What changed in this filing

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Item 1A. Risk Factors

2024-11-04 compared with 2024-08-05 · 92 added, 106 removed, 1028 unchanged (16% of the section changed)

44 unchanged sentences

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 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 VYJUVEK or 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 VYJUVEK or any product candidate that we may develop and commercialize.

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

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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 now that VYJUVEK has been approved by the FDA and when we begin the commercialization of our product candidates, if approved.

We may need to increase our insurance coverage when we begin commercialization of VYJUVEK outside of the United States or the commercialization of our product candidates, if approved.

Insurance coverage is becoming increasingly expensive.

1 unchanged sentence

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.

Negative public opinion and increased regulatory scrutiny of gene therapy may damage public perception of the safety of our gene therapy product candidates and adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.

Negative public opinion and increased regulatory scrutiny of gene therapy may damage public perception of the safety of our gene therapy product or product candidates and adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.

Gene therapy remains a novel technology.

7 unchanged sentences

From time to time, we may become involved in disputes, claims and lawsuits relating to our business operations.

For example, we may, from time to time, face or initiate claims related to intellectual property matters, employment matters, or commercial matters.

For example, we may face or initiate claims related to intellectual property matters, employment matters, or commercial matters.

Any dispute, claim or lawsuit may divert management’s attention away from our business, we may incur significant expenses in addressing or defending any dispute, claim, or lawsuit, and we may be required to pay damage awards or settlements or become subject to equitable remedies that could adversely affect our operations and financial results.

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Social media is increasingly being used by us, our employees, or others to communicate about our business, VYJUVEK, our clinical development programs, DEB, and the diseases our product candidates are being developed to treat.

We use appropriate social media in connection with our commercialization efforts of VYJUVEK and intend to use it in connection with our commercialization efforts of our product candidates, if approved.

We use social media in connection with our commercialization efforts of VYJUVEK and intend to use it in connection with our commercialization efforts of our product candidates, if approved.

Social media practices in the biotechnology and biopharmaceutical industries continue to evolve , and regulations and regulatory guidance relating to such use are evolving and not always clear.

8 unchanged sentences

We have experienced a period of significant expansion in personnel and of our facilities, infrastructure and overhead as we developed our own manufacturing facilities, built our sales, marketing and distribution infrastructure that we believe is necessary to commercialize VYJUVEK, and increased our research and development efforts.

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

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

1 unchanged sentence

Future growth would impose significant added responsibilities on members of management.

Our management, finance, development personnel, systems, and facilities currently in place may not be adequate to support this expected future growth.

Our management, finance, development personnel, systems, including infrastructure such as IT and facilities, currently in place may not be adequate to support this expected future growth.

Our need to effectively manage our operations, growth, and product candidates requires that we continue to develop more robust business processes and improve our systems and procedures in each of these areas and to attract and retain enough numbers of talented employees.

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Multiple pharmaceutical manufacturers have challenged the law in court, largely on constitutional grounds.

These suits will continue through 2024 and the ultimate effects of such legal challenges are unclear.

These suits will likely continue and the ultimate effects of such legal challenges are unclear.

At this time, we continue to evaluate the effect of the IRA on our business operations and financial condition and results as the full impact of the IRA remains uncertain.

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The ACA amended the intent requirement of the federal Anti-Kickback Statute to clarify that a person or entity does not have to have actual knowledge of this statute or specific intent to violate it;

• 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 ACA 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 (“FCA”).

The ACA 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 (“FCA”).

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

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We cannot eliminate the risk of contamination or injury from these materials.

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.

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

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

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Although there are various mechanisms that may be used to transfer personal information from the EEA and UK to the United States in compliance with the law, such as the EEA and UK’s standard contractual clauses, these mechanisms are subject to legal challenges, and we may be unable to rely on these measures to lawfully transfer personal information to the United States in all cases.

If there is no lawful manner for us to transfer personal information from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally compliant

transfer are too onerous, we could face significant adverse consequences, including increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal information necessary to operate our business.

