KRYS

Thank you for standing by, and welcome to the Krystal Biotech first quarter 2026 conference call. At this time, all participants have been placed on 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, Stéphane Paquette, Vice President of Corporate Development. Please begin.

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the first quarter of 2026. The press release is available on our website at www.krystalbio.com. We also filed our earnings 8-K and 10-Q with the SEC earlier today. Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer, Suma Krishnan, President, Research & Development, Laurent Goux, Executive Vice President and General Manager for Europe, Christine Wilson, Senior Vice President and Head of US Commercial, and Kate Romano, Chief Accounting Officer. This conference call will, and our responses to questions may, contain forward-looking statements.

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

Good morning. It's now been 10 years since we founded Krystal, in that time, we have worked to change the lives of DEB patients globally for the better while building a durable, fully integrated company with the financial strength to continue delivering value for both patients and shareholders. We have done this with discipline. We've not accessed the capital market since 2022. Twenty twenty-two is six years from when the company was founded. We maintain a strong balance sheet. We continue to generate meaningful operating leverage. More importantly, somewhat ironically, we believe the next 12 to 24 months represent one of the most exciting periods in Krystal's history. We are positioned for two registrational readouts this year and two more next year. I sincerely want to thank our employees for the dedication and execution that have brought us to this point.

Now, turning to VYJUVEK. We delivered another quarter of global revenue growth, with net revenue of $116.4 million in the quarter. This brings cumulative net VYJUVEK revenue since launch to more than $846 million. We are particularly pleased with this performance, which represents a 9% sequential growth versus 4Q 2025, despite a higher than usual level of insurance changes, which happens, by the way, not just to us, but many biotech commercial companies in 1Q. Gross margin was 95%, and we delivered our 11th consecutive quarter of positive EPS. Outside the U.S., we're still early in the VYJUVEK launch in Europe and Japan, and I'm pleased with the progress overseas. We're also working to add two additional major European markets, Italy and Spain, later this year.

Laurent and Christine will provide more detail on VYJUVEK commercial dynamics and the opportunity ahead in a moment. FDA has now granted platform technology designations to both KB407 for CF and KB111 for Hailey-Hailey. This is in addition to receiving the same designation for our NK program, KB801, last year. These designations have a profound implication for Krystal. At the program level, these designations allow us to streamline our interactions with the agency and our development plans. We've already seen the benefits with KB801, as the designation allowed us to rapidly advance KB801 into a registrational study.

The platform implications are also powerful. These designations bring a compounding advantage. Each developmental milestone on our pipeline strengthens our collective regulatory data set and reduces development risk, cost, and time for the next program we bring to the clinic. This advantage is presently unique to Krystal and one we intend to leverage to its full potential. You'll hear more about our development plans from Suma.

I'll now turn it over to the team to provide details on the commercial launch and the clinical pipeline. Laurent?

Thank you, Krish. We are very encouraged by the progress we are seeing outside the United States, where VYJUVEK is beginning to establish itself as an important new treatment option for DEB patients in key international markets. When we think about the international launch, the story is not just one of geographic expansion. It is a story of building trust across cultures with physicians, with treatment centers, with payers, and ultimately with the entire EB community who have been waiting for new options. There are nuances in every country we launch, and sometimes within a country by region. That said, across Europe and Japan, we have seen strong word of mouth and increasing engagement from key centers. That is raising awareness of VYJUVEK and helping translate physician interest into real patient demand. Importantly, our prescriber base continues to broaden.

This gives more patients the opportunity to start treatment closer to home, while also creating a more durable and resilient foundation for the launch. We estimate that more than 140 DEB patients have been prescribed VYJUVEK across Germany, Japan and France. We believe this reflects both strong execution by our international team and growing physician confidence in VYJUVEK in the early launch market. This early momentum is also beginning to show financials. European market plus Japan contributed to $28.9 million in net revenue, demonstrating the meaningful role these regions can play in the growth of VYJUVEK over time. Looking ahead, our focus is clear. We are working to deepen penetration in our current launch markets, secure positive access and reimbursement outcomes, and expand it to additional major European markets. In Germany and France, pricing negotiations remain ongoing.

