Thank you for standing by, and welcome to the Krystal Biotech First Quarter 2025 Earnings Call. At this time, all participants are on 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, Stephane Paquette, Vice President of Corporate Development. Please begin.

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the first quarter of 2025. The press release is available on our website at www.krystalbio.com. We also filed our earnings 8-K and 10-K with the SEC earlier today. Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development; 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, Stephane. Good morning everyone. I'd like to start today by thanking the Krystal team. We're fortunate to be in such a good position commercially, clinically, and financially to help patients amidst the turbulent macro and FDA backdrop. I'd like to briefly touch on four topics. VYJUVEK going global, the upcoming clinical readouts in 2025, primarily CF Alpha-1, a very exciting second ophthalmic program to treat neurotrophic keratitis that just entered the clinic, and briefly discuss in the end how Krystal's insulated in the current macro and FDA situation. With the positive EC decision now behind us and the broad label that we were fortunate to receive, we're excited about launching in Europe where the burden of finding genetically confirmed patients is much lower than it has been in the U.S. We would like to highlight that this is a full approval and not a conditional approval, now that's pretty rare, and we do not have any post-approval efficacy study requirements with respect to the EU. We're planning to launch in Germany and France in Q3, while simultaneously working on preparations to move the other EU countries towards launch. With a large number of already identified DEB patients across the continent, it's my belief that the opportunity in the EU could be bigger than what the market presently anticipates. With respect to Japan, the regulatory review is progressing well. And as noted in the slide, the manufacturing inspection is now complete. We expect to obtain approval in Q3 of 2025 and commence treating patients in Japan as early as Q4 2025. And now on to our 1Q results, Christine and Jen will discuss the U.S. launch details shortly. Net VYJUVEK revenue for the quarter came in at $88.2 million, and gross margins and GTM were pretty consistent with prior quarters. As you all know, 1Q tends to be a bit light for most companies in this industry and something that's not unique to Krystal. We saw this last year also. But more importantly, we saw patients pausing after an intensive induction period based on their individual needs. VYJUVEK is allowing patients to achieve durable wound closure and in turn enabling patients to take control of their lives. This is a fantastic outcome for patients and for Krystal. These are the outcomes that will drive our long-term success building trust and supporting the utilization of VYJUVEK in the U.S. for patients' lifetimes. I sometimes refer to this as the tail on the drug, which we believe will be long. These success stories also activate new patients to seek out therapy, build anticipation and momentum in our ex-U.S. launches, and enrich our access discussions overseas. This is why we pay so much attention to patient experience on VYJUVEK, and Jen will elaborate more on this. However, in the near term, it'll be important to understand that patient pausing patterns, particularly as patients come off intensive induction therapy for the first time, are inherently unpredictable quarter-to-quarter. And any number we could potentially provide to estimate pausing may not be repeatable in future quarters as patients come back on treatment. We're confident that patient ads in the U.S., Europe, and worldwide will continue to drive long-term growth for years to come. But the upcoming quarters may have some waviness as we bring on new patients and some of our existing U.S. patients transition to a more maintenance-style regimen. It's really key to recognize that DEB is a chronic disease, and VYJUVEK has a strong regulatory and a patent life. As we move into our second full year on the market, we're excited that VYJUVEK is being established as a lifelong first-line therapy for wound management. And we are continually seeking out ways to further support patients' experience with VYJUVEK. With respect to the clinical pipeline in 2025, we have four upcoming clinical readouts for CF, AATD, aesthetic skin conditions, and ocular lesions in DEB. In CF and AATD, having already demonstrated that we can safely deliver to the lung with high rates of transduction and functional cargo expression, we're optimistic heading into molecular data updates for both programs later this year, starting with KB407 this summer. In aesthetics, with the expected KB304 readout and initiation of our KB301 Phase 2 later this year, momentum is building as we work to establish the first truly rejuvenated platform in aesthetics. We're excited to have Marc Forth join the team in support of that effort. Marc's extensive commercial experience during many years managing the BOTOX brand will be invaluable as we work to unlock the significant value that exists in our aesthetics pipeline. On KB803, designed to treat lesions, eye lesions of DEB patients, we plan to dose our first patient later this month. And when we do, we'll provide a detailed overview, a study design, dosing regimen, endpoints, et cetera. So stay tuned. The VYJUVEK franchise globally will be further strengthened when we get KB803 approved. Now on to our new exciting ophthalmic program that's entering the clinic. Neurotrophic keratitis is a rare degenerative corneal disease caused by nerve damage in the eye, leading to corneal epithelial defects, ulcers, and perforation. Estimates of disease prevalence vary, but typical range from 10 to 50 per 100,000. Based on results from the American Academy of Ophthalmology Intelligent Research Insight, or IRIS, registry, the prevalence is approximately 21 per 100,000 patients. Importantly, NK is associated with vision loss and in severe cases can lead to blindness. There is presently only one specific therapy available, recombinant nerve growth factor, Oxervate. Oxervate targets underlying nerve defect and has been shown to improve healing, but must be dosed six times daily for eight weeks, which is highly burdensome on patients. Eye pain is also a frequently reported complication for patients receiving Oxervate, compounding the issue of frequent dosing. Suma will discuss the exciting preclinical data and our value proposition and next steps with respect to NK shortly. Finally, in the current environment, we thought it was important that investors understand how insulated Krystal is from external turbulence. All of our commercial and pipeline products are manufactured in the U.S. All Krystal IP, composition of matter, method of use, formulation are also housed in the U.S. avoiding any complications in our home market. I also want to point out, we do not utilize any kind of transfer pricing with respect to VYJUVEK sales in the U.S. On the financial side, as many of you know, we run a tight ship. We've had seven quarters of profitable EPS. And as I've mentioned before, the expected revenue from VYJUVEK far exceeds our anticipated operating expense for the next few years. This financial stability gives us the optionality to maximize shareholder value at the right time. And finally, with our upcoming ex-U.S. launches, we're well on our way to build a global, geographically diversified business, limiting exposure to regulatory or trade dynamics in any single market, and allowing us to move forward in our mission of being a lifelong, first-line therapy for our patients, and delivering long-term profitable growth. I'll now hand it off to Jennifer to share more about U.S. launch dynamics.

