Krystal Biotech, Inc. (KRYS) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Krystal Biotech 2Q 2026 Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to hand the conference over to your host, Stephane Paquette, Senior 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 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; [indiscernible], Executive Vice President and General Manager for Europe, Christine Wilson, Senior Vice President and Head of U.S. Commercial; and Kate Romano, Chief Account Officer. This conference call will and our response may contain forward-looking statements. You are cautioned not to rely on these forward-looking statements, which are based on current expectations using 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 Kris.

Good morning, and thank you for joining us. We were focused on execution in Q2, making solid progress across both our commercial and clinical programs. Internationally, strong underlying demand and high patient excitement underpin our launch. We're working diligently to meet that down and broaden access for DEB patients around the world. We're advancing pricing and reimbursement discussions in Germany, France, Italy, Spain and the U.K., while working through the country-specific requirements associated with each launch. In the United States, demand continues to grow, supported by our increasing focus on reaching patients and physicians in the community setting. Laurent and Christine will provide additional detail on our commercial performance and international launch progress. Our clinical pipeline is also advancing across multiple important programs. We currently have 2 registrational studies underway, our study in neurotropic keratitis and our study of ocular lesions in patients with dystrophic epidermolysis bullosa. In addition, our repeat dose studies in cystic fibrosis and [indiscernible] disease are progressing and assuming supportive data, we believe both programs have the potential to advance into registrational development in 2027. We're also making great progress with our Kb707 program in oncology. Our inhaled 707 formulation for the treatment of NSCLC is on track for a registrational study next year. And we are now evaluating our intratumoral KB707 formulation in [ Gorlin Syndrome, a ] rare skin indication that fits in well with our therapeutic focus and growing commercial footprint. Suma will provide a more comprehensive update on our clinical program shortly. Finally, we remain in a very strong financial position. Our continued financial strength reflects both the growing performance of our commercial business and the operating discipline we have maintained over the past 12 quarters. This allows us to invest confidently in global expansion and pipeline development while continuing to manage the business responsibly. With that, let's get into the details. Laurent?

Thank you, Krish. We are very encouraged by the recent progress in our video backlog, commercial momentum across Europe and Japan is strong and building, supported by growing physician familiarity, high engagement from leading treatment centers and sustained interest across the dystrophic epidomoleses below the community. In July, Krystal had a strong presence as the third world congress of rare skin diseases in France, including a well-attended symposium. This was another important step in building awareness and advancing our ambition to establish by JVC as an essential treatment for DEB patients. Demand is high in France, Germany and Japan and driving growth in both treated patients and treatment volumes. This growth also reflects the excellent work of our country teams as they navigate the access and operational dynamics unique to each market. In Germany, for example, the care landscape is fragmented and only a limited proportion of DAB patients are routinely seen at established spec centers. Our team is, therefore, engaging a broader network of physicians and supporting patients in continuing treatment at home. In France, VYJUVEK is available through the early access pathway where administration is currently concentrated in hospital settings due to the requirement associated with its GMO classification. Our team is working closely with centers to facilitate access and treatment continuity while exploring solutions that could support home administration over time. And in Japan, an important nuance is the requirement for intensive prescription renewal, which can put a heavy burden on patients in the first year of launch. We are working closely with prescribers and patients to ensure all stakeholders understand the importance of consistent weekly administration and minimize potential disruptions. Turning to revenues. Reported revenue in Europe and Japan was broadly flat in the quarter, primarily due to a reserve provision related to the ongoing pricing process in Germany. This does not change our assessment of the underlying launch trajectory or our confidence in the longer-term opportunity across Europe and worldwide, as we continue to grow patient and treatment volumes in our overseas market. Turning to market access. Pricing and reimbursement work continue across the EU. In Germany, Italy and Spain, we continue to expect key outcomes before the end of 2026, subject to each country's process. In France, formal pricing and reimbursement discussions are expected to progress into 2027. Our engagement with authorities remains constructive, and we believe VYJUVEK clinical evidence and potential value to patients provide a strong formation for these discussions. In the United Kingdom, we also achieved 2 important milestones. On May 15, the MHRA granted marketing authorization for [indiscernible] making it the first genetic medicine approved in the U.K. for [ DB. ] This was followed in June by VYJUVEK receiving the 2026 pre-gain U.K. award for best product for offering disease. This is the third regalia for VYJUVEK following similar recognitions in France and Italy last year. Together, these milestones reinforced the strength of the evidence supporting by VYJUVEK and it's significant for patients and fans living with EB. Our ultimate objective is sustainable patient access. IOLITE appraisal in the U.K. remains ongoing, and our team is engaging constructively to address Nic's question. and showcase the transformational benefit achievable with Baidu be. Finally, we are planning multiple additional regulatory submission in the coming months. including Switzerland and Australia, representing another step towards bringing VYJUVEK to more DEB patients globally. Overall, we are pleased with the momentum across our international business. we remain focused on disciplined execution, navigated market-specific challenges securing sustainable reimbursement and converting strong physician engagement and patient demand into durable patient-centered access. With that, I will hand the call over to [ Krystal. ]

