Krystal Biotech Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 4, 2025

Key Takeaways

  • Positive Sentiment: Visovac U.S. Q2 net revenue reached $96 million, driving total launch revenue to over $525 million and delivering $1.29 EPS, marking two years of profitability.
  • Neutral Sentiment: U.S. Visovac revenues are expected to dip in Q3 due to seasonal patient pauses before rebounding in Q4 as sales hires complete training and patient restarts accelerate.
  • Positive Sentiment: European launches of VYJUVEC in Germany and France are on track this quarter, and Japan’s broad approval sets the stage for meaningful revenue contributions by year-end.
  • Positive Sentiment: The pipeline is advancing with upcoming clinical readouts, including a 36% ORR for inhaled KB707 in NSCLC, AATD repeat-dosing cohorts, CF molecular data, ophthalmology Phase III and Phase I/II starts, and an aesthetic Phase II study.
  • Positive Sentiment: Cash and investments totaled over $820 million at quarter-end, providing a strong financial foundation for global launches and R&D milestones into 2026.
AI Generated. May Contain Errors.
Earnings Conference Call
Krystal Biotech Q2 2025
00:00 / 00:00

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Operator

Thank you for standing by, and welcome to the Crystal Biotech Q2 twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentations, 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 Pequette, Vice President of Corporate Development. Please begin.

Stéphane Paquette
Stéphane Paquette
VP - Corporate Development at Krystal Biotech

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the 2025. The press release is available on our website at www.crystalbio.com. We also filed our earnings eight ks and 10 Q with the SEC earlier today. Joining me today will be Krishnan, Chairman and Chief Executive Officer Suma Krishnan, President of Research and Development Yaron Gupta, Senior Vice President and General Manager for Europe and Kate Romano, Chief Accounting Officer.

Stéphane Paquette
Stéphane Paquette
VP - Corporate Development at Krystal Biotech

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.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Stephane, thank you. Good morning, everyone, and welcome to the Crystal Learning's call. We'd like to touch on four topics in this call. First, the Visovac launch, which is progressing well, and the upcoming launches in Europe and Japan are expected to significantly add to what is already a top tier trajectory in The U. S.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Second, we're expecting several clinical readouts in the upcoming months for diseases in lung and the eye, which could propel Crystal into its next stage of growth and dramatically increase our ability to deliver benefits to patients. We'll talk briefly on our recent KB304 readout, which we believe validates the platform and the opportunity that exists for our subsidiary, Zhijun, in aesthetics. Finally, I'm proud to report that we've been able to achieve these milestones while maintaining operational discipline. We were again profitable this quarter at $1.29 per share fully diluted, marking now two years of consistently positive EPS for the company. Moving on to our 2Q results.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Q2 net revenue was $96,000,000 This brings total net Visovac revenue since launch to over $525,000,000 The return to growth in Q2 was due to patients who paused earlier getting back on drug, and the additional impact of our ongoing sales team expansion. It's important to note that Salesforce hiring is still underway. We expect the full impact of our new hires will only be felt over the next few quarters as hiring is completed, reps are trained to be fully operational in the field. Gross margins and GTN were largely consistent with prior quarters. I'm also happy to report that we saw an increase of reimbursement approvals over the course of 2Q, and we have secured over five seventy five reimbursement approvals for patients in The U.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

S. Compliance while on drug as of the end of the second quarter came in at eighty two percent. However, we do expect compliance to trend down in the coming quarters, as severe patients who started early are now achieving durable wound closure on BIJUVAC, and as the percentage of moderate and mild patients increase in the overall patient mix. But as we discussed last quarter, complete wound closure and treatment pauses are fantastic outcomes for patients, and exactly what we set out to do when founding this company. It's also been rewarding to see patients grow increasingly comfortable with the pausing and restarting dynamic, and gaining confidence in the fact that when wounds do open, they can easily access Spyzovac, and again achieve durable wound closure.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

These treatment successes, together with the tireless commitment of our CrystalConnect patient support team, are what allow us to build strong, trust based patient relationships for the long term. They also help activate new patients, and together with our recent publications and digital tools, they raise awareness of what is achievable with regular Visovac therapy. This also means that we remain in a period with inherent unpredictability quarter to quarter. Consistent with Vizurex mechanism of action and skin turnover, we are seeing a growing number of patient restarts, but the exact cadence at the individual patient level is highly variable and still difficult to predict. Based on the summer pausing trends we're seeing over the first few weeks of 3Q, our current expectation is that 3Q revenues will come in below what we're reporting here today, with a return to growth in 4Q, driven by a growing patient funnel, restarts, and sales expansion efforts.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

