Thank you for standing by, and welcome to the Crystal Biotech Q2 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's 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, Stephan Peckett, 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.crystalbio.com. We also filed our earnings 8K and 10Q with the SEC earlier today. Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer, Sumakrishnan, President of Research and Development, Yorana Gu, Senior Vice President and General Manager for Europe, 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.

Krish DeFens, thank you. Good morning everyone and welcome to the Crystal Learnings call. We'd like to touch on four topics in this call. First, the The Visevec 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 lung and the eye, which could propel Crystal 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 subsidiary Jun 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 at $1.29 per share fully diluted.

Marking now two years of consistently positive EPS for the company. Moving on to our 2Q results.

Q2 net Visevec revenue was $96 million. This brings total net Visevec revenue since launch to over $525 million. The return to growth in Q2 was due to patients who paused earlier getting back on drug and the additional impact of our ongoing sales team expansion. It's important to note that Salesforce 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, 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 2Q, and we have secured over 575 reimbursement approvals for patients in the U.S. Compliance while on drug as of 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 Vyjevec, and as the percentage of moderate and mild patients increase 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 PfizerVac and again achieve durable wound closure. And these treatment successes, together with the tireless commitment of our Crystal 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 Vyjuvec therapy. This also means that we remain in a period with inherent unpredictability quarter to quarter. Consistent with Vyjuvec's mechanism of action and skin turnover, we are seeing a growing number of patients 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 3Q, our current expectation is that 3Q revenues will come in below what we're reporting here today, with a return to growth in 4Q, 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 Weishavec will also benefit from global expansion and our launch overseas. Laurent Gu, 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 Waijuvac by Japan's Ministry of Health, Labor, and Welfare. We received a broad label from the Japanese authorities, similar to the one approved in Europe earlier this year, that includes all DEP patients from birth with the option of home, self, or family administration. The label also provides clinicians flexibility with how to diagnose DEP patients and does not require a genetic test facilitating onboarding and initiation of treatment. Japan is another attractive market into which Crystal can launch directly with hundreds of dead patients in urgent need of a safe and an effective therapy. We already have our core team in place to secure a pricing decision in the upcoming months and launch before the year end. Thanks to the recently completed and published Japanese open label extension data, Key opinion leaders in Japan already have initial experience with Weijuvec, 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. Laurent?

Thank you, Krish. I'm pleased to present an update on the upcoming European launch of Weijuvec. 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 four 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 access precoce 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 eight team members on the ground in each market supported by an additional eight colleagues at our european headquarter and leveraging us back office resources in germany we anticipate for our first commercial patient to be treated in august making an important milestone in our efforts to bring meaningful solutions to the dead patients and the 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 patient 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 successful launch driving uptake at key centers and ensuring an efficient patient experience this launch is a significant step for crystal reflecting both our commitment to wear disease patients and strategic execution of our international commercial plans. I will now hand the call back over to Krish.

Thank you, Laurent. With Vyjuvec delivering transformational clinical outcome 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 multi-year growth as we work with key centers and launch sequentially in major markets. The broad label in Japan adds another high-value launch market, which would start adding meaningfully to our top line in 2026. And increasingly, we're pursuing meaningful opportunities in the rest of the world markets, accessible through distributors and partners. Altogether, these put Vaishavec on an exciting trajectory and provide a strong financial foundation and significant optionality for the company. I'll now hand it off to Summa to touch on recent pipeline development, said Crystal.

