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Item 1A. Risk Factors

2023-02-27 compared with 2022-02-28 · 272 added, 226 removed, 583 unchanged (46% of the section changed)

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Our ability to achieve profitability depends on our ability to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize our product candidates.

We do not anticipate generating revenues from product sales for the next year, if ever.

We have devoted substantially all our efforts to date to research and development of our gene therapy product candidates as well as to building out our infrastructure.

We expect that it could be a year, if ever, before we have a commercialized product candidate.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future.

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

The net losses we incur may fluctuate significantly from quarter to quarter.

We anticipate that our expenses will increase substantially if, and as, we:

• continue our research and the clinical development of Vyjuvek, KB105, and KB301, including our current clinical trials and planned future trials;

• initiate clinical trials for KB104 and KB407 and preclinical studies for any additional product candidates that we may pursue in the future;

• prepare our BLA, MAA and approvals in certain other countries for Vyjuvek;

• continue to operate our in-house commercial-scale cGMP manufacturing facility, ANCORIS, and complete build out of our second cGMP manufacturing facility, ASTRA;

• continue our research and the clinical development of our product candidates, including our current clinical trials and planned future trials;

• initiate clinical trials for certain of our product candidates and preclinical studies for any additional product candidates that we may pursue in the future;

• prepare for regulatory approvals for our product candidates in the United States, EU and in other key geographies;

• continue to operate our in-house commercial-scale CGMP manufacturing facility, ANCORIS, and complete build out and startup of operations at our second CGMP manufacturing facility, ASTRA;

• manufacture material for clinical trials or potential commercial sales;

• further develop our gene therapy product candidate portfolio;

• establish a sales, marketing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval;

• further establish a sales, marketing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval;

• develop, maintain, expand and protect our intellectual property portfolio;

• acquire or in-license other product candidates and technologies,

• seek marketing approval for Vyjuvek and additional product candidates in the EU and in other key geographies.

To become and remain profitable, we must develop and eventually commercialize one or more product candidates with significant market potential.

This will require us to be successful in a range of challenging activities, including completing the clinical trials for our product candidates, developing and validating commercial scale manufacturing processes, obtaining marketing approval for this product candidate, manufacturing, marketing and selling any future product candidates for which we may obtain marketing approval and satisfying any post-marketing requirements.

This will require us to be successful in a range of challenging activities, including completing the clinical trials for our product candidates, developing and validating commercial scale manufacturing processes, obtaining marketing approval, manufacturing, marketing and selling any product candidates for which we may obtain marketing approval and satisfying any post-marketing requirements.

If we were required to discontinue development of any of our product candidates, if any of our product candidates do not receive regulatory approval, if we do not obtain our targeted indications for our product candidates or if any of our product candidates fails to achieve sufficient market acceptance for any indication, we could be delayed by many years in our ability to achieve profitability, if ever, and would materially adversely affect our business prospects and financial condition.

Moreover, if we decide to leverage any success with our Vyjuvek, KB105, KB301, KB104 or KB407, KB408 product candidates to develop other product opportunities, we may not be successful in such efforts.

Moreover, if we decide to leverage any success with any of our current product candidates to develop other product opportunities, we may not be successful in such efforts.

In any such event, our business will be materially adversely affected.

We currently only have three product candidates, Vyjuvek, KB105, and KB301 in clinical trials and we may never develop, acquire or in-license additional product candidates.

We currently have several product candidates in the clinical trials stages, but we may never develop, acquire or in-license additional product candidates.

We may never succeed in any or all these activities and, even if we do, we may never generate revenues that are significant or large enough to achieve profitability.

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Because of the numerous risks and uncertainties associated with pharmaceutical product and biological development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability.

If we are required by the FDA, the EMA, or other regulatory authorities to perform studies in addition to those currently

expected, or if there are any delays in completing our clinical trials or the development of Vyjuvek, KB105, and KB301 our expenses could increase and revenue could be further delayed.

We may need to raise additional funding in order to receive approval for our other product candidates.

If we are required by the FDA, the EMA, or other regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of our product candidates, our expenses could increase and revenue from product candidates in development and profitability from commercially available products could be further delayed.

We may need to raise additional funding in order to receive approval for our product candidates.

Such funding may not be available on acceptable terms, or at all.

Failure to obtain this necessary capital when needed may force us to delay, limit or terminate certain of our product development efforts or other operations.

To complete the process of obtaining regulatory approval for our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we may require substantial additional funding.

To complete the process of obtaining regulatory approval for our product candidates and to continue building the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we may require substantial additional funding.

In addition, if we obtain marketing approval for our product candidates, we expect to incur significant expenses related to product sales, medical affairs, marketing, manufacturing and distribution.

Furthermore, we expect to continue to incur significant costs associated with operating as a public company.

We anticipate that we may need additional funding to complete the development of our product candidates and to commercialize any such approved products.

Our future capital requirements will depend on many factors, including:

• the length of our open label study for Vyjuvek;

• the length of our open label study for B-VEC;

• the progress, timing results and costs of our Phase 1/2 clinical trials for KB105;

• the progress, timing, results and costs of our Phase 2 clinical trials for KB301;

• the continued development and the filing of investigational new drug ("IND"), applications for KB104 and KB407 and other product candidates;

• the progress, timing, results and costs of our Phase 1 clinical trials for KB407;

• the continued development and the filing of IND applications for KB104 and other product candidates;

• the initiation, scope, progress, timing, costs and results of drug discovery, laboratory testing, manufacturing, preclinical studies and clinical trials for any other product candidates that we may pursue in the future, if any;

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• the extent to which the costs of our product candidates, if approved, will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or will be reimbursed by government authorities, private health coverage insurers and other third-party payors;

• the costs of commercialization activities for our current and future product candidates if we receive marketing approval for such product candidates, including the costs and timing of establishing product sales, medical affairs, marketing, distribution and manufacturing capabilities;

• subject to receipt of marketing approval, if any, revenue received from commercial sale of our current and future product candidates;

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• the extent to which we acquire or in-license other product candidates and technologies.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales.

Our product candidates, if approved, may not achieve commercial success.

Our product revenues, if any, will be derived from or based on sales of product candidates that may not be commercially available

for a year, if at all.

Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.

Furthermore, even if we obtain approval for a product candidate, we may not be able to successfully generate significant revenue from the sale of such product candidate.

Accordingly, we may need to continue to rely on additional financing to achieve our business objectives.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

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The sale of additional equity or convertible securities would dilute all our stockholders.

The incurrence of indebtedness would result in increased fixed payment obligations and a portion of our operating cash flows, if any, being dedicated to the payment of principal and interest on such indebtedness, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

Furthermore, existing stockholders may not agree with our financing plans or the terms of such financings.

Existing stockholders may not agree with our financing plans or the terms of such financings.

Adequate additional financing may not be available to us on acceptable terms, or at all.

The terms of additional financing may be impacted by, among other things, general market conditions, the market’s perception of our product candidates and growth potential and the market price per share of our common stock.

The terms of additional

financing may be impacted by, among other things, general market conditions, the market’s perception of our product candidates and growth potential and the market price per share of our common stock.

See “Raising additional capital could cause the price of our common stock to decline and cause dilution to our stockholders, restrict our operations or require us to relinquish rights.”

Our ability to use our net operating loss carryforwards and certain tax credit carryforwards may be subject to limitation.

federal and state net operating loss carryforwards, which are available to reduce future taxable income.

Federal net operating loss carryforwards generated 2018 through 2021 will be limited to offset 80% of taxable income for an indefinite period of time, until fully utilized.

These federal and state net operating loss carryforwards expire beginning in 2037.

We also have federal and state research and development tax credits which may be used to offset future tax liabilities and expire beginning in 2039 and 2032, respectively.

We also have federal orphan drug tax credits which may be used to offset future tax liabilities which expire beginning in 2038.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, changes in our ownership may limit the amount of our net operating loss carryforwards and tax credit carryforwards that could be utilized annually to offset our future taxable income, if any.

This limitation would generally apply in the event of a cumulative change in ownership of our company of more than 50% within a three-year period.

Any such limitation may significantly reduce our ability to utilize our net operating loss carryforwards and tax credit carryforwards before they expire.

Private placements and other transactions that have occurred since our inception, as well as our initial public offering, may trigger such an ownership change pursuant to Sections 382 and 383.

Any such limitation, whether as the result of the initial public offering, prior private placements, sales of our common stock by our existing stockholders or additional sales of our common stock by us, could have a material adverse effect on our results of operations in future years.

Generally, under current law, federal net operating losses generated after December 31, 2017 are not subject to expiration and may not be carried back to prior taxable years.

However, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, suspended the 80% taxable income limitation for net operating losses generated in 2018, 2019, and 2020 to the extent these losses are exhausted during the special five-year carryback period or during the 2018, 2019 or 2020 tax years.

Additionally, as noted above, for taxable years beginning after December 31, 2020, the CARES Act provisions no longer apply and the deductibility of such federal net operating losses is limited to 80% of our taxable income in any future taxable year.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We are a development-stage company that commenced operations in 2016.

Our efforts to date, with respect to the development of our product candidates have been limited to organizing and staffing our company, business planning, raising capital, developing our vector platform and related technologies, identifying potential gene therapy product candidates, and undertaking preclinical studies and clinical trials of Vyjuvek, KB105, KB301, KB104, KB407 and KB408.

