Krystal Biotech Inc

Previous wording

•changes in our estimates regarding the potential market opportunity for our FDA-approved product, VYJUVEK , and our product candidates;

Current wording

•changes in our estimates regarding the potential market opportunity for VYJUVEK and our product candidates;

Previous wording

•global economic conditions, including the recent rise in inflation and interest rates and recent bank failures; and

Current wording

•global economic conditions, including the recent rise in inflation and interest rates; and

Previous wording

We launched VYJUVEK in the United States in the second quarter of 2023. Net VYJUVEK product revenue was $45.3 million for the three months ended March 31, 2024, and $95.9 million in cumulative net product revenue since August 2023.

Current wording

We launched VYJUVEK in the United States in the second quarter of 2023. Net VYJUVEK product revenue was $70.3 million for the three months ended June 30, 2024, and $166.2 million in cumulative net product revenue since launch in August 2023.

Previous wording

We have made steady progress securing access and reimbursement for VYJUVEK since launch. In January 2024, we announced that the U.S. Centers for Medicare & Medicaid Services had assigned a permanent and product-specific J-code (J3401) for VYJUVEK, effective on January 1, 2024, and as of April 2024, positive access has been achieved for 96% of lives covered under commercial and Medicaid plans.

Current wording

We have made steady progress securing access and reimbursement for VYJUVEK since launch and as of July 2024, positive access determinations have been achieved for 97% of lives covered under commercial and Medicaid plans.

Previous wording

As of April 2024, we have secured over 330 reimbursement approvals for VYJUVEK in the U.S.

Current wording

As of July 2024, we have secured over 400 reimbursement approvals for VYJUVEK in the U.S.

Previous wording

We seek to make the patient experience of starting and continuing on VYJUVEK treatment as seamless as possible. Since launch, the infrastructure has been in place for patients to be treated in their home by an HCP, reducing the need for regular visits to a clinic or hospital. Krystal Connect TM, our U.S. in-house patient services call center, has been active since FDA approval and assists patients, care givers and HCPs interested in accessing VYJUVEK. We also continue to offer no-cost genetic testing through our DecodeDEB program. Since launch and through the first quarter of 2024, patient compliance with once weekly treatment while on VYJUVEK remains high at 91%.

Current wording

We seek to make the experience of starting and continuing on VYJUVEK treatment seamless for the patient. Since launch, infrastructure has been in place for patients to be treated in their homes by an HCP, reducing the need for regular visits to a clinic or hospital. Krystal Connect TM, our U.S. in-house patient services call center, has been active since FDA approval and assists patients, care givers and HCPs interested in accessing VYJUVEK. We also continue to offer no-cost genetic testing through our DecodeDEB program. Since launch and through the second quarter of 2024, patient compliance with once weekly treatment while on VYJUVEK remains high at 90%.

Previous wording

Preparations and infrastructure buildout are underway in Europe and Japan to support our planned direct commercial launch in these regions. In March 2024, we completed the formation of Krystal Biotech Japan, G.K. (“Krystal Japan”), for the purpose of establishing initial operations in Japan, and we concluded our search for the President and General Manager of Krystal Japan who will join the Company in June 2024. In March 2024, our General Manager of Germany and Austria also joined the Company in preparation for a European launch.

Current wording

Preparations and infrastructure buildout are underway in Europe and Japan to support our planned direct commercial launch in these regions. In June 2024, the President and General Manager of Krystal Biotech Japan G.K. joined the Company in preparation for a Japanese launch.

Previous wording

In October 2023, we submitted a Marketing Authorization Application (“MAA”) to the European Medicines Agency (“EMA”) for B-VEC for the treatment of DEB in patients from birth. In November 2023, we were notified that the MAA had been validated and was now under Committee for Medicinal Products for Human Use review. In February 2024, the EMA completed inspection of our manufacturing facility as part of the MAA review process. We expect to receive GMP certification from the EMA in the second half of 2024. We expect an EMA decision on our MAA in the second half of 2024.