However, as usage patterns stabilize in The U. S, we expect this waviness to subside with transformative patient outcomes, driving long term sustainable growth, penetration of the identified patient pool, and bringing new patients to therapy. The growth trajectory for Vizureka will also benefit from global expansion and our launch overseas. Laurent Gu, our GM for Europe, will touch on the European launch dynamics and near term activities in a moment. But before getting into the European opportunity, I want to highlight another fantastic milestone for our team.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Late last month, we announced the approval of VYZUVAC by Japan's Ministry of Health, Labor, and Welfare. We received a broad label from the Japanese authorities similar to the one approved in Europe earlier this year, that includes all DEP patients from birth, with the option of home, self or family administration. The label also provides clinicians flexibility with how to diagnose DEP patients, and does not require a genetic test facilitating onboarding and initiation of treatment. DePan is another attractive market into which Crystal can launch directly with hundreds of DEP patients in urgent need of a safe and effective therapy. We already have our core team in place to secure a pricing decision in the upcoming months and launch before year end.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Thanks to the recently completed and published Japanese open label extension data, key opinion leaders in Japan already have initial experience with Visovac, which is a tailwind for our launch. I'll now turn it to Laurent to share more detail on our European launch plans and latest timelines. Laurent?

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

Thank you, Krish. I'm pleased to present an update on the upcoming European launch of VYJUVEC. After receiving approval earlier this year, we are on track for our European launch this quarter. In the 2025, we will bring this important therapy to patients in Germany and then in France. Based on our latest analysis, the identified pool of patients in each country exceeds 500 patients.

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

These patients are supported by four expert centers in both Germany and France, but also 20 to 30 additional sites, usually university hospitals. Please note that the launch in France is subject to the continuity of the Accepraecos or early access program. We are working closely with local authorities to ensure that eligible patients can benefit from this pathway. We have already established dedicated commercial teams in both countries with roughly eight team members on the ground in each market, supported by an additional eight colleagues at our European headquarter and leveraging US back office resources. In Germany, we anticipate for our first commercial patient to be treated in August, making an important milestone in our efforts to bring meaningful solutions to the dead patients and the healthcare professionals.

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

To facilitate rapid and effective access, we have established comprehensive patient service and education programs. These initiatives are designed to support home administration of the therapy, as well as administration by caregivers, ensuring that patient can benefit from our treatment regardless of their healthcare settings. These different possibilities are allowed by the very strong label approved by EMA. Since approval, the team has worked on identifying the key centers and preparing them to enroll patients. Our focus is to ensure successful launch, driving uptake at key centers and ensuring an efficient patient experience.

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

This launch is a significant step for Cristal, reflecting both our commitment to rare disease patients and strategic execution of our international commercial plans. I will now hand the call back over to Krish.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Thank you, Lorong. With VYGEVEC delivering transformational clinical outcome for patients, we remain as confident as ever in the blockbuster trajectory for our first approved genetic medicine. In The U. S, we're already starting to see the benefits of our sales force expansion, which we expect to drive significant penetration of the remaining identified patient pool. In Europe, with a broad label, flexible dosing options, and a large identified patient pool, we see a path for steady, multiyear growth as we work with key centers and launch sequentially in major markets.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

The broad label in Japan adds another high value launch market, which should start adding meaningfully to our top line in 2026. And increasingly, we're pursuing meaningful opportunities in rest of the world markets, accessible through distributors and partners. Altogether, these put Visovac on an exciting trajectory and provide a strong financial foundation and significant optionality for the company. I'll now hand it off to Suma to touch on recent pipeline development, Seth Krystal.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

Thank you, Krish. Our R and D team has had another productive quarter as we work diligently to build a true portfolio of high value genetic medicines. Today, I will touch on key accomplishments, including clinical data updates for oncology and aesthetic programs, progression of KB408 into repeat dosing for AATD, as well as two new study starts that set us up for multiple near term readouts in both the lung and eyes. I would like to start with a few highlights on inhaled KB707. Earlier this summer at ASCO, we shared an update on our phase onetwo study, KINITE-one, evaluating inhaled KV-seven zero seven for solid tumors of the lung.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

This update included safety data from 39 subjects treated with inhaled KB707 as monotherapy, as well as an efficacy data update for the 11 KB707 treated patients with late line NSCLC. With an extended follow-up and new data cut of 04/15/2025, we saw deepening of the responses in the NSCLC cohort with an improved objective response rate of thirty six percent. Median duration of response and progression free survival were not yet reached. Just as importantly, inhaled KB707 continued to be safe and generally well tolerated and amenable to administration in outpatient settings. We are increasingly excited about the profile of inhaled KB707 monotherapy in the clinic.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

