What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-17 compared with 2025-02-19 · 248 added, 237 removed, 701 unchanged (41% of the section changed)

1 unchanged sentence

INDEX TO FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms (KPMG, LLP, Pittsburgh, PA (US Firm), PCAOB ID No.

Report of Independent Registered Public Accounting Firm (KPMG, LLP, Pittsburgh, PA (US Firm), PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2025 and 2024

Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2024, 2023 and 2022

Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2025, 2024 and 2023

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2025, 2024 and 2023

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We have audited the accompanying consolidated balance sheets of Krystal Biotech, Inc.

and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S.

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Product revenue, net is recorded at the net sales price, or transaction price, and includes an estimate of variable consideration, which results from discounts, rebates and returns that are offered within the Company's contracts.

Government rebates, which include Medicaid, are accrued based on estimated percentages of VYJUVEK that will be prescribed to qualified patients, estimated rebate percentages and estimated levels of inventory in the distribution channel that will be prescribed to qualified patients and are recorded as a reduction of

Rebates were $61.9 million as of December 31, 2025, of which a portion relates to the Medicaid rebate accrual.

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We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s Medicaid rebate accrual process.

We evaluated the relevance and reliability of the historical customer data used by the Company in developing the estimate of the Medicaid rebate accrual by obtaining the data directly from the third party and comparing it to what the Company reported.

We evaluated the Company’s ability to accurately estimate the Medicaid rebate accrual by comparing the estimated Medicaid rebate accrual to the actual units delivered to the customer that were dispensed to qualified Medicaid patients subsequent to period end.

We developed an independent estimate of the Medicaid rebate accrual using historical data and compared the result to the Company’s estimated Medicaid rebate accrual.

We evaluated the relevance and reliability of the historical customer data used by the Company in developing the estimate of the Medicaid rebate accrual by performing a trend analytic over the estimated percentages of VYJUVEK that will be prescribed to qualified patients.

We evaluated the Company’s ability to accurately estimate the Medicaid rebate accrual by comparing the estimated Medicaid rebate accrual to the actual invoiced amounts that were paid by the Company throughout the period.

We developed an independent estimate of the Medicaid rebate accrual by confirming the year-to-date units delivered to the customer and vouching payments made during the year, and compared the result to the Company’s estimated Medicaid rebate accrual.

We assessed the sufficiency of evidence obtained over the Medicaid rebate accrual by assessing the results of procedures performed, including the appropriateness of the nature and extent of audit effort.

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Inventory 40,475 26,508

Prepaid taxes

Prepaid expenses and other current assets 14,905 11,657

3 unchanged sentences

Right-of-use assets 7,239 6,280

Deferred tax asset, net of valuation allowance

Other non-current assets 287 231

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Additional paid-in capital 1,194,261 1,127,238

Accumulated other comprehensive (loss) gain

Accumulated deficit ( 180,668 ) ( 269,827 )

Accumulated other comprehensive income (loss)

1,136 ( 190 )

Retained earnings (accumulated deficit)

24,163 ( 180,668 )

Total stockholders’ equity 1,219,560 946,380

2 unchanged sentences

Krystal Biotech, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Operations and Comprehensive Income

Years Ended December 31,

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Income (loss) from operations 161,295 65,748 ( 109,617 )

Other income (expense)

Gain from sale of priority review voucher — — 100,000

Interest and other income, net 28,176 29,608 22,514

Income (loss) before income taxes 95,356 12,897 ( 139,975 )

Income tax expense ( 6,197 ) ( 1,965 ) —

Net income (loss) 89,159 10,932 ( 139,975 )

Unrealized (loss) income on available-for-sale securities and other

Income before income taxes

189,471 95,356 12,897

Comprehensive income (loss) $ 88,331 $ 12,298 $ ( 140,540 )

Net income (loss) per common share:

Income tax benefit (expense)

15,360 ( 6,197 ) ( 1,965 )

204,831 89,159 10,932

Unrealized gain (loss) on available-for-sale securities, net of tax

642 ( 440 ) 1,432

Foreign currency translation 684 ( 388 ) ( 66 )

Comprehensive income

$ 206,157 $ 88,331 $ 12,298

Net income per common share:

Basic $ 7.08 $ 3.12 $ 0.40

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Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit

Retained Earnings (Accumulated Deficit)

Total Stockholders' Equity

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Stock-based compensation — — 41,179 — — 41,179

Unrealized loss on investments and other (1)

Unrealized gain on investments

— — — 1,432 — 1,432

Net loss — — — — ( 139,975 ) ( 139,975 )

Foreign currency translation — — — ( 66 ) — ( 66 )

— — — — 10,932 10,932

Balances as of December 31, 2023

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Stock-based compensation — — 52,394 — — 52,394

Unrealized gain on investments and other (1)

— — — 1,366 — 1,366

Unrealized (loss) on investments — — — ( 440 ) — ( 440 )

Foreign currency translation — — — ( 388 ) — ( 388 )

Net income — — — — 89,159 89,159

6 unchanged sentences

Stock-based compensation — — 58,318 — — 58,318

Unrealized loss on investments and other (1)

Unrealized gain on investments, net of tax

— — — 642 — 642

Foreign currency translation

— — — 684 — 684

Net income — — — — 204,831 204,831

1 unchanged sentence

29,192 $ — $ 1,194,261 $ 1,136 $ 24,163 $ 1,219,560

(1) Includes foreign currency translation losses of $ 388 thousand, $ 66 thousand and $ 78 thousand for the years ended December 31, 2024 , 2023 , and 2022 , respectively.

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

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Operating Activities

Net income (loss) $ 89,159 $ 10,932 $ ( 139,975 )

Adjustments to reconcile net income (loss) to net cash used in operating activities

$ 204,831 $ 89,159 $ 10,932

Adjustments to reconcile net income to net cash used in operating activities

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

Deferred tax asset

( 22,845 ) — —

Depreciation 5,724 5,967 5,007

(Accretion) amortization of marketable securities

Accretion of marketable securities

( 498 ) ( 1,706 ) ( 2,183 )

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Changes in operating assets and liabilities

Accounts receivable ( 62,706 ) ( 42,040 ) —

Accounts receivable, net

( 22,124 ) ( 62,706 ) ( 42,040 )

Inventory ( 6,286 ) ( 11,907 ) ( 4,475 )

Prepaid taxes

( 12,389 ) ( 1,617 ) —

Prepaid expenses and other assets

2 unchanged sentences

Other long-term liabilities

2,280 1,419 —

Accounts payable 826 1,011 ( 101 )

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Investing Activities

Proceeds from disposal of assets

Proceeds from sale of priority review voucher — — 100,000

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In April 2019, we incorporated Jeune Aesthetics, Inc.

