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Item 2. Management’s Discussion and Analysis

2025-05-06 compared with 2024-11-04 · 170 added, 253 removed, 171 unchanged (71% of the section changed)

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These statements relate to future events or to our future operating or financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

Some of such factors include, but are not limited to:

• the commercial success of VYJUVEK ® (beremagene geperpavec-svdt) , our U.S.

Food and Drug Administration (“FDA”) approved product for treating patients, six months of age or older, suffering from dystrophic epidermolysis bullosa (“DEB”);

• the timing, scope or results of regulatory filings and approvals for B-VEC outside of the U.S.

and the commercial success of B-VEC outside the U.S.

• the initiation, timing, cost, progress and results of our research and development activities, preclinical studies and clinical trials for our product candidates;

• the timing, scope or results of regulatory filings and approvals, including timing of final FDA and other regulatory approval of our product candidates;

Forward-looking statements appearing in a number of places throughout this Quarterly Report on Form 10-Q include, but are not limited to, statements about the following, among other things:

• our commercialization plans in the United States and the European Union (“EU”) for our first commercial product, VYJUVEK ® (beremagene geperpavec-svdt) , which was approved by the U.S.

Food and Drug Administration (“FDA”) in May 2023 and the European Medicines Agency (“EMA”) in April 2025 for the treatment of dystrophic epidermolysis bullosa (“DEB”);

• the timing, scope;

or results of our regulatory filings and potential approval for a marketing authorization for B-VEC in Japan;

• our plans and expected timing of commercial launch of B-VEC in Europe and Japan;

• our plans for commercialization of B-VEC outside of the United States, major European markets, and Japan;

• the commercial success of B-VEC outside the U.S.;

• the initiation, timing, progress, and results of clinical trials for KB407, KB408, KB707 (intratumoral and inhaled), KB105, KB803, KB801, KB301, KB304, and any other product candidates, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and the timing of our disclosure of study data;

• the timing, scope or results of regulatory filings and approvals, marketing and other regulatory approval of our product candidates;

• our ability to achieve certain accelerated or orphan drug designations from the FDA or other regulators;

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

• increases in costs associated with our research and development programs for our product candidates;

• increases in our selling, general and administrative expenses;

• risks related to our ability to successfully develop and commercialize our product candidates;

• our ability to identify new product candidates;

• our ability to identify, recruit and retain key personnel;

• risks related to our marketing and manufacturing capabilities and strategy;

• our estimates regarding the potential market opportunity for our product candidates;

• our research and development programs for our product candidates;

• our plans and arbility to successfully identify, develop and commercialize our product candidates;

• our beliefs about our proprietary HSV-1 based vector platform, including its ability to deliver multiple genes and other effectors, which could enable development of therapies for more common conditions that are not necessarily the result of an inherited genetic defects;

• our commercialization, marketing, and manufacturing capabilities and strategy;

• the scalability and commercial viability of our proprietary manufacturing methods and processes;

• our business model and strategic plans for our business, product candidates and technology;

• the rate and degree of market acceptance and clinical utility of our product candidates and gene therapy, in general;

• our competitive position and the success of competing therapies;

• the rate and degree of market acceptance and clinical utility of VYJUVEK and our product candidates and gene therapy, in general;

• our competitive position;

• our intellectual property position and our ability to protect and enforce our intellectual property;

• our ability to establish and maintain collaborations;

• our financial performance and our estimates regarding expenses, future revenue, capital requirements and needs for additional financing, as well as our ability to raise capital;

• our ability to successfully avoid or resolve any litigation, intellectual property or other claims, that may be brought against us;

• global economic conditions;

• the impact of changes in laws and regulations.

• the impact of laws and regulations and potential changes thereto;

• any statements regarding U.S.

or global economic conditions and the impact on our business, or performance and any statement of assumptions underlying any of the foregoing.

Forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Item 1A of Part II of this Quarterly Report on Form 10-Q and other filings we make with the SEC from time to time.

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You should read this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect.

Forward-looking statements represent our management’s beliefs and assumptions only as of the date of filing this Quarterly Report with the SEC.

Forward-looking statements represent our management’s beliefs and assumptions only as of the date of filing this Quarterly Report on Form 10-Q with the SEC.

Except as required by law, we assume no obligation to update these forward-looking statements publicly as a result of subsequent events, developments or otherwise, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Throughout this Form 10-Q, unless the context requires otherwise, all references to “Krystal,” “the Company,” “we,” “our,” “us” or similar terms refer to Krystal Biotech, Inc., together with its consolidated subsidiaries.

Throughout this Quarterly Report on Form 10-Q, unless the context requires otherwise, all references to “Krystal,” “the Company,” “we,” “our,” “us” or similar terms refer to Krystal Biotech, Inc., together with its consolidated subsidiaries.

Web links throughout this document are provided for convenience only and are not intended to be active hyperlinks to the referenced websites.

No content on the referenced websites shall be deemed incorporated by reference into this Quarterly Report on Form 10-Q.

We are a fully integrated, commercial-stage biotechnology company focused on the discovery, development, manufacturing and commercialization of genetic medicines to treat diseases with high unmet medical needs.

We are a fully integrated, commercial-stage, global biotechnology company focused on the discovery, development, manufacturing, and commercialization of genetic medicines to treat diseases with high unmet medical needs.

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

The cell’s own machinery then transcribes and translates the transgene to treat the disease.

Our vectors are amenable to formulation for non-invasive or minimally invasive routes of administration at a healthcare professional’s office or in the patient’s home by a healthcare professional.

Our vectors are amenable to formulation for non-invasive or minimally invasive routes of administration at a healthcare professional’s office or in the patient’s home.

Our innovative technology platform is supported by two in-house, commercial scale Current Good Manufacturing Practice (“CGMP”) manufacturing facilities.

Our FDA Approved Commercial Product

Our FDA and EMA Approved Commercial Product

VYJUVEK (beremagene geperpavec-svdt, or B-VEC;

referred to as B-VEC outside the U.S.

On May 19, 2023, the FDA approved VYJUVEK, the first ever redosable gene therapy, for treating patients, six months of age or older, suffering from DEB, a rare and severe monogenic disease that affects the skin and mucosal tissues and is caused by one or more mutations in a gene called COL7A1 .

VYJUVEK is a redosable topical gel containing our novel vector designed to deliver two copies of the COL7A1 transgene to a patient’s skin cells to produce the COL7 protein.

VYJUVEK is the first and only corrective medicine approved by the FDA for the treatment of DEB, both recessive and dominant, that can be administered by a healthcare professional (“HCP”) in either a clinical setting or in the home.

We possess exclusive rights to develop, manufacture, and commercialize VYJUVEK and all our pipeline candidates throughout the world.

Net VYJUVEK product revenue was $83.8 million for the three months ended September 30, 2024, and $250.1 million in cumulative net product revenue since launch.

Gross margin for the three months ended September 30, 2024 was 92%.

VYJUVEK is a non-invasive, topical, redosable gene therapy approved in the United States and Europe for the treatment of dystrophic epidermolysis bullosa (“DEB”), a rare and severe monogenic disease that affects the skin and mucosal tissues and is caused by one or more mutations in a gene called COL7A1 .

VYJUVEK is designed to deliver two copies of the COL7A1 gene when applied directly to DEB wounds, providing the patient’s skin cells the template to make normal type VII collagen protein and thereby addressing the fundamental disease-causing mechanism.

On April 23, 2025, the European Commission (“EC”) granted marketing authorization to VYJUVEK for the treatment of wounds in patients with DEB who have mutations in the COL7A1 gene, starting from birth.

VYJUVEK is the only corrective medicine approved in Europe for the treatment of DEB wounds.

The approval granted by the EC allows for flexible VYJUVEK dosing either at home or in a healthcare setting, with the option for patient or caregiver administration if deemed appropriate by a healthcare professional (“HCP”).

Previously, in May 2023, the United States Food and Drug Administration (“FDA”) approved VYJUVEK, the first ever redosable gene therapy, for the treatment of wounds in patients, six months of age or older, suffering from DEB.

VYJUVEK is the first and only corrective medicine approved by the FDA for the treatment of both recessive and dominant subtypes of DEB, and is approved in the United States for administration by a HCP in either a clinical setting or in the home.

We possess exclusive rights to develop, manufacture, and commercialize VYJUVEK and all our pipeline candidates throughout the world and intend to commercialize VYJUVEK directly in the United States, major European markets, and

We currently sell VYJUVEK to a limited number of specialty pharmacy (“SP”) providers that mix the medication to be administered by a HCP in either a healthcare or home setting and to a limited number of hospitals or specialty distributors (“SDs”) who deliver to hospitals where patients are administered the medication in a healthcare setting.

We intend to and have started entering into distribution arrangements with specialty distributors to commercialize VYJUVEK outside of the United States, in major European markets, and in Japan.

Net VYJUVEK product revenue was $88.2 million for the three months ended March 31, 2025, and $429.4 million in cumulative net product revenue since launch.

Gross margin for the three months ended March 31, 2025 was 94%.

We define gross margin as product revenue, net less cost of goods sold expressed as a percentage of product revenue, net.

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

As of October 2024, we have secured over 460 reimbursement approvals for VYJUVEK in the U.S.

Our market access team has successfully secured strong nationwide coverage across the United States including, as of April 2025, positive policies or coverage decisions from plans covering over 97% of commercial and Medicaid lives.

As of April 2025, we have secured over 540 reimbursement approvals for VYJUVEK in the United States.

We seek to make the experience of starting and continuing on VYJUVEK treatment seamless for the patient.

Since launch, infrastructure has been in place for patients to be treated in their homes by a HCP, reducing the need for regular visits to a clinic or hospital.

Krystal Connect TM , our U.S.

in-house patient services call center, has been active since FDA approval and assists patients, care givers and HCPs interested in accessing VYJUVEK.

Since launch and through the third quarter of 2024, patient compliance with once weekly treatment while on VYJUVEK remains high at 87%.

Preparations and infrastructure buildout are underway in Europe and Japan to support our planned direct commercial launch in these regions in 2025.

In October 2023, we submitted a Marketing Authorization Application (“MAA”) to the European Medicines Agency (“EMA”) for B-VEC for the treatment of DEB.

In November 2023, we were notified that the MAA had been validated and was

now under Committee for Medicinal Products for Human Use (“CHMP”) review.

In February 2024, the EMA completed inspection of our manufacturing facility as part of the MAA review process and, in May 2024, good manufacturing practices certification was granted by the EMA.

Based on recent interactions with the EMA, we expect a CHMP opinion on the MAA in the fourth quarter of 2024 and a launch in Germany in the first half of 2025.

In September 2024, the Haute Autorité de Santé in France approved pre-marketing early reimbursed access to B-VEC under the Accès Précoce (AP1) program.

DEB patient access to B-VEC under AP1 is expected to start in the fourth quarter of 2024.

AP1 allows for early access to innovative therapies in France prior to European regulatory approval when a positive benefit/risk ratio is recognized and when no other therapeutic alternatives are available.

Krystal Connect TM , our United States in-house patient services call center, has been active since FDA approval and assists patients, care givers, and HCPs interested in accessing VYJUVEK.

Since launch and through the first quarter of 2025, patient compliance with once weekly treatment while on VYJUVEK remains high at 83%.

Compliance in the United States is expected to trend down in coming quarters as patients achieving wound closure begin to transition to maintenance utilization patterns.

Preparations and infrastructure buildout are underway to support our planned direct commercial launch in key European markets and Japan in 2025, starting with our first European launch in Germany expected in mid-2025.

In October 2024, we filed a Japan New Drug Application (“JNDA”) with Japan’s Pharmaceuticals and Medical Devices Agency (“PMDA”).

The JNDA includes the results from the Japan OLE study, the design of which had been approved by the PMDA in July 2023.

The efficacy portion of the Japan OLE study was completed in April 2024 and results closely mirrored those of our Phase 3 study in the U.S.

A total of five patients were enrolled, with one patient discontinuing after eight weeks due to scheduling challenges.

B-VEC was well tolerated in the Japanese study population, with a safety profile consistent with previous studies, and all four patients that completed the study achieved the primary endpoint of complete wound closure at six months.

A decision on the JNDA by the PMDA is expected in the second half of 2025.

The application is expected to receive priority review given the Orphan Drug Designation status granted to B-VEC in December 2023.

The efficacy portion of the Japan OLE study was completed in April 2024 and results closely mirrored those of our Phase 3 study in the United States, with B-VEC exhibiting a safety profile consistent with previous studies and all four patients that completed the study achieved the primary endpoint of complete wound closure at six months.

As part of the ongoing JNDA review, the PMDA recently completed an inspection of our commercial manufacturing facility, ANCORIS.

The JNDA is under priority review, and we expect a decision by the PMDA in the second half of 2025.

Pipeline Highlights and Recent Developments

KB408 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the SERPINA1 transgene, that encodes for normal human alpha-1 antitrypsin protein, for the treatment of alpha-1 antitrypsin deficiency (“AATD”), a serious rare lung disease.

In February 2024, we dosed the first patient in SERPENTINE-1, a Phase 1, open-label, single dose escalation study evaluating KB408, delivered via a nebulizer, in adult patients with AATD with a Pi*ZZ or a Pi*ZNull genotype.

In September 2024, after initiating dosing in Cohort 2, we amended the SERPENTINE-1 protocol to include mandatory bronchoscopies in Cohort 2 for molecular evaluation of alpha-1 antitrypsin (“AAT”) expression .

We are on track to report interim molecular data from the study before the end of the year.

Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier:

KB407 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the full-length cystic fibrosis transmembrane conductance regulator (“ CFTR ”) transgene for the treatment of cystic fibrosis (“CF”), a serious rare lung disease caused by missing or mutated CFTR protein.

KB407 for Cystic Fibrosis (“CF”)

KB407 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the full-length cystic fibrosis transmembrane conductance regulator (“ CFTR ”) transgene for the treatment of CF, a serious rare lung disease caused by missing or mutated CFTR protein.

In July 2023, we announced that we had dosed the first patient in CORAL-1, a Phase 1 multi-center, dose-escalation study evaluating KB407, delivered via a nebulizer, in patients with CF, regardless of their underlying genotype.

In May 2024, we cleared the safety evaluation window for the second cohort of CORAL-1.

We recently activated two additional clinical sites for CORAL-1 and expect to report interim molecular data for KB407 in the first half of 2025.

Dosing of the first patient in the third and final cohort in CORAL-1 is expected before the end of the year.

In December 2024, we announced an interim safety data update for patients treated with KB407 in the first two dose escalation cohorts, in which we found single and repeat inhaled administration of KB407 to be safe and well tolerated.

In January 2025, the Cystic Fibrosis Foundation Therapeutic Development Network Clinical Research Executive Committee granted full sanctioning of our KB407 Phase 1 CORAL-1 study protocol.

Enrollment in CORAL-1 is ongoing, and we expect to report safety and CFTR delivery data from patients in the third and final cohort in mid-2025.

Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT05504837.

KB408 for Alpha-1 Antitrypsin Deficiency (“AATD”) Lung Disease

KB408 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the SERPINA1 transgene, that encodes for normal human alpha-1 antitrypsin (“AAT”) protein, for the treatment of AATD, a serious rare lung disease.

In February 2024, we announced that we dosed the first patient in SERPENTINE-1, a Phase 1, open-label, single dose escalation study evaluating KB408, delivered via a nebulizer, in adult patients with AATD with a Pi*ZZ or a Pi*ZNull genotype.

In December 2024, we announced an interim clinical update from the first two dose escalation cohorts of SERPENTINE-1.

Inhaled KB408 was safe and well-tolerated at both tested dose levels and clear evidence of successful SERPINA1 delivery and AAT expression was observed in both patients that underwent bronchoscopies.

Following this data update, we simultaneously expanded the second cohort and opened enrollment in the third and final cohort of SERPENTINE-1 for more comprehensive molecular assessments at both dose levels.

Enrollment in SERPENTINE-1 is ongoing, and we expect

to report results for both cohorts in the second half of 2025.

Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier:

Ophthalmology

In April 2023, we announced clinical data on the compassionate use of B-VEC, formulated and administered as an eyedrop, to treat a patient suffering from ocular complications of DEB.

Data was first presented at the Association for Research in Vision and Ophthalmology (“ARVO”) 2023 Annual Meeting and subsequently published in the New England Journal of Medicine in February 2024.

Regular application of B-VEC to the eye was well tolerated and associated with full corneal healing at three months and visual acuity improvement from hand motion to 20/25 by eight months.

Based on this early clinical evidence of safety and potential benefit under compassionate use, we started discussions with the FDA in the first quarter of 2024 on a potential clinical development path for KB803, an ophthalmic formulation of B-VEC, and in February 2024, we aligned with the FDA on our proposed single arm, open label study in approximately 10 to 15 patients to enable approval of KB803 to treat ocular complications which are thought to affect over 25% of DEB patients.

We plan to initiate the registrational IOLITE study in the first half of 2025.

In August 2024, we initiated a natural history study to prospectively collect data on the frequency of corneal abrasions in patients with DEB and serve as a run-in period for patients who may be eligible to participate in the registrational study.

Enrollment in the study is ongoing.

We are actively evaluating multiple, preclinical-stage genetic medicine candidates for the treatment of front and back of the eye diseases.

KB707 is a redosable, immunotherapy designed to deliver genes encoding both human interleukin-2 (“IL-2”) and interleukin-12 (“IL-12”) to the tumor microenvironment and promote systemic immune-mediated tumor clearance.

KB803 for Ocular Complications in Patients with DEB

KB803 is a redosable eye drop formulation of B-VEC, designed for the treatment of ocular complications that are thought to affect over 25% of DEB patients.

These complications, which include corneal erosions, abrasions, blistering and scarring, can lead to progressive vision loss.

There is currently no corrective therapy available.

B-VEC has been applied topically to the eye of one DEB patient under a compassionate use protocol.

The clinical observations of this compassionate use case were published in the New England Journal of Medicine in February 2024.

The patient presented with severe cicatrizing conjunctivitis secondary to DEB.

Surgical symblepharon lysis of the patient’s right eye with pannus removal was conducted and regular administration of B-VEC as an eye drop directly to the eye (5×10 9 PFU/mL) were added to routine post-surgical care, three times weekly for the first two weeks and then once weekly.

B-VEC application frequency was further decreased to once monthly once the corneal epithelium was healed.

B-VEC was well tolerated with no drug-related adverse events noted.

Full corneal healing was observed at three months, as well as significant visual acuity improvement from hand motion to 20/25 by eight months.

Building on this early clinical evidence of safety and potential benefit under compassionate use, we are preparing to initiate a registrational Phase 3 study to enable approval of KB803, our eye drop formulation of B-VEC, to treat ocular complications of DEB.

We expect to dose the first patient in the study in May 2025 and plan to enroll up to 30 DEB patients.

Enrollment in the study is ongoing and, as of April 2025, we had enrolled approximately 50 patients in the study.

Details of the natural history study can be found at www.clinicaltrials.gov under NCT identifier NCT06563414.

KB801 for Neurotrophic Keratitis (“NK”)

KB801 is an eye drop formulation of our novel HSV-1 vector designed to deliver two transgene copies to the corneal epithelium for the sustained, localized expression and secretion of nerve growth factor (“NGF”) and treatment of NK, a rare, degenerative corneal disease caused by nerve damage in the eye that leads to corneal epithelial defects, ulcers, and perforation.

Recombinant NGF eye drops have been shown to significantly improve corneal healing and are approved for the treatment of NK in multiple jurisdictions worldwide, including the United States, but rapid clearance from the eye requires intensive administration six times a day, with eye pain frequently reported, and may result in suboptimal treatment outcomes.

In preclinical studies presented the Association for Research in Vision and Ophthalmology (“ARVO”) 2025 Annual Meeting in May 2025, KB801 was shown to efficiently transduce corneal epithelial cells in vitro and in vivo leading to sustained NGF production in the front of the eye.

By transducing the cells of the corneal epithelium to produce and secrete NGF, KB801 has the potential to significantly reduce the treatment burden for patients while also maintaining more consistent NGF levels in the front of the eye.

In April 2025, the FDA cleared our investigational new drug application to evaluate KB801 in a randomized, double-blind, placebo-controlled, multi-center Phase 1/2 study in moderate-to-severe NK patients.

We expect to dose the first patient in the EMERALD-1 Phase 1/2 study in May 2025.

Additional details on EMERALD-1 study design and endpoints will be disclosed at the time the first patient is dosed.

KB707 for Solid Tumors

KB707 is a redosable, immunotherapy designed to deliver transgenes encoding both human interleukin-2 (“IL-2”) and interleukin-12 (“IL-12”) to the tumor microenvironment and promote systemic immune-mediated tumor clearance.

Two formulations of KB707 are in development, a solution formulation for transcutaneous injection and an inhaled (nebulized) formulation for lung delivery.

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Both formulations of KB707 have also been granted Fast Track Designation by the FDA.

In October 2023, we dosed the first patient in OPAL-1, an open-label, multi-center, monotherapy, dose escalation and expansion Phase 1 study, evaluating intratumoral KB707 in patients with locally advanced or metastatic solid tumors, who relapsed or are refractory to standard of care, with at least one measurable and injectable tumor accessible by transcutaneous route of administration.

In May 2024, we cleared the safety evaluation window for our third and final dose escalation cohort of the OPAL-1 study.

Enrollment in the dose expansion cohort is ongoing.

Inhaled KB707 is currently under evaluation in KYANITE-1, an open-label, multi-center, dose escalation and expansion Phase 1/2 study, evaluating inhaled KB707, as monotherapy or in combination, in patients with locally advanced or metastatic solid tumors of the lung.

In December 2024, we announced an initial clinical update for the monotherapy dose escalation and expansion cohorts of KYANITE-1.

Early evidence of monotherapy activity was observed in the evaluable cohort of 11 patients with heavily pre-treated advanced non-small cell lung cancer, achieving an objective response rate of 27% and a disease control rate of 73% as of data cut-off.

Inhaled KB707 was also reported to be safe and generally well tolerated as monotherapy in the 37 patients included in the safety analysis.

The majority of treatment-related adverse events have been mild to moderate in severity and transient with no Grade 4 or 5 adverse events observed.

We expect to present a clinical update on the monotherapy cohort from KYANITE-1 at the 2025 American Society of Clinical Oncology (“ASCO”) Annual Meeting in June 2025.

Enrollment in KYANITE-1 is ongoing.

Details of the Phase 1/2 study can be found at www.clinicaltrials.gov under NCT identifier NCT06228326.

In April 2024, we dosed the first patient in KYANITE-1, an open-label, monotherapy, dose escalation and expansion Phase 1 study, evaluating inhaled KB707 in patients with locally advanced or metastatic solid tumors of the lung.

In August 2024, the dose escalation portion of the study was completed and a dose was selected for expansion.

Enrollment in the dose expansion cohort is ongoing.

Intratumoral KB707 is currently under evaluation in OPAL-1, an open-label, multi-center, dose escalation and expansion Phase 1/2 study, evaluating intratumoral KB707, as monotherapy or in combination, in patients with locally advanced or metastatic solid tumors, who relapsed or are refractory to standard of care, with at least one measurable and injectable tumor accessible by transcutaneous route of administration.

The final monotherapy dose escalation cohort was cleared in May 2024 and enrollment in OPAL-1 is ongoing.

Details of the Phase 1/2 study can be found at www.clinicaltrials.gov under NCT identifier NCT05970497.

Based on the current pace of enrollment in OPAL-1 and KYANITE-1, we expect to report initial interim data for KB707 in the fourth quarter of 2024.

KB105 is a topical gel containing our novel vector designed to deliver two copies of the TGM1 transgene encoding the human enzyme transglutaminase-1 (“TGM1”) for the treatment of lamellar icthyosis, a serious rare skin disorder most often caused by missing or mutated TGM1 protein.

We expect to resume enrollment in the Phase 2 portion of JADE-1, a randomized, placebo-controlled Phase 1/2 study evaluating KB105 for the treatment of lamellar icthyosis in the first half of 2025.

KB105 for Lamellar Ichthyosis (“LI”)

KB105 is a topical gel containing our novel vector designed to deliver two copies of the TGM1 transgene encoding the human enzyme transglutaminase-1 (“TGM1”) for the treatment of LI, a serious rare skin disorder most often caused by missing or mutated TGM1 protein.

We expect to resume enrollment in the Phase 2 portion of JADE-1, a randomized, placebo-controlled Phase 1/2 study evaluating KB105 for the treatment of LI in 2026.

Details of the JADE-1 Phase 1/2 study can be found at www.clinicaltrials.gov under NCT identifier NCT04047732.

Pipeline Expansion

We expect to present preclinical data at the Society for Investigative Dermatology (“SID”) 2025 Annual Meeting in May 2025 on early-stage dermatology genetic medicine candidates for the treatment of Hailey-Hailey and Darier diseases.

In addition to focusing on genetic medicines to treat patients with diseases with high unmet medical needs, we are leveraging the ability of our platform to deliver proteins of interest to cells in the skin in the context of aesthetic medicine via our wholly-owned subsidiary, Jeune Aesthetics, Inc.

KB301 is a solution formulation of our novel vector for intradermal injection designed to deliver two copies of the COL3A1 transgene to address signs of aging or damaged skin caused by declining levels of, or damaged proteins within the extracellular matrix, including type III collagen.

We recently expanded the senior leadership team at Jeune, with Marc Forth joining as Jeune CEO in April 2025 and Nishant Saxena joining as Jeune CFO in January 2025.

Jeune’s lead program, KB301, is a solution formulation of our novel vector for intradermal injection designed to deliver two copies of the COL3A1 transgene to address signs of aging or damaged skin caused by declining levels of, or damaged proteins within the extracellular matrix, including type III collagen.

In August 2024, Jeune announced positive interim safety and efficacy results from Cohorts 3 and 4 of the Phase 1 study PEARL-1, open label studies evaluating KB301 in the treatment of lateral canthal lines at rest and dynamic wrinkles of the décolleté, respectively.

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Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT04540900.

Based on these Phase 1 results, Jeune has selected treatment of the dynamic wrinkles of the décolleté for advanced clinical development and expects to initiate a Phase 2 study evaluating KB301 in this indication in 2025.

Jeune has several other aesthetic medicine product candidates in various stages of preclinical development.

Based on these Phase 1 results, Jeune selected treatment of the dynamic wrinkles of the décolleté for advanced clinical development and expects to initiate a randomized, placebo-controlled Phase 2 study evaluating KB301 in this indication in the fourth quarter of 2025.

In February 2025, Jeune completed enrollment in the PEARL-2 study, an ongoing, 2:1 randomized and placebo-controlled Phase 1 study evaluating its second clinical-stage investigational aesthetic therapy, KB304, for the treatment of wrinkles.

KB304 is a solution formulation of our novel vector for intradermal injection designed to deliver two copies of the COL3A1 transgene and one copy of the ELN transgene to address various signs of skin aging including elasticity loss.

Jeune expects to report top-line results from the study in the second half of 2025.

Jeune Aesthetics has several other aesthetic medicine product candidates in various stages of preclinical development.

Financial Overview

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Our future revenue will fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any such sales.

We have contracted to sell VYJUVEK to a limited number of specialty pharmacy providers that mix the medication and administer it to patients in the patient’s home by a healthcare professional and through a limited number of hospitals and distributors where patients are administered the medication in a hospital or clinic.

The transaction price that we recognize as revenue for VYJUVEK sales includes an estimate of variable consideration, which includes discounts, returns, copay assistance and rebates that are offered within contracts.

Refer to Note 3 of the notes to condensed consolidated financial statements included in this Form 10-Q and Note 2 of our consolidated financial statements in our 2023 10-K for additional information.

Refer to Note 3 of the notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

Cost of Goods Sold

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Cost of goods sold may also include period costs related to certain manufacturing services and inventory adjustment charges.

Prior to receiving FDA approval in May 2023, costs associated with the manufacturing of VYJUVEK were expensed as research and development expenses.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred to advance our preclinical and clinical candidates, which include:

• expenses incurred under agreements with contract manufacturing organizations, contract research organizations, consultants and other vendors that conduct our preclinical activities;

• expenses incurred under agreements with contract research organizations, consultants and other vendors that conduct our preclinical activities;

• costs of acquiring, developing and manufacturing clinical trial materials and lab supplies;

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We expense third-party costs for research and development activities, such as the manufacturing of preclinical and clinical materials, based on an evaluation of the progress to completion of specific tasks such as manufacturing of drug substance, fill/finish and stability testing, which is provided to us by our vendors.

We expect our research and development expenses will increase as we continue the manufacturing of preclinical and clinical materials and manage the clinical trials of, and seek regulatory approval for, our product candidates and as we expand our product portfolio.

In the near term, we expect that our research and development expenses will increase as we continue our preclinical and clinical trials and studies and incur preclinical and clinical expenses for our product candidates.

We expect our research and development expenses will increase as we continue the manufacturing of preclinical and clinical materials, manage the clinical trials of, and seek regulatory approval for our product candidates and as we expand our product portfolio.

Due to the numerous risks and uncertainties associated with product development, we cannot determine with certainty the duration, costs and timing of clinical trials, and as a result, the actual costs to complete clinical trials may exceed the expected costs.

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Additionally, we anticipate that we will continue to increase our salary and personnel costs and other expenses to support B-VEC commercialization globally.

ASTRA Capital Expenditures

In March 2021, we closed on the purchase of the building that was constructed to house our second commercial scale CGMP facility, ASTRA.

In March 2023, we received the permanent occupancy permit for ASTRA which allowed the Company to begin utilizing certain parts of the building for research and development operations once qualification was completed and a portion of the assets were placed into service throughout 2023 and 2024.

We incurred significant capital expenditures related to the construction of ASTRA in 2023 and expect to continue to incur capital expenditures related to ASTRA throughout the operational life of the facility.

Gains from Sale of Priority Review Voucher (“PRV”)

Gain from sale of priority review voucher relates to proceeds from sale of the rare pediatric PRV we received in connection with the FDA’s approval of VYJUVEK.

Interest and Other Income, Net

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Critical Accounting Policies, Significant Judgments and Estimates

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

There have been no significant changes during the three months ended March 31, 2025 to our critical accounting policies, significant judgments and estimates as disclosed in our management’s discussion and analysis of financial condition and results of operations included in our 2024 Form 10-K.

Results of Operations

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The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

Three Months Ended September 30, 2024 and 2023

Three Months Ended September 30, Change

Three Months Ended March 31, 2025 and 2024

Three Months Ended March 31, Change

(in thousands) (unaudited)

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Income (loss) from operations 36,177 (6,684) 42,861 (641) %

Gain from sale of priority review voucher — 100,000 (100,000) (100) %

Interest and other income, net 7,420 7,616 (196) (3) %

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Product Revenue, Net

Product revenue, net was $83.8 million for the three months ended September 30, 2024, as compared to $8.6 million for the three months ended September 30, 2023.

The increase in product revenue, net was driven by an increase in VYJUVEK sales following initial commercial sales recorded in August 2023.

Product revenue, net was $88.2 million for the three months ended March 31, 2025, as compared to $45.3 million for the three months ended March 31, 2024.

The increase in product revenue, net was driven by an increase in VYJUVEK sales as compared to the prior year.

Cost of Goods Sold

Cost of goods sold was $6.7 million for the three months ended September 30, 2024, as compared to $223 thousand for the three months ended September 30, 2023, due to increased sales of VYJUVEK following initial commercial sales recorded in August 2023.

Prior to receiving FDA approval for VYJUVEK in May 2023, costs associated with the manufacturing of VYJUVEK were expensed as research and development expense.

Cost of goods sold was $5.0 million for the three months ended March 31, 2025, as compared to $2.4 million for the three months ended March 31, 2024, due to increased sales of VYJUVEK.

Research and Development Expenses

Research and development expenses increased $2.9 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Research and development expenses increased $3.3 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The increase was primarily driven by the following:

• an increase of $1.8 million in clinical development costs,

• an increase of $1.5 million in other research and development expenses primarily relating to facilities and equipment related costs, and

• an increase of $636 thousand in manufacturing expenses related to our product candidates.

• an increase of $1.8 million in payroll related expenses, including stock-based compensation, primarily driven by an increase in headcount to support our research and development efforts;

• an increase of $813 thousand and $331 thousand in clinical development costs and manufacturing expenses, respectively, related to our product candidates;

• an increase of $481 thousand in facilities and equipment related costs;

• an increase of $316 thousand in licensing and regulatory costs.

These increases were partially offset by:

• a decrease of $1.1 million due to the capitalization of allocated overhead costs, including facilities costs, for increased commercial batches of VYJUVEK.

• a decrease of $837 thousand due to the capitalization of allocated overhead costs for increased commercial batches of VYJUVEK.

Research and development expenses consist primarily of costs relating to our preclinical development, the development of our product candidates and our clinical trial programs.

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For example, we do not allocate costs associated with stock-based compensation, manufacturing of preclinical or clinical development products or costs relating to facilities and equipment to individual product candidates and preclinical programs.

The following table summarizes our research and development expenses by product candidate or program, and for unallocated expenses, by type, for the three months ended September 30, 2024 and 2023.

Three Months Ended September 30, Change

The following table summarizes our research and development expenses by product candidate or program, and for unallocated expenses, by type, for the three months ended March 31, 2025 and 2024.

Three Months Ended March 31, Change

(in thousands) (unaudited)

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KB301 38 176 (138) (78) %

242 131 111 85 %

KB407 349 783 (434) (55) %

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454 51 403 790 %

486 — 486 — %

Other ophthalmology programs

27 49 (22) (45) %

Other dermatology programs 27 — 27 — %

Other aesthetics programs — 3 (3) (100) %

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(2) Other unallocated expenses include rental, storage, depreciation, and other facility related costs that we do not allocate to our individual product candidates.

The primary changes in our research and development expenses by product candidate or program in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 are as follows:

The primary changes in our research and development expenses by product candidate or program in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 are as follows:

• an increase of $1.3 million in KB707 costs following the expansion of our research and development pipeline to oncology consisting of an increase in payroll related costs to support our research and an increase in contract research expenses for our Phase 1 clinical trial of inhaled KB707;

• an increase of $679 thousand in other unallocated expenses primarily driven by facilities and equipment related costs, and

• an increase of $441 thousand in KB105 costs to further advance this program.

The increases were partially offset by:

• a net decrease of $504 thousand in B-VEC costs due to the timing of the manufacturing process optimization activities and

• a decrease of $460 thousand in other unallocated manufacturing expenses primarily due to the increased costs related to the manufacturing of VYJUVEK which are recorded as inventory and cost of goods sold, offset by an increase in facility related expenses.

• an increase of $601 thousand in stock-based compensation primarily driven by an increase in headcount to support our research and development efforts;

• an increase of $486 thousand in KB803 in preparation for the registrational Phase 3 study to enable approval of KB803;

• an increase of $486 thousand in other unallocated costs primarily driven by facilities and equipment related expenses;

• an increase of $437 thousand in other manufacturing costs related to increased allocated overhead;

• an increase of $403 thousand in KB801 in preparation for the Phase 1/2 study.

These increases were partially offset by a decrease of $434 thousand in KB407 due to the timing of the Phase 1 CORAL-1 study.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $5.0 million in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Selling, general and administrative expenses increased $6.7 million in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

The increase was primarily driven by the following:

• an increase of $5.1 million in stock-based compensation,

• an increase of $439 thousand related to professional services incurred to support our commercial growth, and

• an increase of $4.4 million in payroll-related costs, including $3.6 million in stock-based compensation primarily driven by an increase in headcount;

• an increase of $2.0 million in other G&A costs, including $1.0 million in charitable contributions, $258 thousand in G&A facilities expense, $238 thousand in G&A insurance, and $189 thousand in subscription expenses;

• an increase of $1.2 million related to professional services, including legal and consulting services;

• an increase of $242 thousand in marketing costs to support commercial sales of VYJUVEK.

The increases were partially offset by:

• a decrease of $714 thousand in payroll related costs.

Litigation Settlement

Litigation settlement for the three months ended September 30, 2024 and 2023 was $12.5 million and zero, respectively, and consisted of amounts related to the settlement of litigation with PeriphaGen.

See “Legal Proceedings” in Note 7 of the notes to condensed consolidated financial statements included in this Form 10-Q for more information.

Gain from Sale of Priority Review Voucher

Gain from sale of priority review voucher for the three months ended September 30, 2024 and 2023 was zero and $100.0 million, respectively, and consisted of amounts related to the sale of our rare pediatric disease PRV, which was awarded to the Company in connection with the FDA’s approval of VYJUVEK.

Interest and Other Income, Net

Interest and other income, net for the three months ended September 30, 2024 and 2023 was $7.3 million and $6.7 million, respectively, and consisted of interest and dividend income earned from our cash, cash equivalents and investments.

The increase in interest and dividend income is the result of increased investment activity.

Income Tax Expense

Income tax expense for the three months ended September 30, 2024 and 2023 was $2.6 million and zero, respectively, as a result of initial commercial sales of VYJUVEK recorded in August 2023.

Income tax expense for the three months ended September 30, 2024 relates to state, federal and foreign income taxes.

Nine Months Ended September 30, 2024 and 2023

Nine Months Ended September 30, Change

(in thousands)

Product revenue, net

$ 199,376 $ 8,556 $ 190,820 2230 %

Cost of goods sold

15,112 223 14,889 6677 %

Research and development 40,050 35,061 4,989 14 %

Selling, general and administrative

82,398 73,637 8,761 12 %

Litigation settlement 37,500 12,500 25,000 200 %

Total operating expenses 175,060 121,421 53,639 44 %

Income (loss) from operations

24,316 (112,865) 137,181 (122) %

Gain from sale of priority review voucher — 100,000 (100,000) (100) %

Interest and other income, net 22,430 15,105 7,325 48 %

Income before income taxes

46,746 2,240 44,506 1987 %

Income tax expense

(3,066) — (3,066) — %

$ 43,680 $ 2,240 $ 41,440 1850 %

Products Revenue, net

Product revenue, net was $199.4 million for the nine months ended September 30, 2024 as compared to $8.6 million for the nine months ended September 30, 2023 due to initial sales of VYJUVEK after FDA approval was obtained on May 19, 2023.

Cost of Goods Sold

Cost of goods sold was $15.1 million for the nine months ended September 30, 2024 as compared to $223 thousand for the nine months ended September 30, 2023 due to initial sales of VYJUVEK.

Prior to receiving FDA approval for VYJUVEK in May 2023, costs associated with the manufacturing of VYJUVEK were expensed as research and development expense.

Research and Development Expenses

Research and development expenses increased $5.0 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The increase was primarily driven by the following:

• an increase of $2.8 million in clinical development costs,

• an increase of $2.4 million in manufacturing expenses related to our product candidates,

• an increase of $2.5 million in other research and development expenses primarily relating to licensing and regulatory costs and facilities and equipment related costs, and

• an increase of $1.0 million in depreciation due to the Company’s second CGMP facility being placed into service in 2023 partially offset by the capitalization of depreciation associated with increased commercial batches of VYJUVEK.

The increases were partially offset by:

• a decrease of $2.4 million due to the capitalization of allocated overhead costs for increased commercial batches of VYJUVEK partially offset by increased payroll related expenses, including stock-based compensation, primarily driven by an increase in headcount to support overall growth and

• a net decrease of $1.3 million in direct manufacturing expenses due to the costs to manufacture VYJUVEK being capitalized into inventory and cost of goods sold.

The following table summarizes our research and development expenses by product candidate or program, and for unallocated expenses, by type, for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30, Change

2024 2023 $ %

(in thousands) (unaudited)

B-VEC $ 7,068 $ 6,337 $ 731 12 %

KB105 484 274 210 77 %

KB301 522 480 42 9 %

KB407 1,631 1,259 372 30 %

KB408 1,107 749 358 48 %

KB707 6,469 2,633 3,836 146 %

394 — 394 — %

Other ophthalmology programs

801 8 793 9913 %

Other aesthetics programs 1,146 23 1,123 4883 %

Other research programs 890 421 469 111 %

Other development programs 596 689 (93) (13) %

Stock-based compensation 6,907 7,695 (788) (10) %

Other unallocated manufacturing expenses (1)

6,631 10,181 (3,550) (35) %

Other unallocated expenses (2)

5,404 4,312 1,092 25 %

Research and development expense $ 40,050 $ 35,061 $ 4,989 14 %

(1) Unallocated manufacturing expenses consist of shared pre-commercial manufacturing costs, primarily relating to raw materials, contract manufacturing, contract testing, process development, quality control and quality assurance activities and other manufacturing costs which support the development of multiple product candidates in our preclinical and clinical development programs.

(2) Other unallocated expenses include rental, storage, depreciation, and other facility related costs that we do not allocate to our individual product candidates.

The primary changes in our research and development expenses by product candidate or program in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 are as follows:

• an increase of $3.8 million in KB707 costs following the expansion of our research and development pipeline to oncology consisting of an increase in payroll related costs to support our research and an increase in contract research expenses in preparation for the Phase 1 clinical trial of inhaled KB707 that has now commenced,

• an increase of $1.1 million in other aesthetics programs,

• an increase of $1.1 million in other unallocated expenses, which largely relates to (1) depreciation due to the Company’s second CGMP facility being placed into service in 2023 partially offset by the capitalization of depreciation associated with increased commercial batches of VYJUVEK and (2) other facilities and equipment related costs,

• an increase of $793 thousand in other ophthalmology programs,

• a net increase of $731 thousand in B-VEC costs largely due to:

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

◦ an increase in overseas preclinical and clinical trial costs, and

◦ overseas licensing and regulatory costs.

The increases were partially offset by:

◦ costs being expensed to research and development expense prior to receiving FDA approval in May 2023 that are now included as part of the cost of inventory,

• an increase of $469 thousand in other research programs,

• an increase of $394 thousand in KB803 costs, and

• an increase of $372 thousand in KB407 costs.

The increases were partially offset by:

• a decrease of $3.6 million in other unallocated manufacturing expenses primarily due to the increased costs related to the manufacturing of VYJUVEK following FDA approval being recorded as inventory and cost of goods sold and

• a decrease of $788 thousand in stock-based compensation due to the allocation of labor costs related to work performed to manufacture VYJUVEK to inventory.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $8.8 million in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

The increase was primarily driven by the following:

• an increase of $6.5 million in stock-based compensation,

• an increase of $3.3 million in selling expenses related to the commercial launch of VYJUVEK, which includes $1.5 million related to our patient access program, and

• an increase of $1.5 million related to professional services incurred to support our commercial growth.

The increases were partially offset by:

• a decrease of $2.0 million in marketing costs due to the timing of marketing activities ahead of the VYJUVEK commercial launch.

• a decrease of $1.0 million, inclusive of a decrease in costs associated with our patient access program of $1.1 million partially offset by an increase in selling expenses.

Litigation Settlement

Litigation settlement for the nine months ended September 30, 2024 and 2023 was $37.5 million and $12.5 million, respectively, and consisted of amounts related to the settlement of litigation with PeriphaGen.

See “Legal Proceedings” in Note 7 of the notes to condensed consolidated financial statements included in this Form 10-Q for more information.

Gain from Sale of Priority Review Voucher

Gain from sale of priority review voucher for the nine months ended September 30, 2024 and 2023 was zero and $100.0 million, respectively, and consisted of amounts related to the sale of our rare pediatric disease PRV, which was awarded to the Company in connection with the FDA’s approval of VYJUVEK.

Litigation settlement for the three months ended March 31, 2025 and 2024 was zero and $12.5 million, respectively, and consisted of amounts related to the settlement of litigation with PeriphaGen.

See discussion in Note 6 of the notes to condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information.

Interest and Other Income, Net

Interest and other income, net for the nine months ended September 30, 2024 and 2023 was $22.4 million and $15.1 million, respectively, and consisted of interest and dividend income earned from our cash, cash equivalents and investments.

The increase in interest and dividend income is the result of increased investment activity and more favorable interest rates as compared to the prior period and an increase in our balance of cash, cash equivalents and investments.

Interest and other income, net for the three months ended March 31, 2025 and 2024 was $7.4 million and $7.6 million, respectively, and consisted of interest and dividend income earned from our cash, cash equivalents and investments.

The decrease in interest and dividend income is primarily the result of market conditions.

Income Tax Expense

Income tax expense for the nine months ended September 30, 2024 and 2023 was $3.1 million and zero, respectively, as a result of initial commercial sales of VYJUVEK recorded in August 2023.

Income tax expense for the nine months ended September 30, 2024 relates to state, federal and foreign income taxes.

Income tax expense for the three months ended March 31, 2025 and 2024 was $7.9 million and zero, respectively.

Income tax expense for the three months ended March 31, 2025 relates to state, federal and foreign income taxes.

Liquidity and Capital Resources

As of September 30, 2024, our cash, cash equivalents and short-term investments balance was approximately $588.3 million.

As of September 30, 2024, we had an accumulated deficit of $226.1 million.

We believe that our cash, cash equivalents and short-term investments as of September 30, 2024 will be sufficient to allow us to fund our operations for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

As of March 31, 2025, our cash, cash equivalents and short-term investments balance was approximately $616.8 million.

As of March 31, 2025, we had an accumulated deficit of $144.9 million.

We believe that our cash, cash equivalents and short-term investments as of March 31, 2025 will be sufficient to allow us to fund our operations for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

Our ability to continue to achieve operating profitability is dependent upon the continued successful commercialization of VYJUVEK and the successful development, approval, manufacturing, and commercialization of product candidates.

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As we seek to obtain regulatory approval for our product candidates, we expect to continue to incur significant manufacturing and commercialization expenses as we prepare for product sales, marketing, commercial manufacturing, packaging, labeling and distribution.

Furthermore, pursuant to our settlement agreement with PeriphaGen, we will be required to pay (1) a $6.25 million milestone payment as a result of reporting $100.0 million in cumulative sales during the second quarter of 2024 payable within 120 days following December 31, 2024, (2) a $12.5 million milestone payment as a result of reporting $200.0 million in cumulative sales during the third quarter of 2024 payable within 30 days following the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 2024 and (3) a $12.5 million contingent milestone payment within 30 days following the filing of its Annual Report on form 10-K that reports $300.0 million in cumulative sales.

Our funds may not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for or commercially launch our product candidates.

Our funds may not be sufficient to

enable us to conduct pivotal clinical trials for, seek marketing approval for or commercially launch our product candidates.

Accordingly, to obtain marketing approval for and to commercialize these or any other product candidates, we may be required to obtain further funding through public or private equity offerings, debt financings, collaboration and licensing arrangements or other sources.

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Our failure to raise capital when needed could have a negative effect on our financial condition and our ability to pursue our business strategy.

On May 8, 2023, the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”) with respect to an at-the-market equity offering program (“ATM Program”), under which the Company may issue and sell from time to time through Cowen, acting as agent and/or principal, shares of its common stock having an aggregate offering price up to $150.0 million (“Placement Shares”).

The Placement Shares will be offered and sold pursuant to the Company’s effective shelf registration statement on Form S-3 filed with the SEC on April 6, 2023 (the “Form S-3”), and a prospectus supplement relating to the Placement Shares that was filed with the SEC on May 8, 2023.

We may terminate the ATM Program at any time upon 10 days’ notice to Cowen.

If not earlier terminated, the ATM Program will automatically terminate upon issuance of all of the Placement Shares or the expiration of the Form S-3 on April 6, 2026.

The ATM Program is not and has never been active.

2023 Private Placement Offering

On May 22, 2023 and May 23, 2023, the Company sold 1,720,100 and 9,629 shares of Common Stock, respectively, in a private placement to certain institutional investors at a price of $92.50 per share for aggregate net proceeds of $160.0 million.

In addition, the Company entered into a Registration Rights Agreement that required the Company to file a registration statement with the SEC within 60 days of the date of the Registration Rights Agreement registering the resale of the shares of Common Stock issued in the private placement.

On July 18, 2023, the Company filed the resale registration statement on Form S-3ASR with the SEC, which became effective upon filing.

Operating Capital Requirements

Our primary uses of capital are, and we expect will continue to be for the near future, compensation and related expenses, manufacturing costs for preclinical and clinical materials, regulatory expenses, third-party clinical trial research and development services, laboratory and related supplies, selling expenses, costs to manufacture our commercial product, legal expenses, payments of settlement amounts to PeriphaGen and general overhead costs.

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

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Our future funding requirements will depend on many factors, including, but not limited to:

• the costs needed to commercialize and market our lead product, VYJUVEK;

• the costs needed to globally commercialize and market our lead product, VYJUVEK;

• the progress, timing and costs of clinical trials of our current product candidates;

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• 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;

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

• the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may establish;

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We may need to obtain substantial additional funding in order to receive regulatory approval and to commercialize our product candidates.

To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interests of our existing stockholders may be materially diluted and the terms of these securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders.

securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders.

In addition, debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely affect our ability to conduct our business.

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Sources and Uses of Cash

The following table summarizes our sources and uses of cash for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

The following table summarizes our sources and uses of cash for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(in thousands)

Net cash provided by (used in) operating activities

Net cash provided by operating activities

$ 30,969 $ 15,888

Net cash (used in) provided by investing activities

Net cash (used in) investing activities

(54,769) (25,980)

Net cash provided by financing activities

Net cash (used in) provided by financing activities

(12,466) 10,583

Effect of exchange rate changes on cash and cash equivalents 171 187

Net increase in cash

Net (decrease) increase in cash

$ (36,095) $ 678

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2024 was $70.6 million and consisted primarily of net income of $43.7 million adjusted for $35.7 million of non-cash items and a $8.8 million increase in working capital.

Non-cash adjustments included depreciation of $4.6 million, amortization of operating lease right-of-use assets of $556 thousand, stock-based compensation expense of $35.8 million and other adjustments of $725 thousand, offset by realized gain on investments of $4.4 million and accretion on marketable securities of $1.5 million.

Net cash used in operating activities for the nine months ended September 30, 2023 was $81.6 million and consisted primarily of net income of $2.2 million adjusted for $71.3 million of non-cash items and a $12.5 million increase in working capital.

Non-cash adjustments included gain from sale of priority review voucher of $100.0 million, realized gain on investments of $3.9 million, accretion on marketable securities of $1.6 million and other adjustments of $77 thousand, partially offset by depreciation of $3.5 million, amortization of operating lease right-of-use assets of $671 thousand and stock-based compensation expense of $30.1 million.

Net cash provided by operating activities for the three months ended March 31, 2025 was $31.0 million and consisted primarily of net income of $35.7 million adjusted for $13.8 million of non-cash items and a $18.5 million decrease in cash from an increase in working capital.

Non-cash adjustments included depreciation of $1.4 million, amortization of operating lease right-of-use assets of $224 thousand, stock-based compensation expense of $13.5 million and other adjustments of $614 thousand, offset by realized gain on investments of $1.5 million and accretion on marketable securities of $453 thousand.

Net cash provided by operating activities for the three months ended March 31, 2024 was $15.9 million and consisted primarily of net income of $0.9 million adjusted for $8.7 million of non-cash items and a $6.3 million increase in cash from a decrease in working capital.

Non-cash adjustments included depreciation of $1.4 million, amortization of operating lease right-of-use assets of $182 thousand and stock-based compensation expense of $9.3 million, offset by realized gain on investments of $1.2 million, accretion on marketable securities of $0.8 million and other adjustments of $238 thousand.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2024 was $79.7 million and consisted of $314.3 million in purchases of short-term and long-term investments and $3.4 million in purchases of property and equipment, partially offset by $238.0 million received from the maturities and early calls of short- and long-term investments.

Net cash provided by investing activities for the nine months ended September 30, 2023 was $92.8 million and consisted of $428.6 million received from the maturities of short-term investments and $100.0 million received from gain from sale of priority review voucher, partially offset by $425.9 million in purchases of short-term and long-term investments and $10.0 million in purchases of property and equipment.

Net cash used in investing activities for the three months ended March 31, 2025 was $54.8 million and consisted of $137.8 million in purchases of short-term and long-term investments and $6.2 million in purchases of property and equipment, partially offset by $88.8 million received from the maturities and early calls of short and long-term investments and $435 thousand received in proceeds from disposal of assets.

Net cash used in investing activities for the three months ended March 31, 2024 was $26.0 million and consisted of $88.3 million in purchases of short-term and long-term investments and $1.3 million in purchases of property and equipment, partially offset by $63.6 million received from the maturities of short-term investments.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2024 was $24.6 million and consisted of proceeds of $30.0 million from exercises of stock options, partially offset by $4.2 million used for employee tax withholding payments related to vested restricted stock units and $1.2 million used for employee tax withholding payments for settlement of vested restricted stock awards.

Net cash provided by financing activities for the nine months ended September 30, 2023 was $200.1 million and consisted of proceeds of $159.7 million from issuances of common stock, proceeds of $41.2 million from exercises of stock options, partially offset by $749 thousand used for employee tax withholding payments for settlement of vested restricted stock awards.

Net cash used in financing activities for the three months ended March 31, 2025 was $12.5 million and consisted of $12.1 million used for employee tax withholding payments related to vested restricted stock units and $1.8 million used for employee tax withholding payments for settlement of vested restricted stock awards partially offset by $1.5 million from exercises of stock options.

Net cash provided by financing activities for the three months ended March 31, 2024 was $10.6 million and consisted of proceeds of $16.0 million from exercises of stock options, partially offset by $4.2 million used for employee tax withholding payments related to vested restricted stock units and $1.2 million used for employee tax withholding payments for settlement of vested restricted stock awards.

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 2. Management’s Discussion and Analysis