Krystal Biotech, Inc. Q2 FY2025 Earnings Call

Thank you for standing by, and welcome to the Krystal Biotech Q2 2025 Earnings Call. As a reminder, today's conference is being recorded. I would now like to hand the conference over to your host, Stephane Paquette, Vice President of Corporate Development. Please begin.

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

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.

Stephane, thank you. Good morning, everyone, and welcome to the Krystal earnings call. We'd like to touch on 4 topics in this call. First, the VYJUVEK launch, which is progressing well, and the upcoming launches in Europe and Japan are expected to significantly add to what is already a top-tier trajectory in the U.S. Second, we're expecting several clinical readouts in the upcoming months for diseases in the lung and the eye, which could propel Krystal into its next stage of growth and dramatically increase our ability to deliver benefits to patients. We'll talk briefly on our recent KB304 readout, which we believe validates the platform and the opportunity that exists for our subsidiaries Jeune in aesthetics. Finally, I'm proud to report that we've been able to achieve these milestones while maintaining operational discipline; we were again profitable this quarter with $1.29 per share fully diluted, marking now 2 years of consistently positive EPS for the company. Moving on to our Q2 results, net VYJUVEK revenue was $96 million. This brings total net VYJUVEK revenue since launch to over $525 million. The return to growth in Q2 was due to patients who paused earlier getting back on the drug and the additional impact of our ongoing sales team expansion. It's important to note that sales force hiring is still underway. We expect the full impact of our new hires will only be felt over the next few quarters as hiring is completed and reps are trained to be fully operational in the field. Gross margins and GTN were largely consistent with prior quarters. I'm also happy to report that we saw an increase of reimbursement approvals over the course of Q2 and we have secured over 575 reimbursement approvals for patients in the U.S. Compliance while on drug at the end of the second quarter came in at 82%. However, we do expect compliance to trend down in the coming quarters as severe patients who started early are now achieving durable wound closure on VYJUVEK and as the percentage of moderate and mild patients increases in the overall patient mix. But as we discussed last quarter, complete wound closure and treatment pauses are fantastic outcomes for patients and exactly what we set out to do when founding this company. It's also been rewarding to see patients grow increasingly comfortable with the pausing and restarting dynamic and gaining confidence in the fact that when wounds do open, they can easily access VYJUVEK and again achieve durable wound closure. These treatment successes, together with the tireless commitment of our Krystal Connect patient support team, are what allow us to build strong trust-based patient relationships for the long term. They also help activate new patients, and together with our recent publications and digital tools, they raise awareness of what is achievable with regular VYJUVEK therapy. This also means that we remain in a period with inherent unpredictability quarter-to-quarter. Consistent with VYJUVEK's mechanism of action and skin turnover, we are seeing a growing number of patient restarts, but the exact cadence at the individual patient level is highly variable and still difficult to predict. Based on the summer pausing trends we're seeing over the first few weeks of Q3, our current expectation is that Q3 revenues will come in below what we're reporting here today, with a return to growth in Q4 driven by a growing patient funnel, restarts and sales expansion efforts. However, as usage patterns stabilize in the U.S., we expect this waviness to subside with transformative patient outcomes driving long-term sustainable growth, penetration of the identified patient pool, and bringing new patients to therapy. The growth trajectory for VYJUVEK will also benefit from global expansion and our launch overseas. Laurent Goux, our GM for Europe, will touch on the European launch dynamics and near-term activities in a moment. But before getting into the European opportunity, I want to highlight another fantastic milestone for our team. Late last month, we announced the approval of VYJUVEK by Japan's Ministry of Health, Labour and Welfare. We received a broad label from the Japanese authorities similar to the one approved in Europe earlier this year. That includes all DEB patients from birth with the option of home, self, or family administration. The label also provides clinicians flexibility with how to diagnose DEB patients and does not require a genetic test, facilitating onboarding and initiation of treatment. Japan is another attractive market into which Krystal can launch directly with hundreds of DEB patients in urgent need of a safe and effective therapy. We already have our core team in place to secure a pricing decision in the upcoming months and launch before year-end. Thanks to the recently completed and published Japanese open-label extension data, key opinion leaders in Japan already have initial experience with VYJUVEK, which is a tailwind for our launch. I'll now turn it to Laurent to share more detail on our European launch plans and latest timelines.