Thank you, Krish. I am happy to share continued growth in the number of U.S. patients gaining access to VYJUVEK with the number of patients with reimbursement approvals exceeding 540 as of April 2025. The access landscape across the United States remains very strong. We continue to maintain effectively full nationwide commercial and Medicaid coverage. We are seeing no friction with reauthorizations. All have either been approved or unprocessed, and changes in insurance that occurred in the first quarter were also processed smoothly with timelines in line with industry standards. Reimbursement approvals were again similar to recent quarters with roughly even splits between commercial and government plans. We also continue to see approvals across the entire DEB population, including patients of all ages with either dominant or recessive forms of the disease. Patient preference for at-home administration is again effectively unchanged with 97% of treatments occurring in the home setting. As Krish mentioned, as patients are experiencing real-world treatment success and wound closure, we are seeing meaningful treatment pauses and maintenance treatment. Treatment success is a fantastic outcome, not only for DEB patients, but also for Krystal. Success on VYJUVEK brings about patients' and caregivers' recognition that VYJUVEK is reliable and effective in treating and retreating wounds, which will change the course of the disease and enable patients to take control of their lives. In turn, successful outcomes will result in lifetime VYJUVEK usage, support better understanding of the benefits of lifetime VYJUVEK usage in the medical community, and encourage new DEB patients to seek out usage of VYJUVEK, all of which will drive Krystal's long-term success. The benefits of patient success on VYJUVEK is why we pay so much attention to patient experience. Our commitment to patients via Krystal Connect goes far beyond simply treating patients. Because VYJUVEK is a lifelong therapy, our goal is to support patients so that they integrate treatments into their normal wound care routines. And because wound closure and wound durability is personalized, we strive to build long-term partnerships with each patient and their family. Our goal is to support their success at every stage of life and throughout their treatment journey, helping them heal and live more fully. Treatment persistence is a priority education topic for our patients, their caregivers, and their prescribers, and is continually reinforced by our patient support team at Krystal Connect. We have invested in educational campaigns drawing on real-world outcomes to emphasize the importance of regular treatment and the potential links between wound closure and known complications of DEB. We also work closely with our patients, setting expectations that VYJUVEK is a lifelong therapy as they manage their wounds, so patients are well-prepared to define and meet their treatment goals and ultimately get the most from their VYJUVEK treatments. This is all in addition to our comprehensive Krystal Connect services that include onboarding education, periodic check-ins, and live and virtual patient programs, all of which are designed to maximize engagement to build strong, trust-based relationships for the long term. With our Krystal Connect team, we look forward to working hand-in-hand with patients as they integrate VYJUVEK into their first-line wound care routine throughout their lives, helping them reduce the disease burden and improve their quality of life. I will now hand it off to Christine.