We continue to expect a decision in Germany in the second half of 2026. In France, we continue to expect a decision in 2027, which would further support broader access and reimbursement stability. We are also advancing discussions with reimbursement authorities in Italy and are actively preparing for potential launch in the second half of 2026, pending the outcome of those negotiations. In Spain, I'm pleased to report that our discussions with authorities have accelerated. Based on our latest interactions, we now see a potential opportunity to launch in Spain in the second half of the year, again pending the outcome of negotiations. In the interim, we are also responding to opportunities to start patients on VYJUVEK through early reimbursement access pathways. Overall, we are very encouraged by the early traction we are seeing internationally.

The launch is progressing market by market, physician by physician, and patient by patient. We remain focused on disciplined execution of our global commercialization strategy and on bringing VYJUVEK to more DEB patients around the world.

I will now hand the call off to Christine to share updates on VYJUVEK launch in the U.S. Christine.

Thank you, Laurent. Our team has been making great progress in recent months, building on our leadership position and delivering transformational outcomes for patients across the United States. Strong sales force execution is expanding our community reach and allowing us to meet patients wherever they seek care, whether that is at the center of excellence with a pediatric dermatologist or in a family practice office in the community. By bridging this gap, we have now been able to secure over 695 reimbursement approvals for DEB patients nationwide, even as access teams were navigating a higher volume of insurance switchovers. Upstream demand metrics are even better, with over 60 new prescribers in the first quarter and over 570 unique prescribers since launch, underpinning a strong team approval outlook for the rest of the year.

Net VYJUVEK revenues for the United States were $87.5 million for the quarter. Revenues were impacted by insurance switchovers in the quarter, which are now behind us, as well as the start-stop treatment cadence characteristics of a patient population shifting towards maintenance treatment regimen. With VYJUVEK now on the market in the United States for nearly three years, a growing number of patients have been able to achieve dramatic and transformational wound closure outcomes. Patients have been able to take control of their disease and their lives, opening up new opportunities and autonomy never before possible. These quality-of-life gains, made possible by the robust efficacy and safety profile of VYJUVEK, are deeply motivating and the foundation for the long-term trust-based relationships we are building with the DEB patient community.

These improvements are also a natural and anticipated evolution of the launch as patient motivations and support needs shift to reflect their newfound autonomy. This is where the flexibility of VYJUVEK administration and last year's label updates are especially valuable, providing patients with the option to self-administer or receive nurse support where and when they want it. To this end, we have launched patient support initiatives to communicate and educate around recent VYJUVEK label updates, which provide greater administration flexibility and help DEB patients and families conveniently integrate VYJUVEK into lifelong wound healing routines as part of their standard of care. Our goal is to establish long-term relationships with VYJUVEK patients, ensuring ongoing connectivity and ease of use throughout their lifelong treatment journey.

Skin cells do turn over and wounds eventually reopen, particularly as patients get more active. As patients transition into these start and stop phases, we are focused on enabling timely access to VYJUVEK whenever it is needed. This focus is driving continued assessment of our infrastructure to better support patients where they are in their journey and to further enhance the ease of delivering VYJUVEK across the United States.

At the recent American Academy of Dermatology conference, key opinion leaders underscored their appreciation for VYJUVEK and the positive outcomes achieved by their treated patients. In a patient population where, prior to VYJUVEK's approval, there were no treatment options beyond palliative wound care, VYJUVEK represents a meaningful advancement and fueling an increased focus on the long-term clinical and quality-of-life benefits that might come with long-term VYJUVEK therapy. As we progress in our launch, we are excited about the opportunity ahead.

There are still hundreds of known diagnosed patients we hope to bring to therapy, and many more not yet identified that we believe could benefit from VYJUVEK. By driving new patient starts and maximizing convenience for patients already on therapy, we see an opportunity to deliver significant growth in the years ahead.

With that, I'll turn the call over to Suma to share the latest on our development pipeline. Suma.

Thank you, Christine. Good morning, everyone. I am excited to share that we are faced with two registrational study readouts expected later this year and two more in 2027. With respect to the ophthalmology registrational readouts this year, we are excited to announce we completed enrollment in our registrational study evaluating KB803 for the treatment and prevention of corneal abrasions in DEB patients. A total of 16 patients were enrolled in the study. IOLITE is a randomized intra-patient, double-blind, decentralized, placebo-controlled study with crossover design in which patients are randomized 1-to-1 to receive KB803 three times weekly for 12 weeks, followed by placebo three times weekly for 12 weeks, or vice versa.

