What changed in this filing

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Item 1. Financial Statements

2022-05-09 compared with 2021-11-08 · 117 added, 149 removed, 371 unchanged (42% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(In thousands, except shares and per share data) September 30,

(In thousands, except shares and per share data) March 31,

2022 December 31,

14 unchanged sentences

Accrued expenses and other current liabilities 50,817 16,297

Build to suit lease liability — 7,600

Total current liabilities 60,437 25,736

6 unchanged sentences

20,000,000 shares authorized at

September 30, 2021 (unaudited) and December 31, 2020;

shares issued, and no shares outstanding at September 30, 2021

March 31, 2022 (unaudited) and December 31, 2021;

shares issued, and no shares outstanding at March 31, 2022

(unaudited) and December 31, 2021

2 unchanged sentences

80,000,000 shares authorized at

September 30, 2021 (unaudited) and December 31, 2020;

and 19,714,220 shares issued and outstanding at September 30, 2021

(unaudited) and December 31, 2020, respectively

March 31, 2022 (unaudited) and December 31, 2021;

shares issued and outstanding at March 31, 2022

and 25,207,985 shares issued and outstanding at December 31, 2021

Additional paid-in capital 740,500 734,523

Accumulated other comprehensive income (expense) ( 14 ) 6

Accumulated other comprehensive expense ( 1,197 ) ( 163 )

Accumulated deficit ( 190,749 ) ( 140,784 )

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands, except share and per share data) 2022 2021

1 unchanged sentence

General and administrative 15,908 8,152

Litigation settlement 25,000 —

Total operating expenses 50,222 14,353

4 unchanged sentences

Net loss $ ( 49,965 ) ( 15,812 )

Unrealized gain (loss) on available-for-sale securities 7 ( 20 ) ( 20 ) 10

Unrealized loss on available-for-sale securities and other ( 1,034 ) ( 3 )

Comprehensive loss $ ( 50,999 ) $ ( 15,815 )

8 unchanged sentences

Stockholders'

(In thousands, except shares) Shares Amount Capital Income Deficit Equity

(In thousands, except shares) Shares Amount Capital Expense Deficit Equity

Balances at January 1, 2022 25,207,985 $ — $ 734,523 $ ( 163 ) $ ( 140,784 ) $ 593,576

Issuance of common stock, net 1,475 — 55 — — 55

Restricted stock surrendered for taxes ( 10,379 ) — ( 649 ) — — ( 649 )

Stock-based compensation expense — — 6,571 — — 6,571

Unrealized loss on investments — — — ( 3 ) — ( 3 )

Unrealized loss on investments and other — — — ( 1,034 ) — ( 1,034 )

Net loss — — — — ( 49,965 ) ( 49,965 )

Balances at March 31, 2022 25,199,081 $ — $ 740,500 $ ( 1,197 ) $ ( 190,749 ) $ 548,554

Issuance of common stock, net 975 — 14 — — 14

Stock-based compensation expense — — 4,261 — — 4,261

Unrealized loss on investments — — — ( 24 ) — ( 24 )

Net loss — — — — ( 16,363 ) ( 16,363 )

Balances at June 30, 2021 22,205,032 $ — $ 521,950 $ ( 21 ) $ ( 103,389 ) $ 418,540

Issuance of common stock, net 32,952 — 1,534 — — 1,534

Stock-based compensation expense — — 3,745 — — 3,745

Unrealized gain on investments — — — 7 — 7

Net loss — — — — ( 15,589 ) ( 15,589 )

Balances at September 30, 2021 22,237,984 $ — $ 527,229 $ ( 14 ) $ ( 118,978 ) $ 408,237

Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Total

Stockholders'

(In thousands, except shares) Shares Amount Capital Income Deficit Equity

(In thousands, except shares) Shares Amount Capital Expense Deficit Equity

Balances at January 1, 2021 19,714,220 $ — $ 363,292 $ 6 $ ( 71,214 ) $ 292,084

1 unchanged sentence

Stock-based compensation expense — — 2,350 — — 2,350

Unrealized gain on investments — — — 14 — 14

Unrealized loss on investments and other — — — ( 3 ) — ( 3 )

Net loss — — — — ( 15,812 ) ( 15,812 )

Balances at March 31, 2021 22,204,057 $ — $ 517,675 $ 3 $ ( 87,026 ) $ 430,652

Issuance of common stock, net 2,293,495 — 117,337 — — 117,337

Stock-based compensation expense — — 807 — — 807

Unrealized gain on investments — — — 16 — 16

Net loss — — — — ( 6,833 ) ( 6,833 )

Balances at June 30, 2020 19,664,059 $ — $ 360,877 $ 40 $ ( 51,221 ) $ 309,696

Issuance of common stock, net 42,811 — 298 — — 298

Stock-based compensation expense — — 1,356 — — 1,356

Unrealized loss on investments — — — ( 20 ) — ( 20 )