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

In January 2022, August 2022, December 2022, August 2023, March 2024, November 2024, and December 2024 we incorporated wholly-owned subsidiaries in Switzerland, Netherlands, France, Germany, Japan, Italy, and Spain respectively, for the purpose of establishing initial operations in Europe and Japan for the commercialization of VYJUVEK and our product pipeline.

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

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

The cell’s own machinery then transcribes and translates the encoded effector to treat or prevent disease.

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

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

Our innovative technology platform is supported by an in-house, FDA and EMA-inspected, commercial scale Current Good Manufacturing Practice (“CGMP”) manufacturing facility and a second, completed and qualified, commercial scale CGMP facility to support future expansion.

As of December 31, 2024, the Company had an accumulated deficit of $ 180.7 million.

Our transition to continued operating profitability is dependent upon the continued successful commercialization of VYJUVEK ® , as well as successful development, approval and commercialization of our other product candidates.

Management intends to fund future operations through its on hand cash and cash equivalents, revenue generated from the sale of VYJUVEK and the sale of equity, and may also seek additional capital through arrangements with strategic partners, debt financings or other sources.

There can be no assurance that additional funding will be available on terms acceptable to the Company, if at all.

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

In January 2022, August 2022, December 2022, August 2023, March 2024, November 2024, December 2024 and July 2025 we incorporated wholly-owned subsidiaries in Switzerland, Netherlands, France, Germany, Japan, Italy, Spain, and the UK, respectively, for the purpose of establishing operations in Europe and Japan for the commercialization of VYJUVEK ® and our product pipeline.

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

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

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

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

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

As of December 31, 2025, the Company had a retained earnings balance of $ 24.2 million.

Our operating profitability is dependent upon the continued successful commercialization of VYJUVEK, our U.S.

Food and Drug Administration (“FDA”), European Commission (“EC”), and Japan’s Ministry of Health, Labour, and Welfare (“MHLW”) approved product, as well as successful development, approval and commercialization of our product candidates.

Management intends to fund future operations through its on hand cash and cash equivalents and revenue generated from the sale of VYJUVEK, and may also seek additional capital through arrangements with strategic partners, the sale of equity, debt financings or other sources.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to the failure of product candidates in clinical and preclinical studies, the development of competing product candidates or other technological innovations by competitors, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to commercialize product candidates.

The Company expects to incur significant costs to further its pipeline and to expand its commercialization capabilities in advance of the potential global regulatory approvals of VYJUVEK.

The Company expects to incur significant costs in connection with, among other things, advancing its product pipeline, expanding its commercialization capabilities, and complying with EU post-authorization regulatory requirements and EU member state–specific pricing, reimbursement, and market access activities.

The Company believes that its cash, cash equivalents and short-term investments of approximately $ 827.8 million as of December 31, 2025 will be sufficient to allow the Company to fund its planned operations for at least the next 12 months from the date of this Annual Report on Form 10-K.

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As the Company’s entire investment portfolio is considered available for use in current operations, it classifies all investments as available-for-sale securities.

Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive gain (loss), which is a separate component of stockholders’ equity on the consolidated balance sheets.

Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive income, which is a separate component of stockholders’ equity on the consolidated balance sheets.

Any premium arising at purchase is amortized to the earliest call date and any discount arising at purchase is accreted to maturity.

Amortization and accretion of premiums and discounts are recorded in interest and other income, net on the consolidated statements of operations and comprehensive (loss) income.

Amortization and accretion of premiums and discounts are recorded in interest and other income, net on the consolidated statements of operations and comprehensive income.The Company evaluates its available-for-sale debt securities on a quarterly basis to determine whether a decline in fair value below amortized cost is attributable to credit-related factors.

During the years ended December 31, 2025, 2024 and 2023, the Company concluded that no allowances for credit losses on investments were required.

Fair Value of Financial Instruments

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There have been no (1) significant changes to the valuation methods utilized by the Company or (2) transfers between Level 1, Level 2 and Level 3 during the years ended December 31, 2025, 2024 and 2023.

The carrying amounts of financial instruments consisting of cash and cash equivalents, investments, accounts receivable, net, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities included in the Company’s consolidated balance sheets, are reasonable estimates of fair value, primarily due to their short maturities.

The carrying amounts of financial instruments consisting of cash and cash equivalents, investments, accounts receivable, net, prepaid expenses and other current assets, accounts payable, accrued expenses, accrued rebates, and other current liabilities included in the Company’s consolidated balance sheets, are reasonable estimates of fair value, primarily due to their short maturities.

Our available-for-sale, short-term and long-term investments, which consist of commercial paper, corporate bonds, and U.S.

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and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring control of the promised good to the customer.

Revenue is recognized when the Company satisfies a performance obligation by transferring control of the promised good to the customer.

The only performance obligation in the Company’s contracts with customers is the timely delivery of the product to the customer’s designated location.

The Company sells VYJUVEK to a limited number of specialty pharmacy (“SPs”) providers that mix the medication to be administered by a healthcare professional in either a healthcare professional or home setting and to a limited number of hospitals or specialty distributors (“SDs”) who deliver to hospitals where patients are administered the medication in a healthcare setting.

The Company sells VYJUVEK to a limited number of specialty pharmacy (“SPs”) providers that mix the medication to be administered at a healthcare professional’s office or in the patient’s home and to a limited number of hospitals or specialty distributors (“SDs”) who deliver to hospitals where patients are administered the medication in a healthcare setting.

Revenue is recognized when the customer obtains control of the product, which occurs at a point in time, upon delivery to the customer.

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Accrued commercial rebates are recorded as a reduction of revenue on the consolidated statements of operations and are included in accrued rebates on the consolidated balance sheets

• Copay Assistance:

The Company provides copay assistance to qualified patients with commercial insurance in states that allow copay assistance, helping them meet copay obligations to their insurance provider.

The Company reimburses pharmacies for this discount through third-party vendors.

The Company estimates copay assistance costs using the expected value method based on estimated percentages of VYJUVEK that will be prescribed to

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

qualified patients, average assistance paid based on reporting from third-party vendors and estimated levels of inventory in the distribution channel.

Copay assistance costs are recorded as reductions to revenue on the consolidated statements of operations and are recorded in accrued expenses and other current liabilities on the consolidated balance sheets.

• Product Returns:

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The Company has not experienced significant product returns to date, and accordingly no allowance for returns was recorded for the year ended December 31, 2025.

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Cost of Goods Sold

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The Company estimates an allowance for credit losses by considering factors such as credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay.

The Company has no historical write-offs of its accounts receivable and its payment terms are generally less than 90 days from the invoice date.

The Company has no historical write-offs of its accounts receivable and its payment terms are generally 90 days or less from the invoice date.

The Company evaluates the creditworthiness of each counterparty on a regular basis.

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Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred, while costs of major additions and betterments are capitalized.

Upon disposal, the related cost and accumulated depreciation is removed from the accounts and any

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

resulting gain or loss is included in the results of operations.