Thank you, Laurent. I am pleased to report another strong quarter of commercial performance. U.S. net revenue was $91.6 million for the quarter. Our field team continues to perform exceptionally well as we extend our reach deeper into the community and across the country. Working in close partnership with health care providers nationwide, they are filling education gaps, raising awareness and helping us reach more patients through the debt community. To that end, I am also very happy to report that we have achieved more than 730 U.S. reimbursement approvals for VYJUVEK. We have now surpassed our initial penetration target of 60% and have no plans of stopping there. With a strong pace of approvals over the last year and a growing prescriber base, we expect continued penetration of the diagnosed teb patient pool in the quarters to come. In addition to driving new patient starts, we continue to strengthen our patient engagement efforts to help patients and caregivers successfully incorporate Tiger back into their long-term wound care routines. Based on ongoing feedback from the dev community, we know that virtual education and peer-to-peer connection remain preferred ways to access information and support. As a result, we continue to invest in scalable community-driven programs that educate, engage and empower patients through their treatment journey. During the second quarter, we partnered with Debra America to host a virtual education webinar focused on recent Figer back label updates and practical vantaging techniques presented by our Krystal Connect team. The program was developed in direct response to questions from the patient community as treatment needs continue to evolve. As more patients achieve complete room closure, in larger wound areas and transition to managing smaller or more anatomically challenging wounds, including the scalp, years and other sensitive locations, the educational needs of patients and caregivers continue to change. The webinar attracted more than 100 live attendees and remain available on demand, extending its impact across the debt community. Our VYJUVEK Voices program continues to provide peer-to-peer education and support by connecting patients and caregivers with trained ambassadors who share first-hand experience, practical insights and ongoing encouragement through the treatment journey. During the quarter, we also launched VYJUVEK Connections, a virtual discussion series that brings together patients, caregivers and Bijevec ambassadors to discuss topic selected by the community. These sessions foster meaningful peer engagement while addressing the real-world questions that arise as patients gain experience with therapy. Collectively, these initiatives support patients as they adopt greater self-administration at home, following our recent label expansion and further integrate VYJUVEK into their long-term treatment routine. These programs also provide Krystal with valuable real-world insights into the evolving needs of the Dev community, enabling us to continuously refine and strengthen our patient engagement strategy. Just a few weeks ago, we were also proud to serve as a diamond sponsor of the Deborah America Care Conference, 1 of the largest gatherings of the EB community. The conference provided an important opportunity to engage directly with patients, caregivers, health care professionals and advocacy leaders. These interactions not only strengthen our connection with the community but also allow us to see firsthand the meaningful impact VYJUVEK continues to have on patients' lives. These advancements, combined with our continued investment in patient support, education and community engagement further strengthen our reach and impact as we establish VYJUVEK as the long-term standard of care for patients living with Deb. I will now hand the call off to Suma to share pipeline highlights.

