Krystal Biotech Inc.
05/04/2026 | Press release | Distributed by Public on 05/04/2026 05:06
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 10-K"), as filed with the SEC on February 17, 2026.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "seek," "should," "target," "will," "would," or similar expressions and the negatives of those terms. These statements relate to future events or to our future operating or financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.
Forward-looking statements appearing in this Quarterly Report on Form 10-Q include, but are not limited to, statements about the following, among other things:
•our commercialization plans in the United States, the European Union, Japan, and elsewhere for our first commercial product, VYJUVEK® (beremagene geperpavec-svdt) for the treatment of dystrophic epidermolysis bullosa ("DEB"), including timing of pricing negotiations and potential commercial launches in Europe;
•the design, initiation, enrollment, timing, progress, and results of clinical trials for our product candidates, as well as expected timing of regulatory filings and reporting of data readouts from our clinical trials;
•our beliefs about our proprietary HSV-1 based vector platform;
•our expectations regarding future fluctuations in revenue and anticipated increases in certain expenses; and
•our commercialization, marketing, and manufacturing capabilities and strategy.
Forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referenced in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and other filings we make with the SEC from time to time. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.
Forward-looking statements represent our management's beliefs and assumptions only as of the date of filing this Quarterly Report on Form 10-Q with the SEC. Except as required by law, we assume no obligation to update these forward-looking statements publicly as a result of subsequent events, developments or otherwise, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Throughout this Quarterly Report on Form 10-Q, unless the context requires otherwise, all references to "Krystal," the "Company," "we," "our," "us," or similar terms refer to Krystal Biotech, Inc., together with its consolidated subsidiaries. Web links throughout this Quarterly Report on Form 10-Q are provided for convenience only and are not intended to be active hyperlinks to the referenced websites. No content on the referenced websites shall be deemed incorporated by reference into this Quarterly Report on Form 10-Q.
Overview
We are a fully integrated, global, commercial-stage biotechnology company focused on the discovery, development, manufacturing, and commercialization of genetic medicines to treat diseases with high unmet medical needs. Using our patented gene therapy technology platform that is based on engineered HSV-1, we create vectors that efficiently deliver therapeutic transgenes to cells of interest in multiple organ systems. The cell's own machinery then transcribes and translates the transgene to treat the disease. Our vectors are amenable to formulation for non-invasive or minimally invasive routes of
administration at a healthcare professional's office or in the patient's home. Our innovative technology platform is supported by two in-house, commercial scale CGMP manufacturing facilities.
Our Commercial Product
VYJUVEK (beremagene geperpavec-svdt, or B-VEC)
VYJUVEK is a non-invasive, topical, redosable gene therapy approved in the United States, European Union ("EU"), and Japan for the treatment of DEB, a rare and severe monogenic disease that affects the skin and mucosal tissues and is caused by one or more mutations in a gene called COL7A1. VYJUVEK is designed to deliver two copies of the COL7A1 gene when applied directly to DEB wounds, providing the patient's skin cells the template to make normal type VII collagen protein and thereby addressing the fundamental disease-causing mechanism.
VYJUVEK was first approved by the FDA in May 2023 for the treatment of wounds in patients, six months of age or older, suffering from DEB, making it the first and only corrective medicine approved by the FDA for the treatment of both recessive and dominant subtypes of DEB. In September 2025, the FDA approved a label update for VYJUVEK that expanded the treatment eligible population to include DEB patients from birth and provided patients with greater dosing flexibility, including the option for VYJUVEK to be applied by a healthcare professional ("HCP"), caregiver, or directly by the patient themselves, either at home or in a healthcare setting.
VYJUVEK was also approved in Japan and the EU in 2025, making it the first and only corrective therapy approved for the treatment of DEB in each of those respective markets. Both approvals include flexible dosing options with the potential for patient or caregiver administration in the home setting.
We possess exclusive rights to develop, manufacture, and commercialize VYJUVEK throughout the world. We are commercializing VYJUVEK directly in the United States, major European markets, and Japan. We launched VYJUVEK in the United States in 2023, in Germany in August 2025, and in France and Japan in October 2025. The launch in France is under the post-marketing authorization early reimbursed access Accès Précoce program.
Pricing negotiations are underway in both Germany and France and are expected to continue until the second half of 2026 in Germany and 2027 in France. Pricing negotiations were successfully completed in Japan prior to launch.