Net loss — — — — ( 9,610 ) ( 9,610 )

Balances at September 30, 2020 19,706,870 $ — $ 362,531 $ 20 $ ( 60,831 ) $ 301,720

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

(In thousands) 2022 2021

4 unchanged sentences

Stock-based compensation expense 6,430 2,313

Loss on disposals of fixed assets — 33

Non-cash interest expense — 1,492

Other, net ( 135 ) 12

Changes in operating assets and liabilities

Prepaid expenses and other current assets 820 1,312

Prepaid rent — ( 2,400 )

Other non-current assets 9 —

Lease liability ( 126 ) ( 77 )

1 unchanged sentence

Accrued expenses and other current liabilities 2,013 276

Accrued legal settlement 25,000 —

Net cash used in operating activities ( 15,493 ) ( 9,654 )

6 unchanged sentences

Issuance of common stock, net 107 152,264

Taxes paid related to settlement of restricted stock awards ( 649 ) —

Repayment of ASTRA build to suit liability — ( 7,960 )

Net cash provided by financing activities 145,613 117,878

Net increase in cash and cash equivalents 18,345 94,855

Net cash provided by (used in) financing activities ( 542 ) 144,304

Net increase (decrease) in cash and cash equivalents ( 71,943 ) 133,903

Cash and cash equivalents at beginning of period 341,246 268,269

2 unchanged sentences

Unpaid purchases of property and equipment $ 14,507 $ 2,615

Initial recognition of right-of-use assets $ 1,394 $ —

Unpaid offering costs $ 24 $ 214

Initial recognition of right-of-use assets and modification $ 4,396 $ —

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7 unchanged sentences

("Jeune"), in Delaware, a wholly-owned subsidiary, for the purpose of undertaking preclinical and clinical studies for aesthetic skin conditions.

We are a clinical stage biotechnology company leading the field of redosable gene delivery for the treatment of serious rare diseases.

On January 7, 2022, the Company incorporated Krystal Biotech Switzerland GmbH, for the purpose of establishing initial operations in Europe for the development and commercialization of Krystal's pipeline.

We are a clinical stage biotechnology company leading the field of redosable gene delivery.

Using our patented platform that is based on engineered herpes simplex virus type 1 ("HSV-1"), we create vectors that efficiently deliver therapeutic transgenes to cells of interest in multiple organ systems.

1 unchanged sentence

We formulate our vectors for non-invasive or minimally invasive routes of administration at a doctor’s office or potentially in the patient’s home by a healthcare professional.

Our goal is to develop easy to use, medicines to dramatically improve the lives of patients living with rare diseases.

Our goal is to develop easy to use medicines to dramatically improve the lives of patients living with debilitating diseases.

Our innovative technology platform is supported by in-house, commercial scale current good manufacturing practices ("cGMP") manufacturing capabilities.

As of September 30, 2021, the Company had an accumulated deficit of $ 119.0 million.

With the net proceeds raised from its public and private securities offerings, including the public offering of its common stock completed on February 1, 2021, the Company believes that its cash, cash equivalents and short-term investments of approximately $ 343.1 million as of September 30, 2021 will be sufficient to allow the Company to fund its planned operations for at least the next 12 months from the date of this Quarterly Report on Form 10-Q.

As of March 31, 2022, the Company had an accumulated deficit of $ 190.7 million.

With the net proceeds raised from its public and private securities offerings the Company believes that its cash, cash equivalents and short-term investments of approximately $ 434.6 million as of March 31, 2022 will be sufficient to allow the Company to fund its planned operations for at least the next 12 months from the date of this Quarterly Report on Form 10-Q.

As the Company continues to incur losses, a transition to profitability is dependent upon the successful development, approval and commercialization of its product candidates and the achievement of a level of revenues adequate to support the Company’s cost structure.

6 unchanged sentences

The accompanying unaudited interim condensed financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), as found in the Accounting Standards Codification (“ASC”), the Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”), and the rules and regulations of the US Securities and Exchange Commission (“SEC”).

In the opinion of management, all adjustments, which consist of all normal recurring adjustments necessary for a fair presentation of the Company's financial position and results of operations for the interim periods ended September 30, 2021 and 2020, are reflected in the interim condensed consolidated financial statements.

In the opinion of management, all adjustments, which consist of all normal recurring adjustments necessary for a fair presentation of the Company's financial position and results of operations for the interim periods ended March 31, 2022 and 2021, are reflected in the interim condensed consolidated financial statements.

All intercompany balances and transactions have been eliminated in consolidation.

Certain prior period amounts have been reclassified to conform to the current period presentation.

The reclassified amounts have no impact on the Company’s previously reported financial position or results of operation.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

These unaudited interim condensed financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC on March 1, 2021.

Risks and Uncertainties

25 unchanged sentences

Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase.