While we have conducted clinical trials of Vyjuvek, KB105, and KB301 we have not yet demonstrated the ability to complete clinical trials of KB105 and KB301, obtain marketing approvals for any of our products, manufacture a commercial-scale product or conduct sales and marketing activities necessary for successful commercialization.

We commenced operations in 2016.

We have not yet demonstrated an ability to obtain marketing approvals for any of our products, manufacture a commercial-scale product or conduct sales and marketing activities necessary for successful commercialization.

Consequently, any predictions you make about our future success, performance or viability may not be as accurate as they could be if we had more experience developing gene therapy products.

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We may encounter unforeseen expenses, difficulties, complications and delays and may not be successful in such a transition.

Accordingly, you should not rely upon the results of any particular quarterly or annual period as indications of future operating performance.

Risks Related to Our Business

Business interruptions resulting from the COVID-19 pandemic or similar public health crises could cause a disruption of the development efforts for our product candidates and adversely impact our business.

The COVID-19 pandemic has previously adversely affected our business and could have a material adverse effect on our financial condition and results of operations.

Authorities have imposed, and businesses and individuals have implemented, numerous measures to try to contain the virus or treat its impact, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, shutdowns, and vaccine requirements.

We are substantially dependent on the commercial success of B-VEC

To date, we have invested substantial efforts and financial resources in the research and development of our product candidates.

Our near-term prospects, including our ability to develop our product candidates and generate revenue, and our future growth is substantially dependent on the commercial success of B-VEC.

We initiated Phase 3 testing of B-VEC in July of 2020 and announced positive topline results in November 2021.

We submitted the BLA for B-VEC in June 2022, which was accepted by the FDA in August 2022 and granted priority review.

The PDUFA target date is May 19, 2023, but we cannot be certain of how long it will take to successfully complete the regulatory approval process.

Any delay in obtaining FDA approval of the BLA for B-VEC would further delay commercialization and would adversely impact our ability to generate revenue and further develop our other product candidates.

If the BLA for B-VEC is not approved on a timely basis or at all, our business, financial condition, results of operations and prospects would be adversely impacted.

The successful development, regulatory approval and commercialization of B-VEC will depend on a number of

factors, including the risks identified in these “Risk Factors.” One or more of these factors, many of which are beyond our control, could cause significant delays or an inability to successfully commercialize B-VEC.

Accordingly, we cannot assure you that we will be able to generate revenue through the sale of B-VEC.

The effect of the COVID-19 pandemic or similar public health crises on our operations and the operations of our third-party partners could cause a disruption of the development efforts for our product candidates and adversely impact our business.

The COVID-19 pandemic has previously adversely affected our international business and could have a material adverse effect on our financial condition and results of operations.

Authorities have previously imposed, and businesses and individuals have implemented, numerous measures to try to contain the virus or treat its impact, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, shutdowns, and vaccine requirements.

These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our third-party partners.

The extent to which COVID-19 impacts our operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19, including new strains, and the actions to contain COVID-19 or address its impact in the short and long term, among others.

The extent to which COVID-19 or similar public health crises impacts our operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19, including new strains, and the actions to contain COVID-19 or address its impact in the short and long term, among others.

Timely initiation and completion of planned clinical trials is dependent upon the availability of, for example, clinical trial sites, researchers and investigators, regulatory agency personnel, and materials, which may be adversely affected by global health matters, such as pandemics.

We plan to conduct clinical trials in geographies that are currently being affected by COVID-19.

In the event that governmental authorities were to further modify current restrictions, our employees conducting research and development or manufacturing activities may not be able to access our laboratory or manufacturing spaces, and our core activities may be significantly limited or curtailed, possibly for an extended period of time.

Some factors from the COVID-19 pandemic that could delay or otherwise adversely affect the completion of our preclinical activities and the planned initiation of our clinical trials for our investigational drug product candidates, as well as our business operations generally, include:

• the potential diversion of healthcare resources away from the conduct of preclinical activities and clinical trials to focus on pandemic concerns, including the availability of necessary materials and the attention of physicians serving as our clinical trial investigators, hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our prospective clinical trials;

• limitations on travel that could interrupt key preclinical and clinical trial activities, such as clinical trial site initiations and monitoring, domestic and international travel by employees, contractors or patients to clinical trial sites, including any government-imposed travel restrictions or quarantines that will impact the ability or willingness of patients, employees or contractors to travel to our research, manufacturing and clinical trial sites or secure visas or entry permissions, any of which could delay or adversely impact the conduct or progress of our prospective clinical trials;

• interruption or delays in the operations of the FDA and comparable foreign regulatory agencies, which may impact our ability to conduct preclinical and clinical activities as well as product approval timelines;

• limitations on our business operations by local, state, or the federal government that could impact our ability to conduct our preclinical or clinical activities, including completing our IND-enabling studies or our ability to select future development candidates;

and interruption in global shipping affecting the transport of clinical trial materials and other supplies used in our prospective clinical trials;

• interruption of, or delays in receiving, key materials from our suppliers and vendors due to staffing shortages, travel limitations, production slowdowns or stoppages and disruptions in delivery systems;

• interruption of, or delays in manufacturing our product candidates at our manufacturing facility in Pittsburgh or receiving supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, travel limitations, production slowdowns or stoppages and disruptions in delivery systems;

• business disruptions caused by potential office, manufacturing and laboratory closures and an increased reliance on employees working from home, disruptions to or delays in ongoing laboratory experiments and operations, staffing shortages, travel limitations, cyber security and data accessibility, or communication or mass transit disruptions, any of which could adversely impact our business operations or delay necessary interactions with local regulators, ethics committees, manufacturing sites, research sites and other important agencies and contractors.

These and other factors arising from COVID-19 could worsen, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results.

In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic.

As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms.

Further, conditions in the capital and credit markets may continue to deteriorate as a result of the pandemic such that our access to capital and other sources of funding may be constrained.

The COVID-19 outbreak continues to evolve.

The extent to which the outbreak may impact our business, preclinical studies and planned clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, travel restrictions and other actions to contain the outbreak or address its impact, such as social distancing and quarantines or lock-downs in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and address the disease.

We are a development-stage company.

In the event that governmental authorities were to further modify or implement new restrictions, our employees conducting research and development or manufacturing activities may not be able to access our laboratory or manufacturing spaces, and our core activities may be significantly limited or curtailed, possibly for an extended period of time.

If we are unable to advance our product candidates through clinical trials, obtain regulatory approval and ultimately commercialize our product candidates, or if we experience significant delays in doing so, our business will be materially harmed.

We are a development stage company, and Vyjuvek entered its first clinical trial in May 2018, KB105 entered its first clinical trial in September 2019, and KB301 entered its first trial in August 2020.

The development and commercialization of our product candidates are subject to many uncertainties, including the following:

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If we do not receive regulatory approvals for our product candidates, our business, financial condition, results of operations and prospects could be materially and adversely affected.

Our lead candidate, Vyjuvek, has not been submitted to or reviewed by regulatory agencies, and we cannot predict when, or if, we will obtain regulatory approval to commercialize Vyjuvek and the approval may be for a narrower indication than we seek.

Our lead candidate, B-VEC, has not received regulatory approval, and if we obtain regulatory approval to commercialize B-VEC the approval may be for a narrower indication than we seek.

We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed and approved the product candidate.

Even though Vyjuvek met its safety and efficacy endpoints in clinical trials, the regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval.

Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval.

In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority or policy during the period of product development, clinical trials and the review process.

In June 2022, we filed a BLA with the FDA seeking approval of B-VEC for the treatment of patients with DEB with a request for six-month priority review.

In August 2022, the FDA accepted the BLA and granted priority review with a PDUFA target date of February 17, 2023.

In January 2023, the FDA notified us that based on manufacturing information submitted to the agency on December 20, 2022, in response to an information request, the PDUFA date had been revised to May 19, 2023.

Even though B-VEC met its safety and efficacy endpoints in clinical trials, the regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval.

Additionally, we submitted a request for MAA with the EMA in November 2022 for B-VEC for the treatment of DEB in patients 6 months and older.

The Company was informed by the EMA in January 2023 to modify the PIP waiver request to include patients between birth and 6 months.

The Company is modifying the application so that the MAA procedure can officially start in the second half of 2023 with an approval expected in early 2024.

Regulatory authorities also may approve a product candidate for more limited indications than requested or they may impose significant limitations in the form of narrow indications, warnings or a post-approval safety monitoring program.

These regulatory authorities may require precautions or contra-indications with respect to conditions of use or they may grant approval subject to the performance of costly post-marketing clinical trials.

In addition, regulatory authorities may not approve the labeling claims that are necessary or desirable for the successful commercialization of Vyjuvek.

Any of the foregoing scenarios could materially harm the commercial prospects for Vyjuvek and materially and adversely affect our business, financial condition, results of operations and prospects.

Vyjuvek is based on a novel technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval.

In addition, regulatory authorities may not approve the labeling claims that are necessary or desirable for the successful commercialization of B-VEC.