We are also advancing pricing discussions with Italian and Spanish reimbursement authorities to enable potential launches in both Italy and Spain in the second half of 2026, as well as initiating pricing discussions with relevant authorities in other key Western European markets. The timing of additional European launches is uncertain will depend on the cadence and outcomes of ongoing and planned regulatory interaction and pricing negotiations.
We continue to expand our specialty distributor network to support the commercialization of VYJUVEK in territories outside of the United States, major European markets, and Japan.
Net VYJUVEK product revenue was $116.4 million for the three months ended March 31, 2026, and $846.7 million in cumulative net product revenue since our first launch of VYJUVEK in the United States in 2023.
Gross margin for the three months ended March 31, 2026 was 95%. We define gross margin as product revenue, net less cost of goods sold expressed as a percentage of product revenue, net.
Pipeline Highlights and Recent Developments
Ophthalmology
KB803 for Ocular Complications in Patients with DEB
KB803 is a redosable eye drop formulation of B-VEC, designed for the treatment of ocular complications that are thought to affect over 25% of DEB patients. These complications, which include corneal erosions, abrasions, blistering and scarring, can lead to progressive vision loss. There is currently no corrective therapy available.
B-VEC has been applied topically to the eye of one DEB patient with severe cicatrizing conjunctivitis under a compassionate use protocol. The clinical observations of this compassionate use case were published in the New England Journal of Medicine in February 2024. Regular eye drop administration of B-VEC was well tolerated by the patient with no drug-related adverse events noted. Full corneal healing was observed at three months, as well as significant visual acuity improvement from hand motion to 20/25 by eight months.
In June 2025, we announced that we dosed the first patient in IOLITE, an intra-patient, double-blind, placebo-controlled, multicenter Phase 3 registrational study with a crossover design to evaluate KB803 for the treatment and prevention of corneal abrasions in DEB patients, six months of age or older. After observing a promising clinical safety profile in the initial patients treated with Krystal's eye drop gene therapies, we modified the KB803 dosing schedule to reduce the potential impact
of human error in eye drop administration. In April 2026, we completed study enrollment, with a total of 16 patients enrolled under the updated IOLITE protocol. We expect to report top-line results from IOLITE before the end of the year. The primary efficacy endpoint of the IOLITE study is the change in the average number of days per month with corneal abrasion symptoms while receiving KB803 versus placebo. Safety and secondary efficacy data, including weekly assessments of eye pain and monthly Epidermolysis Bullosa Eye Disease Index questionnaires, are being collected through to the end of the 24-week study period.
To enroll in IOLITE, patients first completed a 12-week run-in period in our natural history study, during which they reported the number of days they experienced symptoms of corneal abrasions. Additional details on both studies are available at www.clinicaltrials.gov under NCT identifiers NCT07016750 for IOLITE and NCT06563414 for the natural history study.
KB801 for Neurotrophic Keratitis ("NK")
KB801 is an eye drop formulation of our novel HSV-1 based vector designed to deliver two transgene copies to the corneal epithelium for the sustained, localized expression and secretion of nerve growth factor ("NGF") and treatment of NK, a rare, degenerative corneal disease caused by nerve damage in the eye that leads to corneal epithelial defects, ulcers, and perforation. Recombinant NGF eye drops have been shown to significantly improve corneal healing and are approved for the treatment of NK in multiple jurisdictions worldwide, including the United States, but rapid clearance from the eye requires intensive administration six times a day, with eye pain frequently reported, and may result in suboptimal treatment outcomes. By transducing the cells of the corneal epithelium to produce and secrete NGF, KB801 has the potential to significantly reduce the treatment burden for patients while also maintaining more consistent NGF levels in the front of the eye.
In July 2025, we announced that we dosed the first patient in EMERALD-1, a randomized, double-masked, multicenter, placebo-controlled study evaluating KB801, administered as an eye drop, for the treatment of NK. In October 2025, the FDA granted platform technology designation to the engineered HSV-1 viral vector used in KB801, a designation which affords development and manufacturing efficiencies for the development of KB801. Following receipt of this designation, we amended the EMERALD-1 protocol to enable the study to serve as a registrational trial supporting the potential registration of KB801. Under the updated protocol, we expect to enroll approximately 60 adult patients with Stage 2 or Stage 3 NK, as defined by the Mackie criteria, randomized 1:1 to receive either KB801 or placebo. The primary efficacy endpoint of EMERALD-1 is the proportion of patients with complete healing of corneal epithelium at eight weeks. Enrollment in EMERALD-1 is ongoing. We expect to complete enrollment and report top-line results from EMERALD-1 before the end of the year. More details of the EMERALD-1 study can be found at www.clinicaltrials.gov under NCT identifier NCT06999733.
