Krystal Biotech, Inc. Q4 FY2025 Earnings Call

Thank you for holding. We sincerely appreciate your patience. Please stay on the line, and we will be back in a moment. Thank you for holding. We look forward to talking with you soon. Please hold the line, and we will be right back with you. Thank you for waiting. Your patience is appreciated. Please hold the line and we will be right back with you. Thank you for standing by, and welcome to the Krystal Biotech, Inc. 4Q 2025 Conference 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. Good morning, and thank you all for joining today’s call.

Earlier today, we released our financial results for the fourth quarter and full year of 2025. The press release is available on our website www.krystalbio.com. We also filed our earnings 8-Ks and 10-Ks with the SEC earlier today. Joining me today will be Krish S. Krishnan, chairman and chief executive officer, Suma M. Krishnan, president of research and development, Christine Wilson, senior vice president and head of US commercial, Geraint Goeks, senior vice president and general manager for Europe, and Kathryn A. Romano, chief accounting officer. This conference call will and our responses to questions may contain forward-looking statements. 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 I will turn the call over to Krish. can be found in our SEC filings.

With that, thanks, Stephane. Before I begin, I want to recognize Suma for being named to the innovator list. The concept of enabling repeat dosing of a genetic medicine in a home setting by the patient is truly innovative. So congrats, Suma. Stepping back, I am very pleased with where we are at Krystal. On the commercial side in 2025, we have made meaningful progress across all geographies. In the US, we added sales capacity and successfully reaccelerated demand. In Europe, despite the country-by-country nuances, we launched a genetic medicine that can be applied in a home setting by a patient. In Japan, we leverage the attributes of VYJUVEC to establish a strong value proposition for patients. And we continue to broaden VYJUVEC access. To date, we signed distributor agreements covering more than 20 countries and our goal is to expand to over 40 countries in 2026. More importantly, the patient stories that we continue to hear about how VYJUVEC is changing lives remain deeply motivating for our entire team. On the pipeline, we are currently in the middle of two registrational trials in NK, and in treating eye lesions in patients with DEB. With the potential to initiate two additional registrational programs in CF and HHH later this year. Together, that positions us well for the next five years and we believe that if approved, we have the capabilities to self-launch these four indications. Meanwhile, the oncology and other trials continue to progress well. None of this would be possible without the dedication of the Krystal team, and I am grateful for their commitment and execution. Overall, Krystal is building a durable commercial gene therapy company with disciplined capital allocation. We are generating strong gross margins and operating profitability while expanding global access for VYJUVEC and advancing a focused pipeline. Our operating principle is straightforward: invest behind measurable execution milestones, compound value without relying on dilution, and work diligently to get the next pipeline medicine approved. Turning now to results, we are pleased to report another quarter of revenue growth with net VYJUVEC revenue of $107,100,000 in Q4. That brings total net VYJUVEC revenue since launch to over $730,000,000. The net revenue reported this quarter includes contributions from Europe and Japan as we build momentum in our initial overseas markets. Christine and Laurent are both here today and will share more country-level color in a moment. Gross margin was 94% for the quarter, and 94% for the full year. We continue to expect gross margins in the 90% to 95% range for the foreseeable future. With that, I will turn it over to Christine to provide an update on the US commercial performance.

Thank you, Krish. We remain very encouraged by the VYJUVEC launch and the momentum we are seeing in the US, which continues to support our long-term commercial outlook. I am pleased to share that we have now seen reimbursement approval acceleration for three consecutive quarters with over 60 since launch, reflecting strong execution by our commercial organization. As we continue to expand our reach into the community setting, we added over 50 new prescribers in Q4 2025, and have reached over 500 unique prescribers since launch. With our expanded sales force now fully trained and deployed, we are also seeing continued improvement across key demand metrics. The impact of our expanded sales force is supporting broader patient identification across the United States, including patients with DDEB that are being treated by local dermatologists or primary care physicians. It is encouraging to see the benefits that VYJUVEC is providing to patients across the full spectrum of disease severity. From severe cases to mild and moderate presentations, patients are achieving durable wound closure, which in many cases is allowing them to transition to as-needed applications over time. Importantly, our commitment to the DEB community remains unwavering. As the market continues to evolve as expected through the launch, we remain focused on optimizing our processes to better support patients and providers. We continue to execute on this through strong partnerships with advocacy and centers of excellence, ongoing feedback from healthcare providers and patients gathered through objective market research, and a continued focus on driving operational improvements and advancing the standard of care. I will now hand the call off to Laurent to share updates on the VYJUVEC launch overseas.