Current wording

In October 2023, we submitted a Marketing Authorization Application (“MAA”) to the European Medicines Agency (“EMA”) for B-VEC for the treatment of DEB. In November 2023, we were notified that the MAA had been validated and was now under Committee for Medicinal Products for Human Use review. In February 2024, the EMA completed inspection of our manufacturing facility as part of the MAA review process and, in May 2024, good manufacturing practices certification was granted by the EMA. We expect an EMA decision on our MAA in the second half of 2024.

Previous wording

In July 2023, the Pharmaceuticals and Medical Devices Agency (“PMDA”) in Japan officially accepted the open label extension (“OLE”) study of B-VEC. The efficacy portion of the Japan OLE study was completed in April 2024, and we anticipate filing our Japan New Drug Application with Japan’s PMDA in the second half of 2024, enabling a potential authorization by PMDA in 2025. Previously, in December 2023, B-VEC was granted orphan drug designation status for the treatment of DEB by the Japan Ministry of Health, Labour and Welfare, a designation which confers specific benefits for orphan drug development including priority review of applications, extended registration validity, and reduced development costs.

Current wording

In July 2023, the Pharmaceuticals and Medical Devices Agency (“PMDA”) in Japan officially accepted the open label extension (“OLE”) study of B-VEC. The efficacy portion of the Japan OLE study was completed in April 2024 and results closely mirrored those of our Phase 3 study in the U.S. A total of 5 patients were enrolled, with one patient discontinuing after 8 weeks due to scheduling challenges. B-VEC was well tolerated in the Japanese study population, with a safety profile consistent with previous studies, and all four patients that completed the study achieved the primary endpoint of complete wound closure at 6 months. We anticipate filing our Japan New Drug Application with Japan’s PMDA in the second half of 2024, enabling a potential authorization by PMDA in 2025.

Previous wording

KB407 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the full-length cystic fibrosis transmembrane conductance regulator (“CFTR”) transgene for the treatment of cystic fibrosis (“CF”), a serious rare lung disease caused by missing or mutated CFTR protein. In July 2023, we announced that we had dosed the first patient in CORAL-1, a Phase 1 multi-center, dose-escalation study of evaluating KB407, delivered via a nebulizer, in patients with CF, regardless of their underlying genotype. In March 2024, we completed dosing of the second cohort of CORAL-1, and we intend to initiate the third and final cohort in the second quarter of 2024. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT05504837.

Current wording

KB407 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the full-length cystic fibrosis transmembrane conductance regulator (“CFTR”) transgene for the treatment of cystic fibrosis (“CF”), a serious rare lung disease caused by missing or mutated CFTR protein. In July 2023, we announced that we had dosed the first patient in CORAL-1, a Phase 1 multi-center, dose-escalation study evaluating KB407, delivered via a nebulizer, in patients with CF, regardless of their underlying genotype. In May 2024, we cleared the safety evaluation window for the second cohort of CORAL-1, and we expect to initiate the third and final cohort in the second half of 2024. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT05504837.

Previous wording

KB408 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the SERPINA1 transgene, that encodes for normal human alpha-1 antitrypsin protein, for the treatment of alpha-1 antitrypsin deficiency (“AATD”), a serious rare lung disease. In February 2024, we dosed the first patient in SERPENTINE-1, a Phase 1, open-label, single dose escalation study evaluating KB408, delivered via a nebulizer, in adult patients with AATD with a PI*ZZ genotype. We are working closely with the Alpha-1 Foundation and their Therapeutic Development Network on the SERPENTINE-1 study and intend to announce interim data from the study in the second half of 2024. Recruitment is ongoing and details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier: NCT06049082.

Current wording

KB408 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the SERPINA1 transgene, that encodes for normal human alpha-1 antitrypsin protein, for the treatment of alpha-1 antitrypsin deficiency (“AATD”), a serious rare lung disease. In February 2024, we dosed the first patient in SERPENTINE-1, a Phase 1, open-label, single dose escalation study evaluating KB408, delivered via a nebulizer, in adult patients with AATD with a PiZZ or a PiZNull genotype. In May 2024, we cleared the safety evaluation window for the first cohort of SERPENTINE-1 and enrollment in the second cohort is ongoing. We are working closely with the Alpha-1 Foundation and their Therapeutic Development Network on the SERPENTINE-1 study and intend to announce interim data from the study in the fourth quarter of 2024. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier: NCT06049082. An overview of KB408 IND-enabling studies conducted to support the initiation of SERPENTINE-1 was presented at the American Thoracic Society 2024 International Conference held in May 2024.