Upon disposal, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations.

Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets, which are as follows:

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In evaluating the useful lives, the Company considers how long assets will remain functionally effective, whether the technology continues to be relevant and considers other competitive and economic factors.

If the assessment indicates that the assets will be used for a shorter or longer period than previously anticipated, the useful life of the assets is adjusted, resulting in a change in estimate.

If the assessment indicates that the assets will be used for a

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

shorter or longer period than previously anticipated, the useful life of the assets is adjusted, resulting in a change in estimate.

Changes in estimates are accounted for on a prospective basis by depreciating the current carrying values of the assets over their revised remaining useful lives.

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Research and development costs are charged to expense as incurred in performing research and development activities.

These costs include employee compensation costs, facilities and overhead, preclinical and clinical activities, clinical manufacturing costs, contract management services, regulatory and other related costs.

The Company estimates contract research and manufacturing expenses based on the services performed pursuant to contracts with research organizations and manufacturing organizations that manufacture materials used in the Company’s ongoing preclinical and clinical studies.

These costs include employee compensation costs, facilities and overhead, preclinical and clinical activities, contract research and manufacturing expenses.

The Company estimates contract research and manufacturing expenses based on the services performed pursuant to contracts with research organizations in the Company’s ongoing preclinical and clinical studies.

Non-refundable advanced payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized.

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If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly.

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Stock-Based Compensation Expense

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The Company recognizes compensation costs related to stock-based awards based on the estimated fair value of the awards on the date of grant.

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

Compensation expense for stock options, restricted stock awards and restricted stock units is recognized on a straight-line basis based on the grant-date fair value over the associated service period of the award, which is generally the vesting term.

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and (iv) expected dividends.

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

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

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Stock-based compensation expense recognized in the financial statements is based on awards for which service conditions are expected to be satisfied.

For the years ended December 31, 2024, 2023 and 2022, income taxes were recorded in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach.

Foreign Currency Transaction Gain (Loss)

Gains and losses arising from transactions denominated in currencies other than U.S.

dollars are recorded in interest and other income, net on the statement of operations and comprehensive income.

The Company recorded losses of $ 1.2 million for the year ended December 31, 2025, and immaterial losses for the years ended December 31, 2024 and 2023.

The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach.

Under this method, the Company records deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect when the differences are expected to reverse.

Valuation allowances are provided when necessary to reduce net deferred tax assets to the amount that is more likely than not to be realized.

Based on the available evidence, the Company is unable, at this time, to support the determination that it is more likely than not that our deferred tax assets will be utilized in the future.

Accordingly, the Company recorded a full valuation allowance as of December 31, 2024 and 2023.

The Company intends to maintain a valuation allowance until sufficient evidence exists to support its reversal.

As of December 31, 2025, after weighing all available evidence, including three-year cumulative income and forecasted future income, the Company is able to support the realizability of its deferred tax assets, except certain state tax attributes.

Accordingly, except for certain state net operating loss and tax credits, the Company recorded no valuation allowance as of December 31, 2025 attributable to its deferred tax assets.

The Company recorded a full valuation allowance as of December 31, 2024.

The Company intends to continue assessing the realizability of the remaining valuation allowance until sufficient evidence exists to support its reversal.

The Company accounts for unrecognized tax benefits in accordance with the provisions of ASC 740.

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The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

As of December 31, 2024 and 2023, the Company had $ 4.2 million and zero , respectively in unrecognized tax benefits.

The Company may recognize interest and penalties related to unrecognized tax benefits in income tax expense.

As of December 31, 2024 and 2023, the Company had recognized $ 218 thousand and zero , respectively in interest or penalties related to unrecognized tax benefits.

See Note 11 to these consolidated financial statements for additional discussion.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions from non-owner sources.

Comprehensive Income

Comprehensive income is defined as the change in equity during a period from transactions from non-owner sources.

Unrealized gains or losses on available-for-sale securities is a component of other comprehensive gains or losses and is presented net of taxes.

The Company records reclassifications from other comprehensive gains or losses to interest and other income, net on the consolidated statements of operations and comprehensive income (loss) related to realized gains on sales of available-for-sale securities.

The Company reviews its securities quarterly to determine whether an other-than-temporary impairment has occurred.

The Company determined that there were no other-than-temporary impairments during the years ended December 31, 2024, 2023 and 2022.

The Company records reclassifications from other comprehensive gains or losses to interest and other income, net on the consolidated statements of operations and comprehensive income related to realized gains on sales of available-for-sale securities.

Recently Issued Accounting Pronouncements, Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The purpose of this guidance is to enhance the transparency and usefulness of income tax disclosures and provide

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

comprehensive income tax information, particularly in relation to rate reconciliation and income taxes paid in the U.S.

and foreign jurisdictions.

This new standard will be effective for fiscal years starting after December 15, 2024, with the option to apply it retrospectively.

Early adoption is also allowed.

Currently, the company is assessing the potential impact of this guidance on its consolidated financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

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Currently, the Company is assessing the potential impact of this guidance on its consolidated financial statement disclosures.

In December 2025, the FASB issued ASU 2025-11 Interim Reporting (Topic 270):

Narrow-Scope Improvements.

This standard clarifies current interim reporting requirements on Topic 270 and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity.

This standard will be effective for fiscal years beginning after December 15, 2027, with the option to apply it retrospectively.

Early adoption is allowed.

Currently, the Company is assessing the potential impact of this guidance on its consolidated financial statement disclosures.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, requiring public companies to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The purpose of this guidance is to enhance the transparency and usefulness of income tax disclosures and provide comprehensive income tax information, particularly in relation to rate reconciliation and income taxes paid in the U.S.

and foreign jurisdictions.

The Company adopted ASU 2023-09 during the year ended December 31, 2025.

See Note 11 to these consolidated financial statements for additional discussion.

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Product Revenue, Accounts Receivable and Reserves for Product Sales

Following FDA approval in May 2023, the Company began commercial marketing and sales of VYJUVEK and began recognizing revenue in the third quarter of 2023.

The Company’s product revenue, net of sales discounts and allowances totaled $ 290.5 million, $ 50.7 million and zero for the years ended December 31, 2024, 2023 and 2022, respectively.

The Company’s product revenue, net of sales discounts and allowances totaled $ 389.1 million, $ 290.5 million and $ 50.7 million for the years ended December 31, 2025, 2024 and 2023, respectively.

For the years ended December 31, 2025, 2024, and 2023, approximately 75 %, 87 % and 100 %, respectively, of the Company’s product revenue, net was generated from a single customer in the U.S.

No other customer exceeded 10% of the Company’s product revenue, net.

The Company’s accounts receivable, net balance relating to VYJUVEK sales was $ 104.7 million as of December 31, 2024 and $ 42.0 million as of December 31, 2023.

