Krystal Biotech Q3 2026 Earnings Call Transcript

Krystal Biotech (NASDAQ:KRYS) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Krystal Biotech reported Q3 2026 Vyjuvek revenue of $127.3 million, a 30% increase from the previous year, with U.S. net revenue of $95.3 million.

The company ended September with $1.2 billion in cash and investments and announced a $400 million share repurchase program, reflecting confidence in its long-term prospects.

The company reported significant international expansion with Vyjuvek, particularly in Germany, France, and Japan, with pricing negotiations in key European markets largely concluded.

Krystal Biotech reported encouraging clinical progress, including positive results from the Gorlin syndrome study, and ongoing development in Hailey-Hailey disease, cystic fibrosis, and other pipeline projects.

The company revised full-year non-GAAP R&D and SG&A guidance to $155-$165 million from prior guidance of $175-$195 million, with a focus on disciplined capital allocation and global commercial strategy.

Full Transcript

OPERATOR

Good morning and thank you for standing by and welcome to Krystal Biotech’s third quarter 2026 earnings conference call. At this time all participants are on a listen-only mode. After the speakers’ presentations there will be a question-and-answer session. During the question-and-answer session there will be a limit of two questions per participant. As a reminder, today’s conference is being recorded. I would now like to hand the conference over to your host, Stephan Paquette, Senior Vice President of Corporate Development.

Please begin.

Stephan Paquette (Senior 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 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, Laurent Goux, Executive Vice President and Head of International, Christine Wilson, Senior Vice President and Head of U.S. Commercial, and Kate Romano, Chief Accounting Officer.

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

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

Krish Krishnan (Chairman and Chief Executive Officer)

Good morning and thank you for joining us. Q3 was another strong quarter 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 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 today we have generated approximately $1.1 billion in Vyjuvek revenue since launch and that is an important milestone for a medicine 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 gaining 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 for Vyjuvek in Japan and Germany and Italy today 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 Golden syndrome clinical results that demonstrated regression 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 two 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 quarter 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.

Laurent Goux (Executive Vice President and Head of International)

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 extend 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.

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

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.

Suma Krishnan (Founder & President)

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, KB113 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 HSV-1 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 KB707, which we now refer to as KB113, in three adult patients with Gorlin syndrome. Each received six doses over 14 weeks. Investigators assessed 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 three Gorlin syndrome patients. As summarized in the table on the left, over 80% of the assessed lesions 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 tumors, had shrunk by at least 90%, indicating potential for tumor eradication with KB113 treatment. To further assess depth of response, one injected tumor from each patient was biopsied for histological assessment. In all three cases, complete clearance was confirmed with no evidence of residual tumor tissue. 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 BCC 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’ve already started engaging with FDA regarding potential clinical development pathways for 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 five patients in our repeat-dose study for Hailey-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 the NK program and the ophthalmic PBAC programs are progressing well. In the case of KB803, we enrolled three additional patients in our registrational ILI study. Two of these additional patients have been enrolled to replace two patients who withdrew for reasons unrelated to safety. The third patient, a 1-year-old child, was enrolled to generate evidence to support potential treatment of corneal aberrations in DEB patients from birth.

We now expect 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 the 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 three patients in our repeat-dose study and expect to enroll and dose three additional patients before 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 2027 registrational study start. We also continue to enroll in our KB408 repeat-dose study and are on track to report interim data next year. With 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 ONE 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.

Kate Romano (Chief Financial Officer)

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 product 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 services, and marketing costs, offset by increased payroll costs.

Operating expenses for the quarter included non-cash 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 non-recurring.

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 to $165 million from our prior guidance of $175 to $195 million. 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.

Krish Krishnan (Chairman and Chief Executive Officer)

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 medicine.

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

Thank you. At this time we’ll be conducting our question and answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality and would like to remind you to please limit yourself to two questions. Thank you. Please hold while we poll for questions. Our first question today is coming from Lachlan Hanbury Brown with William Blair.

Your line is live.

Lachlan Hanbury Brown (Analyst)

Hey guys, thanks for the question and congrats on all the progress. I guess first question maybe on KB407, you said you’re enrolling an additional three patients. Was wondering on the rationale for that. I mean, are you wanting to test a different dose? Is there something that you’ve seen in the first few patients that makes you want a larger sample here? And then on the second question, wondering about Japan. You know, 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 one-year mark, wondering how we should think about the sort of acceleration of growth in Japan moving forward.

Krish Krishnan (Chairman and Chief Executive Officer)

Thanks, Lachlan, for the question. Suma,

Suma Krishnan (Founder & President)

I can address the 803—sorry, I can address the 407 question. Sorry, 407? Yeah, I mean we have three patients right now. They’re ongoing on the repeat dosing. It has nothing to do with the dose. I mean, we’re very excited. I mean, these patients are tolerating repeat dose. That was one of the biggest questions we had to address regarding safety, and obviously we’re collecting FEV1 data. The enrollment for these additional three patients is going to happen this year. Unfortunately, it was a little slow because some of the patients that were supposed to get on the drug—remember these are patients that are null and with no other options—so it is their life events that actually pushed out. But I think we feel confident now all the patients will get on the study and we expect to have this data by middle of next year.