In addition, combination therapy cohorts have been opened in kyanite one and enrollment is ongoing. We have also made exciting progress with KB408 for the treatment of AATD lung disease. We recently completed dosing and bronchoscopy of a third AATD patient dosed with KB408 in cohort two. As shown on the slide, we again saw robust airway transduction resulting in functional AAT expression as demonstrated by neutrophil elastase binding in the ELF. Please note that this patient was on background IV augmentation, and yet we still detected a reduction of free neutrophil elastase following KB408 dosing.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

Across all three bronchoscopy patients, we have seen transaction rates in the thirty percent to forty percent range after a single dose. The safety profile of KB408 continues to be attractive across all five patients dosed in cohort two. Based on these data, we recently amended the serpentine one protocol and started dosing in a newly opened cohort 2B to investigate repeat dosing in cohort two dose levels. Our study objectives with this new cohort are to evaluate safety and tolerability of repeat dosing, as well as assess the efficacy of repeat dosing and explore optimal dosing timing based on durability of effect. Design details are summarized on the slide.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

Patients will undergo a baseline bronchoscopy, receive four weekly doses of KB408, and then receive a bronchoscopy either one or two weeks after the final dose to assess expression and durability. We expect the data generated from Cohort 2B to dictate our approach with respect to the advanced clinical development of KB408, including potential accelerated approval approaches. We are also making steady progress on KB407 with TDN sanctioning and the additional of new network sites providing expanded access to CF patients, including those that are currently ineligible for modulators. We now have our fourth patient enrolled in cohort three and expect to soon have five TDN sites up and running to support completion of both cohort three as well as subsequent repeat dosing studies. Based on the latest patient screening and enrollment timelines, we expect to be able to share molecular data later this year.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

Finally, we have our recent clinical data in aesthetics where we reported positive results from our two:one randomized, double blind, and placebo controlled study evaluating our second aesthetic candidate, KB304. KB304 is a combination aesthetic therapy encoding both collagen III and elastin to drive aesthetic improvements in the skin. As the June team shared a few weeks ago, investigators and subjects alike reported meaningful aesthetic improvements across multiple attributes, including wrinkles and elasticity, with clear and statistical significant advantages over placebo. The images shown on right highlight the improvement achieved by some of our KB304 treated subjects. The safety profile of KD-three zero four was also in line with expectations.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

All adverse events were mild to moderate and transient. Based on the broad aesthetic improvement observed with KB304 in PERL two, we have decided to progress KB304 into Phase II study for the treatment of wrinkles of the decollete. In support of this goal, we also recently completed development and validation of a Declitae specific photonumeric scale. We intend to align on the phase two protocol later this year, enabling a potential Phase two study to start in the 2026. Finally, I would like to add that we started two ophthalmology clinical trials in the last two months.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

Iolite, a phase three study evaluating KB803 for the treatment and prevention of corneal abrasions in deaf patients. And EMERALD I, a phase onetwo study evaluating KB801 for the treatment of neurotrophic keratitis. Both of these programs leverage the unique attributes of our platform and showcase what is achievable with our HSV-one based platform in the front of the eye. We are looking forward to sharing data progress updates on those programs as they progress. Altogether, this steady execution sets up for many near term readouts in CF, AATV, NK, and DEB that we expect will validate the breadth of opportunity that exists with our HSV OnePlace platform. With that, I would like to turn the call to Kate.

Kathryn Romano
Kathryn Romano
EVP & Chief Accounting Officer at Krystal Biotech

Thank you, Suma, and good morning, everyone. I'd like to provide some highlights from our second quarter financial results that were reported in our press release and filing this morning. As Krish mentioned earlier, our net product revenue for Visovac was $96,000,000 for the 2025. This marked continued growth as compared to the 2024, as well as 9% growth over the recent 2025.

Kathryn Romano
Kathryn Romano
EVP & Chief Accounting Officer at Krystal Biotech

Gross to net revenues remained consistent with prior quarters. Cost of goods sold was $7,200,000 compared to $6,000,000 in the prior year's second quarter, and gross margin remained relatively consistent at 93% in 2Q 'twenty five. Research and development expense was $14,400,000 compared to $15,600,000 in the prior year. The decrease quarter over quarter is primarily due to the timing of our various research and development manufacturing runs, offset slightly by increased clinical development costs across many of our product candidates. General and administrative expenses were $35,200,000 compared to $27,600,000 in the prior year's second quarter, primarily due to increased professional services fees, including marketing services, consulting, and legal.