If there is no lawful manner for us to transfer personal information from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally compliant transfer are too onerous, we could face significant adverse consequences, including increased exposure to regulatory actions,

substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal information necessary to operate our business.

Some European regulators have ordered certain companies to suspend or permanently cease certain transfers of personal information to recipients outside Europe for allegedly violating the EU GDPR’s cross-border data transfer limitations.

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Moreover, despite our efforts, our personnel or third parties on whom we rely on may fail to comply with such obligations, which could negatively impact our business operations.

government enforcement actions (e.g., investigations, fines, penalties, audits, and inspections);

litigation (including class-action claims);

additional reporting requirements and/or oversight;

bans on processing personal information;

and orders to destroy or not use personal information.

Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to loss of customers;

significant reputational harm;

an inability to process personal information or to operate in certain jurisdictions;

limited ability to commercialize VYJUVEK or develop and commercialize our product candidates;

expenditures of time and resources to defend ourselves against claims or inquiries;

adverse publicity;

or substantial changes to our business model or operations.

If we or the third parties that process personal information or other sensitive data our behalf fail, or are perceived to have failed, to address or comply with applicable privacy and data security obligations, we could face significant consequences, including but not limited to government enforcement actions (e.g., investigations, fines, penalties, audits, and inspections), litigation (including class-action claims), additional reporting requirements and/or oversight, bans on processing personal information, and orders to destroy or not use personal information.

Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to loss of customers, significant reputational harm, an inability to process personal information or to operate in certain jurisdictions, limited ability to commercialize VYJUVEK or develop and commercialize our product candidates, expenditures of time and resources to defend ourselves against claims or inquiries, adverse publicity, or substantial changes to our business model or operations.

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 high inflation and interest rates and concerns of a recession in the United States or other major markets due to a number of factors.

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

In addition, Russia’s invasion of Ukraine and/or the Israel-Hamas conflict may lead to a prolonged, adverse impact on global economic, sociopolitical and market conditions.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including inflation and interest rates and concerns of a recession in the United States or other major markets due to a number of factors.

For example, inflation and rising interest rates have recently caused volatility and disruptions in the capital and credit markets, and it is unclear how long such volatility will continue.

In addition, Russia’s invasion of Ukraine and/or the Israeli conflicts in the Middle East may lead to a prolonged, adverse impact on global economic, sociopolitical, and market conditions.

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 or on acceptable terms, if at all.

6 unchanged sentences

Cybersecurity threats include, but are not limited to, ransomware attacks, phishing attempts, and the exploitation of software vulnerabilities to gain access to our information technology environment, and cyber-security risks increase when we transmit information from one location to another, including transmissions over the Internet or other electronic networks.

Despite our robust security measures and our commitment to implementing and continually improving our cybersecurity posture to mitigate the risk of a cybersecurity incident, we cannot guarantee that such incidents will not occur to us or any third-party with whom we do

For example, our specialty pharmacy provider was affected by a cybersecurity incident that delayed reimbursement approvals and had a negative impact on our product revenue, net for the first quarter of 2024.

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

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.

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 and IT systems, 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.

A significant portion of our current supply of drug product for VYJUVEK and our product candidates is located at our manufacturing facilities in Pittsburgh, Pennsylvania.

A significant portion of our current supply of materials necessary for production of VYJUVEK and our product candidates, as well as finished VYJUVEK and product candidates, is located at our

manufacturing facilities in Pittsburgh, Pennsylvania.

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.

4 unchanged sentences

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.

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.

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

Furthermore, certain investors and others have been engaged in “anti-ESG” campaigns, and, to the extent we take actions that are seen as positive to some investors, other investors may take issue with such actions.

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Therefore, it is unknown whether the new rules will go into effect and if they do, whether there will be significant changes.

If the new rules go into effect and are not substantially different than the rules adopted by the SEC, we will may be required 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.