Thank you, Christine, and good morning, everyone. I'm happy to share today's update and our progress. Thanks to the tireless commitment of our team, -- we are rapidly approaching 2 registrational study readouts in the front of the eye. These readouts have exciting implications both for the patients we aim to serve as well as our platform. Due to the rapid cell turnover and protein clearance, the front of the high has historically been a difficult to target with gene therapies and biologics. Our HSV-1 vectors which we easily and repeatedly administered as an eye drop are uniquely positioned to fill this treatment gap. In sentinel patient cases, repeat dosing of our vectors has been well tolerated and delivered profound clinical improvement, underscoring the therapeutic potential of our HSV 1-based approach. With our registrational programs for KB-803 and KD801 mirroring readouts, we are on the cusp of validating that potential. Our registrational ELITE study evaluating KB803 in debt patients was fully enrolled in April and is on track for a readout later this year. On success, we expect to move rapidly to BLA submission, leveraging the extensive CMC work already completed for VYJUVEK. Our registrational [indiscernible] study evaluating KB801 in NK patients is also progressing well. We expect to complete enrollment before year-end and given the short 8-week primary endpoint, we expect a readout soon thereafter. Our KB 407 and KB11 programs are advancing on similar time lines to deliver clinical data this year and registrational study start in 2027. Dosing is underway in our open-label single-arm study, evaluating the safety of repeat dose 47 in patients with cystic fibrosis who are either ineligible or refractory to modulator therapy. We expect to enroll approximately 5 patients and report interim results before year-end. We are also working with the FDA, the Cystic Fibrosis Foundation and the CF Therapeutic Development Network Coordinating Center or TD -- on our innovative registrational study design, we are making good progress on the details of our design and statistical analysis plan. We expect study design alignment later this year and registrational study start in 2027. Dosing is also underway in our open label single-arm study evaluating the safety of repeat dose. KD111and in patients with Haley heavy disease. We expect to enroll approximately 7 patients and report interim results before year-end. VF completed development of our HD assessment scale and validations are now underway. Altogether, we are on track to discuss our repeat dosing, safety results, scale and study design with the FDA before the end of the year. again enabling a registeral study start in 2027. We look forward to sharing clinical updates on both programs in the coming months as we work to deliver meaningful benefits to the 10 of thousands of patients with untreated cystic fibrosis or Haley Haley disease. In addition to our work in rare disease, we continue to advance our broader pipeline which leverages the flexibility of HC1 to target more common diseases of the lung, skin and I. The most advanced of this program in our InHealth KB 707 program, for treatment of non-small cell lung cancer, or NSCLC, inhale KB 707 is currently under investigation in our Phase I/II dose escalation and expansion study INI-1. Last year, we disclosed the EMALKB707, a monotherapy achieved 36% response rate in heavily treated late-line NSCLC patients. In [indiscernible], KB 707 was also generally well tolerated with a safety profile amenable to outpatient management. At ASCO this year, we provided a clinical update on our dose expansion cohort evaluating KB 707 in combination with pembrolizumab -- we again saw strong response in late-line SCLC basins with an objective response rate of 31% and encouraging durability. Response will achieve a diverse array of tumor types, including those with driver mutation, squamous histology and low PD-L1 expression. The combination regimen was also well tolerated, a positive indicator for KB 707 combination potential with checkpoint inhibitors and immunotherapies more broadly. We expect to complete enrollment in our final dose expansion cohort evaluating inhaled KB707 in combination with chemotherapy later this year. Once data from this cohort is available, we expect to have full information needed to finalize and initiate a registrational study in second-line NSCLC, expected in 2027. We are also moving intratumoral [indiscernible] forward, building on early signals of efficacy in patients with basal cell carcinoma from a Phase I/II O-1 study, we expanded the scope of OPI to evaluate intratumor KB 707 in patients with Carlin syndrome. Collin syndrome is a rare genetic disease, which imposes a heavy burden on patients dramatically increasing the risk of developing basal cell carcinoma. Patients with Gorlin syndrome can suffer from hundreds of DCCs over their lifetimes, requiring frequent and potential disfiguring surgeries. There is no specific therapy approved for Golin and as a result, that exists a clear and urgent need for a safe and effective therapy that reduces PCC burden for these patients. We have now enrolled 3 patients with Collin syndrome and expect to provide a clinical update on these patients as well as our development plan in Golan later this year. with multiple registrational study read out and start upcoming as well as growing momentum in our oncology pipeline, we are uniquely positioned to deliver transformational impact to patients. This is in addition to our ongoing work on alpha-1 antitrypsin lung disease, aesthetics and earlier stage 3 clinical programs. We look toward to sharing many updates in the months ahead. With that, I'll hand the call over to Kate.