Investments with maturities of greater than 90 days but less than one year are classified as short-term investments on the consolidated balance sheets and consist of certificates of deposit, commercial paper, corporate bonds, and government agency securities.

Investments with maturities of greater than 90 days but less than one year are classified as short-term investments on the consolidated balance sheets and consist of commercial paper, corporate bonds, and government agency securities.

Investments with maturities of greater than one year are classified as long-term investments on the consolidated balance sheets and consist of corporate bonds and government agency securities.

16 unchanged sentences

The Company classifies all of its investments as available-for-sale.

Our available-for-sale, short-term and long-term investments, which consist of certificates of deposit, commercial paper, corporate bonds, and government agency securities are considered to be Level 2 valuations.

Our available-for-sale, short-term and long-term investments, which consist of, commercial paper, corporate bonds, and government agency securities are considered to be Level 2 valuations.

The fair value of Level 2 financial assets is determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data, such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities.

13 unchanged sentences

An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount of the asset.

The Company has no t recognized any impairment losses for the three and nine months ended September 30, 2021 and 2020.

The Company has no t recognized any impairment losses for the three months ended March 31, 2022 and 2021.

The Company accounts for its lease agreements in accordance with FASB ASC Topic 842, Leases ("ASC 842").

19 unchanged sentences

Stock-Based Compensation Expense

The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation-Stock Compensation (“ASC 718”).

The Company applies the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification, or ASC, Topic 718, Compensation—Stock Compensation ("ASC 718"), to account for stock-based compensation.

Compensation costs related to stock options granted is based on the estimated fair value of the awards on the date of grant.

ASC 718 requires all stock-based payments, including grants of stock options and restricted stock, to be recognized in the statements of operations based on their grant-date fair values.

5 unchanged sentences

and (iv) expected dividends.

Due to the lack of sufficient history and trading volume of our Common Stock and a lack of Company-specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded.

When selecting these public companies on which it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected term of the stock-based awards.

The Company computes historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards.

The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Due to the lack of Company-specific historical option activity, the Company has estimated the expected term of its employee and non-employee stock options using the “simplified” method, whereby the expected term equals the arithmetic mean of the vesting term and the original contractual term of the option.

The risk-free interest rates are based on the US Treasury securities with a maturity date commensurate with the expected term of the associated award.

The Company has never paid and does not expect to pay dividends in the foreseeable future.

Once the Company's own sufficient historical volatility data was obtained, the Company eliminated the use of a representative peer group and uses only its own historical volatility data in its estimate of expected volatility.

The Company estimates the expected term of its stock options using the “simplified” method, whereby the expected term equals the arithmetic mean of the vesting term and the original contractual term of the option.

The risk-free interest rates are based on US Treasury securities with a maturity date commensurate with the expected term of the associated award.

Company has never paid and does not expect to pay dividends in the foreseeable future.

The Company accounts for forfeitures as they occur.

16 unchanged sentences

Common share equivalents consist of common stock issuable upon exercise of stock options and vesting of restricted stock awards.

There were 1,900,638 and 853,336 common share equivalents outstanding as of September 30, 2021 and 2020, respectively, in the form of stock options and unvested restricted stock awards, that have been excluded from the calculation of diluted net loss per common share as their effect would be anti-dilutive for all periods presented.

There were 3,226,962 and 1,423,540 common share equivalents outstanding as of March 31, 2022 and 2021, respectively, in the form of stock options and unvested restricted stock awards, that have been excluded from the calculation of diluted net loss per common share as their effect would be anti-dilutive for all periods presented.

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In thousands, except shares and per share data) (Unaudited) (Unaudited)

(In thousands, except shares and per share data) (Unaudited)

Net loss per common share $ ( 49,965 ) $ ( 15,812 )

5 unchanged sentences

Fair Value Instruments

The following tables show the Company’s cash, cash equivalents and available-for-sale securities by significant investment category as of September 30, 2021 and December 31, 2020, respectively (in thousands):

September 30, 2021

The following tables show the Company’s cash, cash equivalents and available-for-sale securities by significant investment category as of March 31, 2022 and December 31, 2021, respectively (in thousands):

March 31, 2022

Amortized Cost Gross

20 unchanged sentences

Subtotal 341,246 — — 341,246 341,246 — —

Certificates of deposit 2,986 7 — 2,993 — 2,993 —

Commercial paper 40,469 1 ( 4 ) 40,466 — 40,466 —

Corporate bonds 83,300 10 ( 114 ) 83,196 — 35,768 47,428

government agency securities 37,621 — ( 62 ) 37,559 — 20,616 16,943

Subtotal 161,390 11 ( 180 ) 161,221 — 96,850 64,371

6 unchanged sentences

Property and equipment, net consist of the following (in thousands):

September 30,

2022 December 31,

7 unchanged sentences

Property and equipment, net $ 136,927 $ 112,355

Depreciation expense was $ 474 thousand and $ 1.4 million for the three and nine months ended September 30, 2021 and $ 399 thousand and $ 1.1 million three and nine months ended September 30, 2020, respectively.