Any of the foregoing scenarios could materially harm the commercial prospects for B-VEC and materially and adversely affect our business, financial condition, results of operations and prospects.

B-VEC is based on a novel technology, which makes it difficult to predict the time and cost of obtaining regulatory approval.

The clinical trial requirements of the FDA, EMA and other regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of such product candidates.

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The FDA has established the Office of Tissues and Advanced Therapies within its CBER to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER in its review.

If we were to engage a National Institutes of Health funded institution to conduct a clinical trial, that institution’s Institutional Biosafety Committee ("IBC") as well as its Institutional Review Board ("IRB"), would need to review the proposed clinical trial to assess the safety of the trial.

If we were to engage a National Institutes of Health funded institution to conduct a clinical trial, that institution’s IBC as well as its IRB, would need to review the proposed clinical trial to assess the safety of the trial.

Similarly, the EMA may issue new guidelines concerning the development and marketing authorization for gene therapy medicinal products and require that we comply with these new guidelines.

These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of Vyjuvek or future product candidates or lead to significant post-approval limitations or restrictions.

As we advance Vyjuvek, we may be required to consult with these regulatory and advisory groups and will need to comply with applicable requirements and guidelines.

If we fail to do so, we may be required to delay or discontinue development of Vyjuvek.

These additional processes may result in a review and

approval process that is longer than we otherwise would have expected.

These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of B-VEC or future product candidates or lead to significant post-approval limitations or restrictions.

These additional processes may result in a review and approval process that is longer than we otherwise would have expected.

Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects would be materially and adversely affected.

Vyjuvek may cause undesirable side effects or have other properties that could delay or prevent its regulatory approval, limit the commercial potential or result in significant negative consequences following any potential marketing approval.

Our products may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial potential or result in significant negative consequences following any potential marketing approval.

There have been several significant adverse side effects in gene therapy trials using other vectors in the past.

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Any of these occurrences may harm our ability to develop product candidates, and may harm our business, financial condition and prospects significantly.

Additionally, if Vyjuvek receives marketing approval, the FDA could require us to adopt a post-approval safety monitoring program to ensure that the benefits outweigh its risks, which may include, among other things, a medication guide outlining the risks of the product for distribution to patients and a communication plan to health care practitioners.

Furthermore, if we or others later identify undesirable side effects caused by Vyjuvek, several potentially significant negative consequences could result, including:

Additionally, if one of our product candidates receives marketing approval, the FDA could require us to adopt a post-approval safety monitoring program to ensure that the benefits outweigh its risks, which may include, among other things, a medication guide outlining the risks of the product for distribution to patients and a communication plan to health care practitioners.

Furthermore, if we or others later identify undesirable side effects caused by our product candidates, several potentially significant negative consequences could result, including:

• regulatory authorities may suspend or withdraw approvals of such product candidate;

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• our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of Vyjuvek and could significantly harm our business, financial condition, results of operations and prospects.

Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and could significantly harm our business, financial condition, results of operations and prospects.

We may encounter substantial delays in our clinical trials, or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

Before obtaining marketing approval from regulatory authorities for the sale of our drug candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the drug candidate for its intended indications.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidate for its intended indications.

Clinical trials are expensive, time consuming and uncertain as to outcome.

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• delays in reaching a consensus with regulatory authorities on trial design;

• delays in opening sites and recruiting suitable patients to participate in our clinical trials;

• imposition of a clinical hold by regulatory authorities as a result of a serious adverse event or concerns with a class of drug candidates, or after an inspection of our clinical trial operations or trial sites;

• delays in opening sites and recruiting a sufficient number and diversity of suitable patients to participate in our clinical trials;

• imposition of a clinical hold by regulatory authorities as a result of a serious adverse event or concerns with a class of product candidates, or after an inspection of our clinical trial operations or trial sites;

• delays in having patients complete participation in a trial or return for post-treatment follow-up;

• occurrence of serious adverse events associated with the drug candidate that are viewed to outweigh its potential benefits;

• occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits;

• changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.

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Any delays, setbacks or failures in our clinical trials could materially and adversely affect our business, financial condition, results of operations and prospects.

Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with our drug candidates, we may:

Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with our product candidates, we may:

• be delayed in obtaining marketing approval, if at all, or be required to conduct additional confirmatory safety and/or efficacy studies;

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• be subject to additional post-marketing testing requirements;

• be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;

• have regulatory authorities withdraw, or suspend, their approval of the drug or impose restrictions on its distribution;

• be required to perform additional clinical trials to support approval;

• have regulatory authorities withdraw, or suspend, their approval of the product or impose restrictions on its distribution;

• be subject to the addition of labeling statements, such as warnings or contraindications;

• experience damage to our reputation.

Our drug development costs will also increase if we experience delays in testing or obtaining marketing approvals.

Our product development costs will also increase if we experience delays in testing or obtaining marketing approvals.

We do not know whether any of our preclinical studies or clinical trials will begin as planned, need to be restructured or be completed on schedule, if at all.

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Therefore, we cannot predict with any certainty the schedule for commencement and completion of future clinical trials.

If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our drug candidates could be negatively impacted, and our ability to generate revenues from our drug candidates may be delayed.

We have a limited number of employees and limited corporate infrastructure and may experience difficulties in managing growth.

We are a small company with a limited number of employees and corporate infrastructure.

We have experienced a period of significant expansion in personnel and expect to experience significant expansion of our facilities, infrastructure and overhead as we develop our own manufacturing facilities and increase our research and development efforts.

Future growth will impose significant added capital requirements, as well as added responsibilities on members of management, including the need to identify, recruit, maintain and integrate new personnel.

Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively.

If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our product candidates could be negatively impacted, and our ability to generate revenues from our product candidates may be delayed.

Even if we obtain regulatory approval for a product candidate, our product candidates will remain subject to regulatory oversight.

We will continue to incur costs related to regulatory compliance and are subject to risks related to non-compliance with or changes to applicable law and regulations, which would cause our product candidates to lose approval.

Even if we obtain any regulatory approval for Vyjuvek, our lead product candidate, it will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information.

Any regulatory approvals that we receive for Vyjuvek may also be subject to a post-approval safety monitoring program, limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the quality, safety and efficacy of the product.

Even if we obtain any regulatory approval for B-VEC, our lead product candidate, or other future product candidates, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information.

Any regulatory approvals that we receive for our product candidates may also be subject to a post-approval safety monitoring program, limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the quality, safety and efficacy of the product.

For example, the holder of an approved BLA is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA.

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In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with CGMP requirements and adherence to commitments made in the BLA or foreign marketing application.

If we, or a regulatory authority, discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

If we fail to comply with applicable regulatory requirements following approval of Vyjuvek or any future product candidate, a regulatory authority may:

If we, or a regulatory authority, discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured or a regulatory authority disagrees with the promotion, marketing or labeling of that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

If we fail to comply with applicable regulatory requirements, a regulatory authority may:

• issue a warning letter asserting that we are in violation of the law;

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Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.

The occurrence of any event or penalty described above may inhibit our ability to commercialize Vyjuvek or any future product candidates and adversely affect our business, financial condition, results of operations and prospects.

The FDA’s policies, and those of equivalent foreign regulatory agencies, may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of Vyjuvek or any future product candidates.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and adversely affect our business, financial condition, results of operations and prospects.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in

the United States or abroad.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would materially and adversely affect our business, financial condition, results of operations and prospects.

While we have obtained orphan drug designation for Vyjuvek, KB105, and KB407, it may not effectively protect us from competition, and we may be unable to obtain orphan drug designation for our future product candidates.

While we have obtained orphan drug designation for B-VEC, KB105, and KB407, it may not effectively protect us from competition, and we may be unable to obtain orphan drug designation for our future product candidates.

If our competitors are able to obtain orphan drug exclusivity for products that constitute the same drug and treat the same indications as our product candidates before us, we may not be able to have competing products approved by the applicable regulatory authority for a significant period of time.

On November 2, 2017, the FDA granted orphan drug designation to our lead product candidate, Vyjuvek, for the treatment of dystrophic EB and we may seek orphan drug designation from the FDA for our future product candidates.

On April 16, 2018, the European Commission granted the Orphan Medicinal Product Designation ("OMPD"), for Vyjuvek.

On August 7, 2018, the FDA granted orphan drug designation to our second product candidate, KB105, currently in clinical development for treatment of patients with TGM1-ARCI, and on October 10, 2019, the European Commission granted the OMPD for KB105.

On August 17, 2020, the FDA granted orphan drug designation to our most recent product candidate, KB407, currently in preclinical development, for the treatment of cystic fibrosis.

On November 2, 2017, the FDA granted orphan drug designation to our lead product candidate, B-VEC, for the treatment of DEB.

On April 16, 2018, the European Commission granted the Orphan Medicinal Product Designation (“OMPD”), for B-VEC.

On August 7, 2018, the FDA granted orphan drug designation to our product candidate, KB105, currently in clinical development for treatment of patients with TGM1-ARCI, and on October 10, 2019, the European Commission granted the OMPD for KB105.

On August 17, 2020, the FDA granted orphan drug designation to our product candidate, KB407, currently in clinical development, for the treatment of cystic fibrosis, and on January 13, 2023, the European Commission granted the OMPD for KB407.