Thank you, Christine. It is my pleasure to share the latest on our operations outside the US, including an update on Japan on behalf of our colleagues. I am proud to report that our global VYJUVEC launch continues to progress very well. The high patient demand we are seeing across our very different markets validates the transformative impact VYJUVEC brings to the dystrophic epidermolysis bullosa patients and their families. We now estimate that over 90 DEB patients have been prescribed VYJUVEC across Germany, France, and Japan combined. Our launch in Germany continues to build momentum since late August of last year, and we are sustaining prescription growth and good prescribing breadth. The initial centers of excellence are now routinely prescribing VYJUVEC, and we are expanding it to the broader community setting. This geographic distribution is critical for patient access, as it allows the patients to initiate therapy closer to home, reducing the burden on both patients and individual treatment centers. In France, our launch is progressing well, under the AP2 early access program. The AP2 program is functioning exactly as designed, providing eligible patient access to VYJUVEC while we complete our negotiations with the French health authorities. Importantly, subject to the early access conditions, physicians and patients are demonstrating strong confidence in VYJUVEC’s clinical profile. Please note that pricing negotiations in Germany and France are ongoing and progressing well. We expect this negotiation to continue until at least 2026 in Germany, and 2027 in France. Our colleagues are also achieving early launch successes in Japan after successfully negotiating pricing in October. This includes building a unique in-country distribution model to enable home delivery while addressing the many strict regulations regarding the handling of gene therapies in Japan. Leveraging this infrastructure, our team is driving VYJUVEC adoption and patient treatment in the home setting. Looking ahead to our next launch market, we currently expect to finalize pricing and launch in Italy in 2026. Italy represents another significant patient population, and we are working diligently to ensure timely access to these patients. Additional pricing negotiations are advancing on schedule in Europe and the UK. I would like to highlight another important validation of VYJUVEC’s clinical impact. In December, VYJUVEC was awarded the Prix Galien in France, for innovation and clinical impact in the treatment of dystrophic epidermolysis bullosa. This recognition from the French medical and scientific community underscores the transformative nature of VYJUVEC and strengthens our position in ongoing reimbursement discussions across Europe. Looking beyond our direct markets, I am also pleased to share that we have expanded our distributor network to now include Israel. This expansion demonstrates our commitment to serving the patients across various geographies, and positioned us well for continued growth. While it is still early in our commercialization journey outside the US, we are seeing the foundation being established for sustainable revenue growth in these markets. The successful pricing negotiations we completed in Japan have been very encouraging, and we believe provide a positive benchmark for our ongoing European discussions.