Depreciation expense was $ 462 thousand and $ 438 thousand for the three months ended March 31, 2022 and 2021, respectively.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

September 30,

2022 December 31,

5 unchanged sentences

Accrued financing costs 54 26

Accrued litigation settlement 25,000 —

Other current liabilities 142 87

4 unchanged sentences

On May 26, 2016, the Company signed an operating lease for laboratory and office space that commenced in June 2016 and expired on October 31, 2017 (the “2016 Lease”).

The 2016 Lease has been amended several times to increase the area leased, which currently consists of approximately 44,000 square feet.

The 2016 Lease has been amended several times to increase the area leased, which currently consists of approximately 47,000 square feet and includes the commercial scale cGMP-compliant manufacturing facility, ANCORIS.

As a result of the lease amendments, the lease expiration date was extended to October 31, 2031.

On December 26, 2019, we entered into a lease agreement for our second commercial gene therapy facility ("ASTRA") in the Pittsburgh, Pennsylvania area ("ASTRA lease") with Northfield I, LLC (the "Landlord" or "Northfield") with an initial lease term that expired on October 31, 2035.

The ASTRA lease contained an option ("Purchase Option") to purchase the building, related improvements and take corresponding assignment of the Landlord's rights under its existing Ground Lease (the

"Ground Lease").

an initial lease term that expired on October 31, 2035.

The ASTRA lease contained an option ("Purchase Option") to purchase the building, related improvements and take corresponding assignment of the Landlord's rights under its existing Ground Lease (the "Ground Lease").

A cash contribution in the amount of $ 2.4 million was paid to escrow on January 21, 2020.

9 unchanged sentences

On March 5, 2021, the purchase closed and the Company determined that reclassification of the construction in progress to buildings and leasehold improvements was not appropriate as the interior of the building was not yet ready for its intended use.

The building continues to be held under construction in progress as of September 30, 2021.

The building continues to be held under construction in progress as of March 31, 2022.

The interior of the building is currently under construction and is expected to be completed and validated in 2022.

3 unchanged sentences

When the PSA was finalized, the Company took assignment of the Lessor's Ground Lease, in accordance with the Purchase Option, of which lease payments are based on annual payments of $ 82 thousand, and are subject to a cumulative 10 % escalation clause every 5 years through 2071.

As of September 30, 2021, future minimum commitments under the Company’s operating leases were as follows (in thousands):

2021 (remaining three months) $ 255

On December 15, 2021, the Company entered into a 3 year lease agreement for our Boston, Massachusetts office (the "Boston Lease") location that commenced in January 2022 and expires in January 2025.

As of March 31, 2022, future minimum commitments under the Company’s operating leases were as follows (in thousands):

2022 (remaining nine months) $ 1,115

Thereafter 12,063

3 unchanged sentences

Supplemental condensed consolidated balance sheet information related to leases is as follows:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Operating leases:

5 unchanged sentences

Weighted average discount rate 9.3 % 9.5 %

The Company recorded operating lease costs of $ 339 thousand and $ 836 thousand for the three and nine months ended September 30, 2021 and $ 148 thousand and $ 458 thousand for the three and nine months ended September 30, 2020, respectively, and variable lease costs of $ 65 thousand and $ 183 thousand for the three and nine months ended September 30, 2021 and $ 60 thousand and $ 88 thousand for the three and nine months ended September 30, 2020, respectively.

The Company recorded operating lease costs of $ 409 thousand and $ 218 thousand for the three months ended March 31, 2022 and 2021, respectively, and variable lease costs of $ 49 thousand and $ 37 thousand for the three months ended March 31, 2022 and 2021, respectively.

Agreements with Contract Manufacturing Organizations and Contract Research Organizations

The Company has entered into various agreements with Contract Manufacturing Organizations (“CMOs”) for the manufacture of sterile excipients that are formulated with in-house produced vectors as part of the final drug product applied in certain of our clinical trials.

The Company has also entered into agreements with third-party Contract Research Organizations ("CROs") to provide research and development services to further the Company’s analysis of its product candidates.

The agreements entered into with the CMOs and CROs provide the terms and conditions for their respective services, which may include research and development activities, storage, packaging, labelling, and/or testing of our preclinical and clinical-stage products.

The Company enters into various agreements in the normal course of business with Contract Research Organizations ("CROs"), Contract Manufacturing Organizations ("CMOs") and other third parties for preclinical research studies, clinical trials and testing and manufacturing services.

The agreements with CMOs relate to the manufacturing of sterile gel that is mixed with in-house produced vectors as part of the final drug product applied in certain of our clinical trials.

These agreements may also include research and development activities, storage, packaging, labeling, and/or testing of our preclinical and clinical-stage products.