Regulatory authorities in some jurisdictions, including the United States and the EU, may designate drugs for relatively small patient populations as orphan drugs.

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Orphan drug exclusivity may be revoked if any regulatory agency determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.

Even though we have obtained orphan drug exclusivity for Vyjuvek, KB105 and KB407, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition.

Even though we have obtained orphan drug exclusivity for B-VEC, KB105 and KB407, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition.

In the United States, even after an orphan drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the latter drug is not the same drug or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

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Breakthrough therapy designation, Regenerative Medicine Advanced Therapy designation, Fast Track designation or Rare Pediatric Disease designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development, regulatory review or approval process, and it does not increase the likelihood that any of our product candidates will receive marketing approval in the United States.

The FDA granted Fast Track designation in the United States for Vyjuvek on May 23, 2018 and for KB105 on October 24, 2019.

In addition, Vyjuvek was granted RMAT by the FDA on June 21, 2019 and PRIME by the EMA in March 2019.

The FDA granted Fast Track designation in the United States for B-VEC and for KB105.

In addition, B-VEC was granted RMAT by the FDA and PRIME by the EMA.

The receipt of any of these designations for a product candidate may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA and EMA procedures and does not assure ultimate approval by either the FDA or EMA.

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A sponsor who receives an approval for a drug or biologic for a “rare pediatric disease” may qualify for a voucher that can be redeemed to receive a priority review of a subsequent marketing application for a different product.

We received the designation of “rare pediatric disease” for Vyjuvek in December 2016, for KB105 in August 2018, for KB104 in April 2019, and for KB407 in September 2020, which could qualify us to receive a Rare Pediatric Priority Review Voucher.

There is no assurance we will receive RMAT, PRIME or breakthrough therapy or Fast Track designations for any of our product candidates and the receipt of any of these designations for a product candidate may not result in a faster development process, review or approval and does not assure ultimate approval by the FDA.

Further, even though we have received rare pediatric disease designation for Vyjuvek, KB105, KB104, and KB407 we may not experience a faster review or approval for a subsequent marketing application.

We received the designation of “rare pediatric disease” for B-VEC, KB105, KB104, and for KB407, which could qualify us to receive a Rare Pediatric Priority Review Voucher.

There is no assurance we will receive RMAT, PRIME or breakthrough therapy or Fast Track designations for any of our other product candidates and the receipt of any of these designations for a product candidate may not result in a faster development process, review or approval and does not assure ultimate approval by the FDA.

Further, even though we have received rare pediatric disease designation for B-VEC, KB105, KB104, and KB407, we may not experience a faster review or approval for a subsequent marketing application.

We may expend our limited resources to pursue a product candidate or indication to the exclusion of other product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

We have limited financial and managerial resources.

As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential.

As a result, we may forego or delay pursuit of opportunities with product candidates or for other indications that later prove to have greater commercial potential.

Our resource allocation decisions may cause us to fail to timely capitalize on viable commercial products or profitable market opportunities.

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If we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.

Although a substantial amount of our efforts focuses on the potential approval of Vyjuvek, KB105, KB301, KB104 and KB407 a key component our strategy is to discover, develop and potentially commercialize a portfolio of product candidates to treat orphan diseases and ultimately, non-orphan diseases.

Although a substantial amount of our efforts focuses on the potential approval of B-VEC, KB105, KB301, KB104 and KB407, a key component our strategy is to discover, develop and potentially commercialize a portfolio of product candidates to treat orphan diseases and ultimately, non-orphan diseases.

Identifying new product candidates requires substantial technical, financial and human resources, whether any product candidates are ultimately identified.

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• competitors may develop alternatives that render our product candidates obsolete;

• product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights;

• product candidates we develop may be covered by third parties’ patents or other exclusive rights;

• a product candidate may, on further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;

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If we are unsuccessful in identifying and developing additional product candidates, our potential for growth may be impaired.

We face significant competition in an environment of rapid technological change and the possibility that our competitors may achieve regulatory approval before us or develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully market or commercialize our lead product candidate, Vyjuvek or any future product candidate.

We are aware of several companies and institutions that are currently developing alternative autologous or palliative gene therapy approaches for dystrophic EB and cystic fibrosis.

We are aware of several companies and institutions that are currently developing alternative autologous or palliative gene therapy approaches for DEB and cystic fibrosis.

Many of our potential competitors, alone or with their strategic partners, have substantially greater financial, technical and other resources, such as larger research and development, clinical, marketing and manufacturing organizations.

Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of competitors.

Our commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any product candidate that we may develop.

Our commercial opportunities could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any product candidate that we may develop.

Competitors also may obtain FDA or other regulatory approval for their products more rapidly or earlier than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

Additionally, technologies developed by our competitors may render Vyjuvek or any future product candidate uneconomical or obsolete, and we may not be successful in marketing Vyjuvek or any future product candidate against competitors.

Additionally, technologies developed by our competitors may render B-VEC or any future product candidate uneconomical or obsolete, and we may not be successful in marketing B-VEC or any future product candidate against competitors.

In the future, even if we commercialize a product candidate faster than our competitors, we could also face competition from lower cost biosimilars in the United States or in Europe.

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The availability of our competitors’ products could limit the demand, and the price we are able to charge, for any product candidate that we may develop and commercialize.

If any product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit commercialization of our products or product candidates.

We face an inherent risk of product liability lawsuits related to the sale of our products to, use of our products by, and testing of our product candidates.

Product liability claims may be brought against us by participants enrolled in our clinical trials, patients, health care providers or others using, or administering any of our approved products.

If we cannot successfully defend ourselves against any such claims, we may incur substantial liabilities.

Regardless of their merit or eventual outcome, liability claims may result in:

• decreased demand for our approved products;

• injury to our reputation;

• withdrawal of clinical trial participants;

• termination of clinical trial sites or entire trial programs;

• increased regulatory scrutiny;

• significant litigation costs;

• substantial monetary awards to or costly settlement with patients or other claimants;

• product recalls for approved products or a change in the indications for which they may be used;

• loss of revenue;

• diversion of management and scientific resources from our business operations;

• the inability to commercialize our product candidates.

With respect to any of our product candidates that are approved for commercial sale, we are, and will be, highly dependent upon physician and patient perceptions of us and the safety and quality of our products.

We could be adversely affected if we are subject to negative publicity.

We could also be adversely affected if any of our products or any similar products distributed by other companies prove to be, or are asserted to be, harmful to patients.

Because of our dependence upon consumer perceptions, any adverse publicity could have a material adverse impact on our financial condition or results of operations.

Our product liability insurance coverage may not be adequate to cover all liabilities that we may incur.

We may need to increase our insurance coverage when we begin the commercialization of our product candidates.

Insurance coverage is becoming increasingly expensive.

As a result, we may be unable to maintain or obtain sufficient insurance at a reasonable cost to protect us against losses that could have a material adverse effect on our business.

A successful product liability claim or

series of claims brought against us, particularly if judgments exceed any insurance coverage we may have, could decrease our cash resources and adversely affect our business, financial condition and results of operations.

Risks Related to Manufacturing

Delays in obtaining regulatory approvals of the process and facilities needed to manufacture our product candidates or disruptions in our manufacturing process may delay or disrupt our product development and commercialization efforts.

Before we can begin to commercially manufacture our product candidates, whether in a third-party facility or in our own facilities, once established, we must pass a pre-approval inspection of our manufacturing facilities by the FDA before our product candidates can obtain marketing approval.

Before we can begin to commercially manufacture our product candidates, we must pass a pre-approval inspection of our manufacturing facilities by the FDA.

A manufacturing authorization must also be obtained from the appropriate EU regulatory authorities.

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We may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA, EMA or other applicable standards or specifications with consistent and acceptable production yields and costs.

Although we have established our own manufacturing facility for our product candidates, we may need to utilize third parties to conduct our product manufacturing for the near future.

Although we have established our own manufacturing facilities for our product candidates, we may also utilize third parties to conduct our product manufacturing.

Therefore, we are subject to the risk that these third parties may not perform satisfactorily.

Even if we obtain the validation from the FDA of our cGMP manufacturing facility, we intend to maintain third-party manufacturing capabilities in order to provide multiple sources of supply.

In the event that these third-party manufacturers do

not successfully carry out their contractual duties, meet expected deadlines or manufacture our product candidates in accordance with regulatory requirements or if there are disagreements between us and these third-party manufacturers, we will not be able to complete, or may be delayed in completing, the preclinical studies required to support future IND submissions of product candidates or the clinical trials required for approval of our product candidates.

In such instances, we may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay or increased expense prior to the approval of our product candidates and would thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

If we or our third-party manufacturer fails to comply with applicable cGMP regulations, the FDA and foreign regulatory authorities can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new product candidate or suspension or revocation of a pre-existing approval.

Even if we obtain the validation from the FDA of our CGMP manufacturing facilities, we may maintain third-party manufacturing capabilities in order to provide multiple sources of supply.

We utilize a third-party for manufacturing of the sterile gel that is mixed with our in-house produced vector.

In the event that these third-party manufacturers do not successfully carry out their contractual duties, meet expected deadlines or manufacture in accordance with regulatory requirements or if there are disagreements between us and these third-party manufacturers, we may not be able to manufacture our products for commercial or regulatory purposes.