Previous wording

Based on this early clinical evidence of safety and potential benefit under compassionate use, we started discussions with the FDA in the first quarter of 2024 on a potential clinical development path for ophthalmic B-VEC. In February 2024, we aligned with the FDA on our proposed single arm, open label study in approximately 10 patients to enable approval of B-VEC eyedrops to treat ocular complications which are thought to affect over 25% of DEB patients. We plan to initiate this study in the second half of 2024.

Current wording

Based on this early clinical evidence of safety and potential benefit under compassionate use, we started discussions with the FDA in the first quarter of 2024 on a potential clinical development path for ophthalmic B-VEC, and in February 2024, we aligned with the FDA on our proposed single arm, open label study in approximately 10 to 15 patients to enable approval of B-VEC eyedrops to treat ocular complications which are thought to affect over 25% of DEB patients. We plan to initiate the registrational study in the fourth quarter of 2024.

Previous wording

We will be presenting preclinical data at the ARVO 2024 Annual Meeting later this month highlighting the potential of Krystal’s HSV-1-based gene delivery platform for back of the eye gene delivery, and we are actively evaluating multiple, preclinical-stage genetic medicine candidates for the treatment of front and back of the eye diseases.

Current wording

We are actively evaluating multiple, preclinical-stage genetic medicine candidates for the treatment of front and back of the eye diseases and presented preclinical data highlighting the potential of Krystal’s HSV-1-based gene delivery platform for back of the eye gene delivery at the ARVO 2024 Annual Meeting that was held in May 2024.

Previous wording

KB707 is a redosable, immunotherapy designed to deliver genes encoding both human interleukin-2 (“IL-2”) and interleukin-12 (“IL-12”) to the tumor microenvironment and promote systemic immune-mediated tumor clearance. Two formulations of KB707 are in development, a solution formulation for transcutaneous injection and an inhaled (nebulized) formulation for lung delivery.

Current wording

KB707 is a redosable, immunotherapy designed to deliver genes encoding both human interleukin-2 (“IL-2”) and interleukin-12 (“IL-12”) to the tumor microenvironment and promote systemic immune-mediated tumor clearance. Two formulations of KB707 are in development, a solution formulation for transcutaneous injection and an inhaled (nebulized) formulation for lung delivery. Both formulations of KB707 have been granted Fast Track Designation by the FDA and in May 2024, intratumoral KB707 was also granted Rare Pediatric Disease Designation by the FDA for the treatment of osteosarcoma.

Previous wording

In July 2023, we announced that the FDA had granted intratumoral KB707 Fast Track Designation for the treatment of anti-PD-1 relapsed/refractory locally advanced or metastatic melanoma and accepted our Investigational New Drug (IND) application to evaluate intratumoral KB707 in a clinical study. In October 2023, we dosed the first patient in OPAL-1, an open-label, multi-center, monotherapy, dose escalation and expansion Phase 1 study, evaluating intratumoral KB707 in patients with locally advanced or metastatic solid tumors, who relapsed or are refractory to standard of care, with at least one measurable and injectable tumor accessible by transcutaneous route. We have cleared the first two dose escalation cohorts of OPAL-1 and have completed enrollment in Cohort 3. Data collected to date have shown KB707 to be generally well tolerated with no patients experiencing dose-limiting toxicities or drug-related grade ≥3 adverse events. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT05970497. Based on the current pace of enrollment, we expect to be able to report interim data before the end of the year.