If the new rules go into effect and are not substantially different than the rules adopted by the SEC, we may be required 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.

10 unchanged sentences

• limits in our ability to penetrate international markets;

• financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products, and exposure to foreign currency exchange rate fluctuations;

• financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products that are approved for sale, and exposure to foreign currency exchange rate fluctuations;

• natural disasters, political and economic instability, including wars, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade, and other business restrictions;

41 unchanged sentences

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

• successful completion of preclinical studies, including animal studies, to determine the predicted safety and efficacy profile of our product candidates;

• successful enrollment and completion of clinical trials;

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Regulatory requirements and policy governing gene and cell therapy products have changed frequently and may continue to change in the future.

In 2016, the FDA established the Office of Tissues and Advanced Therapies (“OTAT”) within its Center for Biologics Evaluation and Research to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies Advisory Committee, among others, to advise this review.

In 2016, the FDA established the Office of Tissues and Advanced Therapies (“OTAT”) within

its Center for Biologics Evaluation and Research to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies Advisory Committee, among others, to advise this review.

In September 2022, the FDA announced retitling of OTAT to the Office of Therapeutic Products (“OTP”) and elevation of OTP to a “Super Office” to meet its growing cell and gene therapy workload.

25 unchanged sentences

Obtaining marketing approval is an extensive, lengthy, expensive, and inherently uncertain process, and regulatory authorities may delay, limit, or deny approval of our product candidates for many reasons.

We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all.

We cannot guarantee that any clinical trials will

be conducted as planned or completed on schedule, if at all.

A failure of one or more clinical trials can occur at any stage of testing.

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

The results of nonclinical and preclinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials, and interim results of a clinical trial do not necessarily predict final results.

In some instances, there can be

significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the study subject populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants.

The results of nonclinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials, and interim results of a clinical trial do not necessarily predict final results.

In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the study subject populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants.

In addition, preclinical and clinical data are often susceptible to various interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval.

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• obtain approval for indications or patient populations that are not as broad as intended or desired;

• obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

• obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, precautions, or contraindications;

• obtain approval without labeling claims that are necessary or desirable for the successful commercialization of our product candidates;

2 unchanged sentences

• 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, precautions, or contraindications;

• experience damage to our reputation.

1 unchanged sentence

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.

Further, we, the FDA or an IRB, may suspend our clinical trials at any time if it appears that we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, including the FDA’s Current Good Clinical Practice, or CGCP, regulations, that we are exposing participants to unacceptable health risks, or if the FDA finds deficiencies in our IND, applications or the conduct of these trials.

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

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 product candidates could be negatively impacted, and our ability to generate revenue from our product candidates may be eliminated or delayed.

We rely on third parties to conduct certain aspects of our preclinical studies and clinical trials.

We rely on third parties to conduct certain of our preclinical studies or aspects of our preclinical studies and clinical trials.

If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for, or commercialize, our product candidates.

We depend upon third parties to conduct certain aspects of our preclinical studies and depend on third parties, including independent principal investigators, to conduct our clinical trials under agreements with universities, medical institutions, and others.

We depend upon third parties to conduct certain of our preclinical studies and depend on third parties, including independent principal investigators, to conduct our clinical trials under agreements with universities, medical institutions, and others.

We negotiate budgets and contracts with such third parties, which may result in delays to our development timelines and increased costs.

We rely on third parties over the course of our clinical trials, and, as a result, may have limited control over the clinical principal investigators and limited visibility into their day-to-day activities, including with respect to their compliance with the approved clinical protocol.

Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on third

parties does not relieve us of our regulatory responsibilities.

We and these third parties are required to comply with CGCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in clinical development.

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We cannot be certain that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with CGCP requirements.

In addition, our later-stage clinical trials must be conducted with product produced under CGMP requirements and may require a large number of study subjects.

In addition, our later-stage clinical trials must be conducted with product produced under Current Good Manufacturing Practice, or CGMP, requirements and may require a large number of study subjects.