The Company’s accounts receivable, net balance relating to VYJUVEK sales was $ 127.4 million and $ 104.7 million as of December 31, 2025 and 2024, respectively.

Net product revenue receivable from the Company’s customers who individually accounted for 10% or more of net product revenue receivable consisted of the following:

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Year Ended December 31,

* Indicates the customer represents less than 10% and/or not a customer in the applicable year

The following table summarizes changes in allowances and discounts for the year ended December 31, 2024:

The following table summarizes changes in allowances and discounts:

(in thousands) Rebates Prompt Pay Other Accruals Total

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Rebates are included in accrued rebates and other long-term liabilities on the consolidated balance sheets.

Prompt pay is recorded as an allowance against accounts receivable, net on the consolidated balance sheets.

Other long-term liabilities includes $ 1.4 million of long-term accrued rebates.

Prompt pay discount is recorded as an allowance against accounts receivable, net on the consolidated balance sheets.

Other long-term liabilities include $ 3.7 million of long-term accrued rebates.

Other accruals are included in accrued expenses and other current liabilities on the consolidated balance sheets.

Provisions for rebates, prompt pay and other accruals are recorded as a reduction to product revenue, net on the consolidated statements of operations and comprehensive income (loss).

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Net Income (Loss) Per Share Attributable to Common Stockholders

Provisions for rebates, prompt pay discount and other accruals are recorded as reductions to product revenue, net on the consolidated statements of operations and comprehensive income.

Net Income Per Share Attributable to Common Stockholders

Basic net income per share attributable to common stockholders is calculated by dividing net income attributable to common stockholders by the weighted-average shares outstanding during the period, without consideration for common stock equivalents.

1 unchanged sentence

Common stock equivalents consist of common stock issuable upon (1) exercise of stock options and (2) vesting of restricted stock awards, restricted stock units and performance-based restricted stock units (collectively, “restricted stock”).

For the years ended December 31, 2024, 2023 and 2022, there were (1) 236 thousand, 897 thousand and 3.6 million, respectively, common stock equivalents outstanding in the form of stock options, and (2) 1 thousand, zero and 67 thousand, respectively, in unvested restricted stock that have been excluded from the calculation of diluted net income (loss) per common share as their effect would be anti-dilutive.

For the years ended December 31, 2025, 2024 and 2023, there were (1) 571 thousand, 236 thousand and 897 thousand, respectively, common stock equivalents outstanding in the form of stock options, and (2) 1 thousand, 1 thousand and zero , respectively, in unvested restricted stock that have been excluded from the calculation of diluted net income per common share as their effect would be anti-dilutive.

Years Ended December 31,

(in thousands, except per share data) 2025 2024 2023

Net income (loss) $ 89,159 $ 10,932 $ ( 139,975 )

$ 204,831 $ 89,159 $ 10,932

Weighted-average basic common shares 28,944 28,592 27,154

1 unchanged sentence

Weighted-average diluted common shares 29,951 29,740 27,752

Net income (loss) per common share—basic $ 3.12 $ 0.40 $ ( 5.49 )

Net income (loss) per common share—diluted $ 3.00 $ 0.39 $ ( 5.49 )

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Net income per common share—basic

$ 7.08 $ 3.12 $ 0.40

Net income per common share—diluted

$ 6.84 $ 3.00 $ 0.39

Fair Value Instruments

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Depreciation expense was $ 5.7 million, $ 6.0 million and $ 5.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Depreciation expense capitalized into inventory was $ 3.5 million, $ 1.1 million and zero for the years ended December 31, 2024, 2023 and 2022, respectively.

In March 2023, the Company received the permanent occupancy permit for its second commercial scale CGMP facility, ASTRA, which allowed the Company to begin utilizing certain portions of the building.

As a result, and as qualification of assets occurred through 2023 and the first half of 2024, the majority of assets relating to ASTRA were reclassified from construction in progress to leasehold improvements, manufacturing equipment, buildings and building improvements, furniture and fixtures, or computer equipment and software as it was determined that assets were ready for their intended use.

As certain pieces of equipment are not yet qualified, the Company will continue to hold the remaining assets within construction in progress until qualification has been completed and the assets are ready for their intended use.

Depreciation expense capitalized into inventory was $ 4.1 million, $ 3.5 million and $ 1.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Accrued Expenses and Other Current Liabilities

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(in thousands) 2025 2024

Accrued litigation settlement $ 31,250 —

Accrued payroll and benefits 11,457 9,558

Accrued construction in progress

Accrued taxes 10,919 4,288

Accrued professional fees 5,936 2,659

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Other current liabilities 3,579 2,403

Accrued construction in progress 2,189 5,077

Accrued inventory

Accrued income taxes

Accrued litigation settlement — 31,250

Total $ 39,752 $ 58,989

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Commitments and Contingencies

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The agreements with CMOs primarily relate to the manufacturing of our sterile gel that is mixed with in-house produced vectors as part of the final drug product for VYJUVEK.

Agreements with third parties may also include research and development consulting activities, clinical-trial agreements, testing of our clinical-stage, pre-commercial and commercial stage products and/or storage, packaging and labeling.

Agreements with third

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

parties may also include research and development consulting activities, clinical-trial agreements, testing of our clinical-stage, pre-commercial and commercial stage products and/or storage, packaging and labeling.

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

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

The estimated remaining commitment as of December 31, 2024 under these agreements is approximately $ 627 thousand.

The Company has incurred research and development expenses related to commitments under these agreements of $ 9.3 million, $ 7.1 million and $ 5.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.

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If there is at least a reasonable possibility that a loss may be incurred, ASC 450 requires disclosure of a loss contingency.

For the year ended December 31, 2025, no loss contingency exists.

In May 2020, PeriphaGen, Inc.

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In April 2022, the Company and PeriphaGen entered into a final settlement agreement.

In exchange for an upfront payment of $ 25.0 million and four contingent milestone payments of $ 12.5 million each triggered upon FDA approval of VYJUVEK and the Company reaching $ 100.0 million, $ 200.0 million and $ 300.0 million in cumulative sales, respectively, PeriphaGen (i) released all claims in the litigation;

In exchange for an upfront payment of $ 25.0 million and four contingent milestone payments of $ 12.5 million each, PeriphaGen (i) released all claims in the litigation;

(ii) transferred certain assets to the Company and (iii) granted the Company a license for dermatological applications.

In May 2024, the parties entered into an amendment to the final settlement agreement (“Amendment”).

As defined in the final settlement agreement and clarified in the Amendment, cumulative sales means the total cumulative revenue from sales of the Company’s products by the Company and its affiliates and licensees.