Laurent Goux (Executive Vice President and Head of International)

Hey, on the Japan question, I mean that’s valid. 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 faster adoption, especially in a country where people commute long distances to get to the physician’s office.

OPERATOR

Thank you. Thank you. Our next question is coming from Ritu Burel with TD Cowen. Your line is live.

Ritu Burel (Analyst at TD Cowen)

Good morning, guys. I wanted to keep my two questions to 8001 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 this study—and anything else you can give us on potential timing in 2027?

Suma Krishnan (Founder & President)

Thank you. So I’ll address this question. You know, we are expanding additional sites in the U.S. We have another 10 to 15 sites. Unfortunately, the academic sites—the big ones that have the patients—have been delayed because of contracts. And remember this is a GMO and there’s going to be home-administered, so we ran into some glitches with them. But we’re overcoming all these sites. So we expect many of these academic sites with a large number of patient pools to come online very sharply.

I think we have overcome the bump. So we continue to expand the U.S. pool, but we are going to go beyond the U.S. because there are, you know, Oxybate is available to these patients. As you know, Oxybate is being aggressively marketed in the U.S. So I think we have an opportunity in the EU where Oxybate is not available. 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 actually really improve our enrollment.

So I think with what we have seen, I’m hopeful that enrollment will pick up. But to your second point, also, we do have some screen failures that we ran into because of stringent inclusion–exclusion criteria. We want to make sure that the lesion that we are seeing is persistent. So if you see any decrease in a lesion size between our first screening and second screening, we do not enroll that patient because obviously, as you know, with this disease 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 are robust. So these two factors have delayed NK. But we feel confident that we can get back on track and get the enrollment going early next year with all these multiple sites.

OPERATOR

Thank you. Our next question is coming from Yugil Nachomovitz with Citigroup. Your line is live.

Yugil Nachomovitz (Analyst)

Yeah. Hi. Thanks very much for taking the questions. 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 to 165, 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, 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 to 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. Thank you.

Krish Krishnan (Chairman and Chief Executive Officer)

Hey, thanks for the question. I will say the following: 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 thing, such as cash buyback. And you have to—I mean, we definitely, if in any place, whether it’s NK or CF or oncology or GOLD, 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 feels 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 bio 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 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 a 400 million gives us plenty of cushion to do all of the above.

Yugil Nachomovitz (Analyst)

Okay, thank you very much.

OPERATOR

Thank you. Our next question is coming from Gavin Clark Gartner with Evercore. Your line is live.

Gavin Clark Gartner (Analyst at Evercore ISI)

Hey guys, thanks for taking the question. Can I just ask for the ocular DEB, for those patients that withdrew, what exactly was the reason? I think you mentioned the patients may have gotten sick. And then, 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? Thanks.

Suma Krishnan (Founder & President)

Yeah, I’ll address the 803 first. I mean, on the DEB, I mean these are the patients, remember? They are— they’re difficult patients. I mean, so these two just dropped out because they were traveling and they didn’t want to commit to the weekly dosing. So it was becoming—they 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 onto the study.

Some of them came in later and we had to stop at some point because there were more patients that wanted to participate. We did open up for a one-year-old child again because they were very interested—child had constant abrasion in the eye. We figured this is a younger population that we can add on the label. And with requests from the investigator and the patient’s family, we decided to enroll that patient. So it was 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 803. 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; it’s 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.

Krish Krishnan (Chairman and Chief Executive Officer)

Hey, Gavin, just a couple of things. You mentioned some kind of sickness, but that was a comment on 407, not on 803. 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.

Gavin Clark Gartner (Analyst at Evercore ISI)

All right, great. That’s super helpful. Thank you.

OPERATOR

Thank you. Our next question is coming from Lisa Walter with RBC. Your line is live.

Lisa Walter (Analyst at RBC Capital Markets)

Oh, good morning. Thanks for taking our questions. Maybe first one for me on the NK program, can you share how many patients have been enrolled so far or give us a 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. Thanks so much.

Suma Krishnan (Founder & President)

With regarding to NK, we are not telling you, 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, you know, indication, I mean, any numbers right now. But again, as I said, from what we see and the sites up and coming, we feel confident we should be able to enroll the patients we need for that trial.

On the ocular—again, as I said, we have three patients. The last patient out should be end of February. So again, this will be—once we have the last patient in, we should be shortly announcing data on 803, first half of next year.

Krish Krishnan (Chairman and Chief Executive Officer)

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

Lisa Walter (Analyst at RBC Capital Markets)

Got it. Thanks so much.

OPERATOR

Thank you. Our next question is coming from Josh Schimmer with Cantor Fitzgerald. Your line is live.

Alexa (Analyst at Cantor Fitzgerald)

Hi guys. Congrats 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 five patients that would give you confidence to move this program forward into a registrational study. Thanks.