Our failure or any failure by these third parties to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

Moreover, our business may be adversely affected if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.

Any third parties conducting aspects of our preclinical studies, or our clinical trials will not be our employees and, except for remedies that may be available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our preclinical studies and clinical programs.

Any third parties conducting our preclinical studies or our clinical trials will not be our employees and, except for remedies that may be available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our preclinical studies and clinical programs.

These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities, which could affect their performance on our behalf.

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Regulatory authorities in countries outside of the United States and the European Union also have requirements for approval of product candidates with which we must comply prior to marketing in those countries.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements

could result in significant delays, difficulties, and costs for us and could delay or prevent the introduction of our product candidates in certain countries.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for us and could delay or prevent the introduction of our product candidates in certain countries.

Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries.

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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, which would materially and adversely affect our business, financial condition, results of operations and prospects.

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, which would materially and adversely affect our business, financial condition, results of operations and prospects.

While we have obtained orphan drug exclusivity for VYJUVEK in the U.S., and orphan drug designation for certain of our product candidates in the U.S.

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Upon grant of a marketing authorization, orphan products are entitled to ten years of market exclusivity for the approved therapeutic indication, which means that the EMA and European Commission cannot accept another marketing authorization application, grant a marketing authorization, or accept an application to extend a marketing authorization for a similar product for the same indication for a period of ten years.

The period of market exclusivity is extended by two years for orphan medicinal products that have also complied with an agreed Pediatric Investigation Plan, or PIP.

The ten-year market exclusivity in the European Union may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for which it received orphan designation, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity, or where the prevalence of the condition has increased above the threshold.

The period of market exclusivity is extended by two years for orphan medicinal products that have also complied with an agreed Pediatric Investigation Plan.

The ten-year market exclusivity in the European Union may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for

which it received orphan designation, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity, or where the prevalence of the condition has increased above the threshold.

Additionally granting of an authorization for another similar orphan medicinal product where another product has market exclusivity can happen at any time:

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Specific measures to support the development of orphan drugs in Japan include subsidies for research and development expenditures, prioritized consultation regarding clinical development, reduced consultation fees, tax incentives, priority review of applications, reduced application fees, and extended registration validity period.

Up to 10 years of orphan exclusivity, known as the re-examination period, is granted for the product after approval.

Up to ten years of orphan exclusivity, known as the re-examination period, is granted for the product after approval.

The orphan drug exclusivity may be rescinded by the Japanese government in certain circumstances.

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orphan drug designation for KB105 and KB407 in the United States and the European Union;

and orphan drug designation for KB408 in the United States, we cannot assure you that we will be able to

obtain or maintain orphan drug exclusivity and if we are able to maintain the orphan drug exclusivity, the exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition.

and orphan drug designation for KB408 in the United States, we cannot assure you that we will be able to obtain or maintain orphan drug exclusivity and if we are able to maintain the orphan drug exclusivity, the exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition.

Further, we cannot assure you that any of our other product candidates will be approved for any orphan-designated use in any jurisdiction, in a timely manner or at all, or that a competitor will not obtain orphan drug exclusivity that could block the regulatory approval of any of our drug candidates for several years.

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We may seek a Breakthrough Therapy Designation for some of our product candidates.

A breakthrough therapy is defined as a therapy that is intended, alone or in combination with one or more other therapies, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

A breakthrough therapy is defined as a therapy that is intended, alone or in combination with one or more other therapies, to treat a serious or life-

threatening disease or condition, and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

For therapies that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens.

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If a therapy is intended for the treatment of a serious or life-threatening condition and the therapy demonstrates the potential to address unmet medical needs for this condition, the sponsor may apply for Fast Track Designation.

The FDA has broad discretion whether or not to grant this

designation, so even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it.

The FDA has broad discretion whether or not to grant this designation, so even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it.

Even if we do receive Fast Track Designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures.

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For instance, VYJUVEK was granted PRIME designation.

