Earnings Call Transcript - KRYS Q1 2026

Operator, Operator

Thank you for standing by, and welcome to the Krystal Biotech First Quarter 2026 Conference 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.

Stephane Paquette, Vice President, Corporate Development

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the first quarter of 2026. The press release is available on our website at www.krystalbio.com. We also filed our earnings 8-K and 10-Q with the SEC earlier today. Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development; Laurent Goux, Executive Vice President and General Manager for Europe; Christine Wilson, Senior Vice President and Head of U.S. Commercial; and Kate Romano, Chief Accounting Officer. 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.

Krish Krishnan, Chairman and Chief Executive Officer

Good morning. It's now been 10 years since we founded Krystal. And in that time, we have worked to change the lives of DEB patients globally for the better, while building a durable, fully integrated company with the financial strength to continue delivering value for both patients and shareholders. We have done this with discipline. We've not accessed the capital markets since 2022. We maintained a strong balance sheet, and we continued to generate meaningful operating leverage. Yet more importantly, somewhat ironically, we believe the next 12 to 24 months represent one of the most exciting periods in Krystal's history. We are positioned for two registrational readouts this year and two more next year. I sincerely want to thank our employees for their dedication and execution that have brought us to this point. Now turning to VYJUVEK. We delivered another quarter of global revenue growth with net revenue of $116.4 million in the quarter. This brings cumulative net VYJUVEK revenue since launch to more than $846 million. We are particularly pleased with this performance, which represents a 9% sequential growth versus 4Q 2025 despite a higher-than-usual level of insurance changes, which happens, by the way, not just to us, but to many biotech commercial companies in the first quarter. Gross margin was 95%, and we delivered our 11th consecutive quarter of positive EPS. Outside the U.S., we're still early in the VYJUVEK launch in Europe and Japan, and I'm pleased with the progress overseas. We're also working to add two additional major European markets, Italy and Spain, later this year. Laurent and Christine will provide more detail on VYJUVEK commercial dynamics and the opportunity ahead in a moment. FDA has now granted platform technology designations to both KB407 for cystic fibrosis and KB111 for Hailey-Hailey disease. This is in addition to receiving the same designation for our NK program, KB801, last year. These designations have a profound implication for Krystal. At the program level, these designations allow us to streamline our interactions with the agency and our development plans. We've already seen the benefits with KB801 as the designation allowed us to rapidly advance KB801 into a registrational study. The platform implications are also powerful. These designations bring a compounding advantage. Each developmental milestone on our pipeline strengthens our collective regulatory data set and reduces development risk, cost and time for the next program we bring to the clinic. This advantage is presently unique to Krystal and one we intend to leverage to its full potential. You'll hear more about our development plans from Suma. I'll now turn it over to the team to provide details on the commercial launch and the clinical pipeline. Laurent?

Laurent Goux, Executive Vice President and General Manager, Europe

Thank you, Krish. We are very encouraged by the progress we are seeing outside the United States, where VYJUVEK is beginning to establish itself as an important treatment option for DEB patients in key international markets. When we think about the international launch, the story is not just one of geographic expansion. It is a story of building trust across cultures with physicians, with treatment centers, with payers and ultimately with the entire EB community who have been waiting for new options. There are nuances in every country we launch and sometimes within a country by region. That said, across Europe and Japan, we have seen strong word of mouth and increasing engagement from key centers that is raising awareness of VYJUVEK and helping translate physician interest into real patient demand. Importantly, our prescriber base continues to broaden. This gives more patients the opportunity to stop treatment closer to home, while also creating a more durable and resilient foundation for the launch. We estimate that more than 140 DDEB patients have been prescribed VYJUVEK across Germany, Japan and France. We believe this reflects both strong execution by our international team and growing physician confidence in VYJUVEK in the early launch market. This early momentum is also beginning to show financially. Europe plus Japan contributed $28.9 million in net revenue, demonstrating the meaningful role these regions can play in the growth of VYJUVEK over time. Looking ahead, our focus is clear. We are working to deepen penetration in our current launch markets, secure positive access and reimbursement outcomes and expand into additional major European markets. In Germany and France, pricing negotiations remain ongoing. We continue to expect a decision in Germany in the second half of 2026. In France, we continue to expect the decision in 2027, which would further support broader access and reimbursement stability. We are also advancing discussions with reimbursement authorities in Italy and are actively preparing for potential launch in the second half of 2026 pending the outcome of those negotiations. And in Spain, I'm pleased to report that our discussions with authorities have accelerated. Based on our latest interactions, we now see a potential opportunity to launch in Spain in the second half of the year, again pending the outcome of negotiations. In the interim, we are also responding to opportunities to treat patients on VYJUVEK through early reimbursement access pathways. Overall, we are very encouraged by the early traction we are seeing internationally. The launch is progressing market by market, physician by physician and patient by patient. We remain focused on disciplined execution of our global commercialization strategy and on bringing VYJUVEK to more DDEB patients around the world. I will now hand the call over to Christine to share updates on the VYJUVEK launch in the U.S. Christine?