Thank you, Jen. With the steady stream of new patients over the past few months, we continue to make progress towards our goal of making VYJUVEK available to as many DEB patients as possible across the U.S. We have the privilege of hearing directly from patients giving us valuable insights into the diverse way this condition impacts daily life. Each patient's journey is unique. For example, one long-time patient believed that DEB had a minimal impact on his career or quality of life until he began treatment with VYJUVEK. After experiencing wound improvement, he realized how much pain he had simply learned to live with. Stories like this are exactly why our work matters. These personal experiences are a key element of our consumer communication strategy. Importantly, feedback from healthcare providers has been clear. VYJUVEK is making a meaningful impact across every segment of the DEB patient population. This includes both RDEB and DDEB patients, ranging from mild to severe, regardless of age. While each patient's path is different, physicians consistently report durable wound healing and positive outcomes. It's evident that VYJUVEK is transforming care in a powerful and measurable way. In the last quarter, we observed a slowdown compared to the previous quarters in the number of reimbursement approvals, and this is directly tied to the pace of patient start forms we received in 1Q. We're entering a phase where the patients we aim to reach are further embedded in their communities, often under the care of HCPs who may have limited experience with DEB and in understanding the importance of treatment and who see their patients less frequently. Our reps are dealing with longer interaction times with each physician to meet and educate and pull through a patient start form. We started to address this in 1Q by enhancing the size of our field sales team and bolstering our field activities. In addition, we continue to elevate our direct-to-patient marketing tactics through social media and patient education events through our advocacy partners. We are soon launching our VYJUVEK Voices program that will allow potential patients to speak with VYJUVEK patient and caregiver ambassadors to learn about their experience and success with VYJUVEK, how they've incorporated VYJUVEK into their wound care routine, and the impact it's made on their lives. We believe these initiatives will help us to overcome this temporary slowdown in the next few months. While the pace of Start Forms slowed in 1Q, we remain confident in the total opportunity in the U.S., starting with the 1,200 diagnosed DEB patients. Our near-term claims data and field insights continue to show that there is still a large group of already diagnosed DEB patients we have yet to reach and start on VYJUVEK. With our growing toolkit of real-world experiences and powerful success stories from early adopters, we are confident in the strong growth potential ahead. At the time of launch, we set for ourselves an ambitious goal to obtain 60% market share in two years. Based on the number of reimbursement approvals over the last two quarters, we now expect to take a few extra months to achieve that target. With that being said, without question, the VYJUVEK launch has gone extremely well to date, and we are confident that with the efforts we are putting in place, that momentum will continue. Our mission remains unchanged, to support the DEB community and help all DEB patients, regardless of the severity of their disease, and those who may believe a treatment is out of reach, understand that VYJUVEK is safe, effective, and easy-to-use treatment to dramatically improve the quality of their life. We are confident in the opportunity ahead. Now I will hand it to Suma.

