Krystal Biotech, Inc. Stock

Good morning, and thank you for standing by, and welcome to Krystal Biotech's Third Quarter 2026 Earnings 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, Chief -- sorry, 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 third 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 will and our responses to questions may contain forward-looking statements.

You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings. With that, I'll turn the call over to Krish.

Good morning, and thank you for joining us. Q3 was another strong Q for Krystal. We delivered $127.3 million in VYJUVEK revenue, an increase of 30% from the same period last year and reported diluted earnings of $2.05 a share and ended September with $1.2 billion in cash and investments. Those results, they reflect a business that's growing, that's profitable and generating the resources to advance our pipeline. They also reflect the work our teams have done to build Krystal into a global company with commercial operations, manufacturing capabilities, clinical development programs that we own and control. And to date, we have generated approximately $1.1 billion in VYJUVEK revenue since launch, and that is an important milestone for a medicine developed here at Krystal.

Behind that number are so many patients receiving treatment, physicians incorporating a new paradigm of genetic medicines into their practices and families getting access to a medicine that addresses the underlying cause of DEB. In the U.S., demand continues to grow as does the prescribing physician base. And internationally, we continue to translate physician interest into patient starts across Germany, France and Japan. The pricing secured by VYJUVEK in Japan and Germany and Italy to date reflects recognition of the meaningful benefits that VYJUVEK provides patients and families.

I'm proud of our team's thoughtful work to demonstrate that value and establish a strong foundation for patient access internationally. We'll continue to build on this progress in ensuing pricing discussions across additional markets, and Laurent will discuss those markets in more detail. We also made meaningful progress in development. We were really encouraged by the recent Gorlin Syndrome clinical results that demonstrated progression in both injected and non-injected lesions together with the histologically confirmed clearance of an injected lesion in each patient. So that gives us a very strong foundation to have conversations with the FDA on next steps. I want to address the updated timing of some of our clinical readouts. And while we had hoped to share these readouts sooner, I want to be clear that the programs continue to progress well, and we look forward to sharing results in the upcoming months. Suma will elaborate more in a few minutes.

Alongside these developments, our Board authorized a share repurchase program of up to $400 million that we expect to deploy over the next 2 years. We have reached a position where our financial resources allow us to support global commercial expansion, pipeline and clinical development and have the flexibility to return capital to shareholders. And the authorization reflects our confidence in Krystal's long-term prospects and our responsibility to allocate this capital thoughtfully. So taken all together, this Q demonstrated the strength of the business we've built. It demonstrated continued commercial growth, substantial profitability and progress across the pipeline. For that, I'd like to thank our employees, our investigators and the patients and families participating in our studies for helping make that progress possible. And with that, I'll turn it over to our team to walk through commercial, clinical and financial updates.

Thank you, Krish. VYJUVEK international revenue reached $32 million in the third quarter. We continue to translate physician interest into patient starts while strengthening the growth foundation through reimbursement progress and greater access to treatment at home. In Germany, pricing negotiations have concluded, providing greater visibility as we expand our reach across the country. More than 20 centers have now initiated patients on VYJUVEK, up circa 15% from last quarter. Doing so, we continue to broaden the treatment network to reach patients who are not routinely seen at established expert centers.

In France, we achieved an important milestone with the first home administration through the retrocession pathway. This creates an opportunity to reduce the practical burden of treatment on patients and families and support treatment continuity. We are now working to expand this approach to additional eligible patients and centers while national pricing discussions continue. And in Japan, our team is making steady progress, bringing new patients to treatment and expanding our prescriber network. We are also advancing support initiatives to help the EB community maximize the potential benefits of VYJUVEK therapy and navigate the complexity of VYJUVEK's GMO status.

Looking ahead, pricing and reimbursement negotiations in Italy have also concluded, and we now expect to launch VYJUVEK in early 2027. In Spain, pricing discussions are progressing with a decision expected before the end of the year. Some patients already have access through exceptional regional funding arrangements, providing a foundation for a potential launch next year. We are also advancing regulatory and market access activities in additional countries to expand VYJUVEK's reach over time. Taken together, these developments give us confidence in the international opportunity.

Health systems are recognizing VYJUVEK's value, physicians are gaining treatment experience and barriers to administration are beginning to come down. Our focus is on turning that progress into more patients starting and continuing treatment. With that, I'll hand the call over to Christine.

Thank you, Laurent. U.S. net revenue for the third quarter was $95.3 million, reflecting continued demand for VYJUVEK and our efforts to reach more patients. We have now secured more than 760 reimbursement approvals nationwide. During the quarter, we added over 80 new prescribers. This expanding physician base supports continued adoption, and we believe substantial opportunity remains among diagnosed patients who have not yet started treatment as well as those who remain undiagnosed or misdiagnosed. We are also seeing the benefits of greater treatment flexibility. Approximately 80% of patients now self-administer VYJUVEK, helping patients and caregivers incorporate treatment into their wound care routines at home.

As patients gain experience, our focus extends beyond treatment initiation to supporting continued use as their wound care needs evolve. Our VYJUVEK voices and VYJUVEK connection programs provide education, practical support and opportunities for patients and caregivers to learn from one another. Engagement with physicians, advocacy organizations and the broader DEB community also helps us understand barriers to treatment and improve the support we provide. Looking ahead, our priorities remain clear: reach more patients, expand the prescribing network and support long-term treatment. With continued demand, a growing physician base and greater flexibility in administration, we believe VYJUVEK is well positioned for sustained U.S. growth.

We are proud of the progress we have made and excited about the opportunities ahead as we continue working to establish VYJUVEK as the long-term standard of care for patients living with DEB. With that, I'll turn the call over to Suma.

Thank you, Christine, and good morning, everyone. We have encouraging progress to share this morning, including our initial Gorlin syndrome results, the upcoming Hailey-Hailey readout and the ongoing dosing in cystic fibrosis. But before I get into the update, I want to acknowledge that some clinical results are going to take a bit longer than we initially expected. We recognize the importance of these milestones. Our teams are working diligently to advance each study, and we look forward to sharing the data as they become available. Importantly, the studies themselves are progressing well, and we remain encouraged by their eventual outcome. I'll walk through our rationale and expectations from here shortly.

With that, I would like to start today's update with the latest addition to our pipeline, KB-113 for Gorlin syndrome. Gorlin syndrome is a rare genetic disease estimated to affect more than 10,000 Americans. Patients can develop hundreds of basal cell carcinomas or BCCs over their lifetime, requiring repeated surgeries that can lead to tissue loss, disfigurement and significant psychological burden. With no therapy specifically approved for Gorlin syndrome, there is a substantial need for a safe, effective treatment to reduce BCC burden. KB707 is our HSV1-based immunotherapy designed to drive sustained localized expression of human IL-2 and IL-12 in the tumor microenvironment and promote systemic immune-mediated tumor clearance.

We recently completed a pilot study evaluating a low dose of intratumoral KD707 which we now refer to as KB113 in 3 adult patients with Gorlin syndrome. Each received 6 doses over 14 weeks. Investigators assess regression in both injected and non-injected landmark BCCs throughout treatment and 30 days after the final dose using a prespecified 5-point scale. Profound treatment benefits were observed following KB113 treatment, including broad antitumor responses in all 3 Gorlin syndrome patients. As summarized in the table on the left, over 80% of the assessed patients regressed over the course of the study and more than half of all lesions regressed by over 50%. Critically, substantial regression was observed in lesions that were never directly injected, providing preliminary evidence of systemic immune activation and an abscopal effect.

Investigators also reported that a meaningful proportion, roughly 10% of all assessed tumors had shrunk by at least 90%, indicating potential for tumor eradication with KB113 treatment. To further assess depth of response, 1 injected tumor from each patient was biopsied for histological assessment. In all 3 cases, complete clearance was confirmed with no evidence of residual tumor tissue in the biopsy. Images shown on the right highlight the rapid improvement achieved in Gorlin patients with KB113 and add to the body of evidence suggesting significant potential for KB113 to dramatically reduce PCC burden in patients with Gorlin syndrome. With the addition of KB113 to our pipeline, we are now building out a robust development effort in rare dermatology diseases, an area we know well and where we can move fast.

In the case of KB113, we have already started engaging with FDA regarding potential clinical development pathways in Gorlin syndrome. We will share an update on our plans once aligned with the FDA. We are also making good progress on our KB111 program for HHD. We have completed enrollment of 5 patients in our repeat dose study for HALITE-1 and expect to share a data update before year-end. We then expect to meet with the FDA to discuss next steps. Turning to our ophthalmology pipeline. I want to start by saying that both NK program and the ophthalmic VJUVEK programs are progressing well. In the case of KB803, we enrolled 3 additional patients in our registrational IOLITE study. Two of these additional patients have been enrolled to replace 2 patients who withdrew for reasons unrelated to safety. The third patient, a child 1 year of age, was enrolled to generate evidence to support potential treatment of corneal abrations in DEB patients from birth.

We now expect that the last patient last visit in February 2027 with top line results to be reported shortly thereafter. In KB801 for NK patients, enrollment has progressed more slowly than we initially anticipated, reflecting the study's narrowly defined eligibility criteria and the challenges of enrolling patients in a placebo-controlled trial in an indication with an available approved therapy. We are also working diligently to expand our clinical trial infrastructure. We have activated 22 sites in the United States, and we are close to activating sites in France, Spain and United Kingdom. With continued investment and expansion of our trial network, we now expect to complete the enrollment and report top line results in 2027.

In the lung, we are steadily advancing our program in CF and AATD. Starting with KB407 in CF, we are currently dosing 3 patients in our repeat dose study and expect to enroll and dose 3 additional patients before the year-end. Based on this enrollment timeline, we now anticipate interim study results in the first half of 2027. We are progressing in parallel our discussion with the FDA regarding a potential registrational study design, having recently been selected for FDA's Complex Innovative Design Meeting Program. This is enabling intensive FDA engagement and has us on track for a 27 registrational study start. We also continue to enroll in our KB408 repeat dose study and are on track to report interim data next year. The successful gene delivery already confirmed by biopsies for both KB407 and KB408, we believe we are uniquely positioned to fill urgent treatment gaps for CF and AATD patients. We look forward to sharing more in 2027.

Finally, we are making great progress on our inhaled KB707 program, enrolling patients with advanced NSCLC in the global KYANITE-1 expansion cohort evaluating inhaled KB707 plus chemotherapy. We have completed dose optimization in 10 patients to inform chemotherapy dose selection and expect to enroll and dose 70 patients at the selected regimen by mid-2027. Results from this cohort will help us finalize our plans for subsequent registrational study of KB707. Each disease that we are targeting with our pipeline is an urgent unmet need. We recognize the importance of progressing deliberately and quickly to fill these treatment gaps. With our expanded R&D infrastructure, I'm confident that we can deliver on our ambitions and dramatically grow our impact. With that, I'll hand the call over to Kate.

Thank you, Suma. I'll now provide a few additional highlights from our third quarter financial results as reported in our press release and 10-Q filing earlier today. Net revenue from global sales of VYJUVEK was $127.3 million for the quarter, driven by the continued growth from our Europe and Japan launches and representing a 30% increase over the prior year's third quarter of $97.8 million, which included only a partial quarter of sales from Europe and excludes sales from Japan. Cost of goods sold for the quarter was $7.6 million compared to $4.3 million in the prior year's third quarter. Gross margin for the quarter was 94% as compared to 96% in the third quarter of 2025. The 2% decrease in gross margin was due in part to the increase in sales of products in Europe and Japan, which do not yet benefit from manufacturing process optimizations approved in the U.S. as well as the sale of lower cost R&D batches in the prior year quarter following FDA approval of the optimized process.

R&D expenses for the quarter were $14.9 million compared to the prior year of $14.6 million. G&A expenses were $33.7 million compared to $37.6 million in the prior year's third quarter. This $3.8 million decrease was primarily due to the receipt of insurance proceeds as reimbursement of legal costs previously incurred along with a reduction in period-over-period legal costs, professional service fees and marketing costs, offset by increased payroll costs. Operating expenses for the quarter included noncash stock-based compensation of $13.9 million compared to $13.2 million in the third quarter of last year. Net income for the quarter was $63.1 million, which represented $2.13 per basic and $2.05 per diluted share.

In the third quarter of 2025, net income was $79.4 million and EPS was $2.74 per basic and $2.66 per diluted share. In the third quarter of last year, we had released a majority of the valuation allowance that was historically recorded against our deferred tax assets, and we also benefited from the reversal of the Section 174 R&D capitalization requirement under the One Big Beautiful Bill legislation. Both of these items were nonrecurring. Looking ahead to the remainder of the year, we are also revising our full year non-GAAP R&D and SG&A guidance to $155 million to $165 million from our prior guidance of $175 million to $195 -- and finally, we continue to build on our solid financial position, now exceeding $1.2 billion in overall cash and investments. With this foundation, we remain focused on disciplined capital allocation to support our pipeline and global commercial strategy while maintaining the ability to return capital to shareholders through our newly authorized share repurchase program. And now I'll turn the call back over to Krish.

What excites me most is the opportunity we have to build a company whose impact extends well beyond its first medicine. And with each program, we can apply what we've learned, deepen our capabilities and pursue additional diseases where patients need better options. With pricing negotiations behind us in Japan, Germany and Italy, we can now more clearly see meaningful room for VYJUVEK growth internationally. We have a rich pipeline with several important readouts in the upcoming months. And as I said before, the initial Gorlin findings are very encouraging, and we look forward to the upcoming Hailey-Hailey results along with CF and NK. Each program will generate evidence that helps us determine how best to bring additional medicine to patients.

Financially, we've put ourselves in a good place. The growing commercial business allows us to invest not just in global expansion, but also in development and buy back shares opportunistically. And so we'll allocate capital with a clear focus on building lasting value per share. I'm confident in Krystal's future. We have a strong foundation. We have the resources to invest and a team that's super committed to turning scientific potential into meaningful medicines. -- and our responsibility is to translate all those strengths into more patients treated. So thank you to the employees, the patients, investigators and our shareholders for your continued support, and I'll open the call up for questions.

Thank you. [Operator Instructions] Our first question today is coming from Lachlan Hanbury-Brown with William Blair.

On all the progress. I guess first question maybe on KB407. You said you're enrolling an additional 3 patients. I was wondering on the rationale for that. I mean, are you going to test a different dose? Is there something that you've seen in the first few patients that makes you a larger sample here? And then on the second question, wondering about Japan. Krish, you've talked in the past about how the sort of first year restrictions can limit adoption. So as we kind of approach that 1-year mark, wondering how we should think about the sort of acceleration of growth in Japan moving forward?

Thanks Lachan for the question, Suma?

Yes, I can address the KB803, sorry, I can address the KB407 question, sorry, KB407. Yes, I mean, we have 3 patients right now. They're ongoing on the repeat dosing. It has nothing to do with the dose. I mean we are very excited. I mean these patients are tolerating repeat dose. That was one of the biggest questions we had to address the -- with regarding to safety. And obviously, we're collecting FEV1 data.

The enrollment for these additional 3 patients are going to happen this year. Unfortunately, it was a little slow because some of the patients that were supposed to get on the drug fell sick. And remember, these are patients that are novel and with no other options. So it is their life events that actually pushed out. But I think we feel confident all the patients will get on the study, and we expect to have this data by middle of next year.

On the Japan question, I mean that's valid like that in the next, I think, upcoming -- I don't remember the timing, which should be November, December, the prescription kind of lifts off and it goes from maybe twice a month to once a month, and we definitely believe that, that would incentivize a faster adoption, especially in a country where people commute long distances to get to the physician office.

Our next question is coming from Ritu Baral with TD Cowen.

I wanted to keep my 2 questions to KB801 in NK. Can you talk a little bit about how much you're expanding sites beyond the 22 U.S. sites? Do you have a number of additional sites and how you expect that to impact potential study conduct? And also, can you talk to sort of like the exclusion criteria where that's driving most of the screen failures for enrollment of the study? And anything else you can give us on potential timing in 2027?

Thank you. So I'll address this question. We are expanding additional sites in the U.S. We have another 10 to 15 sites. Unfortunately, the academic sites big ones that have the patients have been delayed because of contracts. And remember, this is a GMO and it's going to be home administered. So we ran into some glitches with them, but we are overcoming all these sites. So we expect many of these academic sites with a large number of patient pools to come online very shortly. I think we have overcome the bump.

So we continue to expand the U.S. pool, but we are going to go beyond U.S. because there are -- Oxervate is available to these patients. As you know, Oxervate has been aggressively marketed in the U.S. So I think we have an opportunity in the EU where Oxervate is not available. We are -- we have talked to sites. They have a lot of patients. We are in the process of actually activating all of the sites. So we are not -- I mean, we are going pretty aggressively and getting multiple sites across the EU region and even Eastern Europe to get -- to actually really improve our enrollment. So I think with what we are seeing, I'm hopeful that enrollment will pick up.

But to your second point also, we do have some screen failures that we run into because of our stringent inclusion/exclusion criteria. We want to make sure that the lesion that we are seeing is persistent. So if we see any decrease in the lesion size between our first and screening -- second screening, we do not enroll that patient because, obviously, as you know, with this disease that there is a lot of waning and ebbing of the corneal lesion. And we want to make sure we know our drug is therapeutically effective. So we want to make sure we are really enrolling the chronic patients because it's a placebo-controlled study and our chances of winning against the placebo gets is robust. So these 2 factors has delayed NK, but we feel confident that we can get back on track and get this -- the enrollment going early next year with all these multiple sites.

Our next question is coming from Yigal Nochomovitz with Citigroup.

I just sort of have a broad one on capital allocation. Obviously, you have a lot of cash, $1.2 billion. You lowered R&D a little bit to $155 million to $165 million and your quarterly R&D spend is obviously very, very low at $15 million. So I just was kind of wondering in terms of how you think about spend, I'm just wondering, would you perhaps consider expanding and increasing on R&D, especially since some of these studies like DEB and NK and CF are taking a little bit longer. And if you invested more in each of them, perhaps you could enroll more patients and get the data a little faster. I'm just curious if you could speak to that just general thinking in terms of the way you're deploying capital.

Thanks for the question. I would say the following. if we -- the whole point of initiating a buyback is a high level of comfort that we have enough both in terms of the revenues from VYJUVEK and in terms of supporting our pipeline before we embark on such a things such as cash buyback. And you have to -- I mean, we definitely -- in any place, whether it's NK or CF or oncology or Gorlin, if additional investment would immediately translate to either increasing enrollment or conducting a faster study or opening a site, of course, we are very open to doing that, and we have done some of that. That seems like something we should be doing and we are doing.

So I think the whole timing of the buyback was based on, look, with pricing in Germany and Italy behind us, we have much more clarity on what VJUVEK revenues could be globally and really pleased with how that is trending. We have a really good idea of the amount it would take to bring some of these pipeline products to the market in a timely manner. We also internally believe that the intrinsic value of the -- what the stock value is and what we believe is intrinsic value are dislocated at the moment. And a balance of like $1.2 billion and the $400 million gives us plenty of cushion to do all of the above.

Our next question is coming from Gavin Clark-Gartner with Evercore.

Can I just ask for the ocular DEB, for those patients that withdrew, what exactly was the reason? Suma, I think you mentioned the patients may have gotten sick. And then a similar topic for NK, acknowledging it's been slower enrollment. Have you seen the trial completion rates, at least thus far in line with your expectations?

Yes. I'll address the KB803 first. I mean on the DEB eye, I mean, these are patients. Remember, they're difficult patients. I mean -- so these 2 just dropped out because they were traveling and they didn't want to commit to the weekly dosing. So it was becoming -- they don't want to be -- didn't want to be compliant, so they dropped out. And as we mentioned, the third subject is because there were patients that were in a natural history study, and they were expecting to jump on to the study. Some of them came in later. And we had to stop at some point because there were more patients that were wanted to participate.

We did open up for a 1-year-old child, again, because they were very interested in this child at constant abrasion in the eye. We figured this is a younger population that we can add on the label and with request from the investigator and the patient family, we decided to enroll that patient. So just truly because we wanted to get that patient in. And we thought even if we didn't add these patients, we had enough powering for the study. But again, it made sense to add them because it didn't affect the time -- it just pushed the timeline by a few months. So that was the logic -- that was the rationale for including these additional patients in KB803. So nothing with regard to NK.

NK, again, as I mentioned, we have 21 sites up and running. We do have a bunch of screen failures. It's not because of lack of enrolling these patients because of our stringent inclusion/exclusion criteria. As you know, when you have sites open, they do want to put patients in and they put in milder patients or patients that tend to spontaneously close their lesions. So we wanted to ensure that we didn't want to enroll these patients. But now we understand with enrollment, what kind of patients, and we are actively getting additional sites in the U.S. As I mentioned, there were some academic sites that were delayed because, unfortunately, as I said, because of some of the viral safety requirements. I think we have just crossed those hurdles. So we expect with all of these academic sites up and running and the European sites up and running, we are very confident that we should be able to get back on track with enrolling NK patients.

Gavin, just to a couple of things. You mentioned some kind of sickness, but that was a comment on KB407, not on KB803. The second point I'll make on NK is to date, the study is progressing really well, and we feel good about the limited number of patients on the trial.

Our next question is coming from Lisa Walter with RBC.

Maybe first one for me on the NK program. Can you share how many patients have been enrolled so far or give us the benchmark? Like, for instance, are we at the halfway mark in terms of enrollment? And also on ocular DEB, should we expect to see the results ahead of the NK readout? Any color here would be helpful.

With regarding to NK, we are not giving any guidance. But as I said, we are very confident that we should be able to get these patients -- get the study enrolled 2027. So we are doing all efforts. We don't want to give you any indication -- I mean, any numbers right now. But again, we are -- as I said, from what we see and the sites up and coming, we feel confident we -- we should be able to enroll the patients we need for that trial. On the ocular, again, as I said, we have 3 patients. The last patient out should be end of February. So again, this will be -- we'll -- once we have the last patient in, we should be shortly announcing data on KB803 first half of next year.