Thank you, Krish. I'm pleased to present an update on the upcoming European launch of VYJUVEK. After receiving approval earlier this year, we are on track for our European launch this quarter. In the second half of 2025, we will bring this important therapy to patients in Germany and then in France. Based on our latest analysis, the identified pool of patients in each country exceeds 500 patients. These patients are supported by 4 expert centers in both Germany and France, but also 20 to 30 additional sites, usually university hospitals. Please note that the launch in France is subject to the continuity of the Accès Précoce or early access program. We are working closely with local authorities to ensure that eligible patients can benefit from this pathway. We have already established dedicated commercial teams in both countries with roughly 8 team members on the ground in each market, supported by an additional 8 colleagues at our European headquarters and leveraging U.S. back-office resources. In Germany, we anticipate that our first commercial patient will be treated in August, marking an important milestone in our efforts to bring meaningful solutions to DEB patients and healthcare professionals. To facilitate rapid and effective access, we have established comprehensive patient service and education programs. These initiatives are designed to support home administration of the therapy as well as administration by caregivers, ensuring that patients can benefit from our treatment regardless of their healthcare settings. These different possibilities are allowed by the very strong label approved by EMA. Since approval, the team has worked on identifying the key centers and preparing them to enroll patients. Our focus is to ensure a successful launch, driving uptake at key centers and ensuring an efficient patient experience. This launch is a significant step for Krystal, reflecting both our commitment to rare disease patients and strategic execution of our international commercial plans. I will now hand the call back over to Krish.

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

Thank you, Krish. Our R&D team has had another productive quarter as we work diligently to build a true portfolio of high-value genetic medicines. Today, I will touch on key accomplishments, including clinical data updates for oncology and aesthetic programs, progression of KB408 into repeat dosing for AATD, as well as 2 new study starts that set us up for multiple near-term readouts in both the lung and eyes. I would like to start with a few highlights on inhaled KB707. Earlier this summer, at ASCO, we shared an update on our Phase I/II study, KYANITE-1, evaluating inhaled KB707 for solid tumors of the lung. This update included safety data from 39 subjects treated with inhaled KB707 as monotherapy, as well as an efficacy data update for the 11 KB707 treated patients with late-line NSCLC. With an extended follow-up and new data cut of April 15, 2025, we saw deepening of the responses in the NSCLC cohort with an improved objective response rate of 36%. Median duration of response and progression-free survival were not yet reached. Just as importantly, inhaled KB707 continued to be safe and generally well tolerated and amenable to administration in outpatient settings. We are increasingly excited about the profile of inhaled KB707 monotherapy in the clinic. In addition, combination therapy cohorts have been opened in KYANITE-1, and enrollment is ongoing. We have also made exciting progress with KB408 for the treatment of AATD lung disease. We recently completed dosing and bronchoscopy of a third AATD patient dosed with KB408 in Cohort 2. As shown on this slide, we again saw robust airway transduction, resulting in functional AATD expression, as demonstrated by neutrophil elastase binding in the ELF. Please note that this patient was a background IV augmentation, and yet we still detected a reduction of free neutrophil elastases following KB408 dosing. Across all 3 bronchoscopy patients, we have seen transduction rates in the 30% to 40% range after a single dose. The safety profile of KB408 continues to be attractive across all 5 patients dosed in Cohort 2. Based on these data, we recently amended the SERPENTINE-1 protocol and started dosing in a newly opened Cohort 2B to investigate repeat dosing in Cohort 2 dose levels. Our study objectives with this new cohort are to evaluate safety and tolerability of repeat dosing, as well as assess additive efficacy of repeat dosing and explore optimal dosing timing based on the durability of effect. Design details are summarized on the slide. Patients will undergo a baseline bronchoscopy, receive 4 weekly doses of KB408, and then receive a bronchoscopy, either 1 or 2 weeks after the final dose to assess expression and durability. We expect the data generated from Cohort 2B to dictate our approach concerning the advanced clinical development of KB408, including potential accelerated approval approaches. We are also making steady progress on KB407 with TDN sanctioning and the addition of new network sites providing expanded access to CF patients, including those that are currently ineligible for modulators. We now have our fourth patient enrolled in Cohort 3 and expect to soon have 5 TDN sites up and running to support completion of both Cohort 3 as well as subsequent repeat dosing studies. Based on the latest patient screening and enrollment timelines, we expect to be able to share molecular data later this year. Finally, we have our recent clinical data in aesthetics, where we reported positive results from our 2:1 randomized, double-blind and placebo-controlled study evaluating our second aesthetic candidate, KB304. KB304 is a combination aesthetic therapy encoding both collagen 3 and elastin to drive aesthetic improvement in the skin. As the Jeune team shared a few weeks ago, investigators and subjects alike reported meaningful aesthetic improvements across multiple attributes, including wrinkles and elasticity with clear and statistically significant advantages over placebo. The images shown highlight the improvement achieved by some of our KB304-treated subjects. The safety profile of KB304 was also in line with expectations. All adverse events were mild to moderate and transient. Based on the broad aesthetic improvement observed with KB304 in PEARL-2, we have decided to progress KB304 into a Phase II study for the treatment of wrinkles of the décolleté. In support of this goal, we also recently completed development and validation of a décolleté-specific photonumeric scale; we intend to align on the Phase II protocol later this year, enabling a potential Phase II study start in the first half of 2026. Finally, I would like to add that we started 2 ophthalmology clinical trials in the last 2 months: IOLITE, a Phase III study evaluating KB803 for the treatment and prevention of corneal abrasions in DEB patients; and EMERALD-1, a Phase I/II study evaluating KB801 for the treatment of neurotropic keratitis. Both of these programs leverage the unique attributes of our platform and showcase what is achievable with our HSV-1 based platform in the front of the eye. We look forward to sharing data progress updates on those programs as they move forward. Altogether, this steady execution sets up for many near-term readouts in CF, AATD, NK and DEB that we expect will validate the breadth of opportunity that exists with our HSV-1 platform. With that, I would like to turn the call to Kate.