The Company is obligated to make milestone payments under certain of these agreements.

The estimated remaining commitment as of September 30, 2021 under these agreements is approximately $ 2.6 million.

The estimated remaining commitment as of March 31, 2022 under these agreements is approximately $ 3.1 million.

The Company may also be responsible for the payment of a monthly service fee for project management services for the duration of any agreements.

The Company has incurred expenses under these agreements of $ 744 thousand and $ 3.3 million for the three and nine months ended September 30, 2021 and $ 1.3 million and $ 2.3 million for the three and nine months ended September 30, 2020, respectively.

The Company has incurred expenses under these agreements of $ 1.8 million for each of the three months ended March 31, 2022 and 2021.

Commercial Preparedness Activities

The Company has contracted with various third parties to facilitate, coordinate and perform agreed upon commercial preparedness and market research activities relating to our lead product candidate, B-VEC.

The Company has contracted with various third parties to facilitate, coordinate and perform agreed upon commercial preparedness and market research activities relating to our lead product candidate.

These contracts typically call for the payment of fees for services upon the achievement of certain milestones.

The estimated remaining commitment as of September 30, 2021 is $ 3.9 million.

The Company has incurred expenses under these activities of $ 1.8 million and $ 4.1 million for the three and nine months ended September 30, 2021 and $ 582 thousand and $ 1.1 million for the three and nine months ended September 30, 2020, respectively.

The estimated remaining commitment as of March 31, 2022 is $ 4.3 million.

The Company has incurred expenses under these activities of $ 3.1 million and $ 1.3 million for the three months ended March 31, 2022 and 2021, respectively.

ASTRA Contractual Obligations

2 unchanged sentences

These contracts typically call for the payment of fees for services or materials upon the achievement of certain milestones.

The estimated remaining commitment as of September 30, 2021 is $ 39.4 million.

The Company has included costs incurred to-date associated with ASTRA within construction in progress as of September 30, 2021.

The estimated remaining commitment as of March 31, 2022 is $ 20.2 million.

The Company has included costs incurred to-date associated with ASTRA within construction in progress as of March 31, 2022.

On June 30, 2021, the Company entered into a Standard Form of Contract for Construction and the corresponding General Conditions of the Contract for Construction (collectively, the “Agreement”) with The Whiting-Turner Contracting Company (“Whiting-Turner”), pursuant to which Whiting-Turner is constructing and managing the construction of ASTRA.

Subject to certain conditions in the Agreement, the Company will pay Whiting-Turner a contract price consisting of the cost of work plus a fee equal to 1.75 % of the cost of work, subject to a guaranteed maximum price to be agreed upon in an amendment to the Agreement at a later date.

Effective September 13, 2021, the Company entered into a guaranteed maximum price amendment (the "Amendment") to the Agreement to set forth the guaranteed maximum price, as well as the date by which Whiting-Turner is to achieve

Substantial Completion (as defined in the Agreement).

Under the Amendment, the guaranteed maximum price to be paid by the Company is $ 78.9 million, subject to certain additions and deductions by change orders as provided by the Agreement, and the date of Substantial Completion of Whiting-Turner's work under the Agreement is March 30, 2022.

Whiting-Turner’s work under the Agreement represents a portion of the work necessary to complete construction of the ASTRA facility and, therefore the date of Substantial Completion of Whiting-Turner’s work under the Agreement does not equate to the date of completion of ASTRA.

Subject to certain conditions in the Agreement, the Company will pay Whiting-Turner a contract price consisting of the cost of work plus a fee equal to 1.75 % of the cost of work.

Under the Amendment, the guaranteed maximum price to be paid by the Company is $ 82.3 million, subject to certain additions and deductions by change orders as provided by the Agreement.

Whiting-Turner’s work under the Agreement represents a portion of the work necessary to complete construction

of the ASTRA facility and, therefore the date of Substantial Completion of Whiting-Turner’s work under the Agreement does not equate to the date of completion of ASTRA.

The guaranteed maximum price under the Agreement constitutes only a portion of the total estimated cost of building and equipping ASTRA.

1 unchanged sentence

On May 1, 2020, a complaint was filed against us in the United States District Court for the Western District of Pennsylvania by PeriphaGen, Inc.

("PeriphaGen"), which also named our Chief Executive Officer and Chief Operating Officer, Krish Krishnan and Suma Krishnan, respectively.

The complaint alleges breach of contract and misappropriation of trade secrets, which secrets the plaintiff asserts were used to develop our product candidates, including the vector backbones, and our STAR-D platform.

("PeriphaGen"), which also named our Chief Executive Officer and President, R&D, Krish Krishnan and Suma Krishnan, respectively.

The complaint alleged breach of contract and misappropriation of trade secrets, which secrets the plaintiff asserted were used to develop our product candidates, including the vector backbones, and our STAR-D platform.