The Amendment modified the timing of the $ 12.5 million contingent milestone payment triggered by the Company reaching $ 100.0 million in cumulative sales, such that $ 6.25 million would be payable following the Company’s filing of a Quarterly Report on Form 10-Q that reports $ 100.0 million in cumulative sales, and the remaining $ 6.25 million would be payable within 120 days following the end of the fiscal year in which the initial $ 6.25 million is paid.

There were no other revisions to the final settlement agreement.

In May 2023, the Company obtained FDA approval of VYJUVEK and paid PeriphaGen $ 12.5 million in June 2023.

During the year ended December 31, 2024, the Company reached cumulative sales of $ 100.0 million, $ 200.0 million and $ 300.0 million.

In accordance with the Amendment, the Company paid PeriphaGen $ 6.25 million in September 2024 following the filing of the Company’s Q2 2024 Form 10-Q that reported $ 100.0 million in cumulative sales and is required to make the remaining $ 6.25 million milestone payment within 120 days following December 31, 2024.

Pursuant to the final settlement agreement, the two additional $ 12.5 million milestone payments triggered by the Company reaching $ 200.0 million and $ 300.0 million of cumulative sales are required to be paid within 30 days following the filing of this Annual Report on Form 10-K.

The Company recorded litigation settlement expense of $ 37.5 million, $ 12.5 million and $ 25.0 million for the years ended December 31, 2024, 2023, and 2022, respectively, on the consolidated statements of operations and comprehensive income (loss).

As of December 31, 2024, the Company has paid $ 43.75 million of the total $ 75.0 million of total consideration discussed above and has recorded accrued litigation expense within accrued expenses and other current liabilities on its consolidated balance sheet for the remaining $ 31.25 million.

The Company has received zero , zero and $ 1.1 million of insurance proceeds during the years ended December 31, 2024, 2023, and 2022, respectively.

The reimbursements have been recorded as an offset to our legal fees included in selling, general and administrative expenses on the consolidated statements of operations and comprehensive income (loss) and within operating activities on the consolidated statements of cash flows.

During the year ended December 31, 2025, the Company paid $ 31.25 million, and together with the $ 43.75 million paid prior to 2025, has fully paid the $ 75.0 million of total consideration in connection with the settlement of the PeriphaGen litigation.

The Company recorded litigation settlement expense for the contingent milestone payments of zero , $ 37.5 million and $ 12.5 million for the years ended December 31, 2025, 2024, and 2023, respectively, on the consolidated statements of operations and comprehensive income.

In the first quarter of 2025, the Company and certain of its employees received subpoenas from the U.S.

Department of Justice requesting that the Company produce certain documents regarding its sponsored genetic testing program relating to VYJUVEK and commercial practices relating thereto.

The Company is cooperating and providing information in response to the subpoenas.

It is not possible to estimate the amount of any loss or range of possible loss that might result from this inquiry, and because the final outcome cannot be predicted with certainty, unfavorable or unexpected developments or outcomes could result in a material impact to the Company’s results of operations.

On September 18, 2025, a stockholder filed a derivative complaint in the Court of Chancery of the state of Delaware naming the Company’s directors as defendants and the Company as a nominal defendant.

The complaint alleges claims for breach of fiduciary duty, unjust enrichment, and waste of corporate assets based on allegedly excessive non-employee director compensation in each of 2021 through 2024.

The complaint seeks unspecified damages in favor of the Company, restitution of compensation and other benefits from the individual defendants, reforms and improvements to the Company’s corporate governance and internal procedures, and the award of costs and disbursements of the complaint, including reasonable attorneys’ fees.

The parties have reached an agreement in principle on settlement terms but must still negotiate and execute a definitive settlement agreement, which will be filed with the Delaware Court of Chancery and is subject to court approval.

If approved, the Company will adopt, implement, and maintain certain corporate governance reforms for a period of five ( 5 ) years.

At this time, the Company cannot reasonably estimate the likelihood of an unfavorable outcome or estimate the potential loss, if any.

Lease Agreements

In May 2016, the Company signed an operating lease for laboratory and office space in Pittsburgh, Pennsylvania that commenced in June 2016 (the “Wharton Lease”).

The Wharton Lease has been amended several times to increase the area

The Company’s operating leases primarily consist of leased office, manufacturing and laboratory space.

The Company has an operating lease for laboratory and office space in Pittsburgh, Pennsylvania that commenced in June 2016 (the “Wharton Lease”).

The Wharton Lease currently consists of approximately 67,000 square feet of office, lab, manufacturing, and warehouse space, including our commercial scale CGMP-compliant manufacturing facility (“ANCORIS”) for a term ending on October 31, 2031.

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

leased and currently consists of approximately 54,000 square feet, including our commercial scale CGMP-compliant manufacturing facility (“ANCORIS”).

In September 2022, the Company amended the Wharton Lease to add approximately 7,000 square feet of additional office space commencing in October 2022 for a 12-month term (the “Short Term Space”) and subsequently amended the Wharton Lease again in September 2023 to extend the term of the Short Term Space for an additional 12-month term through September 30, 2024.

Due to the short-term nature of these amendments for the Short Term Space and the Company's lease accounting policy, the Company did not record a right-of-use asset or corresponding lease liability.

In September 2024, the Company amended the Wharton Lease to (i) add approximately 20,000 square feet of office and manufacturing support space commencing after completion of certain improvements and (ii) extend the term of the Short Term Space on a day-by-day basis until the Company occupies the new office space, after which the lease of the Short Term Space will end.

When the Company takes possession of the approximately 20,000 square feet of additional office and manufacturing support space and the lease of the Short Term Space ends, the Lease will be for approximately 67,000 square feet of office, lab, manufacturing, manufacturing support, and warehouse space for a term ending on October 31, 2031.

The landlord provided access to approximately 20,000 square feet of additional office and manufacturing support space to the Company in January 2025.

See Note 13 to these consolidated financial statements for additional discussion.

In January 2021, in connection with the Company’s second commercial gene therapy manufacturing facility (“ASTRA”) in the Pittsburgh, Pennsylvania area, the Company entered into a ground lease of which lease payments are based on annual payments of $ 82 thousand, and are subject to a cumulative 10 % escalation clause every 5 years through 2071.

In December 2021, the Company entered into a 3 -year lease agreement for the Boston, Massachusetts office that commenced in January 2022 and expires in January 2025.

In May 2022, the Company entered into a 16 -month lease agreement for the Zug, Switzerland office that commenced in September 2022 and was scheduled to end in December 2023.

The Zug lease was renewed on 2 occasions for additional 1 -year terms and expires on December 31, 2025.

Due to the short-term nature of the agreements and the Company’s lease accounting policy, the Company did not record a right-of-use asset or corresponding lease liability.

The Company has entered into 12-month lease agreements in the Netherlands, Germany, Japan, Italy and Spain.

Due to the short term nature of the agreements and the Company’s lease accounting policy, the Company did not record a right-of-use asset or corresponding lease liabilities.