Thank you, Suma, and good morning, everyone. I'd like to provide some highlights from our second quarter financial results that were reported in our press release and filing this morning. As Krish mentioned earlier, our net product revenue for VYJUVEK was $96 million for the second quarter of 2025. This marked continued growth as compared to the second quarter of 2024, as well as 9% growth over the recent first quarter of 2025. Gross to net revenues remained consistent with prior quarters. Cost of goods sold was $7.2 million compared to $6 million in the prior year second quarter, and gross margin remained relatively consistent at 93% in Q2 '25. Research and development expense was $14.4 million compared to $15.6 million in the prior year. The decrease quarter-over-quarter is primarily due to the timing of our various research and development manufacturing runs, offset slightly by increased clinical development costs across many of our product candidates. General and administrative expenses were $35.2 million compared to $27.6 million in the prior year second quarter, primarily due to increased professional services fees, including marketing services, consulting and legal. We also saw increased personnel-related costs compared to last year due mainly to growth in our headcount to support global commercialization and this was inclusive of increased stock-based compensation costs from new grants. Operating expenses for the quarter included noncash stock-based compensation of $14.1 million, as compared to $13.2 million in the second quarter of 2024. You'll note that our non-GAAP, R&D and SG&A guidance remains unchanged on Slide 14. Net income for the quarter was $38.3 million, which represented $1.33 per basic and $1.29 per diluted share. This is compared to $15.6 million in the prior year second quarter, at $0.54 per basic and $0.53 per diluted share. Finally, I am happy to comment on the sustained strength of our balance sheet. We closed the quarter with over $820 million in combined cash and investments with continued growth in our net cash provided by operating activities over previous quarters. We believe this puts us in a great position ahead of our upcoming Europe and Japan launches, as well as for the significant number of research and development objectives we have set forth for the remainder of 2025 and into 2026. With that, I'll now turn the call back over to Krish.