Current wording

In October 2023, we dosed the first patient in OPAL-1, an open-label, multi-center, monotherapy, dose escalation and expansion Phase 1 study, evaluating intratumoral KB707 in patients with locally advanced or metastatic solid tumors, who relapsed or are refractory to standard of care, with at least one measurable and injectable tumor accessible by transcutaneous route of administration. In May 2024, we cleared the safety evaluation window for our third and final dose escalation cohort of the OPAL-1 study. Enrollment in the dose expansion cohort is ongoing. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT05970497. Based on the current pace of enrollment, we expect to report interim data in the fourth quarter of 2024.

Previous wording

In January 2024, the FDA accepted an amendment to our IND application to evaluate inhaled KB707 in a clinical study, and, in April 2024, we dosed the first patient in KYANITE-1, an open-label, monotherapy, dose escalation and expansion Phase 1 study, evaluating inhaled KB707 in patients with locally advanced or metastatic solid tumors of the lung. Recruitment is ongoing. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT06228326. Inhaled KB707 also received Fast Track Designation from the FDA in February 2024, for the treatment of patients with solid tumors with pulmonary metastases that are relapsed or refractory to standard of care therapy.

Current wording

In April 2024, we dosed the first patient in KYANITE-1, an open-label, monotherapy, dose escalation and expansion Phase 1 study, evaluating inhaled KB707 in patients with locally advanced or metastatic solid tumors of the lung. The safety evaluation window for the first dose escalation cohort of the KYANITE-1 study was cleared in June 2024 and enrollment of the second cohort is ongoing. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT06228326.

Previous wording

KB105 is a topical gel containing our novel vector designed to deliver two copies of the TGM1 transgene encoding the human enzyme transglutaminase-1 (“TGM1”) for the treatment of TGM1-deficient autosomal recessive congenital ichthyosis (“TGM1-ARCI”), a serious rare skin disorder caused by missing or mutated TGM1 protein. KB104 is a topical gel formulation of our novel vector designed to deliver two copies of the SPINK5 transgene for the treatment of Netherton Syndrome, a debilitating autosomal recessive skin disorder caused by missing or mutated SPINK5 protein. We expect to resume enrollment in the Phase 2 portion of JADE-1, a randomized, placebo-controlled Phase 1/2 study evaluating KB105 for the treatment of TGM1-ARCI, later in 2024, and plan to file an IND application and initiate a clinical trial of KB104 to treat patients with Netherton Syndrome following initiation of the KB105 Phase 2 study. Details of the JADE-1 Phase 1/2 study can be found at www.clinicaltrials.gov under NCT identifier NCT04047732.

Current wording

KB105 is a topical gel containing our novel vector designed to deliver two copies of the TGM1 transgene encoding the human enzyme transglutaminase-1 (“TGM1”) for the treatment of lamellar icthyosis, a serious rare skin disorder most often caused by missing or mutated TGM1 protein. KB104 is a topical gel formulation of our novel vector designed to deliver two copies of the SPINK5 transgene for the treatment of Netherton Syndrome, a debilitating autosomal recessive skin disorder caused by missing or mutated SPINK5 protein. We expect to resume enrollment in the Phase 2 portion of JADE-1, a randomized, placebo-controlled Phase 1/2 study evaluating KB105 for the treatment of lamellar icthyosis in the first half of 2025, and plan to file an investigational new drug (“IND”) application and initiate a clinical trial of KB104 to treat patients with Netherton Syndrome following initiation of the KB105 Phase 2 study. Details of the JADE-1 Phase 1/2 study can be found at www.clinicaltrials.gov under NCT identifier NCT04047732.

Previous wording

We are also leveraging the ability of our platform to deliver proteins of interest to cells in the skin in the context of aesthetic medicine via our wholly-owned subsidiary, Jeune Aesthetics, Inc. (“Jeune”). KB301 is a solution formulation of our novel vector for intradermal injection designed to deliver two copies of the COL3A1 transgene to address signs of aging or damaged skin caused by declining levels of, or damaged proteins within the extracellular matrix, including type III collagen. In April 2023, Jeune initiated and treated the first subject in the Phase 1 PEARL-1 Cohort 3 clinical study. The PEARL-1 Cohort 3 study is an open label study to evaluate different doses of KB301 for the improvement of lateral canthal lines at rest in up to 20 subjects. In January 2024, Jeune initiated the PEARL-1 Cohort 4 clinical study, an open label study to evaluate KB301 for the improvement of dynamic wrinkles of the décolleté in up to 20 subjects. Jeune expects to announce results for both cohorts in mid-2024. Following completion of both cohorts, Jeune plans to initiate a Phase 2 study of KB301. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT04540900. Jeune has several other aesthetic medicine product candidates in various stages of preclinical development.