Kathryn Romano
Kathryn Romano
EVP & Chief Accounting Officer at Krystal Biotech

We also saw increased personnel related costs compared to last year, due mainly to growth in our headcount to support global commercialization, and this was inclusive of increased stock based compensation costs from new grants. Operating expenses for the quarter included non cash stock based compensation of $14,100,000 as compared to $13,200,000 in the 2024. You'll note that our non GAAP R and D and SG and A guidance remains unchanged on Slide 14. Net income for the quarter was $38,300,000 which represented $1.33 per basic and $1.29 per diluted share. This is compared to $15,600,000 in the prior year's second quarter at $0.54 per basic and $0.53 per diluted share.

Kathryn Romano
Kathryn Romano
EVP & Chief Accounting Officer at Krystal Biotech

Finally, I am happy to comment on the sustained strength of our balance sheet. We closed the quarter with over $820,000,000 in combined cash and investments, with continued growth in our net cash provided by operating activities over previous quarters. We believe this puts us in a great position ahead of our upcoming Europe and Japan launches, as well as for the significant number of research and development objectives we have set forth for the remainder of 2025 and into 2026. With that, I'll now turn the call back over to Krish.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Thanks, Kate. With clear growth drivers for Vizovec in The U. S. And abroad, plus the additional upside of a potential KB803 launch for corneal abrasions over the next few years, we're excited about the path ahead for Visovac and for Crystal. It's important to understand that this upward trajectory will not necessarily be linear.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

But looking beyond the short term, this is a multiyear growth story that has only just begun. At a rich and a growing pipeline of clinical stage programs targeting clear unmet needs, with step jump implications for Cristal, we see opportunities to build significant shareholder value in the years ahead. In the months ahead, lung readouts in CF and AATD, together with ophthalmology readouts in NK and DEB, will make clear the potential of our platform across multiple tissues and open up blockbuster product opportunities. Finally, our inhaled seven zero seven program for NSCLC continues to progress well, and stay tuned for readouts in 2026. Thanks for listening, and I'd like to now open the call for Q and A.

Operator

Certainly. At this time, we will be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions.

Operator

Your first question for today is from Roger Song with Jefferies.

Fiona Shang
Fiona Shang
Equity Research Associate at Jefferies

Hi. This is Fiona on for Roger. Congrats on the quarter, and thanks for taking our questions. My first question is just to clarify, the revenue growth for this Q is not impacted by the Salesforce expansion. And if you think the volatility for the next quarters will be offset by the Salesforce expansion kicking in and the EO launch. Thank you.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

No. As I alluded to in my script, part of the increase in Q2 was driven by people patients who are pausing, getting back on drug. And to start, you know, and we have been hiring reps since the tail end of Q1, and so there was an incremental effect. I think the point I was trying to make is the full impact of all the hires will be felt over the next couple quarters as they come on board, get trained, and are fully functional in the field.

Fiona Shang
Fiona Shang
Equity Research Associate at Jefferies

Yeah, that's very helpful. Thank you.

Operator

Your next question is from Gavin Clark Garner with Evercore ISI.

Gavin Clark-Gartner
MD - Biotechnology Equity Research at Evercore ISI

Hey, guys. Thanks for taking the questions. Could you just give us a little more quantitative commentary on the magnitude of how much slower the first few weeks of the quarter have been versus Q1? Just any rough way to think about that.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

No, we're not going to get to that level of detail, Gavin. And it is early in the quarter. I was just trying to set expectations that in the summer, people take a vacation, and the summer holidays always has an impact on pauses. But beyond that, it's tough for me to quantify because it's such a variable thing. The quarter is just maybe one third of its way in.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

But I just wanted to point out that summer is usually filled with more pauses than usual.

Gavin Clark-Gartner
MD - Biotechnology Equity Research at Evercore ISI

Okay. Great. Just a quick follow-up. For U. S.

Gavin Clark-Gartner
MD - Biotechnology Equity Research at Evercore ISI

Vizjubeq, what's the mix of RDEB versus DDEB patients either, in reimbursement approvals or in start forms that are coming onto therapy? Thanks.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Doctor. That's a good question. I believe as of the last quarter, that mix is more like sixty four-thirty six in that range. But I asked Stephane, Stephane, if you have a clearer number, can you jump in?

Stéphane Paquette
Stéphane Paquette
VP - Corporate Development at Krystal Biotech

Yeah, it's basically in line. We didn't see really much movement at all in the breakdowns for reimbursement approvals, either RDIB, DDIB, age, even insurance plan. So, it's one of the reasons we didn't really get into it this time around, but they're largely stable. Maybe shifting, you know, always, shifting very gradually with DDIB. Okay, great. Thanks.

Operator

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

Joshua Fleishman
Joshua Fleishman
Biotech Equity Research Associate at Cowen

Hi, team. This is Joshua Fleishman on the line for Ratu. Congrats on the quarter, and thanks for taking our question. How do you expect for drug holidays to factor into the original guidance of seven twenty U. S.