Lisa, to answer your question directly, the ocular DEB will come ahead of NK at the moment.

Our next question is coming from Josh Schimmer with Cantor Fitzgerald.

On the quarter. This is Alexa on for Josh. So for the Hailey-Hailey disease program, maybe you can clarify a bit what you're looking for in those first 5 patients that would give you confidence to move this program forward into a registrational study?

Hailey-Hailey is, again, this is an indication that there is no prior studies or there's no validated clinical endpoints. As I mentioned earlier, we did have -- we discussed with the FDA. We have a natural history that's ongoing that has enrolled a pretty decent number of patients. We developed a scale based on, again, we have discussions with the agency. We are -- we validated the first part of the scale. The second part of the scale should complete validation. So we're using the scale. It's an investigator-based evaluation.

So the patients come in and the investigator uses the scale to look at improvement in these patients. And we feel pretty good about the scale. As I said, Part A of the validation is completed. The Part B section should be almost done. So it will be an investigator-based evaluation. We show improvement from baseline and after treatment at the end of 3 months. We'll also be biopsying these patients at baseline and at the end of the treatment to show molybdenum correction and also expression of ---sorry, [indiscernible]. So we should have that data by end of this year.

_:p id="534984067" name="Krish Krishnan" type="E" /> And one last point. We also intend to show -- they're not easy to see, but before and after images of the area that we have been treated along with the biopsy and the scale validation improvement.

Our next question is coming from Roger Song with Jefferies.

This is Fiona on for Roger. Congrats on the quarter. Just 2 quick ones from us. One is on the ex-U.S. revenue. Now with our Germany and Italy pricing negotiations completed, should we expect a more stabilized ex-U.S. revenue moving forward? Or any other factors that you expect to still contribute to the volatility? And the second one is on o DEB ocular DEB. Assuming the February completion goes smoothly and data is positive, anything else that is outstanding before the filing?

On the ex-U.S., EU revenue, as Laurent mentioned, demand continues to grow really nicely. We're really pleased that pricing in some of the leading countries like Germany and Italy are behind us, and we're not too far away from Spain. And because there are a lot of countries and pricing hasn't been done in many of those countries, approvals will continue to be part of the story until many of those countries, at least the 5 like Italy, Spain, U.K. are behind us. Spain and U.K. are behind us. I wouldn't use the word volatility because demand continues to go up in some of the big countries. Pricing is already done, but we are excited and looking forward to bringing more and more patients in Europe on the drug as soon as possible. Germany was the big one with the approval, and that's behind us at the moment.

Yes. On ocular DEB, I think we are all set. From a CMC perspective, we have all the requirements. I think from a BLA, we should be ready to go as soon as we have the last patient enrolled, and we have locked the database and we analyze the data. So obviously, we are working very diligently to get the BLA started. So it will be just once we have the data, we should be able to file the application shortly after that.

Our next question is coming from Alec Stranahan with Bank of America.

Two from us, one on commercial and one on the type. I appreciate the color on the pricing negotiations. Maybe just in France, I think the press release said no earlier than 2027. Can you just remind us kind of the nuances around pricing in France specifically? And what sort of gating factors are at this point to get that completed? And then maybe one actually on the Gorlin syndrome program, which I'm surprised no one's actually asked you about. But I guess, what are you sort of working through with the FDA? What kind of size of the study do you think would be feasible in this population? And I guess since you've observed an abscopal effect, do you expect a lesion level or maybe a patient level registration endpoint for the primary?

I'll let Laurent answer the France question.

Thank you, Krish. In France, the new President of the committee negotiating the price in terms of negotiating the price has been made clear that they usually expect a 13-month negotiation timelines. And for us, these 13 months, I mean, we are 6 months in this negotiation framework. So we are completely within the boundaries of the negotiations. Usually, the negotiations are in 2 steps. The first step is to agree on what the framework of the reimbursement will be and then entering into the more granular aspect of the pricing itself. So we are well engaged in the negotiations and it's following its normal course.

I'll take the Gorlin question. I mean, as you can see from the 3-patient study where we looked at it, the data was pretty remarkable. We can see response in all 3 patients. I think we were also surprised to see the response. It was consistent across the 3 patients. And we were also able to confirm this by histology to show that the injected tumors that showed complete response had no BCCs in them. So again, very exciting. I mean, as you know, with Gorlin lesions do not heal on its own unlike the other. So whatever we see is a drug effect. So even if you assume placebo as a 0% response and for us to see a pretty good response, we don't expect to see this to be a large study. So again, it should be well within less than 100 patients that we should be able to do a pivotal trial if we have to, based on the response rate that we see in these 3 patients.

Our next question is coming from Andrea Newkirk with Goldman Sachs.

Suma, maybe here to follow up on NK. Could you just remind us on the inclusion criteria with respect to the expected proportion of Oxervate experienced versus naive patients? And then also just given the availability of commercial Oxervate, especially in the U.S., would you consider any protocol adjustments such as adjusted lesion windows to accelerate the accrual?

I mean if you look at our inclusion/exclusion criteria, again, there's 2 screenings. The first screening, we look at the lesion size and obviously, it's random -- it is stratified for lesion surface area. And we -- it's pretty stringent. So even if you see like a 10% decrease between the first and the second screening, we don't enroll those patients. With regards to Oxervate, we have our inclusion criteria where the Oxervate patients have to wash out if they are in Oxervate or if they failed Oxervate and they want to get on our study. There is a 30-day washout for these patients before they can enroll on the study.

Sorry, did you have another question?

Maybe I could just ask one other question on KB407. Could you just confirm if we'll see FEV1 data in the first half of next year when that data set comes? And what threshold of lung function improvement or disease stabilization would you use the benchmark to support the plan for the pivotal program?

Yes. We will have FEV1 data in these patients. Obviously, we are also selecting some of the natural history of these patients. So I think we will have -- I mean, it's not like a number. Hopefully, we will have it holistically. We will look at these patients, what was their lung function over the period of time and the lung function of these patients with -- on KB407. So that's what we are expecting to announce.

next question is coming from Morgan Lamberti with Goldman Sachs.

Can you please speak to the rate of recurrence for patients taking Oxervate? And then how that informs your view on the expected TAM for KB801 in terms of if the TAM is actually patients who have not been treated with Oxervate. Just how to think about that.

Yes. I mean we do not really ask those questions. we are -- we do not look at the history, the sales on Oxervate or there's recurrence. We do expect some medical history at this point. It's too early to tell for us. We have not looked at all the data. But all of that, we will have collected as a medical history. We tried to calculate. But we have not -- I mean it's too early to look at that data population to make that determination.

Our final question today is coming from Kalpit Patel with Wolfe Research.

For ocular DEB, for those 2 patients that withdrew, would those be counted in the ITT efficacy population? And any color on how you might handle incomplete crossover data in the primary analysis, that would be useful. And then for the NK program, you mentioned that you're trying to essentially trying to reduce spontaneous lesion decreases. Do we know -- is that criteria similar to how it was in the Oxervate studies?

I'll take I'll answer the KB803 first. Yes, the 2 patients, yes, they will meet the ITT because that's the definition of ITT. Obviously, we have sensitivity analysis to capture that. And also, remember, we have the natural history of each of these patients. So in our analysis, I'm not going to get into depth of it, but we will be able to use some of that natural history study, even though with the crossover design to help with if there is any carryover effect. So all of that is taken into consideration for the statistical analysis plan for us to improve the chance of success.

Some other question was the spontaneous lesion decrease, did Oxervate also observe that in their study?

We don't know, but they did have an inclusion criteria for some persistence, but I can't comment on the Oxervate what was that level. But I think they did have something in the inclusion criteria. But I don't know the level of decrease for them to enroll that patient, not sure.

Thank you. Ladies and gentlemen, this does conclude today's question-and-answer session and will also conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.

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.

Yes. Again, as I mentioned, we are going globally. So our -- I mean, as I said, we're getting all the sites activated in EU countries and regions because we want to do 1 global filing -- so yes, we expect -- I mean, we are targeting and getting all of it enrolled by end of the year, so potentially '27 by the early '27 by the time we clean the database and announce data. But again, keep in mind, I mean, the thing is the CMC, right? I mean, if we have still -- that's the stuff. We have to -- we have the platform technology. We have all this stuff ready to go. So once data is out, I think we -- all of the -- I mean, in an entirety, I think we'll be ready to file the BLA.

Your next question is from Ritu Baral with TD Cowen.

Suma I just want to clarify on NK enrollment, are you pushing out the enrollment completion in the data just slightly in order to -- for the sake of the European patients I wanted to just ask how enrollment rate was going overall as far as a reflection of the interest in the therapy. And also, are you upsizing the trial at all to include these European patients? And then my second question was a commercial question just on VYJUVEK in the U.S. In your remarks, you mentioned -- Chris, you mentioned that you were going more to the community setting. -- what opportunity, what commercial opportunity or patient number opportunity is left in the community setting for Dev?

Is it mostly dominant Deb and what sort of market research trends how have you seen to sort of drive that interest?

So to outtake the NK study, I mean, obviously, it makes sense for us to go global. It makes to file in Europe. And obviously, in Europe, there is -- oxalate is not available. So there is a need for these patients. I mean it will be hopefully, when we talk to all of the cos in Europe, they all want to participate because there's nothing for these patients. So obviously, we want to take advantage of that. so we can speed up some of the enrollment with adding more patients in Europe that are willing to get that there's a need. So that's the intent.

So again, I mean, we are not upsizing the study trial. It's just it we want to do global filing, we want to increase recruitment with keeping the study design the same and the number the same. -- and intend to get a global filing.

And we do we presently expect enrollment to be done year-end, as we've been said. On the commercial side, Christine, do you want to take a so...

I'd be happy to. So yes, we continue to believe there's opportunity in the community setting -- while we've made a lot of great progress of finding these patients wherever they may be looked across the U.S. And as mentioned, we have surpassed our initial penetration target of 60% of the diagnosed patient population. -- we're continuing to see opportunities and finding opportunities, which supports the demand growth that you're continuing to see. In addition, you asked about the DDAB population. We're continuing to see patients commend that are both RDandDtAb. As you can imagine, as the launch has gone on, we're seeing the Detpatient population grow as they sit more on that mild to moderate spectrum, but we're still also seeing our deadpatients coming in.

So it is still a healthy split of the opportunity that's being found in that community setting?

Yes. And we do, in terms of overall, I don't think there's any change. There's about 1,200 identified patients. That's the initial target. Once we get close to that number, we're going to expand our efforts to go after the 3,000 or so, the majority of whom probably are undiagnosed. But if you look at the number of reimbursement approvals, we're able to generate every quarter, that shows there is still a healthy demand left like we're not in any kind of like stable mode. It is true that most of the new patients coming into the drug tend to be more moderate to mild than super severe. But that said, demand continues to be really strong, like somewhere between 35 and 50 reimbursement approvals. We keep hitting on that almost every quarter.

Your next question for today is from Lachlan Hanbury-Brown with William Blair.

Maybe a couple on access. I think over the past couple of weeks, we've seen headlines out of Germany that they're sort of passing some reforms on drug pricing or health insurance. I know your negotiations are ongoing and this new law is still very early, but is there any thoughts on your side on how, if at all, that could impact either the negotiations or the ultimate outcome there. And then in the U.S., maybe somewhat similar, but wondering how the sort of negotiations on pricing and coverage and access is going through the PBMs, the at-home administration, given that's sort of earlier in the launch of that than the original ACP-administered Product?

I'll answer the U.S. quickly and turn it to Laurent to talk about Germany. Look, in the U.S. since the beginning of the launch, we've had really good access. We really haven't had any substantive issue with regard to access today to really talk about. We do have some wrinkle in the early part of January every year as people transition insurances. But in terms of pricing, in terms of rebates, and we've had a very productive relationship with payers and payers in general. And Laurent, on the German side, do you have any comments on the question?

I mean, each market has its own pricing and reimbursement framework and specificities -- so the outcome will naturally vary from 1 country to another, but our focus is definitely on achieving sustainable reimbursement that reflects Rajive clinical value. the high unmet medical need in the countries, while being able to provide access to an expanding group of patients. yet keeping it consistent with the international reference pricing framework. So yes, the new things are evolving in Germany, but we are very aware of it and negotiations are very constructive.

Your next question for today is from Debjit Chattopadhyay with Guggenheim Securities.

I have a couple. So the first 1 on NK. Our channel checks seems to suggest patients who have undergone prior coronial surgeries or any vision correction procedures might be at risk for NK -- if that's correct, how are you thinking about the commercial opportunity? And the second question ocular debt program will read out prior to NK. How are you thinking about the read-through from debt to NK.

Yes, Debjit, thanks for the question on the NK market opportunity and you're flagging the prospect of maybe a higher incidence rate of NK associated with surgeries is certainly something we're looking at. I mean we look collectively across the claims data, some of which we've disclosed, and OxoVit's performance. I mean it's clear the number of patients being diagnosed and treated annually with NK has increased dramatically. I mean, some of this likely awareness, but it does also point to some potential incident forces that we are investigating. I mean, I think quite clearly, the trends both on the claims side and the sales data, the reasons associated for oxybate Point being a large and growing market in the United States. And then as Sum alluded to, underserved disease worldwide. So plenty of opportunity here for us on 801.

I think the advantage for 81 is our CMC. I mean, if you look -- I mean, we have optimized cost of goods, all of that. With regard to -- we are completely different, right? I mean if you look at NK, it's very similar to open wounds and bitumen. I mean you need to make sure they are chronic, you keep them you have to then look for complete wound healing. So it's mechanistically you have -- because they have to have an operon and then you treat the wound in the eye and to be closure.

Whereas for A3 is very different. It's prophylactic. -- there is no optimal involved in the study. It's purely a patient-reported outcome. I mean, so we have patients in a natural is study. We look at a number of events. And then we keep them -- I mean, the prophylactic administer and the patient reported outcome. -- the patients evaluate and say, hey, on a scale of 5, the measurements. Do I see pain, do you have abrasion, so it's very patient-reported outcome, apples and oranges. Whereas for NK, it's a physician and you have to take pictures of time independent lab. They have to show that the wound is subtlety closed. And so again, very different.

The 2 endpoints are different. The valuation is different. So we drew from 1 to the other, either way, Minot it's not the right thing to do.

If I may follow up with 1 more when we entered the channel checks, the physicians are also reporting a huge influx of Danesa reps and which is obviously being reflected in the Ora sales numbers. So assuming a successful outcome of the study, how are you thinking about sales force in 2027 prepping for a launch later on, so you can address the market opportunity there.

Yes. Dean, I think it's a little early for us to be getting into Phase 4 plants. Certainly, I mean Yes, we recognize that there is a significant unmet need and patient opportunity here. And I think certainly on success of Emerald One, if it is successful, we would be looking to assume a dominant position in the United States and all we do everything we could to achieve that.

Your next question is from Cal Patel with Wolfe Research.

For the ocular Deb program, can you remind us if that also includes global patients like you're planning for the NK program? And then 1 for the NK program itself. Can you comment on what the screening to enrollment rates are and what the demand looks like for the trial itself? And then finally, for the Germany question, or your question, on the gross prepricing accrual basis, can you give us any color if European Valve sales increased sequentially? And if so, by approximately how much?

Suma, do you want to quickly talk about...

I mean for the I study ocular. It's not a global study because I think patient-reported outcomes are not very well accepted by Europe. So we have to first show this in the U.S., at least we were able to negotiate that with the agency. So it's just right now that it is just focused on the U.S. It's a U.S.-based study. And then based on the outcome, then we will open up discussions with us because, again, because of the patient reported outcome as the endpoint. Unlike NK is a well-defined physician imaging -- it's well recognized and it's accepted by Europe and rest of the world.

So that's the main business between the 2 trials. And with regarding to enrollment, I mean we are, as I said, we are really picking up enrollment at the moment because we have got most of our sites up and running. We are almost in the process of getting Europe sites in app and coming. So enrollment, we expect to continue the pace is going to continue to increase.

On the Germany question, the answer is yes. We try not to quantify these things because then it becomes a perpetual question that we are held responsible to, but I will say it will be -- it's in the double digits.

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

Okay. I guess we can get going here. Thanks for joining this session with Krystal Biotech. My name is Alec Stranahan.

I'm SMID Biotech Analyst at Bank of America covering Krystal. And it's my pleasure to introduce Krish Krishnan, Chief Executive Officer; and Suma Krishnan, President and Head of Research and Development at Krystal. Thanks for being here, guys.

Thanks for having us, Alec.

Yes. Good to see you again. Maybe at a high level, just taking a flyover of the company in its current state. You've delivered 11 consecutive quarters, maybe 12 of positive EPS, I've lost count.

Gross margins consistently in the 90%, 95% range. So you've really built a good sustainable business model and a strong foundation for the company, which is this kind of financial profile is pretty unusual within biotech.

I guess, when you think about the VYJUVEK launch, this is your main asset. How is this launch going? You're expanding ex-U.S. Where do you sort of see the top line growth going? And how does that flow down in terms of your cost structure to the bottom line?

Yes. Thanks, Alec. Appreciate those comments. The global launch, which is ex-U.S. launch has exceeded our expectations to date.

As you saw from the 1Q data, we've been able to make the drug and the team have been able to make a compelling value proposition, both in France and in Germany and in Japan. And we're actually a bit ahead of schedule working to launch in Italy and Spain in the second half of this year.

While there are nuances to every country, overall, we expect ex-U.S launch to be very positive over the next year and a few years going forward. In the U.S., we're still in a growth mode as evidenced by the reimbursement approvals that we report every quarter and reimbursement approvals are a proxy for patients on drug.

And if you look at it that way, every quarter, somewhere between 40 and 50 reimbursement approvals show that U.S. continues to grow. So overall, we're very pleased with the way the VYJUVEK launch is progressing.

In terms of the impact to the cost structure, the teams in these different countries tend to be small, less than 10 per country. And so we don't see a big impact of the global launch on the cost structure.

And so we expect the financials to look like they have been over the last 11, 12 quarters moving forward. And we do guide on the 2026 operating expense and -- which has not been that much higher than it was last year.

And that's with putting new assets into the clinic, which is how you're reinvesting the VYJUVEK revenues. Maybe we can talk a little bit about the U.S. revenue trajectory for VYJUVEK and then we can get into the ex-U.S. launches, which are a growth driver we're seeing this year.

How farly penetrated are you into the U.S. population at this point? Is new patient identification kind of the primary growth lever here? Is it maintaining the compliance rate with patients?

Yes. So if you look at reimbursement approvals, we're roughly at the 60% share of the identified patients. U.S. has about 1,200 identified patients, and we expect to continue to head towards that number over time.

Definitely, as you go beyond the 60% market share, the probability of new patients coming on drug tend to be moderate and mild as opposed to severe. But that said, we feel very confident about the 1,200 number, and we're progressing towards that target as a first step.

And then once we get there, we still do believe the prevalence is 3,000. So incrementally, we're going to go try and go beyond the 1,200 once we get to that point or close to that point.

In terms of compliance, look, the drug has been launched for 3 years now. The drug has worked really well. The patient experience on the drug has been really positive. The physicians have been very happy with the way that patients are responding to the drug.

And so a lot of the patients who started early on to some extent and the moderate and the mild patients are starting to heal. We feel the stop and start in the U.S. is what keeps the patient on drug and is the tail on the drug for the long term.

So we try to make sure that when a patient is ready to come back on drug that coming back on drug is easy, simple, convenient and fast for the patient. So that trend, the stops and starts will stay in place in the U.S. going forward.

But please to bear in mind, in terms of number of patients being added in the U.S., that number continues to grow up. And so if you look not at a quarter level, but if you look out 12, 15 months, we do expect the revenue to be growing, not just in ROW, but in the U.S., too.

Okay. And obviously, having the ex-U.S. contribution this year should help smooth over that growth profile largely.

Yes. I think if you look at global launch of VYJUVEK, there should be no turbulence. The stop and start, the nuances by every European country, but they all smooth out. Overall, the growth trajectory looks pretty positive at the moment.

Okay. And Krish, I know when VYJUVEK was first approved, there was a $900,000 cap sort of in agreement with payers because honestly, they probably didn't know how much they were going to have to actually pay with a novel drug like this for a rare skin condition like DEB.

Is that cap going away? How are your recent payer conversations kind of around the reimbursement piece?

Yes. With the exception of a very small number, most of the renewals have been without the cap. So it was a good starting point to give payers reassurance on the on their contribution to VYJUVEK.

But now with the renewals, I think there may be 1 or 2 still remaining, but most -- the cap story in the U.S. is pretty much going away.

Okay. Okay. And maybe thinking about the ex-U.S. launches, I guess Japan is kind of the first stop, Germany, France coming online. Maybe just walk us through how those launches are going. And we've gotten some questions around the pricing dynamics in the early launch as well, if you want to speak to that.

Yes. So Japan launch has gone really well. That was the first outside country to launch, I mean, officially calling it like a commercial launch. In Japan, because of Cartagena, the only commercial requirement is the patient renew their prescription every 2 weeks for the first year of launch.

So that's -- and it's a calendar year. It's not the first year of the patient on drug. It's the first year of launch. So that should iron itself out going forward. Pricing has been -- pricing has exceeded -- the pricing we got has been very positive, and it reflects the value the drug brings -- the value proposition the drug brings to the patient.

In Germany and France, as also evidenced in terms of patient numbers, they continue to go really well. And we expect that in Italy and Spain, too, which will happen second half of this year. In terms of pricing, we started accruing in Germany middle of February.

And so that accrual will continue until we get a firm pricing in Germany, which should happen second half of this year. In France, we have been accruing since the beginning of launch, which is, I believe, in Q4 of last year, and that will continue until 2027.

But outside of Germany and France, there are no accrual issues at the moment because in all the other countries, we will have a price before we launch.

I've seen some investors trying to do some fancy arithmetic around the linking between the scripts or the prescriptions that -- in the ex-U.S. geographies with the revenues reported.

I guess how would you sort of help folks think through the accruals and the revenue recognition sort of as the negotiations get finalized?