Current wording

In addition to focusing on genetic medicines to treat patients with diseases with high unmet medical needs, we are leveraging the ability of our platform to deliver proteins of interest to cells in the skin in the context of aesthetic medicine via our wholly-owned subsidiary, Jeune Aesthetics, Inc. (“Jeune”). KB301 is a solution formulation of our novel vector for intradermal injection designed to deliver two copies of the COL3A1 transgene to address signs of aging or damaged skin caused by declining levels of, or damaged proteins within the extracellular matrix, including type III collagen. In April 2023, Jeune initiated and treated the first subject in the Phase 1 PEARL-1 Cohort 3 clinical study. The PEARL-1 Cohort 3 study is an open label study to evaluate different doses of KB301 for the improvement of lateral canthal lines at rest in up to 20 subjects. In January 2024, Jeune initiated the PEARL-1 Cohort 4 clinical study, an open label study to evaluate KB301 for the improvement of dynamic wrinkles of the décolleté in up to 20 subjects. Cohorts 3 and 4 were fully enrolled in April 2024 and Jeune plans to announce results for both cohorts in the third quarter of 2024. Following completion of both cohorts, Jeune plans to initiate a Phase 2 study of KB301. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT04540900. Jeune has several other aesthetic medicine product candidates in various stages of preclinical development.

Previous wording

We have contracted to sell VYJUVEK to a limited number of specialty pharmacy providers (“SPs”) that mix the medication and administer it to patients in the patient’s home by a healthcare professional and through a specialty distributor (“SD”) to hospitals and outpatient clinics where patients are administered the medication at a healthcare professional’s office. The transaction price that we recognize as revenue for VYJUVEK sales includes an estimate of variable consideration, which includes discounts, returns, copay assistance and rebates that are offered within contracts. Refer to Note 2 of our consolidated financial statements in our 2023 10-K for additional information.

Current wording

We have contracted to sell VYJUVEK to a limited number of specialty pharmacy providers (“SPs”) that mix the medication and administer it to patients in the patient’s home by a healthcare professional and through a specialty distributor (“SD”) to hospitals and outpatient clinics where patients are administered the medication at a healthcare professional’s office. The transaction price that we recognize as revenue for VYJUVEK sales includes an estimate of variable consideration, which includes discounts, returns, copay assistance and rebates that are offered within contracts. Refer to Note 3 of the notes to condensed consolidated financial statements included in this Form 10-Q and Note 2 of our consolidated financial statements in our 2023 10-K for additional information.

Previous wording

We expect our research and development expenses will increase as we continue the manufacturing of preclinical and clinical materials and manage the clinical trials of, and seek regulatory approval for, our product candidates and as we expand our product portfolio. In the near term, we expect that our research and development expenses will increase as we continue our Phase 1 trials for KB407, KB408, intratumoral KB707, and inhaled KB707, resume dosing with KB105 in our Phase 1/2 clinical trial, complete the Phase 1, Cohorts 3 and 4 study and initiate a Phase 2 trial for KB301, begin our open label study with ophthalmic B-VEC, and incur preclinical expenses for our other product candidates. Due to the numerous risks and uncertainties associated with product development, we cannot determine with certainty the duration, costs and timing of clinical trials, and, as a result, the actual costs to complete clinical trials may exceed the expected costs.