Christine Wilson, Senior Vice President and Head of U.S. Commercial

Thank you, Laurent. Our team has been making great progress in recent months, building on our leadership position and delivering transformational outcomes for patients across the United States. Strong sales force execution is expanding our community reach and allowing us to meet patients wherever they seek care, whether that is at centers of excellence with a pediatric dermatologist or in the family practice office in the community. By bridging this gap, we have now been able to secure over 695 reimbursement approvals for DDEB patients nationwide, even as access teams were navigating a higher volume of insurance activity. Upstream demand metrics are even better, with over 60 new prescribers in the first quarter and 570 unique prescribers since launch, underpinning a strong patient start outlook for the rest of the year. Net VYJUVEK revenues for the United States were $87.5 million for the quarter. Revenues were impacted by insurance switchovers in the quarter, which are now behind us, as well as the start-stop treatment cadence characteristics of a patient population shifting toward a maintenance treatment regimen. With VYJUVEK now on the market in the United States for nearly three years, a growing number of patients have been able to achieve dramatic and transformational wound closure outcomes. Patients have been able to take control of their disease and their lives, opening up new opportunities and autonomy never before possible. These quality of life gains made possible by the robust efficacy and safety profile of VYJUVEK are deeply motivating and are the foundation for the long-term trust-based relationships we are building with the DDEB patient community. These improvements are also a natural and anticipated evolution of the launch as patient motivation and support needs shift to reflect their newfound autonomy. This is where the flexibility of VYJUVEK administration and last year's label updates are especially valuable, providing patients with the option to self-administer or receive nurse support care when they want it. To this end, we have launched patient support initiatives to communicate and educate around recent VYJUVEK label updates, which provide greater administration flexibility and help DDEB patients and families conveniently integrate VYJUVEK into lifelong treatment routines as part of their standard of care. Our goal is to establish long-term relationships with VYJUVEK patients, ensuring ongoing connectivity and ease of use throughout their lifelong treatment journey. Skin cells do turnover and wounds eventually reopen, particularly as patients get more active. As patients transition into these start and stop phases, we are focused on enabling timely access to VYJUVEK whenever it is needed. This focus is driving continued assessment of our infrastructure to better support patients where they are in their journey and to further enhance the ease of delivering VYJUVEK across the United States. At the recent American Academy of Dermatology Conference, key opinion leaders underscored their appreciation for VYJUVEK and the positive outcomes achieved by their treated patients. In a patient population where prior to VYJUVEK approval there were no treatment options beyond palliative care, VYJUVEK represents a meaningful advancement and is fueling an increased focus on the long-term clinical and quality of life benefits that might come with long-term VYJUVEK therapy. As we progress on our launch, we are excited about the opportunity ahead. There are still hundreds of known diagnosed patients we hope to bring to therapy and many more not yet identified that we believe could benefit from VYJUVEK. By driving new patient starts and maximizing convenience for patients already on therapy, we see an opportunity to deliver significant growth in the years ahead. With that, I'll turn the call over to Suma to share the leads on our development pipeline. Suma?