Thank you, Laurent, and good morning, everyone. It is my pleasure to share today’s update on our development efforts. Thanks to the hard work of our dedicated R&D team, we are making rapid progress on our rare disease pipeline, generating breakthrough clinical data, and moving quickly towards multiple registrational data readouts later this year. I would like to start by highlighting one such breakthrough recently achieved with our KB407 program for the treatment of cystic fibrosis. A little over a month ago, we announced a successful delivery and expression of full-length wild-type CFTR protein following KB407 administration to the lung of patients with CF. Not only could we confirm full-length protein expression in CF patients with class one mutations, we also saw that HSV1 airway cell transduction was consistent across all patient biopsied. In a diverse patient population, including four modulator ineligible patients with uncorrected lung disease, we consistently observed transduction rates ranging from 29% to 42%, and all usable biopsies were positive for transduction. Taken together with encouraging apical CFTR expression observed in class one patients as well as durability of expression out to at least 96 hours, these results give us high conviction regarding the potential of KB407 to fill the treatment gap that exists today for modulator ineligible patients. We are working closely with the CFFTDN and the FDA on a repeat dosing study design and streamlined pathways to support registration. We look forward to sharing updates once we have aligned with the agency and expect to start repeat dosing in the first half of the year. Our KB407 results also have profound implications for our platform, showcasing the versatility of HSV1-based gene delivery to epithelial tissues beyond the skin. Another important advantage of our HSV1 is the potential for convenient at-home dosing. Although it took us a few years, we are very proud that VYJUVEC is now approved in the United States, Europe, and Japan for administration in the home setting with the option for caregiver or patient administration. This is a fantastic breakthrough for patients, and one we want to secure for as many of our pipeline programs as possible, including our ophthalmology program, KB801, and KB803. To that end, we have updated the protocol of EMERALDE one, our registrational study evaluating KB801 for the treatment of NK. Our updated KB801 study protocol is briefly summarized here. To expedite the potential path to registration, we have upsized the study and now expect to enroll approximately 60 patients in the study. And to enable flexible administration options from launch while also mitigating the risk of human error when administering an eye drop, we have updated the KB801 dosing regimen. Patients enrolled in EMERALDE one will receive KB801 or placebo once daily. Importantly, KB801 or placebo may be administered either by HCP or by a caregiver or the patient after receiving appropriate training. We believe that this change will provide maximal flexibility to patients and their caregivers and ultimately support superior real-world outcomes. It is also a change that is only made possible because of the clean safety profile observed to date across both KB801 and KB803 programs. We do not expect these changes to meaningfully affect our timelines to data readout. Thanks to the rapid expansion of our clinical trial site network, already over half of the number of sites have been activated, and we are well on our way to target 30. We continue to expect data before the end of the year. To our KB803 program, we have made similar updates again, with the goal of maximizing flexibility and real-world outcome for patients from the day of launch. Our KB803 protocol is summarized here. Patients enrolled in the study will receive KB803 or placebo three times weekly. As with KB801, KB803 or placebo may be administered either by HCP or by a caregiver or the patient after receiving appropriate training. With our existing trial network and patients available for rollover from the natural history study, we expect to complete enrollment in the first half of the year and report data before the end of the year. We are also making tremendous progress across our broader pipeline, working towards our registrational study start and multiple additional clinical data readouts before year-end. Our clinical development efforts for KB111, our latest rare skin disease program, for the treatment of HHH disease are progressing well. Our team is in the process of developing our HHH-specific scale and is on track to complete the study in the first half of the year, enabling a registrational study start in the second half. We expect many of our patients from the scale validation study to enroll into the registrational study. We are actively enrolling patients with AATD lung disease in our KB408 repeat dosing study and expect to be able to issue a data update before year-end. This study includes multiple bronchoscopies, both at baseline and after four week KB408 doses and will help us better understand the illicit effects of repeat KB408 dosing on lung AAT and bound neutrophil elastase levels. These are key data points that will support accelerated approval discussions with the FDA. We are also enrolling patients in our phase 1/2 KYNITE1 evaluating inhaled KB707 in patients with advanced NSCLC. Here as well, we are on track for clinical data updates later this year with an opportunity to move quickly into a registrational study, having already received FDA input on a phase 3 study design to support a potential filing. Finally, I would like to make a special mention of the two program designations we recently received from the FDA. In January, the FDA granted us a Fast Track designation for KB111, and earlier this month, we received RMAT designation for KB707. These designations underscore the potential of our programs to address urgent unmet needs for patients with rare and serious diseases. They also provide important advantages to accelerate our programs, including opening the door to accelerated approval based on surrogate or intermediate endpoints. Having received similar designations for VYJUVEC in the past, we are well versed in the many benefits they can provide and how to best leverage them. We look forward to working closely with the FDA to accelerate KB111, KB707, and a broader pipeline of redosable genetic medicines.