Current wording

We expect our research and development expenses will increase as we continue the manufacturing of preclinical and clinical materials and manage the clinical trials of, and seek regulatory approval for, our product candidates and as we expand our product portfolio. In the near term, we expect that our research and development expenses will increase as we continue our Phase 1 trials for KB407, KB408, intratumoral KB707, and inhaled KB707, resume dosing with KB105 in our Phase 1/2 clinical trial, complete the Phase 1, Cohorts 3 and 4 study and initiate a Phase 2 trial for KB301, begin our open label study evaluating ophthalmic B-VEC, and incur preclinical expenses for our other product candidates. Due to the numerous risks and uncertainties associated with product development, we cannot determine with certainty the duration, costs and timing of clinical trials, and, as a result, the actual costs to complete clinical trials may exceed the expected costs.

Previous wording

There have been no significant changes during the three months ended March 31, 2024 to our critical accounting policies, significant judgments and estimates as disclosed in our management’s discussion and analysis of financial condition and results of operations included in our 2023 10-K.

Current wording

There have been no significant changes during the six months ended June 30, 2024 to our critical accounting policies, significant judgments and estimates as disclosed in our management’s discussion and analysis of financial condition and results of operations included in our 2023 10-K.

Previous wording

Product revenue, net was $45.3 million for the three months ended March 31, 2024, as compared to zero for the three months ended March 31, 2023 due to sales of VYJUVEK after FDA approval was obtained on May 19, 2023. As VYJUVEK initial product sales revenue did not begin until the third quarter of 2023, there was no comparative period revenue.

Current wording

Product revenue, net was $70.3 million for the three months ended June 30, 2024, as compared to zero for the three months ended June 30, 2023 due to sales of VYJUVEK after FDA approval was obtained on May 19, 2023. As VYJUVEK initial product sales revenue did not begin until the third quarter of 2023, there was no comparative period revenue.

Previous wording

Cost of goods sold was $2.4 million for the three months ended March 31, 2024, as compared to zero for the three months ended March 31, 2023 due to sales of VYJUVEK after FDA approval was obtained on May 19, 2023. Prior to receiving FDA approval for VYJUVEK in May 2023, costs associated with the manufacturing of VYJUVEK were expensed as research and development expense.

Current wording

Cost of goods sold was $6.0 million for the three months ended June 30, 2024, as compared to zero for the three months ended June 30, 2023 due to sales of VYJUVEK after FDA approval was obtained on May 19, 2023. Prior to receiving FDA approval for VYJUVEK in May 2023, costs associated with the manufacturing of VYJUVEK were expensed as research and development expense.

Previous wording

The increase was primarily driven by the following:

Current wording

Research and development expenses increased $3.4 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily driven by the following:

Previous wording

•a decrease of $899 thousand in allocated overhead costs due to the capitalization of commercial batches of VYJUVEK after its approval in May 2023.

Current wording

•a decrease of $407 thousand due to the capitalization of allocated overhead costs for commercial batches of VYJUVEK after FDA approval in May 2023 and

Previous wording

•a net decrease in KB103 costs is due to research and development costs being expensed in 2023 prior to receiving FDA approval in May 2023 that are now included as part of the cost of inventory, offset by an increase in overseas preclinical and clinical trial costs, licensing and regulatory costs, and on-going manufacturing efficiency and process optimization costs for which such processes have not yet been approved by the FDA; offset by

Current wording

◦on-going manufacturing efficiency and process optimization costs for which such processes have not yet been approved by the FDA,

Previous wording

•an increase of $272 thousand of depreciation due to the Company's second CGMP facility being placed into service in 2023 offset by the capitalization of commercial batches of VYJUVEK after its approval in May 2023.

Current wording

•an increase in other unallocated expenses of $430 thousand, which largely relates to depreciation due to the Company's second CGMP facility being placed into service in 2023 partially offset by the capitalization of depreciation associated with commercial batches of VYJUVEK after its approval in May 2023.

Previous wording

•a decrease of $1.1 million in manufacturing expenses related to VYJUVEK following FDA approval being recorded as inventory; and

Current wording

•a decrease in other unallocated manufacturing expenses of $1.2 million primarily due to costs related to the manufacturing of VYJUVEK being recorded as inventory and cost of goods sold following FDA approval.