In such instances, we may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay or increased expense and would thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

If we or a third-party manufacturer fails to comply with applicable CGMP regulations, the FDA and foreign regulatory authorities can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new product candidate or suspension or revocation of a pre-existing approval.

Such an occurrence may cause our business, financial condition, results of operations and prospects to be materially harmed.

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Such raw materials are difficult to procure and may be subject to contamination or recall.

A material shortage, contamination, recall or restriction on the use of biologically derived substances in the manufacture of our product candidates could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could materially and adversely affect our development timelines and our business, financial condition, results of operations and prospects.

A material shortage, contamination, recall or restriction on the use of biologically derived substances in the manufacture of our product candidates could adversely impact or

disrupt the commercial manufacturing or the production of clinical material, which could materially and adversely affect our development timelines and our business, financial condition, results of operations and prospects.

Risks Related to Commercialization of Our Product Candidates

If we are unable to expand our market development capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any product revenue.

We currently have a small market development organization.

To successfully commercialize our product candidates, if approved, we plan to expand our capabilities to promote market access and build awareness.

To successfully commercialize B-VEC, and any other approved product candidates, we have expanded our capabilities to promote market access and build awareness.

To successfully commercialize any products that may result from our development programs, we will need to further expand our market development organization, either on our own or with a third-party.

The development of our own market development team will be expensive and time-consuming and could delay any product launch.

The development of our own market development team is expensive and time-consuming and could delay any product launch.

Moreover, we cannot be certain that we will be able to successfully develop this capability.

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Gene therapy remains a novel technology.

Ethical, social and legal concerns about gene therapy could result in additional regulations restricting or prohibiting our product candidates.

Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community.

In particular, our success will depend upon physicians who specialize in the treatment of genetic diseases targeted by our product candidates prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are familiar and for

which greater clinical data may be available.

More restrictive government regulations or negative public opinion would have an adverse effect on our business, financial condition, results of operations and prospects and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop.

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Serious adverse events in our clinical trials, or other clinical trials involving gene therapy products or our competitors’ products, even if not ultimately attributable to the relevant product candidates, and the resulting publicity, could result in increased government regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates.

Our success also will depend upon physicians who specialize in the treatment of prescribing treatments that involve the use of our product candidates, in lieu of, or in addition to, other treatments with which they are more familiar and for which greater clinical data may be available.

If the market opportunities for our product candidates are smaller than we believe they are, our product revenues may be adversely impacted, and our business may suffer.

We have mainly focused our research and product development efforts to date on Vyjuvek for dystrophic EB.

Our understanding of both the number of people who have this disease, as well as the subset of people with this disease who have the potential to benefit from treatment with Vyjuvek, are based on estimates in published literature.

We have mainly focused our research and product development efforts to date on B-VEC for DEB.

Our understanding of both the number of people who have this disease, as well as the subset of people with this disease who have the potential to benefit from treatment with B-VEC, are based on estimates in published literature.

These estimates may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of this disease.

The number of patients in the United States, the EU and elsewhere may turn out to be lower than expected or these patients may not be otherwise amenable to treatment with Vyjuvek or may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations and prospects.

Further, there are several factors that could contribute to making the actual number of patients who receive Vyjuvek less than the potentially addressable market.

The number of patients in the United States, the EU and elsewhere may turn out to be lower than expected or these patients may not be otherwise amenable to treatment with B-VEC or may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations and prospects.

Further, there are several factors that could contribute to making the actual number of patients who receive B-VEC less than the potentially addressable market.

These include the lack of widespread availability of, and limited reimbursement for, new therapies in many underdeveloped markets.

Further, the severity of the progression of a disease up to the time of treatment will likely diminish the therapeutic benefit conferred by a gene therapy due to irreversible cell damage.

Further, the severity of the progression of a disease up to the time of treatment

will likely diminish the therapeutic benefit conferred by a gene therapy due to irreversible cell damage.

Lastly, certain patients’ immune systems might prohibit the successful delivery of certain gene therapy products to the target tissue, thereby limiting the treatment outcomes.

The commercial success of our product candidates will depend upon its degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

Ethical, social and legal concerns about gene therapy could result in additional regulations restricting or prohibiting our product candidates.

The commercial success of our product candidates will depend upon their degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

Even with the requisite approvals from the FDA in the United States, the EMA in the EU and other regulatory authorities internationally, the commercial success of our product candidates will depend, in part, on the acceptance of physicians, patients and health care payors of gene therapy products in general, and our product candidates, in particular, as medically necessary, cost-effective and safe.

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We cannot predict the extent to which our business may be affected by these or other potential future legislative or regulatory developments.

However, future price controls or other changes in pricing regulation or negative publicity related to the pricing of pharmaceutical drugs generally could restrict the amount that we are able to charge for our future products, which would adversely affect our anticipated revenue and results of operations.

However, future price controls or other changes in pricing regulation or negative publicity related to

the pricing of pharmaceutical drugs generally could restrict the amount that we are able to charge for our future products, which would adversely affect our anticipated revenue and results of operations.

The insurance coverage and reimbursement status of newly approved products is uncertain.

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The Medicare and Medicaid programs increasingly are used as models for how private payors and government payors develop their coverage and reimbursement policies.

Currently, no gene therapy product has been approved for coverage and reimbursement by the Centers for Medicare & Medicaid Services ("CMS"), the agency responsible for administering the Medicare program.

It is difficult to predict what CMS will decide with respect to coverage and reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these types of products.

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It is difficult to predict what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.

Outside the United States, international operations generally are subject to extensive government price controls and other market regulations and increasing emphasis on cost-containment initiatives in the European Union, Canada and other countries may put pricing pressure on us.

Outside the United States, international operations generally are subject to extensive government price controls and other market regulations and increasing emphasis on cost-containment initiatives in the EU, Canada and other countries may put pricing pressure on us.

In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems.

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We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional potential legislative and administrative changes.

The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become intense.

pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become intense.

As a result, increasingly high barriers are being erected to the entry of new products such as ours.

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Approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA.

Sales of Vyjuvek or other future product candidates outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval.

Sales of B-VEC or other future product candidates outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval.

Even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries also must approve the manufacturing and marketing of the product candidate in those countries.

Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and more onerous than, those in

the United States, including additional preclinical studies or clinical trials.

Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and more onerous than, those in the United States, including additional preclinical studies or clinical trials.

In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country.

In some cases, the price that we intend to charge for our product candidates, if approved, is also subject to approval.

We intend to submit a marketing authorization application to the EMA for approval of Vyjuvek in the EU but obtaining such approval from the European Commission following the opinion of the EMA is a lengthy and expensive process.

Obtaining a Marketing Authorization Application from the European Commission following the opinion of the EMA is a lengthy and expensive process.

We submitted a request for MAA with the EMA in November 2022 for B-VEC for the treatment of DEB in patients 6 months and older.

The Company was informed by the EMA in January 2023 to modify the PIP waiver request to include patients between birth and 6 months.

The Company is modifying the application so that the MAA procedure can officially start in the second half of 2023 with an approval expected in early 2024.

Even if a product candidate is approved, the FDA or the European Commission, as the case may be, may limit the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming additional clinical trials or reporting as conditions of approval.

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If we fail to comply with the regulatory requirements, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed and our business, financial condition, results of operations and prospects will be adversely affected.

Increasing demand for compassionate use or expanded access of our unapproved therapies could negatively affect our reputation and harm our business.

We are developing our product candidates for illnesses for which there are currently limited to no available therapeutic options.

At least one other company has been the target of disruptive social media campaigns related to a request for access to unapproved drugs for patients with significant unmet medical need.

If we experience a similar social media campaign regarding our decision to provide or not provide our product candidates under an expanded access corporate policy, our reputation may be negatively affected and our business may be harmed.

Recent media attention to individual patients’ expanded access requests has resulted in the introduction of legislation at the local and national level referred to as “Right to Try” laws, such as the Right to Try Act, which are intended to give patients access to unapproved therapies.

New and emerging legislation regarding expanded access to unapproved drugs for life-threatening illnesses could negatively impact our business in the future.

A possible consequence of both activism and legislation in this area is the need for us to initiate an unanticipated expanded access program or to make our product candidates more widely available sooner than anticipated.

We are a small company with limited resources and unanticipated trials or access programs could result in diversion of resources from our primary goals.

In addition, some patients who receive access to unapproved drugs through compassionate use or expanded access programs have life-threatening illnesses and have exhausted all other available therapies.

The risk for serious adverse events in this patient population is high which could have a negative impact on the safety profile of our product candidates if we were to provide them to these patients in accordance with our expanded access corporate policy, which could cause significant delays or an inability to successfully commercialize our product candidates, which could materially harm our business.

If we were to provide patients with our product candidates under our expanded access corporate policy, we may in the future need to restructure or pause ongoing compassionate use and/or expanded access programs in order to perform the controlled clinical trials required for regulatory approval and successful commercialization of our product candidates, which could prompt adverse publicity or other disruptions related to current or potential participants in such programs.

Risks Related to Our Business Operations

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For example, our research may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects, may be commercially impracticable to manufacture or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval.

Additionally, because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that later prove to have greater commercial potential.