Thank you, Suma, and good morning, everyone. I will now provide some highlights from our fourth quarter and full year financial results reported in our press release and 10-K filings earlier this morning. We previously announced preliminary Q4 2025 VYJUVEC net revenue of $106,000,000 to $107,000,000. Our final net revenue from global sales of VYJUVEC during 2025 was $107,100,000, which includes sales from our Q4 launches in both France and Japan. This marked growth as compared to the prior quarter of almost 10% and approximately 18% growth when compared to the prior year’s fourth quarter. Year-to-date, VYJUVEC net revenue was $389,100,000, an increase of approximately 34% compared to full year 2024 revenue. Gross to net revenue percentages remain consistent with prior quarters. Cost of goods sold was $6,600,000 compared to $4,300,000 in the third quarter and $4,900,000 in the prior year’s fourth quarter. Gross margin for the quarter was 94%, as compared to 96% in the third quarter and 95% in 2024. This change in gross margin is in part due to the volume of products sold outside of the U.S. increasing, which still carries a higher cost per unit ahead of our planned manufacturing process optimizations for products sold in these markets. R&D expenses were $14,800,000 compared to $13,500,000 in the prior year’s fourth quarter, and SG&A expenses were $41,400,000 compared to $31,300,000 in the prior year’s fourth quarter. This increase was primarily due to increased headcount, legal and consulting services, and marketing costs to support our global launches of VYJUVEC. Operating expenses for the quarter included noncash stock-based compensation of $13,800,000 compared to $13,400,000 in the fourth quarter of last year. Consistent with the prior year, we are providing guidance on our non-GAAP operating expenses. For 2026, we anticipate approximately $175,000,000 to $195,000,000 in non-GAAP R&D and SG&A expenses. This represents an increase over year-to-date 2025 actual non-GAAP R&D and SG&A expenses of $150,300,000, and is the result of our continued planned spend on VYJUVEC global launches and further development of our pipeline. As we discussed in the third quarter, we released a majority of the valuation allowance that was previously recorded against our deferred tax assets. We also benefited from the reversal of the Section 174 R&D capitalization requirement under the One Big Beautiful Bill legislation. This resulted in a one-time noncash tax benefit that increased reported EPS for this year. Net income for the quarter was $51,400,000 which represented $1.77 per basic and $1.70 per diluted share. Net income for the year was $204,800,000 which represented $7.08 per basic and $6.84 per diluted share, reflective of the previously mentioned one-time benefits. And finally, we ended the year with $955,900,000 in combined cash and investments, which positions us well to support our commercial launches globally as well as our upcoming pipeline milestones in the year ahead.

Thanks, Kate. And now I will turn the call back over to Krish. I would like to reiterate a few key points before we open for questions. First, geographic expansion is a meaningful tailwind for VYJUVEC and for Krystal.

There are more DEB patients outside the United States than within it, and we are still early in addressing global demand. In 2026, we will continue on a disciplined international rollout and we look forward to adding our third European market, Italy, in the second half of the year. With large identified patient pools, strong demand, and favorable product labels in Europe and Japan, we expect our overseas expansion to be the predominant driver of revenue growth in 2026. In the US, demand continues to grow, but we are also seeing an evolution in utilization patterns among some longer-tenured patients shifting toward more intermittent treatment cycles as their disease management stabilizes over time. Second, as we add patients overseas, it is important to note that revenue may not track linearly with patient counts this year due to accruals, timing effects, and ongoing pricing negotiations. That said, having completed strong successful negotiations in Japan, we believe we have a strong value proposition to present to European payers and we look forward to reaching final alignment on pricing. On the clinical front, we understand the importance of our registrational programs and we are executing methodically to drive the desired outcomes. We remain on track to move KB407 into repeat dosing in the months ahead, and we strongly believe the updates to the KB801 and KB803 protocols position these programs to deliver tangible real-world benefits, maximizing convenience and building resilience to account for the inevitable human factor that comes with self-dosing. We were also pleased to receive RMAT for KB707 and Fast Track designation for KB111, two designations we know well, and that can meaningfully shorten development timelines. We are excited to advance both of those programs along with KB408 for alpha one deficiency, which is progressing through the redosing phase of the initial study. Overall, 2026 is shaping up to be a busy and an important year, and we are approaching it with a lot of enthusiasm. But let us open the call for questions.