Previous wording

•an increase of $706 thousand related to professional services incurred to support our commercial growth; and

Current wording

•an increase related to professional services incurred to support our commercial growth of $938 thousand and

Previous wording

These increases were partially offset by a decrease in marketing costs of $1.3 million due to the timing of marketing activities ahead of the VYJUVEK launch.

Current wording

•a decrease in marketing costs of $1.5 million due to the timing of marketing activities ahead of the VYJUVEK launch and

Previous wording

Litigation settlement for each of the three months ended March 31, 2024 and 2023 was $12.5 million, and consisted of amounts related to the settlement of litigation with PeriphaGen. See “Legal Proceedings” in Note 7 of the notes to condensed consolidated financial statements included in this Form 10-Q for more information.

Current wording

Litigation settlement for the three months ended June 30, 2024 and 2023 was $12.5 million and zero, respectively, and consisted of amounts related to the settlement of litigation with PeriphaGen. See “Legal Proceedings” in Note 7 of the notes to condensed consolidated financial statements included in this Form 10-Q for more information.

Previous wording

Interest and other income, net for the three months ended March 31, 2024 and 2023 was $7.6 million and $3.5 million, respectively, and consisted of interest and dividend income earned from our cash, cash equivalents and investments. The increase in interest and dividend income is the result of increased investment activity and more favorable interest rates as compared to the prior period and an increase in our balance of cash, cash equivalents, and investments.

Current wording

Interest and other income, net for the three months ended June 30, 2024 and 2023 was $7.5 million and $4.8 million, respectively, and consisted of interest and dividend income earned from our cash, cash equivalents and investments. The increase in interest and dividend income is the result of increased investment activity and more favorable interest rates as compared to the prior period and an increase in our balance of cash, cash equivalents and investments.

Previous wording

•an increase in KB707 costs of $1.4 million following the expansion of our research and development pipeline to oncology consisting of increase in payroll related costs to support our research and an increase in contract research expenses in preparation for the Phase 1 clinical trial of inhaled KB707.

Current wording

•an increase in KB707 costs of $1.7 million following the expansion of our research and development pipeline to oncology consisting of increase in payroll related costs to support our research and an increase in contract research expenses in preparation for the Phase 1 clinical trial of inhaled KB707that has now commenced,

Previous wording

•a decrease in other unallocated manufacturing expenses of $1.8 million due to the costs related to the manufacturing of VYJUVEK following FDA approval being recorded as inventory and cost of goods sold;

Current wording

•a decrease in other unallocated manufacturing expenses of $3.0 million primarily due to the costs related to the manufacturing of VYJUVEK following FDA approval being recorded as inventory and cost of goods sold and

Previous wording

•a decrease in stock-based compensation of $628 thousand due to the allocation of labor costs related to work performed to manufacture VYJUVEK to inventory following FDA approval; and

Current wording

•a decrease in stock-based compensation of $719 thousand due to the allocation of labor costs related to work performed to manufacture VYJUVEK to inventory following FDA approval.

Previous wording

•an increase in selling expenses related to the launch of VYJUVEK of $2.1 million, which includes $1.5 million related to our patient access program;

Current wording

•an increase in selling expenses related to the launch of VYJUVEK of $3.0 million, which includes $1.7 million related to our patient access program,

Previous wording

•an increase in net payroll related expenses of approximately $367 thousand, which was primarily driven by an increase in headcount in our commercial and other administrative functions to support overall growth for commercialization and includes a partially offsetting decrease in stock-based compensation of $509 thousand due to the departure of certain employees in the second half of 2023.

Current wording

•an increase in payroll related expenses of $1.0 million, which was primarily driven by an increase in headcount to support overall growth.