Thank you, Christine. Before getting into our clinical pipeline, I want to take a moment to highlight two publications that came out just last month in support of VYJUVEK, including our open-label extension study results. Our OLE study, published in the American Journal of Clinical Dermatology, includes findings from an expanded study population across all ages and ethnicities with a medium VYJUVEK exposure of over 500 days. These data clearly demonstrated that long-term use of VYJUVEK is safe and delivers durable wound closure with clinical benefits compounding over time. Dramatic improvements were also reported for patients with large and chronic wounds, reinforcing that wounds of any size can benefit from VYJUVEK therapy. The second publication in the British Journal of Dermatology describes a case of VYJUVEK therapy successfully promoting wound healing following the surgical excision of a large squamous cell carcinoma lesion in a recessive DEB patient. Not only did the authors report that this patient achieved closure of a large wound over 100 centimeters square in size within a few months, it remained closed at 4 and 10-month follow-up. These data underscore the consistent clinical benefits provided by VYJUVEK and supports its use in the routine management of SCC. Both these studies reinforce the versatility of VYJUVEK in treating wounds of all types and sizes. The benefits of VYJUVEK therapy for the treatment of large and chronic wounds, in particular, are showcased here, with multiple examples of large wound healing among our OLE participants. On the left, we have a case where at the start of the OLE, the patient's entire upper back was an open wound. With regular treatment, we saw steady and continual improvements approaching complete closure at the one-year mark. On the right, we have images from the patient that started in our Phase 3 study and continued on the OLE. Here we can see not only compelling initial wound healing outcomes with the context of the Phase 3 but also further improvements over the course of the OLE, again, reinforcing VYJUVEK's versatility and the potential benefits of sustained long-term therapy. We are excited for more patients to access and benefit from VYJUVEK therapy as we progress in our launch in the U.S. and worldwide. Shifting focus to our pipeline, we are now rapidly approaching a critical juncture for our lung program. Thanks to the support of the CF Foundation, we are on track to report molecular data in CF patients this summer, followed by additional molecular data in AATD patients before year-end. With initial KB408 data already demonstrating that we can deliver safely functional genetic cargo to the airways of the lung, we look forward to validating the breadth of our platform for lung delivery in a broader population of CF and AATD patients, and then moving quickly to repeat dosing. At the same time, we are pushing ahead our development efforts in the eye. Our lead ophthalmology program and eye-drop formulation of B-VEC, we refer to as KB803, is on track for registrational study start later this month. Having already seen a dramatic improvement in the patient treated with B-VEC eye-drops under compassionate use, we are excited about the prospect of delivering more comprehensive benefits to DEB patients with KB803. With our IND cleared, approximately 50 patients in our natural history study, and potential to roll over into our Phase 3, we continue to expect a top line data readout before year-end. Additional details on the study design and endpoints will be disclosed at the time we dose our first patient this month. We are excited to announce today our second clinical stage ophthalmology program KB801 for the treatment of neurotrophic keratitis. Until now, rapid clearance rate and high turnover in the front of the eye have severely limited the therapeutic potential of biologics and gene therapies for the treatment of corneal dystrophies and other front of the eye diseases. With our redosable vector platform already shown to be safe in the clinic, we have an opportunity to drive sustained expression of therapeutic biological payloads with a simple eye-drop application. KB801 leverages these exact features. Developed using a proprietary HSV-1 vector platform, KB801 is an eye-drop designed to deliver two transgene copies to the corneal epithelium and enable sustained local production of nerve growth factor with the therapeutic goal of maintaining more consistent nerve growth factor levels and potential healing advantages in NK patients, all while also significantly reducing the treatment burden for patients when compared to the currently approved recombinant protein dosing regimen of six times per day. We recently presented preclinical data on KB801 at ARVO. The presentation has been filed as an 8-K. These data clearly demonstrated that KB801 is able to efficiently transduce corneal epithelial cells in vitro and in vivo, leading to sustained NGF production in front of the eye. On the back of this data and with the recently cleared IND, we are on track to dose the first patient with KB801 in a Phase 1-2 study later this month. Head-to-head data comparing the pharmacokinetics of KB801 to the recombinant human NGF are shown here. Mouse corneas were wounded to approximate the corneal lesions that are observed in neurotropic keratitis and then treated with a single dose of either KB801 or a dilution factor matched recombinant human NGF. Eyes were then collected at the specified time point for assessment of NGF levels by ELISA. Whereas detectable NGF levels dropped rapidly after administration of a recombinant protein, a single dose of KB801 resulted in sustained expression peaking at 24 hours at levels higher than those achieved with recombinant protein and remaining elevated for many days thereafter. In a follow-up study comparing a single dose head-to-head with six doses of recombinant protein and approximation of the current label treatment regimen of Oxervate, we found that within 15 minutes of the sixth recombinant protein dose, NGF levels were higher in KB801-treated eyes and remained elevated through 24 hours after the last dose. Both of these results in a relatively stringent mouse model gives us strong conviction in the potential of KB821 to achieve and maintain therapeutic NGF levels with infrequent dosing. Based on the preclinical data generated to-date, as well as previously generated preclinical and clinical data with ophthalmic B-VEC, last month, the FDA cleared our IND to evaluate KB801 in NK patients. Study preparations are underway, and we expect to dose the first patient in a 2:1 randomized, placebo-controlled, blinded, multicenter Phase 1 study in moderate to severe NK patients later this month. Additional details on the study design and endpoints will be disclosed at the time we dose the first patient. With upcoming readouts in the lung, eyes, and aesthetics, we remain on track to meet our ambitious 2025 plans, all while adding our new clinical stage program, KB801. We look forward to delivering our first molecular readout in CF this summer, followed by readouts for KB408 in AATD, KB803 in ocular DEB, and KB304 in aesthetics before year-end. Finally, you probably saw the announcement regarding our ASCO presentation. Dr. Ma Weiss, Chairman of the Cancer Institute of Cleveland Clinic, will present efficacy and safety data from inhaled KB707, a novel HSV-based immunotherapy as a monotherapy in patients with solid tumor malignancies affecting the lung. We are excited about this upcoming announcement and cannot wait to share this data with you. This update will build on the interim data readout we provided at the end of last year, in which we saw early evidence of monotherapy activity in patients with non-small cell lung cancer, including an ORR of 27%. We also continue to enroll in both our intratumoral and inhaled KB707 clinical studies. We believe that we have only begun to tap into the opportunity that exists with HSV-1-based gene delivery and are excited about the work ahead. With that, I would like to turn the call to Kate.