Respiratory
KB407 for Cystic Fibrosis ("CF")
KB407 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the full-length cystic fibrosis transmembrane conductance regulator ("CFTR") transgene for the treatment of CF, a serious rare lung disease caused by missing or mutated CFTR protein.
In July 2023, we announced that we had dosed the first patient in our Phase 1 CORAL-1 study, a multi-center, dose-escalation trial of KB407 in patients with CF that included molecular assessments of CFTR delivery and expression in the third and highest dose cohort. In December 2024, we announced an interim safety data update from the first two dose cohorts of CORAL-1 and, in January 2026, interim safety and molecular data updates from the third dose cohort. KB407 was generally well tolerated across all three dose cohorts, and molecular assessments by bronchoscopy confirmed the successful delivery and expression of wild-type CFTR protein in patient's lungs, with broad airway distribution and confirmation of KB407 transduction in all six CF patients with successful bronchoscopies.
We are now working closely with the FDA and the Cystic Fibrosis Foundation ("CFF") on development pathways to support potential registration of KB407. In April 2026, the FDA also granted platform technology designation to the engineered HSV-1 viral vector used in KB407, affording the program the same potential development and manufacturing efficiencies as KB801.
Based on recent interactions with the FDA, we are initiating an open label, single-arm study to evaluate safety of repeat dose KB407 for 24 weeks in five patients with CF who are ineligible for, do not tolerate, or do not benefit from modulator therapy. We expect to dose the first patient in the open-label study later this month, complete enrollment in the second quarter of 2026, and report results before the end of the year. Details of the study can be found at www.clinicaltrials.gov under NCT identifier: NCT05504837. Concurrently, we are in discussions with the FDA and CFF regarding a potential innovative registrational study design and statistical analysis plan that explores using prospectively collected natural history data from the CFF to supplement placebo control data for evaluation of KB407 treatment effect. We expect to share the design
and associated statistical analysis of the registrational study following alignment with the FDA, which is anticipated in the second half of 2026, and initiate the registrational study in 2027.
KB408 for Alpha-1 Antitrypsin Deficiency ("AATD") Lung Disease
KB408 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the SERPINA1 transgene, that encodes for normal human alpha-1 antitrypsin ("AAT") protein, for the treatment of AATD, a serious rare lung disease characterized by diminished or absent functional AAT protein in the lungs and unopposed neutrophil elastase activity resulting in progressive lung function decline.
In February 2024, we announced that we dosed the first patient in SERPENTINE-1, a Phase 1, open-label, dose escalation study evaluating KB408, delivered via a nebulizer, in adult patients with AATD with a Pi*ZZ or a Pi*ZNull genotype. In December 2024, we announced an interim clinical update from the first two dose escalation cohorts of SERPENTINE-1. Inhaled KB408 was safe and well-tolerated at both tested dose levels and clear evidence of successful SERPINA1 delivery and AAT expression was observed in both patients that underwent bronchoscopies. We have since confirmed SERPINA1 delivery and functional AAT expression in a third patient dosed with KB408 in Cohort 2 and amended the SERPENTINE-1 protocol to investigate repeat dosing at the Cohort 2 dose level (the repeat dose cohort now referred to as "Cohort 2B"). A total of five patients were dosed in Cohort 2 of which three underwent bronchoscopy. The first patient in Cohort 2B was dosed in August 2025 and enrollment in this repeat dose cohort is ongoing. We expect to report interim safety and SERPINA1 delivery data from the repeat dose Cohort 2B in 2026. Enrollment in single dose cohorts is now closed. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier: NCT06049082.
Dermatology
KB111 for Hailey-Hailey Disease ("HHD")
KB111 is a topical gel formulation of our novel vector designed to deliver two copies of the ATP2C1 transgene encoding the human calcium-transporting ATPase type 2C member 1 ("ATP2C1") for the treatment of HHD, a serious and rare monogenic skin disorder characterized by painful rash and blistering in skin folds and linked to low ATP2C1 expression levels in keratinocytes.