The primary efficacy endpoint, the change from baseline in the average number of days per month with symptoms, will be assessed at 24 weeks, putting us on a path for a readout in the fourth quarter of this year. This is an exciting milestone for our team and the many DEB patients suffering from ocular complications of this terrible disease. Our second registrational study evaluating KB801 for the treatment of neurotrophic keratitis is also progressing well. Our focus here is operational, supporting our trial sites, expanding our network, and driving enrollment. This is an eight-week study. We expect to enroll 60 patients and are on track for a data readout later this year.

We are moving quickly on our broader pipeline as well, including the initiation of two open-label studies evaluating repeat-dose KB407 and KB111, which we expect to read out later this year. Based on FDA interactions, we are initiating an open-label single-arm study to evaluate safety of repeat-dose KB407 for 24 weeks in five patients with CF who are ineligible for, do not tolerate, or do not benefit from modulate therapy. Dosing is expected to start later this month. With strong backing from the Cystic Fibrosis Foundation, the CFF, we expect to complete enrollment in the study later this quarter and report data by end of the year.

Concurrently, we are working closely with the FDA and the CFF on an innovative registrational study design and statistical analysis plan that may include prospectively collected natural history data from the CFF to supplement placebo-controlled data for evaluation of KB407 treatment effect. We will share the design and associated statistical analysis plan of the registrational study following alignment with the FDA, which we expect in second half of 2026. We expect the registrational study to commence in first half of 2027. Strong patient and KOL engagement is also helping us move quickly on our KB111 program for the treatment of Hailey-Hailey disease. We are making steady progress on our HHD severity scale and expect to complete both the development and validation in the first half of this year.

We also plan to initiate an open-label safety HALITE-1 to evaluate KB111 for 12 weeks in seven patients with HHD. We expect to dose the first patient in the HALITE-1 later this month and submit our registrational study design to FDA in the second half of the year. Based on the current timelines, we expect the registrational study to start in 2027.

We have our KB408 program for AATD lung disease and our KB707 program for non-small cell cancer. Both are advancing steadily in the clinic and on track for data updates later this year, including, in the case of KB707, a data update at ASCO next month. Altogether, this sets up for six potential readouts before year-end, including two registrational study readouts.

With that, I'll hand the call over to Kate.

Thank you, Suma, and good morning, everyone. I'll now provide some highlights from our Q1 financial results reported in our press release and 10-Q filing earlier today. Net revenue from global sales of VYJUVEK was $116.4 million for the first quarter, which included sales from our commercial launches in Europe and Japan. This marked growth as compared to the prior quarter of 9% and was a 32% increase compared to the first quarter of 2025. Cost of goods sold for the quarter was $6.3 million compared to $5 million in the prior year's first quarter. Gross margin for the quarter was 95%, slightly up from 94% in 1Q 2025.

We are seeing the benefits of manufacturing process improvements related to our U.S.-approved product and are actively working to achieve similar efficiencies for our other markets. R&D expenses for the quarter were $15.3 million compared to $14.3 million in the prior year's first quarter. This was driven mainly by payroll, materials, and support costs for production runs across several product candidates. G&A expenses were $41 million compared to $32.6 million in the prior year. This $8.4 million increase was primarily due to increased headcount and related compensation expense as well as higher legal consulting and launch support costs for VYJUVEK globally. Operating expenses for the quarter included non-cash stock-based compensation of $13.6 million compared to $13.5 million in the first quarter of last year.

The guidance we previously issued relating to non-GAAP operating expenses remains unchanged. We anticipate approximately $175 million-$195 million in non-GAAP R&D and SG&A expenses for the full year of 2026. Net income for the quarter was $55.9 million, which represented $1.91 per basic and $1.83 per diluted share. We are pleased to report growth as compared to the prior year's first quarter's net income of $35.7 million and EPS of $1.24 per basic and $1.20 per diluted share. Finally, we continue to build on our strong cash position, now exceeding $1 billion in combined cash and investments, which positions us well to support our pipeline and global commercial efforts.

With that, I'd like to turn the call back over to Krish.

Thanks, Kate. I want to circle back and underscore our excitement in the global VYJUVEK launch trajectory. While there are nuances to a launch in every country, for example, prescription renewal frequency in Japan in the first year, mandatory first physician visit, and ongoing pricing negotiations in Europe, or the start-stop paradigm in the U.S. that we're now starting to see three years into launch. Taken as a whole, all these geographies, the resilience in our launch dramatically increase the number of patients able to benefit from VYJUVEK and strengthens our conviction in the long-term growth outlook. Country-level fluctuations quarter to quarter are inevitable, but mitigated by the diversification that geographic expansion brings. I am pleased that VYJUVEK continues to work well for patients living with DEB, which, as you all know, is a devastating and a debilitating disease.