We were -- we started reporting out rough patient numbers because given the privacy issues in Europe, we're guessing based on vial distribution, how many patients. So we don't have an exact number like we do in the U.S.

And we were providing that as a proxy because there were a couple of quarters where the revenue was just overall revenue and I wanted to give a sense of what piece of that could have been Europe.

Now that we're splitting out Europe and Japan from our global revenue line, then we don't want to be carrying around an approximation number for a very long time. We haven't yet decided when we would stop or what, but the patient number is just a rough approximation. I think the way to think about global revenue is simply the revenue number itself as opposed to try to make some kind of fancy arithmetic around an approximate number.

Okay. And I guess in terms of the pricing overall, how has that been playing out in Japan? And does that maybe set up expectations for what you expect in the rest of Europe, especially as you expand to Italy and Spain?

Japan pricing, we have been more -- we've been very happy with the outcome. We are in ongoing negotiations in Germany. We may have the pricing in Italy ahead of the final pricing in Germany. We don't know.

We feel good going into these negotiations. It does vary by country. Traditionally, Europe, we expect to end up in a good place based on what we saw in Japan, but it's tough for me to think about it until we get to the endpoint because there are a lot of global issues going on. But to date, the conversations have been very positive on VYJUVEK.

Great. And you've accelerated the Italy and Spain launches into, I think, potentially the second half of this year.

How have you seen physician awareness overall given the pretty established launch in the U.S. at this point? Has it made education faster or easily than it was domestically?

Much higher than it was in the U.S. has a lot to do with physicians sharing the U.S. experiences in global setting, either in scientific conferences. We find that in all these countries, the physician awareness is high. They've been able to see what the drug can do.

We were not expecting to launch in Spain this year, but there was a big -- it came because of a demand from the Spanish authorities and the physicians in Spain that their patients need to be treated that we had to quickly pivot and figure out how to launch in Spain in the second half of this year. So awareness is high.

Okay. Okay. Could you maybe walk us through, Krish, how the Italy and Spain launch model works? Is it accrual based like Germany and France? Or is it a pricing-first model? And I guess, how large are the patient populations in each of these?

Yes. About, I would say, in terms of prevalence, 275 to 350 is a good number to use in Italy. In Spain, at a prevalence level, in terms of prevalence. In terms of pricing, in both these countries, there are no accruals. We will negotiate a price before we launch in these countries.

Okay. Okay. And I guess when we think about kind of the -- where the puck is going around most favored nations and does that influence sort of your approach to the ex-U.S. launches and pricing? And is there maybe a lower bound for where you'd want to go?

No, we are very cognizant and aware and constantly thinking about MFN. There are some conversations that it may or may not apply to companies in the rare disease space, but we're proceeding with the view that it could someday come and have an impact on companies -- I mean, with rare diseases.

So we do try and bring awareness in these countries where we negotiate about the impact MFN could have, not just on the company, but also on the patients. So it's definitely a conversation that we use. But if you look at our gross margins, so it's not a financial decision. It's more like what could the long-term impact to the U.S. business be is the question we think about.

And we fully intend to -- once we know where a country is going to land on price, we'll definitely think about MFN before we decide to launch in that country.

Okay. Okay. I want to shift gears here maybe in the second half of our time to talk about the pipeline. And we can kind of go stepwise. We've got a few exciting programs in ocular DEB, neurotrophic keratitis, cystic fibrosis. So maybe we can just go down the list.

Let's start with KB803. This is your corneal abrasions in DEB. It was nice to get the, I guess, the granularity around the cadence of when we could see those updates in 4Q. It sounds like this one will maybe be first up in terms of updates later this year.

The study is fully enrolled. Maybe you could walk us through sort of the powering in the study and how big of an issue this is for DEB patients.

Thanks, Alec. I mean, again, as you said, we -- good news is we have enrolled all the patients. As you may be aware, we had a natural history study that we deployed 1.5 years ago. So we have over 100 patients in this natural history study.

So as we collected data in these patients, this is a prospectively designed study. It's just like the clinical study or in the protocol, they have weekly diaries, they fill in their symptoms in a weekly manner, and we've been able to collect very meaningful and very good quality data on these patients.

And based on the -- I mean, the -- many of these patients had to be in the natural history study to enroll into the pivotal trial, and this was -- there was a rationale behind it because we wanted to enroll the very severe patients in the study because, as you know, in these rare diseases, it's very important to get the right patient population because you're looking at the effect in a very short period of time.

So we wanted to make sure we had the severe patients into the study. So patients that were severe met the inclusion criteria to then move on and enroll into the study.

So I think this is an intra-patient study, just like the VYJUVEK study. So it's a crossover design, randomized placebo-controlled double-blinded. So patients are either randomized to either drug or placebo.

So I mean, obviously, from the natural history study helps us to understand -- I mean, the impact on these patients or the patient-reported outcomes that we are measuring. And we are hoping with -- based on that, we were able to come up with, as you said, a sample size because to see drug effect. We know from VYJUVEK that this is a corrective therapy.

The reason that these patients have these lesions or blisters in the eye is because of a defect of collagen VII. So we believe if we can see expression and we can improve those symptoms.

So we collectively with the animal studies with the corrective nature, we were able to power the study to -- for success and being an intra-patient study, we know when they're not on drug, and our natural history study, we'll be able to separate placebo versus treated.

So we feel very comfortable with the powering of the study, the intra-patient design to minimize variability. And so the statistical analysis plan that we have obviously got blessings from the agency. So we all said and we feel maximizes the chance of success.

Okay. Great. And obviously, the Collagen VII mechanism of action is pretty well validated in DEB with VYJUVEK, it's the exact same thing. Same vector, just different tissues and we already have, I guess, a single patient of data that you've shared.

What is sort of a meaningful endpoint here for patients and I guess, for regulators in terms of the alignment you achieved with the FDA? Is it, I guess, corneal abrasion? And are there any other symptoms that would increase kind of the quality of life for the patients?

Absolutely. I mean, again, you have to look at this therapy. It's more not -- I mean, unlike VYJUVEK, you have to open wound and then you're closing the wound. This is more of a prophylactic design because, again, this is something we work very closely with the agency, and this is why it's a patient-reported outcome.

It's because what are the patients -- I mean, these patients, they have -- it's not just the lesions, it's [indiscernible]. They have blisters on the eyelets, not just the cornea, but surrounding the eyes.

So I think when we put the vector into the eye, you have exposure to all of these areas that can minimize the symptoms. So again, our natural history study really -- the main focus of this study was -- I mean, DEB blisters in the eye, unlike is very well studied and very published literature.

We have patient-reported outcome measurements. So based on what was in the literature, we came up with a scale looking at different clinical complications and how you rate them. So this scale was developed from the natural history study.

Again, this is something we have -- the agency is aware of what the PRO scale is. And then we are looking at these multi-measurements and measuring number of days of events. It's number of events, days of events and treatment versus nontreatment improvement.

So it's a scale-based measurement. And then you look at placebo versus the treated cycle and see the improvement.

Okay. That makes sense. And I guess when you look at your natural history study or even just experience through the VYJUVEK launch and kind of feedback you're hearing from the field, how many of the patients that are already on VYJUVEK would be candidates for your ocular DEB program?

I mean if you look at a natural history, we have a good number of DDEB patients and RDEB patients because DDEB patients also -- I mean, they have similar eye complications.

I mean, most of the patients that are on a natural history study are also on the VYJUVEK commercially. So we do see that overlap.

I would add about half the RDEB population and the percentage of DDEB, that's true in the commercial setting. It's also true in this clinical setting.

Okay. And I guess when we think about assuming that the study reads out positive and you're advancing towards the launch of your second product, is there an opportunity to piggyback off the sales force and the commercial scale that you have for VYJUVEK with 803?

I believe so. After all, the end physician is not that different. There could be some ophthalmology overlap when we -- as we think about NK, but predominantly derms. We feel that the uptake could be quicker given that we've already identified the patients. We've gone through the genetic testing.

So we're -- I mean, fingers crossed once we get past the pivotal and the approval, on all launches are difficult, but on a relative scale, we feel it's a pretty -- the launch is in our sweet spot.

I mean also this clinical study has been done by dermatologists, like EB specialists. So it's not an ophthalmologist.

And we do not require examination of the eye. It's more of a patient-reported outcome. So based on the label and the prescribing physicians and participants in the clinical trial, we think it's the same physicians that be able to write the prescription for these patients.

Okay. And just for the sake of time, maybe we can talk about NK disease. It's a pretty well-validated market, $1 billion market at least, probably more. Some clear benefits to improve upon the existing approved therapy.

You recently upsized your study to 60 patients with daily home administration after updating the protocol. How does this kind of help the caregiver flexibility around the dosing and I guess what would KB801 need to show to support an accelerated approval here?

I just want to correct, it's not a caregiver. It's going to be patient administered. So I think this is obviously -- it's going to be like Oxervate, right? I mean you ship it to the patient's home, the patient can administer. There's no caregiver. It's going to be just like Oxervate.

The only differences obviously are we are once-a-day administration versus multiple dose administration. So in the clinical study, again, these patients -- to initiate them in the clinical study, they come to the site because you have to take imaging of the eye to -- and make sure that they meet inclusion/exclusion criteria.

We enroll them, basically train these patients how to administer in the first 2 visits and then the drug is shipped into the patient's home and they self-administer the drug. So again, we don't anticipate, unlike VYJUVEK, it's going to be off the shelf into the patient's home. prescription written shipped to the patient's home and administered by the patient.

Okay. And I guess, assuming we see the ocular DEB data first, is there any lateral reads either around the route of administration?

Absolutely. There's no lateral reads because different diseases, very different endpoints because patient-reported outcome is 803. That's more of a noisy endpoint.

Whereas with NK, I mean, I think it's very well established like if you treat it with our vector and you can produce a neurotropic protein, NGF, Oxervate has already shown that by having NGF and initiating neuronal growth that will help with healing.

So very different endpoint, you measure the lesion at the baseline and the endpoint is in 8 weeks complete healing. So it's an independent reader. It's not a patient -- we'll have patient-reported outcomes as quality of life and improvements as secondary.

The primary read is the photographic images are read by an independent reader to evaluate complete closures. So very different mechanism, different endpoints.

Okay. But similar vector and formulation.

Correct. From a safety key, read-through will be absolutely -- there will be overlap.

Okay. Okay. I want to ask about your CF program. We saw some pretty important, I guess, delivery expression type de-risking for the program. Now the next steps sound like aligning on sort of a registrational endpoint and really connecting the dots between expression and function.

What should investors look forward to sort of in the second half of this year? What are sort of the next updates from the program? Is it alignment with the FDA on the pivotal? Should we get extended follow-up with maybe some functional type of endpoints? How should we be thinking about the catalysts?

I mean, obviously, the very first thing that we showed was -- I mean, the first part of the study was the dose ranging. We had a safe, effective dose. I think the biggest achievement for us internally was basically showing that the dose that we picked with a single dose administration that we were able to bronch these patients and established molecular correction, I mean, molecular expression.

This is exactly what we did with our VYJUVEK program. If you look at it, it's the same mechanism that we followed. We showed expression. And in VYJUVEK, obviously, based on that expression, we were able to get into a registrational trial and show that expression translated into effect.

We -- it's the same thing that we are following with the CF in the CF population. I mean, obviously, we have met with the agency. We have shared the expression data. We have discussions around the data. The agency is convinced that we do so expression, this molecular correction.

What the agency's request was that since we had not established safety in CF patients with repeat dose administration, they wanted us to do a small patient population to establish safety in a repeat dose administration setting. And that's exactly that we have done.

The protocol has been approved by the agency. We are in the process of enrolling patients. We are pretty -- I think we should be enrolling that study pretty quickly, and it will be a repeat dose to establish safety.

In parallel, we have always also been discussing with the agency on a registrational trial design, the statistical analysis and sample size. I mean you can see from the data that we showed expression now that we have blessings from the TDN and the CFF foundation.

The TDN is working very closely with us and the FDA. They're actually in the meetings with the agency with us. We're coming up with a hybrid design model where we can use CFF or TDN's [indiscernible] REACH data, which is their prospectively designed natural history data, which to allow us to efficiently design our clinical study so we can effectively use this external control in our pivotal Phase III design.

So these are the discussions that we will be having with the agency. We are in the process of finalizing the study design, the protocol, the statistical analysis plan, and we intend to submit that to the agency and work very closely with the FDA.

And we are pretty confident that by end of the year, we'll have agreement with the agency and sign off on this design and the sample, and we plan to execute the pivotal trial beginning of next year.

Okay. Great. Maybe in the last minute or so, if we could just rehash sort of the next 12-month outlook for the company. What gets you most excited from the pipeline?

What are you looking for to really gauge the strength of the VYJUVEK launch? And how does your capital position sort of set you up to succeed?

From a VYJUVEK launch perspective, it's in a good place. We're excited to bring this medication to patients, not just in Germany, France, but in Italy and Spain.

Japan continues, and we are working to find a way to get beyond these countries and maybe into other nations of the world next year. With respect to the pipeline, look, it's a very important clinical year for us.

Obviously, the open-label data on the CF is kind of exciting because this is a program that we've been working on for a very long time. and being able to communicate that expression does translate to functionality would be very big for the company and for the patient long term.

NK, of course, well-established market. We know the value proposition. So if the data were to read out, that would have a very strong impact. It's tough to handicap which one is better.

But at the same time, I would think about Hailey-Hailey, which is very similar to DEB, where we have an open-label study ongoing and definitely not to forget our DEB patients, being able to provide some kind of relief in the eye is definitely a very positive thing for the DEB patients.

So overall, a very busy but super exciting year. And as I mentioned in the Q1. The next 12 to 24 months are the most exciting in the history of Krystal, although we've had a pretty remarkable 10-year look back.

Great. Well, with that, I think we'll have to end it there. So thank you so much, Krish and Suma, for the great conversation, and thanks for everyone for attending. Thank you.

Thank you, Alec.

Thank you for standing by, and welcome to the Krystal Biotech First Quarter 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, 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 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 will and our responses to questions may contain forward-looking statements. You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings.

With that, I will turn the call over to Krish.

Good morning. It's now been 10 years since we founded Krystal. And in that time, we have worked to change the lives of depatients 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 market since 2022. 2022 is 6 years from when the company was founded.

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 1 of the most exciting periods in Krystal's history. We are positioned for 2 registrational readouts this year and 2 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 Q. 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 many biotech commercial companies in 1Q.

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 2 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 CF and KB111 for Hailey-Hailey. 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 1 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?

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 1 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 by 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 financials. European market plus Japan contributed to $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 it to 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 during 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 stop patients on VYJUVEK? through early reimbursement access pathways.

Overall, we are very encouraged by the early tractions 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 of to Christine to share updates on VYJUVEK? launch in the U.S. Christine?

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 the center of accidents 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.

Upstream demand metrics are even better, with over 60 new prescribers in the first quarter and were 570 unique prescribers since launch, underpinning a strong pain approval outlook for the rest of the year.

Net adviser back 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 towards maintenance treat regimen.

With VYJUVEK now on the market in the United States for nearly 3 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 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 [indiscernible] 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 palatialon care. VYJUVEK?represents a meaningful advancement and 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?

Thank you, Christine, and good morning, everyone. I am excited to share that we are faced with 2 registrational study readouts expected later this year and 2 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 were enrolled in the study. IOLITE is randomized, intrapatient double-blind, decentralized placebo-controlled study with crossover design in which patients are randomized 1:1 to receive KB803, 3 times weekly for 12 weeks followed by placebo, 3 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 neurotropic keratitis is also progressing well. Our focus here is operational supporting our trial sites, expanding our network and driving enrollment. This is an 8-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 2 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 5 patients with CF who are ineligible for do not tolerate or do not benefit from modular therapy. So 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 end of the year. Then concurrently, we are working closely with the FDA and the CFF on an innovative registrational study design and systical analysis plan that may include prospectively collected natural Histidata from the CFF to supplement placebo-controlled data for evaluation of KB407 treatment effect.

We will chair the design and associated statistical analysis plan of the registrational study following alignment with the FDA, which we expect in second half of 2026. We expect the registrational study to commence in first half of 2027.

Strong patient and KOL 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 7 patients with HHD. We expect to dose the first patient in the [indiscernible] later this month, and submit our registrational study design to FDA in the second half of the year.

Based on the current time line, we expect the registrational study to start in 2027, and then we have our KB408 program for AATD lung disease and our KB707 program for non-small cell cancer, both are 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 6 potential readouts before year-end, including 2 registrational study readouts.

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 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 growth as compared to the prior quarter of 9% 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 head count and related compensation expense as well as higher legal consulting and launch for 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's 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.

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 3 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 2 registrational readouts in DI, initial repeat dose data from KB407 in CF and KB111 in Hailey-Hailey?disease, along with data update for KB707 in NSCLC and KB408 in AATD. So it's turning out to be a really busy clinical and a 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 Instructions] Your first question comes from Roger Song with Jefferies.

Great. Maybe just 2 questions, 1 related to the commercial and then the pipeline. For the commercial looking at the 10-Q, so you have a 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 the 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 the 2025?

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 [indiscernible] decision before you start a pivotal?

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, right? 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 Q-by-Q basis. But the point I made in the call in my script was, look, people are pretty -- patients are really happy with that 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 Q-by-Q basis, it's really tough to predict the ups and downs. So you can have a down 1Q up the second Q. But overall, we expect the trend to be appointed in the positive direction.

Yes, Christine, if I may add, we're continuing to launch support programs that really educate them 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.

I can take the CF question. No, I know. I got it. Yes. And so as you guys are aware, we finished the single-dose study in these patients. And clearly, we were able to establish molecular correction, and as we discussed in our last call, we are obviously working collaboratively with the CFF Foundation and the FDA. We met with the agency. I mean, the agency is convinced with our expression data. And I mean, they seem to agree that we do see nice positive expression.

The only feedback that we got from the agency is, obviously, we don't have safety regarding repeat dose administration that was not established. So in order to satisfy that requirement, we set up this interim 5 patient study to establish safety in repeat dose administration safety in these patient population.

Obviously, in the interim, we are in discussion -- actively in discussion with the agency and the CFF Foundation. On the design of the registrational trial, I mean, obviously, we are proposing some sort of innovative trial design. And I think we have -- working with the CFF, we have really come up with a very good -- we feel confident in our study design. And we hope to sit with the agency and basically get their confidence on this design, so we can start the registrational trial early next year.

And Roger, I was looking at the question. You had a comment about global trajectory. That's the point I wanted to emphasize. We feel really good about the direction of the global trajectory launch. And the individual ones, especially in mature markets like the U.S. are tough to predict up and down. It's also difficult on a quarterly basis to think about as Japan up versus France versus Germany. But really, we feel really good about the overall global trajectory launch in 2020.

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

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-a-vis VYJUVEK?in terms of overlap with existing prescribers patients, reimbursement or site of care dynamics. And then maybe 1 on Hailey-Hailey?. I guess in terms of the data that we should expect later this year and sort of why the registration was pushed out to 2027. Just any commentary on that would be helpful.

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 store administer like all the things in the launch have been ironed out with JV -- with VV. And so should the drug get approved and so the label have a really strong profile. We expect the launch to be really positive.

It's tough for me to quantify to what extent about. It affects about 50% of the RD population according to publications, and maybe 10% to 15% of the dominant population, and there are evidences of many more patients having lesions in the eye, but it is positioned as somewhat like a prophylactic, and so we expect the launch to be really good. So the drug get approved.

I can take Hailey-Hailey. Yes. Hailey-Hailey, again, this is a disease that nobody has ever embarked upon. So there was a little bit of learning and understanding, and this is where we have -- we talk to the agency, we came to an agreement on a patient-reported outcome scale. So the agency wanted us to basically validate the scale. So we are in the process of validating the scale, which should be done shortly.

But in the process of validating the scale, we were able to really reach out and we have a lot of patients technically reached out and to participate in this scale. So now we have a repository of these patients where we are actually like our mini natural history sort of database, we collect the data on these patients as we are validating the scale, and we have a lot of interest from these patients to participate in the trial. But again, since we don't have any clinical data, I think the best approach for us was to do a small Phase I study, where we have 5 to 6 patients. I mean we're already the patients in our system, the scales are being validated and to just collect both safety dosing regimen and also some sort of the scale validation to really validate because before we want to go into the registration trial, we want to be really comfortable with our skills, really understand the disease. So we position ourselves for success. So that's the goal.

So I think the Phase I study in this handful of patients will allow us to really evaluate this patient population, the timing of the evaluation and the robustness of the scale. So I think all of this will be completely established by end of the year. And then we expect to get into the registration trial early. And I think the study should go pretty quickly because we have the patient population. I mean, as I said, as we with the validation of the scale, establishing these patients, we have been genetically testing them. So I think once we have this the registrational style should be pretty fast because, again, this is a decentralized study, the patient reported outcome editions, the drug is shipped to the relations house. So because of the decentralized nature and the CRO outcome of the endpoint, we expect once the registration trial that this trial could pretty much be fully enrolled pretty rapidly.

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

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. So do you see any key education steps that are needed for ex U.S. doctors versus U.S.? What are some of the key negotiation points besides, say, pricing or any other factors you'd like to highlight that might be different from the U.S. launch.

Thanks, Joe. Look, given that Europe launched after the U.S. a lot of physicians in Europe, especially like Germany, France, the countries we're going after Italy, Spain are aware of the significant benefit that VYJUVEK has been affording to patients in the U.S. So in terms of bringing them up to speed, teaching them about the disease, the benefits of VYJUVEK and how it works and the application, it's been a lot easier relative to the U.S. in terms of physician education and getting them up to speed, and that's true in Japan, too.