Certainly. At this time, we will be conducting a question and session. If you have any questions or comments, please press 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 coming from Roger Song with Jefferies. Excellent.

Thanks, team, for the update, and congrats for the successful 2025. A couple of questions from us. On VYJUVEC, I heard you said a couple comments around the US versus the US. Given two months in the 1Q, any visibility into the 1Q and then looking ahead to 2026, particularly contribution from ex US versus US on dollar value? Because I hear you say the revenue driver predominantly will come from the ex US in 2026. Thank you.

Yeah. Thanks, Roger. Thanks for the question. I want to clear out a couple things. While I did say that the predominant growth driver will be from ex US, I do want to highlight that demand in the US is accelerating. I mean, you heard Christine talk about the number of reimbursement approvals being up quarter-over-quarter. And the one comment on while demand in the US is accelerating, you should also assume that patients are now starting to settle into a start-stop regime, which is kind of tough. It is nuanced; the kinetics of that is kind of a bit hard to predict. But in Europe, which for our launch is recent, definitely, it is an accelerating growth driver. That all said, in terms of breakdown of US versus ex US, we at the moment pretty strongly believe that when we report 1Q, we will be breaking them out.

Got it. Yeah. Thank you. And then in terms of the pipeline, I just noticed you adjusting the dosing regimen for both ocular and NK. Be a little bit more frequent. Just curious, is there any data to support— I heard you say that, yeah, avoid that human error. So any data to suggest more frequent dosing may be resulting in better outcome and any plan to test less frequent dosing later on? Thank you.

Yeah, I can take this. I mean, with KB801, the weekly dose was deliberate. I mean, obviously, we have seen our blinded data, and we feel pretty confident about that data. The reason we initially started to talk about in-clinic dosing for KB801 was that we realized commercially for this to be a viable product, it has to be home administered. So again, there was, you know, interactions with the agency to get that home dosing. I mean, obviously, now it is implemented. The change was deliberate because now that the dose is being administered by the patient at their home, obviously, train the patient. There are always nuances with it. Right? I mean, our concern is you want to make sure that, in the event of daily administration, there is a dose that does not get into the eye. They blink. You know, all kinds of administration errors. So we thought it would be easier. We have a very safe profile. And the drug is clean. So we figured it is better to avoid and also, you know, the more it is easy for the patient to remember. Right? Daily one dose in the morning, you can drop it in the eye. I think it was deliberate to make sure that dosing is known, and they comply and we get the right dose in the eye.

Got it. Yep. Makes sense. Thank you.

Your next question is from Sami Corwin with William Blair. Good morning. Thanks for taking my questions.

I was curious if you could provide any insight into the compliance rate so far in the EU and Japan. And then, Chris, previously, you have commented on giving Krystal’s growing profitability the company could potentially explore stock buyback options. So I guess I just wanted your updated thoughts there versus increased investment in the pipeline or M&A? Thanks.

When you talked about compliance, were you referring primarily to the United States compliance number, or was it outside? Outside. In the US, yeah. Look. In Europe, compliance has been just as compliance has been in the US when we first started the launch. The only comment on Japan I would make is by law, in Japan, in the first year of launch, the patient only gets a two-week prescription. And so one of the things which is a bit burdensome in the early days of the launch is for the patient to have to go back to the physician to get a new prescription every two weeks. Today, patients have been pretty compliant. It is the early days of launch, but when you look out over the next six to nine months, one could imagine a situation where some patients may drop off on compliance purely based on this burden, but if there are any such dropouts, our expectation is by the time year two rolls out, which is the late second half of this year, we expect compliance to come back up to normal levels.

Okay. And for Japan, that two-week prescription burden, you said that lasts for the first year? Yep.

Yeah.