Thank you, Suma, and good morning, everyone. I'd like to provide a few highlights from our Q1 financial results that were reported in our press release earlier today. As Krish noted, our net product revenue for VYJUVEK was $88.2 million for the first quarter of 2025. This marked meaningful growth from the first quarter of 2024, up 95% from the prior year. Cost of goods sold was $5 million compared to $2.4 million in the prior year's first quarter, and gross margin remained relatively consistent at 94% in 1Q 2025. Research and development expenses were $14.3 million compared to $11 million in the prior year, primarily due to an increase in personnel-related expenses, including stock compensation expense, clinical development costs, and increased manufacturing costs related to our product candidates. General and administrative expenses were $32.7 million compared to $26.1 million in the prior year, primarily due to an increase in personnel-related expenses, including stock compensation expense, as well as charitable contributions and increased professional service expenses. Operating expenses included non-cash stock-based compensation of $13.5 million as compared to $9.3 million in the prior year's first quarter. Net income for the quarter was $35.7 million, which represented $1.24 per basic and $1.20 per diluted share. In closing, we ended Q1 well capitalized with $765.3 million in total cash plus investments, noting quarterly growth in our overall cash and investments position and putting us in excellent shape to execute on our European launch and to invest in our significant clinical programs this year. And now, I will turn the call back over to Krish.

Thanks, Kate. You heard from Jen that the successes that patients are achieving today, characterized by pauses, drive our success tomorrow and are the tailwinds that will support long-term utilization, further market adoption, and penetration in the U.S. and abroad, and productive access discussions with ex-U.S. payers. You heard from Christine that our reps are dealing with longer interaction times with each physician, and we've already started to address this in 1Q by enhancing the size of our field sales team. That said, with strong patient outcomes demonstrating the value of regular VYJUVEK therapy, our conviction on the total market opportunity and the long-term profitability of the VYJUVEK franchise have only been strengthened. You heard from Suma on the upcoming readouts and productive clinical pipeline, and Kate confirmed the strength of our financial situation. All of the above give us plenty of ammunition to deliver on shareholder value in 2025. Thanks for listening, and I'd like to now open the call for Q&A.

Certainly. At this time, we will be conducting a question-and-answer session. Your first question for today is from Alec Stranahan with Bank of America.

Hey, guys. Thanks for taking our questions. Just a couple from us. First, on the VYJUVEK sales in 1Q, curious how insurance changes or any other effects sort of impacted the trends you're seeing in 1Q? And is it fair to maybe model a bit of a rebound at 2Q, just given the trends we saw last year? And then, I've got a follow-up.

Look, there was an impact from insurance changes. It wasn't as prominent as it was last year because we already have a J-code in place, but this is something we expect every year, and especially those with insurance changes, there's a time lag, and that part of it makes it up in 2Q, catches up.

Okay, that makes sense. And then it looks like the new reimbursement approvals are slowing down as well. Since the percent access determinations appears stable at 97%. Is this sort of a natural shrinking in the addressable population, or should we maybe expect some swings on this number as well? Thanks a lot.

No, look, I was clear in my opening conversation that, look, we have no hesitation, no questions about the total market opportunity, which we defined as about 1,200 identified patients and a total prevalence of close to 3,000 in the U.S. But as Christine mentioned, it is taking longer for our reps to pull through a patient Start Form, especially as they get deeper into the community. And so to address that, we have been, we already started increasing the size of the commercial effort to address that slowness.

Okay, makes sense. Yes, thanks for the color and congrats on the continued progress.

Your next question is from Roger Song with Jefferies.