Thank you, Suma, and good morning, everyone. I'll now provide some highlights from our second quarter financial results as reported in our press release and 10-Q filing earlier today. Net revenue from global sales of Wisbech was $119.2 million for the quarter, which included sales from our commercial launches in Europe and Japan, as compared to $96 million or a 24% increase from the second quarter of 2025. Note that this quarter also included a full quarter of accrued pricing for Germany, as we started our pricing negotiations mid last quarter, which contributed to reduced quarter-over-quarter net European revenue despite growth in related via sales. Cost of goods sold for the quarter was $6.4 million compared to $7.2 million in the prior year second quarter. Gross margin for the quarter was 95% and improved from 93% in the second quarter of 2025. R&D expenses for the quarter were $14.5 million, which was essentially flat to the prior year of $14.4 million. G&A expenses were $39.9 million compared to $35.1 million in the prior year. This $4.8 million increase was primarily due to increased head count and related compensation expense as well as commercial costs related to global sales of Vivek. Operating expenses for the quarter included noncash stock-based compensation of $14.2 million compared to $14.1 million in the second quarter of last year. Net income for the quarter was $54.8 million, which represented $1.85 per basic and $1.79 per diluted share. This marks an increase compared to the prior year second quarter net income of $38.3 million and EPS of $1.33 per basic and $1.29 per diluted share. I'll also note that the guidance we previously issued relating to non-GAAP operating expenses remains unchanged. We continue to expect to incur in the range of $175 million to $195 million in non-GAAP R&D and SG&A expenses for the full year of 2026. And finally, we continue to further strengthen our cash and investments foundation, now exceeding $1.1 billion in overall cash and investments. We remain committed to thoughtfully and efficiently deploying our capital as we execute on our upcoming pipeline milestones and continued global commercial strategy. And with that, I'd like to turn the call back over to Krsh.

Thanks, Kate. To summarize on the commercial side, we're working through typical overseas launch dynamics, including accruals and pricing negotiations as we build the foundation to sustain our launch for the years to come. We're confident that the work we're doing this year will put us in a position to provide access to thousands of patients worldwide and provide a clear path for VYJUVEK to reach its full commercial potential. On the clinical side, we're focused on completing the ongoing registrational trials and initiating at least 2 more registrational trials in 2027. When we do that in the next 12 to 18 months, Crystal has the potential to transition from a commercial success story into a multiproduct generic medicines company. Thank you, and we're now ready to answer questions.

[Operator Instructions] Your first question for today is from Roger Song with Jefferies.

Great. Congrats for the quarter -- maybe 1 for commercial 1 for pipeline. For the commercial side, seeing the European sales down a little bit from the first quarter, understanding some pricing dynamics. Can you just give us some color around the demand side and then maybe the compliance between Germany and France, that would be very helpful. And then on the pipeline, [indiscernible] seems very interesting indications and appreciated right now -- so given you will have Phase I data by year-end. So how should we -- what should we expect from that data readout -- and then also what the current thinking about the epidemiology and then overall market opportunity for [indiscernible]?

Roger, thanks for the question. Laurent, do you want to take a first stab at the European question?

Yes. As we said earlier, the market dynamics are pretty strong. We have been -- we're facing a strong growth in both patient inclusion and volume. -- and the overall revenues, the full quarter of the German reserve for the future Laurent,..

Laurent do you want to make any comment on demand because there was a question on demand?

I mean the main is strong. Yes, the and the to over 180 patients have been treated in Western Europe and Japan. -- so far. So we are -- but as we are expanding in more centers and countries, it is more and more difficult to have a precise estimation in Europe. So that's why we might not have explicitly given the number. And I will add, Roger, just to close on that. I think compliance in the early days of launch in any country tends to be really good as we start off treating CBF patients. So your comment on -- your question on compliance in Germany and France, we see pretty good strong compliance similar to what we saw in the U.S.

I can take the heel. Clearly, is an interesting disease. I mean, again, underappreciated not well study, there's not a lot of information in the literature or -- but this is -- the beauty of this is we have done a natural history study. It's been 5 months. We have over 60 to 70 patients already enrolled in this natural history because we use these patients to understand the disease. We've been collecting data over the past 4 to 5 months. So we have extensive knowledge and understanding now about the disease cycle time and all of that good stuff. And we've also used these patients to obviously validate our scale. So we -- as you can tell, we are nearing the end of the valscale validation. We feel pretty confident like now we understand the disease and what the endpoints we should go after. We have -- obviously, we have also put together the scientific experts and KOLs in the space together develop the scale and also to the endpoint. So the Phase I study is basically what we learned from the nature. So we have already -- most of the patients already everybody is excited to be part of this trial. So we have no problem enrolling. We have already got patients on the study and started dosing them. So we will, again, through imaging and investigators evaluation over 3 months, just like we did with Viewer, pretty similar. Again, it's going to be a gel. And we have learned a lot from VYJUVEK how to administer, how to have these patients maintain the treatment and use the right bandages. It's very useful. It is very easy for us to take the VYJUVEK experience into Haley Harley. And I think very -- in the 3 months, we will look at treated versus non-treated. We also have biopsy patients at baseline and see some sort of correction of the treated areas. So I think we will have enough data for us to basically then sit with the agency and let them know what the endpoints are because the FDA has no idea. So we are going to let them know based on our data that we generated. We're going to propose the end point and we expect to start registrational style early next year. As I said, we have over 60 to 70 patients already in our natural history, and we continue to new patients continue to enroll into that study.

