Krystal Biotech, Inc. Q2 FY2025 earnings call

• VYJUVEK launch progressing well, with upcoming launches in Europe and Japan expected to boost growth.
• Upcoming clinical readouts in lung and eye diseases, including KB304 readout validating the platform and Jeune's aesthetics subsidiary.
• Profitable for the quarter with $1.29 per share fully diluted, marking 2 years of positive EPS.
• VYJUVEK Q2 growth due to patients resuming and sales team expansion; total VYJUVEK revenue since launch over $525M.
• Japan approved VYJUVEK with broad label, set to launch before year-end. Europe launch in Germany in August, France pending Accès Précoce.
• R&D updates: inhaled KB707 Phase I/II study progress, KB408 repeat dosing in AATD, KB407 progress in CF, KB304 in aesthetics Phase II for décolleté wrinkles, and ophthalmology trials IOLITE and EMERALD-1.

Q2 net VYJUVEK revenue was $96 million. This brings total net VYJUVEK revenue since launch to over $525 million. VYJUVEK revenue contribution is the key segment performance here.

• VYJUVEK revenue expected lower in Q3 but return to growth in Q4.
• Europe launch in Germany in August, France launch pending Accès Précoce continuity.
• Japan launch before year-end.
• Pipeline readouts expected in 2025-2026 for CF, AATD, NK, DEB, and inhaled KB707 for NSCLC.

• Patient variability causing revenue unpredictability.
• Regulatory and reimbursement challenges in Europe and Japan.
• Delays in clinical trial enrollment and data readouts due to factors like academic site paperwork for CF program.

Q: Congrats on the quarter. 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. And then do you have any goal in terms of the reimbursement ramp like the 720 number that was initially applied for the U.S. launch?

A: Laurent? 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 a center. I mean this is the reason why the team has dedicated the past 3 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. 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 body, the national insurance in most cases.

Q: Maybe on the pipeline, I noticed that the timeline for CF data was mid-2025, now by year-end. Anything to read into this? Or is this just enrollment timelines? And then maybe you can remind us of sort of the number type of patients we expect in that first readout?

A: Yes, I can take this question. As you may be aware that we did announce that the TDN -- 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, 6 TDN sites, that's 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. 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 multiple patients across these sites once they are up and operational.

Q: Do you anticipate a similar dynamic will be required in Japan such that patients will need to be seen by a health care practitioner before initiating VYJUVEK. And then also, can you share some details on the fifth patient dose in Cohort 2 for AATD in terms of the percent cells that were transduced and the level of AAT expression and distribution of 408 across the lungs?

A: On the Japan question, yes, 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, just give us a minute. Yes. And as you can...

Q: Two topics, if you don't mind. So first on VYJUVEK, Krish, you talked about one topic. 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 around VYJUVEK over the long term with regard to starts and restarts and wound reopening?

A: 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 50% each. So if you have an even split of recessive and dominant. And there are in a -- they've been on drug a while; we expect the average consumption across the patient base to be 26 vials a year. So that is how we define steady state. And if you look at the compliance, if you look at the RDEB, DDEB ratio, you look at the vials consumed, we're definitely months away from getting to that point.

Q: Two topics, if you don't mind. So first on VYJUVEK, Krish, you talked about one topic. 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 around VYJUVEK over the long term with regard to starts and restarts and wound reopening?

A: 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 50% each. So if you have an even split of recessive and dominant. And there are in a -- they've been on drug a while; we expect the average consumption across the patient base to be 26 vials a year. So that is how we define steady state. And if you look at the compliance, if you look at the RDEB, DDEB ratio, you look at the vials consumed, we're definitely months away from getting to that point.

Q: Just 2 quick ones. Krish, can you clarify that when you suggest a decline in VYJUVEK revenue quarter-over-quarter in the third quarter. Is that in the U.S. only? Or does that encompass worldwide because you do have the offsetting launch in Europe? And then second question, your R&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 do you expect to see going forward across the other programs?

A: 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 gone vacation and there's more disruptions and pauses than usual. With respect to the R&D breakdown on cost, cancer trials are expensive when have...

Q: 2 questions. Could you talk about -- you've talked a lot about the 720, the 60%, as you pointed out. I'm curious about the other 40%, the 420 to get to the full 1,200. What have you said or what can you say today above the timelines to capture that aspects of the U.S. market?

A: Look, the 720, 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 2 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 720. 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. The only point I'll make is as you get past 700, 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 VYJUVEK to be treated, and it's -- by no means are we trying to convey that once we get to 720, 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. And 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.

Q: I have got a couple of clarifications. So on the 82% compliance, could you sort of clarify what percentage of patients are currently using 4 months of vial versus 3, 2, 1, et cetera? And how are you -- how have recessive patients evolved versus the dominant patients? And I have a follow-up.

A: Yes, Debjit, I was following you along. Can you just repeat the first part of your question?

Q: I have got a couple of clarifications. So on the 82% compliance, could you sort of clarify what percentage of patients are currently using 4 months of vial versus 3, 2, 1, et cetera? And how are you -- how have recessive patients evolved versus the dominant patients? And I have a follow-up.

A: Yes, Debjit, I was following you along. Can you just repeat the first part of your question?

Q: I appreciate the clarification. And just a follow-up then on the utilization that you're seeing in the recessive patients versus the dominance. I know you mentioned once you get to 50-50, roughly 26 vials per patient. But right now, what are you seeing in the recessive versus dominance?

A: 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 Q3 of 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. The RDEB is extremely consistent on drug 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 mild side.

Q: Based on the single-arm data, what kind of TPS scores are you enrolling in the combo program in non-small cell lung cancer?

A: TPS scores. Suma M. Krishnan: Okay. I mean we are looking at -- obviously, we are agnostic, right? It doesn't matter what kind of PD-1 expression or PD-L1 expression, right? I mean we are looking for frontline failed patients. So either they failed PD-1 or PD-1 plus platinum therapy. So once they failed, we know rechallenging with PD-1, the number of overall response goes down from 30% to 35% to 10%. So we are agnostic. We have seen -- we looked at our data with monotherapy with patients that have failed PD-1 or with they were mutation-specific we still seem to have an impact, and we work. We see stable disease or in some cases, we also see partial responses. So we feel we are pretty much agnostic. So we are going to stratify our enrollment. Obviously, we look at PD-1 high patients and PD-1 0. So we -- 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-1 expression versus negative PD-1 expression.