Thank you for the update and for addressing all questions. We have a couple of questions as well. The first relates to compliance. I completely understand that patients are doing well and following treatments closely, but I'm curious about your updated thoughts on what the long-term compliance rate might look like. Additionally, since you have been treating all the patients for a year, do you have any patients who have restarted VYJUVEK? How does their experience look in terms of the timing of the restart and the duration of VYJUVEK use as they begin again? Thank you.

Look, with respect to compliance, Roger, when we launched about, I don't know, 18 months ago, we had expected that we'd be at 50% compliance, 18 months post-launch. We're not there. We're way ahead, like as you noted. But as the mix of RDEB and DDEB patients get closer and closer to each other, we expect the compliance to hit 50% in the long term. And it's tough to predict when that would happen, but it's definitely heading in that direction, but a lot slower than we had anticipated it to be. And on your second question,

Which was specific, I think, to pauses and restarts. As I mentioned in the script, it is very individualized for every patient. Wound closure and wound durability is just very specific to patients and where their wounds are located and the type of friction and some other outside influences that do impact the behavior of the wounds and the reopening. But, yes, we definitely are seeing patients pause and then come back as their wounds all reappear or reopen or other wounds are created. So, yes, so we are seeing all that behavior.

I mean, which is a good thing. I mean, this is what we want to see in these patients. What we can see is our treatment is effective, it's durable. And as you know, these patients, even if they're durable, as Jen mentioned, sometimes they get more confident and they do more activities because of wound healing. And sometimes that can result in created wounds because of those additional activities. And then obviously they're so used to getting these wounds treated, they signal that they need the drug again. So the flexibility really does help these patients, the drugs.

Got it. Yes, thank you for the comment. And then just one more question from me is the German label or this label seems pretty favorable. And then you say, well, you will launch VYJUVEK in Germany in the year. So how should we think about the trajectory of that compared to the U.S.? I believe in the past that you also benchmark to U.S. launch. So do you still hold the same view here? Thank you.

Yes. So look Roger, Germany we plan to launch in Q3. As I mentioned in the call, patient identification is less of an issue in Europe. They're all genetically sequenced, and it really helps because now, in terms of our growth targets, we have the same objective in every country, trying to get to like a 60% market share in two years. It is a really big stretch. It's a really big goal, but even getting close to it means that the launch has gone really, really well. But in terms of trajectory, I think we need a quarter or so after launch to kind of determine, but there is quite a bit of existing demand to get on drugs, both in Germany and in France.

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

Good morning guys, thanks for taking the question. On the increase in Salesforce, Krish, by how much are you increasing headcount and are these sort of boots on the ground reps or are they sort of back office helping with reimbursement and patient support and how much of this new initiative essentially for increasing the Salesforce is related to rising DDEB? How much is potential increasing competition coming up in the next 12 months?

Jen, you want to take the first step?

Yes, I'll take us out of this. So we started our efforts here in Q1 based on, as mentioned, as we get deeper in the community, it takes more educational efforts of both the HCPs as well as to work to engage the patients into the HCP offices. So as a result of that, we did enhance our field force efforts starting in Q1. We're still monitoring the impact of that and then evaluating how we wanna proceed from there. But it's really about our goal is to achieve and strive to reach every DEB patient. And in doing that, it's taking more time so we're adding efforts to support that.

I want to emphasize that this is not related to a competitive situation. Rather, it is about trying to achieve a specific level of demand in a given quarter, as the time required to obtain a PSF is increasing as we progress further into the community.

And how much of this, Krish, is related to DDEB? In our last tracking survey, we were seeing rapid uptake in DDEB patients and intent to treat by clinicians in more DDEB. So we're just wondering how that impacts numbers, return to treatment, whether these patients resolve their lesions faster, et cetera.

Yes, I mean, our percentage of DDEB patients is definitely on the rise. DDEB patients, because they're not severe, need a little bit more education in terms of getting VYJUVEK. We make a strong case. We have seen a lot of dominant patients, not a lot, but a percentage of dominant patients. So just as severe as recessive, sometimes they learn to live with the disease. And so to pull them through requires education on the part of the physician, education with respect to how the disease can potentially get, there's always a chance of getting squamous cell. And so, yes, so you're right, Ritu. I think as we go into the community, as we start to get more dominant patients, the cycle time of getting a PSF is taking longer. And by having additional reps and having reps cover a territory that was not as big as prior will definitely help bring it forward.