Joshua Fleishman
Joshua Fleishman
Biotech Equity Research Associate at Cowen

Patients initiating VYJOVAC? And on Europe, how should we think about pricing, and what's important to the country's health technology assessments? Thank you.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

With respect to seven twenty, Joshua, as we mentioned last quarter, we're on track, but we're maybe a quarter or two behind. Sometime early next year is when we think we'll get to that number. Our original ambitious goal was to get there by September, October this year. And so I think we're still very pleased with the track we're on, and we hope to get there pretty quickly. In terms of EU pricing, I'm going to let Laurent speak to it, and I'll come back to the last question when he's done.

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

Thank you, Krish. Yep. Thank you, Krish. Reimbursement application processes are proceeding as planned with the HTA bodies in the main countries in Europe. As you know, in Germany, we benefit from free pricing, during the first twelve months, post approval and then negotiation with GKV are about to start now.

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

It's a bit premature to provide any feedback given that we have not received any feedback from the authorities with regard to our HTA dossier. But the early engagement we had with the key authorities throughout Europe were very productive. And the unmet medical need of in DB is well recognized by the payers and the potential benefit transformational benefit of VYJUVEC seems to be understood.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Krish? Yeah. Thanks a lot. And, Joshua, your last question was on something around technology used in Salesforce.

Gavin Clark-Gartner
MD - Biotechnology Equity Research at Evercore ISI

It was on what's important to the country's health technology assessments.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Gotcha. Gotcha. So it's okay. Great. Does that answer your question? Any follow-up?

Gavin Clark-Gartner
MD - Biotechnology Equity Research at Evercore ISI

Nope. That's great. Thank you so much.

Operator

Your next question is from Sami Corwin with William Blair.

Sami Corwin
Research Analyst at William Blair

Hey there, good morning. Congrats on the quarter and thanks for taking our questions. I have another couple of questions about the upcoming European launches. I know previously you mentioned that there might be a dynamic of onboarding patients based on their need to get treated in a physician office first. So, I wonder if you could comment on that a little bit.

Sami Corwin
Research Analyst at William Blair

And then do you have any goal in terms of the reimbursement ramp like the seven twenty number that was initially applied for The U. S. Launch? Thank you.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Laurent?

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

Yes, Krish. Thanks for the question. I mean, the requirement for an appointment at a specialty center is quite customary in practice in Europe to access a prescription in general and even more for specialty drugs. So it's not something unusual that you have to go through an appointment at the center. I mean, this is the reason why the team has dedicated the past three months in notifying the centers, understanding the potential bottlenecks and ensuring their readiness to enroll patients, either through education, advanced scheduling, or addressing any other needs on a case by case basis.

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

So these are the main guidelines. Then with regard to the number of patients covered in Europe when a country grants reimbursement, it will be for the entire population that will be designated in the reimbursement approval. So there is no case by case request once the drug is approved by the payer bodies, the national insurance in most cases.

Sami Corwin
Research Analyst at William Blair

Okay, if I could rephrase those questions slightly then. So, is it possible for patients to do that initial appointment in a group or does it need to occur on a patient by patient basis? And then I guess instead of a patient ramp, do you have a goal in terms of onboarding patients to drug over a particular period of time?

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

So, I don't think we have communicated any guidance for patient on drug. This will be a stepwise approach and that will depend on when the countries will be reimbursing the product. So, we have the same goal as The U. S, which is to reach 60% of the patient pool, the eligible patient pool within the first two to three years. But we have not communicated more detailed numbers.

Sami Corwin
Research Analyst at William Blair

Great. Thanks.

Operator

Your next question for today is from Alex Stranhan with Bank of America.

Analyst

Hey, guys. This is Matthew on for Alex. Appreciate you taking our questions. Maybe on the pipeline, noticed that the timeline for CF data was mid twenty twenty five now by year end. Anything to read into this, or is this just, you know, enrollment timelines?

Analyst

And then maybe you can remind us of sort of the number type of patients we expect in that first readout.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

Yeah, I can take this question. As you may be aware that we did announce that the TDN, you know, we got endorsement from the TDN, so that opened up all the TDN sites. So we have been actively working. We have at the moment six TDN sites that we are in contract and budget phase. So unfortunately, with these academic sites, just the whole process and paperwork took more time than we anticipated.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

Our team really pushed. But we're getting close. So we believe once we can get these sites up and running, which we are pretty close, we should be able to enroll the patients. So that pushed out. But hopefully we can enroll, you know, multiple patients across these sites once they are up and operational.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

And with respect to the data announcement, look, you know cohort three is essentially three patients on modulator and three null. And what we're looking to show is molecular data on three null mutation patients in Zika.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

And again, keep in mind, null patients are harder to get by, but the TDN sites do that have them. So we have patients, but we also need patients that are willing to bronch, which is not easy. But we are there. We're getting there.