In -- so that part, like we feel really good about what the physicians think about VYJUVEK?so and so. It's kind of helped us accelerate launches in both Spain and Italy, given the voice of the physicians in these countries. With respect to negotiations, look, that's a tough question. that beyond the nature of the drug itself, which is very powerful, the clinical benefits are great. There are also political factors that come into negotiations in these countries. They have budgets for rare diseases. But today, the negotiations have been progressing well. We've been able to make a good compelling benefit. We'll obviously know the outcome first in Germany, second half of this year, followed by maybe Italy ahead of that. So we'll have a couple of European benchmarks, which will probably dictate the direction of the French and U.K. and subsequent Spanish pricing.

But all in all, given what we were able to do in Japan, given the benefits of the drug, we feel really good about making the compelling value proposition. The question always is what are the macroeconomic factors in these countries that could potentially influence our pricing.

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

I've got 1 on VYJUVEK?and then a couple on CF. Krish, we have been hearing just of sort of insurance friction around the stop-start drug holidays that insurance companies are sort of coming down on patients whether it's requirements for documentation of reopened wounds or things like that and how insurance companies are sort of monitoring whether wounds are closed or not. So if you could elaborate just on insurance dynamics around stop and start and reauthorization of coverage? And then I've got a couple on CF.

Yes. Thanks, Ritu. I mean we have had -- I mean, from since the launch, we've had no issues with access to date, whether that's in terms of reimbursement, reauthorization, start and stop effect. The start and stop decisions are obviously made by the patient in consultation with their physician. But once they're ready to start, we've had no delays with respect to getting them back on drug at all. So it's been really smooth. Fingers crossed.

Okay. And then on CF, you mentioned that the patients, the patients include those that do not tolerate modulators or do not benefit from modulators. Are there sort of prescribed definitions around either liver enzyme elevations or sweat chloride changes either longer retreatment periods that the FDA wanted. If so, why? And would it be possible to get functional data from these 4-week patients ahead of pivotal?

So Ritu, I'll answer that question. Yes, we are enrolling patients that are now and that are modulator intolerant. With regards to sweat chloride, I mean, I don't think there is any marker because we are nebulizing the drug, it directly goes into the lung, and that's where the action is. So we don't have systemic levels of measurements. But yes, we are -- I mean, we have a lot of now patients ready to go on this trial in our -- the study that where we are evaluating repeat dose. So we are evaluating patients who are ineligible for modulation. Either they don't tolerate it or they cannot take these drugs. So with regarding to your second question, we never did a repeat dose administration. As was a single dose. When you see 4 dose of applications, this is something that we discussed with the agency. -- because when we made the first batch titers, I mean, the dose was not enough to deliver all of it in 1 sitting. I mean, obviously, now we have manufacturing and we have doses that can be done as a single administration. So we discussed with the agency and the agency recommended that we divide the dose over 4 days. So it was not immediately with day 1, day 2, day 3, day 4, but they're still considered as a single dose.

And the entire dose is now was between 4 days. But if you look at the study that we are proposing, it's the same dose as a single administration as a single dose, but as a repeat administration. So now we are going -- so this has never been done -- so we're going to do it weekly, the same dose, but once a day, weekly over the entire 6-month period, and we will evaluate Obviously, safety is going to be is the primary endpoint of the study. We will look at -- we will also evaluate obviously, we will be measuring FEV1. We will look at patients reported out PRO scales to see that benefit. So we are going to look at all of that in an expiatory fashion because more data that will help us so the better for us as we embark upon our base registration trial.

Your next question is from Yigal Nochomovitz with Citi.

Just a few on Europe. Could you just comment as to whether you've entered the second 6 months of the accrual phase in Germany, and then with regard to Spain and Italy, could you clarify whether this is going to 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 1 other 1 on KB-803.

Yes, Lauren you want to start.

Yes. So maybe to start with the second question on the pricing model. in Italy and Spain. What we expect is definitive reimbursement in those countries. So it will not be advanced, like the 1 in France or Germany currently. And with regard to the German situation, yes, we've entered with within the second 6 months of the launch. So that's the first semester where we start accruing for future potential pricing.

Okay. And then on 803, I'm just curious if you could comment on the natural history run-in data. Those are tracking with expectations? And if you have any comments on the diary, the blinded symptom diaries in terms of compliance with logging that during the trial?

Sure. I mean we -- as you know, we do have a natural -- it's the same diary that -- I mean, the same information or data that we are collecting in the natural history study. Once they qualify to be in the main study, at that point, we have a database where it's blinded, randomized the patients I mean the drug is randomized and the patients that are signed to either placebo or drug. And they have -- so then they start a new diary, which is, I mean, a complete different database always blinded. So the patient is blinded, the physician is blinded, we have blinded it except the pharmacy that ships the drug to the patients where they do the randomization and the blinding. So it's a completely blinded system, which is completely maintained. And then the patient is just still the diary on a weekly basis, just like the natural history. So they have the practice and experience. Obviously, the clinical operations team will help them answer or address any questions they have, or we have, I mean the external CRO that is managing the diary, if there is a patient that's missing information, then we can cross them to say make sure you feel so the data can be is there's nothing no missing information. So it's a completely blinded system.

Your next question for today is from Bill Maughan with 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? And might we see something meaningfully -- a meaningfully larger separation and I guess, how much does that delta matter in terms of supporting commercialization down the road?

I mean, again, I think any improvement in these patients because, I mean, it's such a debilitating disease. And once they have 1 of these abrasions or symptoms, it can be pretty rough on these patients, because they can open the eyes, they can be decommissioned for 3 days. And in addition to all of the other comorbidities that they have to experience. So I think from a any improvement, I think, is a benefit to these patients.

The good thing is we have this natural history study that we have been collecting over a year. So we have a ton of data that -- so as we embark upon this study will have some flexibility to even use some of this natural history as we do the analysis. So again, I think any improvement that the prospectively collected natural history, I mean a lot of the I mean, reasons that you see the agencies have issues with external control of using them as controllers because many of that data is not prospectively collected.

In our case, we have over 100 patients in this natural is very prospectively collected, which simulates exactly what they're going to do in the clinical. So I think we can leverage that data to -- in the analysis as we move forward.

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

Yes. Yes, a regular question for me. I'll say a couple of things, like right now, we are in a growth out, both in terms of commercial growth in the world and in terms of our pipeline. We're not planning on licensing or buying and I've said that before in different forms. So once we have visibility into the future of our pipeline, especially on the drugs that address large markets, KB408, the oncology, the aesthetics, and then when we have some visibility into the launch of our next drug, that would be a great timing to think about share buyback.

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

Krish, I didn't know you were Star Wars fan. Anyways, on KB 803, I just wanted to double click on the powering a little bit. So for the 16 patients that you enrolled in the study from a natural history runner, what was the average symptom is at baseline? And what was the standard deviation that you saw in the natural history portion? And then on the powering side, you noted the study is 90% powered for a 25% reduction and symptom is -- at what point does the study become 50% powered? Like what's the minimum detectable benefit you think you could tease out in this trial?

I mean, obviously, we looked at our natural history data extensively, and we know the pattern, right? I mean we know there are patients that have the severity of the disease. I mean, you can see from our natural history are a subset of patients that these abrasions are pretty frequent, right, and really over 1-year period. So the benefit we have is because of this [indiscernible], we could select those patients. So we can see a difference from a drug effect. I mean, so that was very important to us. So if you look at the patients, we have the patients that are enrolled into the 16 patients that we have meet that criteria. So hopefully, I mean, because of that, the drug effect should become evident. And I think based on that, we were -- that's how we powered it. We were able to see, okay, 25% difference with what is the least amount of difference we need to see statistical significance, what is the sample size.

And again, with the crossover design where patients -- the same patient gets either drug or placebo -- we that also improve our sample size and increases the chances. So all of that was taken into account to calculate the sample size and the powering for the stent.

Your next question is from [ Joshua Sodo ] with William Blair.

Congrats on the quarter. This is Josh on from Sami and Logan. I have questions on VYJUVEK?. The first is ever since the company gave home administration in the U.S. at the end of Q4. I was wondering what has been the impact of that on either if that has been the driver in the decrease of start-stop dynamic? Or nation adds in the U.S.

The second question was on the ex U.S. launch. I was wondering if pricing in Spain is going to be similar compared to other European territories and how many patients does the company estimate can address the territory.

Thank you for the question. In terms of the label updates in the home administration, it's been received incredibly well, both by patients and physicians as it really offers the opportunity for patients to integrate this differently. So we have seen a subset of patients who maybe didn't initiate therapy early on because they weren't comfortable with the nurse coming to their home, and now they have that flexibility and that choice.

We've also seen a subset of patients that have transitioned from home nursing into self-administration. And if you think about our goal of being able to create a scenario where this fits comfortably into their daily routines. The label updates that have allowed that flexibility, and we've seen some really positive impact of that, both from patients receptivity to VYJUVEK?and supporting their stop and start on therapy, but also the way physicians are thinking about initiating therapy for their patients.

Laurent, do you want to talk on the international question.

Yes. So if I understood the question, it was related to Spain, specifically. And the first 1 was about the pricing in Spain. We do have a pricing corridor reflecting the value of Vivek. And so we do expect Spain to be within this pricing corridor. But of course, negotiations are ongoing. So difficult to speculate at this stage.

And the number of patients in Spain, we would think, we would look at it as an equivalent prevalence to the other European countries. So there are no difference in prevalence versus the other European countries.

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

Thank you for standing by, and welcome to the Krystal Biotech 4Q 2025 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, 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 at www.krystalbio.com. We also filed our earnings 8-K and 10-K with the SEC earlier today.

Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development, Christine Wilson, Senior Vice President and Head of U.S. Commercial, Laurent Goux Senior Vice President and General Manager for Europe; and Kate Romano, Chief Accounting Officer.

This conference call will and our responses to questions may contain forward-looking statements. You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings.

With that, I will turn the call over to Krish.

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'm very pleased with where we are at Krystal. On the commercial side in 2025, we've made meaningful progress across all geographies. In the U.S., 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 leveraged the attributes of VYJUVEK to establish a strong value proposition for patients. And we continue to broaden VYJUVEK access globally. 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 VYJUVEK is changing lives, remains deeply motivating for our entire team.

On the pipeline, we're currently in the middle of 2 registrational trials in NK and in treating eye lesions in DEB patients with the potential to initiate 2 additional registrational programs in CF and Hailey-Hailey later this year. Together, that positions us well for the next 5 years, and we believe that if approved, we have the capabilities to self-launch these four indications. Meanwhile, the oncology and the alpha-1 trials continue to progress well. None of this would be possible without the dedication of the Krystal team, and I'm grateful for their commitment and execution. Overall, Krystal is building a durable commercial gene therapy company with disciplined capital allocation. We're generating strong gross margins and operating profitability while expanding global access for VYJUVEK and advancing our 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're pleased to report another quarter of revenue growth with net VYJUVEK revenue of $107.1 million in Q4. That brings total net VYJUVEK revenue since launch to over $730 million. 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'll turn it over to Christine to provide an update on the U.S. commercial performance.

Thank you, Krish. We remain very encouraged by the VYJUVEK launch and the momentum we are seeing in the U.S., which continues to support our long-term commercial outlook. I am pleased to share that we have now seen reimbursement approval acceleration for 3 consecutive quarters with over 660 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 D-DEB that are being treated by local dermatologists or primary care physicians. It is encouraging to see the benefit that VYJUVEK 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 utilization of VYJUVEK 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 organizations and centers of excellence, ongoing feedback from HCPs and patients data 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 VYJUVEK launch overseas. Laurent?

Thank you, Christine. It is my pleasure to share the latest on our operations outside the U.S., including an update on Japan on behalf of our colleagues. I'm proud to report that our global VYJUVEK launch continues to progress very well. The high patient demand we're seeing across our very different markets, validate the transformative impact VYJUVEK brings to the dystrophic epidemiologic [ below the ] patients and their families. We now estimate that over 90 DEB patients have been prescribed VYJUVEK across Germany, France and Japan combined.

Our launch in Germany continues to build momentum since late August of last year. We're seeing sustained prescription growth and good prescribing breadth. The initial Center of Excellence are now routinely prescribing VYJUVEK and we are expanding into the broader community setting. This geographic distribution is critical for patient access and it allows the patients to initiate therapy closer to home, reducing the burden on both patients and individual treatment centers. After initiation in the center, most of the patients are already benefiting from home administration.

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 VYJUVEK 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 VYJUVEK's clinical profile. Please note that pricing negotiations in Germany and France are ongoing and progressing well. We're expecting the negotiation to continue into at least the second half of 2026 in Germany, and 2027 in France.

Our colleagues are also achieving early launch successes in Japan after successfully negotiating pricing in October of last year. This includes building a unique in-country distribution model to enable home delivery while addressing the many strict regulation regarding the handling of gene therapies in Japan. Leveraging this infrastructure, our team is driving VYJUVEK 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 the second half of 2026. Italy represents another significant patient population, and we're working diligently to ensure timely access to these patients. Additional pricing negotiations are advancing on schedule in Europe and the U.K.

I'd like to highlight another important validation of VYJUVEK's clinical impact. In December, VYJUVEK was awarded the [indiscernible] in France for innovation and clinical impact in the treatment of dystrophic [indiscernible]. This recognition from the French medical and scientific community underscores the transformative nature of VYJUVEK and strengthen our position in ongoing reimbursement discussions across Europe. Looking beyond our direct markets. I'm also pleased to share that we have expanded our distributor network to now include Israel. This expansion demonstrates our commitment to serving DEB patients across various geographies and position us well for continued growth.

While it's still early in our commercialization journey outside the U.S. we're 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. Without we'll turn the call over to Suma to share the latest on pipeline development at Krystal.

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 our dedicated R&D team, we are making rapid progress on our rare disease pipeline, generating breakthrough clinical data and moving quickly through its 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 lungs of patients with CF. Not only could we confirm full-length protein expression in CF patients with Class I mutations, we also saw that HSV-1 [indiscernible] transduction was consistent across all patient biopsies. In a [indiscernible] 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 I patients as well as durability of expression out to at least 96 hours, these results give us high conviction in the potential of KB407 to fill the treatment gap that exists today for modulated 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 HSV-1-based gene delivery to epithelial tissues beyond the skin. With upcoming readouts for KB801, KB803 and KB408, we hope to further underscore the exciting potential of HSV-1-based gene delivery to both the lung and eye.

Another important advantage of our HSV1 platform is the potential for convenient at-home dosing. Although it took us a few years, we're very proud that VYJUVEK is now approved in the United States, Europe and Japan for administration in the home setting, the option for caregiver or patient administration. This is a fantastic breakthrough for DEB patient 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 EMERALD-1, 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 administrating an eye drop we have updated the KB801 dosing regimen. Patients enrolled into EMERALD-1 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.

There's also a change that is only made possible by the clean safety profile that we have 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 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.

We have made similar updates to our KB803 program. again, the goal of maximizing flexibility and real-world outcome for patients from day of launch. Our KB803 protocol is summarized here. Patients enrolled in the study will receive KB803, or placebo, 3x weekly. As with KB801, KB803, all 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 natural history study, we expect to complete enrollment in the first half and report data before 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 Hailey-Hailey disease are progressing well. Our team is in the process of developing our HHD-specific scale and is on track to complete this 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 4 weeks, with KB408 doses, and will help us better understand the additive effects of repeat KB408 dosing on lung, AAT and bound mutable elastase levels. These are key data points that will support accelerated approval discussions with the FDA.

We are also enrolling patients on our Phase I/II KYANITE-1, evaluating inhaled KB707 in patients with advanced NSCLC. Here as well, we are on track for clinical data update later this year with an opportunity to move quickly into a registrational study having already received FDA input on a Phase III study design to support a potential filing.

Finally, I would like to make a special mention of the 2 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 an RMAT designation for KB707. These designations underscore the potential of our programs to address urgent unmet needs for patients with rare and serious diseases. We also provide us important advantages to accelerate our programs, including opening the door to accelerated approvals based on surrogate or intermediate end points. Having received similar designations for VYJUVEK 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 redoseable genetic medicines. 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 fourth quarter and full year financial results reported in our press release and 10-K filing earlier this morning.

We previously announced preliminary 4Q 2025 VYJUVEK net revenue of $106 million to $107 million. Our final net revenue from global sales of VYJUVEK during the fourth quarter of 2025 was $107.1 million, 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 VYJUVEK net revenue was $389.1 million, an increase of approximately 34% compared to full year 2024 revenue. Gross to net revenue percentages remained consistent with prior quarters.

Cost of goods sold was $6.6 million compared to $4.3 million in the third quarter and $4.9 million 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 the fourth quarter of 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 $14.8 million compared to $13.5 million in the prior year's fourth quarter, and SG&A expenses were $41.4 million compared to $31.3 million 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 VYJUVEK. Operating expenses for the quarter included noncash stock-based compensation of $13.8 million compared to $13.4 million 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 million to $195 million 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 $150.3 million and is the result of our continued planned spend on VYJUVEK 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 onetime noncash tax benefit that increased reported EPS for this year.

Net income for the quarter was $51.4 million, which represented $1.77 per basic and $1.70 per diluted share. Net income for the year was $204.8 million, which represented $7.08 per basic and $6.84 per diluted share, reflective of the previously mentioned onetime benefits. And finally, we ended the year with $955.9 million 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. And now I will turn the call back over to Krish.

Thanks, Kate. I'd like to reiterate a few key points before we open for questions. First, geographic expansion is a meaningful tailwind for VYJUVEK 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'll continue executing 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 U.S., demand continues to grow but we're 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's important to note that revenue may not track linearly with [ patients ] 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're 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 profiles position these programs to deliver tangible real-world benefit, maximizing convenience and building resilience to account for the inevitable human factor that comes with cell dosing. We were also pleased to receive RMAT for KB707 and Fast Track designation of KB111, two designations we know we and that can meaningfully shorten development timelines. We're excited to advance both of those programs along with KB408 for Alpha-1 deficiency, which is progressing through the re-dosing phase of the initial study.

Overall, 2026 is shaping up to be a busy and an important year and we're approaching it with a lot of enthusiasm. With that, let's open the call for questions.

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

Excellent. Congrats for the successful 2025. A couple of questions from us. On VYJUVEK, Krish, I heard you said a couple of comments around the U.S. versus ex U.S. given 2 months in the 1Q, any visibility into the 1Q and then looking ahead of 2026? Particularly contribution from ex U.S. versus the U.S. on the dollar value? Because I hear you say the revenue driver predominantly will come from the ex U.S. in 2026?

Yes. Thanks, Roger. Thanks for the question. I want to clear out a couple of things. While I did say that the predominant boat driver will be from ex U.S., I do want to highlight that demand in the U.S. is accelerating. I mean you heard Christine talk about the number of reimbursement approvals being up Q-over-Q, and the [indiscernible] while demand in the U.S. is accelerating, you should also assume that patients are now starting to settle into a start-stop regime, which is kind of tough. It's nuanced and the kinetics of that is kind of a bit hard to predict.

But in Europe, where the launch is recent definitely, it's an accelerating growth driver when you think about -- without exception. That all said, in terms of breakdown of U.S. versus ex U.S., we at the moment, pretty strongly believe that when we report 1Q, we will be breaking the [indiscernible].

Got it. Yes. And then in terms of the pipeline, I'm just noticing you are adjusting the dosing measurement for both ocular and NK, be a little bit more frequent. Just curious any data to support that? I heard you said, avoid the 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?

Yes, I can take this. I mean, with 801, the weekly dose was deliberate, I mean, obviously, we have seen our blinded data from -- and we feel pretty confident about that data. The reason was -- initially, we started with in-clinic dosing for 801, and we realize commercially for this to be a viable product. We have to be home-administered. So again, there was interactions with the agency to get that home dosing. I mean, obviously, now it's implemented. The change was deliberate because now that the dose is being administered by the patient at their home, obviously we train the patients, I mean, there's always nuances answers with it, right?

I mean [indiscernible] I want to make sure that in the event of daily administration, there's a dose that they -- it doesn't get into the eye, they blink -- all kind of sort of an administration errors. So we thought we have a very safe profile and the drug is clean. So we figured it's better to avoid and also it's more -- it's easy for the patient to remember, right, daily one dose in the morning, you can drop it in the eye. So I think it was deliberate to make ensure that dosing is -- they comply and get the right dose in eye.

Your next question is from Sami Corwin with William Blair.

I was curious if you could provide any insight into the compliance rate so far in the EU and Japan. And then, Krish, previously, you commented on giving Krystal's growing profitability [indiscernible] 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, Sami. When you talked about compliance, were you referring primarily to the United States compliance number? Or was it outside?

Outside the U.S.

Yes. Look, in Europe, compliance has been, just as compliance had been in the U.S. 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 has to -- the patient only gets a 2-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 2 weeks. To date, patients have been pretty compliant. It's the early days of launch. But when you look out over the next 6 to 9 months, one could imagine a situation where some patients may drop off on compliance purely based on this burden. But if there are any stop-outs, our expectation is by the time year 2 rolls out, which is late second half of this year, we expect compliance to come back up, to normal levels.

Okay. And for Japan that 2-week prescription burden, you said that last for the first year?

Yes. And on your second question on profitability and share buyback. Look, -- we understand -- we have a few research programs. As you know, our pipeline. We have a few rare diseases that are in resgitrational and have to launch. We have a couple of large indications, one being oncology, one being an alpha 1, 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's difficult to be very definitive on a time line for a stock buyback.

But that said, one thing I have made clear in the past is we're 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.

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

Congrats on the close to the year. Two questions. Maybe first on ex-U.S. Can you just remind us what's 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 and France, Germany and Japan?

Yes. I think our present expectation is that we would have reached some kind of pricing agreement with Germany in the second half of this year. It's tough, Alex, at this point, to say if it's a 3Q or 4Q, but our expectations sometime in 3Q.

With respect to France, clear expectation that we will not reach pricing agreement this year and probably be shifted to sometime in the first half of next year. That's 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'll also be accruing in France until the pricing becomes definitive, and in general, and I've reiterated this in the past, we tend to be a bit conservative when it comes to accruing for a future press.