Suma Krishnan, President, Research and Development

Thank you, Christine, and good morning, everyone. I am excited to share that we are faced with two registrational study readouts expected later this year and two more in 2027. And with respect to the ophthalmology registrational readouts this year, we are excited to announce we completed enrollment in our registrational study evaluating KB803 for the treatment and prevention of corneal abrasions in DDEB patients, with a total of 16 patients enrolled in the study. IOLITE is a randomized, intrapatient double-blind, decentralized placebo-controlled study with a crossover design in which patients are randomized 1:1 to receive KB803 three times weekly for 12 weeks followed by placebo three times weekly for 12 weeks or vice versa. The primary efficacy endpoint, the change from baseline in the average number of days per month with symptoms, will be assessed at 24 weeks, putting us on a path for a readout in the fourth quarter of this year. This is an exciting milestone for our team and the many DDEB patients suffering from ocular complications of this terrible disease. Our second registrational study evaluating KB801 for the treatment of neurotrophic keratitis is also progressing well. Our focus here is operational: supporting our trial sites, expanding our network and driving enrollment. This is an eight-week study. We expect to enroll 60 patients and are on track for a data readout later this year. We are moving quickly on our broader pipeline as well, including the initiation of two open-label studies evaluating repeat dose KB807 and KB111, which we expect to read out later this year. Based on FDA interactions, we are initiating an open-label single-arm study to evaluate safety of repeat dose KB407 for 24 weeks in five patients with cystic fibrosis who are ineligible for, do not tolerate, or do not benefit from modulator therapy. Dosing is expected to start later this month. With strong backing from the Cystic Fibrosis Foundation, the CFF, we expect to complete enrollment in the study later this quarter and report data by the end of the year. Then concurrently, we are working closely with the FDA and the CFF on an innovative registrational study design and statistical analysis plan that may include prospectively collected natural history data from the CFF to supplement placebo-controlled data for evaluation of KB407 treatment effect. We will finalize the design and associated statistical analysis plan of the registrational study following alignment with the FDA, which we expect in the second half of 2026. We expect the registrational study to commence in the first half of 2027. Strong patient and key opinion leader engagement is also helping us move quickly on our KB111 program for the treatment of Hailey-Hailey disease. We are making steady progress on our HD severity scale and expect to complete both the development and validation in the first half of this year. We also plan to initiate an open-label safety KYANITE-1 to evaluate KB111 for 12 weeks in seven patients with Hailey-Hailey disease. We expect to dose the first patient later this month, and submit our registrational study design to the FDA in the second half of the year. Based on the current timeline, we expect the registrational study to start in 2027. Then we have our KB408 program for AATD lung disease and our KB707 program for non-small cell lung cancer, both advancing steadily in the clinic and on track for data updates later this year, including in the case of KB707, a data update at ASCO next month. Altogether, this sets up for six potential readouts before year-end, including two registrational study readouts.

Kathryn Romano, Chief Accounting Officer

Thank you, Suma and good morning, everyone. I'll now provide some highlights from our Q1 financial results reported in our press release and 10-Q filing earlier today. Net revenue from global sales of VYJUVEK was $116.4 million for the first quarter, which included sales from our commercial launches in Europe and Japan. This marked a 9% growth as compared to the prior quarter and was a 32% increase compared to the first quarter of 2025. Cost of goods sold for the quarter was $6.3 million compared to $5 million in the prior year's first quarter. Gross margin for the quarter was 95%, slightly up from 94% in 1Q 2025. We are seeing the benefits of manufacturing process improvements related to our U.S.-approved product and are actively working to achieve similar efficiencies for our other markets. R&D expenses for the quarter were $15.3 million compared to $14.3 million in the prior year's first quarter. This was driven mainly by payroll, materials and support costs for production runs across several product candidates. G&A expenses were $41 million compared to $32.6 million in the prior year. This $8.4 million increase was primarily due to increased headcount and related compensation expense as well as higher legal consulting and launch costs for VYJUVEK globally. Operating expenses for the quarter included noncash stock-based compensation of $13.6 million compared to $13.5 million in the first quarter of last year. The guidance we previously issued relating to non-GAAP operating expenses remains unchanged. We anticipate approximately $175 million to $195 million in non-GAAP R&D and SG&A expenses for the full year of 2026. Net income for the quarter was $55.9 million, which represented $1.91 per basic and $1.83 per diluted share. We are pleased to report growth as compared to the prior year's first quarter net income of $35.7 million and EPS of $1.24 per basic and $1.20 per diluted share. And finally, we continue to build on our strong cash position now exceeding $1 billion in combined cash and investments, which positions us well to support our pipeline and global commercial efforts. And with that, I'd like to turn the call back over to Krish.