We're hearing meaningful stories from patients and families globally whose lives have improved, including patients who are now able to participate in activities they have never imagined before. Many are also able to pause weekly administration and return to treatment when wounds recur. We're deeply humbled to play a role in helping these patients and their families as they navigate a lifelong journey with this disease.

On the pipeline, we have multiple data readouts coming later this year, including two registrational readouts in DEB, initial repeat dose data from KB407 in CF, and KB111 in Hailey-Hailey disease. Along with data updates for KB707 in NSCLC and KB408 in AATD. It's turning out to be a really busy clinical and a commercial year for Krystal Biotech. Overall, we're set up for an exciting 2026. Thank you, and may the Fourth be with you. Operator?

Thank you. 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. Once again, that is star one to ask a question. Please hold while we poll for questions. Your first question comes from Roger Song with Jefferies.

Great. Congrats for the quarter. Thank you for taking our question. Maybe just two questions, one related to the commercial and then the pipeline. For the commercial, looking at the 10-Q, so you have U.S. 87.5 and then Europe at 20.7, Japan 8.1. Seems a very strong launch ex-U.S. How should we think about the growth trajectory in the U.S. for the rest of 2026? How this strong trend in ex-U.S., Europe, Japan will continue for the rest of the year? I know long term, I totally hear you for the outlook, but how about 2026?

Just quickly on the pipeline. On the CF, this 24-week data, what will be the endpoint for that data readout? What will be the go/no-go decision before you start the pivotal? Thank you.

Hey, Roger. Thanks for your question, both, super relevant. On the commercial in the U.S., as you can see from the reimbursement approvals, the top-line demand continues to grow very nicely. I know, we've previously said there's maybe about 1,200 identified patients, and we're steadily marching towards that and even hope to get to that 720 number by next quarter, right? We're at 60% market share, and so the top line's growing well. What's a bit difficult to predict is the start-stop paradigm on a quarter-by-quarter basis. The point I made in the call in my script was, look, patients are really happy with their experience on VYJUVEK. We've seen many instances of patients stopping and coming back on drug, which is what we had always wanted this to be.

That's the tail on the drug. On a quarter-by-quarter basis, it's fairly tough to predict the ups and downs. You could have a down one quarter, up the second quarter. Overall, we expect the trend to be pointed in the positive direction.

Yeah, Krishnan, if I may add, you know, we're continuing to launch support programs that really educate them on the label updates that will help these patients continue to integrate this into their daily life as we look to establish lifelong partnerships with these patients and support their ongoing trajectory with VYJUVEK as they start and stop through natural wound healing.

Suma, on the clinical.

I can take the CF question.

I can briefly the question.

No, I know. I got it. As you guys are aware, we finished the single-dose study in these patients, and clearly we were able to establish molecular correction. As we discussed in our last call, we are, you know, obviously, working collaboratively with the CFF and the FDA. We met with the agency. I mean, the agency is convinced with our expression data, and they, I mean, they seem to, you know, agree that we do see nice positive expression. The only feedback that we got from the agency is obviously, we don't have safety regarding repeat dose administration. That was not established. In order to satisfy that requirement, we set up this, you know, interim five-patient study to establish safety in repeat dose administration safety in these patient populations.

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

Hey, Roger, you know, I was looking at the question. You had a comment about global trajectory. That's the point I wanted to emphasize. We feel really good about the direction of the global trajectory launch, the individual ones, especially in mature markets like the U.S., are tough to predict up and down. It's also difficult on a quarterly basis to think about is Japan up versus France versus Germany. We feel really good about the overall global trajectory launch in 2026.

Got it. Thank you so much. Congrats again.

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

Hey, guys, this is Matthew on for Alec. Appreciate you taking our questions. First, on KB803, assuming positive data in the fourth quarter of this year, can you maybe speak to how we should think about the potential launch trajectory vis-à-vis VYJUVEK in terms of overlap with existing prescribers/patients, reimbursement or site of care dynamics? Then maybe one on Hailey-Hailey disease. You know, in terms of the data that we should expect later this year and sort of why, you know, the registration was pushed out to 2027, just any commentary on that would be helpful. Thanks.