Our spending on current and future research and development programs may not yield any commercially viable products.

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If any of these events occur, we may be forced to abandon our development efforts with respect to a particular product candidate or fail to develop a potentially successful product candidate, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We have experienced significant growth in the number of employees and infrastructure and may experience difficulties in managing this growth.

If we are unable to manage expected growth in the scale and complexity of our operations, our performance may suffer.

We have experienced a period of significant expansion in personnel and of our facilities, infrastructure and overhead as we develop our own manufacturing facilities, build our sales, marketing and distribution infrastructure that we believe will be necessary to commercialize B-VEC, and increase our research and development efforts.

The anticipated commercialization of B-VEC and our ongoing development of other product candidates, will continue to impose significant added capital requirements, as well as added responsibilities on members of management, including the need to identify, recruit, maintain and integrate new personnel.

Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage our growth effectively.

If we are successful in executing our business strategy, we will need to expand our managerial, operational, financial and other systems and resources to manage our operations, continue our research and development activities and build a commercial infrastructure to support commercialization of any of our product candidates that are approved for sale.

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The inability to recruit, or loss of services of certain executives, key employees or advisors, may impede the progress of our research, development and commercialization objectives and have a material adverse effect on our business, financial condition, results of operations and prospects.

Our employees, principal investigators and advisors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

Our employees, principal investigators and advisors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.

We are exposed to the risk of fraud or other misconduct by our employees, principal investigators and advisors.

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In the U.S., there have been and continue to be a number of legislative efforts to contain healthcare costs.

For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act ("PPACA"), was passed, which substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S.

For example, in March 2010, PPACA, as amended by the Health Care and Education Reconciliation Act, was passed, which substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S.

pharmaceutical industry.

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(iv) expands the availability of lower pricing under the 340B drug pricing program by adding new entities to the program;

and (v) establishes a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts

off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

and (v) establishes a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand

drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the PPACA, and we expect there will be additional challenges in the future.

As a result, there have been delays in the implementation of, and action taken to repeal or replace, certain aspects of the PPACA.

Most recently, under President Biden, the Department of Justice dropped support of two Supreme Court cases challenging the ACA in addition to a case before the U.S.

Court of Appeals for the Fifth Circuit, and in June 2021, the Supreme Court upheld the ACA in a 7-2 opinion that the states and individuals that challenged the individual mandate did not have standing to challenge the law.

Further, on January 28, 2021, President Biden signed an executive orders to expand access to ACA coverage, stating that it is the “policy” of the Biden administration to protect and strengthen the ACA and directing agencies to consider suspending, revising, or rescinding actions related to President Trump’s executive orders that are inconsistent with this policy position.

However, other legislators continue efforts to repeal and replace other elements of the ACA.

While the ultimate outcome of ACA result of these efforts is not yet known, any changes that result in price controls reduce access to and reimbursement for care or add additional regulations may have an adverse effect on our financial condition and results of operations.

We cannot predict the impact that such actions against the ACA or other health care reform under the Biden administration will have on our business, and there is uncertainty as to what healthcare programs and regulations may be implemented or changed at the federal and/or state level in the United States, or the effect of any future legislation or regulation.

Most recently, under President Biden, the Department of Justice dropped support of two Supreme Court cases challenging the PPACA in addition to a case before the U.S.

Court of Appeals for the Fifth Circuit, and in June 2021, the Supreme Court upheld the PPACA in a 7-2 opinion that the states and individuals that challenged the individual mandate did not have standing to challenge the law.

Further, on January 28, 2021, President Biden signed an executive order to expand access to PPACA coverage, stating that it is the “policy” of the Biden administration to protect and strengthen the PPACA and directing agencies to consider suspending, revising, or rescinding actions related to President Trump’s executive orders that are inconsistent with this policy position.

However, other legislators continue efforts to repeal and replace other elements of the PPACA.

While the ultimate outcome of PPACA result of these efforts is not yet known, any changes that result in price controls reduce access to and reimbursement for care or add additional regulations may have an adverse effect on our financial condition and results of operations.

We cannot predict the impact that such actions against the PPACA or other health care reform under the Biden administration will have on our business, and there is uncertainty as to what healthcare programs and regulations may be implemented or changed at the federal and/or state level in the United States, or the effect of any future legislation or regulation.

However, it is possible that such initiatives could have an adverse effect on our ability to obtain approval and/or successfully commercialize products in the United States in the future.

For example, any changes that reduce, or impede the ability to obtain, reimbursement for the type of products we intend to commercialize in the United States (or our products more specifically, if approved) could adversely affect our business plan to introduce our products in the United States.

While Congress has not passed repeal legislation, the Tax Reform Act includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Further, the Bipartisan Budget Act of 2018 ("BBA"), among other things, amends the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” Congress may consider other legislation to repeal and replace elements of the ACA.

Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.

While Congress has not passed repeal legislation, the Tax Reform Act includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Further, the Bipartisan Budget Act of 2018, among other things, amended the PPACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” Congress may consider other legislation to repeal and replace elements of the PPACA.

Litigation and legislation over the PPACA are likely to continue, with unpredictable and uncertain results.

Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted.

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In January 2013, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to certain providers, and increased the time for Medicare contractors to recoup Medicare overpayments to providers from three to five years.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

The IRA includes several provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government.

In relevant part, the IRA allows Medicare to negotiate prices for certain prescription drugs, requires drug manufacturers to pay a rebate to the federal government if prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under Part D increase faster than the rate of inflation (“CPI-U”) and caps out of pocket spending for Medicare Part D enrollees and makes other benefit design changes to Medicare Part D intended to lower drug costs for enrollees and Medicare.

These requirements, which begin to go into effect in 2023, will affect the amounts available through reimbursement for Medicare programs.

These significant changes made under the IRA, which will affect pricing for both brand and generic drugs, may affect reimbursement for our products.

Further, there has been heightened governmental scrutiny in recent years over the manner in which manufacturers set prices for their marketed products and the cost of prescription drugs to consumers and government healthcare programs, which have resulted in several recent Congressional inquiries and proposed and enacted bills designed to, among other things, reduce the cost of prescription drugs, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.

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For example, the United States government has passed legislation requiring pharmaceutical manufacturers to provide rebates and discounts to certain entities and governmental payors to participate in federal healthcare programs.

Further, Congress and the current administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs, and the current administration recently released a “Blueprint”, or plan, to reduce the cost of drugs.

The current administration’s Blueprint contains certain measures that the U.S.

Department of Health and Human Services is already working to implement.

Individual states in the United States have also been increasingly passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain

product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Individual states in the United States have also

been increasingly passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Additional changes may affect our business, including those governing enrollment in federal healthcare programs, reimbursement changes, fraud and abuse enforcement, and expansion of new programs, such as Medicare payment for performance initiatives.

On October 14, 2022, President Biden signed Executive Order 14087 on “Lowering Prescription Drug Costs for Americans.” The Executive Order specifically requests that the Center for Medicare and Medicaid Innovation consider “models that may lead to lower cost sharing for commonly used drugs and support value-based payment that supports high-quality care.” The outcomes of the findings made under the Executive Order could lead to further drug pricing initiatives that could affect reimbursement for our products.

These initiatives, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product.

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• federal civil and criminal false claims laws and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid or other government payors that are false or fraudulent.

The PPACA provides that a claim for items or services resulting from an Anti-Kickback Statute violation is a false claim under the federal False Claims Act.

Cases against pharmaceutical manufacturers support the view that certain marketing practices, including off-label promotion, may implicate the False Claims Act;

• HIPAA, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or from making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private);

The PPACA provides that a claim for items or services resulting from an Anti-Kickback Statute violation is a false claim under the federal FCA.

Cases against pharmaceutical manufacturers support the view that certain marketing practices, including off-label promotion, may implicate the FCA;

• the federal Health Care Fraud statute imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and its implementing regulations, and as amended again by the final HIPAA omnibus rule, Modifications to the HIPAA Privacy, Security, Enforcement, and Breach;

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Other modifications to HIPAA, published in January 2013, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization by entities subject to the rule, such as health plans, health care clearinghouses and health care providers;

• federal transparency laws, including the federal Physician Payment Sunshine Act, that require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the CMS information related to:

information related to:

(i) payments or other “transfers of value” made to physicians and teaching hospitals and (ii) ownership and investment interests held by physicians and their immediate family members;

or marketing expenditures and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts in certain circumstances, such as specific disease states;

• state and foreign law equivalents of each of the above federal laws, state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts in certain circumstances, such as specific disease states;

• state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

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If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Often, to avoid the threat of treble damages and penalties under the False Claims Act, health care providers will resolve allegations in a settlement without admitting liability to avoid the potential treble damages.

Often, to avoid the threat of treble damages and penalties under the FCA, health care providers will resolve allegations in a settlement without admitting liability.

Any such settlement could materially affect our business, financial operations, and reputation.

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It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.

If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations.

The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations.

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In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources.

Moreover, certain environmental laws may impose liability without regard to fault or legality of the action at the time of its occurrence.

We also could incur significant costs associated with civil or criminal fines and penalties.

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These current or future laws and regulations may impair our research, development or production efforts.

Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions or liabilities, which could materially adversely affect our business, financial condition, results of operations and prospects.