Thanks, Kate. With clear growth drivers for VYJUVEK in the U.S. and abroad, plus the additional upside of a potential KB803 launch for corneal abrasions over the next few years, we're excited about the path ahead for VYJUVEK and for Krystal. It's important to understand that this upward trajectory will not necessarily be linear, but looking beyond the short term, this is a multiyear growth story that has only just begun. At a rich and growing pipeline of clinical stage programs targeting clear unmet needs with step-jump implications for Krystal, we see opportunities to build significant shareholder value in the years ahead. In the months ahead, lung readouts in CF and AATD, together with ophthalmology readouts in NK and DEB, will make clear the potential of our platform across multiple tissues and open up blockbuster product opportunities. Finally, our inhaled KB707 program for NSCLC continues to progress well and stay tuned for readouts in 2026. Thanks for listening, and I'd like to now open the call for Q&A.

Your first question for today is from Roger Song with Jefferies.

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

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

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

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

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

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

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

Yes, it's mostly consistent. We didn't observe significant changes in the breakdowns for reimbursement approvals, whether for RDEB, DDEB age, or even the insurance plan. This stability is one reason we didn't delve deeper this time, although there may be some gradual shifts on the DDEB side.

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

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

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

Thank you, Krish. Reimbursement application processes are proceeding as planned with HTA bodies in the main countries in Europe. As you know, in Germany, we benefit from free pricing during the first 12 months post-approval, and then negotiation with GKV are about to start now. It's a bit premature to provide any feedback given that we have not received any from the authorities with regard to our HTA dossier. But the early engagement we had with the key authorities throughout Europe were very productive. The unmet medical need in DEB is well recognized by the payers, and the potential transformational benefit of VYJUVEK seems to be understood. Krish?

Thanks, Laurent. And Joshua, your last question was on something around technology used in sales force?

It was on what's important to the country's health technology assessment.

Okay, great. Does that answer your question? Any follow-up?

No, that's great.

Your next question is from Sami Corwin with William Blair.

Congrats on the quarter. I have another couple of questions about the upcoming European launches. I know previously, you mentioned that there might be a dynamic of onboarding patients based on their need to get treated in a physician office first. So I wonder if you could comment on that a little bit. And then do you have any goal in terms of the reimbursement ramp like the 720 number that was initially applied for the U.S. launch?

Laurent?

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

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

So I don't think we have communicated any guidance for patient on drug. This will be a stepwise approach, and that will depend on when the countries will be reimbursing the product. So we have the same goal as the U.S., which is to reach 60% of the patient pool, the eligible patient pool within the first 2 to 3 years. But we have not communicated more detailed numbers.

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

This is Mathew on for Alec. Maybe on the pipeline, I noticed that the timeline for CF data was mid-2025, now by year-end. Anything to read into this? Or is this just enrollment timelines? And then maybe you can remind us of sort of the number type of patients we expect in that first readout.

Yes, I can address this question. We recently received endorsement from the TDN, which has allowed us to open all the TDN sites. Currently, we are working with six TDN sites and are in the contract and budget phase. Unfortunately, the process and paperwork for these academic sites took longer than we expected. Our team has made significant efforts, and we are nearing completion. Once these sites are operational, we anticipate being able to enroll patients efficiently. This delay has affected our timeline, but we hope to enroll multiple patients across these sites once they are ready.

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

And again, keep in mind that patients are harder to find now, but the TDN sites have them. So we have patients, but you also need patients who are willing to undergo bronchoscopies, which is not easy, but we are getting there.

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

This is Morgan on for Andrea Newkirk. Following up on one of the previous questions. Do you anticipate a similar dynamic will be required in Japan such that patients will need to be seen by a healthcare practitioner before initiating VYJUVEK? And then also, can you share some details on the fifth patient dose in Cohort 2 for AATD in terms of the percent of cells that were transduced and the level of AAT expression and distribution of 408 across the lungs?

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

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

We had difficulty recovering the right amount of lavage because the procedure is quite tricky. Due to some issues with the lavage recovery, we couldn't obtain the levels. However, in two patients, we successfully demonstrated both the expression in the lavage and measured AAT, showing neutrophil elastase binding and a reduction in neutrophil elastase. Furthermore, in all patients, the biopsies revealed AAT expression above baseline levels.