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 two 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, Kinite I, evaluating inhaled KB707 for solid tumors of the lung. This update included safety data from 39 subjects treated with in-health 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 KB-707 continued to be safe and generally well-tolerated and amenable to administration in outpatient setting. We are increasingly excited about the profile of inhaled KB-707 monotherapy in the clinic. In addition, combination therapy cohorts have been open 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 the slide, we again saw robust airway transduction resulting in functional AAT expression as demonstrated by neutrophil elastase binding in the ELF. Please note that this patient was on background IV augmentation and yet we still detected a reduction of free neutrophil elastase following KB 408 dosing. Across all three bronchoscopy patients, we have seen transaction rates in the 30 to 40 percent range after a single dose. The safety profile of KB 408 continues to be attractive across all five patients dosed in cohort two. 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 durability of effect. Design details are summarized on the slide. Patients will undergo a baseline bronchoscopy, receive four weekly doses of KB408, and then receive a bronchoscopy, either one or two weeks after the final dose, to assess expression and durability. We expect the data generated from cohort 2B to dictate our approach with respect to the advanced clinical development of KB408 including potential accelerated approval approaches. We are also making steady progress on KB407 with TDN sanctioning and the additional 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 five 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-to-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 improvements in the skin. As the June stream shared a few weeks ago, investigators and subjects alike reported meaningful aesthetic improvements across multiple attributes, including wrinkles and elasticity, with clear and statistical significant advantages over placebo. The images shown on right 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 KB-304 in Pearl II, we have decided to progress KB-304 into phase two study for the treatment of wrinkles of the decollete. In support of this goal, we also recently completed development and validation of a decretate-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 two ophthalmology clinical trials in the last two months. Iolite, a Phase III study evaluating KB803 for the treatment and prevention of Corneal Liberation in Depth Patients, and EMERALD-1, a Phase I and 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 HSC1-based platform in the front of the eye. We are looking forward to sharing data progress, updates on those programs as they progress. 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 HSE 1-Place 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 Chris mentioned earlier, our net product revenue for Visevec 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 remain consistent with prior quarters. Cost of goods sold was $7.2 million compared to $6 million in the prior year's second quarter, and gross margin remained relatively consistent at 93% in 2Q25. Research and development expense was $14.4 million compared to $15.6 million in the prior 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's 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 non-cash 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's 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 rivals for Vaisovac 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 Vaisovac and for Kristo. It's important to understand that this upward trajectory will not necessarily be linear, but looking beyond the short term, this is a multi-year growth story that has only just begun. Add a rich and a growing pipeline of clinical stage programs targeting clear unmet needs with step-jump implications for CRYSTO, 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 707 program for NSELC 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.

Certainly. At this time, we will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions.

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

Hi, this is Fiona for Roger. Congrats on the quarter and thanks for taking our questions. My first question is just to clarify the revenue growth for this queue is not impacted by the Salesforce expansion.

And if you think the volatility for the next quarters will be offset by the sales force expansion kicking in and the EO launch.

Thank you.

No, you know, as I alluded to in my script, part of the increase in Q2 was driven by people, patients who were pausing getting back on drug and to start, you know, 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 quarters as they come on board, get trained, and are fully functional in the field.

Yeah, that's very helpful. Thank you.

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

Hey, guys. Thanks for taking the questions. 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? Now, 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 the summer holidays always has 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 one-third of its way in. But I just wanted to point out that summer is usually filled with more pauses than usual.

Just a quick follow-up. For U.S. Vajjuvec, what's the mix of RDEB versus DDEB patients, either in reimbursement approvals or in start forms that are coming on to 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 asked the fans, if you have a clearer number, can you jump in?

Yeah, it's basically in line. We didn't see really much movement at all in the breakdowns for reimbursement approvals, either our WDDB, age, even the insurance plan. So it's one of the reasons we didn't really get into it this time around, but they're largely stable. maybe shifting, you know, as always, you know, shifting very gradually on the DDoS side.

Okay, great.

Thanks.

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

Hi, team. This is Joshua Fleischman on the line for Ritu. Congrats on the quarter, and thanks for taking our question. How do you expect for drug holidays to factor into the original guidance of 720 U.S. patients initiating IGEVAC? And on Europe, how should we think about pricing, and what's important to the country's health technology assessments? Thank you.

With respect to 720, Joshua, as we mentioned last quarter, we're on track, but we're maybe a quarter or two 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. 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. Thank you, Krish.

Yep, thank you, Krish. Reimbursement application processes are proceeding as planned with the 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 the negotiation with GKV are about to start now. It's a bit premature to provide any feedback, given that we have not received any feedback from the authorities with regard to our HTA dossier. But the early engagement we had with the key authorities throughout Europe were very productive. And the unmet medical need in DEB is well recognized by the payers and the potential transformational benefit of Vajruvec seems to be understood. Krish?

Yeah, thanks, Laurent. And Joshua, your last question was on something around technology used in Salesforce?

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

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

No, that's great. Thank you so much.

Your next question is from Sammy Corwin with William Blair.

Hey there, good morning. Congrats on the quarter, and thanks for taking our questions. I have another couple 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 a reimbursement ramp like the 720 number that was initially applied for the U.S. launch?

Hello, Ron. 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 something 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 three 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 that will be designated in the reimbursement approval. So there is no case-by-case request once the drug is approved by the payer body, the national insurance in most cases.

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 two to three years, but we have not communicated in more detailed numbers.

Great, thanks.

Your next question for today is from Alex Stranahan with Bank of America.

Hey, guys. This is Matthew on for Alex. Appreciate you taking our questions. Maybe on the pipeline, notice that the timeline for CF data was mid-2025, now by year end. anything to read into this? Or is this just, you know, enrollment timelines? And then maybe you can remind us of sort of the number type of patients we expect in that first readout.