Thank you.

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

Hey guys, thanks for taking the questions. On the compliance side, so the figure you report is still reported as since launch. I was curious how it's tracking on more of a quarterly or a run rate type of basis?

Look, Gavin, I'll answer. Look, we've been consistent in mentioning compliance since launch. It has served well over the last 12, 15 months or so, but definitely will paint a slightly different picture than what happens on a quarterly basis. And I'll turn it over to Jen to describe the quarterly behavior. The only point I'll make, the reason we're not putting up another stat in terms of your answer, as I mentioned in the call, it's tough to predict pausing, right? Let's say it was a particular number and they all come back over the next quarter. And all of a sudden you're in this wavy pattern again. So we're being cautious about trying to put a number out that we don't have enough history on, but with that, we'll send it over.

I think one thing that we can be solid on is that patients are compliant to weekly therapy. That is not an issue. The convenience around at-home dosing allows that weekly application with no issue at all. So as prescribed weekly to open wound, we're 100% confident on and patients are not concerned about that at all. And I mentioned in my speech around persistence, that's the combination that we're trying to evaluate as Krish mentioned. So on a quarterly basis, patients are extremely compliant in that high range because they're taking it week-to-week. It's the persistence when we look at like a one-year mark or an 18-month mark that we're being cautious on as we try to understand the wounding behaviors and how we segment patients potentially based on their disease severity.

Got it, that makes sense. And just to follow-up on the same topic, I believe the way you do the calculation, if a patient has been completely off drug for a certain amount of time, I think they get excluded from the denominator of the calculation. Is that right? And what's that period of time again?

No, actually, it's while they're on therapy. So if they do come back, then we look at that start date, end date from the entire time that they had experience with VYJUVEK. So they would always be in the denominator. We don't take them out. So if they come back on, like I said, their compliance percentage would go down. It's when they stay off that it just maintains where they were at while they were on therapy.

Okay, so in other words, if someone comes off drug, they don't get counted until they come back on?

Well, they stay in the calculation of where they were at while they were on therapy.

Your next question for today is from Sami Corwin with William Blair.

Hey guys, congrats on the progress and thanks for taking my question. I was wondering if you could talk a bit more about the EU launch and how we should think about the cadence of patient starts and the first dose needs to be administered in an office by a physician. And then kind of going back to the patient start-stops. I mean, any stats you could really provide us on patients that have stopped therapy and not restarted? Thank you.

Regarding the EU launch, I think the main factor we are actively working on is the time required for the first appointment with a physician and how many patients a center or doctor can see in the early stages of the launch. If we can resolve this, once patients meet with their physician, there is a chance for them to quickly transition to home dosing, where care can be administered or in some cases, self-administered. The speed at which appointments can be secured varies by country. We have recognized this issue over the past six months, and Laurent, our General Manager for Europe, is making significant efforts to address it. We will have a clearer understanding of the situation after the first couple of months of the launch and will provide further details. Overall, we feel positive about this aspect of the launch, and we are taking steps to mitigate any challenges.

I can add, our MSOs have already reached out to the centers. They've educated the physicians. Everybody's pretty excited, because keep in mind there was no corrective therapy for any of these patients. So I think the most of the physicians that get educated about the drug, now that it's approved, they see the label. So obviously now, I mean, hopefully they will prioritize getting these patients in.

And on your second question, Sami, on starts and stops, look, there are a very small percentage of patients who do not come back on drug. And most of the time, the rationale is they are undergoing a complication that's more severe than the nature of DEB itself, which is a skin manifestation. Squamous cell carcinoma and in terms of coming back, we, outside of that factors, I don't want to call them the beyond, that had nothing to do with the safety of the drug or the efficacy of the drug or the convenience, patients come back on drugs. Some come back in 30, some come back in 60, some come in 90, some 120 plus. It all depends on, it's highly individual, depends on where the wound is, if they're recessive, if they're dominant, but we honestly have had no concern at all with respect to them coming back on drug. And we actually like that pattern because that's the tail on the top that we believe will continue for a very long time. But Jen and her team, they do a great job of managing the patient experience while on drug and it's really served us well.

Got it, appreciate the call.

Your next question is from Andrea Newkirk with Goldman Sachs.