As of December 31, 2025, future minimum commitments under the Company’s operating leases were as follows:

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Present value of lease liability $ 9,339

As of December 31, 2024 and 2023, the Company's weighted-average remaining lease term for operating leases was 12.2 years and 12.3 years, respectively, and the Company’s weighted-average discount rate for operating leases was 9.5 % as of December 31, 2024 and 2023.

As of December 31, 2025 and 2024, the Company's weighted-average remaining lease term for operating leases was 10.1 years and 12.2 years, respectively, and the Company’s weighted-average discount rate for operating leases was 9.7 % and 9.5 % as of December 31, 2025 and 2024, respectively.

The components of the Company's lease expense are as follows:

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Capitalization

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

On December 31, 2020, the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”) with respect to an at-the-market equity offering program (“2020 ATM Program”), under which the Company issued and sold from time to time through Cowen, acting as agent and/or principal, shares of its common stock, par value $ 0.0001 per share, having an aggregate offering price up to $ 150.0 million (“2020 Placement Shares”).

The issuance and sale of the 2020 Placement Shares were made pursuant to the Company's effective “shelf” registration statement on Form S-3 that was filed with the Securities and Exchange Commission (the “SEC”) on May 4, 2020 (the “2020 Shelf Registration Statement”).

During the year ended December 31, 2022, the Company issued and sold 434,782 2020 Placement Shares at a weighted average price of $ 69.00 per share for net proceeds of $ 29.1 million after deducting selling commissions of approximately $ 900 thousand.

The Company’s 2020 Shelf Registration Statement expired on May 4, 2023, and the Company put in place a new at-the-market equity offering program under substantially the same terms as the 2020 ATM Program (the “New ATM Program”).

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

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

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

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

The New ATM Program is not and has never been active.

The Company has an effective shelf registration statement on Form S-3 that expires on April 6, 2026.

The Company has a $ 150 million at-the-market offering ("ATM") program under that shelf registration statement that has never been utilized.

The Company does not currently intend to renew the ATM program after the shelf registration statement expires.

2023 Private Placement Offering

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

In addition, the Company entered into a Registration Rights Agreement with the investors (“Registration Rights Agreement”) that required the Company to file a registration statement with the SEC within 60 days of the date of the Registration Rights Agreement registering the resale of the shares of common stock issued in the private placement.

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

In May 2023, the Company sold an aggregate of 1,729,729 shares of our common stock in private placements to certain institutional investors at a price of $ 92.50 per share for aggregate net proceeds of $ 160.0 million.

Stock-Based Compensation

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The sublimit of incentive stock options is not subject to the increase.

The Company has historically granted stock options and restricted stock awards (“RSAs”) to its employees.

In February 2023, the Company began issuing restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) to certain employees.

Shares remaining available for grant under the Plan were 2,369,021 , with a sublimit for incentive stock options of 29,684 , at December 31, 2024.

The Company has historically granted stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) to certain employees.

Shares remaining available for grant under the Plan were 2.0 million at December 31, 2025

Stock Options

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

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

Stock options have a life of ten years .

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$ 168.08 $ 168.67 $ 92.14

Forfeiture Rate — % — % — %

Dividend Yield — % — % — %

Restricted Stock Awards

RSAs granted to employees vest ratably over a four-year period.

The following table summarizes the Company’s RSA activity for the years ended December 31, 2024 and 2023:

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Restricted Stock Awards

The following table summarizes the Company’s RSA activity for the years ended December 31, 2025 and 2024:

Number of Shares Weighted- Average

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Non-vested RSAs as of December 31, 2025

22,200 $ 78.89

There was $ 273 thousand of unrecognized stock-based compensation expense related to employees’ awards that is expected to be recognized over a weighted-average period of two months as of December 31, 2024.

Restricted Stock Units

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Non-vested RSUs as of January 1, 2024

160,900 $ 81.91

Granted 230,403 $ 160.15

( 40,084 ) $ 81.93

( 43,123 ) $ 119.02

Non-vested RSUs as of December 31, 2024

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The Company recognizes stock-based compensation expense for the fair value of the PSU awards relating to the portion of the awards that are probable of vesting over the service period.

On a quarterly basis, management estimates the probable number of PSUs that would vest until such time that the ultimate achievement of the performance criteria are known.

As of December 31, 2024, the Company determined that 100 % of the PSUs granted will be eligible to vest.

The following table summarizes the Company’s PSU activity for the years ended December 31, 2025 and 2024:

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Non-vested PSUs as of January 1, 2024

50,000 $ 81.91

Granted 112,500 $ 159.47

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56,250 $ 159.47

There was $ 10.8 million of unrecognized stock-based compensation expense related to employees’ PSU awards that is expected to be recognized over a weighted-average period of 1.1 years as of December 31, 2024.

There was $ 1.4 million of unrecognized stock-based compensation expense related to employees’ PSU awards that is expected to be recognized over a weighted-average period of two months as of December 31, 2025.

Stock-Based Compensation Expense, Net

The Company recorded stock-based compensation expense, net related to stock options, RSAs, RSUs and PSUs in the consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2024, 2023 and 2022 as follows:

The Company recorded stock-based compensation expense, net related to stock options, RSAs, RSUs and PSUs in the consolidated statements of operations and comprehensive income for the years ended December 31, 2025, 2024 and 2023 as follows:

Years Ended December 31,

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After the FDA approval of VYJUVEK in May 2023, the Company began capitalizing stock-based compensation associated with the allocation of labor costs related to work performed to manufacture VYJUVEK.

For the years ended December 31, 2024 and 2023, the Company capitalized $ 3.3 million and $ 1.1 million, respectively, into inventory.

For the years ended December 31, 2025, 2024, and 2023 the Company capitalized $ 3.8 million, $ 3.3 million, and $ 1.1 million, respectively, into inventory.

Historically, the Company also capitalized the portion of stock-based compensation related to work performed on the construction of our manufacturing facilities.

For the years ended December 31, 2024, 2023 and 2022, the Company capitalized zero , $ 162 thousand and $ 551 thousand, respectively, into property, plant and equipment .

Income (loss) before income taxes by jurisdiction consisted of the following:

For the years ended December 31, 2025, 2024 and 2023, the Company capitalized zero , zero and $ 0.2 million, respectively, into property, plant and equipment .