Yeah, I can take this question. As you may be aware that we did announce that the TDN, you know, we got endorsement from the TDN. So that opened up all the TDN sites. So we have been actively working. We have, at the moment, six TDN sites that we are in contract and budget phase. So, unfortunately, with these academic sites, just the whole process and paperwork took more time than we anticipated. Our team really pushed, but we're getting close. So, we believe once we can get these sites up and running, which we're pretty close, we should be able to enroll the patients. So that pushed out, but hopefully we can enroll, you know, multiple patients across these sites once they are up and operational.

And with respect to the data announcement, look, you know cohort three is essentially three patients on modulator and three null. And what we're looking to show is molecular data on three null mutation patients in C. And again, keep in mind now patients are harder to get by, but the TDN sites do have them.

So we have patients, but we also need patients that are willing to bronc, which is not easy. But we are there. We're getting there.

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

Hi. Thank you for taking our question. 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 Vyjuvic? And then also, can you share some details on the fifth patient dose in Cohort 2 for AATV in terms of the percent cells that were transduced and the level of AAT expression and distribution of 408 across the lungs?

Thank you so much. on the japan question yeah it's very similar to uh europe um it's um it's the way all drugs like the first visit is in a physician office so no change there um in terms of the aat i'd ask somebody to go back to that slide um i don't know stephen if you can uh pull up that slide on AAT? Just give us a minute. Yeah. And as you can...

It should be, of course, you can...

So basically all three patients we saw expression in the biopsy samples. We could clearly show expression from baseline increase. Obviously in the lavage, one of the patients we had difficulty recovering the right amount of lavage because this whole procedure is pretty tricky and, you know, it's because of some of the issues with recovery of the lavage, we were not able to get the levels. But in two patients, we were able to show both expression of... In the lavage, 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 their biopsies, we did see expression of AAT about the levels of baseline.

Okay, great. Thank you.

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

Hi, everybody. Good morning. Thanks for taking the questions. Two topics, if you don't mind. So, first on Vyjavec, Chris, 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, you know, based on the, you know, pausing and restarting and, you know, chronic wounds being closed versus mild to moderate, how would you define, if you can, steady state for a patient as they're on Vajavec over the long term with regard to starts and restarts and wound reopening?

You know, we've said consistently, even from at the pre-launch 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 R-DEP to D-DEP patients is about 50% each. So if you have an even split of recessive and dominant, and they're in a, you know, they've been on drug a while, we expect the average consumption across the patient base to be 26 miles a year. So that is how we define steady state. Got it. And if you look at the compliance, if you look at the R-DEP, D-DEP ratio, 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 Jun right now. I'll start with the Phase 2 program. The prepared comments, you know, with regard to Decolleté Phase 2, you talked about a photonumeric scale. I guess I wanted to discuss, you know, the novelty of that and, you know, what are the key aspects of the regulatory discussions around this endpoint?

I mean, obviously, as you know, with 304, it's a combination of collagen-3 and elastin. So, I mean, with adding elastin, and we clearly know that we can express elastin from animal models with our vector. The definition of elastin, obviously, it's not going to be slightly different. You're going to see improvement is texture of the skin, skin quality, et cetera, et cetera. And that's something that we captured in our 304 study. If you look at a patient's feedback, I mean, or their rating, that's some of the consistent feedback that we got from consistently all the patients that were on the drug. that they felt their skin was smoother, the texture felt better. So obviously some of that cannot be captured just by photonumeric scale. So we do want to talk to the agency about the novel mechanism. Obviously with this division, we know that we can express collagen 3, we'll express elastin, and we need to, you know, we're going to propose some sort of, you know, quality evaluation for the patient-reported outcome of skin quality and skin texture. So this is something we're going to sit down with the agency and have that discussion. We have developed a photonumeric scale at the moment for the decollete. So we have a scale that's developed and validated. So we want to do some sort of a combination and then have that discussion with the agency.

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

Yeah, I think following the announcement on three or four, and Suma's starting to have conversations with the FDA, from a development perspective, we expect to start phase two in the upcoming months. and meanwhile, Nishant, the CEO and the CFO of Jun are actively pursuing or diligently working towards getting Jun financed and spun out and the broad timing on that is roughly before the end of phase two. So our expectation is by the middle to the end of 2026, we're expecting JIN to be a separate subsidiary.

Great. Appreciate all the answers.

Your next question is from Josh Shimmer with Cancer.