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

Yes. No. As you can see, the powering and the number of patients have not changed because we clearly know that from Oxervate and [indiscernible] give us confidence from our data. With regards to, again, 801, we have 50% of our sites, I mean we are targeting 30 sites. So we can maximize and optimize -- speeding up the process of enrollment. So with 60 patients, even on an average of 2 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, I think, all of them done by -- in the next couple of months. So I think with all of those sites up to speed, we feel confident in our enrollment as we -- as announced, that we would enroll this complete enrollment of the study by end of the year.

And for 803 and also potentially announced, I mean, it's 8 weeks, and then we have -- hopefully, the data comes in and we can data by end of the year. For 803, again, we feel very good from what we saw in our initial blinded study. Again, same thing. Initially, it was designed to administered by clinicians in the clinic. And obviously, we realize that this has to be home administered for the study to be enrolled and patient convenience. So we shifted from in-clinic to home dosing. And as a result, against while the same logic goes beyond. We wanted to make sure that we know from the data we saw that give some flexibility for dosing for the patients because every day can be burdened. I mean, it can be -- so they 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 VYJUVEK. I mean there were lessons learned and that helped us optimize the dose for 803 in the clinic.

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

Congrats on the progress. I was just curious if you could speak in a little bit more detail with respect to the 90 patients that have been prescribed VYJUVEK in Europe, how that splits out across the geographies, Germany, France and then also in Japan? And if you could speak to more specifically the cadence in terms of patient adds month-over-month in the recent quarter?

Yigal, thanks for the question. It's really difficult to estimate a number of patients in Europe. We do not -- I mean, the laws are different between U.S. and Europe and more just making an estimate based on vials being shared and pharmacies being disclosed. So while it's a closing of proxy, the number 90 itself is somewhat of an approximation and segment that further into France versus Germany versus other countries, just makes it that much more irrelevant at the moment. But it provides a directional guidance until we break out revenues.

So our expectation is starting in 1Q, we'll have an idea. I mean you will have an idea of how U.S. is doing versus the rest of the world. But until then, the only reason we provided patient estimates is to give people some sense of how launch is going. And honestly, in all these three countries, given all the different nuances and Europe is definitely a bit more burdensome in terms of figuring out supply chain logistics, getting the medication to the patient, we feel really good about the way it's gotten started. Fingers crossed hopefully, it continues to go in the right direction.

Okay. Understood. And then I was just curious, in Italy, how does the reimbursement work there? I know in Germany, you have sort of this three-phase negotiation. And then in France, you accrue from the beginning. What's the setup in Italy as far as how you do the reimbursement?

Italy, we will launch once the pricing is finalized. So we're not expecting any accrual-type situation in Italy.

Your next question is from Ritu Baral with TD Cowen.

This is Josh Fleishman on for Ritu. Congrats on the quarter. Just curious, was patient compliance also the major factor required that at home self dosing for 803 in ocular DEB? And what was the differentiating factor that resulted in the 3-week dosing schedule for 803 and the once-daily dosing schedule for 801?

Yes. I mean I think one of the main deciding factor was obviously home administration. And the reason was as we said we learned from VYJUVEK. I mean, from what we see from patient feedback, they have asked that can be administered the drug multiple times during the week. So I think we want to give them the flexibility. So we decided that, yes, let's have a volume and then give them the flexibility to administer it as a couple of times during the week. So that was the best regimen for these patients. Again, based on the data that we saw before, we feel pretty confident that this should not make any difference. So again, convenience for the patient at home, we give them a volume and they can administer that volume during the week.

Okay. Very helpful. And then I just have one follow-up, please. On the Italian discussions, we recall that the original guidance for the Italian launch was in mid-2026, now its second half. Is the delay associated more with rescheduling, or is it more on pushback than VYJUVEK efficacy?

This is -- I would not use the word delay. It's tough to predict whether it's in June or whether it's going to be in July, but I would not frame that as the kind of delay with respect to the Italian launch. Whatever we said in the past, we continue to believe that's the time line.

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

Also on the ocular modified dosing regimens, what happens to the data generated to-date on the prior regimen? Like does this all get pulled into the primary analysis of the study? And then can I just also confirm you didn't change the PFU or the volume of dose in either of the study, right? It's just the frequency.

Correct. No, none of that changes. The dose is correct. So what happens is basically, when we -- the first study goes towards safety, and then we started the Phase III protocol with the SAP. We had to go through back and forth with the agency on the statistical analysis plan, there is a couple of iterations. So this helped us do that, too. So it was a combination. Now we have the final protocol, the green statistical analysis plan with the agency, which they agree and concurred. All of this is important as we start the study. So it's all set and now it's in the process of execution.

Okay. So just to be clear, like if we just take the NK study? For 801. Like all of those 60 patients, those are all going to be enrolled on a go-forward basis at this modified regimen?

That is correct. Yes.

[Operator Instructions] 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.

Good morning, everyone, and welcome I hope you enjoyed the beginning of the conference. My name is Alex Buckley. I'm with the Healthcare Investment Banking Group at JPMorgan. And it's my pleasure to introduce firstly, Krystal Biotech. And joining us is Krish Krishnan, CEO and Chairman; and Suma Krishnan, President of R&D. We'll have some time at the end for Q&A. If you could just raise your hand and a microphone will be passed around.

And with that, I will pass over to Krish and Suma to kick things off.

Good morning, everyone. Thanks for coming. Thanks, Alex and JPMorgan for having us. This presentation, roughly about 20 minutes, divided into 2 primary parts. I'll spend about 10 minutes-or-so talking about our thinking with respect to advancing Krystal over the next 5 years. And then Suma will follow-up and talk about the specific deliverables and objectives for 2026. That's how the presentation is structured.

And before I commence the presentation, I'd like you all to take a moment to look at the forward-looking statements, and spend a couple of minutes looking throughout it. We will be making forward-looking statements.

Before I talk about our ambitions for the next 5 years, it's good to spend a couple of minutes on where we are today. And I'd like to start with VYJUVEK, which we launched around September of 2023. I wanted to spend a few minutes for the treatment of patients with dystrophic epidermolysis bullosa. And I want to talk about how differentiated this product is and how it completely changed the way people thought about genetic medicines.

VYJUVEK is the first drug that was redoseable in genetic medicines, and that was the first. VYJUVEK was the first drug that could be applied at home, in a patient's home, and that was the first for gene therapy. VYJUVEK was the first. There was a topical gel that was easily conveniently applicable to a patient's wound and now to the lung and other parts as we advance our pipeline.

VYJUVEK was the first genetic medicine that could be applied by a primary care physician, a health care professional, a caregiver at a patient's home or by a patient. So -- and the reason I mentioned the attributes of VYJUVEK today and how differentiated it is, is there's a read through to a lot of products in our pipeline in terms of some of those attributes or in fact many, if not all, of those attributes.

And so it's important to understand VYJUVEK. And so we launched 2 years ago in the U.S., the launch has gone well. The patient experience, the physician experience on the drug has been really positive. The conveniences has been really good for the patients, especially to the moderate and mild patients to be able to get the drug at home, to be able to travel with the drug has provided a level of convenience, and that shows in the compliance in the drug and it reflects in the number of patients on the drug and the number of reimbursement approvals we get.

And then last year, we launched in Europe in both France and Germany and in Japan. And then are working on a bunch of distribution agreements to tackle some of the countries where Krystal has no plants to self-launch. So our -- as a company, we kind of decided that we were going to self-launch in Germany, France, I mean, the EU4 in U.K. and Japan and all the other countries with patients suffering from DEB, our strategies to use distributors to get the drug to the patients.

So that launch has gone really well and hope -- and our objective with respect to VYJUVEK is to get one other European country launched sometime during the middle of this year, and then work towards the remaining 1 or 2. So overall, we're very pleased that the drug has provided a great benefit to patients with this debilitating disease.

What the launch has done for us is kind of put us in a really good financial position also. So as you can see from the chart. Ever since the launch, we've had almost 10 consecutive quarters of positive EPS. Our balance sheet is pretty strong. And when someone says balance sheet is strong, I think the implication is that we're not planning on any kind of financing in the company over the next -- I mean, fingers crossed over the next many, many years, if not forever.

EPS is positive. But the more important thing on this slide is the 2 manufacturing facilities that you see on the top of the right side of that slide. And Krystal, even before we had our pivotal readout realized that CMC was probably the most important function when you are developing genetic medicine. And it is important not only to have control of CMC, but keep all the trade secrets in-house.

And so we built one facility, about 20,000 square feet-or-so for B-VEC, but then immediately start of construction and a much larger facility as a backup and most of the CMC was in place even before the drug was approved. And what we're doing in the launch is trying to take control of more and more functions in the supply chain. We're trying to bring packaging in-house. In fact, packaging is in-house for the most part. Our drugs to Europe and Japan are being supplied from the 2 manufacturing facilities in Pittsburgh, Pennsylvania.

And I also want to point out that the way the company -- because this idea came from Suma, and we built a lab and started with a handful of scientists working on the idea. We do not have any royalty obligations to any universities or any pharma companies, the idea was not licensed. And so Krystal has complete ownership of all its pipeline and all its products and with the CMC in hand, we feel we're really positioned to talk about ambitions over the next 5 years.

So let me get to our dreams over the next 5 years. Our vision, you got to take a stand somewhere, it's about 4 marketed rare disease products. We say a rare disease because one of the things the launch has done for us is to realize we're really good. We're really, really -- our capability competence is developing and commercializing rare diseases. I think we're very convinced of that.

And in our pipeline, any time you see a rare disease in our pipeline, you should assume the intent of Krystal is to self-launch in the U.S. in EU4 and Japan. That's how we think about our pipeline. And when you see an indication that's much larger, you should assume that at the right time there is still intense to partner with somebody to commercialize that drug.

We do have a strong balance sheet to take development as far as we have to before we get into a commercialization stage, but -- and that's why when you look at our pipeline, while it looks like a lot of items in the pipeline, you can break it down simply into 2 buckets. There's a bucket called the rare disease pipeline, which we plan to develop, commercialize and launch. There is a bucket called the expanded pipeline that we're thinking about advancing to the extent possible before we can find a partner willing to commercialize with us.

And so the focus of the 4 approved drugs and the 10,000 patients you saw is primarily based on 803 for DEB, 801 for NK, 407 for CF, KB111 for Hailey-Hailey and any potential additional rare disease program that could come over the next 4 years. We're not ignoring or talking differently about 408 or 707. In fact, we're super excited about both those programs. We just feel at this point, given where Krystal is, we would advance them to the extent we need to be, and then hopefully find a partner to get to patients worldwide.

So briefly, let me talk briefly about the 5 indications and how we get there, and it's pretty much the last 1 or 2 slides of my presentations because the story is simple. We have KB803, and Suma will get into the details. It treats lesions in the eye of DEB patients. It has a prevalence of about 1,000-plus patients in U.S. and Europe. And I kind of talk about the market potential of that drug. We feel really good about 803 because it's not that different from VYJUVEK.

And we've already had one patient with clinical data, who has had tremendous benefit over many years. While it may be a singular data point, it is a clinical data point and we do know about VYJUVEK, the way VYJUVEK operates and functions. And that ability to dose in front of the eye leads us to neurotrophic keratitis, KB801, which I know many of you are excited about.

We are also enrolling for a registrational trial. So we have 2 studies that we are enrolling registrational right now. That's a much bigger market, but it's still a rare disease. And there are -- there's a prior evidence of a company self-launching the drug. So the ability to sell-launch NK is well understood, not just in U.S. but in Europe and Japan.

And then the exciting data we announced a few days ago for CF, where for the first time a company has been able to deliver 2 full copies of functional CFTR to patients with a null mutation. Null mutation is an unmet medical need. And we're super excited about the data. We're super excited about the level of safety we saw. And again, the concept is a simple nebulizer maybe nebulize for a few minutes, potentially when the drug is approved at home in a patient, by a patient. So it affords all the conveniences that VYJUVEK enjoys for the most part, and we'll work to get there.

And the last drug on that list is Hailey-Hailey, which just phenotypically is very similar to VYJUVEK. I mean it's not the same indication. It's not the same complication on the patient, but Hailey-Hailey is a skin disease with lesions, and we feel really good about being able to tackle that. It's an unmet medical need and has a lot of the common attributes of B-VEC.

So there is -- I'll close with saying, look, the market potential is over $4 billion. The patients are over 10,000. Most of these registrational studies either have started or are planning to be started in 2026. So we feel really good about getting the drug launched over the next 4 years.

And a lot of the pricing negotiations we've had in Japan and Europe and has really helped us refine the pipeline a lot better because you start learning about how people and other countries would pay for a drug, reimburse the drug, the distribution of a drug. And so VYJUVEK global launch has been instrumental for us in figuring out how to prioritize the pipeline.

With that, I'm going to turn it over to Suma to talk about much more specifics on 2026 and what we're going to do over the next 12 months. Suma?

Thanks, Krish. So this is -- here is just basically outline of our platform. I think many of you guys who have been following us, I mean, understand our platform. I think Krish has touched upon it. Again, the advantage of HSV is it's got a large payload capacity, it's got broad tropism, as we have now recognized and as you'll see the additional indications that we are going after because of the broad tropism, flexible administration, redoseable, low immunogenicity, this is pretty important because we can repeat dose.

Now we have in commercial setting with VYJUVEK. We have dosed a large number of patients over several years, and immunogenicity is something that is, again, never comes up, pretty safe. And again, we have a very scalable manufacturing. And that's very important because CMC is one of the biggest, most important things in the gene therapy because a lot of the nuances with all of the assays, the manufacturing, the process validation, I think we've got a very good handle on this. So this makes it very easy for all our pipeline products.

Now let's start with 803. Again, Krish touched upon it. We are very excited for this particular indication. I mean, as you know, dystrophic epidermolysis bullosa even though it's recognized as skin disease, it's not that simple because, I mean, again, collagen VII is essential to hold the basement membrane zone together. So these patients not only are just impacted by the skin, but it's also the eye and internal organs like the epithelia, inside the -- in the esophageal ear regions and all of the internal organs, all of those areas get affected. So this is why this disease is very severe.

Now eye is pretty -- I mean, these patients, again, eye is impacted in these patients, it's pretty bad as much as the skin. I mean, we hear from patients that they get constant blistering and as a result of the blistering these patients, it can really impact days of their lives because they're not able to open the eye in addition to all of the skin and the other complications, this can again affect the quality of the life.

And what happens is with repeat scarring and blistering in the eyes, these patients can have extreme scoring. And in a subset of these patients, because of extreme scarring, it can lead to blindness. So this is an example of one patient that we treated on a compassionate patient -- on a basis.

This patient was 5 years old when he went completely blind in actually both his eyes. I mean he had severe scarring. He underwent surgery to remove the scarring, was treated with plasma-derived and all the other topical treatments that were available to him, but none of that helped. So right after his surgery, he would go blind again because, I mean, again, because of the underlying molecular correction was not addressed.

So for this patient, we -- after his surgery, we started treating them with B-VEC on a compassionate basis. And what we noticed was with treatment of continuous use of B-VEC. These patient's scarring was addressed, I mean his blisters did not come back and he got his vision back. And as you can see from the table, which time he got his complete vision back. And this patient is -- has been on the drug for almost 3 years and has his complete vision. So very exciting. So based on the results and outcome of this compassionate use study, we decided that we should explore using B-VEC in patient's eye prophylactically to prevent blisters.

So again, as you know, 803 is we have an ongoing registrational study where we have discussed with the agency on the study design is a patient-reported outcome. The drug is administered in the patient's home. And we look -- I mean, it's a crossover design where we start the patient with either drug or placebo, and then we look -- and the patient is -- fills out a diary and reports patient -- how many blisters is blistering during the treatment, and then we look at analysis where placebo versus treated.

And so we hope we are actively recruiting patients in the study. We expect to finished enrollment pretty soon, and we'll make an announcement once we finish enrollment, and we expect to have data from that study by end of the year.

The next program, 801, again, pretty exciting neurotrophic keratitis. Again, this can be a pretty debilitating disease. I mean, we have one approved drug called Oxervate, which is a recombinant protein. The problem with -- it's a recombinant NGF. The problem with the protein is it's got a very short half-life. So within minutes, the protein is -- it degrades.

So the outcome of using is Oxervate as a result, you have to administer very frequently. So if you look at the label for Oxervate, it's 6 times a day. And these are usually older patients, very inconvenient. They are not compliant. It's very inconvenient for them to keep applying 6 doses frequently throughout the day. So this is where we believe that our platform would really help these patients with using our platform, we could deliver in NGF in a more consistent way because -- and again, hopefully, in a durable manner, so we can avoid frequent application.

This is based on animal study where we did with a wounding study in mice, where we compared recombinant NGF with our 801 vector that again is coded for 2 copies of NGF. So we have good release of NGF, and as you can see, we see in the wounding model that you see within the -- within the first 10 hours, all of the NGF from the recombinant NGF is gone. And within -- at 34 hours, we consistently still see the same levels of NGF. So again, the main goal for this study for us is to differentiate us from Oxervate, were with infrequent administration and hopefully, with a durable response.

And so where do we stand with this study, again, this is going to be a registrational study. We have increased the number of N for the study based on the animal study. And we have had our discussions with the agency on the protocol design. We have got agreement with the agency, and we -- and this is a registrational study. So this study started out as a Phase I, Phase II study, but looking at the robustness in the pharmacokinetic profile of the data, we believe that we could translate this into the clinic, so we turn this from a Phase I, Phase II to a registrational study.

And this study is recruiting. And hopefully, we are aggressively looking at multiple sites and getting the site getting patients enrolled. The goal for this study is to finish enrollment by end of the year, and hopefully, we can announce some data by end of the year.

407 for cystic fibrosis. Again, we very recently announced our very exciting data on our null patients from this study again from our cohort III. I mean clearly, we have shown robust expression of CFTR in the lung, I mean, across the entire lung. I mean, we have biopsy these null patients top of the lung, middle -- top lobe, middle lobe and the lower lobe across all of the different lobes. Consistently in all the biopsies that was usable, we saw robust CFTR expression and the expression was in the right area.

Again, very exciting because we know that if you can produce the full-length CFTR, hopefully, we know that will translate into clinical benefit. I mean, again, this -- we have this confidence because, again, from our VYJUVEK, this is exactly what we did. We started with our Phase I study where we showed molecular correction. We were able to show full-length collagen VII and anchoring fibrils and which in our first few patients, I mean, based on that, we designed our registrational study. And obviously, Phase III study was very successful. So we believe that if you are going to express the right protein in the right location, that should translate into clinical.

So based on that, we are working with the agency to design our registrational study, so hopefully, we hope to get concurrence with the agency shortly on that study. And once we have that, we are going to proceed into the registrational study and start enrolling patients first half of this year.

Last not least, this is another exciting program, Hailey-Hailey. I think this is an exciting program because there is -- there's a real unmet need. There is no therapy available for these patients. I know as Krish mentioned, it's very similar to dystrophic epidermolysis bullosa. But the -- this is a genetic disease. The onset of disease is usually in adolescence, that's when the disease begins, and it's a dominant disease. So it's very interesting.

Usually, this disease is, if 1 member in the family has it, you'll see multiple family members have this disease. People don't talk about it. I mean there is Facebook, even for us as we explore, and we learn to understand and study this disease a little more because we are beginning to now engage with patients and try to really understand.

We realize there's a lot of patients, but they do not talk about this disease, though the -- I mean, it's estimated 10,000 to 15,000 patients in the U.S., we expect even more because, as I said, this is usually because there are areas that are affected by this disease is usually in -- where in the growing or under the arms, where there's excessive sweating.

And patients usually suffer in silence because they're a little bit embarrassed about the disease and they -- it's pretty painful, and it never goes away. It keeps recurring, and it's a constant -- just like EB, it's a constant chronic disease for these patients. Again, unmet need. Patients just -- and there's -- as you can imagine, adults with areas that's affected that can really affect the quality of life and can be pretty miserable.

So we hope with our approach, very similar. We use the HSV vector. We're going to formulate into a gel. We have learned a lot from VYJUVEK. So hopefully, we can come with even a clever, right, instead of mixing the drug with the gel, we'll hopefully come with prefilled clever ideas of prefilled syringes. So application becomes very easy.

And again, so we are pretty excited. Again, we have filed the IND. We have got clearance from the agency. We are in communication with the FDA. We have agreed upon a clinical endpoint, which is going to be a patient-reported outcome. The FDA has given us guidance on what's needed. We have -- the scale that we have presented is acceptable to the agency. Now we are in the process of validating the scale, again, because this is a pretty new indication. Again, there is nothing that's out there. The scales are not developed specifically for this indication.

So we are in the process of actively validating the scale, which we hope to finish in the first half of this year. And once the scales have been validated, we hope to get into a clinical trial. And we hope to get into -- directly into registrational trial because we know based on some of our animal model, and we can capitalize what's based on VYJUVEK, the expression profile, we hope that we can accelerate this program.

And there's a lot of patients. Again, it's -- the good thing is one person in the family has it. There's multiple people that are involved. So we hope with the nature of this disease, we will be able to enroll, make more -- create more disease awareness and enroll these patients pretty quickly.

So again, very exciting clinical program. We have potentially 3 registrational trials, 803, 801 and hopefully 407. And also 111, we think we can get into registrational trial by this year. So 4 exciting registrational trials this year. And then with 408 and with our 707, those are also exciting programs, but I think we are continuing to do additional clinical studies and hope to announce some data in the future.

I mean, again, I want to really make this point. The clinical study is one aspect, but there is the whole CMC aspect of it. And I think as you -- as we have announced with KB111, we have the platform technology, and we hope to apply for the platform technology for all of these programs. And I think it makes a big difference because, again, we interact with the same division, a lot of our manufacturing and process validations, all of that, we can really capitalize on what was done with VYJUVEK.

So we don't have to do those extensive validation and especially assays. They're very tricky. I mean we have 12 different assays to release each of these products. I know people don't understand it, sometimes underestimate CMC. Even if you have one assay that does not work or fail, you're stuck. The FDA will not clear you because they're very picky on these kinds of things.