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

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

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

Okay. That's helpful. And then I just want to switch gears to Jeune right now. I'll start with the Phase II program. The prepared comments regarding décolleté Phase II, you talked about a photonumeric scale. I guess I wanted to discuss the novelty of that and what are the key aspects of the regulatory discussions around this endpoint.

In our Phase II program, we are using a combination of collagen 3 and elastin. Adding elastin allows us to express it from animal models using a vector. The characteristics of elastin will differ slightly, but we expect to see improvements in skin texture and quality, which we observed in our 304 study. Patient feedback consistently noted that their skin felt smoother and had better texture. Some of this feedback may not be fully captured by a photonumeric scale. We plan to discuss this novel mechanism with the regulatory agency, as we know they can express both collagen 3 and elastin. We aim to propose a quality evaluation for patient-reported outcomes related to skin quality and texture. We have already developed and validated a numeric scale for the décolleté and intend to combine these insights for our discussions with the agency.

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

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

Your next question is from Josh Schimmer with Cantor.

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

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

I can definitely contribute to this. As you might have noticed, we have the monotherapy data available. We are currently engaged in the study which has already commenced, focusing on the combination therapy. KEYTRUDA is quite costly. In light of the agency's recent changes and other factors, we are confident that our data is robust. Our goal is to position ourselves to engage with the agency and initiate discussions about a controlled study. This will be determined by our conversations with the agency, but we have accounted for the associated costs if we were to proceed with a comprehensive study.

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

Could you discuss the remaining 40% of the market, the 420, in relation to the full 1,200? What timelines have you mentioned or can you share today for capturing that portion of the U.S. market?

The 720 serves as a benchmark because historically, successful drug launches have achieved around 60% market share within two years. This is more of an academic measure and does not imply that we will stop at 720. We believe we need to target the entire 1,200 patient base. Our goal has been to reach a 60% market share and compete with the top previous launches. As we exceed 700 patients, we expect that the patient profile will lean toward more moderate to mild cases, primarily within the community and likely older in age. However, this does not mean that every wound treated by VYJUVEK is less significant. We are not shifting our strategy once we reach 720; we will maintain our commitment to reach the full 1,200 patient base. After reaching that target, we will begin to consider how to address the gap between 1,200 and 3,000, which represents a more challenging and largely undiagnosed population.

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

Yes, Laurent?

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

Your next question is from Debjit Chattopadhyay with Guggenheim Securities.

I have a couple of clarifications. Regarding the 82% compliance, could you clarify what percentage of patients are currently using 4 months of the vial compared to 3, 2, 1, and so on? Also, how have recessive patients evolved in comparison to dominant patients? I have a follow-up.

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

So the 82% compliance rate, what percentage of these patients are on 4 vials versus 3, 2, 1? We're just trying to get a better feel for how to calculate that 82% or how to calculate in our models rather.

The way we define compliance has always been the same since we launched. The simplest way to understand compliance is that if you are on a drug for 10 weeks and miss a week, you are at 90% compliance. However, if someone pauses for a long time and then resumes the drug, that negatively impacts compliance. Conversely, if someone never returns to the drug, that does not affect compliance in the same way. Therefore, we focus on compliance while on the drug rather than when not on it. Regardless of how compliance is calculated—quarterly, biannually, or annually—we are looking at a range between 76% and 84%. The figures are quite close, and there are various methods to calculate compliance, but we prefer not to dwell on the details since it’s not materially significant to the overall situation.

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

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

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

TPS scores.

We are looking for patients who have failed frontline treatments, specifically those who have not responded to PD-1 or to PD-1 in combination with platinum therapy. Once patients fail these treatments, the overall response rates decline significantly. Our analysis of data from monotherapy shows that we still observe some level of effectiveness, evidenced by stable disease and partial responses, even among patients who have previously failed PD-1 therapy or are mutation-specific. We are planning to stratify our enrollment based on PD-1 expression levels, both high and zero, to understand the effects of combining our treatment with Pembro and whether higher PD-1 expression correlates with improved outcomes.

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