We answered the complaint on June 26, 2020 by denying the allegations and brought a counterclaim asking the court to declare that we did not misappropriate PeriphaGen’s trade secrets or confidential information, and to further declare that we are the rightful and sole owner of our product candidates and STAR-D platform.

In addition, we filed a third-party complaint against two principals of PeriphaGen, James Wechuck and David Krisky, alleging breach of contract and seeking contribution and indemnification from them in the event PeriphaGen is awarded damages.

On July 29, 2020, PeriphaGen filed its response to our answer and counterclaim, denying the allegations in the counterclaim.

On the same day, Messrs Wechuck and Krisky filed a motion to dismiss the third-party complaint on various grounds, and we opposed the motion.

On December 1, 2020, the court ruled on Messrs.

Wechuck and Krisky's motion to dismiss our third-party complaint.

The court determined that our claims for contribution and indemnification based on PeriphaGen's state law claims for unfair competition and misappropriation of trade secrets can proceed.

Our breach of contract claim will also go forward in full.

Fact discovery is ongoing.

PeriphaGen is seeking monetary damages, injunctive relief, attorneys' fees and costs.

While we are unable to provide any assurances as to the ultimate outcome of the case, we believe the allegations in the complaint are without merit, and we intend to vigorously defend against them.

We are currently unable to estimate the costs and timing of any litigation, including any potential damages if PeriphaGen were to prevail on its claims.

The Company has received insurance proceeds during fiscal year 2021 relating to legal defense costs and expenses associated with the PeriphaGen litigation.

During the three and nine months ended September 30, 2021, the Company has received $ 954 thousand of insurance proceeds and an additional $ 619 thousand has been approved for reimbursement, which is expected to be received in November 2021 and has been recorded as a receivable within Prepaid Expenses and Other Current Assets on the Condensed Consolidated Balance Sheet as management determined that the amount was probable of collection.

On March 9, 2022, the court officially ordered the parties to attend mediation on March 11, 2022.

During the course of the mediation process, the parties were able to exchange information, allowing the parties to value their positions.

On March 12, 2022, we entered into a binding term sheet.

In consideration of settling the dispute, the acquisition of certain PeriphaGen assets, and the grant of a license by PeriphaGen for dermatological applications, Krystal made a payment of $ 25.0 million on April 28, 2022.

Upon approval of Krystal’s first product by the U.S.

Food and Drug Administration ("FDA"), Krystal will pay an additional $ 12.5 million, followed by three additional $ 12.5 million contingent milestone payments upon reaching $ 100.0 million in total cumulative sales, $ 200.0 million in total cumulative sales and $ 300.0 million in total cumulative sales.

As defined in the settlement agreement, cumulative sales shall include all revenue from sales of Krystal products by Krystal and its affiliates and licensees, as reported by Krystal in its annual Form 10-K filings.

If all milestones are achieved, the total consideration for settling the dispute, acquiring certain assets, and granting of a license from PeriphaGen will be $ 75.0 million.

The final settlement agreement was signed on April 28, 2022, and, because we deemed settlement to be probable as of the balance sheet date, we have recorded an accrued liability equal to the settlement of $ 25.0 million under accrued expenses and other current liabilities on the condensed consolidated balance sheet and under litigation settlement expense on the condensed consolidated statements of operations.

The additional contingent milestone payments were not deemed probable due to uncertainty in the achievement of these milestones as of March 31, 2022, and therefore no additional accrual has been recorded.

The Company has received $ 768 thousand of insurance proceeds during the three months ended March 31, 2022 and we have recorded an additional $ 301 thousand as a receivable within prepaid expenses and other current assets on the condensed consolidated balance sheet as management determined that the amount was probable of collection relating to legal defense costs and expenses associated with the PeriphaGen litigation.

The reimbursements have been recorded as an offset to our legal fees included in general and administrative expenses on the condensed consolidated statements of operations and within operating activities on the condensed consolidated statements of cash flows.

1 unchanged sentence

Sale of Common Stock

On December 3, 2021, the Company completed a public offering of 2,866,667 shares of its common stock, including 200,000 shares purchased by the underwriters, at $ 75.00 per share.

Net proceeds to the Company from the offering were $ 201.9 million after deducting underwriting discounts and commissions of approximately $ 12.9 million, and other offering expenses payable by the Company of $ 227 thousand.

On February 1, 2021, the Company completed a public offering of 2,211,538 shares of its common stock, including 288,461 shares purchased by the underwriters, at $ 65.00 per share.

Net proceeds to the Company from the offering were $ 134.9 million after deducting underwriting discounts and commissions of approximately $ 8.6 million, and other offering expenses payable by the Company of $ 198 thousand.