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

And good to see all the progress in the quarter. I guess First, maybe on NK, could you talk a bit about the patient treated with KB 801 that had a complete closure? Is this patient still being followed? And I guess, how does their disease stage or demographic compared to the population that's being enrolled in Emerald One? And then on CF, just on the 5 patients and follow-up study. Could you maybe just remind us what kind of functional metrics the study is designed to show or is it maybe more around the dosing PK side, just hoping to link the CFTR expression to improve lung function. But possible this is maybe something we see more with the typical study.

Alex, before Suma gets into the comment on NK patients, I want to say, look, it was a legal requirement that made us disclose that one patient data stemming from some of the patent disclosures that ensued as we were supporting the patent with clinical information. We have always said and expressed to not have the investment community read too much into a single patient data. I mean the data was fantastic on a single patient. But it is a one patient data and the new study that we are working on is a different design. And so with that, I'll turn it over to Suma.

Correct. Okay. This patient, again, was chronic at chronic molding in the high, I mean, some is records. We treated it treated the patient, obviously, you can see that there was complete closure, and we monitor this patient over a couple of weeks after, and we see durability of that wound healing. So -- and the patient has -- I mean, we are done with this patient because that study got closed out. And as -- in the past, we've explained why we changed the dosing regimen because it made more sense to give daily. It's just for not least for compliance and it makes sense when you're administering them into the eye. These are older patients to maximize the dose and there was no safety concerns. So again, very similar population. We want to make sure that we get patients that have chronic wound healing because that's important because if you want to separate from placebo, you want to treat those patients with when you express NGF, you're going to see that the better effect or the efficacy from that drug when we compared to placebo. We're really excited because we opened this trial to globally. We have filed our CTA and we have identified several sites across EU. We want to expand it because we think we want to go for a global trial, just like we did with VYJUVEK that and hope to get approval just if everything is successful, not just in the U.S. but globally. So that's the intent for the MKS study. On the CF -- Sorry, on the C, again, as we have said earlier in our previous calls, the intent of this study is, I mean, as per our discussions, which is ongoing with we definitely wanted to see some repeat dosing data in these patients. So we are -- we have enrolled in those patients already. We expect to enroll 5 patients -- and this is going to be a weekly repeat dosing study. They come in monthly, and we check for FEV1 and other safety outcomes. So it's going to be a measurement of FEV1 over 6 months, every month the patient comes in and hopefully, by 6 months, we'll have data on what happens with repeat dosing and what's the improvement in this patient. And again, remember, we are enrolling really sick patients, these patients that very low FEV1. They have no other options, so the all patients and patients that have no other option today. So it's a very situation population with high demand.

Your next question for today is from Yigal Nochomovitz with Citi Group.

I'm just wondering if you could be perhaps a little more specific with respect to the progress in Germany in terms of the quarter-over-quarter vial growth, the demand growth relative to the accrual process and what the headwind is on the accrual given that starting in 2Q, I believe that was accrual throughout the quarter. And then on NK, if you could just clarify, it sounds like you're going to finish enrollment before the end of the year and then 8 weeks to the endpoint. But it appears I'm correct that the data will be likely in early 2017? Or could it still be in this year?

Laurent, do you want to take the German question?

Yes. We don't provide country-by-country details for number of patients and revenues, but German -- the dynamic in terms of patient inclusion and vial increase is very solid in Germany.

and Yigal on the accrual process, look, we are expecting at this moment to complete negotiations in Q3, pricing negotiations in Germany. -- and assuming successful completion of negotiation, the impact of accrual, I mean, our whole objective is to be conservative in the approval and get it over with once the pricing is established in Germany. So we did experience some accrual in the first half of completely in Q2 and maybe a partial in Q3 and hopefully, by the time Q4 comes around, we'll be back to an actual net revenue number in Germany. On NK Suma.