Great. On KB803, look, you should expect a really positive launch trajectory, because now that we have identified these patients, we have a good sense of who these patients are. The whole supply chain mechanism of getting the drug to a patient's home when needed, self-administration versus needing a nurse to administer, like, all the kinks in the launch have been ironed out with VYJUVEK. Should the drug get approved and should the label have a really strong profile, we expect the launch to be really positive. It's tough for me to quantify to what extent. It affects about 50% of the RDEB population according to publications, and maybe 10%-15% of the dominant population.

There are evidences of many more patients having lesions in the eye, but it is positioned as somewhat like a prophylactic. We expect the launch to be really good should the drug get approved.

I can take Hailey-Hailey. Yeah, Hailey-Hailey, again, this is a disease that nobody has, you know, ever embarked upon. There was a little bit of learning and understanding, this is where we have, you know, we talked with the agency. At least we came to an agreement on a patient-reported outcome scale. The agency wanted us to basically validate the scale. We are in the process of validating the scale, which should be done shortly. In the process of validating the scale, we were able to really reach out, and we have a lot of patients that technically reached out and to participate in this scale. Now we have a repository of these patients where we are actually, it's like our mini natural history sort of database.

We collect the data on these patients as we are validating the scale, and we have a lot of interest from these patients to participate in the trial. Again, since we don't have any clinical data, I think the best approach for us was to do a small phase I study where we have five to six patients. I mean, we already have patients in our system. The scales are being validated. To just, you know, collect both safety, dosing regimen, and also some sort of, you know, the scale validation to really validate. Before we want to go into the registration trial, we want to be really comfortable with our scales, really understand the disease so we position ourselves for success. That's the goal.

I think this phase I study in this handful of patients will allow us to really evaluate the patient population, the timing of the evaluation, and the robustness of the scale. I think all of this will be completely established by end of the year, and then we expect to, you know, get into the registration trial early. I think the study should go pretty quickly because we have the patient population. I mean, as I said, with the validation of the scale, establishing these patients, we've been genetically testing them. I think once we have this, the registrational trial should be pretty fast because, again, this is a decentralized study. The patient-reported outcome, the patients, the drug is shipped to the patient's house.

Because of the decentralized nature and, the, you know, the PRO of the endpoint, we expect once the registrational trial, that this trial could, you know, pretty much be, fully, enrolled pretty rapidly.

Thanks.

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

Hey, guys. Good morning. Thanks for the questions and the updates. Krish, at the end of your prepared comments, you started to highlight some of the key factors or differences with regard to ex-U.S. launch of VYJUVEK. I was hoping to get a little more color on that. Do you see any key education steps that are needed for ex-U.S. doctors versus U.S.? What are some of the key negotiation points besides, say, pricing or any other factors you'd like to highlight that might be different from the U.S. launch? Thanks a lot.

Thanks, Joe. Look, given that Europe launched after the U.S., a lot of physicians in Europe, especially like Germany, France, the countries we're going after, Italy, Spain, are aware of the significant benefit that VYJUVEK has been affording to patients in the U.S. In terms of bringing them up to speed, teaching them about the disease, the benefits of VYJUVEK and how it works and the application, it's been a lot easier relative to the U.S. in terms of physician education and getting them up to speed, and that's true in Japan, too. Like, we feel really good about what the physicians think about VYJUVEK, so much so it's kind of helped us accelerate launches in both Spain and Italy given the voice of the physicians in these countries.

With respect to negotiations, look, that's a tough question. Beyond the nature of the drug itself, which is very powerful, the clinical benefits are great. There are also political factors that come into negotiations in these countries. They have budgets for rare diseases. To date, the negotiations have been progressing well. We've been able to make a good compelling benefit. We'll obviously know the outcome first in Germany, second half of this year, followed by maybe Italy ahead of that. We'll have a couple European benchmarks, which will probably dictate the direction of the French and U.K. and subsequent Spanish pricing. All in all, given what we were able to do in Japan, given the benefits of the drug, we feel really good about making the compelling value proposition.

The question always is, what are the macroeconomic factors in these countries that could potentially influence the pricing of?

Thank you, Krish. Very helpful.

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

Hi, guys. Thanks for taking the question. I've got one on VYJUVEK and then a couple on CF. Krish, we have been hearing just of sort of insurance friction around the stop-start drug holidays, that insurance companies are sort of coming down on patients whose wounds are closing. We wonder if there might be friction on restarts, whether it's requirements for, you know, documentation of reopened wounds or things like that, and how insurance companies are sort of monitoring whether wounds are closed or not. If you could elaborate just on insurance dynamics around stop and start and, you know, reauthorization of coverage. I've got a couple on CF.