And fortunately, there's overlap on these -- all these assays. 90% of assays are very similar across all of the programs. Again, that makes it very easy, so that we don't have to spend excessive time and effort, and we have a team that's very well versed that we can use for -- we don't have to build expertise every for every program because of the platform technology.

And so we are very excited with all our clinical programs and hope to execute all of them as we promise for this year. So 2026 is an exciting year for Krystal. I see. And that concludes my talk.

Thank you very much for the updates and fantastic to see the progress. It certainly sounds like an exciting 2026. I'll open to questions from the room. If not, I've got some here.

Maybe just to start. Could you speak a bit more about the global launch for VYJUVEK and particularly, I suppose, in the rollout in Europe? And how you expect that cadence to go?

Yes. I think -- can you hear me?

Yes.

I think we launched first in Germany and subsequently in France, somewhere, I believe, around Q3. Each country, what we learned that each country, the distribution and the reimbursement is a bit nuanced. And it takes a certain amount of time to understand how to get a generic medicine to a patient's home because across the world, like as I mentioned, VYJUVEK can be applied at home by a patient.

And some of these countries, you have to work with the existing infrastructure to make this amenable or possible. So there's a little bit of growing pains, but I think we had thought about this way before we got the approval. And so both the launch in Germany and France have gone really well. We also launched in Japan, which is a very -- which is very different from both the U.S. and in Europe.

And we also spent a lot of time negotiating a reimbursement price in Japan, which gave us a lot of insight into how to -- the clinical data of VYJUVEK, the pivotal data of VYJUVEK was really, really strong, and that helps a lot. But it's also good to understand local nuances as you negotiate a price in all these different countries. So we were fortunate to get a good price in Japan, and we hope that, that provides a window into a potential outcome in Europe, which is traditionally a bit difficult to get the extent of pricing that a sponsor usually requires.

We're on track to launch in Italy sometime mid this year, all the efforts now that we've done a couple of countries in Europe, I think we seem to have the recipe to kind of how to go about launching in all these different countries. And then our plan, obviously, the 2 remaining ones are Spain and U.K., and we'll get that in time.

So overall, the launch has gone really well. We're also aggressively going after distributors to get this medicine out to patients in countries that are outside the EU4, U.K. and Japan. And so whether countries like Eastern Europe, Israel, South America, Canada, Australia, so all these countries, there's a big effort in the company to get them generic medicines.

Fantastic. And moving maybe to the rare disease pipeline, which you spent some time speaking to. Could you maybe speak about how those indications were nominated and maybe the potential differentiation there of Krystal within those spaces?

I'll say, and I'll have Suma add a few things. Look, it's -- there's a burden and a curse with platform technology. On one hand, you could do a lot -- you get a lot of ideas. On the other hand, you got to be careful you pick the right ideas because everything in drug development takes many years to realize you made a mistake.

But I will say one of the good things at Krystal is if we start realizing that either on the clinical side or on the reimbursement side, we're not going to be successful, we stop quickly because we have a lot of ideas. And so it has taken us honestly, a couple of iterations to get at this pipeline that we showed today. That hasn't come on first guess.

For example, the CF program has been around for 6 years, but we were so convinced that it was a great program that against all odds and some odds were not our doing, we got to this point. Like we were relentless in the pursuit of CF because we believed we had a differentiated product.

We finally have arrived at a good pipeline. But the basic criteria, as Suma mentioned, large genes, we try to stay in areas where other vectors can deliver genes. We like the redosability concept. We like the idea that a patient can dose at home. And so we look for indications that have those.

Yes. I think, Krish, you covered most of it. But as Krish said, the big thing is for us is getting this -- I mean, we are the first ever gene therapy that can be home dosed by patients. I mean it took us extensive working with the agency, collecting the data. So again, once we have done that for one product, it becomes very easy. And we are a gene therapy.

So again, we need to work on indications that differentiate, right? If there are indications that this one and done, if you have an integrating virus and that can suffice, then that's not what we -- that's not the area we'll play with. Skin is a very interesting organ, again, because it turns over. So one and done solutions are almost impossible because it will turn over, unless you go into stem cells complex. So that's where we look at those indications that we can really -- our platform can work that -- and there are no other products before.

So -- and lung is another same as the skin. I mean, usually one-and-done solutions don't work for the lung. So again, that's an area that we are in. So we are very deliberate in when we pick indications, again, should they -- I mean, can we -- I mean, from platform, we can make all of them and we can scale them. That's not an issue.

And again, I work with Krish and Krish's team with [ Stephane ] to really understand the market and the competition and the landscape before we fully put our engage.

Super. And I want to open again to the room for questions.

I'm [indiscernible] from Laboratorios Sophia. For your ophthalmic assets, KB803 and KB801, have you considered any kind of global partnerships or regional partnerships. What is your strategy behind that?

Because -- as I mentioned, because 803 and 801 are rare diseases, and it's something we strongly believe we can handle -- we can self-launch. We have not looked for partnerships in either of 801 or 803 at the moment. There have been occasional inbounds on interest, but not specifically for 801, 803. Yes.

If there are no further questions, I think we can wrap up. And thank you very much again for your time.

Thank you.

Thank you.

Thank you for standing by, and welcome to Krystal Biotech's Clinical Update Call for Cystic Fibrosis program, KB407. [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, Vice President of Corporate Development.

Good afternoon, and thank you all for joining today's call. Earlier today, we announced positive interim clinical results for Krystal Biotech's cystic fibrosis program, KB407, including molecular confirmation of wild-type CFTR protein expression in patients' lungs. The press release is available on our website at www.krystalbio.com. Both the press release and today's presentation have also been filed as an 8-K with the SEC. Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development; Trevor Parry, Vice President of Product Development; David Sweet, Director of Clinical Development; and Dr. Jorge Lascano, Professor of Medicine, Associate Director of the Adult Cystic Fibrosis Program and Director of the Cystic Fibrosis Therapeutics Development Center at the University of Florida.

This conference call will and our responses to questions may contain forward-looking statements. You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings.

The agenda for today's call is outlined here. Krish will provide a few remarks to open the call, after which Dr. Lascano will share his perspectives as a practicing clinician and thought leader on the unmet need that remains among cystic fibrosis patients unable to benefit from modulator therapies. Suma will then provide an overview of our lung delivery platform and the potential of our KB407 program to fill this treatment gap. David Sweet, clinical lead for our KB407 program, will walk us through today's clinical update and confirmation of CFTR delivery to patients' lungs. Suma and Krish will close the call with an overview of next steps for the program and Krystal. Trevor Parry, our Head of Product Development, will join all speakers in the Q&A session.

With that, I will turn the call over to Krish.

Thank you, Stephane. Good afternoon, everyone. Welcome to the call. We are very excited to share a long-awaited milestone for our cystic fibrosis program today. We have now confirmed the successful delivery and expression of wild-type CFTR protein in multiple patients with cystic fibrosis, a breakthrough for the field made possible by the unique attributes of our HSV-1 platform. With the wild-type payload and already confirmed functionality in multiple preclinical models, today's readout gives us the conviction to move rapidly into repeat dosing. We're working closely with the Cystic Fibrosis Foundation to initiate repeat dosing before midyear.

Thanks to the FDA's familiarity with our HSV-1 platform, we also believe there is an opportunity to accelerate development of KB407 towards a potential approval. As Suma will share, we are discussing study designs with the Cystic Fibrosis Foundation and the FDA to make the repeat dosing study registrational. Our urgency is driven by the clear unmet need that exists among patients with cystic fibrosis. We estimate that the number of patients ineligible or otherwise underserved by modulators is in the tens of thousands.

Dr. Lascano will expand on the burden these patients face in the absence of corrective therapy. I will also take this opportunity to flag the platform implications of today's readout. The lungs of patients with cystic fibrosis are widely regarded as some of the most difficult to access with a nebulized therapy. Successful delivery with KB407, combined with prior clinical evidence from our alpha-1 antitrypsin program, KB408 and the lung cancer program, KB707, underscore the tremendous potential of HSV-1 for the treatment of a wide range of lung diseases.

With that, I'll hand it off to Dr. Lascano to share his perspectives on the urgent unmet need that exists among modulator ineligible patients with CF. Dr. Lascano?

Hi. Good afternoon. My name is Jorge Lascano. I'm a Professor of Medicine at the University of Florida. I'm also the Associate Director for the Adult Cystic Fibrosis Program and the Director of the Cystic Fibrosis Therapeutic Development Center at UF. Thank you for the opportunity to speak today. I'm a pulmonologist by training. I have spent most of my career taking care of individuals with cystic fibrosis. My role today is to provide some clinical context on why despite all the tremendous advances in the care of CF patients, there still remains a persistent unmet medical need.

Over the next few minutes, I'll briefly review how CF treatment has evolved during the modulator therapy era and identify the population that has not benefited from these therapies. I will also discuss why nucleic acid-based approaches, despite some historical challenges, continue to remain clinically relevant today. My comments are generally based on published data, data from the registry and clinical experience, and they are intended to frame the importance of the work that you will hear about shortly. Next slide.

To begin, let me acknowledge the importance on how transformative CFTR modulators have been for many patients with CF. Data from -- for very strong clinical trials have shown how sustained improvement in terms of lung function, reduction in pulmonary exacerbations, improving nutritional status and increased survival, all these in patients who are eligible for highly effective modulator therapy. From a clinical perspective, the modulator era has literally changed the expectations for many of our patients. Individuals who previously experienced lung function decline, repeated exacerbations have now maintained or even improved their health status, including their pulmonary status over time. However, there's still a subset of patients for which modulator therapy really have not been beneficial. Next slide.

Despite the success of modulators, at least 10%, if not more, individuals with cystic fibrosis either cannot receive or cannot tolerate modulator therapy. So this population includes patients with rare or minimal function mutations, such as nonsense mutations that do not produce CFTR protein. And even if they are or they have mutations that are receptive to this therapy, some patients just don't get the meaningful benefit that other patients do. Next slide.

So for patients who do not benefit from CFTR modulators, the clinical burden of CF remains substantial. Registry data shows continuous decline in lung function, higher rates of pulmonary exacerbations and persistent chronic airway infection in this group. Many continue to require hospitalizations, prolonged antibiotic exposure and intensive daily therapies. Importantly, these patients do not share the same survival gain in modulator treatment populations. In clinical practice, this translates into early considerations for lung transplant and ongoing uncertainty regarding long-term outcomes. From a patient perspective, this group of patients experience high treatment burden with limited disease-modifying benefits and experience that contrasts sharply with the progress seen elsewhere in the CF community. In general terms, these patients feel that they have been left behind. Next slide.

So cystic fibrosis is fundamentally a monogenic disease caused by a defect in the CFTR gene. CFTR modulators work by improving the trafficking of the function of certain mutant protein, but they cannot address all mutation classes. For example, who -- mutations that do not produce a functional CFTR protein, alternative strategies are required to address these issues. Nucleic acid-based approach offer the theoretical advantage of addressing the disease upstream from protein dysfunction. Importantly, this strategy has the potential to be mutation agnostic, which is particularly relevant for patients with rare or previously unaddressed genotypes. Next slide.

Gene-based nucleic acid therapy for cystic fibrosis are not new concept, and it's important to recognize that many efforts did not result in clinically meaningful benefit. Prior programs encountered several well-documented challenges. This included difficulty delivering therapeutic material through thick infected airways mucus, limited transduction of the airway epithelium, vector cargo limitations given the size of a full-length CFTR and immune response that limit the ability to repeat dosing. That said, these efforts were not failures in the scientific sense. They generally allow us to learn more, give us critical insight into the airway biology vector design, delivery routes and clinical trial methodology. Much of what the field understands today about what does not work in CF gene therapy really came directly from these previous programs. Next slide.

The unmet medical needs for patients who do not benefit from modulators remain unchanged. At the same time, the broader field of gene therapy has evolved considerably. Advances in vector engineering, manufacturing scale and our understanding of pulmonary biology has altered the landscape compared with early attempts. From a clinical perspective, the question is no longer whether alternative disease-modifying therapies are needed for cystic fibrosis, but how the lessons learned over the past several decades can be applied to develop approaches that are safe, effective and durable.

With that context in mind, I will now turn things over to the Krystal team to discuss their gene therapy program and share an update on their progress.

Thank you, Dr. Lascano, and good afternoon, everyone. I'm very happy to be sharing today's update, which we believe significantly derisks our KB407 program for the treatment of cystic fibrosis. As Dr. Lascano just touched on, the lung has been a difficult tissue to target with gene therapy. Many gene delivery modalities are not amenable to nebulization. And if they are, they must contend with multiple barriers, which may limit access to target epithelial cells. Then there is the issue of cell turnover requiring the ability to repeat dose. Finally, in the case of cystic fibrosis, there is the additional challenge of large genetic cargo.

We have long believed that our clinically validated HSV-1 vector already FDA approved and shown to be safe, effective and suitable for repeat dosing of patients with dystrophic epidermolysis bullosa have broader potential as a gene delivery solution for other high turnover epithelial tissues, including the lung. This belief has only been strengthened with the recent clinical readouts and evidence of successful gene delivery with KB408 and KB707 in patients with alpha-1 antitrypsin deficiency and lung cancer, respectively. With today's readout, we have now also demonstrated successful gene delivery with KB407 in our patients with cystic fibrosis.

Delivery to a cystic fibrosis lung is the highest potential bar for our platform and a critical step towards our goal of bringing the first mutation-agnostic therapy to patients with cystic fibrosis. As a brief introduction, KB407 is our inhaled genetic medicine designed to deliver 2 copies of the full-length CFTR gene to the lung and thereby restore CFTR-mediated ion transport, mucus clearance and lung function. The program is supported by a robust preclinical data package in which we have shown across a variety of models that KB407 efficiently transduces clinically relevant cell populations.

KB407-encoded CFTR is full length properly localized and functional. And as demonstrated in our GLP- IND-enabling toxicology studies in NHPs, KB407 is amenable to nebulization, well tolerated and broadly distributed in the airways with payload expression persisting for at least 28 days. We saw no notable toxicity in our NHPs studies and did not reach an adverse dose, underscoring the attractive safety profile of our HSV-1 platform. Collectively, these data provided clear support for progression of KB407 into the clinic and more recently, sanctioning of our Phase I study protocol from the CFF TDN.

I will now hand it off to our KB407 clinical lead, David Sweet, to walk through our CORAL-1 phase study design and today's data update. David?

Thank you, Suma. The Phase I CORAL-1 study was designed to evaluate preliminary safety and tolerability of ascending doses of nebulized KB407. Cohort 3 also assessed molecular correction by the highest KB407 dose. The study schematic is provided on the right. We provided a safety update for Cohorts 1 and 2 previously. KB407 was well tolerated by all patients dosed in those first 2 cohorts. Today's update is focused on safety and molecular assessments from patients in Cohort 3.

The key enrollment criteria for Cohort 3 included adults with a confirmed diagnosis of CF, a lung function of 40% to 100% as assessed by percent predicted forced expiratory volume in 1 second or ppFEV1 and no more than 3 patients in this cohort being on concurrent modulator therapy. Patients received 10 to the 9 plaque-forming units of KB407 via nebulization once daily for 4 consecutive days and then underwent a post-dose bronchoscopy 1 to 4 days after last KB407 exposure. Endobronchial biopsies were examined for any aberrant histological features as well as to establish evidence of vector transduction and consequent molecular correction via immunofluorescent detection of a viral marker and/or human CFTR protein where feasible.

Patients were then followed for 8 weeks and samples were collected for vector shedding and immunogenicity analysis. Seven patients were ultimately dosed with KB407 as part of Cohort 3 and had post-dose bronchoscopy performed, 6 of which were successful, meaning the bronchoscopy yielded biopsy samples containing suitable airway histological features that allowed for substantive molecular analysis. The demographics of all 7 patients are shown here. 3 of the 7 were modulator eligible. Lung function as assessed by spirometry ranged from 45% to 82% across patients.

Endobronchial biopsies were collected from the left and right lungs of each patient with clinical sites required to collect at least 4 and up to 10 biopsies if tolerated by the patient during the procedure. As noted previously, bronchoscopies were conducted 24 to 96 hours after the last dose of KB407, allowing for flexibility to account for availability of a bronchoscopy suite and scheduling for both the physician and the patient. Biopsies were then immediately preserved in paraformaldehyde and shipped to Krystal where they were embedded in paraffin, sectioned and stained as appropriate.

For patients without confounding endogenous CFTR expression, in other words, patients with Class I mutations, biopsies were stained to detect exogenous CFTR. The remaining patients were assessed for successful vector delivery to the airways via immunofluorescent detection of a viral marker, ICP-27, which is expressed from KB407's backbone soon after cellular transduction. The key readout for this interim analysis was the percentage and distribution of KB407 transduced conducting airway cells based on expression of full-length human CFTR where possible or expression of the viral marker.

Here, we see representative CFTR protein staining via immunofluorescence and airway biopsies harvested from a healthy donor and a patient with CF harboring G542X homozygous mutations, serving as positive and negative controls, respectively, for the study. The positive control biopsy was procured commercially while the CF Foundation provided the sample used as a negative control. Additionally, the protein staining was conducted using the CFF protocol and preferred antibody for CFTR visualization, clone AB596. The data suggests that CFTR can be specifically and predictably detected via IF based on the underlying genotype. It's important to note that all patient samples from the CORAL-1 study were stained and imaged in parallel to these controls, so all results are directly comparable.

Key findings from endobronchial biopsies harvested from the first Cohort 3 patient with 2 Class I mutations are shown here. This patient is heterozygous for a frame shift mutation and premature stop codon in CFTR with a baseline lung function of 64%. A post-dose bronchoscopy was conducted 96 hours after the last day of KB407 administration and 7 biopsies with acceptable airway histology were successfully collected for CFTR protein analysis. All 7 biopsies were positive for human CFTR and when quantifying the proportion of DAPI positive cells that were co-positive with CFTR in these samples, 42.1% of cells at the conducting airway surface were found to be positive for the KB407 encoded human transgene. On the right are representative H&E and IF images of a biopsy harvested from the right middle lobe of this patient. Broadly disseminated CFTR signal across the conducting airway surface with an apical distribution pattern can be seen.

Shown here is the second set of representative histology and immunofluorescence images from a different biopsy site in this patient, demonstrating consistent apical delivery of the full-length human CFTR expressed from KB407. Parallel stained negative control samples were devoid of meaningful CFTR signal as expected. We next sought to define the cell types of human airways amenable to KB407 transduction. Previously, we showed that both ciliated and secretory cells, the cell types that express the bulk of CFTR in the airways, were positive for the vector in nonhuman primate lungs after receiving nebulized KB407. Those findings extended to humans as can be seen here. Our null patient samples were costained for human CFTR and cell type specific markers of ciliated, club and goblet cells. All 3 cell types were found to express CFTR after KB407 exposure, demonstrating a broad airway cell tropism for our vector platform technology that has positive implications for both KB407 and our pipeline of inhaled programs.

Results for our second null patient are shown here. The patient has 2 Class I CFTR mutations and is heterozygous for premature stop and start loss mutations with a baseline lung function of 45%. A post-dose bronchoscopy was again conducted 4 days after KB407 exposure and 5 usable biopsies were obtained. Again, a meaningful proportion, 29.4%, of cells at the conducting airway surface across these biopsies were found to be positive for KB407-encoded CFTR with an apical expression pattern as can be observed in the representative images shown on the right. Importantly, a broad distribution of the transgene to all tested lobes was observed in this low lung function non-modulator patient, indicating successful vector delivery to notoriously difficult to access and treat tissues.

Shown here are additional histology and immunofluorescence images from a second biopsy site in this patient, again, demonstrating consistent apical delivery of full-length human CFTR expressed from KB407. Given the potential for background CFTR expression in the remaining 4 patients, analyses of KB407 transduction were conducted based on expression of the ICP-27 viral marker. Results for each patient are briefly summarized on the following slides.

On this slide, we have the results from our third Cohort 3 patient. This patient is ineligible for modulator therapy with mutations, including polythymidine tract variation as well as polymorphism at the M470V locus, which contributed to baseline lung function of 45%. A post-dose bronchoscopy conducted 1 day after last KB407 exposure and 5 usable biopsies were obtained. Transduction in over 36.5% of conducting airway cells was observed in line with the high rates of transduction observed by CFTR staining in all patients.

Similar levels of transduction were seen throughout the lungs of patients in Cohort 3, irrespective of genetics, baseline pulmonary status or concurrent modulator use. Here, patient 4 is someone who is ineligible for modulator therapy who has a premature stop codon as well as a missense mutation leading to baseline pulmonary disease with ppFEV1 of 69%. 24 hours after their final dose of KB407, bronchoscopy revealed successful transduction of 33.8% of cells. Patient 5 is homozygous for F508del mutations who is concurrently on modulator therapy with baseline ppFEV1 of 54%. 72 hours after their last dose of KB407, they exhibited 36.8% of conducting airway cells positive for KB407 transduction. Finally, patient 6 is also homozygous for F508del on modulator therapy with baseline pulmonary function of 59%. This individual also had bronchoscopy performed 72 hours after their last dose of KB407 and had 31.4% of cells positive for KB407 transduction.

A summary of the findings from all Cohort 3 patients is provided on the next slide. Consistently, transduction of the conducting airways has been demonstrated in all biopsy patients via staining for either CFTR or a viral marker as feasible. While patient-to-patient variability in transduction efficiency was observed, as would be expected, over 29% of cells were positive post dose for all treated patients, exceeding the approximately 5% to 15% target number that is currently predicted to provide meaningful functional correction of the CFTR defect underlying lung function loss in CF. The apically localized staining pattern of CFTR in Class I patients post dose is suggestive of proper post-translational modification and successful trafficking of transgene. In addition, the vector tropism established by cell type specific staining indicates delivery to the clinically relevant cells that are known to express the bulk of CFTR in healthy patients. Finally, the favorable pharmacokinetic profile implied by robust detection of CFTR signal up to 4 days post dose is a positive indicator for potential patient-friendly weekly dosing of patients in upcoming studies.