Failure to comply with these laws and regulations also may result in

substantial fines, penalties or other sanctions or liabilities, which could materially adversely affect our business, financial condition, results of operations and prospects.

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of our control, such as the current COVID-19 pandemic.

Inflation and potential for rising interest rates have recent caused volatility in the capital and credit markets, and it is unclear how long such volatility will continue.

A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of our control.

Inflation and rising interest rates have caused volatility in the capital and credit markets, and it is unclear how long such volatility will continue.

A severe or prolonged economic downturn could result in a variety of risks to our business, including our ability to raise additional capital when needed on acceptable terms, if at all.

A weak or declining economy could strain our suppliers, possibly resulting in supply disruption.

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Our internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

While we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions.

For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed.

Cyber-security incidents, including data security breaches or computer viruses, could harm our business by disrupting our delivery of services, damaging our reputation or exposing us to liability.

We receive, process, store, and transmit, often electronically, confidential data of others, including the participants in our clinial trials.

Cyber-security incidents, including data security breaches or computer viruses, could harm our business by disrupting our operations, damaging our reputation or exposing us to liability.

We receive, process, store, and transmit, often electronically, confidential data of others, including the participants in our clinical trials.

Unauthorized access to our computer systems or stored data could result in the theft or improper disclosure of confidential information, the deletion or modification of records, or could cause interruptions in our operations.

These cyber-security risks increase when we transmit information from one location to another, including transmissions over the Internet or other electronic networks.

Despite implemented security measures, our facilities, systems, and procedures, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, software viruses, misplaced or lost data, programming and/or human errors, or other similar events which may disrupt our delivery of services or expose confidential information of the patients who participate in our clinical trials.

Despite implemented security measures, our facilities, systems, and procedures, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, software viruses, misplaced or lost data, programming and/or human errors, or other similar events which may disrupt our operations or expose confidential information of the patients who participate in our clinical trials.

Any security breach involving the misappropriation, loss or other unauthorized disclosure or use of confidential information of others, whether by us or a third-party, could:

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Our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters could severely disrupt our operations or the operations of manufacturing facilities and have a material adverse effect on our business, financial condition, results of operations and prospects.

If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as manufacturing facilities, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time.

Natural disasters could severely disrupt our operations or the operations of third-party suppliers or service providers and have a material adverse effect on our business, financial condition, results of operations and prospects.

The severity and frequency of weather-related natural disasters have been amplified, and are expected to continue to be amplified by, global climate change.

Such natural disasters may cause, damage to and/or disrupt our operations, which may result in a material adverse effect on our product sales, if approved, business and results of operations.

Moreover, climate change may also result in various chronic physical changes, such as changes in temperature or precipitation patterns or sea-level rise, that may also have an adverse impact on our operations.

Our suppliers, vendors and business partners also face similar risks, and any disruption to their operations could have an adverse effect on our supply and manufacturing chain.

If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our manufacturing facilities, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time.

The disaster recovery and business continuity plans that we have in place currently are limited and may not prove adequate in the event of a serious disaster or similar event.

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We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Increased attention to, and evolving expectations for, environmental, social, and governance (“ESG”) initiatives could increase our costs, harm our reputation, or otherwise adversely impact our business.

Companies across industries are facing increasing scrutiny from a variety of stakeholders related to their ESG and sustainability practices.

Expectations regarding voluntary ESG initiatives and disclosures may result in increased costs (including but not limited to increased costs related to compliance, stakeholder engagement, contracting and insurance), enhanced compliance or disclosure obligations, or other adverse impacts to our business, financial condition, or results of operations.

While we may at times engage in voluntary initiatives (such as voluntary disclosures, certifications, or goals, among others) to improve the ESG profile of our company and/or products, such initiatives may be costly and may not have the desired effect.

Moreover, we may not be able to successfully complete such initiatives due to factors that are within or outside of our control.

Even if this is not the case, our actions may subsequently be determined to be insufficient by various stakeholders, and we may be subject to investor or regulator engagement on our ESG efforts, even if such initiatives are currently voluntary.

Certain market participants, including major institutional investors and capital providers, use third-party benchmarks and scores to assess companies’ ESG profiles in making investment or voting decisions.

Unfavorable ESG ratings could lead to increased negative investor sentiment towards us or our industry, which could negatively impact our share price as well as our access to and cost of capital.

To the extent ESG matters negatively impact our reputation, it may also impede our ability to compete as effectively to attract and retain employees or customers, which may adversely impact our operations.

In addition, we expect there will likely be increasing levels of regulation, disclosure-related and otherwise, with respect to ESG matters.

For example, the SEC has published proposed rules that would require companies to provide significantly expanded climate-related disclosures in their periodic reporting, which may require us to incur significant additional costs to comply, including the implementation of significant additional internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased oversight obligations on our management and board of directors.

These and other changes in stakeholder expectations will likely lead to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor.

Additionally, many of our customers and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us.

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain adequate U.S.

and foreign patent protection for our product candidates, including Vyjuvek, KB105, KB301, KB104, KB407, and any future product candidates we may develop, and/or our vector platform, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technologies similar or identical to ours, and our ability to successfully commercialize our current product candidates, any future product candidates we may develop, and our platform technologies may be adversely affected.

Our success depends, in large part, on our ability to obtain and maintain patent protection in the United States and other countries with respect to Vyjuvek, KB105, KB301, KB104, KB407, and additional product candidates in our pipeline, current and future innovations related to our vector platform, and our institutional knowledge.

and foreign patent protection for our product candidates, including our current product candidates, and any future product candidates we may develop, and/or our vector platform, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technologies similar or identical to ours, and our ability to successfully commercialize our current product candidates, any future product candidates we may develop, and our platform technologies may be adversely affected.

Our success depends, in large part, on our ability to obtain and maintain patent protection in the United States and other countries with respect to our current product candidates, and additional product candidates in our pipeline, and current and future innovations related to our vector platform.

The patent prosecution process is expensive, time-consuming and complex;

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We currently have seven issued patents in the United States:

9,877,990, covering, in part, pharmaceutical formulations comprising our lead clinical product Vyjuvek, as well as methods of its use for treating wounds, disorders, and diseases of the skin, which we refer to as the ’990 patent;

10,155,016 covering pharmaceutical compositions containing Vyjuvek formulated for myriad routes of administration;

9,877,990, covering, in part, pharmaceutical formulations comprising our lead clinical product B-VEC, as well as methods of its use for treating wounds, disorders, and diseases of the skin, which we refer to as the ’990 patent;

10,155,016 covering pharmaceutical compositions containing B-VEC formulated for myriad routes of administration;

10,441,614 covering aspects of our vector platform technology, and its uses in delivering any gene of interest to the skin;

10,525,090, covering pharmaceutical compositions comprising our second clinical product candidate, KB105, and methods of its use for treating TGM1-deficient autosomal recessive congenital ichthyosis;

10,786,438 covering pharmaceutical compositions comprising vectors encoding cosmetic proteins, including our third product candidate, KB301, and methods for their use for improving skin condition, quality, and/or appearance;

10,525,090, covering pharmaceutical compositions comprising our clinical product candidate, KB105, and methods of its use for treating TGM1-deficient autosomal recessive congenital ichthyosis;

10,786,438 covering pharmaceutical compositions comprising vectors encoding cosmetic proteins, including our product candidate, KB301, and methods of its use for improving skin condition, quality, and/or appearance;

10,829,529 covering methods of using KB407 for the treatment of cystic fibrosis and other diseases causing progressive lung destruction;

11,185,564 covering aspects of our vector platform technology, and its uses in delivering any gene of interest to the skin.

Furthermore, we have nine international patent applications filed in accordance with the Paris Cooperation treaty directed to multiple discovery, preclinical, and clinical programs, including Vyjuvek, KB105, KB301, KB104, and KB407, as well as multiple patent applications filed in foreign jurisdictions stemming from these international applications.

Vyjuvek is also the subject of patents granted in Australia, Europe, Japan, and New Zealand, including European Patent No.

3 377 637 B1, covering pharmaceutical compositions containing Vyjuvek as well as uses thereof.

Furthermore, we have nine international patent applications filed in accordance with the Paris Cooperation treaty directed to multiple discovery, preclinical, and clinical programs, including B-VEC, KB105, KB301, KB104, and KB407, as well as multiple patent applications filed in foreign jurisdictions stemming from these international applications.

B-VEC is also the subject of patents granted in Australia, Europe, Japan, Mexico, New Zealand, and Singapore including European Patent No.

3 377 637 B1, covering pharmaceutical compositions containing B-VEC as well as uses thereof.

Even if we are granted the patents we are currently pursuing, they may not issue in a form that will provide us with the full scope of protection we desire, they may not prevent competitors or other third parties from competing with us, and/or they may not otherwise provide us with a competitive advantage.

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We also may not be aware of all third-party intellectual property rights potentially relating to technologies similar to our own.

Publications of discoveries in the scientific literature often lag their actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing or, in some cases, not at all.

Therefore, it is impossible to be certain that we were the first to develop the specific technologies as claimed in any owned patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on each and every one of our product candidates, current and future innovations related to our vector platform, and our institutional knowledge in all countries throughout the world would be prohibitively expensive, and intellectual property rights in some countries outside the United States may differ in scope from those eventually granted in the United States.