Income before income tax benefit (expense) by jurisdiction consisted of the following:

Years Ended December 31,

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Foreign 1,533 1,548 5,102

Income (loss) before income taxes $ 95,356 $ 12,897 $ ( 139,975 )

Income before income taxes

$ 189,471 $ 95,356 $ 12,897

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

The provision for income taxes consists of the following:

The benefit (expense) for income taxes consists of the following:

Years Ended December 31,

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Foreign ( 671 ) ( 153 ) ( 138 )

Total tax provision $ 6,197 $ 1,965 $ —

A reconciliation of income tax expense (benefit) computed at the statutory federal and state income tax rate for the year to income tax expense as reflected in our financial statements for years ended December 31, 2024, 2023 and 2022 are as follows:

Total current tax (expense)

$ ( 11,915 ) $ ( 6,197 ) $ ( 1,965 )

Federal $ 19,637 $ — $ —

State 7,188 — —

Foreign 450 — —

Total deferred tax benefit

$ 27,275 $ — $ —

Federal $ 16,650 $ ( 1,445 ) $ ( 125 )

State ( 1,069 ) ( 4,599 ) ( 1,702 )

Foreign ( 221 ) ( 153 ) ( 138 )

Total benefit (expense) for income taxes

$ 15,360 $ ( 6,197 ) $ ( 1,965 )

Income taxes paid, net of refunds, consisted of the following:

Years Ended December 31,

(in thousands) 2025 2024 2023

Federal income tax expense (benefit) at statutory rate 20,025 $ 2,708 $ ( 29,395 )

Federal $ 12,210 $ 1,740 $ —

Kentucky 3,055 1,158 —

Pennsylvania ( 880 ) 880 —

California — 276 —

Other States 149 1,611 —

Total State 2,324 3,925 —

Total Taxes Paid (Net of Refunds) $ 14,793 $ 5,665 $ —

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

A reconciliation of income tax (benefit) expense computed at the statutory federal and state income tax rate for the year to income tax expense as reflected in our financial statements for years ended December 31, 2025, 2024 and 2023 are as follows:

Years Ended December 31,

(in thousands, except percentages)

2025 2024 2023

Amount Percent Amount Percent

Federal Income Tax Expense at Statutory Rate $ 39,791 21.0 % $ 20,025 21.0 % $ 2,708 21.0 %

State and Local Income Taxes, Net of Federal Income Tax Effect (a)

( 5,227 ) ( 2.8 ) ( 547 ) ( 0.6 ) 1,340 10.4

Change in Valuation Allowance ( 51,231 ) ( 27.1 ) ( 8,833 ) ( 9.3 ) 1,258 9.8

State income tax expense (benefit) net of federal benefit 2,097 7,546 ( 10,438 )

Credits ( 3,876 ) ( 4,458 ) ( 3,167 )

Nontaxable or Nondeductible Items

Stock compensation ( 2,721 ) ( 1.4 ) ( 4,793 ) ( 5.0 ) ( 1,715 ) ( 13.3 )

Executive compensation 4,570 2.4 2,645 2.8 2,675 20.7

Other nontaxable or nondeductible items 81 — 71 0.1 95 0.7

Effect of Cross Border Tax Laws

Global Intangible Low-taxed Income (GILTI) 1 — ( 220 ) ( 0.2 ) 623 4.8

Foreign Derived Intangible Income (FDII) ( 1,178 ) ( 0.6 ) ( 635 ) ( 0.7 ) — —

R&D tax credits ( 3,596 ) ( 1.9 ) ( 3,150 ) ( 3.3 ) ( 2,782 ) ( 21.6 )

Orphan drug credits ( 931 ) ( 0.5 ) ( 1,416 ) ( 1.5 ) ( 1,570 ) ( 12.2 )

Other credits — — 16 — ( 106 ) ( 0.8 )

Change in Unrecognized Tax Benefits 5,227 2.8 3,316 3.5 — —

Other Adjustments

Other comprehensive income — — ( 114 ) ( 0.1 ) 389 3.0

Other adjustments ( 45 ) — 5 — ( 16 ) ( 0.1 )

Foreign Tax Effects

Other nondeductible expenses — — ( 137 ) ( 0.1 ) 137 1.1

Valuation allowance — — ( 52 ) ( 0.1 ) ( 140 ) ( 1.1 )

Other Australia — — 57 0.1 11 0.1

Foreign rate differential ( 69 ) — ( 62 ) ( 0.1 ) ( 470 ) ( 3.6 )

Valuation allowance — — — — ( 475 ) ( 3.7 )

Other Switzerland 31 — ( 2 ) — — —

Other Foreign Jurisdictions ( 63 ) — 23 — 3 —

Total Tax (Benefit) Expense

$ ( 15,360 ) ( 8.1 ) % $ 6,197 6.5 % $ 1,965 15.2 %

Section 162(m) limitation ( 455 ) 2,674 620

GILTI ( 219 ) 623 —

Foreign income deduction

Other non-deductible expenses ( 53 ) 136 30

Income taxed at foreign rates

Other ( 114 ) 376 417

Total tax expense $ 6,197 $ 1,965 $ —

(a) In 2025 and 2024, state and local income taxes in Kentucky comprised the majority of the state and local income taxes, net of federal effect category.

In 2023, state and local income taxes in Kentucky and Pennsylvania comprised the majority of the state and local income taxes, net of federal category.

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

The significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows:

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Credits 1,855 10,376

Inventory 1,018 558

Deferred tax assets 52,518 83,138

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Net deferred tax assets $ 22,824 $ —

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

The Company has evaluated the positive and negative evidence bearing upon the realizability of its net U.S.

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Under the applicable accounting standards, management has considered the Company’s history of operating losses and the uncertainty around any sustained future profitability.

The Company has concluded that it is more likely than not that the Company will not realize the benefits of its net deferred tax assets.

Accordingly, the Company has provided a full valuation allowance for deferred tax assets as of December 31, 2024 and 2023.

The Company has concluded that it is more likely than not that the Company will realize the benefits of its net deferred tax assets.

Accordingly, the Company has decreased the valuation allowance for deferred tax assets from $ 68.0 million as of December 31, 2024 to $ 14.2 million as of December 31, 2025.

As of December 31, 2025 and 2024, the Company had federal research and development credit carryforwards of $ 0.5 million and $ 6.6 million, respectively.

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The orphan drug tax credit carryforwards will begin to expire in 2042 if not utilized.

As of December 31, 2024 and 2023, the Company had state research and development credit carryforwards of $ 731 thousand and zero respectively.

As of December 31, 2025 and 2024, the Company had state research and development credit carryforwards of $ 1 million and $ 0.7 million respectively.

The state research and development credit carryforwards will begin to expire in 2038 if not utilized.

As of December 31, 2025, the Company had cumulative U.S.

federal net operating loss carryforwards of $ 18.3 million.

The federal NOL carryforwards are available indefinitely to offset future income tax liabilities with no expiration period.

As of December 31, 2024, the Company had cumulative U.S.

state net operating loss carryforwards of $ 166.2 million.

The state net operating losses are available to offset future state income tax liabilities and will begin to expire in 2037.

Under the provisions of the Internal Revenue Code, the Net operating loss carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

Under the provisions of the Internal Revenue Code, the net operating loss carryforwards and tax credits utilized during the year are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

Net operating loss carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 %, as defined under Internal Revenue Code Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions.