Turning to safety. KB407 continued to exhibit a favorable tolerability profile. Importantly, we continue to note stable percent predicted FEV1 levels throughout the 8-week study period, underscoring the safety of the top dose. All KB407-related adverse events were transient with all but one being mild to moderate in severity. Of note, one serious adverse event was reported 24 hours after bronchoscopy for one patient. The independent data monitoring committee reviewed the case and deemed the adverse event as related to bronchoscopy procedure and not KB407. As with other AEs, this event was transient in nature, resolving within 5 days of onset.

Neutralizing immunity against nucleic acid-based therapies continues to be of particular interest as this can decrease efficacy of some vectors with repeat dosing, thereby affecting durability of chronically administered therapies. Consistent with data seen across Krystal's programs, no significant neutralizing antibody response has been observed after KB407 administration, suggesting that long-term administration of this inhaled therapy will not become less efficacious over time.

Finally, data from Cohort 3 continued to demonstrate that inhaled delivery of KB407 is highly localized to the lungs as evidenced by lack of systemic vector distribution. Altogether, the safety and tolerability data paired with exciting evidence of molecular correction has provided confidence in advancing KB407 into repeat dosing.

To discuss next steps, I'll pass it back to Suma.

Thank you, David. We believe that today's update clearly demonstrates that KB407 can safely and efficiently deliver CFTR to the lungs of patients with cystic fibrosis. Moreover, we saw a high degree of reproducibility, broad airway dissemination with all usable biopsies positive for CFTR or viral marker, encouraging durability with CFTR protein expression detected at least as far as 96 hours post dose and a CFTR protein distribution pattern suggests of appropriate apical localization. Building on these exciting results, we have already started working with CFF TDN on a repeat dosing CORAL 3 study design, which has been submitted to the FDA. The final study details will be disclosed once alignment with the FDA is reached, but the overarching goal will be to assess the functional impact of repeat KB407 dosing by spirometry without the confounder of bronchoscopy.

We believe we also have an opportunity to sharpen the path to a potential approval. The unmet need for modulator ineligible patients is evident. This is a debilitating and ultimately lifespan shortening disease for which no corrective therapy is available. With our HSV-1 platform already significantly derisked, we believe KB407 presents a risk-benefit profile suitable for potential accelerated development. As a result, we are working closely with CFF TDN and the agency to explore potential study designs that could support registration on success. We expect to align with the FDA on the study design in the months ahead and initiate our registrational study in the first half of this year. We also expect to file for platform technology designation for KB407, which may bring additional efficiencies to the program and potential BLA filing.

The results we are reporting today parallel our Phase I/II findings for B-VEC, where we confirm the successful delivery and expression of full length and appropriately localized Type 7 collagen in the biopsies of patients. These findings ultimately translated to profound clinical benefit in our Phase III GEM-3 study. With KB407, we have again confirmed expression and appropriate localization of our gene of interest, and we look forward to advancing KB407 into a registrational repeat dose study soon. I would like to thank our study investigators, the CFF and most importantly, our patients for their support and participation in this study. I will now hand the call back over to Krish.

Thank you, Suma. I would like to close today's call by highlighting the growing momentum in our clinical pipeline of rare disease medicines. With today's readout confirming full-length CFTR gene delivery to the lung, we are putting KB407 on an accelerated path towards a potential registrational data readout and filing. Success with KB407 would open up a $2 billion-plus market for Krystal without competing head-to-head with modulators. And alongside KB407, we also have our rare ophthalmology programs, KB803 and KB801, both of which could deliver registrational data readouts later this year. With momentum building across all 3 of these programs, plus our newly announced KB-111 program for Haley-Haley disease, we're well on our way to building a true portfolio of high-value rare disease medicines. Rare disease is an area we understand well and an area where we can unlock significant value through expedited development and our global commercial infrastructure. I look forward to sharing additional updates on all of our rare disease programs in 2026. Thanks for listening, and I'd like to now open the call for Q&A.

And the first question today is coming from Ritu Baral from TD Cowen.

Apologies for the background noise. Krish, am I putting the dots together correctly? Are you going to approach FDA with a potential approval on CFTR biomarker? It's something you and I have discussed before. Could CFTR expression serve as a biomarker for approval? And is there a way to do it without invasive bronchoscopy that would still preserve the ability to measure even on a relative basis, lung function in these patients? And also, when might we get first lung function from the repeat doses or even these patients if they are turned over to repeat doses? And my second question has to do with biofilm distribution and transduction through the biofilm or around the biofilm and how that might relate to outcomes.

Thanks, Ritu. To be very clear, I think our approach right now is we have submitted, as we mentioned in the call, we're talking to the FDA. We intend to get -- we intend to make the repeat dosing study registrational. And we're looking at an endpoint -- we're looking at an FEV1 endpoint, not a biomarker based. And I'm going to turn it over to Suma to provide some more clarity. But the objective is based on the data, working closely with the TDN and with the agency, we aligned on a study design on repeat dosing that would be registrational and looks at FEV1 as an endpoint in the study.

Yes. For clarity, again, I think expression is really important to demonstrate, and this is something what the CFF Foundation and TDN has been asking for because I think that, as you know, is a proxy for clinical benefit or clinical effect. And I think we have clearly demonstrated that in all our patients that we have biopsies across different portions of the lung, like upper lobe, middle lobe, and we consistently see expression. As you know, these biopsies are like tiny little biopsies across the large surface area of the lung, and it's pretty impressive that we see ranges of 30% to 40% of cells positive for full-length CFTR. So that's very encouraging.

And I think that also addresses your second question regarding biofilms. Remember, these patients are very sick. Some of these patients had FEV1 as low as in the 40s. So they're pretty sick and they have high thick mucus. So in spite of this, we were able to deliver through nebulization, our product and see expression. So I think we are very encouraged by that. So even with a single dose, we were able to show that. So I think with repeat dose as we keep repeat dosing, we feel that the -- with the clinical benefit improving, it's going to improve the efficiency of transduction and administration. So we're not concerned. I think this is something we are sharing this with the agency. We have shown -- we have basically demonstrated expression, function and nebulization reproducibility. So I think these are the key factors.

And obviously, this is an unmet need. We are still in negotiations with the agencies. There are several approaches that the TDN has suggested to expedite this particular program because they have -- TDN has met with the agency and has communicated the need for these patients -- a need for something for these patients because this is a patient population that's been left behind. So -- and these are severe patients. So I think we have come up with some creative study designs. I mean we are not ready to speak about it right now. But TDN has recommended and we are very confident like we have a very accelerated path for these studies. So again, once we have some agreement and clarity, we will communicate that. So along with expression, some sort of a hybrid model that we have shown expression along with some sort of clinical benefit, we will -- we are certainly exploring an accelerated pathway for the registrational trial.

And the next question will be from Roger Song from Jefferies.

Great. Congrats for the data, very impressive. Two questions from us. One is the -- I think the CFTR expression is exceeding the initial expectation at least the initial guidance, 5% to 15%, 10% threshold. My question is, how do you think about this higher expression level going to correlate with the lung function potentially down the road? Is that like proportional or they reach certain level and then every now you're reaching a certain level, you get a similar functional benefit. So that's number one question.

Number two, just clarifying the registrational path here is you used the accelerated path. Is that a correct interpretation is you are pursuing the accelerated approval path plus future confirmatory trial? Or this is we're getting the full approval -- potentially full approval?

Yes, I can take this question. With regards to CFTR expression, you have to remember these patients do not have any expression. We're going to start with the null patients. So in rare diseases, you hear numbers like even 10% is good enough. Any CFTR expressions that can aid with clinical benefit, I think, is beneficial. And we saw that even with VYJUVEK or with B-VEC. We didn't need full collagen VII. I mean we biopsy patients in a subset of anchoring fibrosis enough for them to show healing and good clinical benefit.

So you don't need 100%, but we are very impressed because even with a single administration, we see anywhere between 25%, 30% to 40%. And this is in like a very small section of the biopsy. So if we see 30% across the entire lung, I think -- I mean, we would expect to see benefit. So I think the numbers we see, we feel good. And I think the beauty of our product is that we can repeat administer, so we can sustain those levels, right, by weekly administration. We know that there is no effect -- immunological effect where the drug can -- is still effective with repeat administration. We have shown that with VYJUVEK and other products. So again, with that ability to repeat dose and sustained effect, we have -- we see this is not an issue.

With regarding to your second question on approval path, yes, obviously, we are going to -- I mean, as you know, with the agency, I mean, we've been working with this agency very closely. They're very familiar with our platform, and we have several applications with this particular division. And I think this division is sensitive to rare diseases with unmet need. And they have clearly communicated pathways for accelerated pathways for drugs that unmet need. So obviously, we are going to explore those pathways. So we will discuss with the agency. As I said, I don't want to say anything more until we get complete agreement with them, but we are going to evaluate that to see if there's some sort of a hybrid where we can get something approved and then post marketing, continue to evaluate efficacy. This is something that's on the table.

The next question will be from Alec Stranahan from Bank of America.

Congrats on the updates today. Really great to see the progress from the pipeline. Two questions from me. First, what kind of frequency do you see as being the ideal profile for a therapy such as this? Is that weekly or maybe something else? And given the good tolerability you've seen at the highest dose level, will you select one schedule and dose for the registrational study? Or would you aim to enroll a few different dosing regimens, maybe even at a higher dose in the study?

And then second, could you give us a sense of the viral fill rate for 407? Or any color around assays that you're using to ensure appropriate encapsulation? Like is there a situation where a patient could screen positive for the viral marker, but maybe not have transduced CFTR gene?

Okay. So the first question, I'm going to have David address. And the second question, Trevor, you can answer that question.

Yes. Thanks, Suma. Thanks, Alec. So yes, it's too early to say at this point or at least we can't talk too much about it about the dosing frequency ideally. What I will say is we are encouraged by the fact that in patients with -- in null patients, we're seeing expression of full-length CFTR even 96 hours after the dose of KB407. That gives us confidence that at least weekly dosing should be sufficient to kind of get these levels where we need them to be at, right, over that 5% to 15% of wild-type CFTR expression. And so I think this does give us a good launching off point on how to choose our dosing strategy very thoughtfully, and that's kind of what we're in discussion with the CFF TDN as well as the FDA. So TBD on specifics, but yes.

I'll just add to David's point. I mean, again, I think for us, the best bet is going to go weekly because I know from a safety perspective, we have done this with our 707. There is no safety concern because we have given more frequent dosing, and we see our vector is conducive to that. And again, keep in remember -- it's easy. These patients are nebulizing anyway like -- because they have constant infection and use of nebulizer is consistent with these patients. And we will -- again, just like VYJUVEK, we are targeting home dosing. We are using a nebulizer that will be conducive to home dosing and these patients will be able to, again, home dose at -- so from an administration standpoint and ease of use, this is going to be very practically if this drug gets approved for commercial purposes. So Trev, can you answer the second question?

Yes. So the second question related to the viral marker we're looking at. So that viral marker is delivered as a gene in the genome that co-packages CFTR. It's not a protein that is delivered in -- that's packaged into the virus, but it's expressed from the genome once the genome is successfully delivered to the nucleus of the target cell. So the only way that you can see viral marker expression is that you see the successful delivery of the genome into that cell and then subsequent marker expression and that genome inherently also packages full-length copies of CFTR. So we think it's clear that if the vector can express ICV 27, it will be co-expressing CFTR in the cell.

The next question will be from Gavin Clark from Evercore.

This is Gautam on for Gavin. So 2 quick questions from our side. One on the safety here. For the patient with asthma exacerbation, when was their bronch done after dosing? The idea is that if it's done longer after dosing, it could be less likely to be dose related. So I just wanted to get some clarity on that. And then on the adverse events, can you give us some more color on any signs of causing acute FEV1 declines? And if so, to what degree?

David, can you answer this question?

Yes, definitely. Thanks, Gautam. So yes, so for this patient with the asthma exacerbation, their bronchoscopy, I believe, was 72 hours after their last dose of KB407 and then they experienced that asthma exacerbation 24 hours after that bronchoscopy. Yes, as mentioned, the data monitoring committee reviewed that case pretty extensively and came to the conclusion that they did that it was related to bronchoscopy, but that was kind of the timing of things.

With regards to your second question about acute FEV1 changes, we don't see anything significant, certainly not outside of the normal variability of spirometry. We're tracking these things quite closely, obviously, and we don't see any signal that nebulization of KB407 should lead to considerable decrease in FEV1.

And the next question is coming from Sami Corwin from William Blair.

Congrats on the data. I was curious how you're thinking about the cadence of enrollment and treatment in CORAL-3. I think the CF Foundation was a limiting factor when enrolling and conducting CORAL-1. So I just wanted to get your thoughts there. And then I think this was asked a bit earlier, but I missed the answer. How are you kind of thinking about when we might see some initial functional data from CORAL-3?

Okay. Again, I'll just take the second question first, and then I'll have David answer the first one. I mean, again, we are working with the agency on this registrational trial. And as we announced that we intend to start the study second half -- sorry, first half of this year. So as soon as we -- I mean, as we are in communication, so very quickly, very soon, we should be coming to some agreement with the agency. So we intend to start the study. I think we have sites ready. We are aligned with the TDN. So I'll have David talk about enrollment. But hopefully, as soon as we enroll patients, our goal is to get the study moving as quickly as we can because, again, because of the unmet need and there's a patient population. I mean, the toughest part was getting the bronch portion of the study. Even then we had patients volunteering. We have now even more patients with bronch. But I think once the bronch portion is done, we have patients aligned to ready to do the repeat dose administration. So David, can you talk about the first question?

Yes, definitely. So yes, we've been very pleased with recent conversations with the CFF of late. We've had several really productive interactions with them, and that has really developed into getting multiple sites on board with us. We have several large academic centers that are excited to begin enrolling. Yes, to Suma's point, I think no longer requiring bronchoscopy as a requirement for CORAL-3 is certainly going to increase patient excitement and enrollment, right? And especially since we're talking about repeat dosing and the fact that we're looking for functional improvement from a spirometry standpoint, FEV1 standpoint, I think that's very appealing to patients, I would predict it would be. And so I'm anxiously looking forward to beginning that enrollment process because I think it will be much, much more efficient and fruitful once we get the ball rolling.

The next question will be from Joe Pantginis from H.C. Wainwright.

A very nice update today. So first question is, I know you said you'll be providing more of the study design criteria in the future. But I was just curious if you could disclose, are there any key factors that you consider outstanding that are still being discussed right now? That's the first question.

And then the second question is, I just want to look to push the envelope a little bit. Very encouraging to hear that you didn't really see evidence of significant neutralizing antibodies. So me pushing the envelope here is, do you have any evidence in animals for 401 or any of your pipeline assets that after repeat dosing over a decent amount of time that you see differing or no levels of neutralizing antibodies?

I can answer the second question on neutralizing. Biggest example is VYJUVEK, right? I mean VYJUVEK is -- we administer VYJUVEK into open wounds, the most immunogenic area, right, skin, open wounds, a lot. And we have dosed now over 6 -- so many patients, repeat dose over 3 years. We haven't seen any kind of safety signal from antibodies or worsening or any effect. So that's our real true testing of repeat dose administration. And obviously, as Trevor mentioned, I mean he can talk to you a little more, I mean, we do look at patients samples, blood samples to look at antibodies and neutralizing effects. Maybe, Trevor, you can talk a little bit about that in all our programs. We continue to monitor them. And I'll let Trevor talk -- provide some color on that.

Yes. So this is a question that, obviously, we're very interested in and regulators are interested in. We monitor neutralizing antibodies platform-wide in all of our clinical programs. It's something we will look at in the 407 study, but we're confident from all the human data to date, we see no meaningful neutralization of our vector upon repeat dosing kind of irrespective of route of delivery.

And the next question will be from Yigal Nochomovitz from Citigroup.

Congrats on the update. I have 2 questions. So first of all, just with respect to the primary endpoint for the Phase III trial for FEV1, do I understand correctly that ahead of that study, you're not going to have any preliminary measurements of FEV1 in some of these early patients and that you're confident that based on the CFTR expression that, that will translate in the pivotal study? That's the first question.

Yes, we are because, again, we will circle back to our VYJUVEK, we showed expression where expression of the protein translated into efficacy. I mean, obviously, these patients are missing the protein. So if we are expressing the correct protein in the right region, we expect function. I mean, obviously, with a single dose, we don't expect to see FEV1 improvement because we have to get into a repeat dose, and that's why we're going to demonstrate FEV1 improvement. So we feel good about expressing protein. And maybe Dr. Lascano can talk a little bit if Dr. Lascano are you on the call and give your opinion on this.

Yes, I'm here. So it's probably too early just for 1 dose 3 days later or so to get an improvement on the FEV1. So I think it's -- the important part is the repeating dosing is probably when you're going to see that particular change. I don't know if that answered the question, but it's just too early at this point to see that the FEV1 will jump right away.

Yigal, I will say, look, just based on one dose, I think David mentioned this prior, we were happy to be at FEV levels from a safety perspective, not only at the point of administration, but several days, weeks later. So while we are ecstatic about what we quickly saw in these 3 null patients, the real answer to your FEV question will come from the registrational study. And that's what we're talking to the FDA. We do believe, as Suma said, the molecular expression is a great proxy, at least internally to us with respect to efficacy, we saw the same thing with KB103 or B-VEC. And since we code for 2 full-length CFTR genes, we feel -- and we've seen this across multiple programs. So based on the level of expression, which was honestly much higher than we expected it to be going into the study, based on our prior experience with other encoding other genes and the protein being expressed, we're pretty excited to align with the FDA and get the repeat dose registrational study going.

Okay. No, that's super helpful. And then my other question is, obviously, you nicely showed the 29% to 42% above the 5% to 15%. I was curious if based on the imaging data or based on any of the other molecular techniques that you have at your disposal, if you could look at the amount of CFTR expression per cell and how that correlates with a nonaffected individual. Is that information you have access to? Or is the assumption that it's on the order of what you would expect in a normal individual?

Trev, can you answer the question because you have looked at it.

Yes. So that is something we've looked at previously. We've compared expression levels of CFTR from bronchial cells and small airway cells from healthy patients versus from CF patients, and we do see that the relative level of CFTR expressed from our vector is at least as high as wild-type CFTR, if not super physiologic expression. So we do expect every cell that's CFTR positive is expressing at least wild-type levels of CFTR.

The next question is coming from Andrea Newkirk from Goldman Sachs.

Maybe just a clarification point on the last question and answer. But does this suggest that you plan to engage with the FDA on a potentially registrational trial design without having the functional FEV1 data on hand? And if so, what is your level of confidence that the agency would feel comfortable aligning on such a trial design and that you could power a trial appropriately without foreseeing that key data set?

Again, our confidence comes from our interactions with TDN. I mean, I think they have worked with the agency on creative study designs, and we are aligning -- helping -- with the TDN, we are working on the design. So this is not something that -- I mean, I think has been discussed with the agency. So it's a path or a design that has been presented and the FDA is open to it.

Yes, Andrea, I'll just add, you think risk-benefit profile here, obviously, a patient population of high unmet need our vector has been very well behaved in the lung and other tissues, well tolerated, of course, in this Phase I study. You combine that with clear molecular evidence of wild-type gene delivery, we've shown function of CFTR in multiple preclinical models. We think the basis is there to push for a design that more robustly evaluates FEV because the risk with a relatively volatile endpoint is you do an underpowered study to get a directional signal. It's a little unpredictable you almost might as well go the whole way.

That does conclude today's Q&A session, and it also concludes today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.

Thank you for standing by, and welcome to the Krystal Biotech Third Quarter 2025 Earnings Call. [Operator Instructions] After the speakers' presentation, 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. Please begin.

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the third quarter of 2025 The press release is available on our website at www.crystalbio.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, Senior Vice President and General Manager for Europe, and Kat Romano, Chief Accounting Officer. This conference call will and our responses to questions may contain forward-looking statements.

You are cautioned not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings. With that, I will turn the call over to Krish.

Thank you, Stephane. Good morning, and welcome to the call. It gives me immense pride to realize that we're now in a position to help so many DEB patients within and outside the U.S. I would like to thank the entire team at Krystal for their contributions. In Q3, VYJUVEK launch continued to build momentum and the updated U.S. label clearly strengthens long-term outlook in the U.S. We're now launched in Germany, France and Japan. We successfully negotiated pricing in Japan and we believe the outcome bodes well for our payer conversations in Europe. We are looking forward to our readout in CF this quarter and we're accelerating enrollment across our pipeline, including KB801 for NK.

We are initiating a new clinical program for Hailey-Hailey disease. It is a rare genetic disease of the skin that is a strong fit with our HSV1 gene delivery platform and our commercial footprint. Suma will share more about this program later on the call. Financially, we're strong and well positioned to execute on our strategic growth plans and deliver value to shareholders. Moving now to our 3Q results. We are pleased to report another quarter of revenue growth with net base revenue coming in at $97.8 million.

The patient pausing impacts due to summer holidays that we observed earlier last quarter were mitigated by patient adds and early traction in Europe. Net VYJUVEK revenues reported here does include a contribution from Europe, following our launch in Germany in late August. This brings total net VYJUVEK revenues since launch to over $623 million. Gross margins were 96% for the quarter, gross to net dynamics were stable as with prior quarters. I'm happy to report continued acceleration in new reimbursement approvals in the U.S. Our team added over 40 new approvals since our last earnings call update, bringing the total number of reimbursement approvals in the U.S. to over 615.

This is now our second sequential quarter of reimbursement approval acceleration and a reflection of our field team's efforts as was the ongoing sales force expansion. Our expanded field force is now fully hired and being deployed as training is completed. Full impact is expected in early 2026. We're also happy to report continued expansion of our prescriber work, reflecting increased penetration into the community setting with a total number of prescribers in the U.S. now exceeding 450. I would like to highlight a recent milestone achieved in the U.S., which was the FDA approval of our updated VYJUVEK label.