In October 2025, the FDA cleared our investigational new drug application to evaluate KB111 in the clinic and, in January 2026, the FDA granted KB111 Fast Track Designation for the treatment of HHD. In April 2026, the FDA also granted platform technology designation to the engineered HSV-1 viral vector used in KB111, affording the program the same potential development and manufacturing efficiencies as KB801 and KB407.
We are currently developing an HHD-specific severity scale required for the clinical evaluation of KB111. We expect to complete development and validation of the scale in the first half of 2026. We also plan to initiate an open-label safety study later this month, HALITE-1, evaluating repeat dose KB111, administered once weekly for 12 weeks, in approximately seven patients with HHD. We expect to report HALITE-1 study results in the second half of 2026. We also plan to submit the results from HALITE-1 along with the registrational study design for discussions with the FDA in the second half of 2026 to enable a potential registrational study start in 2027.
Oncology
KB707 for Solid Tumors
KB707 is a redosable, immunotherapy designed to deliver transgenes encoding both human interleukin-2 and interleukin-12 to the tumor microenvironment and promote systemic immune-mediated tumor clearance. Two formulations of KB707 are in development, a solution formulation for transcutaneous injection and an inhaled (nebulized) formulation for lung delivery. Both intratumoral and inhaled KB707 have been granted Rare Pediatric Disease Designations and Fast Track Designations by the FDA. In February 2026, the FDA also granted Regenerative Medicine Advanced Therapy designation to KB707 for the treatment of advanced or metastatic non-small cell lung cancer ("NSCLC").
We have prioritized development of the inhaled KB707 formulation for the treatment of NSCLC based on early evidence of efficacy from KYANITE-1, an open-label, multi-center, dose escalation and expansion Phase 1/2 study, evaluating inhaled KB707, as monotherapy or in combination, in patients with locally advanced or metastatic solid tumors of the lung. As of the latest data cut-off disclosed in June 2025, in an evaluable cohort of 11 patients with heavily pre-treated advanced NSCLC, we observed monotherapy activity with inhaled KB707 therapy, achieving an objective response rate of 36% and a disease control rate of 54%. Inhaled KB707 was also reported to be safe and generally well tolerated as monotherapy in the 39 patients included in the safety analysis. The majority of treatment-related adverse events have been mild to moderate in severity and transient with no Grade 4 or 5 adverse events observed.
We continue to enroll patients with advanced NSCLC in a cohort evaluating a fixed dose of inhaled KB707 in combination with chemotherapy in patients with advanced NSCLC and expect to report additional interim efficacy data from KYANITE-1, as well as potential registrational study plans for inhaled KB707, later this year. Details of the KYANITE-1 study can be found at www.clinicaltrials.gov under NCT identifier NCT06228326.
With the prioritization of inhaled KB707, we have paused enrollment in OPAL-1, an open-label, multi-center, dose escalation and expansion Phase 1/2 study, evaluating intratumoral KB707, as monotherapy or in combination, in patients with locally advanced or metastatic solid tumors, who relapsed or are refractory to standard of care, with at least one measurable and injectable tumor accessible by transcutaneous route of administration. Patients enrolled in OPAL-1 continue to be followed and based on safety and efficacy results from the study, the Company may adjust development plans for intratumoral KB707. Details of the OPAL-1 study can be found at www.clinicaltrials.gov under NCT identifier NCT05970497.
Aesthetics
In addition to focusing on genetic medicines to treat patients with diseases with high unmet medical needs, we are leveraging the ability of our platform to deliver proteins of interest to cells in the skin in the context of aesthetic medicine via our wholly-owned subsidiary, Jeune Aesthetics, Inc. ("Jeune").
Jeune's lead clinical program, KB304, is a solution formulation of our novel vector for intradermal injection designed to deliver two copies of the COL3A1 transgene and one copy of the ELN transgene to address various signs of skin aging including elasticity loss. In July 2025, Jeune announced positive safety and efficacy results, including significant improvements in key skin aesthetic attributes such as wrinkles and elasticity, in PEARL-2, a 2:1 randomized, double-blind, placebo-controlled Phase 1 study evaluating KB304, for the treatment of wrinkles of the décolleté.
Based on the broad aesthetic improvements observed in PEARL-2, Jeune is progressing KB304 into a Phase 2 study for the treatment of wrinkles of the décolleté. In support of the Phase 2 study, Jeune developed and validated a décolleté-specific photonumeric scale ("JDWS") which was submitted to the FDA in the second half of 2025. Jeune has aligned with the FDA on the JDWS and expects to initiate the Phase 2 study in 2027.