The PRIME scheme is open to medicines under development and for which the applicant intends to apply for an initial MAA through the centralized procedure.

The PRIME scheme is open to medicines under

development and for which the applicant intends to apply for an initial MAA through the centralized procedure.

Eligible products must target conditions for which where is an unmet medical need (there is no satisfactory method of diagnosis, prevention or treatment in the European Union or, if there is, the new medicine will bring a major therapeutic advantage) and they must demonstrate the potential to address the unmet medical need by introducing new methods or therapy or improving existing ones.

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The sponsor of a rare pediatric disease drug product receiving a priority review voucher may transfer (including by sale) the voucher to another sponsor.

The voucher may

be further transferred any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted the application.

The voucher may be further transferred any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted the application.

The FDA may also revoke any priority review voucher if the rare pediatric disease drug for which the voucher was awarded is not marketed in the United States within one year following the date of approval.

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We have also obtained a rare pediatric disease designation for KB105, KB104, and for KB407.

In addition, in May 2024, intratumoral KB707 was also granted rare pediatric disease designation by the FDA for the treatment of osteosarcoma.

In addition, in May 2024, inhaled KB707 was granted rare pediatric disease designation by the FDA for the treatment of osteosarcoma, and in August 2024, intratumoral KB707 was granted rare pediatric disease designation by the FDA for the treatment of rhabdoymyosarcoma.

However, there is no guarantee that we will be able to obtain a priority review voucher if these product candidates are approved by the FDA.

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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.

A manufacturing authorization must also be obtained from the appropriate EU

regulatory authorities.

The timeframe required for us to obtain such approvals is uncertain.

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Accordingly, we employ multiple steps to control our manufacturing process to assure that the process works and that VYJUVEK and our product candidates are made strictly and consistently in compliance with the process.

Problems with an approved manufacturing process, even minor deviations from the normal process, could

result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory.

Problems with an approved manufacturing process, even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims, or insufficient inventory.

In addition to the potential impacts of problems with an approved manufacturing process, changes to an approved manufacturing process may result in problems with the process design, process reproducibility, stability, or batch consistency, and may require regulatory approval before we are permitted to sell products manufactured with the changed manufacturing process, which could potentially delay commercial availability of an approved product.

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For example, as a result of the strong and increasing commercial demand for VYJUVEK, we designed a revised commercial manufacturing process that should more than quadruple the output of each production batch.

Before we can commercially sell VYJUVEK manufactured with the revised commercial manufacturing process, the change to the manufacturing process must be validated and we need to preparee and submit to the FDA a PAS, which must be approved by the FDA.

We have validated the revised commercial manufacturing process and submitted a PAS to the FDA, which must be approved by the FDA before we can commercially sell VYJUVEK manufactured with the revised commercial manufacturing process.

In addition to requiring FDA approval of a PAS, there are risks associated with scaling up a manufacturing process, including, among others, cost overruns, potential problems with the process scale-up design, process reproducibility, stability issues, and batch consistency.

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We rely on a small number of third parties to commercially distribute VYJUVEK to patients in the United States.

We have contracted with a third-party packaging company to package VYJUVEK, a third-party logistics company to warehouse , process, and ship VYJUVEK to a limited number of specialty pharmacies that mix the medication and administer it to patients in the patient’s home by a healthcare professional and a specialty distributor that distributes VYJUVEK to hospitals and outpatient clinics where patients are administered the medication at a healthcare professional’s office.

We have contracted with a third-party packaging company to package VYJUVEK, a third-party logistics company to warehouse,

process, and ship VYJUVEK to a limited number of specialty pharmacies that mix the medication and administer it to patients in the patient’s home by a healthcare professional and to a limited number of hospitals and distributors where patients are administered the medication in a hospital or clinic.

This distribution network requires significant coordination with our sales and marketing and finance organizations.