Previous wording

As of March 31, 2024, our cash, cash equivalents and short-term investments balance was approximately $538.3 million. Since operations began, we have incurred operating losses. As of March 31, 2024, we had an accumulated deficit of $268.9 million. We believe that our cash, cash equivalents and short-term investments as of March 31, 2024 will be sufficient to allow us to fund our operations for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

Current wording

As of June 30, 2024, our cash, cash equivalents and short-term investments balance was approximately $559.6 million. As of June 30, 2024, we had an accumulated deficit of $253.3 million. We believe that our cash, cash equivalents and short-term investments as of June 30, 2024 will be sufficient to allow us to fund our operations for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

Previous wording

Our transition to operating profitability is dependent upon the continued successful commercialization of VYJUVEK and the successful development, approval, manufacturing, and commercialization of our product candidates. Furthermore, we expect to incur increasing costs associated with satisfying regulatory and quality standards, maintaining and initiating product clinical trials, and furthering our efforts to discover, develop, manufacture, and commercialize current and future product candidates. We intend to fund future operations through on hand cash and cash equivalents, revenue generated from the sale of VYJUVEK, the sale of equity, debt financings, and we may also seek additional capital through arrangements with strategic partners or other sources.

Current wording

Our ability to continue to achieve operating profitability is dependent upon the continued successful commercialization of VYJUVEK and the successful development, approval, manufacturing, and commercialization of product candidates. Furthermore, we expect to incur increasing costs associated with satisfying regulatory and quality standards, maintaining and initiating product clinical trials, and furthering our efforts to discover, develop, manufacture, and commercialize current and future product candidates. We intend to fund future operations through on hand cash and cash equivalents, revenue generated from the sale of VYJUVEK, the sale of equity, debt financings, and we may also seek additional capital through arrangements with strategic partners or other sources.

Previous wording

Costs related to clinical trials can be unpredictable and therefore there can be no guarantee that we will have sufficient capital to fund our continued clinical studies of KB105, KB407, KB408, KB301, KB707 or our planned clinical and preclinical studies for our other product candidates, or our operations. Further, we expect future revenue to fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any product sales. While we are in the process of building out our internal vector manufacturing capacity, some of our manufacturing activities will be contracted out to third parties. Additionally, we currently utilize third-party contract research organizations to carry out some of our clinical development activities. As we seek to obtain regulatory approval for our product candidates, we expect to continue to incur significant manufacturing and commercialization expenses as we prepare for product sales, marketing, commercial manufacturing, packaging, labeling and distribution. Furthermore, pursuant to our settlement agreement with PeriphaGen, we will be required to pay three $12.5 million contingent milestone payments upon reporting $100.0 million in total cumulative sales, $200.0 million in total cumulative sales and $300.0 million in total cumulative sales. Our funds may not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for or commercially launch KB104, KB105, KB407, KB408, KB301, KB707, ophthalmic B-VEC or any other product candidate. Accordingly, to obtain marketing approval for and to commercialize these or any other product candidates, we may be required to obtain further funding through public or private equity offerings, debt financings, collaboration and licensing arrangements or other sources. Adequate additional financing may not be available to us on acceptable terms, if at all. Our failure to raise capital when needed could have a negative effect on our financial condition and our ability to pursue our business strategy.

Current wording

Costs related to clinical trials can be unpredictable and, therefore, there can be no guarantee that we will have sufficient capital to fund the continued or planned pre-clinical and clinical studies for our product candidates, or our operations. Further, we expect future revenue to fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any product sales. While we are in the process of building out our internal vector manufacturing capacity, some of our manufacturing activities will be contracted out to third parties. Additionally, we currently utilize third-party contract research organizations to carry out some of our clinical development activities. As we seek to obtain regulatory approval for our product candidates, we expect to continue to incur significant manufacturing and commercialization expenses as we prepare for product sales, marketing, commercial manufacturing, packaging, labeling and distribution. Furthermore, pursuant to our settlement agreement with PeriphaGen, we will be required to pay three $12.5 million contingent milestone payments upon reporting $100.0 million in cumulative sales, $200.0 million in cumulative sales and $300.0 million in cumulative sales. Our funds may not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for or commercially launch our product candidates. Accordingly, to obtain marketing approval for and to commercialize these or any other product candidates, we may be required to obtain further funding through public or private equity offerings, debt financings, collaboration and licensing arrangements or other sources. Adequate additional financing may not be available to us on acceptable terms, if at all. Our failure to raise capital when needed could have a negative effect on our financial condition and our ability to pursue our business strategy.