Financial Overview
Product Revenue, Net
After FDA approval of VYJUVEK in May 2023, we launched VYJUVEK in the United States in 2023, in Germany in August 2025, and in France and Japan in October 2025. Our future revenue will fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of sales of VYJUVEK.
The transaction price that we recognize as revenue for VYJUVEK sales includes an estimate of variable consideration, which may include discounts, returns, and rebates that are offered within contracts. Refer to Note 3 of the notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.
Cost of Goods Sold
Cost of goods sold includes direct and indirect costs related to the manufacturing of VYJUVEK. These costs consist of manufacturing costs, personnel costs including stock-based compensation, facility costs, and other indirect overhead costs. Cost of goods sold may also include period costs related to certain manufacturing services and inventory adjustment charges.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred to advance our preclinical and clinical development programs and the development and manufacturing of our product candidates, which include:
•agreements with contract research organizations, consultants and other third parties that conduct preclinical activities, clinical trials and other research and development activities on our behalf;
•costs of acquiring, developing and manufacturing product candidates and clinical trial materials, lab supplies and consumables;
•facility costs, depreciation and other related expenses, which include expenses for rent and the maintenance of our facilities;
•other testing and support costs and supplies; and
•payroll related expenses, including stock-based compensation expense.
We expense research and development costs to operations as incurred.
We expect our research and development expenses will increase as we continue the manufacturing of preclinical and clinical materials, manage the clinical trials of and seek regulatory approval for our product candidates and as we expand our
product portfolio. Due to the numerous risks and uncertainties associated with product development, we cannot determine with certainty the duration, costs and timing of clinical trials, and as a result, the actual costs to complete clinical trials may exceed the expected costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of salaries and other related costs, including stock-based compensation for personnel in our executive, finance, legal, commercial, business development, information technology and other general and administrative functions and are expensed as incurred. Selling, general and administrative expenses also include professional fees associated with corporate and intellectual property-related legal expenses, consulting and accounting services, insurance, facility-related costs and expenses associated with obtaining and maintaining patents. Other selling, general and administrative costs include travel expenses, patient access program costs, management service fees, marketing expenses, and selling expenses which include transportation, shipping and handling fees.
We anticipate that our selling, general and administrative expenses will increase in the future relating to our commercialization efforts and to support the development of our product candidates. These increases will likely include increased costs for insurance, costs related to the hiring of additional personnel and payments to outside consultants, lawyers and accountants, among other expenses. Additionally, we anticipate that we will continue to increase our salary and personnel costs and other expenses to support VYJUVEK commercialization globally.
Interest and Other Income, Net
Interest and other income, net consists primarily of income earned from our cash, cash equivalents and investments and gains and losses on foreign currency transactions.
Critical Accounting Policies, Significant Judgments and Estimates
There have been no material changes during the three months ended March 31, 2026 to our critical accounting policies, significant judgments and estimates as disclosed in our management's discussion and analysis of financial condition and results of operations included in the 2025 10-K.
Results of Operations
Our management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Three Months Ended March 31, 2026 and 2025
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2026 | 2025 |
$
|
%
|
||||||||||||||||||||
| (in thousands) | (unaudited) | ||||||||||||||||||||||
| Product revenue, net | $ | 116,357 | $ | 88,183 | $ | 28,174 | 32 | % | |||||||||||||||
|
Operating expenses
|
|||||||||||||||||||||||
| Cost of goods sold | 6,323 | 5,028 | 1,295 | 26 | % | ||||||||||||||||||
| Research and development | 15,331 | 14,256 | 1,075 | 8 | % | ||||||||||||||||||
| Selling, general and administrative | 41,014 | 32,647 | 8,367 | 26 | % | ||||||||||||||||||
| Total operating expenses | 62,668 | 51,931 | 10,737 | 21 | % | ||||||||||||||||||
| Income from operations | 53,689 | 36,252 | 17,437 | 48 | % | ||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Interest and other income, net | 7,753 | 7,345 | 408 | 6 | % | ||||||||||||||||||
| Income before income taxes | 61,442 | 43,597 | 17,845 | 41 | % | ||||||||||||||||||
|
Income tax expense
|
(5,510) | (7,864) | 2,354 | (30) | % | ||||||||||||||||||
| Net income | $ | 55,932 | $ | 35,733 | $ | 20,199 | 57 | % | |||||||||||||||
Product Revenue, Net
Product revenue, net was $116.4 million for the three months ended March 31, 2026, as compared to $88.2 million for the three months ended March 31, 2025. The increase in product revenue, net was driven by an increase in VYJUVEK sales as compared to the prior year, primarily due to continued growth in our Europe and Japan markets.