Analyst

Gotcha. Thank you.

Operator

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

Morgan Lamberti
Morgan Lamberti
Equity Research Associate at Goldman Sachs

Hi. Thank you for taking our question. This is Morgan on for Andrea Newkirk. Following up on one of the previous questions, do you anticipate a similar dynamic will be required in Japan such that patients will need to be seen by a healthcare practitioner before initiating VYJUVEC? And then also, can you share some details on the fifth patient dosed in cohort two for AATV in terms of the percent of cells that were transduced and the level of AAT expression and distribution of phoroid across the lungs? Thank you so much.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

On the Japan question, yeah, it's very similar to Europe. It's the way all drugs, like the first visit is in a physician office. So no change there. In terms of the AAT, I'd ask somebody to go back to that slide. I don't know, Stephane, if you can pull up that slide on AAT.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Just give us a minute. Yeah. And as you get we're trying.

Stéphane Paquette
Stéphane Paquette
VP - Corporate Development at Krystal Biotech

Should be up, of course, you can

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

get some Yeah, so basically all three patients we saw expression in the biopsy samples. We could clearly show expression from baseline increase. Obviously, the lavage, one of the patients we had difficulty recovering the right amount of lavage because this whole procedure is pretty tricky. And it's, you know, it's because of some of the issues with recovery of the we were not able to get the levels. But in two patients we were able to show both expression of, in the lavage we were able to measure AAT and so neutrophil elastase and binding and reduction of that neutrophil elastase.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

But in all of the patients in their biopsies, we did see expression of AAT above the levels of baseline.

Morgan Lamberti
Morgan Lamberti
Equity Research Associate at Goldman Sachs

Okay, great. Thank you.

Operator

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

Joseph Pantginis
MD & Senior Healthcare Analyst at H.C. Wainwright & Co.

Hi everybody, good morning. Thanks for taking the questions. Two topics if you don't mind. So first on VYJUVEC. Chris, you talked about one topic.

Joseph Pantginis
MD & Senior Healthcare Analyst at H.C. Wainwright & Co.

I know it might be too early and also might include a lot of patient variability, so I don't know if it really could be answered. How would you view, based on the pausing and restarting and chronic wounds being closed versus mild to moderate, how would you define, if you can, steady state for a patient as they're on VYGEVEC over the long term with regard to starts and restarts and wound reopening?

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

You know, we've said consistently, even from at the prelaunch stage, that steady state implies that the entire patient base, on average, consumes about 26 vials a year. And we're not there yet. And we believe we'll get to steady state when the ratio of RDEB to DDEB patients is about fifty percent each. So if you have an even split of recessive and dominant, and they're in a, you know, they've been on drug a while, we expect the average consumption across the patient base to be 26 vials a year. So that it. Is how we define steady state.

Joseph Pantginis
MD & Senior Healthcare Analyst at H.C. Wainwright & Co.

And Got it.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

And if you look at the compliance, if you look at the RDEV, DW ratio, you look at the vials consumed, we're definitely months away from getting to that point.

Joseph Pantginis
MD & Senior Healthcare Analyst at H.C. Wainwright & Co.

Okay. That's helpful. Thank you. And then just want to switch gears to Xun right now. I'll start with the phase two program.

Joseph Pantginis
MD & Senior Healthcare Analyst at H.C. Wainwright & Co.

The prepared comments with regard to Declutet Phase II, you talked about a photonumeric scale. I guess I wanted to discuss the novelty of that and what are the key aspects of the regulatory discussions around this endpoint?

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

I mean, obviously, as you know, with three zero four, it's a combination of collagen III and elastin. I mean, with adding elastin, and we clearly know that we can express elastin from animal models with our vector, the definition of elastin obviously is not going to be slightly different. You're going to see improvement in texture of the skin, skin quality, etcetera, etcetera. And that's something that we captured in our 03/2004 study. If you look at our patients' feedback, I mean, or their rating, that's some of the consistent feedback that we got from consistently all the patients that were on the drug, that they felt their skin was smoother, the texture felt better.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

So obviously some of that cannot be captured just by photonumeric scale. So we do want to talk to the agency about the novel mechanism. Obviously with this division, We know that we can express collagen three, we'll express elastin. And we need to, you know, we're going to propose some sort of, you know, quality evaluation for the patient reported outcome of skin quality and skin texture. So this is something we're going to sit down with the agency and have that discussion.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

We have developed a photonumeric scale at the moment for the Declutet. So we have a scale that's developed and validated. So we want to do some sort of a combination and then just have that discussion with the agency.