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

Okay, thanks. On CF, you mentioned that the patients include those that do not tolerate modulators or do not benefit from modulators. Are there sort of prescribed definitions around either liver enzyme elevations or sweat chloride changes, either changes or absolute level that define this to sort of population, subpopulation of CF patients? We noted that on your Q2 call, you said that you had already enrolled four patients in Cohort 3 of CORAL-1, and this was like the four weekly doses. Why do you need the repeat dose data on top of it? Is it just sort of earlier? I'm sorry. Is it just longer retreatment periods that the FDA wanted? If so, why?

Would it be possible to get functional data from these 24-week patients, ahead of pivotal?

Ritu, I'll answer that question. Yes, we are enrolling patients that are null and that are modulator intolerant. With regards to sweat chloride, I mean, I don't think there is any marker because we are nebulizing the drug. It directly goes into the lung, and that's where the action is. We don't have systemic levels of measurement. Yes, we are I mean, we have a lot of null patients ready to go on this trial in our, you know, the study that we are evaluating repeat dose. We are evaluating patients who are ineligible for modulators. Either they don't tolerate it or, you know, they cannot take these drugs. With regarding to your second question, Ritu, we never did a repeat dose administration. Ours was a single dose.

When you see four dose of applications, this is something that we discussed with the agency because when we made the first batch, our titers, I mean, the dose was not enough to deliver all of it in one sitting. I mean, obviously now we have manufacturing, and we have doses that can be done as a single administration. We discussed with the agency, and the agency recommended that we divide the dose over four days. It was not immediately. It was day one, day two, day three, day four. It was still considered as a single dose. The entire dose is now was between four days. If you look at the study that we are proposing, it's the same dose as a single administration, as a single dose, but as a repeat administration.

Now, this has never been done. We're gonna do it weekly, the same dose, but once a day, weekly over the entire six-month period. We will evaluate. Obviously, safety is going to be the primary endpoint of this study. We will also evaluate, obviously, we will be measuring FEV1. We will look at patient-reported out, you know, PRO scales to see the benefits. We are going to look at all of that in an exploratory fashion because more data that will help us, you know, the better for us as we embark upon our phase III registration trial.

Got it. Thank you.

Your next question is from Yigal Nochomovitz with Citi.

Hi. Great. Thank you very much for taking the questions. Just a few on Europe. Could you just comment as to whether you've entered the second six months of the accrual phase in Germany? With regard to Spain and Italy, could you clarify whether this is going to be a pricing first model where there's no accrual, or will it be an accrual model where you'll launch and then negotiate similar to Germany and France? I have one other one on KB803.

Hey, Laurent, do you wanna start?

Yep. Yeah, yeah. So maybe we start with the second question on the pricing model in Italy and Spain. What we expect is definitive reimbursement in those countries, so it will not be advanced, you know, like the one in France or Germany currently. With regard to the Germany situation, yes, we've entered within the second six months of the launch, so that's the first semester where we start accruing for future potential pricing.

Okay. Thank you. On KB803, I am just curious if you could comment on the natural history run-in data, if those are tracking with expectations, and if you have any comments on the diary, the blinded symptom diaries, in terms of compliance with logging that during the trial.

Sure. I mean, as you know, we do have a natural. I mean, the same information or data that we are collecting in the natural history study. Once they qualify to be in the main study, at that point we have a database where blinded, randomized. The patients, I mean, the drug is randomized, the patients are assigned to either placebo or drug. They start a new diary, which is, I mean, a complete different database. All is blinded. The patient is blinded, the physician is blinded, we are blinded, except the, you know, the pharmacy that ships the drug to the patients where they do the randomization and the blinding. It is a completely blinded system, which is completely maintained.

The patient just fills the diary on a weekly basis, just like the natural history, so they have the practice and experience. Obviously, the clinical operations teams will help them answer or address any questions they have or, you know, we have, I mean, the external CRO that is managing the diary. If there is a patient that's missing information, we can prompt them to say, "Make sure you fill so the data can be, you know, there's nothing, no missing information." It's a completely blinded system.

Thanks.

Your next question for today is from Bill Maughan with Clear Street.