Krish Krishnan, Chairman and Chief Executive Officer

Thanks, Kate. I want to circle back and underscore our excitement in the global VYJUVEK launch trajectory. While there are nuances to a launch in every country, for example, prescription renewal frequency in Japan in the first year, mandatory first physician visit and ongoing pricing negotiations in Europe or the start-stop paradigm in the U.S. that we're now starting to see three years into launch. But taken as a whole, all these geographies, the resilience in our launch dramatically increased the number of patients able to benefit from VYJUVEK and strengthens our conviction in the long-term growth outlook. Country-level fluctuations quarter-to-quarter are inevitable but mitigated by the diversification that geographic expansion brings. I am pleased that VYJUVEK continues to work well for patients living with DDEB, which, as you all know, is a devastating and debilitating disease. We're hearing meaningful stories from patients and families globally whose lives have improved, including patients who are now able to participate in activities they have never imagined before. Many are also able to pause weekly administration and return to treatment when wounds recur. We're deeply humbled to play a role in helping these patients and their families as they navigate a lifelong journey with this disease. And on the pipeline, we have multiple data readouts coming later this year, including two registrational readouts, initial repeat dose data from KB407 in cystic fibrosis and KB111 in Hailey-Hailey disease, along with data updates for KB707 in NSCLC and KB408 in AATD. So it's turning out to be a really busy clinical and commercial year for Krystal Biotech. Overall, we're set up for an exciting 2026. Thank you and May the 4th be with you. Operator?

Operator, Operator

Your first question comes from Roger Song with Jefferies.

Roger Song, Analyst, Jefferies

Great. Maybe just two questions, one related to the commercial and then the pipeline. For the commercial, looking at the 10-Q, you have U.S. 87.5% and then Europe 20.7%, Japan 8.1% seems a very strong launch ex-U.S. How should we think about the growth trajectory in the U.S. for the rest of 2026 and then how this strong trend in ex-U.S., Europe and Japan will continue for the rest of the year? I know long term, I totally hear you for the outlook, how about 2026? And then just quickly on the pipeline. On the CF 24-week data, what would be the endpoint for that data readout? And then what will be the key decision before you start a pivotal?

Krish Krishnan, Chairman and Chief Executive Officer

Thanks for your question, both super relevant. Yes, on the commercial and the U.S. As you can see from the reimbursement approvals, the top line demand continues to grow very nicely. I know we've previously said there's maybe about 1,200 identified patients and we're steadily marching towards that and even hope to get to that $720 million number by next quarter. So we're at 60% market share. And so the top line is growing well. What is a bit difficult to predict is the start-to-stop paradigm on a quarter-by-quarter basis. But the point I made in the call in my script was, look, patients are really happy with their experience on VYJUVEK. We've seen many instances of patients stopping and coming back on drug, which is what we had always wanted this to be — that's the tail on the drug. But on a quarter-by-quarter basis, it's really tough to predict the ups and downs. So you can have a down 1Q and up in the second quarter. But overall, we expect the trend to be in the positive direction.

Christine Wilson, Senior Vice President and Head of U.S. Commercial

Yes, if I may add, we're continuing to launch support programs that really educate patients and physicians on the label updates that will help these patients continue to integrate this into their daily life as we look to establish lifelong partnerships with these patients and support their ongoing trajectory with VYJUVEK as they start and stop through natural wound healing.

Suma Krishnan, President, Research and Development

I can take the cystic fibrosis question. Yes. We finished the single-dose study in these patients and were able to establish molecular correction. As we discussed in our last call, we are working collaboratively with the Cystic Fibrosis Foundation and the FDA. We met with the agency and they are convinced with our expression data. They seem to agree that we see positive expression. The only feedback that we got from the agency is that we don't have safety data regarding repeat dose administration. So in order to satisfy that requirement, we set up this interim five-patient study to establish safety in repeat dose administration in these patient populations. Obviously, in the interim, we are actively in discussion with the agency and the CFF regarding the design of the registrational trial. We are proposing an innovative trial design and we feel confident in our proposed study design. We hope to meet with the agency and get their feedback on this design so we can start the registrational trial early next year.