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We may be unable to enter into appropriate supply, marketing, and distribution arrangements on favorable terms, if at all.

reduce or discontinue their efforts to sell or support VYJUVEK, not devote the resources necessary to market and sell VYJUVEK in the volumes and within the time frame we expect, not be able to satisfy financial obligations to us or others, not provide us with accurate or timely information regarding their inventories of VYJUVEK or the number of patients who are using VYJUVEK, or not provide us with accurate or timely information regarding serious adverse events and/or product complaints.

Our use of distributors in these markets to market and sell VYJUVEK involves certain risks, including, but not limited to, risks that these organizations will not comply with applicable laws and regulations, not effectively sell or support VYJUVEK or reduce or discontinue their efforts to sell or support VYJUVEK, not devote the resources necessary to market and sell VYJUVEK in the volumes and within the time frame we expect, not be able to satisfy financial obligations to us or others, not provide us with accurate or timely information regarding their inventories of VYJUVEK or the number of patients who are using VYJUVEK, or not provide us with accurate or timely information regarding serious adverse events and/or product complaints.

Any such events may result in regulatory actions that may include suspension or termination of the distribution and sale of our products in a certain country, loss of revenue, and/or reputational damage, which could harm our results of operations and business.

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Such efforts may require more resources than are typically required due to the complexity and uniqueness of our products.

If VYJUVEK or any of our product candidates that are approved fails to achieve market acceptance among physicians, patients, or third-party payors, we will not

be able to generate significant revenue from such product, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

If VYJUVEK or any of our product candidates that are approved fails to achieve market acceptance among physicians, patients, or third-party payors, we will not be able to generate significant revenue from such product, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

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

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In addition to determining market opportunities for our products, we need to accurately forecast demand and the timing of the demand, which is difficult.

Incorrect demand estimates could adversely impact the Company.

Incorrect demand estimates could adversely impact our business, financial condition, results of operations, and prospects.

For example, if product demand is higher than we initially estimate, we may need to spend time and money on increasing our manufacturing capabilities and/or changing our manufacturing processes, which could require greater capital expenditures than initially forecasted and potentially delay commercial availability of an approved product, which could adversely affect our business, financial condition, and results of operations.

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Current government regulations and possible future legislation regarding health care may affect coverage and reimbursement for medical treatment by third-party payors, which may render VYJUVEK or our product candidates, if approved, not commercially viable or may adversely affect our anticipated future revenue and gross margins.

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 drugs or biologics generally could restrict the amount that we are able to charge for VYJUVEK or our product candidates, if approved, which would adversely affect our anticipated revenue and results of operations.

We cannot predict the extent to which our business may be affected by proposed health care reforms and cost reductions or potential future legislative or regulatory developments.

However, future price controls or other changes in pricing regulation or negative publicity related to the pricing of drugs or biologics generally could restrict the amount that we are able

to charge for VYJUVEK or our product candidates, if approved, 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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If coverage and reimbursement are not available, or are available only at limited levels, we may not be able to successfully commercialize our product candidates, if approved.

Even if coverage is provided, the coverage may be more limited than the purposes for which the product is approved

by the FDA or comparable foreign regulatory authorities.

Even if coverage is provided, the coverage may be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory authorities.

Moreover, eligibility for coverage and reimbursement does not imply that a product will be paid for in all cases or at a rate that covers our costs, including research, development, intellectual property protection, manufacture, sale, and distribution expenses, and therefore, the approved reimbursement amount may not be adequate to realize a sufficient return on our investment.

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The existing data for reimbursement based on some of these metrics is relatively limited, although certain states have begun to survey acquisition cost data for the purpose of setting Medicaid reimbursement rates, and CMS has begun making pharmacy National Average Drug Acquisition Cost and National Average Retail Price data publicly available on at least a monthly basis.

Therefore, it may be difficult to project the impact of these evolving reimbursement metrics on the willingness of payors to cover product candidates that we are able to commercialize.

Therefore, it may be difficult to project the impact of these evolving reimbursement metrics on the

willingness of payors to cover product candidates that we are able to commercialize.