Suma Krishnan (Founder & President)

And again, this is an indication that there are no prior studies or validated clinical endpoints. As I mentioned earlier, we did have discussions 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, our discussions with the agency. We validated the first part of the scale. The second part of the scale should complete validation. So we’re using this 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 to show improvement from baseline and after treatment at the end of three months. We’ll also be biopsying these patients at baseline and at the end of the treatment to show molecular correction and also expression of ATCP protein.

So we should have that data by end of the. 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’ve treated along with the biopsy and the scale validation improvement.

OPERATOR

Thank you. Our next question is coming from Roger Song with Jefferies. Your line is live.

Fiona (Analyst)

Hi guys, this is Fiona for Roger. Congrats on the quarter and thanks for taking our question. Just two quick ones from us. One is on the ex-U.S. revenue. Now, are 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 can still contribute to the volatility? And the second one is on ocular DEB, assuming the February completion goes smoothly and data is positive.

Anything else that is outstanding before the filing? Thank you.

Kate Romano (Chief Financial Officer)

Hey, 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, accruals will continue to be part of the story until many of those countries — at least the five, like Italy, Spain, UK — are behind us.

Spain and UK 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. But Germany was the big one with the approval, and that’s behind us at the moment.

Suma Krishnan (Founder & President)

Yeah. 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, you know, 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.

Fiona (Analyst)

Super helpful, thank you.

OPERATOR

Thank you. Our next question is coming from Alex Stranahan with Bank of America. Your line is live.

Alex Stranahan (Analyst at Bank of America)

Hey guys, thanks for taking our questions. Two from us, one on commercial and one on the pipeline. Appreciate the color on the pricing negotiations. Maybe just in France — I think the press release said no earlier than 2027 — could 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 a 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? Thank you.

Krish Krishnan (Chairman and Chief Executive Officer)

Hey, Laurent. I’ll let Laurent answer the France question.

Laurent Goux (Executive Vice President and Head of International)

Thank you, Chris. In France, the new president of the committee negotiating the price has made clear that they usually expect a 13-month negotiation timeline. And for us, these 13 months — I mean, we are six months in this negotiation framework — so we are completely within the boundaries of the negotiations. Usually the negotiations are in two 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.

Suma Krishnan (Founder & President)

I’ll take the Gorlin question. I mean, as you can see from a three-patient study where we looked at it, the data was pretty remarkable. You can see response in all three patients. I think we were also surprised to see the response. It was consistent across the three 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, Gorlin lesions do not heal on their own.

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 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 three patients.

OPERATOR

Thank you. Our next question is coming from Andrea Newkirk with Goldman Sachs. Your line is live.

Andrea Newkirk (Analyst)

Good morning. Thanks for taking the question. Suma, maybe here to follow up on NK. Can you just remind us on the inclusion criteria with respect to the expected proportion of oxybate-experienced versus naive patients? And then also, just given the availability of commercial oxybate, especially in the U.S., would you consider any protocol adjustments such as adjusted lesion windows to accelerate the accrual? Thanks so much.

Suma Krishnan (Founder & President)

I mean, if you look at our inclusion/exclusion criteria, again, there’s two screenings. The first screening we look at the lesion size and obviously it’s randomized. It is stratified for lesion surface area and 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 oxybate, we have our inclusion criteria where the oxybate patients have to wash out if they are on oxybate, or if they failed oxybate and they want to get on our study.

There is a 30-day washout for these patients before they can enroll on the study.

OPERATOR

Thank you. Sorry, ma’am, did you have another question?

Andrea Newkirk (Analyst)

Oh, no. Thank you so much. Yeah, maybe I could just ask one other question on 407. Could you just confirm if we’ll see FEV1 data in the first half of next year when that dataset comes? And what threshold of lung function improvement or disease stabilization would you view as the benchmark to support the plans for the pivotal program? Thanks again.

Suma Krishnan (Founder & President)

Yes, we will have FEV1 data in these patients. Obviously we are also collecting 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 are their lung function over the period of time, and the lung function of these patients on 407. So that’s what we are expecting to announce.

OPERATOR

Thank you. Our next question is coming from Morgan Lamberti with Goldman Sachs. Your line is live.

Morgan Lamberti (Analyst at Goldman Sachs)

Hi team, thanks for taking our question. Can you please speak to the rate of recurrence for patients taking oxybate 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 oxybate? Just how to think about that? Thank you so much.

Suma Krishnan (Founder & President)

Yeah, I mean, we do not really ask those questions. We do not look at the history — they’ve failed on oxybate or there’s recurrence. We do collect 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. It’s too early to look at that data population to make that determination. Thank you.

OPERATOR

Thank you. Our final question today is coming from Kalpit Patel with Wolfe Research. Your line is live.

Kalpit Patel (Analyst)

Yeah. Hey, good morning and thanks for taking the questions. For ocular DEB, for those two 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 essentially trying to reduce spontaneous lesion decreases. Do we know — is that criteria similar to how it was in the oxybate studies?

Thanks for taking the questions.

Suma Krishnan (Founder & President)

I’ll answer the 803 first. Yes, the two 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 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.

The question was the spontaneous lesion decrease. Did oxybate 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 oxybate — 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.

Kalpit Patel (Analyst)

Got it. Okay. Thank you very much.

OPERATOR

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.

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