Krish Krishnan, Chairman and Chief Executive Officer

And Roger, on the global trajectory point you had, that's the point I wanted to emphasize. We feel really good about the direction of the global launch trajectory. Individual markets, especially mature markets like the U.S., are tough to predict quarter-to-quarter. It's also difficult on a quarterly basis to think about Japan up versus France versus Germany. But really, we feel very good about the overall global trajectory.

Operator, Operator

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

Matthew, Analyst, Bank of America (on for Alex)

This is Matthew on for Alex. First, on KB803, assuming positive data in the fourth quarter of this year, can you maybe speak to how we should think about the potential launch trajectory vis-à-vis VYJUVEK in terms of overlap with existing prescribers, patients, reimbursement or site-of-care dynamics? And then maybe one on Hailey-Hailey. In terms of the data that we should expect later this year and why the registration was pushed out to 2027, any commentary would be helpful.

Krish Krishnan, Chairman and Chief Executive Officer

Great. On KB803, look, you should expect a really positive launch trajectory because now that we have identified these patients, we have a good sense of who these patients are, the whole supply chain mechanism of getting the drug to a patient's home when needed, self-administration versus needing a nurse to administer — all the things in the launch have been ironed out. Should the drug get approved and the label reflect a strong profile, we expect the launch to be really positive. It's tough for me to quantify to what extent, but according to publications it affects about 50% of the recessive dystrophic population and maybe 10% to 15% of the dominant population, and there is evidence of many more patients having lesions in the eye. It is positioned somewhat like a prophylactic, and so we expect the launch to be very good if the drug gets approved.

Christine Wilson, Senior Vice President and Head of U.S. Commercial

I can take Hailey-Hailey. Hailey-Hailey is a disease that nobody has ever embarked upon in a significant way, so there was a learning curve and understanding needed. We have been in discussions with the agency and we came to an agreement on a patient-reported outcome scale. The agency wanted us to validate the scale, so we are in the process of validating it, which should be done shortly. In the process of validating the scale we reached out and have many patients willing to participate in this scale, creating a mini natural history database. Since we don't have clinical data yet, the best approach for us was to do a small Phase I study in five to six patients to collect safety, dosing regimen information and some scale validation data to thoroughly understand the disease and position ourselves for success in the registrational trial. I think the Phase I study will allow us to evaluate this patient population, the timing of evaluation and the robustness of the scale. We expect all of this to be established by the end of the year and then to get into the registrational trial early next year. The registrational trial should enroll quickly because we already have the patient population and the trial is decentralized with patient-reported endpoints; the drug is shipped to the patient's house. So because of the decentralized nature and the endpoint, we expect rapid enrollment once the registrational trial starts.

Operator, Operator

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

Joe Pantginis, Analyst, H.C. Wainwright

So Chris, at the end of your prepared comments, you started to highlight some of the key factors or differences with regard to ex-U.S. launch of VYJUVEK. I was hoping to get a little more color on that. Do you see any key education steps that are needed for ex-U.S. doctors versus the U.S.? What are some of the key negotiation points besides pricing or any other factors you'd like to highlight that might be different from the U.S. launch?

Krish Krishnan, Chairman and Chief Executive Officer

Thanks, Joe. Given that Europe launched after the U.S., a lot of physicians in Europe, especially in Germany, France and the countries we're going after like Italy and Spain, are already aware of the significant benefit that VYJUVEK has afforded to patients in the U.S. So bringing them up to speed on the disease, the benefits of VYJUVEK and how it works and how to apply it has been easier relative to the U.S., and that's true in Japan too. That part has helped accelerate launches in Spain and Italy given the voice of the physicians in these countries. With respect to negotiations, beyond the nature of the drug itself, which is very powerful and has clear clinical benefits, there are political and macroeconomic factors that come into negotiations in these countries. They have budgets for rare diseases. Negotiations have been progressing well and we've been able to make a compelling value proposition. We'll know the outcome first in Germany in the second half of this year, followed by maybe Italy. Those benchmarks will likely influence the direction of French, U.K. and Spanish pricing. All in all, given what we were able to do in Japan and the benefits of the drug, we feel very good about making a compelling value proposition. The question is always what macroeconomic factors in these countries could potentially influence our pricing.