Great. Thanks for taking the questions. Just two quick ones. Krish, can you clarify that when you suggest a decline in Vyjuvec 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 10Q, seems very heavily weighted to the oncology program specifically. Just curious as to why that's the case and what trends you expect to see going forward across the other programs. Thank you.

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

I can surely chime in. Obviously, you guys saw the monotherapy data. We are now in the process. The study has already started between the combination. Keytruda is not cheap and it's expensive. And also given, you know, the agency's recent example and other stuff, we believe we have very strong data. So we want to position ourselves to meet with the agency and start talking about a controlled study. So, I mean, again, this is something we'll have based on our discussion with the agency, but we anticipated that into the cost, what it would take if you would go into a full-blown study.

Thank you.

Your next question for today is from Yagal Nachumovitz with Citigroup.

Hi, Kirish and Chene, thanks. Two questions. Could you talk about the – you've talked a lot about the 720, the 60%, as you pointed out. I'm curious about the other 40%, the 420, to get to the full 1,200. What have you said or what can you say today about the timelines to capture that aspect of the U.S. market?

Look, the 720, it's a number. Like, if you look at the past history of drugs that have been launched, the best of the launches have gotten to about 60% market share in two years. So this is more of an academic benchmark than anything related to, oh, it has nothing to do with we're going to stop at 720. We fully believe that the entire 1,200 patient base is something that we need to target. But we have set a goal in terms of the rate of launch, trying to get to like a 60% market share and compete with the best of prior launches out there. The only point I'll make is as you get past 700s, the profile of patients that we get will be much more moderate to mild, much more out in the community, probably higher on the age scale. And so, but it does not mean every wound is important for vice-effect to be treated, and it's by no means are we trying to convey that once we get to 720, we're on some different mode or pathway. We'll continue with the same level of diligence and effort to get to the remaining 1,200. And once we get to that point, we'll definitely start thinking about how to go after the gap between the 1,200 and the 3,000, which is a much more undiagnosed, difficult-to-find target 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 to 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? Yeah, Laurent.

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 access precoce post-authorization. It does happen, even though it's very rare, but it does happen that some companies don't. So we will respect the process that we have engaged with the authorities. But we are confident that, yeah, the patients will be able to have access to the drug under the access precoce in France.

Okay, thank you.

Our next question is from Debjet. Chattopatier with Guggenheim Securities.

Hey, good morning, and thank you for taking my questions. I have got a couple of clarifications. So, on the 82% compliance, could you sort of clarify what percentage of patients are currently using four months of IL versus 3, 2, 1, etc., and how have recessive patients evolved versus the dominant patients? And I have a follow-up.

Yeah, 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 four vials versus three, two, one? We're just trying to get a better feel for how to calculate that 82% or how to calculate in our models, rather.

Look, the way we define compliance has always been consistent and the same since the time of the launch. I mean, the easiest way to think about compliance is if you are on drug for, if you're on drug for 10 weeks and you miss a week, you're at 90% compliance. That said, if somebody paused for an extended period and got back on drug, they kind of heard compliance. And if you never came back on drug, you kind of held compliance. So that's why it's compliance while you're on drug, as opposed to if you're not on drug. But that said, Debjit, irrespective of how one calculates compliance, whether on a quarterly basis or a six-month basis or an annual basis, we're talking a range somewhere between 76% and 84%. Like it's not that far off with respect to, and there could be many ways to calculate, and we try not to get into when it's not that material to the overall situation.

I appreciate the clarification. Then just to follow up on the utilization that you're seeing in the recessive patients versus the dominance. I know you mentioned, you know, 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 who make this pause and start difficult to figure out. The RDAP is extremely consistent on 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 drug. But the entire conversation around stops and starts is on the moderate to malsa.

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

Okay. I mean, we are looking at, obviously, we are agnostic, right? It doesn't matter what kind of PD-1 expression or a PD-L1 expression, right? I mean, obviously, we are looking for frontline failed patients. So either they have failed PD-1 or PD-1 plus platinum therapy. So once they fail, we know re-challenging with PD-1, the number of overall response goes down from 30% to 35% to 10%. So we are agnostic. We have seen, we looked at our data with monotherapy with patients that have failed PD-1 or with their mutation specific. We still seem to have an impact on the work. We see stable disease, or in some cases we also see pastoral responses. So we feel we are pretty much agnostic. So we are going to stratify our enrollment. Obviously we look at PD-1 high patients and PD-1 zero. So in our recruitment study and our analysis, we will try to stratify and collect that data and see, you know, the impact of whether when you use in combination with PEMBRO, are we seeing better impact with higher PD-1 expression versus negative PD-1 expression?

Thank you. Good luck.

Thank you.

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.