Joseph Pantginis
MD & Senior Healthcare Analyst at H.C. Wainwright & Co.

Got it. And then just quickly on Jun again. I know, Chris, you've talked about this in the past with regard to potential options of how Xun corporate aspect might play out with regard to say, keeping it a subsidiary, part of Crystal, spinning out or what have you. Do you have any potential thoughts on when we might see visibility on potential outcomes there?

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Yeah, I think, following the announcement on 03/2004, and Suma's starting to have conversations with the FDA, from a development perspective, we expect to start phase two in the upcoming months. And meanwhile, Nishant, the CEO and the CFO of Zhijn, are actively pursuing or actively diligently working towards getting Zhijn financed and spun out. And the broad timing on that is roughly before the end of phase two. So our expectation is by the 2026, we're expecting Xen to be a separate subsidiary of KRYST.

Joseph Pantginis
MD & Senior Healthcare Analyst at H.C. Wainwright & Co.

Great. Appreciate all the answers.

Operator

Your next question is from Josh Schimmer with Cantor.

Josh Schimmer
Managing Director at Cantor Fitzgerald

Great. Thanks for taking the questions. Just two quick ones. Chris, can you clarify that when you suggest a decline in VYGEVEC revenue quarter over quarter in the third quarter, is that in The U. S.

Josh Schimmer
Managing Director at Cantor Fitzgerald

Only? Or does that encompass worldwide because you do have the offsetting launch in Europe? And then second question, your R and D expense allocation, at least in the 10 Q, seems very heavily weighted to the oncology program specifically. Just curious as to why that's the case and what trends you expect to see going forward across the other programs? Thank you.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Hey, on the decline, that was on The U. S. Commentary, it was completely 100% U. S.-specific commentary, taking into account, like we saw last year, that in the summer months, families go on vacation and there's more disruptions and pauses than usual. With respect to the R and D breakdown on cost, cancer trials are expensive. I'll have

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

I can surely chime in. Obviously, you guys saw the monotherapy data. We are now in the process. The study has already started between the combination. Keytruda is not cheap and it's expensive.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

And also given the agency's recent and other stuff, We believe we have very strong data, so we want to position ourselves to meet with the agency and start talking about a controlled study. So, we and I mean, again, this is something we'll have based on our discussion with the agency, but we anticipated that into the cost. What it would take if you would, you know, go into a full blown study. Thank you.

Operator

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

Yigal Nochomovitz
Yigal Nochomovitz
Director at Citigroup

Krish and team. Thanks. Two questions. Could you talk about the you've talked a lot about the seven twenty, the 60%, as you pointed out. I'm curious about the other 40%, the four twenty to get to the full 1,200.

Yigal Nochomovitz
Yigal Nochomovitz
Director at Citigroup

What have you said, or what can you say today about the timelines to capture that aspect of The US market?

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Look, the seven twenty, it's a number. Like if you look at the past history of drugs that have been launched, the best of the launches have gotten to about 60% market share in two years. So this is more of an academic benchmark than anything related to, Oh, it has nothing to do with, we're going to stop at seven twenty. We fully believe that the entire 1,200 patient base is something that we need to target. But we had set a goal in terms of the rate of launch, trying to get to like a 60% market share, and compete with the best of prior launches out there.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

The only point I'll make is as you get past 700s, the profile of patients that we get will be much more moderate to mild, much more out in the community, probably higher on the age scale. And so, but it does not mean every wound is important for Vicervix to be treated, and by no means are we trying to convey that once we get to seven twenty, we're on some different mode of pathway. We'll continue with the same level of diligence and effort to get to the remaining 1,200. Once we get to that point, we'll definitely start thinking about how to go after the gap between the 1,200 and the 3,000, which is a much more undiagnosed, difficult to find target population.

Yigal Nochomovitz
Yigal Nochomovitz
Director at Citigroup

Okay, that's helpful. And then I think you made a comment with respect to France that something about the continuity of the EAP. Can you just expand on that? Are there specific risks to continuity? Or why wouldn't there be continuity of the EAP that would impact the transition to the commercial?

Yigal Nochomovitz
Yigal Nochomovitz
Director at Citigroup

Can you just walk through that in more detail please?

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Yes, Laurent?

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

Yes. I mean this is a more formal aspect to it. We had the Axitricos pre marketing authorization in France and now we are waiting for the Axitricos post authorization. It does happen, even though it's very rare, but it does happen that some companies don't. So, we respect the process that we have engaged with the authorities.

Laurent Goux
Laurent Goux
SVP & General Manager - Europe at Krystal Biotech

But we are confident that, yeah, patients will be able to have access to the drug under the accepted consent.