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, additional legislative changes, statements by elected officials, and administrative changes.

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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.

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.

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Our competitors, or other third parties, may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.

Moreover, our patent estate does not preclude third parties from having intellectual property rights that could interfere with our freedom to use our platform, including for our intended indications.

Moreover, our patent

estate does not preclude third parties from having intellectual property rights that could interfere with our freedom to use our platform, including for our intended indications.

Even assuming patents issue from our pending and future patent applications, changes in either the patent laws or interpretation of the patent laws in the United States and foreign jurisdictions may diminish the value of our patents or narrow their scope of protection.

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

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

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

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

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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 VYJUVEK or any of our product candidates, if approved.

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

In order to successfully challenge

the validity of any such U.S.

patent in federal court, we would need to overcome a presumption of validity.

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Competitors may infringe our current or future patents, should such patents issue, or we may be required to defend against claims of infringement or other unauthorized use of intellectual property.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant

expenses and could distract our scientific and management personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our scientific and management personnel from their normal responsibilities.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

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We have incurred net losses in the past and may not sustain profitability.

Although we generated net income for the year ended December 31, 2023 and for the quarters ended March 31, 2024 and June 30, 2024, we have otherwise previously incurred recurring losses and negative cash flows from operations since inception.

Our transition to operating profitability depends on our ability to (i) successfully commercialize VYJUVEK in the

Although we generated net income starting with the year ended December 31, 2023, we previously incurred recurring losses and negative cash flows from operations since our inception.

Our transition to operating profitability depends on our ability to (i) successfully commercialize VYJUVEK in the U.S.

and obtain the necessary regulatory approvals to commercialize VYJUVEK outside of the U.S.

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To remain profitable, we must be successful in a range of challenging activities, including designing, initiating, and completing clinical trials for our product candidates, developing, validating, and maintaining commercial scale manufacturing processes, obtaining marketing approvals, manufacturing, marketing, and selling VYJUVEK and 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 VYJUVEK does not receive regulatory approvals outside the U.S., or any of our product candidates do not receive regulatory approvals, or if VYJUVEK or any of our product candidates, if approved, fails to achieve sufficient market acceptance for any indication, our ability to remain profitable, our business prospects and financial condition could be materially adversely affected.

If we were required to discontinue

development of any of our product candidates, if VYJUVEK does not receive regulatory approvals outside the U.S., or any of our product candidates do not receive regulatory approvals, or if VYJUVEK or any of our product candidates, if approved, fails to achieve sufficient market acceptance for any indication, our ability to remain profitable and our business prospects and financial condition could be materially adversely affected.

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

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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.

commercialize VYJUVEK and our product candidates, if approved, we may require substantial additional funding.

We expect to continue to incur significant expenses related to sales, medical affairs, marketing, manufacturing, and distribution of VYJUVEK.

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

We expect to continue to incur significant expenses related to sales, medical affairs, marketing, manufacturing, and distribution of VYJUVEK in the United States and abroad.

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

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• the outcome, timing and costs of seeking regulatory approvals for VYJUVEK outside the U.S.;

• the progress, timing, results, and costs of our current and planned clinical trials of B-VEC (in Japan), ophthalmic B-VEC, KB105, KB301, KB407, KB707, and KB408;

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

• the progress, timing, results, and costs of our current and planned clinical trials;

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

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

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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.

Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline.

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

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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.

Any such limitation may significantly reduce our ability to utilize our net operating loss carryforwards and tax credit carryforwards before they expire and could have a material adverse effect on our results of operations in future years.

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.

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We expect our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control.

We are transitioning from a company with a research and development focus to a company undertaking commercial activities.

We are transitioning from a company with a research and

development focus to a company undertaking commercial activities.

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

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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 and consistent product revenue, we may need to finance our cash needs through a combination of private and public equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements.

Until such time as we can generate substantial and consistent product revenue, we may need 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.

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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-Q

Item 1A. Risk Factors