Operator, Operator

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

Ritu Baral, Analyst, TD Cowen

I've got one on VYJUVEK and then a couple on cystic fibrosis. Krish, we have been hearing about insurance friction around the stop-start drug holidays where insurance companies are requiring documentation of reopened wounds or monitoring whether wounds are closed. Could you elaborate on insurance dynamics around stop and start and reauthorization of coverage? And then I have a couple on CF.

Krish Krishnan, Chairman and Chief Executive Officer

Yes. Since the launch, we've had no systemic issues with access to date, whether that's in terms of reimbursement, reauthorization, or start and stop. The start and stop decisions are made by the patient in consultation with their physician. But once they're ready to restart, we've had no delays with respect to getting them back on drug at all. So it's been really smooth — fingers crossed.

Ritu Baral, Analyst, TD Cowen

Okay. And then on CF, you mentioned that the enrolled patients include those that do not tolerate modulators or do not benefit from modulators. Are there prescribed definitions around either liver enzyme elevations or sweat chloride changes or longer retreatment periods that the FDA wanted? If so, why? And would it be possible to get functional data from these four-week patients ahead of pivotal?

Suma Krishnan, President, Research and Development

So Ritu, I'll answer that. Yes, we are enrolling patients who are modulator intolerant or who do not benefit from modulators. With regards to sweat chloride, I don't think there is a predictive marker in this context because we are nebulizing the drug; it directly goes into the lung and that's where the action is. We don't have systemic levels of measurement. We have many patients ready to go into the repeat dose study. Regarding the single-dose study, when we manufactured the first batch, the dose required multiple administrations to deliver the full dose, so we discussed with the agency and they recommended dividing the dose over four days. These four administrations were still considered a single dose for that study. For the repeat administration study we are proposing the same total dose delivered as a single administration in the future, but in the repeat dose trial we will administer the dose weekly as a single administration each week over the six-month period. The primary endpoint of the repeat dose study will be safety. We will also assess FEV1 and patient-reported outcome scales to evaluate benefit. We'll collect all of that data to inform the registrational trial design.

Operator, Operator

Your next question is from Yigal Nochomovitz with Citi.

Yigal Nochomovitz, Analyst, Citi

Just a few on Europe. Could you comment as to whether you've entered the second six months of the accrual phase in Germany, and with regard to Spain and Italy, could you clarify whether this will be a pricing-first model where there's no accrual, or will it be an accrual model where you'll launch and then negotiate similar to Germany and France? And then I have one other on KB803.

Krish Krishnan, Chairman and Chief Executive Officer

Yes, Laurent, do you want to start?

Laurent Goux, Executive Vice President and General Manager, Europe

Yes. On the pricing model in Italy and Spain, what we expect is definitive reimbursement in those countries, so it will not be the kind of advance accrual model like in France or Germany currently. With regard to the German situation, yes, we've entered the second six months of the launch accrual period, which is the first semester where we start accruing for future potential pricing.

Yigal Nochomovitz, Analyst, Citi

Okay. And then on KB803, can you comment on the natural history run-in data? Are those tracking with expectations? And any comments on the diary, the blinded symptom diaries in terms of compliance with logging during the trial?

Christine Wilson, Senior Vice President and Head of U.S. Commercial

Sure. We have a natural history study using the same diary that we are collecting prospectively. Once patients qualify for the randomized study, we move them into the main trial with a blinded diary and randomized treatment. The system is completely blinded — patients and investigators are blinded; only the pharmacy that performs randomization and ships product is unblinded for logistics. Patients continue to complete the diary on a weekly basis as they did in the natural history study, so they are familiar with the process. Our clinical operations team and our external CRO managing the diary support patients and follow up if any entries are missing to minimize missing data. So compliance has been managed closely and we maintain a blinded, rigorous data collection system.