On December 31, 2020, the Company entered into a sales agreement (the "Sales Agreement") with Cowen and Company, LLC ("Cowen") with respect to an at-the-market equity offering program ("ATM Program"), under which Cowen will act as the Company's agent and/or principal and may issue and sell from time to time, during the term of the Sales Agreement, shares of our common stock, par value $ 0.0001 per share, having an aggregate offering price up to $ 150.0 million ("Placement Shares").

On December 31, 2020, the Company entered into a sales agreement (the "Sales Agreement") with Cowen and Company, LLC ("Cowen") with respect to an at-the-market equity offering program ("ATM Program"), under which Cowen will act as the Company's agent and/or principal and may issue and sell from time to time, during the term of the Sales Agreement, shares of our common stock, having an aggregate offering price up to $ 150.0 million ("Placement Shares").

Related offering expenses payable by the Company were $ 172 thousand.

The issuance and sale of the Placement Shares by the Company under the Sales Agreement will be made pursuant to the Company's effective "shelf" registration statement on Form S-3.

During the nine months ended September 30, 2021, 262,500 shares of common stock were issued pursuant to the ATM Program at a weighted average price of $ 66.50 per share for net proceeds of $ 16.9 million after deducting underwriting discounts and commissions of approximately $ 524 thousand, resulting in a remaining $ 132.5 million available for issuance under the ATM Program.

On May 21, 2020, the Company completed a public offering of 2,275,000 shares of its common stock to the public at $ 55.00 per share.

Net proceeds to the Company from the offering were $ 117.2 million after deducting underwriting discounts and commissions of approximately $ 7.5 million, and other offering expenses payable by the Company of approximately $ 463 thousand.

The issuance and sale of the Placement Shares by the Company under the Sales Agreement will be made pursuant to the Company's effective "shelf" registration statement on Form

During the three months ended March 31, 2021, 262,500 shares of common stock were issued pursuant to the ATM Program at a weighted average price of $ 66.50 per share for net proceeds of $ 16.9 million after deducting underwriting discounts and commissions of approximately $ 524 thousand, resulting in a remaining $ 132.5 million available for issuance under the ATM Program.

Stock-Based Compensation

Stock Options

Stock options granted to employees a nd non-employees ve st ratably over four-year periods and stock options granted to directors of the company vest ratably over one year to four-year periods.

Options granted to employees vest ratably over four-year periods and stock options granted to directors of the company vest ratably over one year to four-year periods.

Stock options have a life of ten years .

The Company granted 322,500 and 1,122,450 stock options to employees and directors of the Company during the three and nine months ended September 30, 2021, respectively, and 195,850 and 740,250 stock options to employees and directors of the Company during the three and nine months ended September 30, 2020, respectively.

The Company granted 50,000 and zero stock options to non-employees during the three and nine months ended September 30, 2021 and 2020, respectively.

The Company granted 1,179,500 and 502,450 stock options to employees and directors of the Company during the three months ended March 31, 2022 and 2021, respectively.

The following table summarizes the Company’s stock option activity:

8 unchanged sentences

Expired — $ —

Outstanding at September 30, 2021 1,801,838 $ 55.78 9.1 $ 9,456

Exercisable at September 30, 2021 265,843 $ 30.02 7.4 $ 6,087

(1) Aggregate intrinsic value represents the difference between the closing stock price of our common stock on September 30, 2021 and the exercise price of outstanding in-the-money options.

The total intrinsic value (the amount by which the fair market value exceeds the exercise price) of stock options exercised during the three and nine months ended September 30, 2021 was $ 348 thousand and $ 1.2 million, respectively, and during the three and nine months ended September 30, 2020 was $ 1.7 million and $ 2.9 million, respectively.

The weighted-average grant-date fair value per share of options granted to employees and directors during the three and nine months ended September 30, 2021 was $ 35.00 and $ 43.73 , respectively, and during the three and nine months ended September 30, 2020 was $ 27.44 and $ 30.58 , respectively.

The weighted-average grant-date fair value per share of options granted to non-employees during the three and nine months ended September 30, 2021 was $ 33.93 and $ 33.93 , respectively, and during the three and nine months ended September 30, 2020 was zero , respectively.

There was $ 51.9 million of unrecognized stock-based compensation expense related to employees and directors’ option awards that is expected to be recognized over a weighted-average period of 3.3 years as of September 30, 2021.

There was $ 1.7 million of unrecognized stock-based compensation expense related to non-employees’ option awards that is expected to be recognized over a weighted-average period of 3.9 years as of September 30, 2021.

The Company has recorded aggregate stock-based compensation expense related to the issuance of stock option awards in the condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(unaudited) (unaudited)

Outstanding at March 31, 2022 3,152,862 $ 58.99 9.1 $ 30,364

Exercisable at March 31, 2022 439,954 $ 44.52 7.6 $ 10,929

(1) Aggregate intrinsic value represents the difference between the closing stock price of our common stock on March 31, 2022 and the exercise price of outstanding in-the-money options.

