we have set certain targets for ourselves, we want to analyze the complete package before we decide how to move the program forward. But at this point, we do not have a clear sense of the levels in any of these patients.

Very good morning. Thanks for taking my questions. Two from us as well. Going back to the VYJUVEK launch metric, you mentioned 460 being reimbursed. Can you provide a bit more detail about how that distribution is between centers of excellence and primary care? I'm curious what kind of growth we should expect going into Q4 and future. Secondly, regarding AATD, is it the expectation that the year-end update will encompass Cohort 1 and 2, thus informing the go-forward decision, including protocol amendments for redosing after Cohort 2? Or will you still go through Cohort 3A and 3B, which I recall were the IV augmentation and non-augmentation cohorts?

Yes. For Cohort 1 and 2 data for the year-end update regarding AATD, if we see an expression we need to, we will stop at Cohort 2. If not, we have the option to proceed into Cohort 3, as we haven’t seen any dose-limiting toxicity in Cohort 2. We are at a good dose level right now with Cohort 2, and if we see favorable results then we will be prepared to go into repeat dosing with Cohort 2 or have the option to progress to Cohort 3.

I'm happy to answer question two. Our success has stemmed from balancing growth in both COEs and community settings. Our KOLs continue to position VYJUVEK very effectively. What we see in COEs are new patients coming in, as well as more patients who may not have seen the COE since the approval of VYJUVEK. In the community setting, as mentioned, 70% of our prescribers in Q3 were new prescribers. This illustrates that our targeting efforts are working, and both KOLs and community physicians recognize the value of VYJUVEK and the ease of prescribing.

Hi, good morning and thanks for taking my questions. As patients approach the reimbursement caps, coupled with the holiday season, how should we think about Q4? Do you expect significant growth, or will it be a sequentially flat quarter? On the 2025 guidance, I understand there are many moving parts concerning Europe, but why not guide the U.S. market, especially now that you have trends from summer and the holiday season under your belt? Thanks.

On the first question, the only reason I made that comment was to remind everyone of the holiday disruptions we experienced last year, which will affect the uptake as Thanksgiving and Christmas are at least two weeks where patients may opt out of treatment due to family, vacations, or other lifestyle factors. Thus, that comment was merely to alleviate concerns regarding a potential dip after Q4, not to imply any weakening in demand or revenue. We still anticipate achieving the target of 720 reimbursement approvals as we outlined at launch. Regarding guidance for 2025, you are correct. While we expect to have a clearer understanding of the U.S. market, we will still lack clarity regarding Germany, France, and other ex-U.S. markets. At year-end, we will assess if guidance would be useful for shareholders as a modeling tool, recognizing the potential for supplementary revenues from Europe and possibly Japan.

Good morning. Thanks for taking my question. Just curious if you could share what activities are currently underway as you prepare for this potential launch starting in Germany? As you look to next year, what type of step up in infrastructure do you believe is required to support the launch?

Regarding activities, we are working on the necessary dossiers ahead of pricing negotiations in several countries. The commercial team in Germany is in place and will likely progress. The team in France is set to be established by year-end. In terms of infrastructure, we are expecting about 10 employees per country at a high level, which includes aspects of commercial support like medical affairs and access. Most of the onboarding in Germany should be completed before the end of the year, while in France, some will occur by year-end and some in early next year. We also have a team in Japan, currently consisting of 6 to 8 employees, who will be onboarded in the first half of the year in anticipation of a launch in the second half of 2025.

There are no further questions in queue.

Thank you all for joining the call. We look forward to answering any follow-on questions in the upcoming days. Thank you.

Thank you for joining Krystal Biotech's third quarter earnings conference call. This concludes today's event. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.