Filing, prosecuting and defending patents on each and every one of our product candidates, and current and future innovations related to our vector platform, in all countries throughout the world would be prohibitively expensive, and intellectual property rights in some countries outside the United States may differ in scope from those eventually granted in the United States.

Thus, in some cases, we may not have the opportunity to obtain patent protection for certain technologies in some jurisdictions outside the United States.

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The biotechnology and pharmaceutical industries are characterized by extensive and complex litigation regarding patents and other intellectual property rights.

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., 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.

For more information, see "Item 3 – Legal Proceedings .” We may in the future become party to, or be threatened with, other adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates or related technologies, including, for example, interference proceedings, post grant review challenges, and inter partes review before the USPTO.

We may become party to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates or related technologies, including, for example, interference proceedings, post grant review challenges, and inter partes review before the USPTO.

Our competitors or other third parties may assert infringement claims against us, alleging that our therapeutics, manufacturing methods, formulations or administration methods are covered by their patents.

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There is a risk that third parties may choose to engage in litigation with us to enforce or to otherwise assert their patents or other intellectual property rights against us.

Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, which could materially and adversely affect our ability to commercialize our products, including Vyjuvek.

In order to successfully challenge the validity of any such U.S.

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Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and further, it could require us to make substantial licensing and royalty payments.

We could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technologies, including Vyjuvek.

We could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technologies.

We also could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right.

A finding of infringement could prevent us from manufacturing and commercializing our technologies, including VYJUVEK, or force us to cease some or all our business operations.

A finding of infringement could prevent us from manufacturing and commercializing our technologies or force us to cease some or all our business operations.

Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects.

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Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

We are subject to claims asserting that we, our employees or our advisors have wrongfully used or disclosed alleged trade secrets of other parties or claims asserting ownership of what we regard as our own intellectual property and we may face other such claims in the future.

We have been subject to claims asserting that we, our employees or our advisors have wrongfully used or disclosed alleged trade secrets of other parties or claims asserting ownership of what we regard as our own intellectual property and we may face other such claims in the future.

Certain of our employees or advisors are currently, or were previously, employed at universities or other biotechnology or pharmaceutical companies, including potential competitors, and we have and may in the future enter into agreements providing us with rights to intellectual property of third parties for limited purposes.

Although we try to observe the terms of agreements under which we obtain access to third-party intellectual property and to ensure that our employees and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals, or we, have used or disclosed intellectual property, including trade secrets or other proprietary information, of third parties or the current or former employers of employees or advisors.

For instance, as described below under “Item 3—Legal Proceedings,” on May 1, 2020, a complaint was filed against us by PeriphaGen, Inc., which also named our Chief Executive Officer and our 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 we used to develop our vector platform and product candidates.

If we fail in defending any such claims, in addition to paying monetary damages, we may be subject to an injunction and may lose valuable intellectual property rights or personnel.

Moreover, any such litigation, or the threat thereof, may adversely affect our ability to hire new employees or contract with independent contractors.

A loss of key personnel or their work product could hamper or prevent our ability to commercialize our technologies, which would have an adverse effect on our business, results of operations, and financial condition.

A loss of key personnel or their work product could hamper or prevent our ability to commercialize our products, which would have an adverse effect on our business, results of operations, and financial condition.

Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

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The Leahy-Smith Act included several significant changes to U.S.

patent law, including

provisions that affected the way patent applications are prosecuted, and altered strategies regarding patent litigation.

patent law, including provisions that affected the way patent applications are prosecuted, and altered strategies regarding patent litigation.

These provisions also switched the United States from a “first-to-invent” system to a “first-to-file” system, allowed third-party submissions of prior art to the USPTO during patent prosecution, and set forth additional procedures to attack the validity of a patent through various post grant proceedings administered by the USPTO.

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Risks Related to Ownership of Our Common Stock

Our Chief Executive Officer and Chairman of the Board of Directors and our founder, Chief Operating Officer and director will have the ability to substantially influence all matters submitted to stockholders for approval.

Our Chief Executive Officer and Chairman of the Board of Directors and our founder, President, Research & Development and director will have the ability to substantially influence all matters submitted to stockholders for approval.

As of December 31, 2022, Krish S.

Krishnan and Suma M.

Krishnan, our Chief Executive Officer and Chairman of the Board and our founder, Chief Operating Officer and director, respectively, in the aggregate, beneficially owned shares representing approximat e ly 15% of our capital stock.

Krishnan, our Chief Executive Officer and Chairman of the Board and our founder, President, Research & Development and director, respectively, in the aggregate, beneficially owned shares representing approximat e ly 15% of our capital stock.

As a result, they will be able to substantially influence all matters submitted to our stockholders for approval, as well as our management and affairs.

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If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

Raising additional capital could cause the price of our common stock to decline and cause dilution to our stockholders, restrict our operations or require us to relinquish rights.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of private and public equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements.

We may issue additional common stock or restricted securities as part of such financing activities and any such issuances may have a dilutive effect on our then-existing stockholders.

Sales of substantial amounts of our common stock in the open market, or the availability of such shares for sale, could adversely affect the price of our common stock.

If we are unable to raise additional funds through equity or debt financings when needed, and instead raise additional capital through marketing and distribution agreements or other collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our current and future product candidates, technologies, future revenue streams or discovery programs or grant licenses on terms that may not be favorable to us.

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for holders of our common stock.

Our stock price has been and is likely to continue to be volatile.

The price of our common stock has been and is likely to continue to be volatile.

The stock market in general and the market for biopharmaceutical or pharmaceutical companies specifically has experienced extreme volatility that has often been unrelated to the operating performance of such companies.

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• results of clinical trials of our product candidates or those of our competitors;

• our ability to obtain regulatory approval for our product candidates and our ability to successfully commercialize any of our approved product candidates;

• the success of competitive products or technologies;

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• actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

• our inability to obtain or delays in obtaining adequate product supply for any approved product or inability to do so at acceptable prices;

• our inability to manufacture adequate product supply for any approved product or inability to do so at acceptable prices;

• disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

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• the other factors described in this “Risk Factors” section.

We will continue to incur costs as a result of being a public company, and such costs may increase as a result of no longer being an “emerging growth company.”

As a public company, we expect to continue to incur significant legal, accounting, insurance and other expenses, including costs associated with public company reporting requirements.

The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing.

We expect compliance with these public reporting requirements and associated rules and regulations to increase expenses, particularly because we are no longer an emerging growth company, although we are currently unable to estimate these costs with any degree of certainty.

As of December 31, 2021, we are no longer an emerging growth company.

We will incur additional costs applicable to public companies that are not emerging growth companies.

If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report our financial results, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.

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As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Third-party expectations relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance factors.

Some investors may use these factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies relating to corporate responsibility are inadequate.

Third-party providers of corporate responsibility ratings and reports on companies have increased in number, resulting in varied and in some cases inconsistent standards.

In addition, the criteria by which companies’ corporate responsibility practices are assessed are evolving, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria.

Alternatively, if we elect not to or are unable to satisfy such new criteria or do not meet the criteria of a specific third-party provider, some investors may conclude that our policies with respect to corporate responsibility are inadequate.

We may face reputational damage in the event that our corporate responsibility procedures or standards do not meet the standards set by various constituencies.

Furthermore, if our competitors’ corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our competitors instead.

In addition, in the event that we communicate certain initiatives and goals regarding environmental, social and governance matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals.

If we fail to satisfy the expectations of investors and other stakeholders or our initiatives are not executed as planned, our reputation and financial results could be adversely affected

Any of these developments could have a material adverse effect on our business, financial condition, and results of operations.

Issuances of additional shares of our common stock could cause the price of our common stock to decline.

As of December 31, 2021, we had 25,207,985 million shares of common stock issued and outstanding.

Issuing additional shares of our common stock could cause the price of our common stock to decline and cause dilution to our stockholders.

As of December 31, 2022, we had 25.8 million shares of common stock issued and outstanding, and 80.0 million shares authorized for issuance.

As of December 31, 2022, we also had outstanding options to purchase 3.6 million shares of common stock with a weighted-average exercise price of $61.50 per share.

Outstanding vested options are likely to be exercised if the market price of our common stock exceeds the applicable exercise price, and, in the future, we expect to issue additional equity awards to directors and employees.

As of December 31, 2021, we had 98,800 non-vest restricted stock awards ("RSAs") at a weighted-average price of $78.89.

In addition, we may issue additional common stock or restricted securities in the future as part of financing activities or business development activities and any such issuances may have a dilutive effect on our then-existing shareholders.

Sales of substantial amounts of our common stock in the open market, or the availability of such shares for sale, could adversely affect the price of our common stock.

Outstanding vested options are likely to be exercised if the market price of our common stock exceeds the applicable exercise price.

As of December 31, 2022, we had 66,600 non-vested restricted stock awards (“RSAs”) at a weighted-average price of $78.89.

We expect to issue additional equity awards to

directors and employees.

The issuance of restricted common stock or common stock upon exercise of any outstanding options would be dilutive, and may cause the market price for a share of our common stock to decline.

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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-K

Item 1A. Risk Factors