Yigal Nochomovitz
Yigal Nochomovitz
Director at Citigroup

Okay, thank you.

Operator

Your next question is from Debjit Chattopadhyay with Guggenheim Securities.

Debjit Chattopadhyay
Senior Managing Director at Guggenheim Partners

Hey. Good morning, and thank you for taking my questions. I have got a couple of clarifications. So on the 82% compliance, could you sort of clarify what percentage of patients are currently using four months of IO versus three, two, one, etc? And how are you, how have recessive patients evolved versus the dominant patients? And I have a follow-up.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Yeah, Debjit, I was following you along. Know, can you just repeat the first part of your question?

Debjit Chattopadhyay
Senior Managing Director at Guggenheim Partners

So of the eighty two percent compliance rate, percentage of these patients are on four vials versus three, two, one? We're just trying to get a better feel for how to calculate that eighty two percent, or how to calculate in our models rather.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Look, the way we define compliance has always been consistent and the same since the time of the launch. I mean, the easiest way to think about compliance is if you are on drug for ten weeks and you miss a week, you're at 90% compliance. That said, if somebody paused for an extended period and got back on drug, they kind of hurt compliance. And if you never came back on drug, you kind of help compliance. So that's why it's compliance while you're on drug, as opposed to if you're not on drug.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

But that said, Debjit, irrespective of how one calculates compliance, whether on a quarterly basis or a six month basis or an annual basis, we're talking a range somewhere between 7684%. Like it's not that far off with respect to and there could be many ways to calculate, and we try not to get into when it's not that material to the overall situation.

Debjit Chattopadhyay
Senior Managing Director at Guggenheim Partners

Appreciate the clarification. Then just a follow-up then on the utilization that you're seeing in the recessive patients versus the dominance. I know you mentioned, you know, once you get to fiftyfifty, roughly 26 vials per patient. But right now, what are you seeing in the recessive versus dominance?

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

Doctor. The recessive are definitely much more consistent and have been since the beginning of the launch. I mean, we even look at what is the compliance of the people who came on the drug in 2023. How are they doing today? All the pauses and stops and starts are heavily impacted by moderate to mild patients, typically adult moderate to mild patients is who make this pause and start difficult to figure out.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

The RDEB is extremely consistent on track for the most part. Some of them now are approaching a point where the wounds are fully healed. And so there is an opportunity for them to take a break and get back on drug. But the entire conversation around stops and starts is on the moderate to Malsa.

Debjit Chattopadhyay
Senior Managing Director at Guggenheim Partners

Awesome. And then one last one. So based on the single arm data, what kind of TPS scores are you enrolling in the combo program in non small cell lung cancer? Thanks so much.

Krish Krishnan
Krish Krishnan
Chairman & CEO at Krystal Biotech

EPS scores.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

Okay. I mean, we are looking at, obviously, we are agnostic, right? It doesn't matter what kind of PD-one expression or PD L1 expression, right? I mean, we are looking for frontline failed patients. So, either they have failed PD-one or PD-one plus platinum therapy.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

So, once they fail, we know re challenging with PD-one, the number of overall response goes down from thirty to thirty five to ten percent. So we are agnostic. We have seen, we looked at our data with monotherapy with patients that have failed PD-one or with their mutation specific. We still seem to have an impact in the work. We see stable disease, or in some cases we also see possible responses.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

So we feel we are pretty much agnostic. So we are going to stratify our enrollment. Obviously, we look at PD-one high patients and PD-one zero. So we will in our recruitment study and our analysis, we will try to stratify and collect that data and see the impact of whether when you use in combination with pembro, are we seeing better impact with higher PD-one expression versus negative PD-one expression?

Debjit Chattopadhyay
Senior Managing Director at Guggenheim Partners

Thank you. Good luck.

Suma Krishnan
Suma Krishnan
President - R&D at Krystal Biotech

Thank you.

Operator

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.

Executives
Analysts
    • Fiona Shang
      Equity Research Associate at Jefferies
    • Gavin Clark-Gartner
      MD - Biotechnology Equity Research at Evercore ISI
    • Joshua Fleishman
      Biotech Equity Research Associate at Cowen
    • Sami Corwin
      Research Analyst at William Blair
    • Analyst
    • Morgan Lamberti
      Equity Research Associate at Goldman Sachs
    • Joseph Pantginis
      MD & Senior Healthcare Analyst at H.C. Wainwright & Co.
    • Josh Schimmer
      Managing Director at Cantor Fitzgerald
    • Yigal Nochomovitz
      Director at Citigroup
    • Debjit Chattopadhyay
      Senior Managing Director at Guggenheim Partners
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