Cost of Goods Sold
Cost of goods sold was $6.3 million for the three months ended March 31, 2026, as compared to $5.0 million for the three months ended March 31, 2025, representing an increase in units of VYJUVEK sold.
Research and Development Expenses
The following table summarizes our research and development expenses by product candidate or program, and for unallocated expenses, by type, for the three months ended March 31, 2026 and 2025.
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2026 | 2025 |
$
|
%
|
||||||||||||||||||||
| (in thousands) |
(unaudited)
|
||||||||||||||||||||||
|
B-VEC
|
$ | 547 | $ | 1,973 | $ | (1,426) | (72) | % | |||||||||||||||
|
KB111
|
992 | 27 | 965 | 3574 | % | ||||||||||||||||||
|
KB304
|
3 | 242 | (239) | (99) | % | ||||||||||||||||||
| KB407 | 762 | 349 | 413 | 118 | % | ||||||||||||||||||
|
KB408
|
143 | 298 | (155) | (52) | % | ||||||||||||||||||
| KB707 | 2,432 | 2,738 | (306) | (11) | % | ||||||||||||||||||
|
KB801
|
787 | 454 | 333 | 73 | % | ||||||||||||||||||
|
KB803
|
1,142 | 486 | 656 | 135 | % | ||||||||||||||||||
|
Other programs
|
736 | 692 | 44 | 6 | % | ||||||||||||||||||
| Stock-based compensation | 2,177 | 2,469 | (292) | (12) | % | ||||||||||||||||||
|
Other unallocated expenses(1)
|
5,610 | 4,528 | 1,082 | 24 | % | ||||||||||||||||||
| Research and development expense | $ | 15,331 | $ | 14,256 | $ | 1,075 | 8 | % | |||||||||||||||
(1)Other unallocated expenses consist of shared pre-commercial manufacturing costs, primarily relating to certain raw materials, process development, quality control and quality assurance activities, as well as other manufacturing and facility related costs including rent, storage and depreciation which support the development of multiple product candidates.
Research and development expenses increased by $1.1 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase in research and development expenses was primarily attributable to:
•a net increase of $0.9 million in unallocated materials and other support costs for our pipeline products; and
•a net increase of $0.8 million in R&D payroll and manufacturing costs driven by the timing of production runs across our product candidates and programs, mainly due to an increase in KB111, KB407, and KB803, partially offset by a decrease in B-VEC.
These increases were partially offset by:
• a decrease of $0.4 million in B-VEC regulatory fees due to timing of international expansion.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $8.4 million in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase was primarily driven by the following:
•an increase of $3.8 million in payroll costs, including stock-based compensation;
•an increase of $2.3 million in costs related to our global commercialization efforts; and
•an increase of $2.0 million in professional services, including legal and consulting fees.
Interest and Other Income, Net
Interest and other income, net was $7.8 million and $7.3 million for the three months ended March 31, 2026 and 2025, respectively, and consisted of interest and dividend income earned from our cash, cash equivalents and investments as well as the effects of foreign exchange rates.
Income Tax Expense
Income tax expense was $5.5 million and $7.9 million for the three months ended March 31, 2026 and March 31, 2025, respectively, which relates to state, federal and foreign income taxes.
Liquidity and Capital Resources
Overview
As of March 31, 2026, our cash, cash equivalents and short-term investments balance was approximately $823.4 million, and we had a retained earnings balance of $80.1 million. We believe that our cash, cash equivalents and short-term investments as of March 31, 2026 will be sufficient to allow us to fund our operations for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.
Costs related to clinical trials can be unpredictable and, therefore, there can be no guarantee that we will have sufficient capital to fund the continued or planned pre-clinical and clinical studies for our product candidates or our operations. Further, we expect our future revenue to fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any product sales. While we are in the process of building out our internal vector manufacturing capacity, some of our manufacturing activities will be contracted out to third parties. Additionally, we currently utilize third-party contract research organizations to carry out some of our clinical development activities. As we seek to obtain regulatory approval for our product candidates and prepare for product sales, marketing, commercial manufacturing, packaging, labeling and distribution, we expect to continue to incur significant manufacturing and commercialization expenses. Our funds may not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for or commercially launch our product candidates. Accordingly, to obtain marketing approval for and to commercialize these or any other product candidates, we may be required to obtain further funding through public or private equity offerings, debt financings, collaboration and licensing arrangements or other sources. Adequate additional financing may not be available to us on acceptable terms, if at all. Our failure to raise capital when needed could have a negative effect on our financial condition and our ability to pursue our business strategy.