Good morning, thank you for taking the question. Krish, in the context of the approval of a competitor product last week, just curious based off of your market research, how you're thinking about VYJUVEK utilization on the forward and how those two products can coexist? And then Suma, just quickly, if you could speak a little bit more about what we should be looking for at ASCO, how many more patients or extent of follow-up will be included? Thank you.

Look, I'll start on the recent approval question. Look, when Krystal was founded in 2016, it was founded on the principle that Suma felt that an autologous way of treating DEB is not sustainable. That was the premise of Krystal founding. And I'll turn it over. There are issues on this. I mean, there's so many differences on safety side, efficacy side, convenience side. Suma, if you can quickly talk about ASCO.

We currently do not view the product as competition due to significant differences. It is important to note that it is only indicated for our DEB and there are various safety concerns, such as oncogenesis, anaphylaxis, and the fact that the graft is not sterile, which can lead to infections in patients. There are numerous safety issues when considering efficacy as well. Their study is controlled but not blinded, and most participants came from Stanford, making it an unblinded study, unlike our randomized, blinded, multi-site study. In terms of efficacy, our results are quite strong, showing 100% closure at six months compared to their 50%. While they claim improved pain management, any pain-induced complications during surgery may require biopsies that could fail and need to be repeated. Additionally, their graft size is limited to 40 centimeters, which can complicate wound closure since wounds often vary in shape. This necessitates debridement and further intervention, creating extra challenges for the patients. Therefore, we believe comparing our product to theirs isn't appropriate. Regarding ASCO, we are very enthusiastic about our upcoming poster presentation, which will include a poster talk highlighting our ability to safely and effectively deliver cytokines directly to the lungs. We have already proven this capability and are addressing safety, a significant concern. In December, we presented data from 11 patients with a cutoff in November, but we now have three or four additional months of data to share, along with updated efficacy and safety statistics, as well as imaging that shows tumor shrinkage. We are genuinely excited about the poster.

Your next question is from Debjit Chattopadhyay with Guggenheim Securities.

Hey, good morning, and thank you for taking the questions. I have a couple. So, number one, could you elaborate on the subpoena with respect to the genetic testing? And does that impact prior revenue recognition or future implications?

Hey, on that, we're fully cooperating with the DOJ, and we have no further comment on that at the moment.

And the second question, just to clarify, the 83% compliance rate that is being reported, that includes the patients who are, let's say one week on, one week off, right? I mean, your 83% assumes that there is going to be partial compliance, at least in the patients who are on therapy for the longest?

Correct.

That's right. It includes any missed dose, like while they're on therapy. So that's how it gets adjusted lower. If somebody misses and then comes back, it would calculate as missed doses.

And one last follow-up. In the patients who are still being treated or managed at the community centers who you still don't have on therapy, did we assume that off the bat, these are milder patients and compliance to start off is going to be on the lower end of what you currently have versus the more severe or DEB patients? Thank you.

Initially, regardless of whether you're RDEB, DDEB, or part of a COE, compliance is generally good. The primary reason patients discontinue medication is that all their wounds are healed. This healing occurs more rapidly in dominant patients compared to recessive patients. Additionally, in terms of recovery times, dominant patients tend to take a bit longer to recover on repeat treatments, while RDEB patients are more sensitive and focused on their wounds. However, aside from that, although there is a spectrum of severity from severe to moderate to mild, compliance remains similar between recessive and dominant patients for a prolonged period after starting treatment.

Thank you.

Your next question is from Yigal Nochomovitz with Citigroup.

Hi, Krish and team. I had a question on the Japan market with the upcoming approval there. Can you just discuss how the Japan market will contribute to the global revenue picture for VYJUVEK? And do you have any numbers in terms of the identified patients there in Japan based on genetic testing, as well as the overall prevalence compared to Europe and the United States? Thanks.

You should consider the overall prevalence, which I estimate could be off by about 10%, to be around 500, with more than 200 to 225 of those cases fully identified. We recently conducted an inspection that went well, indicating a promising market. The pricing in Japan isn't exactly comparable to the U.S., but it typically falls between U.S. and European prices, provided we deliver a strong value proposition. Compared to certain European nations, Japan's rare disease market looks very appealing. We're excited to potentially launch in Japan by the end of this year or early next year.

I mean, this was, we had both the clinical and the CMC inspection because we did study, we did have Japanese particular study, and obviously the manufacturing facility at Encoris was inspected for the drug.

Yes, look, because we don't have the official answer here, I mean, I can broadly say the inspection went well, there were no findings.

Okay, thank you.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.