The total intrinsic value (the amount by which the fair market value exceeds the exercise price) of stock options exercised during the three months ended March 31, 2022 and 2021 was $ 36 thousand and $ 808 thousand, respectively.

The weighted-average grant-date fair value per share of options granted to employees and directors during the three months ended March 31, 2022 and 2021 was $ 43.09 and $ 50.04 , respectively.

There was $ 101.1 million of unrecognized stock-based compensation expense related to employees' and directors’ option awards that is expected to be recognized over a weighted-average period of 3.4 years as of March 31, 2022.

The Company has recorded aggregate stock-based compensation expense related to the issuance of stock option awards in the condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 as follows (in thousands):

Three Months Ended March 31,

Research and development $ 1,368 $ 516

2 unchanged sentences

We capitalize the portion of stock-based compensation that relates to work performed on the construction of new buildings.

There was $ 79 thousand and $ 182 thousand of stock-based compensation that was capitalized in the three and nine months ended September 30, 2021, respectively, and zero of stock-based compensation that was capitalized in the three and nine months ended September 30, 2020, respectively.

The Company recorded stock-based compensation expense of $ 3.2 million and $ 9.0 million for the three and nine months ended September 30, 2021, respectively, and $ 1.4 million and $ 2.7 million for the three and nine months ended September 30, 2020, respectively.

The fair value of options was estimated at the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

There was $ 141 thousand and $ 37 thousand of stock-based compensation that was capitalized in the three months ended March 31, 2022 and 2021, respectively.

The Company recorded stock-based compensation expense of $ 6.0 million and $ 2.1 million for the three months ended March 31, 2022 and 2021, respectively.

The fair value of options was estimated at the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Expected stock price volatility 78 % 73 %

5 unchanged sentences

Restricted stock awards ("RSAs") granted to employees vest ratably over a four-year period.

Restricted stock awards have a life of ten years.

The Company granted zero and 98,800 RSAs to employees of the Company during the three and nine months ended September 30, 2021, respectively, and zero RSAs to employees of the Company during the three and nine months ended September 30, 2020.

The following table summarizes the Company’s RSA activity:

The Company granted zero and 98,800 RSAs to employees of the Company during the three months ended March 31, 2022 and 2021, respectively.

Number of Shares Weighted Average

1 unchanged sentence

Granted — $ —

Vested ( 14,321 ) $ 78.89

Forfeited ( 10,379 ) $ 78.89

Non-vested RSAs as of September 30, 2021 98,800 $ 78.89

As of September 30, 2021, 98,800 RSAs were outstanding.

The fair value of each restricted stock award was $ 78.89 reflecting the closing price of our common stock on the grant date.

The Company recorded stock-based compensation expense related to RSAs of $ 491 thousand and $ 1.2 million for the three and nine months ended September 30, 2021, respectively, and zero for the three and nine months ended September 30, 2020, within general and administrative expenses in the accompanying condensed consolidated statements of operations (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(unaudited) (unaudited)

Non-vested RSAs as of March 31, 2022 74,100 $ 78.89

There was $ 5.7 million of unrecognized stock-based compensation expense related to employees’ awards that is expected to be recognized over a weighted-average period of 2.9 years as of March 31, 2022.

The Company recorded stock-based compensation expense related to RSAs of $ 480 thousand and $ 182 thousand for the three months ended March 31, 2022 and 2021, respectively, within general and administrative expenses in the accompanying condensed consolidated statements of operations (in thousands):

Three Months Ended March 31,

General and administrative $ 480 $ 182

Total stock-based compensation $ 480 $ 182

Shares remaining available for grant under the Company’s stock incentive plan were 1,381,481 , with a sublimit for incentive stock options of 379,921 , at September 30, 2021.

Related Party Transactions

In December 2019, the Company advanced $ 420 thousand to a member of our management team to cover the personal payroll and income taxes on their taxable income from NSO exercises.

This employee repaid the Company in full in January 2020.

Shares remaining available for grant under the Company’s stock incentive plan were 1,028,815 , with a sublimit for incentive stock options of 26,546 , at March 31, 2022.

Subsequent Events

The Company evaluates events or transactions that occur after the balance sheet date, but prior to the issuance of the financial statements, to identify matters that require disclosure.

The Company concluded that no subsequent events have occurred that would require recognition or disclosure in the condensed consolidated financial statements.

On April 28, 2022, the Company entered into a final settlement agreement and paid PeriphaGen an upfront payment of $ 25.0 million for:

(i) the resolution of all claims in the trade secret litigation with PeriphaGen, Inc.;

(ii) the acquisition of certain PeriphaGen assets, and (iii) the grant of a license by PeriphaGen for dermatological applications.

On April 5, 2022, pursuant to an inbound request, the Company issued and sold 434,782 shares of common stock at a weighted average price of $ 69.00 per share, under it's ATM Program, for net proceeds of $ 29.1 million after deducting underwriting discounts and commissions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements