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Item 1A. Risk Factors

2026-02-17 compared with 2025-02-19 · 259 added, 263 removed, 892 unchanged (37% of the section changed)

Risk Factors.

Our business involves significant risks, some of which are described below.

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

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

Although we received approval from the FDA for VYJUVEK for the treatment of DEB, we can provide no assurances that we will obtain regulatory approval in any other jurisdiction, which would have an adverse impact on our results of operations.

In addition, the successful commercialization of VYJUVEK will depend on a number of factors and involves risk, including some of the risks identified in these “Risk Factors.” One or more of these factors, many of which are beyond our control, could cause significant delays or an inability to successfully commercialize VYJUVEK.

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

Although we received approval from the U.S.

Food and Drug Administration, or FDA, the European Commission, and Japan’s Ministry of Health, Labour and Welfare, or MHLW, for VYJUVEK for the treatment of dystrophic epidermolysis bullosa, or DEB, we can provide no assurances that we will obtain regulatory approval in any other jurisdiction, which could have an adverse impact on our results of operations.

In addition, the successful commercialization of VYJUVEK will depend on a number of factors and involves risk, including some of the risks identified in these “Risk Factors.” One or more of these risks, many of which are beyond our control, could cause significant delays or an inability to successfully commercialize VYJUVEK.

We may not be successful in our efforts to identify, develop, and commercialize additional product candidates, which may impair our ability to expand our business and achieve our strategic objectives, and we may fail to capitalize on programs or product candidates that may be a greater commercial opportunity or for which there is a greater likelihood of success.

Although a substantial amount of our efforts focus on the commercialization of VYJUVEK and the development and potential approval of our current product candidates, a key component of our strategy is to identify, develop and potentially commercialize a portfolio of genetic medicines.

Although a substantial amount of our efforts are focused on the commercialization of VYJUVEK and the development and potential approval of our current product candidates, a key component of our strategy is to identify, develop and potentially commercialize a portfolio of genetic medicines.

Research programs to identify new product candidates require substantial technical, financial, and human resources and may not be successful in identifying potential product candidates.

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

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

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

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

If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaboration, licensing, or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Alternatively, we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.

Alternatively, we may

allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.

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

VYJUVEK and, if approved, our investigational product candidates regulated as biologics may face competition from biosimilars approved through an abbreviated regulatory pathway.

The ACA includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product.

The Patient Protection and Affordable Care Act (“ACA”) includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA.

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After the FDA approves the BLA for the competing product, the competitor may also bring a declaratory judgment action of non-infringement, invalidity, and/or unenforceability of our patent rights.

The law is complex and is still being interpreted and implemented by the FDA.

The law is complex and is still being interpreted and implemented by the FDA, and recent FDA policies, described in draft guidance, could lower development burdens and accelerate the timing and volume of biosimilar competition.

As a result, its ultimate impact, implementation, and meaning are subject to uncertainty.

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

We are aware of several companies and institutions that have developed, or are currently developing, alternative autologous or palliative gene therapy or other approaches for our targeted indications, including DEB, cystic fibrosis, solid tumors, and aesthetic skin conditions.

We are aware of several companies and institutions that have developed, or are currently developing, alternative autologous, or palliative gene therapy or other approaches for our targeted indications, including DEB.

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

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

Product liability claims may be brought against us by participants enrolled in our clinical trials, patients, health care providers, or others using or administering VYJUVEK and our product

Product liability claims may be brought against us by participants enrolled in our clinical trials, patients, health care providers, or others using or administering VYJUVEK and our product candidates.

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

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

• decreased demand for VYJUVEK or any of our product candidates that are approved for commercial sale in the future;

• decreased demand for VYJUVEK or any of our product candidates that are approved for commercial sale;

• injury to our reputation;

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• the inability to successfully commercialize VYJUVEK or our product candidates, if approved.

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

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

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

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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 when we begin commercialization of VYJUVEK outside of the United States or the commercialization of our product candidates, if approved.

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

Insurance coverage is becoming increasingly expensive.

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More restrictive government regulations or negative public opinion would have an adverse effect on our business, financial condition, results of operations, and prospects and may delay or impair the commercialization of VYJUVEK, regulatory approval of our product candidates, or demand for VYJUVEK or any product candidates that are approved for commercial sale.

For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of leukemia and death seen in trials using other vectors.

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

For example, other companies’ gene therapies and earlier gene therapy trials using other vectors led to several well-publicized adverse events, including death.

stricter labeling requirements for those product candidates that are approved, and a decrease in demand for any such product candidates.

Our business operations may subject us to disputes, claims and lawsuits, which may be costly and time-consuming and could materially and adversely impact our financial position and results of operations.

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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 materially and adversely affect our operations and financial results.

Any dispute, claim, or lawsuit may divert management’s attention away from our business, result in significant expenses to address or defend such matters, and require us to pay damage awards or settlements or become subject to equitable remedies, any of which could materially and adversely affect our operations and financial results.

In addition, the uncertainty associated with litigation could lead to increased volatility in our stock price.

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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.

This evolution creates uncertainty and risk of noncompliance with regulations applicable to our business, resulting in potential regulatory actions against us, along with the potential for litigation and heightened scrutiny by the FDA, the Securities and Exchange Commission, or the SEC, and other regulators.

For example, patients may use social media channels to comment on their experience in an ongoing clinical trial of our product candidates, or to report an alleged adverse event.

This evolution creates uncertainty and risk of noncompliance with regulations applicable to our business, resulting in potential regulatory actions against us, along with the potential for litigation and heightened scrutiny by the FDA, the European Medicines Agency, or EMA, the European Commission, the MHLW, the SEC, and other regulators.

For example, patients may use social media to comment on their experience in an ongoing clinical trial of our product candidates, or to report an alleged adverse event.

If such disclosures occur, there is a risk that clinical trial enrollment may be adversely impacted, that we may fail to monitor and comply with applicable adverse event reporting obligations, or that we may not be able to defend our business or the public’s legitimate interests in the face of the political and market pressures generated by social media due to restrictions on what we may say about our product candidates.

There is also a risk of inappropriate disclosure of sensitive information, loss of trade secrets or other intellectual property, public exposure of personal information of our employees, patients who use VYJUVEK, clinical trial patients, and others, or negative or inaccurate posts or comments about us on any social networking website.

In addition, we may encounter attacks on social media regarding our company, management, VYJUVEK, or our product candidates that seriously damage our reputation, brand image, and goodwill.

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In addition, failure to succeed in preclinical or clinical trials or applications for marketing approval may make it more challenging to recruit and retain qualified personnel.

The inability to recruit, or loss of services of

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

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

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

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

Misconduct by these parties could include intentional failures to comply with FDA regulations or the regulations applicable in the EU and other jurisdictions, provide accurate information to the FDA, the EMA, and other regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities.

Misconduct by these parties could include intentional failures to comply with FDA regulations, regulations applicable in the EU, Japan, and other jurisdictions;

to provide accurate information to the FDA, the European Commission, the EMA, the MHLW, and other regulatory authorities;

to comply with healthcare fraud and abuse laws and regulations in the United States and abroad;

to report financial information or data accurately;

or to disclose unauthorized activities.

Sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices.

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In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services.

Under certain circumstances, we may be required to report some of these relationships to the FDA.

The FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the clinical trial.

The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized.

This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of our current and future product candidates.

Under certain circumstances, we may be required to report some of these relationships to the FDA or regulators in other jurisdictions if we conduct clinical trials outside of the United States.

The FDA or other applicable regulators may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the clinical trial data.

The FDA or other applicable regulators may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized.

This could result in a delay in approval, or rejection, of our marketing applications by the FDA or foreign regulators and may ultimately lead to the denial of marketing approval of our current and future product candidates.

Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.

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Any changes that reduce, or impede the ability to obtain, reimbursement for VYJUVEK or our product candidates that we intend to commercialize in the United States could adversely affect successful commercialization of VYJUVEK and our plans to introduce our product candidates in the United States.

The Budget Control Act of 2011, among other things, created measures for spending reductions by Congress.

A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.

This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2032 unless additional Congressional action is taken.

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

In August 2022, the IRA was signed into law.

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

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

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Beginning January 1, 2025, Medicare Part D enrollees now have a new annual out-of-pocket cap of $2,000 on prescription drugs.

Other 2025 Medicare Part D changes include the elimination of the coverage gap phase and the replacement of the Coverage Gap Discount Program with the Manufacturer Discount Program, which requires drug manufacturers to pay a 10% discount for brand-name drugs and biologics during the initial coverage period and a 20% discount during the catastrophic phase.

Other 2025 Medicare Part D

changes include the elimination of the coverage gap phase and the replacement of the Coverage Gap Discount Program with the Manufacturer Discount Program, under which drug manufacturers are required provide a 10% discount for brand-name drugs and biologics during the initial coverage phase and a 20% discount during the catastrophic phase.

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

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.

To date, the majority of these challenges have been unsuccessful, with courts upholding the IRA.

However, these suits will likely continue and the ultimate effects of such legal challenges are unclear.

On April 15, 2025, President Trump issued an executive order directing the Secretary of the Department of Health and Human Services to take certain actions on drug pricing reform, including working with Congress on amendments to the IRA and rule making to establish new Medicare payment models for so-called “high-cost” prescription drugs and biological products.

Subsequently, President Trump has issued additional executive orders directing additional actions designed to lower drug prices, including by tying the price of certain drugs to the price of those drugs in other countries.

It is unclear whether the Trump administration executive orders will lead to actual legislative initiatives.

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

On July 4, 2025, legislation commonly referred to as the One Big Beautiful Bill Act was signed into law, which reduces funding to federal healthcare programs and imposes additional requirements to be eligible for healthcare, which may result in decreased access to healthcare, particularly in Medicaid programs.

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

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

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

Individual states in the United States have also increasingly enacted legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, required discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, measures designed to encourage importation from other countries and bulk purchasing.

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

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

Healthcare reform measures that may be adopted could result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

The implementation of cost containment measures or other healthcare reforms could result in reduced demand for our product and product candidates or additional pricing pressures and may adversely impact our ability to generate sufficient revenue, attain consistent profitability, or commercialize our product candidates, if approved.

The implementation of cost containment measures or other healthcare reforms could result in reduced demand for our product and product candidates that are approved for sale or additional pricing pressures and may adversely impact our ability to generate sufficient revenue, attain consistent profitability, or commercialize our product candidates, if approved.

We are subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy and security laws.

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These laws impact, among other things, our sales, marketing, access assistance, sponsored genetic patient testing, and educational programs.

In addition, we are subject to patient privacy laws by both the federal government and the states in which we conduct our business, as well as by foreign jurisdictions.

In addition, we are subject to privacy and data security laws concerning personal information and health information imposed by both the federal government and the states in which we conduct our business, as well as by foreign jurisdictions.

The laws that affect our operations include, but are not limited to:

• the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for the purchase, recommendation, leasing, or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs.

This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers, and formulary managers on the other.

This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers, and

formulary managers on the other.

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 FCA.

The ACA provides that a claim for items or services resulting from an Anti-Kickback Statute violation is a false claim under the False Claims Act (“FCA”).

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

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

• the HIPAA Rules, which impose certain requirements relating to the privacy, security, and transmission of individually identifiable health information by certain entities subject to the HIPAA Rules, such as health plans, health care clearinghouses, and health care providers that engage in certain covered transactions, known as covered entities, as well as their business associates that perform certain services that involve the use or disclosure of individually identifiable health information for or on behalf of covered entities;

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

• the Health Insurance Portability and Accountability Act of 1996 Rules (“HIPAA Rules”), which impose certain requirements relating to the privacy, security, and transmission of individually identifiable health information by certain entities subject to the HIPAA Rules, such as health plans, health care clearinghouses, and health care providers that engage in certain covered transactions, known as covered entities, as well as their business associates that perform certain services that involve the use or disclosure of individually identifiable health information for or on behalf of covered entities;

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

• our operations in Europe and Japan may be directly or indirectly subject to European and Japanese law equivalents of each of the above U.S.

federal laws, some of which may not have been applicable prior to the recent European Commission and MHLW approvals and commercial launch of VYJUVEK in Europe and Japan;

state and foreign law equivalents of each of the above federal laws, state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures;

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

Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

Any action against us for violation of these laws, even if we successfully defend against such action, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

The shifting compliance environment and the need to build and maintain a robust and expandable systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that we may run afoul of one or more of the requirements.

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Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount that could have a material adverse effect on our business, financial condition, results of operations, and prospects, and our clinical trials or regulatory approvals could be suspended.

Although we maintain workers’ compensation insurance for certain costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities.

Although we maintain workers’ compensation insurance for certain costs and expenses that we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities.

We also may incur substantial costs to comply with current or future environmental, health, and safety laws and regulations, which have tended to become more stringent over time.

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and foreign laws, regulations, and other obligations related to privacy and data security.

Our actual or perceived failure to comply with such obligations could lead to regulatory inquiries or actions,

litigation, fines and penalties, disruptions to our business operations, reputational harm, loss of revenue, and other adverse business consequences.

Privacy and data security have become significant areas of legal and regulatory focus in the United States, European Union, and in many other jurisdictions where we conduct or may conduct our operations.

Our actual or perceived failure to comply with such obligations could lead to regulatory inquiries or actions, litigation, fines and penalties, disruptions to our business operations, reputational harm, loss of revenue, and other adverse business consequences.

Privacy and data security have become significant areas of legal and regulatory focus in the United States, European Union, Japan, and in many other jurisdictions where we conduct or may conduct our operations.

In our ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “process”) personal information and other sensitive information, including, but not limited to, health information, individuals’ financial information, as well as proprietary and confidential business data, including trade secrets, intellectual property, and sensitive third-party data (collectively, “sensitive data”).

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In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal information privacy laws, consumer protection laws, and other similar laws.

Notably, HIPAA, as amended by HITECH, imposes requirements on covered entities, as well as their business associates regarding the privacy, security, and transmission of individually identifiable health information.

Further, states continue to adopt new laws or amend existing laws related to data privacy, requiring attention to frequently changing regulatory requirements.

For example, and the California Consumer Privacy Act of 2018 (“CCPA”) requires businesses to provide specific disclosures in their privacy notices and honor residents’ privacy rights.

Notably, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes requirements on covered entities, as well as their business associates regarding the privacy, security, and transmission of individually identifiable health information.

Further, states continue to adopt new laws or amend existing laws related to privacy and data security, requiring attention to frequently changing regulatory requirements.

For example, the California Consumer Privacy Act of 2018 (“CCPA”) requires businesses to provide specific disclosures in their privacy notices and honor residents’ privacy rights.

The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

Although the CCPA does not apply to certain data that we process in the context of clinical trials, efforts to comply with the CCPA may increase our annual compliance costs and subject us to potential liability with respect to other personal information we may maintain about California residents.

In addition, the California Privacy Rights Act of 2020 (“CPRA”), which came into effect on January 1, 2023, expanded the CCPA’s requirements, extending it to cover personal information of business representatives and employees and the CPRA established a new regulatory agency to implement and enforce the law.

Other states, such as Virginia, Nevada, Connecticut, Utah, Texas, and Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels, which impose similar obligations to those in the CCPA.

Further, other states, such as Nevada and Washington, have enacted privacy laws specifically governing consumer health information, with Washington providing for a private right of action.

In addition, the California Privacy Rights Act of 2020 (“CPRA”), which came into effect on January 1, 2023, expanded the CCPA’s requirements, extending it to cover personal

information of business representatives and employees and the CPRA established a new regulatory agency to implement and enforce the law.

Other states, such as Virginia, Nevada, Connecticut, Utah, Texas, Colorado, Oregon, Montana, Iowa, Indiana, Tennessee, Delaware, and New Jersey, have enacted comprehensive privacy laws that have taken effect or are scheduled to take effect, and similar laws are being considered in several other states, as well as at the federal and local levels, which impose similar obligations to those in the CCPA.

Further, other states, such as Nevada and Washington, have enacted privacy laws specifically governing consumer health information, with Washington providing for a private right of action, and additional states are considering similar consumer health information-related laws.

Although many of these laws currently exempt certain health-related information, the laws may increase our potential liability related to our data processing activities, complicate our compliance efforts, and increase both legal risk and compliance costs for us and the third parties upon whom we rely.

Outside of the United States, there are an increasing number of laws, regulations, and industry standards regarding privacy and data security.

For example, the EU General Data Protection Regulation (“GDPR”) and UK GDPR impose strict requirements for processing personal information, and companies that violate the GDPR may face temporary or permanent bans on certain data processing activities and they may be subject to other penalties such as fines of up to 20 million Euros under the EU GDPR / 17.5 million pounds sterling under the UK GDPR or 4% of annual global revenue, whichever is greater;

or private litigation related to processing of personal information brought by classes of data subjects or consumer protection organizations authorized to represent data subjects’ interests.

For example, the EU General Data Protection Regulation (“GDPR”), the Japanese Act on the Protection of Personal Information, and UK GDPR impose strict requirements on processing personal information.

Companies that violate the GDPR may face temporary or permanent bans on certain data processing activities and may be subject to significant penalties, including fines of up to 20 million Euros under the EU GDPR or 17.5 million pounds sterling under the UK GDPR, or 4% of annual global revenue, whichever is greater.

In addition, companies may be subject to private litigation relating to processing of personal information, including actions brought by brought by classes of data subjects or consumer protection organizations authorized to represent data subjects’ interests.

In some circumstances, we may be unable to transfer personal information between certain jurisdictions due to data localization requirements or other limitations on cross-border data flows.

Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal information to other countries.

In particular, the European Economic Area (“EEA”) and the UK have significantly restricted the transfer of personal information to the United States and other countries whose privacy laws they consider inadequate.

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.

The European Economic Area (“EEA”), the UK, Japan, and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal information to other countries.

In particular, the EEA and the UK have significantly restricted the transfer of personal information to the United States and other countries whose privacy laws they consider inadequate.

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, and other approved data transfer mechanisms, 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.

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.

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

Additionally, companies that transfer personal information to recipients outside of the EEA and/or UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups.

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We may at times fail (or be perceived to have failed) in our efforts to comply with our privacy and data security obligations.

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.

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.

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

If we or the third parties that process personal information or other sensitive data on 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.

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

In addition, the conflict between Russia and Ukraine and the conflicts in the Middle East may lead to a prolonged, adverse impact on global economic, sociopolitical, and market conditions.

In addition, the current geopolitical uncertainty may lead to prolonged, adverse impacts 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 if needed or on acceptable terms, if at all.

A weak or declining economy, sanctions, trade restrictions, and other global conditions could also strain our suppliers, possibly resulting in supply delays or disruptions.

In addition, we may be impacted by the imposition of tariffs, trade protection measures or other policies adopted by any jurisdiction that favors domestic companies and technologies over foreign competitors.

Any of the foregoing could materially and adversely affect our business, and we cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact our business, financial condition, results of operations, and prospects.

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For example, in 2024, our specialty pharmacy provider was affected by a cybersecurity incident that delayed reimbursement approvals and had a negative impact on our product revenue.

A cybersecurity incident, even if promptly

addressed, may harm our reputation, damage our brand, and erode trust.

A cybersecurity incident, even if promptly addressed, may harm our reputation, damage our brand, and erode trust.

Our systems, and those of any third-party with whom we do business, may also be vulnerable to software viruses, stolen, misplaced, or lost data, programming and/or human errors, or other similar events which may disrupt our operations or expose personal and confidential information.

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federal and state laws, and requirements of non-U.S.

jurisdictions, including the EU GDPR and relevant member state law in the European Union and other foreign laws.

jurisdictions, including the EU GDPR and relevant member state law in the EU and other foreign laws.

Although we maintain cyber-security and other customary insurance, our insurance policies may not be adequate to compensate us for the potential losses arising from breaches, failures, or disruptions of our infrastructure.

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Further, our insurance may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.

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

Any security breach involving the

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

(i) subject us to civil and criminal penalties;

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Artificial intelligence presents risks and challenges that could negatively impact our business.

Artificial intelligence (“AI”)-based platforms and tools are increasingly being used in the biopharmaceutical industry, and we have adopted and integrated in limited situations artificial intelligence platforms for limited specific business uses and may adopt and integrate additional artificial intelligence platforms and/or tools into our business.

As with many technological innovations, artificial intelligence presents opportunities, risks and challenges that could impact our business.

As with many technological innovations, AI presents opportunities, risks and challenges that could impact our business.

Harnessing AI’s potential may enable us to speed up the discovery and development of new product candidates, optimize our manufacturing processes, and drive efficiencies.

However, AI may exacerbate existing risks, including risks associated with data privacy, cybersecurity, intellectual property, healthcare fraud and abuse, product development and manufacturing, and risks to subjects in clinical trials.

If the models underlying AI technologies that we may use are incorrectly designed or implemented, trained, or reliant on incomplete, inadequate, inaccurate, biased, or otherwise poor quality data, or on data to which we do not have sufficient rights or in relation to which we and/or the providers of such data have not implemented sufficient legal compliance measures, used without sufficient oversight and governance to ensure their responsible use, misused, or used outside of scope of applicable regulatory authorizations, and/or adversely impacted by unforeseen defects, technical challenges, cybersecurity threats, or material performance issues, the performance of our products and business, as well as our reputation, could suffer or we could incur liability resulting from the violation of laws or contracts to which we are a party, regulatory enforcement actions, or civil claims.

contravention of our internal policies, data protection laws, other applicable laws, or contractual requirements, and/or (ii) the loss of proprietary information, trade secrets, or other intellectual property.

If the models underlying AI technologies that we use or may use are incorrectly designed, implemented, or trained;

rely on incomplete, inadequate, biased, or otherwise poor-quality data;

rely on data with respect to which we do not have sufficient rights or for which we or the data providers have not implemented appropriate legal compliance measures;

are used without sufficient oversight and governance to ensure responsible use;

are misused, or used outside the scope of applicable regulatory authorizations;

or are adversely impacted by unforeseen defects, technical challenges, cybersecurity threats, or material performance issues, the performance of our products and business, as well as our reputation, could suffer.

In addition, we could incur liability as a result of violations of applicable laws or contracts to which we are a party, regulatory enforcement actions, or civil claims.

Additionally, the use of AI solutions by us or third parties on which we rely could lead to (i) the public disclosure of confidential information (including personal data of our employees, clinical trial participants, or other third parties) in contravention of our internal policies, data protection laws, other applicable laws, or contractual requirements, and/or (ii) the loss of proprietary information, trade secrets, or other intellectual property.

In addition to existing risks, AI also introduces new risks, due to the autonomous nature of the technology, which, in some cases, may be deployed to perform tasks, inform decisions, automate decisions, and make predictions.

AI may amplify biased and discriminatory decision making, perform unreliably and malfunction, generate insights which are difficult to interpret and explain, and cause direct harm to individuals or groups.

AI may amplify biased and discriminatory decision making, perform unreliably, malfunction, generate insights which are difficult to interpret and explain, and cause direct harm to individuals or groups.

Our failure to use AI technologies in a way that maintains trust, quality and control in our business activities and to capitalize on opportunities presented by AI may place us at a competitive disadvantage.

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Failure to address AI risks could reduce our ability to deliver on our strategic objectives, result in reputational harm, and have a material adverse effect on our business, prospects, operating results, and financial condition.

The regulatory framework for AI is rapidly evolving as many federal, state, and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations.

The regulatory framework for AI is rapidly evolving as many federal, state, and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations, including the European Union’s AI act.

Evolving AI-related regulations, particularly in the United States, may impact our ability to develop, use, and commercialize AI technologies in the future.

It is possible that further new laws and regulations will be adopted in the United States and in other non-U.S.

jurisdictions, or that existing laws and regulations may be interpreted in ways that would limit our ability to use AI for our business, or require us to change the way we use AI in a manner that negatively affects the performance of our system and business and the way in which we use AI.

We may need to expend resources to adjust our system in certain jurisdictions if the laws, regulations, or decisions are not consistent across jurisdictions.

Further, the cost to comply with such laws, regulations or decisions and/or guidance interpreting existing laws, could be significant and would increase our operating expenses (such as by imposing additional reporting obligations regarding our use of AI).

We may need to expend resources to adjust our systems in certain jurisdictions if the laws, regulations, or decisions are not consistent across jurisdictions.

Further, the cost to comply with such laws, regulations or decisions and/or guidance interpreting existing laws, could be significant and could increase our operating expenses (such as by imposing additional reporting obligations regarding our use of AI).

Such an increase in operating expenses, as well as any actual or perceived failure to comply with such laws and regulations, could materially and adversely affect our business, financial condition, results of operations, and prospects.

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

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

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

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

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

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

Companies across industries are facing increasing scrutiny from a variety of stakeholders related to their ESG, including diversity, equity, and inclusion (“DEI”), and sustainability practices.

Investor advocacy groups, certain institutional investors, investment funds, and other influential investors have increasingly focused on ESG practices and have placed increasing importance on the non-financial impacts of their investments.

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

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

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

Even if this is not the case, our actions may subsequently be determined

to be insufficient by various stakeholders, and we may be subject to investor or regulator engagement on our ESG efforts, even if such initiatives are currently voluntary.

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

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

In addition, in recent years “anti-ESG” sentiment has gained momentum across the United States, with several states and Congress having proposed or enacted “anti-ESG” policies, legislation, or initiatives or issued related legal opinions, and the President having recently issued an executive order opposing DEI initiatives in the private sector.

Such anti-ESG and anti-DEI-related policies, legislation, initiatives, litigation, legal opinions, and scrutiny could result in us facing additional compliance obligations, becoming the subject of investigations and enforcement actions, or sustaining reputational harm.

Therefore, to the extent we take actions that are seen as positive to some investors, other investors may take issue with such actions or face regulatory pressure to refrain from investing in, or divest from, our business.

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

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

For example, the SEC recently adopted new rules that require companies to provide significantly expanded climate-related disclosures in their periodic reporting.

The new climate disclosure rules were the subject of multiple legal challenges, and the SEC voluntarily stayed the climate disclosure rules pending the completion of judicial review.

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 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.

Even if the SEC rules are not adopted, states or ex-U.S.

jurisdictions in which we currently or may in the future operate may also have or adopt ESG or climate-related disclosure rules requiring similar or broader disclosure obligations.

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

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

Our international operations may expose us to business, regulatory, political, operational, financial, pricing and reimbursement, and economic risks associated with doing business outside of the United States.

On April 23, 2025, the European Commission granted marketing authorization to VYJUVEK, and we commercially launched VYJUVEK in Germany in August 2025.

On July 24, 2025, Japan’s MHLW granted marketing authorization to VYJUVEK, and we commercially launched in Japan in October 2025.

We currently have operations and employees located outside the United States and our business strategy incorporates potential additional international expansion to target patient populations outside the United States.

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Compliance with these legal standards could impair our ability to compete in domestic and international markets.

We can face criminal liability and other serious consequences for violations, which can harm our business.

We could face criminal liability and other serious consequences for violations, which could harm our business.

We are subject to export control and import laws and regulations, including the U.S.

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We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other collaborators and partners, even if we do not explicitly authorize or have actual knowledge of such activities.

Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other adverse consequences.

Furthermore, U.S.

export control laws and economic sanctions prohibit the provision of certain products and services to countries, governments, and persons targeted by U.S.

The effect of pandemics, epidemics, outbreaks of infectious diseases, or similar public health crises on our operations and the operations of our customers, suppliers, third-party partners, and regulators could have an adverse impact our business.

Pandemics, epidemics, outbreaks of infectious diseases, or similar public health crises could adversely disrupt or impact our operations or those of our customers, suppliers, third-party partners, and regulators.

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If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to review and process our regulatory submissions in a timely manner, which could have a material adverse effect on our business.

Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital.

government funding of government agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable.

Further, future government shutdowns could impact our ability to access the public markets and obtain capital, if necessary.

In addition, government funding of government agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable.

There remains substantial uncertainty as to how the current U.S.

administration will seek to or continue to modify or revise the requirements and policies of the FDA and other regulatory agencies with jurisdiction over VYJUVEK and our

product candidates.

This uncertainty could present new challenges or potential opportunities as we navigate the clinical development and approval process for our product candidates.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action or as a result of legal challenges, 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, if we are not able to maintain regulatory compliance, if we experience delays in obtaining approval, or if we fail to obtain approval of our product candidates, 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, or the commercial prospects for our product candidates may be harmed and our ability to generate revenue could be materially impaired.

Risks Related to the Development, Regulatory Review, and Approval of Our Product Candidates

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If we fail in one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

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

Our gene therapy platform is based on a novel technology, which makes it difficult to predict the time and cost of obtaining regulatory approvals for our product candidates.

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

Our gene therapy platform is based on novel technology, which makes it difficult to predict the time and cost of obtaining regulatory approvals for our product candidates.

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

The regulatory approval process for novel product candidates such as ours, including approvals of or changes to manufacturing processes, can be more expensive and take longer than for other, better known or more extensively studied product candidates.

It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States, the European Union, or elsewhere, or how long it will take to commercialize our product candidates.

Approvals by the European Commission may not be indicative of what the FDA may require for approval and approval by the FDA may not be indicative of what the European Commission would require for approval.

It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States, the European Union, Japan, or elsewhere, or how long it will take to commercialize our product candidates.

Approvals by the European Commission, MHLW, or other foreign regulators may not be indicative of what the FDA may require for approval and approval by the FDA may not be indicative of what the European Commission, MHLW, or other foreign regulators would require for approval.

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

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

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

Further, the FDA continues to update policies relating to clinical trial design and data collection which may impact compliance requirements.

Similarly, the EMA, the

European Commission, MHLW, or other foreign regulators may issue new or revised guidelines concerning the development and marketing authorization of gene therapy medicinal products.

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

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

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

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

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

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If any such adverse events occur, our clinical trials could be suspended or terminated.

If we are unable to demonstrate that such adverse events were caused by the administration process or related procedures and not by our product candidates, the FDA, the European Commission, the EMA, or other regulatory authorities could order us to cease further development of, or deny approval of, our product candidates for any or all targeted indications.

If we are unable to demonstrate that such adverse events were caused by the administration process or related procedures and not by our product candidates, the FDA, the European Commission, or other regulatory authorities could order us to cease further development of, or deny approval of, our product candidates for any or all targeted indications.

Even if we can demonstrate that any serious adverse events are not product-related, such occurrences could affect patient recruitment or the ability of enrolled patients to complete the trial.

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If preclinical studies of our product candidates do not generate strong data, our preclinical stage programs may never progress to clinical development and may prove to be worthless.

In addition, the results of preclinical studies may not be predictive of the results of clinical trials.

In addition, the results of preclinical

studies may not be predictive of the results of clinical trials.

For example, we utilize animal models to ascertain the predicted safety and efficacy profile of our product candidates, but animal models are imperfect predictors of a product candidate’s effect/interactions in humans.

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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 investigational new drug, or 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.

Further, we, the FDA or an Institutional Review Board, 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 investigational new drug, or IND, applications or the conduct of these trials.

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

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We rely on third party contract research organizations (“CROs”) to conduct our preclinical animal studies to support product candidate development and related regulatory submissions.

Use of CROs for our animal studies subjects us to a number of risks, including a CRO going out of business, failing to meet deadlines or appropriately performing an animal study, or altering their internal practices that prevent future collaboration (e.g., change the types or biosafety levels of materials they are willing to handle).

Use of CROs for our animal studies subjects us to a number of risks, including a CRO going out of business, failing to meet deadlines or appropriately performing an animal study, or altering their internal practices (e.g., changing the types or biosafety levels of materials they are willing to handle) that prevent future collaboration.

In addition, our use of CROs located outside of the United States is subject to changes in import/export regulations that could delay or prevent timely shipping/receiving of our product candidates for animal studies.

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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 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.

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

Any third parties conducting our preclinical studies or our clinical trials are not 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.

If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the preclinical or clinical data they obtain is compromised due to the failure to adhere to our protocols or regulatory requirements or for other reasons, our development timelines, including clinical development timelines, may be extended, delayed or terminated, and we may not be able to complete development of, obtain regulatory approval of, or successfully commercialize our product candidates.

If these third parties do not successfully perform

their contractual duties or meet expected deadlines, need to be replaced, or fail to adhere to our protocols or applicable regulatory requirements, or if the quality or accuracy of the preclinical or clinical data they generate is otherwise compromised, our development timelines, including clinical development timelines, may be extended, delayed or terminated, and we may be unable to complete development of, obtain regulatory approval for, or successfully commercialize our product candidates.

As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed or precluded entirely.

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As a result, interim and preliminary data should be viewed with caution until the final data are available.

Material adverse changes

between preliminary, “top-line,” or interim data and final data could significantly harm our business, financial condition, results of operations, and prospects.

Material adverse changes between preliminary, “top-line,” or interim data and final data could significantly harm our business, financial condition, results of operations, and prospects.

Even if we obtain and maintain approval for our product candidates from the FDA, we may never obtain approval for them outside of the United States, which would limit our market opportunities and adversely affect our business.

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

Obtaining a Marketing Authorization Application (“MAA”) from the European Commission following the opinion of the EMA is a lengthy and expensive process.

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

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 a Marketing Authorization Application (“MAA”) from the European Commission following the opinion of the EMA and obtaining marketing authorization from the MHLW in Japan are lengthy and expensive processes.

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

Regulatory authorities in countries outside of the United States, the European Union, and Japan 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.

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We will continue to incur costs related to regulatory compliance and are subject to risks related to non-compliance with or changes to applicable laws and regulations, which could cause VYJUVEK or any of our product candidates that obtain regulatory approval to lose that approval.

VYJUVEK, our first FDA-approved product, and any other product candidates that obtain regulatory approval in the future, will remain subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, and submission of safety and other post-market information.

VYJUVEK, our first FDA, European Commission, and MHLW-approved product, and any other product candidates that obtain regulatory approval in the future, will remain subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, and submission of safety and other post-market information.

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

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

For example, the holder of an approved Biologics

License Application, or BLA, is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA.

The holder of an approved BLA also must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process.

For example, if demand for an approved product increases more than we previously estimate, we may need or desire to scale up an existing FDA-approved manufacturing process and the scaled-up manufacturing process would be subject to FDA review and approval.

Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.

For example, if demand for an approved product increases more than we previously estimated, we may need or desire to scale up an existing FDA-approved manufacturing process and the scaled-up manufacturing process would be subject to FDA review and approval.

Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal, state, and foreign laws.

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

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The FDA’s policies, and those of equivalent foreign regulatory agencies, may change and additional government regulations may be enacted that could negatively impact the existing marketing approval for VYJUVEK and prevent, limit, or delay regulatory approval of our product candidates.

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

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 United States, and orphan drug designation for certain product candidates in the United States and other jurisdictions, it may not effectively protect us from competition, and we may be unable to obtain orphan drug designation for other product candidates.

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Orphan drug designation itself does not convey any advantage in or shorten the duration of the regulatory review and approval process, but it can lead to financial incentives, such as opportunities for grant funding toward clinical trial costs, tax advantages, and user-fee waivers.

In addition, if a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the drug is entitled to orphan drug marketing exclusivity for a period of seven years.

Orphan drug marketing exclusivity generally prevents the FDA from approving another application to market the same drug or biological product for the same disease or condition for seven years, except in limited circumstances, including if the FDA concludes that the later drug is safer, more effective, or makes a major contribution to patient care.

In addition, if a product candidate that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the drug is entitled to orphan drug marketing exclusivity for a period of seven years.

the FDA concludes that the later drug is safer, more effective, or makes a major contribution to patient care.

A designated orphan drug may not receive orphan drug marketing exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.

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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.

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:

(i) that the second applicant can establish that its product, although similar, is safer, more effective, or otherwise clinically superior, (ii) that the applicant cannot supply enough orphan medicinal product, or (iii) where the applicant consents to a second orphan medicinal product application.

Additionally, a recent legislative initiative that is still under discussion in the European Parliament, may introduce a variable duration of market exclusivity based on the type of orphan medicinal product (between four and 11 years) in the upcoming years.

(i) that the second applicant can establish that its product, although similar, is safer, more effective, or otherwise clinically superior, (ii) that the first applicant cannot supply enough orphan medicinal product, or (iii) where the first applicant consents to a second orphan medicinal product application.

Pursuant to a recent legislative reform initiative of the pharmaceutical framework, for which a provisional political agreement has been reached between the European Parliament and the Council in December of 2025, exclusivity for new orphan medicinal products will likely run nine years (as opposed to the current ten years), while "breakthrough" orphan medicinal products addressing diseases with no existing treatments can benefit from up to 11 years of market exclusivity.

The final legislative text has not yet been published, however, and remains subject to formal adoption, entry into force, and transitional arrangements.

The orphan drug designation system in Japan aims to support the development of drugs for diseases that affect fewer than 50,000 patients in Japan, for which significant unmet medical need exists.

An investigational therapy is eligible to qualify for orphan drug designation in Japan if there is no approved alternative treatment option or if there is high efficacy or safety compared to existing treatment options expected.

An investigational therapy may be eligible for orphan drug designation in Japan if there is no approved alternative treatment option or if the therapy is expected to demonstrate superior efficacy or safety compared to existing treatment options.

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.

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

Even though we have obtained orphan drug exclusivity for VYJUVEK in the United States;

orphan drug designation for B-VEC in the European Union and Japan;

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 may not be able to 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.

Even though we have obtained orphan drug exclusivity for VYJUVEK in the United States, EU, and Japan and obtained orphan drug designation for certain product candidates in the United States and the European Union, we may not be able to maintain orphan drug exclusivity, and if we are able to maintain the orphan drug exclusivity, the exclusivity may not effectively protect the product or product candidate 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 product candidates for several years.

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FDORA also requires sponsors to send updates to the FDA every 180 days on the status of such studies, including progress toward enrollment targets, and the FDA must promptly post this information publicly.

The FDA has also continued to update its accelerated approval policies, including expectations for clinical trial endpoints.

Furthermore, under FDORA, the FDA is empowered to take action, such as issuing fines, against companies that fail to conduct with due diligence any post-approval confirmatory trial or submit timely reports to the agency on their progress.

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There can be no assurance that the FDA would allow any of our product candidates to proceed on an accelerated approval pathway, and even if the FDA did allow such pathway, there can be no assurance that any expedited development, review, or approval will be granted on a timely basis, or at all.

Breakthrough Therapy Designation, Fast Track Designation, Regenerative Medicine Advanced Therapy Designation, or Priority Review by the FDA, or PRIME Scheme by the EMA, even if granted for any of our product candidates, may not lead to a faster development, regulatory review, or approval process, and such designations may not increase the likelihood that any of our product candidates will receive marketing approval.

Breakthrough Therapy Designation, Fast Track Designation, Regenerative Medicine Advanced Therapy (“RMAT”) Designation, or Priority Review by the FDA, or PRIority MEdicines (“PRIME”) Scheme by the EMA, even if granted for any of our product candidates, may not lead to a faster development, regulatory review, or approval process, and such designations may not increase the likelihood that any of our product candidates will receive marketing approval.

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

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Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation.

In any event, the receipt of a Breakthrough Therapy Designation for a product candidate may not result in a faster development process, review, or approval compared to therapies considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA.

In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that such product candidates no longer meet the conditions for qualification or decide that the time for FDA review or approval will not be shortened.

We have obtained and may seek Fast Track Designation for some of our product candidates.

For instance, VYJUVEK, KB105, and KB707 (intratumoral and inhaled) were granted Fast Track Designation by the FDA.

For instance, VYJUVEK and KB707 (intratumoral and inhaled) were granted Fast Track Designation by the FDA.

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.

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

For products that receive Fast Track Designation, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of the marketing application before the application is complete.

For product candidates that receive Fast Track Designation, sponsors may have greater interactions with the FDA, and the FDA may initiate review of sections of the marketing application before the application is complete.

This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a Fast Track product may be effective.

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In 2017, the FDA established the RMAT designation as part of its implementation of the 21st Century Cures Act to expedite review of any drug that meets the following criteria:

it qualifies as a RMAT, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions;

it qualifies as a RMAT, which is defined as a cell

therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions;

it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition;

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The priority review voucher was sold in August 2023.

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

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 rhabdomyosarcoma.

We have also obtained a rare pediatric disease designation for certain of our product candidates, including KB407, inhaled KB707, and intratumoral KB707.

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.

Congress included a sunset provision in the statute authorizing the rare pediatric disease priority review voucher program.

Under the current statutory sunset provisions, since December 20, 2024, the FDA is only able to award a voucher for an approved rare pediatric disease product application if the sponsor has rare pediatric disease designation for the product candidate, and that designation was granted by September 30, 2026.

After September 30, 2026, the FDA may not award any rare pediatric disease priority review vouchers.

We may seek designation for our platform technology as a designated platform technology, but we might not receive such designation, and even if we do, such designation may not lead to a faster development or regulatory review or approval process.

We may seek designation for our platform technology as a designated platform technology.

Under the Food and Drug Omnibus Reform Act of 2022, or FDORA, a platform technology incorporated within or utilized by a drug or biologic is eligible for designation as a designated platform technology if (1) the platform technology is incorporated in, or utilized by, a product approved under a New Drug Application, or NDA, or BLA;

Under current law, the FDA’s authority to award rare pediatric disease priority review vouchers is scheduled to sunset after September 30, 2029.

If the program is not extended, modified, or reauthorized prior to that date, we may be unable to obtain a priority review voucher for one or more of our product candidates, even if such product candidates otherwise satisfy the applicable criteria.

Separately, in June 2025, the FDA announced the Commissioner’s National Priority Voucher pilot program, which is distinct from the priority review voucher program and is intended to expedite review of certain applications aligned with national health priorities.

We have received designation for our platform technology as a designated platform technology, but such designation may not lead to a faster development or regulatory review or approval process.

Under FDORA, a platform technology incorporated within or utilized by a drug or biologic is eligible for designation as a designated platform technology if (1) the platform technology is incorporated in, or utilized by, a product approved under a New Drug Application, or NDA, or BLA;

(2) preliminary evidence submitted by the sponsor of the approved product, or a sponsor that has been granted a right of reference to data submitted in the application for such product, demonstrates that the platform technology has the potential to be incorporated in, or utilized by, more than one product without an adverse effect on quality, manufacturing, or safety;

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If so designated, the FDA may expedite the development and review of any subsequent NDA or BLA for a product that uses or incorporates the platform technology.

Even if we believe our platform technology meets the criteria for such designation, the FDA may disagree and instead determine not to grant such designation.

In addition, the receipt of such designation for a platform technology does not ensure that our applicable product candidates will be developed more quickly or receive a faster FDA review process or ultimate FDA approval.

In 2025, the FDA granted platform technology designation to our genetically modified, non-replicating herpes simplex virus type 1 (HSV-1) viral vector used in our redosable eye drop gene therapy KB801 that is currently under evaluation in a clinical trial for the treatment of neurotrophic keratitis.

However, the receipt of such designation does not ensure that our applicable product candidates will be developed more quickly or receive a faster FDA review process or ultimate FDA approval.

Moreover, the FDA may revoke a designation if the FDA determines that a designated platform technology no longer meets the criteria for such designation.

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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 may also be required from the appropriate regulatory authorities outside of the United States.

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

To obtain approval, we need to ensure that all our processes, methods, and equipment are compliant with CGMP, and perform extensive audits of vendors, contract laboratories, and suppliers.

If any of our vendors, contract laboratories, or suppliers is found to be out of compliance with CGMP, we may experience delays or disruptions in manufacturing while we work with these third parties to remedy the violation or while we work to identify suitable replacement vendors, contract laboratories, or suppliers.

If any of our vendors, contract laboratories, or suppliers are found to be out of compliance with CGMP, we may experience delays or disruptions in manufacturing while we work with these third parties to remedy the violation or while we work to identify suitable replacement vendors, contract laboratories, or suppliers.

The CGMP requirements govern quality control of the manufacturing process and documentation policies and procedures.

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In addition, 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.

We may encounter problems achieving adequate quantities and quality of materials that meet FDA, EMA, or other applicable standards or specifications with consistent and acceptable production yields and costs, which could materially and adversely affect our business, financial condition, results of operations, and prospects.

We may encounter problems achieving adequate quantities and quality of materials that meet FDA or other applicable standards or specifications with consistent and acceptable production yields and costs, which could materially and adversely affect our business, financial condition, results of operations, and prospects.

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

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Our ability to commercially supply VYJUVEK depends, in part, on the ability of third parties to supply and manufacture the raw materials and other important components related to our manufacture of VYJUVEK.

Potential changes in export/import and trade laws, regulations, and policies of the United States and other countries, including any increased trade restrictions or tariffs, may impact prices and availability of raw material and other components used in the manufacture of VYJUVEK, cause supply chain volatility, and harm the development of our product candidates, any of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

For some materials and components related to our manufacture of VYJUVEK and our product candidates, there are, in general, relatively few alternative sources of supply.

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Any need to find and qualify new suppliers or manufacturers could significantly delay production of VYJUVEK or any product candidate, if approved, adversely impact our ability to market VYJUVEK or any product candidate, if approved, and have a material adverse effect on our business, financial condition, results of operations, and prospects.

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

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

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

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Failure to increase manufacturing capacity and at higher yields in a timely or cost-effective manner, or at all, to sufficiently meet our commercial needs could result in delays in commercial availability of an approved product.

If a manufacturing process is approved by the FDA, implementing a new or changed manufacturing processes is difficult, time consuming, and would require regulatory approvals, which could potentially delay commercial availability of an approved product, which, in turn, could harm our results of operations and cause reputational damage.

If a manufacturing process is approved by the FDA or other regulator, implementing a new or changed manufacturing processes is difficult, time consuming, and would require regulatory approvals, which could potentially delay commercial availability of an approved product, which, in turn, could harm our results of operations and cause reputational damage.

Our failure to maintain or continuously improve our quality management program could have an adverse effect upon our business, subject us to regulatory actions, and cause patients to lose confidence in us or our products, among other negative consequences.

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Any change to an approved manufacturing process will put strain on our quality management program.

A quality or safety issue may result in adverse inspection reports, warning letters, monetary sanctions, injunctions to halt manufacture and distribution of VYJUVEK or our product candidates, civil or criminal sanctions, costly litigation, refusal of a government to grant approvals and licenses, restrictions on operations, or withdrawal, suspension or variation of existing approvals and licenses.

A quality or safety issue may result in adverse inspection reports, warning letters, monetary sanctions, injunctions to halt manufacture and distribution of VYJUVEK or our product candidates, civil or criminal sanctions, costly litigation, refusal of a government regulator to grant approvals and licenses, restrictions on operations, or withdrawal, suspension or variation of existing approvals and licenses.

An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, or a loss of patient confidence in us or VYJUVEK or our product candidates, which may result in difficulty in successfully launching products and the loss of potential future sales, which could have an adverse effect on our business, financial condition, and results of operations.

us to submit a Prior Approval Supplement (“PAS”) to the FDA and obtain the agency’s approval for the manufacturing process changes before they can be implemented.

If demand for VYJUVEK or any product for which we obtain marketing approval increases more than previously estimated or we wish to improve manufacturing efficiencies to lower cost of production, we may need or choose to scale up or change a current FDA-approved commercial manufacturing process, which is subject to risks and uncertainties and could require us to submit a Prior Approval Supplement (“PAS”) to the FDA and obtain the agency’s approval for the manufacturing process changes before they can be implemented.

We may desire or need to make manufacturing process changes to scale-up manufacturing to meet increased demand, to improve efficiencies or costs, or otherwise.

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We have limited experience as a commercial company and the sales, marketing, and distribution of VYJUVEK or any future approved products may be unsuccessful or less successful than anticipated.

We received FDA approval of VYJUVEK in May 2023 and initiated a commercial launch of VYJUVEK in the United States in the second quarter of 2023.

We received FDA approval of VYJUVEK in May 2023, European Commission approval of VYJUVEK in April 2025, and MHLW approval in July 2025, and initiated a commercial launch of VYJUVEK in the United States in the second quarter of 2023, in Germany in August 2025, and in Japan in October 2025.

As a company, we have no prior experience commercializing a biologic.

The success of our commercialization efforts is difficult to predict and subject to the effective execution of our business plan, including, among other things, the continued development of our internal sales, marketing, manufacturing, and distribution capabilities and our ability to navigate the significant expenses and risks involved with the development and management of such capabilities.

For example, our commercial launch of VYJUVEK may not develop as planned or anticipated, which may require us to, among others, adjust or amend our business plan and incur significant expenses.

For example, our commercial launch of VYJUVEK in the United States, the European Union, or Japan may not develop as planned or anticipated, which may require us to, among others, adjust or amend our business plan and incur significant expenses.

Further, given our lack of experience commercializing products, we do not have a track record of successfully executing a commercial launch.

There is a risk that we underestimate the level of demand for a product, which could require us to change a manufacturing process to increase production yields and changes to a manufacturing process are time consuming and subject to regulatory, financial, and operational risks.

If we are unsuccessful in accomplishing our objectives and executing on our business plan, or if our commercialization efforts do not develop as planned, we may not be able to successfully commercialize VYJUVEK and any future approved products, we may require significant additional capital and financial resources, we may not become profitable on a consistent basis, and we may not be able to compete against more established companies in our industry.

If we are unsuccessful in accomplishing our objectives and executing on our business plan, or if our commercialization efforts do not develop as planned, we may not be able to successfully commercialize VYJUVEK and any future approved products, we may require significant additional capital and financial resources, we may not be profitable on a consistent basis, and we may not be able to compete against more established companies in our industry.

If we are unable to maintain our agreements with third parties to distribute VYJUVEK to patients in the United States, our results of operations and business could be adversely affected.

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 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.

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 may 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.

In addition, failure to coordinate financial systems could negatively impact our ability to accurately report product revenue from VYJUVEK.

If we are unable to effectively manage the distribution process, the sales of VYJUVEK could be compromised and our results of operations may be harmed.

If the third parties involved in the commercial distribution of VYJUVEK in the United States do not fulfill their contractual obligations to us or refuse or fail to adequately or to properly distribute VYJUVEK and serve patients, or the agreements with them are terminated without adequate notice, shipments of VYJUVEK, and associated revenue, could be adversely affected.

In addition, if we were required to replace such third parties, it could take time to locate an appropriate replacement third-party on acceptable terms, which could cause delays in our distribution network and increased expenses, and thereby adversely impact our commercial sales of VYJUVEK in the United States and result in a material adverse effect on our business, financial condition, results of operations, and prospects.

Using specialty distributors to market and sell VYJUVEK in certain jurisdictions outside of the United States, the United Kingdom, certain EU countries, and Japan subjects us to certain risks.

Outside of the United States, major European markets and Japan, we intend to and have started entering into distribution agreements with specialty distributors to commercialize VYJUVEK.

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

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.

In connection with the commercial launch of VYJUVEK in the United States, we recruited a sales force and established marketing, market access, and medical affairs teams and distribution capabilities and if the commercial launch of VYJUVEK is not successful for any reason, we could incur substantial costs and our investment would be lost if we cannot retain or reposition our sales, marketing, market access, and medical affairs personnel.

If the third parties involved in the commercial distribution of VYJUVEK in the United States, European Union, or Japan do not fulfill their contractual obligations or refuse or fail to adequately or to properly distribute VYJUVEK and serve patients, or the agreements with them are terminated without adequate notice, shipments of VYJUVEK, and associated revenue, could be adversely affected.

In addition, if we were required to replace such third parties, it could take time to locate an appropriate replacement third-party on acceptable terms, which could cause delays in our distribution network and increased expenses, and thereby adversely impact our commercial sales of VYJUVEK and result in a material adverse effect on our business, financial condition, results of operations, and prospects.

Using specialty distributors to market and sell VYJUVEK in certain jurisdictions outside of the United States, the United Kingdom, certain EU countries, and Japan subject us to certain risks.

Outside of the United States, major European markets, and Japan, we have entered into distribution agreements with specialty distributors to commercialize VYJUVEK.

We have entered into agreements with leading regional specialty distributors to cover key markets in central and eastern Europe and the middle east, and we expect to further expand our specialty distributor network.

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

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 VYJUVEK in a certain country, loss of revenue, and/or reputational damage, which could harm our results of operations and business.

In connection with the commercial launch of VYJUVEK in the United States, Europe, and Japan, we have recruited a sales force and established marketing, market access, and medical affairs teams and distribution capabilities and if the commercial launch of VYJUVEK is not successful for any reason, we could incur substantial costs and our investment would be lost if we cannot retain or reposition our sales, marketing, market access, and medical affairs personnel.

To achieve commercial success for VYJUVEK, we have devoted and anticipate that we will continue to devote significant resources to support our sales force, marketing, market access, and medical affairs teams and distribution capabilities.

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For example, recruiting and training sales and marketing personnel is expensive and time-consuming and could delay our ability to focus on other priorities.

If the commercial launch of VYJUVEK in the United States is not successful for any reason, this would be costly, and our investment would be lost if we cannot retain or reposition our sales, marketing, market access, and medical affairs personnel or terminate on favorable terms any agreements entered into with third parties to support our commercialization efforts.

Factors that may inhibit our efforts to commercialize VYJUVEK or any other product candidates, if approved, on our own in the United States or elsewhere include:

If the commercial launch of VYJUVEK in the United States, European Union, or Japan is not successful for any reason, this would be costly, and our investment would be lost if we cannot retain or reposition our sales, marketing, market access, and medical affairs personnel or terminate on favorable terms any agreements entered into with third parties to support our commercialization efforts.

Factors that may inhibit our efforts to commercialize VYJUVEK or any other product candidates, if approved, on our own in the United States, European Union, Japan, or elsewhere include:

• our inability to train and retain adequate numbers of effective sales, marketing, training, and support personnel;

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• unforeseen costs and expenses associated with establishing and maintaining an independent sales, marketing, training, and support organization.

If our sales force, marketing, market access, and medical affairs teams and distribution capabilities fail, or are otherwise unsuccessful, it would materially adversely impact the commercial launch of VYJUVEK, impact our ability to generate revenue, and harm our business.

If our sales force, marketing, market access, and medical affairs teams and distribution capabilities fail, or are otherwise unsuccessful, it would materially adversely impact the commercial launch of VYJUVEK in the United States, Europe, or Japan, impact our ability to generate revenue, and harm our business.

If we are unable to expand our medical affairs, marketing, market access, sales, and distribution capabilities or collaborate with third parties to market and sell our product candidates for which we obtain marketing approval, we may be unable to generate sufficient product revenue.

To successfully commercialize any products for which we obtain marketing approvals, we will need to expand our sales force, marketing, market access, and medical affairs teams and distribution capabilities, either on our own or in collaboration with others.

The development of a sales force, marketing, market access, and medical affairs teams and

distribution capabilities effort is expensive and time-consuming, and our expenses associated with maintaining our sales force may be disproportional compared to the revenue we may be able to generate on sales of VYJUVEK and future products.

To successfully commercialize any products for which we obtain marketing approvals, we will need to expand our sales force, marketing, market access, medical affairs teams, and distribution capabilities, either on our own or in collaboration with others.

The development of a sales force, marketing, market access, and medical affairs teams and distribution capabilities effort is expensive and time-consuming, and our expenses associated with maintaining our sales force may be disproportional compared to the revenue we may be able to generate on sales of VYJUVEK and future products for which we obtain marketing authorization.

We cannot be certain that we will be able to internally develop this capability successfully.

We may enter into collaborations regarding VYJUVEK or any future approved product candidates with other entities to utilize their established marketing and distribution capabilities.

We may enter into collaborations with other entities to utilize their established marketing and distribution capabilities.

However, we may be unable to enter into such agreements on favorable terms, if at all.

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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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Estimating market opportunities can be particularly challenging for rare indications, as epidemiological data is often more limited than for more prevalent indications and can require additional assumptions to assess potential patient populations.

For example, as we commercialize VYJUVEK in the United States and learn more about market dynamics and engage with regulators on additional potential marketing approvals, our view of VYJUVEK’s initial potential market opportunity will become more refined.

For example, as we commercialize VYJUVEK in the United States and abroad and learn more about market dynamics and engage with regulators on additional potential marketing approvals, our view of VYJUVEK’s initial potential market opportunity will become more refined.

The addressable patient population in the United States and internationally may turn out to be lower than expected, patients may not be otherwise amenable to treatment with VYJUVEK or our product candidates, if approved, or may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations, and prospects.

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

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

Even with the requisite approvals from the FDA in the United States, from the European Commission in the European Union, and the MHLW in Japan, and other regulatory authorities internationally (and potential approvals of any of our product candidates by regulatory authorities), the commercial success of VYJUVEK and our product candidates will depend, in part, on the acceptance of physicians, patients, and health care payors of gene therapy products in general, and VYJUVEK and our product candidates, in particular, as medically necessary, cost-effective, and safe.

VYJUVEK and any product candidate that we commercialize may not gain acceptance by physicians, patients, health care payors, and others in the medical community.

If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue

and may not become consistently profitable.

The degree of market acceptance of gene therapy products and VYJUVEK and our product candidates, if approved for commercial sale, will depend on several factors, including:

If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become consistently profitable.

The degree of market acceptance of VYJUVEK and our genetic medicine product candidates, if approved for commercial sale, will depend on several factors, including:

• the efficacy and safety of VYJUVEK and our product candidates as demonstrated in clinical trials;

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• the clinical indications for which VYJUVEK and our product candidates are approved by the FDA and other regulatory authorities;

• the willingness of physicians to prescribe new therapies;

• identification of patients and the willingness of physicians to prescribe new therapies;

• the willingness of the target patient population to try new therapies;

• the prevalence and severity of any side effects;

• product labeling or product insert requirements of the FDA, the EMA, the PMDA, or other regulatory authorities, including any limitations or warnings contained in a product’s approved labeling;

• product labeling or product insert requirements of the FDA, the European Commission, the MHLW, or other regulatory authorities, including any limitations or warnings contained in a product’s approved labeling;

• relative convenience and ease of administration;

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

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

Outside the United States, international operations generally are subject to extensive government price controls and other market regulations.

Increasing emphasis on cost-containment initiatives in the European Union and other countries may put pricing pressure on us.

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

For example, the European Union member states operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed.

To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular product to currently available therapies.

It also can take a significant amount of time after approval of a product to secure pricing and reimbursement for such product in many counties outside the United States.

In general, the prices of medicines under such systems are substantially lower than in the United States.

Other countries allow companies to fix their own prices for medical products but monitor and control company profits.

Some countries outside the United States allow companies to fix their own prices for medical products but monitor and control company profits.

Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates.

Accordingly, in markets outside the United States, the reimbursement for our approved products may be reduced compared with the United States and may be insufficient to generate commercially reasonable product revenue.

There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for VYJUVEK or any of our product candidates.

Moreover, increasing efforts by government and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates.

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This could lead to governmental authorities restricting genetic testing or calling for additional regulation of genetic testing, particularly for diseases for which there is no known cure.

For example, on May 6, 2024, FDA released a final rule clarifying that in vitro diagnostic tests (IVDs) manufactured by

laboratories are medical devices.

If the rule withstands recent court challenges, such tests will be required to undergo premarket review and will be subject to other medical device regulations.

Any of these scenarios could decrease demand for VYJUVEK and our product candidates, if approved.

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

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

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

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

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

In 2018, the Right to Try Law was enacted, allowing eligible patients to request access to certain investigation drugs, including biologics, that have not been FDA approved.

In 2018, the Right to Try Law was enacted, allowing eligible patients to request access to certain investigational drugs, including biologics, that have not been FDA approved.

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

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

In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.

In addition, the laws of some foreign countries do not protect intellectual property rights to the same

extent as federal and state laws in the United States.

Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, even in jurisdictions where we do pursue patent protection.

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Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability (and the ability of any potential future collaborators) to market and sell VYJUVEK and to develop, manufacture, market, and sell our product candidates, and to freely use our proprietary technologies without infringing the rights and intellectual property of others.

Our commercial success depends upon our ability (and the ability of any potential future collaborators) to market and sell VYJUVEK and to develop, manufacture, market, and sell our product candidates for which marketing approvals are granted, and to freely use our proprietary technologies without infringing the rights and intellectual property of others.

Many companies and institutions have filed, and continue to file, patent applications related to various aspects of gene therapy.

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

We could be forced,

including by court order, to cease developing, manufacturing, and commercializing the infringing product or technologies.

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

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

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

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

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

Claims that we

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

Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

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

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

For instance, as described in Note 7 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, in April of 2022, we entered into a settlement agreement with PeriphaGen, Inc., which had alleged breach of contract and misappropriation of trade secrets.

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

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

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

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

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

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

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

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

additional procedures to attack the validity of a patent through various post grant proceedings administered by the USPTO.

As patent reform legislation can inject serious uncertainty into the patent prosecution and litigation processes, it is not clear what impact future patent reform legislation will have on the operation of our business.

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Supreme Court.

We cannot assure you that our efforts to seek patent protection for our technology and product candidates will not be negatively impacted by future court decisions or changes in guidance or procedures issued by the USPTO.

We cannot assure you that our efforts to seek patent protection for our technology, commercial product, and product candidates will not be negatively impacted by future court decisions or changes in guidance or procedures issued by the USPTO.

These decisions, and any guidance issued by the USPTO (or changes thereto), could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property rights in the future.

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• others may be able to make gene therapy products that are similar to our approved product or any of our product candidates but that are not covered by the claims of our current patents, or of patents that we may own or license in the future;

• we, or any future license partners or collaborators, might not have been the first to file patent applications covering certain aspects of the concerned technologies;

• others may independently develop similar or alternative technologies, or duplicate any of our technologies, potentially without falling within the scope of our current or future issued claims, thus not infringing our intellectual property rights;

• it is possible that our filed or future patent applications will not lead to issued patents;

• we, or any license partners or collaborators, may not have been the first to file patent applications covering certain aspects of the relevant products or technologies;

• others may independently develop similar or alternative technologies, or duplicate any of our technologies, that may fall outside the scope of our current or future issued patent claims and therefore may not infringe our intellectual property rights;

• it is possible that our pending or future patent applications may not result in issued patents;

• issued patents to which we currently hold rights or to which we may hold rights in the future may be held invalid or unenforceable, including as a result of legal challenges by third parties or our competitors;

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

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 consistent operating profitability depends on our ability to (i) successfully commercialize VYJUVEK in the United States and obtain the necessary regulatory approvals to commercialize VYJUVEK outside of the United States and then successfully commercialize VYJUVEK outside the United States, and (ii) complete the development of, and obtain the regulatory approvals necessary to successfully commercialize our product candidates with significant market potential.

We have devoted substantially all our efforts to date to (i) research and development of our gene therapy platform, product candidates and our manufacturing infrastructure, and, more recently, (ii) commercializing VYJUVEK in the United States.

We have generated net income for each of the previous three years starting with the year ended December 31, 2023;

however, we previously incurred recurring losses and negative cash flows from operations since our inception.

Our transition to consistent operating profitability depends on our ability to (i) successfully commercialize VYJUVEK in the United States and abroad, and (ii) complete the development of, and obtain the regulatory approvals necessary to successfully commercialize our product candidates with significant market potential.

We expect to continue to incur significant expenses for the foreseeable future and our operating results may fluctuate significantly from quarter to quarter.

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

• manufacture, market, and sell our lead product, VYJUVEK, in the United States and prepare for regulatory approvals outside of the United States and if such approvals are received, commercialize VYJUVEK in those geographies;

• manufacture, market, and sell our lead product, VYJUVEK, in the United States and market and sell VYJUVEK in the EU and Japan;

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

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

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

• initiate preclinical studies and clinical trials for any additional product candidates;

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

• continue to operate our in-house commercial-scale CGMP manufacturing facilities, ANCORIS and ASTRA, and as we seek to obtain FDA approval for commercial manufacture of VYJUVEK at ASTRA, which approval may not be granted;

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

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 United States, 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.

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

We currently have one product, VYJUVEK, approved by the FDA and several product candidates in the clinical trials stages.

To sustain profitability over the long term, 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 are required to discontinue the development of any of our product candidates, if VYJUVEK does not receive regulatory approval outside the United States, the EU, or Japan, if any of our product candidates do not receive regulatory approvals, or if VYJUVEK or any of our product candidates, if approved, fail to achieve sufficient market acceptance, our ability to remain profitable and our business prospects and financial condition could be materially adversely affected.

We currently have one commercial product, VYJUVEK, approved by the FDA, the European Commission, and MHLW and several product candidates in the clinical trials stages.

However, we may never develop, acquire or in-license additional product candidates.

We may never generate revenue from any of our product candidates.

We may not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business, or continue our operations.

Even with sustained net income in recent periods, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to sustain profitability would decrease the value of our company and could impair our ability to maintain our research and development efforts, expand our business, raise capital, or continue our operations.

A decline in the value of our company also could cause stockholders to lose all or part of their investment.

Because of the numerous risks and uncertainties associated with pharmaceutical product and biological development, we are unable to accurately predict the timing or amount of increased expenses.

If we are required by the FDA, the EMA, the PMDA, or other regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in

completing our clinical trials or the development of our product candidates, our expenses could increase and potential revenue from product candidates in development could be delayed.

Because of the numerous risks and uncertainties associated with development of our product candidates, we are unable to accurately predict the timing or amount of increased expenses.

If we are required by the FDA, the EMA, the European Commission, the MHLW, or other regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of our product candidates, our expenses could increase and the timing or amount of revenue from product candidates in development could be adversely affected.

We may need to raise additional funding to maintain and expand our commercialization capabilities and to complete the development of, and obtain the regulatory approvals necessary to, commercialize our product candidates.

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• the costs of product sales, medical affairs, marketing, manufacturing, and distribution for VYJUVEK;

• the outcome, timing and costs of seeking regulatory approvals for VYJUVEK outside the United States;

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

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

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

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

• the terms and timing of any current or future collaborations, distribution, licensing, consulting, or other arrangements;

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

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

Revenue will be derived from VYJUVEK until we have another product candidate receive marketing approval.

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

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

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

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

The terms of additional financing may be impacted by, among other things, general market conditions, the market’s perception of our approved product, VYJUVEK,

and product candidates, our growth potential, and the market price per share of our common stock.

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

See “Raising additional capital could cause the price of our common stock to decline and cause dilution to our stockholders, restrict our operations or require us to relinquish rights.” Failure to obtain necessary capital when needed could force us to delay, limit, or terminate certain of our product development efforts or other operations, which could significantly harm our business, financial condition, results of operations, and prospects.

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

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

Federal net operating loss carryforwards generated in tax years beginning after December 31, 2017 may be carried forward indefinitely but are limited to offset 80% of taxable income in any tax year.

All of our remaining federal net operating loss carryforwards may be carried forward indefinitely.

Our state net operating loss carryforwards expire beginning in 2037.

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

We also have federal orphan drug tax credits which may be used to offset future tax liabilities, which expire beginning in 2039.

The Company fully utilized its federal net operating losses in 2025.

We have state net operating loss carryforwards, which are available to reduce future taxable income.

These state net operating losses will begin to expire in 2037.

We also have federal research and development tax credits and federal orphan drug tax credits which may be used to offset future tax liabilities and expire beginning in 2042.

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

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Risks Related to Ownership of Our Common Stock

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

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

Krishnan and Suma M.

Krishnan, our Chief Executive Officer and Chairman of the Board and our Founder, President, Research & Development and Director, respectively, in the aggregate, beneficially own over 10% of our outstanding common stock.

Krishnan, our Chief Executive Officer and Chairman of the Board and our Founder, President, Research & Development and Director, respectively, in the aggregate, collectively beneficially own over 10% of our outstanding common stock.

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

For example, these persons would substantially influence the election of directors and approval of any merger, consolidation, or sale of all or substantially all our assets.

This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire or result in management of our company that our public stockholders disagree with.

For example, they could influence the election of directors and approval of any merger, consolidation, or sale of all or substantially all our assets.

This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire or result in the management of our company by persons with whom our other stockholders disagree.

If securities analysts publish negative evaluations of our stock, the price of our stock could decline.

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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 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.

In the future, 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.

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

The incurrence of indebtedness would result in fixed payment obligations and a portion of our operating cash flows, if any, being dedicated to the payment of principal and interest on such indebtedness, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell, or

license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business.

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

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

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

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

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

As a result of this volatility, a stockholder may not be able to sell their common stock at or above the price that they paid for it.

The market price of our common stock may be influenced by many factors, including:

• our ability to successfully commercialize VYJUVEK;

• our ability to continue to successfully sell VYJUVEK in the United States and internationally;

• our ability to successfully proceed to and conduct clinical trials;

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• the recruitment or departure of key personnel;

• the level of expenses related to VYJUVEK or any of our product candidates or clinical development programs;

• the level of expenses related to VYJUVEK and any of our product candidates or clinical development programs;

• the results of our efforts to discover, develop, acquire, or in-license additional product candidates;

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

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

• our inability to manufacture adequate product supply for VYJUVEK and any other approved product or inability to do so at acceptable costs;

• disputes or other developments relating to proprietary rights, including patent applications, and issued patents;

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Our management is responsible for establishing and maintaining adequate internal control over financial reporting and is required to have an independent auditor assess the effectiveness of our internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”).

We cannot give any assurances that material weaknesses will not be identified in the future in connection with our compliance with the provisions of Section 404 of the Sarbanes-Oxley Act.

We cannot provide any assurance that material weaknesses will not be identified in connection with our compliance with the provisions of Section 404 of the Sarbanes-Oxley Act.

The existence of any material weakness would preclude a conclusion by management and our independent auditors that we maintained effective internal control over financial reporting.

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The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations, and cause investors to lose confidence in our reported financial information, all of which could lead to a decline in the market price of our common stock.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our corporate charter and our bylaws may discourage, delay, or prevent a merger, acquisition, or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares.

Provisions in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make an acquisition of our company that may be beneficial to our stockholders more difficult and could prevent or deter our stockholders from replacing or removing our current management.

Provisions in our certificate of incorporation and our bylaws may discourage, delay, or prevent a merger, acquisition, or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares.

These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.

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The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline, and delay the development of our product candidates.

Pending their use, we may invest our cash and cash equivalents in a manner that does not produce income or that loses value.

Pending their use, we may invest our cash and cash equivalents in a manner that does not produce income or that results in a loss of value.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be stockholders’ sole source of gain.

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We cannot predict whether we will raise additional capital by issuing shares of our common stock, or securities convertible into or exchangeable or exercisable for common stock, the size of any future issuances, or the effect, if any, that they may have on the market price for our common stock.

We also have stock options, restricted common stock, restricted stock units, and performance-based restricted stock units outstanding, and we expect to issue additional equity awards to directors and employees.

We also have stock options, restricted stock units, and performance-based restricted stock units outstanding, and we expect to issue additional equity awards to directors and employees.

The issuance of restricted common stock, common stock upon exercise of outstanding options, common stock upon vesting of restricted stock units, or common stock upon vesting of performance-based restricted stock units would be dilutive and may cause the market price for our common stock to decline.

If we issue preferred

stock in the future, the holders of that preferred stock could gain rights superior to our existing stockholders, such as liquidation and other preferences, or the market price of our common stock could be adversely affected.

If we issue preferred stock in the future, the holders of that preferred stock could gain rights superior to our holders of common stock, such as liquidation and other preferences, or the market price of our common stock could be adversely affected.

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

What changed 10-K

Item 1A. Risk Factors