This label update expanded the VYJUVEK eligible patient population to include patients from birth and also provided patients with full flexibility in how they choose to dose VYJUVEK. This change reinforces VYJUVEK's leadership position as the most flexible and convenient corrective therapy for DEB and should serve as a tailwind for adoption and compliance in the future. Compliance to weekly therapy continued the trend we reported in previous quarters coming in, in the low 80s as more patients achieve durable wound closure and more mild and moderate patients come on to therapy. While the device label change should have a positive impact to compliance in the future, we, as always, continue to expect some quarter-to-quarter waviness in the U.S. revenues as we build on our long-term growth trajectory. With that, I'll now hand it off to Laurent to share his excitement in Europe. Laurent?

Thank you, Krish. It is my pleasure to share an update on our progress in Europe. Our first European launch in Germany is off to a good start. Since launching in late August, we have seen wide expressed interest and demand across the country. Based on available aggregate level data, we estimate the number of patients prescribed VYJUVEK in Germany to be approximately 20. Just as importantly, we are seeing broad prescribing patterns across the country with prescription from over 10 centers to date. This breadth of prescribing is particularly helpful given the requirement for patients to stop therapy in a health care setting.

By growing the number of centers prescribing VYJUVEK, we can help patients to stop therapy closer to home and avoid potential single center patient visits -- based on current trends, we expect continued steady growth in patients' inclusion in the months ahead. We are also making rapid progress outside of Germany. In September, the Haute Autorité de Santé, also known as HAS, the French HTA body approved early VYJUVEK access under the post-marketing authorization accepts -- 2. And last month, we formally launched by VYJUVEK in France. Importantly, the relevant authorities in France are also allowing VYJUVEK to be dispensed outside the hospital setting.

This is the first time a gene therapy has been approved in such a setting in France, a tremendous milestone to our local team and patients across the country. Last month, HAS approved VYJUVEK under the amelioration Service Medical or ASMR classification system, a key initial steps for pricing and reimbursement discussions in France. VYJUVEK received an ICMR redesignation. This designation, which was only granted to 11% of the new drugs reviewed in 2024 acknowledged the added clinical benefit of VYJUVEK and may open up the possibility for EU priority list pricing in France. Finally, I'm also proud to report that VYJUVEK was granted the -- in Italy under the Advanced Therapy in a single product category, a prestigious award recognizing excellence in scientific innovation to improve the state of human health. This award is an important acknowledgment of the innovative and transformational nature of VYJUVEK and a helpful touch point as we start to engage with the relevant stakeholders in Italy.

With these recent achievements, we are excited about the long-term growth trajectory in Europe and maximizing VYJUVEK access to the thousands of DEB patients in the region. I now hand the call back over to Krish.

Thanks, Laurent. As I mentioned before, we have now also launched VYJUVEK in Japan. This summer, we were approved by the MHLW for the 3 patients. And late last month, we successfully completed pricing negotiations with the Japanese authorities and launched VYJUVEK. We're very pleased with our pricing in Japan, and that is a testament to the clinical benefits achieved by their patients treated with VYJUVEK. Our core Japanese team has been in place for over a year and is now fully staffed to support the VYJUVEK launch. Our Japanese medical team has also been active for over a year, mapping key centers and patients which will be the early focus of our launch. Although we expect contribution from Japan in 2025 to be modest, it will be another important revenue growth driver in 2026.

Finally, I wanted to highlight 1 more contributor to the long-term growth of VYJUVEK. In addition to our direct VYJUVEK launches in the U.S., major European markets, and Japan, we started contracting with regional specialty distributors to support the commercialization of VYJUVEK in rest of the world markets. We have executed agreements in place with multiple leading distributors covering key markets in Central and Eastern Europe, Turkey and the Middle East and expect to add more in the year ahead. Health care infrastructure and access vary significantly across rest of the world markets, but even after accounting for this variability, we estimate that a global distributor partner network could help bring VYJUVEK to thousands more DEB patients around the world and supplement our exciting growth strategy in the United States, Europe and Japan.

With that, I'll now hand it off to Suma to touch on recent pipeline progress. Suma?

Thank you, Krish. I would like to start today by acknowledging the hard work of our development team here at Krystal. In recent months, we have dramatically transformed the scope and ambition of our clinical stage pipeline expanding our clinical programs in respiratory and oncology and starting up new studies in ophthalmology and dermatology. These are all important achievements, none of which would be possible without the size contribution of each Krystal team member. Our team also achieved another important milestone in recent weeks. A platform therapy designation from the FDA.

This designation granted for our HSV1 gene delivery platform and currently applicable to our KB801 program could significantly accelerate the path to approval, providing us the opportunity for more frequent interactions with the FDA and as well as the chance to leverage manufacturing and nonclinical safety data from VYJUVEK in our filings. The FDA may also consider previous inspectional findings related to drug manufacture. The platform technology designation is applied for on a program-by-program basis and is currently only granted to KB801. Although we intend to apply for this designation for additional programs to ultimately secure the designation and associated efficiencies of our entire pipeline. I'm also excited to report that we remain on track to deliver multiple exciting readouts in the months ahead.

We expect our next readout to come from our cystic fibrosis program, KB-407 with the backing of the CFF TDM, we have expanded our clinical trial network and are now very close to study completion. We look forward to announcing interim data before year-end, including molecular data from null LCF patients to assess the ability of the AT1 to deliver full-length, wild-type CFTR to the lung. On success, we would expect to immediately move to repeat dosing study which would enable assessment of functionality, including longitudinal FEV1. With our now expanded trial network and without the requirement for bronchoscopies, we expect a repeat dosing study would enroll quickly, enabling a potential FEV1 data readout next year.

Our KB408 program for AATD lung disease is also moving ahead well. Having already confirmed successful delivery of functional AAT in our single-dose study. This program is in repeat dosing, and we expect to be able to provide an interim data update in the first half of next year. Together, with KB407, this will serve as a robust data set demonstrating our platform capabilities in the lung. In ophthalmology, strong enrollment is providing us with greater clarity on the timing of our first readout. Based on current rates, we expect to complete enrollment of our Phase III trial evaluating KB803 for corneal abrasions in DEB patients by end of the year. Enrollment in our randomized placebo-controlled study or KB801 in NK is also progressing well as we continue to onboard new sites globally, setting us for a potential data rich in 2026.

I would also like to share a quick update on our work in oncology, which is increasingly focused on the event of inhaled KB707 for the treatment of non-small cell lung cancer or NSCLC. As we shared at ASCO over the summer NSCLC is an indication where we have seen early evidence of monotherapy efficacy even in heavily pretreated and checkpoint inhibitor failed patients. Building on that readout, we were recently granted an end of Phase II meeting with the FDA to discuss potential development pathway for inhaled KB707. Based on FDA's feedback, we now expect that a single Phase III study evaluating inhaled KB707 in combination with chemotherapy versus chemotherapy alone in patients with advanced NSCLC could be sufficient to support a potential registration in combination for second-line NSCLC.

In support of this potential registration pathway, we have opened a new cohort in our ongoing Phase I/II KYANITE-1 study to evaluate a fixed dose of inhaled KB707 in combination with chemotherapy. Enrollment in KYANITE-1 is ongoing. Our current expectation is to report interim data from KYANITE-1 in the second half of 2026 at which point, we would also be able to provide an update on registrational study plans and potential for Phase III initiation. Finally, I'm also happy to introduce today a new addition to our clinical pipeline, KB111 for the treatment of Hailey-Hailey disease. Hailey-Hailey disease is a genetic blistering disease of the skin linked to the mutation in the ATP2C1 gene and low expression of its encoded caption transporting ATPS HD is a rare disease with a prevalence that's not well understood.

The most common estimate of prevalence is 1 case for 50,000 patients although underreporting is possible. HHDS is characterized by painful rash and blistering in skin folds with a relapsing remitting course, that is exacerbated by heat and sweat. Patients often report debilitating symptoms of pain, itch, burning, body odor as well as infections resulting in severe negative impact on quality of life, technological distress and intimacy issues and there are no specific therapies available for treatment of this disease.

Building on our experience and clinically validated HSV platform for skin delivery, we designed KB111 to deliver ATP2c1 directly to skin cells increased ATPS levels and hopefully change the course of this terrible disease. As with VYJUVEK, KB111 is formulated for a topical administration directly to the lesions of HHD patients. We've already confirmed in preclinical studies that KB111 can efficiently transduce skin cells, resulting in functional ATPAs, freshen and last month cleared our I&E. We expect to start an intrapatient randomized, double-blind placebo-controlled multicenter study evaluating KB111 in HHD patients in the first half of next year.

With strong execution across our pipeline and now the added benefits of the platform designation for KB801, we are well positioned to make rapid progress with multiple readouts in months ahead. With that, I'll hand the call over to Kate.

Thank you, Suma, and good morning, everyone. I'd like to provide some highlights from our third quarter financial results reported in our press release and 10-Q filing earlier this morning. VYJUVEK net product revenue for the third quarter was $97.8 million. This marks sustained growth as compared to the prior quarter, including the early sales from our German launch. Gross to net revenues remained consistent with prior quarters. Cost of goods sold was $4.3 million and gross margin was 96% for the quarter as compared to 93% last quarter. Note that the increase in gross margin this quarter was the result of U.S. product manufacturing process optimization and the benefit of lower cost bakes after FDA approval of this optimized process.

While we expect these manufacturing efficiencies to continue benefiting our U.S. operations, the optimized process has not yet been approved for products sold outside the United States. As ex U.S. sales grow over the coming quarters, we Margins will normalize towards historical levels until the optimized process is approved for products sold outside the United States. Research and development expenses were $14.6 million and general and administrative expenses were $37.6 million. Operating expenses for the quarter included noncash stock-based compensation of $13.2 million. You'll note on Slide 13 that we are revising our full year non-GAAP R&D and SG&A guidance to $145 million to $155 million compared to our prior guidance of $150 million to $175 million. This represents both a reduction and narrowing of the range to better reflect our performance so far this year as well as our continued confidence in our ability to execute with discipline for the remainder of the year.

During the quarter, we released a majority of the valuation allowance that was previously recorded against our deferred tax assets, reflecting our confidence in Krystal's future profitability. This release resulted in a onetime noncash tax benefit that increased our reported EPS. We also benefited from the reversal of the Section 174 R&D capitalization requirement under the 1 big beautiful bill legislation. This reversal was also nonrecurring. Net income for the quarter was $79.4 million, which represented $2.74 per basic and $2.66 per diluted share, reflective of these onetime benefits. And finally, our balance sheet continues to be a key point of strength for Krystal. We ended the third quarter with over $864 million in combined cash and investments and we remain well positioned to support our commercial launches globally as well as our significant pipeline programs in the upcoming quarters. And now I will turn the call back over to Krish.

Thanks, Kate. As we close today's call, I'd like to emphasize our excitement for the path ahead at Krystal in 2026. With launches in Germany, France and Japan, VYJUVEK has now truly gone global, providing us the opportunity to dramatically expand the number of patients benefiting from VYJUVEK therapy in the months ahead. The hard part of a global base launch is now behind us, and Krystal's focus in 2026 is on our clinical pipeline. We have our first readout in CF before year-end. We're working towards readouts in 801 for NK and KB803 for eye lesions in depth patients by midyear and we shall update once enrollment is complete in these programs.

These programs, along with KB111 for Hailey-Hailey fit neatly within our core global commercial capabilities. At the same time, we recognized a significant optionality that HSV1 provides as a redoseable non-integrating large-capacity gene delivery platform and the potential upside opportunities that exist in large market indications. We will continue to invest in these programs with the same operational discipline as we have in the past to ensure that we maximize the value that we believe exists in our pipeline and platform before entering into partnerships for these programs. Thanks for listening, and I'd like to now open the call for Q&A.

[Operator Instructions] Your first question for today is from Alec Stranahan with Bank of America.

This is Matthew on for Alec. Maybe just 2 from us. On the ex U.S. launch, I guess, whether your focus is on expanding the breadth of prescribers or depth of prescribers that have already made some prescriptions? And then maybe on the optimized process that led to better gross margins. Just curious what was sort of optimized in this process and whether you can speak to time lines for this optimized process to be expanded to ex U.S. markets?

Thank you, Matthew. In terms of your first question on ex U.S. launch breadth of prescribers was DEB. I mean our focus -- I mean, you know our objective in Europe is primarily to celebrate, getting a patient to meet the physician as soon as possible because the first clinical visit has to be in a physician office. Now purely, logistically, that's a lot easier if you start focusing on centers of excellence, as you heard from Laurent to begin with, but at the same time, slowly spreading out into the community.

On the question about optimized process, this is essentially moving to a larger bioreactor. It's got approved in the U.S., and we're working towards an application in Europe. I'll ask someone to comment on the timing for the approval in Europe with respect to the optimized facts.

I mean we have already started the process. We have filed feel up. I mean, it's pretty straightforward because we have a lot of data from the U.S. So we expect hopefully sometime next year to have the optimized and scaled up process approved.

Your next question is from Roger Song with Jefferies.

Great. Congrats for the quarter. Also related to the question ex U.S. launch. So I understand the contribution in 3Q probably not too much from Germany. But just curious about your expectation moving to next year, maybe 4Q and the next year, how should we think about ex U.S. versus the U.S. revenue contribution? And when on -- so will give us some breakdown data on. And then also related to this ex U.S. launches, how should we think about the pricing? I understand you need to negotiate on top of the list of price and then how this will change over time, particularly with the U.S. MSM policy?

Great, Roger. Thanks for those questions. Look, the only requirement, as I mentioned in the prior response, it's just start in a health care setting. But in spite of that, we think Germany is off to a really good start with like 10-plus centers starting to prescribe. But the only point I'll make with respect to the EU launch, I would expect it to be a steady launch upwards as opposed to expecting any kind of bolus early on in either country, whether it be Germany or France. But the demand and the physicians and the patients are pretty excited, I would say, both in Germany, France and Italy is starting to go that way too.

With respect to pricing, look, we know Germany efforts prepricing for the first 6 months. And then internally, we'll make a determination to start accruing for the next 12 months, depending on how pricing is proceeding. Negotiations are proceeding in France, obviously, we start accruing from day 1. So it's very country specific. But I will say, based on the ASMR rating, based on the pricing regarding Japan, I think it bodes well. It remains to be seen. But I think the efficacy and the debilitating nature of the disease, I think that message, we're doing a really good job of conveying that, and it's being received well by these authorities in different countries.

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

Apologies. I was muted. I have been getting a lot of questions on timing? And specifically, Krish, could you take us through sort of what the gating aspects of getting that trial up and going is how many sites and how difficult it is to open those sites has enrollment -- formal enrollment actually started. I think there's a lot of focus on the rapidity of getting to data and what that says about the overall NK population prevalence? And then I have a quick follow-up on CF.

But on NK, I would just say, look, I think we have started to enroll patients in the study. Maybe Suma, you could add some color on how we're proceeding.

Absolutely. I mean we have we have quite a few sites up and running. We are actively adding additional sites. So really intend not just in the U.S. but globally because there's a lot of NK patients in Europe and the rest of the world, and we want to make this a global filing. So as you know, it takes a little while to get them up and running for the global studies, but we are right in the process. I think we will have most of our sites all completely signed up and ready to go hopefully by end of the year.

And as you know, we are enrolling patients. This is 1 of our top priority projects. So we are excited to see the progress on this particular trial.

And I will add, Ritu, our internal timing target is to announce some kind of minimum data by the middle of next year.

Got it. And can you say what percentage of sales do you have the percentage of plant sites that you have been running at this point?

I mean, we have quite a few sites. I mean, within the U.S., we got most of the academic sites up and running. We have a few more to go, but I think we should have most of the U.S. sites up and running by end of the year.

Got it. And then for CF, can you tell us how many no patients that you plan to provide data on by the year-end update? And sort of what constitutes success on molecular response. What aspects of molecular response will you be reporting and what success in those patients.

Yes. We're -- Rita, thanks for that question. We are looking at a minimum 3 patients primarily focused on molecular correction because it's a single-dose study. Suma anything else?

Yes. I mean, obviously, we are branching these patients, the 3 now patients after the drug is administered and the biopsies, we will take across the different across all the different areas of the lung, and we will look for expression of CFTR by immunofluorescence across. And we will see what kind of expression we are expecting to see robust expressions. I mean, based on our NHP primate study, I mean, we -- hopefully, we can recreate that, we see expression all the way up to 28 days. We see full-length molecular CFTR expression across all of our biopsies. We think -- we feel pretty confident nobody is able to today show full length expression of CFTR. So hopefully, we can break that cycle. That's our goal.

Would you report a like percentage of normal and sort of what threshold could result in FEV changes at a later time point?

We know that you don't need much, right? Even these patients don't produce any CFTR. So even if we can produce anywhere between 5% to 10% of CFTR expression, I think that's pretty robust. So again, our intent is in these multiple biopsies across the lung, we will -- hopefully, we want to show expression in most of these biopsies and that can give us some confidence that, yes, we can express and we have enough molecular correction. So especially in these all patients don't produce any CFTR.

Your next question is from Gavin Clark Gartner with Evercore.

On NK, what makes you confident that you don't need to test any different doses and why the 1 that you picked is the right dose? And somewhat on this topic, do you think you need 2 efficacy studies for approval or may 1 be sufficient?

So the confidence for the dose comes from our animal studies. I mean we clearly see expression gave a clear pharmacokinetic profile. So we know how long the expression lasts. So that is guided us into the dosing regimen in the clinic. Yes, we are pretty sure that we just need 1 efficacy trial because this is, again, a rare disease. It meets the regulatory guidance for what the requirement is. So based on our study and the way we have powered the study based on our animal studies and what oxalate studies have achieved, we have powered it to hopefully see clinical significant improvement from placebo. So that's the goal of this study is successful, then we expect this to be the registrational trial.

And obviously, you have the platform technology. And we have guidance on what we need from a CMC perspective. So we are, I think, you're aligned. So that's -- that's something that's positive for this program.

And is there any commentary you can provide on the safety you're seeing in the Ocular Deb study or even the NK study on a blinded basis?

I mean -- I mean, so far, we have not seen any adverse events of concern. .

Your next question is from Sami Corwin with William Blair.

Congrats on the progress and also have 1 on NK. Could you remind us if you're excluding patients that have had a prior ocular HSV infection and if you think a prior HSV infection could impact the efficacy or safety of treatment? And then in terms of the initial data set, what exactly will we see in that.

Regarding your first question, no, we do not -- we do not exclude patients that had prior infection. The only requirement is they should not have an active infection. That's the only exclusion criteria. Whatever is announce, Yes, data said this is a randomized one-to-one placebo-controlled study 8 week. So we look at complete healing -- we're using I mean, complete healing with an independent reader. So if you see complete healing -- against placebo, then that's a win, just exactly like.

Got. it. Great. And then just 1 question on VYJUVEK. We expect some guidance or full year revenue guidance for VYJUVEK early next year?

No, because we have so many launches and the distribution you see land, it will take us some time to kind of get comfortable with how the different launches are going in different countries. So fortunately, Sam, we will not be guiding on revenue for 2026.

Your next question is from Josh Schimmer with Cantor Fitzgerald.

This is Alexa Deemer on for Josh Schimmer, and congrats on a great quarter. So can you please provide some more color on the contribution of U.S. and ex U.S. sales in the third quarter for VYJUVEK? More specifically, what was the percentage breakdown from the U.S. versus Germany?

Yes. Look, the decision not to break down in this particular quarter was somewhat accounting auditor driven at the coal is to establish a consistent long-term practice on segment reporting. And if you follow that thought, we will be starting to break down geographies at some point in 2026. It's just that now it is so modest contribution relative to the overall net revenues of the company.

Okay. Got it. And can you provide any more specifics on how U.S. sales were in the second quarter versus the third quarter?

Yes. Definitely, I would say that the U.S. was a bit lower than what we saw in 2Q, but not to the extent like based on my comments from the last quarter, definitely reimbursement approvals were on an uptick. And so overall, we ended up getting to a number that was higher than Q2.

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

This is Morgan on for Andrea. With reimbursement approvals, what do you attribute this growth to? Are you seeing more patient adds from the community setting -- and then how are you thinking about the path to 60% penetration from here?

No. Great question, Andrea. Look, like I mentioned maybe last quarter or the 1 before, it was taking us a bit longer to pull through a start form as we are getting patients more out in the community and physicians who are not -- who are far away from a center of excellence. And by just increasing the size of the sales force, I believe we have turned that issue around. We saw some acceleration last quarter. We see a continued acceleration this quarter. Would we expect that to go forward. As more reps are being trained and out into the field. In terms of 60% market share, look, that's a number around 720. We reported 615. So we're maybe a quarter or 2 from hitting that number if you just do a simple math on that metric, which -- so we feel really good about the way the launch is going and how we've been able to reverse this 1 or 2 -- 1 quarter of deceleration in RA.

Your next question is from Yigal Nochomovitz with Citi.

This is Joanne Kim on for Yigal. Maybe just 2 quick ones for -- from us. KB408, can you just talk a little bit about your expectations there, whether you're expecting a significant uptick in AAT with repeat dosing versus a single dose and what sort of boost you'd be expected to see or what you want to see?

Yes. Obviously, we're expecting an uptick, but we're not particularly talking right now about how much of an uptake.

I mean we are doing repeat dosing of even -- I mean, 40 million and we'll be collecting bronch and -- samples. So that's something that's ongoing. So once -- so we will show repeat dosing and an expression of A180.

Got it. And can you speak on whether opening up more sites is also a priority for that program to continue enrolling patients given that there are quite a number of AATP programs ongoing right now?

I mean, right now, we have a couple of sites that open because remember, again, these sites have to be able to do bronchoscopy. In case of 408, it's a little more complex because it's not just biopsies. They also need to take lung lavage fluids out to measure the A180 and the protein levels. So there's only a few sites that are capable of doing this. So we have those sites. We have the patients so hopefully, once we finish that cohort with the repeat dose administration and A180 levels, and we hope to have a meeting with the agency to potentially talk about a path forward.

There are no further questions in queue. Thank you. We've 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.