Operator, Operator

Your next question for today is from Bill Maughan with Clear Street.

Bill Maughan, Analyst, Clear Street

So you mentioned in the press release that your 803 trial is powered to detect at least a 25% reduction in symptom days. How conservative would you describe that bar as being? Might we see a meaningfully larger separation and how much does that delta matter in terms of supporting commercialization down the road?

Christine Wilson, Senior Vice President and Head of U.S. Commercial

I think any improvement in these patients is meaningful because it's such a debilitating condition. When they have one of these abrasions or symptoms it can be severe and disrupt daily life for days. We have a prospective natural history study with over 100 patients that we've been collecting for over a year, which gives us a strong dataset to benchmark expected variability and patient patterns. Because we can leverage prospectively collected natural history data that mirrors the clinical study assessments, we have flexibility in our analysis plan. The crossover design and the prospective nature of the natural history data increase our ability to detect a drug effect. So while the study is powered for a 25% reduction, the combination of the crossover design and rich natural history data provides confidence in our ability to identify meaningful clinical benefit.

Bill Maughan, Analyst, Clear Street

And then with a large and growing cash balance, how are you looking at capital allocation right now?

Krish Krishnan, Chairman and Chief Executive Officer

Good question. Right now we are focused on growth — both commercial expansion globally and advancing our pipeline. We are not actively pursuing licensing or acquisitions at this time. Once we have greater visibility into the pipeline, especially for programs addressing large markets like KB408 and KB707 and when we have visibility into the launch of our next marketed product, we would consider share repurchase as a capital allocation option. But right now our priority is to invest in the business and the pipeline.

Operator, Operator

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

Gavin Clark-Gartner, Analyst, Evercore ISI

Krish, on KB803, I wanted to double-click on powering. For the 16 patients enrolled in the study from the natural history run-in, what was the average symptom days at baseline and what was the standard deviation observed in the natural history portion? On the powering side, you noted the study is 90% powered for a 25% reduction in symptom days — at what point would the study become 50% powered, or what's the minimum detectable benefit you think you could tease out in this trial?

Suma Krishnan, President, Research and Development

We looked at our natural history extensively and know the distribution and patterns. There is a subset of patients who have frequent and severe abrasions. Because we can select those patients based on the natural history data, that increases our ability to detect a drug effect. The crossover design further improves statistical power because each patient serves as their own control. Those considerations were taken into account in the sample size calculation and powering. The study was sized to detect a 25% reduction with 90% power given the observed variability in our natural history dataset. Selecting patients with a higher event rate is key to improving sensitivity, which is why the enrolled patients meet that inclusion criteria.

Operator, Operator

Your next question is from Joshua (Josh) with William Blair.

Josh, Analyst, William Blair

Congrats on the quarter. I have two questions on VYJUVEK. First, ever since the company allowed home administration in the U.S. at the end of Q4, what has been the impact of that on the start-stop dynamic? Has it been a driver in decreasing the stop-start behavior or affecting patient starts in the U.S.? Second, on the ex-U.S. launch in Spain, do you expect pricing in Spain to be similar to other European territories and how many patients does the company estimate can be addressed in that territory?

Christine Wilson, Senior Vice President and Head of U.S. Commercial

Thank you for the question. In terms of the label updates enabling home administration, it's been received very positively by both patients and physicians because it offers greater flexibility and choice. We've seen some patients who didn't initiate therapy early on because they were uncomfortable with a nurse visit now choose to start because of the option to self-administer. We've also seen patients transition from nursing support to self-administration. These changes have had a positive impact on patients' receptivity to VYJUVEK and have supported both starts and the ability to stop and re-start therapy as needed. The label updates help the therapy integrate more easily into daily routines and support longer-term adherence.

Laurent Goux, Executive Vice President and General Manager, Europe

On Spain specifically, we expect pricing to sit within the corridor that reflects the value of VYJUVEK and to be broadly consistent with other European countries, but negotiations are ongoing so it's difficult to be definitive at this stage. Regarding the number of patients in Spain, we would expect prevalence to be similar to other European countries on a per capita basis, so there is no expected difference in prevalence versus other European markets.

Operator, Operator

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.