And on your second question on profitability and share buyback, look, we understand we have a few research programs, you know, our pipeline. We have a few rare diseases that are in registrational and have to launch. We have a couple large indications, one being oncology, one being an alpha one, one being in aesthetics.

And until we kind of have a better sense of how those larger indications are going to go in terms of having a partner, having some support, either in development or in commercialization, it is difficult to be very definitive on a timeline for a stock buyback. But that said, one thing I have made clear in the past is we are not intending presently to use any of our cash towards in-licensing or buying any kind of third party technology or company at the moment.

Makes sense. Thank you.

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

Questions, and congrats on the close to the year. Two questions. Maybe first on ex US. Could you just remind us what is left on the pricing negotiations? And how you expect the balance of price and volumes to trend over the course of this year into next in France, Germany, and Japan?

I think our present expectation is that we would reach some kind of pricing agreement with Germany in the second half of this year. It is tough, Alec, at this point to say if it is a 3Q or a 4Q, but our expectation is sometime in March. With respect to France, clear expectation that we will not reach a pricing agreement this year and probably be shifted to sometime in the first half of next year. That is our present expectation. Japan, we already have a price. The only thing to remember is in Germany, we will be accruing until the pricing is definite. We will also be accruing in France until the pricing becomes definitive. And in general, and I have reiterated this in the past, we tend to be a bit conservative when it comes to accruing for a future price.

Okay. That makes sense. And then just maybe on ophthalmology, curious what kinds of updates you can get from these studies at this point given they are both actively enrolling? I guess just a bit more on specifically what drove the modified dosing regimens and given the protocol amendments, curious if your comfort with the study powering has changed at all as well, either on NK or DDEB.

Yeah. No. As you can see, the powering and the number of patients have not changed. Because, I mean, we clearly know that, you know, from our blinded data what the effects are. So, know, give us confidence on from our data. With regards to, you know, again, KB801, we have 50% of our sites. I mean, we are targeting 30 sites. You know, we can maximize and optimize speeding up the process of enrollment. So with 60 patients, even, you know, on average of two patients per site, we should be good to go. So we have 50% of our sites up and running. And we are aggressively working on getting the other 50, which we should be, you know, I think all of them done in the next couple of months. I think with all of those sites up to speed, we feel confident in our enrollment. As we announced, we would enroll this complete enrollment of study by end of the year. And for KB803, again, we feel very good from what we saw in our initial blinded study. Again, same thing. Initially, it was designed to be administered by clinic physicians in the clinic. And, obviously, we realized that this has to be home for the study to be enrolled in patients' convenience. So we shifted from, you know, from in clinic to home dosing. And as a result, again, for the same logic goes beyond, we wanted to make sure that, you know, we know from the data we saw that you know, some flexibility would be beneficial for dosing for the patients because every day can be burdensome. I mean, they can have a volume, and then they can administer the entire volume a couple of times a week. So that gives us some flexibility. This is what we learned from, you know, there were lessons learned, and that helped us, you know, optimize the dose for KB803 in the clinic.

Hey, guys. Thanks for taking the questions. Also on the ocular modified dosing regimens, what happens to the data generated to date on the prior regimens? Like, does this all get pulled into the primary analysis of the study? And then can I just also confirm, you did not change the PFU or the volume of dose in either of the studies? Right? It is just the frequency. Correct.

No. Yeah. No. None of that changes. The dose is correct. So what happens is, basically, when we start the phase 3 protocol with the statistical analysis plan, we had to go through back and forth with the agency on the statistical analysis plan. There were a couple of iterations. So this helped us do that too. It is a combination. Now we have the final protocol, the agreed-upon statistical analysis plan with the agency, which they agreed and concurred. All of this is important as we start the study. So it is all set, and now it is in the process of execution.

Okay. So, like, just to be clear, if we just take the NK study, for KB801, like, all of those 60 patients, those are all going to be enrolled on a go-forward basis at this modified regimen. Correct.

That is correct. Yep.

Once again, if there are any questions or comments, please press 1 on your phone at this time. Thank you. We have reached the end of the question and answer session and today’s conference. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.