Operating Capital Requirements
Our primary uses of capital are, and we expect will continue to be for the near future, compensation and related expenses, manufacturing costs for preclinical and clinical materials, regulatory expenses, third-party clinical trial research and development services, laboratory and related supplies, selling expenses, costs to manufacture our commercial product, legal expenses and general overhead costs. In order to complete the process of obtaining regulatory approval for any of our product candidates and to build the sales, manufacturing, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we may require substantial additional funding.
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development, manufacturing and commercialization of genetic medicines, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
•the costs needed to globally commercialize and market our lead product, VYJUVEK;
•the progress, timing and costs of clinical trials of our current product candidates;
•the progress, timing and cost of manufacturing VYJUVEK and revenue received from commercial sale of VYJUVEK;
•the continued development and the filing of investigational new drug applications for current and future product candidates;
•the initiation, scope, progress, timing, costs and results of drug discovery, laboratory testing, manufacturing, preclinical studies and clinical trials for any product candidates that we may pursue in the future, if any;
•the costs of maintaining our own commercial-scale CGMP manufacturing facilities;
•the outcome, timing and costs of seeking regulatory approvals;
•the costs associated with the manufacturing process development and evaluation of third-party manufacturers;
•the extent to which the costs of VYJUVEK and our product candidates, if approved, will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or will be reimbursed by government authorities, private health coverage insurers and other third-party payors;
•the costs of commercialization activities for our current and future product candidates if we receive marketing approval for such product candidates, including the costs and timing of establishing product sales, medical affairs, marketing, distribution and manufacturing capabilities;
•the revenue received from commercial sale of our current and future product candidates, subject to receipt of marketing approval;
•the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may establish;
•the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or other intellectual property rights, including milestone and royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements;
•our current license agreements remaining in effect and our achievement of milestones under those agreements;
•our ability to establish and maintain collaborations and licenses on favorable terms, if at all; and
•the extent to which we acquire or in-license other product candidates and technologies.
We may need to obtain substantial additional funding in order to receive regulatory approval and to commercialize our product candidates. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interests of our existing stockholders may be materially diluted and the terms of these securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders. In addition, debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely affect our ability to conduct our business. If we are unable to raise capital when needed or on attractive terms, we could be forced to significantly delay, scale back or discontinue the development or commercialization of our product candidates, seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, our rights to our product candidates that we otherwise would seek to develop or commercialize ourselves.
Sources and Uses of Cash
The following table summarizes our sources and uses of cash for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
|
(in thousands)
|
(unaudited)
|
||||||||||
|
Net cash provided by operating activities
|
$ | 80,382 | $ | 30,969 | |||||||
|
Net cash (used in) investing activities
|
(63,583) | (54,769) | |||||||||
|
Net cash (used in) financing activities
|
(10,459) | (12,466) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (1,331) | 171 | |||||||||
|
Net increase (decrease) in cash
|
$ | 5,009 | $ | (36,095) | |||||||
Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2026 and 2025 was $80.4 million and $31.0 million, respectively. Increase in operating cash flows was driven by a $31.3 million impact of changes in accrued legal settlement due to the final payment of the PeriphaGen settlement in the first quarter of 2025 and a $20.2 million increase in net income primarily due to increased revenue, partially offset by increased operating expenses.
Investing Activities
Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was $63.6 million and $54.8 million, respectively. The increase in cash used in investing activities was driven by increased purchases of investments of $22.2 million, partially offset by increased maturities of investments of $14.8 million.
Financing Activities
Net cash used in financing activities for the three months ended March 31, 2026 and 2025 was $10.5 million and $12.5 million, respectively. The decrease in cash used in financing activities was primarily driven by a $5.0 million increase in proceeds from exercise of stock options and $1.8 million decrease in taxes paid related to settlement of restricted stock awards, offset by $4.8 million increase in taxes paid for employee tax withholding related to restricted stock units.
Krystal Biotech Inc. published this content on May 04, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 04, 2026 at 11:07 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]