This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

No deferred tax assets have been recognized on our consolidated balance sheets related to these net operating losses, as they are fully offset by a valuation allowance.

If we have previously had, or have in the future, one or more Section 382 “ownership changes,” including in connection with our initial public offering or another offering, or if we do not generate sufficient taxable income, we may not be able to utilize a material portion of our net operating losses.

At December 31, 2025, deferred tax assets have been recognized on our consolidated balance sheets related to federal research and development credits and orphan drug credits.

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

If we have previously had, or have in the future, one or more Section 382 or 383 “ownership changes,” including in connection with our initial public offering or another offering, or if we do not generate sufficient taxable income, we may not be able to utilize a material portion of our federal tax credits.

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

The "One Big Beautiful Bill Act" (OBBBA) enacted on July 4, 2025, introduced notable changes to the U.S.

Internal Revenue Code, including immediate expensing of domestic Section 174 costs.

Section 174 costs are expenditures which represent research and development costs that are incident to the development or improvement of a product, process, formula, invention, computer software, or technique.

As previously required under the Tax Cuts and Jobs Act, we capitalized research and development expenditures in the years ended December 31, 2022 through December 31, 2024.

With the enactment of OBBBA, we began deducting 2025 and cumulative domestic Section 174 costs.

As of December 31, 2025, we have a deferred tax asset of $ 4.4 million related to capitalized Section 174 expenditures.

The Company files income tax returns in the United States at the federal and state level and in foreign jurisdictions in which the Company conducts business activities.

The federal and state income tax returns are subject to tax examinations for the tax years ended December 31, 2023, 2022 and 2021.

To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period.

The federal and state income tax returns are subject to tax examinations for the tax years ended December 31, 2022 through December 31, 2025.

To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Federal or state tax authorities to the extent utilized in a future period.

Additionally, the Company is subject to tax examinations by taxing authorities in foreign jurisdictions where it has business operations.

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federal, various state, and foreign jurisdictions.

Significant judgement is required in evaluating the Company’s tax positions and determining the provision for income taxes.

Significant judgment is required in evaluating the Company’s tax positions and determining the provision for income taxes.

During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.

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We do not anticipate significant increases or decreases to the amount of unrecognized tax benefits within the next twelve months.

As of December 31, 2024, 2023, and 2022 the Company had unrecognized tax benefits of $ 4.2 million, zero , and zero , respectively, of which $ 3.3 million , zero , and zero , respectively, if fully recognized would decrease the Company’s effective tax rate.

As of December 31, 2025, 2024, and 2023 the Company had unrecognized tax benefits of $ 10.0 million, $ 4.2 million and zero , respectively, of which $ 8.0 million, $ 3.3 million, and zero , respectively, if fully recognized would decrease the Company’s effective tax rate.

A reconciliation of unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023 are as follows:

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Years Ended December 31,

1 unchanged sentence

Unrecognized tax benefits - January 1 $ 4,152 $ — $ —

Gross increases to tax positions in prior periods 34

Gross increases to current period tax positions 5,863 4,152 —

2 unchanged sentences

Unrecognized tax benefits - December 31 $ 10,049 $ 4,152 $ —

$ 4,152 $ — $ —

As of December 31, 2024 and 2023, the Company had accrued interest and penalties related to unrecognized tax benefits of $ 218 thousand and zero , respectively.

As of December 31, 2025, 2024, and 2023 the Company had accrued interest and penalties related to unrecognized tax benefits of $ 0.8 million, $ 0.2 million, and zero , respectively.

The Company recognizes interest expense and any related penalties from unrecognized tax benefits in income tax expense.

The Company is also subject to taxation in various states and other foreign jurisdictions including Switzerland, Netherlands, France, Germany, Japan, Italy and Spain.

The Company is also subject to taxation in various states and other foreign jurisdictions including Switzerland, Netherlands, France, Germany, Japan, United Kingdom, Italy and Spain.

Gain on Sale of Priority Review Voucher

4 unchanged sentences

The Company operates as one operating segment, which is focused on the discovery, development, manufacturing and commercialization of genetic medicines to treat diseases with high unmet medical needs.

The Company’s chief operating decision maker (“CODM”), its chief executive officer, utilizes financial information presented on a consolidated basis to manage and allocate resources.

The CODM uses consolidated gross margin, operating margin, net income and total research and development expenses by product candidate or program to assess performance, forecast future financial results and allocate resources.

The following table presents selected financial information with respect to the Company’s single operating segment for the years ended December 31, 2024, 2023, and 2022:

The Company’s chief operating decision maker (“CODM”), its chief executive officer, utilizes financial information presented on a consolidated basis to

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

manage and allocate resources.

The following table presents selected financial information with respect to the Company’s single operating segment for the years ended December 31, 2025, 2024, and 2023:

Years Ended December 31,

12 unchanged sentences

KB707 10,856 8,677 3,828

KB707 8,677 3,828 400

2,175 1,314 —

KB803 2,564 604 —

Other dermatology programs 12 935 284

Other aesthetics programs 6 25 111

Other ophthalmology programs 44 554 71

Other research programs 1,274 567 876

Other development programs 823 939 645

Other programs

2,493 2,098 1,506

Other research and development costs (1)

8 unchanged sentences

$ 161,295 $ 65,748 $ ( 109,617 )

Other income (expense)

Gain from sale of priority review voucher

1 unchanged sentence

28,176 29,608 22,514

Income (loss) before income taxes

Income before income taxes

189,471 95,356 12,897

Income tax expense

Income tax benefit (expense)

15,360 ( 6,197 ) ( 1,965 )

Net income (loss)

204,831 89,159 10,932

1 unchanged sentence

Subsequent Events

In connection with the Wharton lease amendment in September 2024, on January 7, 2025, the office and manufacturing support space included in the amendment was made available for use to the Company by the lessor and as such, the Company recorded a right-of-use asset and lease liability of $ 1.6 million upon commencement of the lease on January 7, 2025.

The additional space resulted in an increase of the remaining commitments associated with the Company’s lease agreements as shown below:

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

(in thousands) Remaining Commitment

Thereafter 1,082

Future minimum operating lease payments 3,486

Interest ( 1,936 )

Present value of lease liability $ 1,550

On February 17, 2025, the Company reached an agreement with The Whiting-Turner Contracting Company (“Whiting-Turner”) regarding unpaid invoices that the Company was contesting.

Under the terms of the agreement, the Company will pay certain unpaid invoices in an aggregate amount of $ 5.5 million, which was fully accrued and for which the Company does not believe to have a material impact on the Company's financial condition, results of operations or cash flows.

In addition, Whiting-Turner fully released the Company from all other claims it could have for further payments related to ASTRA.

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

The Company concluded that no additional subsequent events have occurred that would require recognition or disclosure in the consolidated financial statements except as discussed above.

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

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data