Good morning, and thanks. You mentioned in the press release that your KB803 trial is powered to detect at least a 25% reduction in symptom days. How conservative would you describe that bar as being? Might we see something, you know, meaningfully, a meaningfully larger separation? I guess how much does that does that delta matter in terms of supporting commercialization down the road?

I mean, again, I think any improvement in these patients, because, I mean, it's such a debilitating disease, and once they have one of these abrasions or symptoms, it can be pretty, you know, rough on these patients because they can't open their eyes. They can be, you know, decommissioned for three days in addition to all of the other comorbidities that they have to experience. I think from a, any improvement, I think is a benefit to these patients. The good thing is we have this natural history study that we have been collecting over a year, so we have a ton of data. As we embark upon this study, we'll have some flexibility to even, you know, use some of this natural history as we do the analysis.

Again, I think any improvement, the prospectively collected natural history, I mean, a lot of the, I mean, reasons that you see the agencies have issues with external controls, of using them as controls is because many of that data is not prospectively collected. In our case, we have over 100 patients with this natural history, very prospectively collected, which simulates exactly what they're going to do in the clinical. I think we can leverage that data to, you know, in the analysis as we move forward.

Okay. With a large cash balance and growing, I guess, how are you looking at capital allocation right now?

Yeah. Yeah. It's a regular question for me. I'll say a couple things, right? Like right now, first, we are in a growth mode, both in terms of commercial growth in the world and in terms of our pipeline. We're not planning on licensing or buying, and I've said that before in different forms. Once we have visibility into the future of our pipeline, especially on the drugs that address large markets, KB408, the oncology, the aesthetics.

When we have some visibility into the launch of our next drug, that would be a great timing to think about, share about that. Okay, thank you.

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

Hey, good morning. Krish, I didn't know you were a Star Wars fan. Anyways, on KB803, I just wanted to double-click on the powering a little bit. For the 16 patients that you enrolled in the study from the natural history running, what was the average symptom days at baseline? What was the standard deviation that you saw in the natural history portion? On the powering side, you noted the study is 90% powered for a 25% reduction in symptom days. At what point does the study become 50% powered? Like, what's the minimum detectable benefit you think you could tease out in this trial? Thank you.

I mean, obviously we looked at our natural history data extensively, and we know the pattern, right? I mean, we know there are patients that have the severity of the disease. I mean, you can see from our natural history there are a subset of patients that these abrasions are pretty frequent, right? Pretty over one-year period. The benefit we had is because of this natural history data, we could select those patients so we can see a difference from a drug effect. I mean, that was very important to us. If you look at the patients we have, the patients that are enrolled into the 16 patients that we have meet that criteria. Hopefully, I mean, because of that, the drug effect should become evident.

I think based on that's how we powered it. We were able to see, okay, 25% difference with what is the least amount of difference we need to see statistical significance? What is the sample size? Again, with the crossover design where patients, you know, the same patient gets either drug or placebo, That also, you know, improves our sample size and increases the chances. All of that was taken into account to calculate the sample size and the powering for the study.

Got it. Thanks.

Your next question is from Joshua Soto with William Blair.

Good morning, team. Congrats on the quarter. This is Josh on from Sami and Lachlan. I have questions on VYJUVEK. The first is, ever since the company gained at-home administrations in the U.S. at the end of Q3, I was wondering what has been the impact of that on either if that has been the driver in the decrease in start-stop dynamic or addition adds in the U.S. The second question was on the ex-U.S. launch. I was wondering if pricing in Spain is gonna be similar compared to other European territories, and how many patients does the company estimate can address that territory? Take. Thanks.

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

If you think about our goal of being able to you know, create a scenario where this fits comfortably into their daily routines, the label updates sort of allow that flexibility, and we've seen some really positive impact of that, both from patients' receptivity to VYJUVEK and, you know, supporting their stop and start on therapy, but also the way physicians are thinking about initiating therapy for their patients.

Hey, Laurent, do you wanna talk on the international question?

Yes. So if I understood well the question, it was related to Spain specifically. The first one was about the pricing in Spain. We do have, you know, a pricing corridor reflecting the value of VYJUVEK. We do expect Spain to be within this pricing corridor. Of course, negotiations are ongoing, so difficult to speculate at this stage. The number of patients in Spain, we would think and we would look at it as an equivalent prevalence to the other European countries. There are no difference in prevalence versus the other European countries.

Thank you.

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.