What changed in this filing

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Item 1. Financial Statements

2026-05-04 compared with 2025-11-03 · 111 added, 192 removed, 378 unchanged (44% of the section changed)

3 unchanged sentences

(in thousands, except par value)

September 30,

2026 December 31,

6 unchanged sentences

Prepaid taxes

10,642 14,006

Prepaid expenses and other current assets 16,026 14,905

4 unchanged sentences

Deferred tax asset, net of valuation allowance

22,824 22,824

Other non-current assets 300 287

15 unchanged sentences

$ 0.00001 par value;

80,000 shares authorized as of September 30, 2025 and December 31, 2024;

28,984 and 28,794 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively.

80,000 shares authorized as of March 31, 2026 and December 31, 2025;

29,437 and 29,192 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively.

Additional paid-in capital 1,198,257 1,194,261

Accumulated other comprehensive gain (loss)

Accumulated other comprehensive (loss) gain

( 1,623 ) 1,136

Accumulated deficit ( 27,237 ) ( 180,668 )

Retained earnings

80,095 24,163

Total stockholders’ equity

5 unchanged sentences

Condensed Consolidated Statements of Operations and Comprehensive Income

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except per share data)

2025 2024 2025 2024

Product revenue, net

5 unchanged sentences

41,014 32,647

Litigation settlement — 12,500 — 37,500

Total operating expenses 62,668 51,931

Income from operations 53,689 36,252

41,374 22,472 117,025 24,373

Interest and other income, net 7,753 7,345

Income before income taxes 61,442 43,597

47,967 29,769 138,340 46,746

Income tax benefit (expense)

Income tax expense

( 5,510 ) ( 7,864 )

Net income 55,932 35,733

Unrealized gain on available-for-sale securities

Unrealized (loss) gain on available-for-sale securities

( 1,577 ) 344

Foreign currency translation ( 1,182 ) 236

( 714 ) 306 447 161

Comprehensive income $ 53,173 $ 36,313

$ 79,308 $ 29,326 $ 154,721 $ 44,554

Net income per common share:

7 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings

Total Stockholders’ Equity

(in thousands)

5 unchanged sentences

Vesting of restricted stock units, net of shares withheld for taxes 100 — ( 16,960 ) — — ( 16,960 )

Shares of restricted stock awards surrendered for taxes ( 10 ) — ( 1,812 ) — — ( 1,812 )

Stock-based compensation — — 14,455 — — 14,455

Unrealized gain on investments

Unrealized loss on investments

— — — ( 1,577 ) — ( 1,577 )

4 unchanged sentences

29,437 — $ 1,198,257 $ ( 1,623 ) $ 80,095 $ 1,276,729

Issuance of common stock upon exercise of stock options 28 — 1,796 — — 1,796

Stock-based compensation — — 15,077 — — 15,077

Unrealized (loss) on investments

— — — ( 158 ) — ( 158 )

Foreign currency translation

— — — 925 — 925

— — — — 38,333 38,333

Balances as of June 30, 2025 28,927 $ — $ 1,146,092 $ 1,157 $ ( 106,602 ) $ 1,040,647

Issuance of common stock upon exercise of stock options 57 — 3,713 — — 3,713

Stock-based compensation — — 14,208 — — 14,208

Unrealized gain on investments

— — — 657 — 657

Foreign currency translation

— — — ( 714 ) — ( 714 )

— — — — 79,365 79,365

Balances as of September 30, 2025 28,984 $ — $ 1,164,013 $ 1,100 $ ( 27,237 ) $ 1,137,876

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Income

Accumulated Deficit Total Stockholders’ Equity

(in thousands)

7 unchanged sentences

Stock-based compensation — — 14,447 — 14,447

Unrealized (loss) on investments

Unrealized gain on investments

— — — 344 — 344

4 unchanged sentences

28,899 $ — $ 1,129,219 $ 390 $ ( 144,935 ) $ 984,674

Issuance of common stock upon exercise of stock options 181 — 10,637 — — 10,637

Stock-based compensation — — 13,781 — — 13,781

Unrealized (loss) on investments

— — — ( 252 ) — ( 252 )

Foreign currency translation

— — — ( 83 ) — ( 83 )

— — — — 15,568 15,568

Balances as of June 30, 2024 28,709 $ — $ 1,092,854 $ ( 634 ) $ ( 253,327 ) $ 838,893

Issuance of common stock upon exercise of stock options 48 — 3,365 — — 3,365

Stock-based compensation — — 14,262 — — 14,262

Unrealized gain on investments

— — — 1,840 — 1,840

Foreign currency translation

— — — — 27,180 27,180

Balances as of September 30, 2024

28,757 $ — $ 1,110,481 $ 1,512 $ ( 226,147 ) $ 885,846

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2026 2025

2 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities

Deferred income taxes

Depreciation 1,522 1,410

Amortization (accretion) on marketable securities 139 ( 1,535 )

Accretion on marketable securities

( 576 ) ( 453 )

Amortization of operating lease right-of-use assets 204 224

6 unchanged sentences

Prepaid taxes

( 10,103 ) ( 646 )

Prepaid expenses and other current assets ( 1,699 ) ( 3,433 )

2 unchanged sentences

Accounts payable 1,022 906

Accrued expenses and other current liabilities 8,318 ( 2,092 )

Accrued rebates 12,685 10,601

Accrued litigation settlement ( 31,250 ) 31,250

Accrued expenses and other current liabilities ( 6,312 ) 3,695

Accrued legal settlement

Net cash provided by operating activities 80,382 30,969

2 unchanged sentences

Purchases of property and equipment ( 7,148 ) ( 6,204 )

Purchases of available-for-sale securities

Purchases of investments

( 160,033 ) ( 137,806 )

Maturities of available-for-sale securities

Maturities of investments

103,598 88,806

4 unchanged sentences

Taxes paid related to settlement of restricted stock awards — ( 1,812 )

Net cash (used in) provided by financing activities ( 6,961 ) 24,586

Net cash (used in) financing activities

( 10,459 ) ( 12,466 )

Effect of exchange rate changes on cash and cash equivalents ( 1,331 ) 171

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

5,009 ( 36,095 )

2 unchanged sentences

Supplemental Disclosures of Non-Cash Activities

Unpaid purchases of property and equipment included in accounts payable and accrued expenses $ 623 $ 8,292

Unpaid purchases of property and equipment

$ 1,218 $ 1,397

Initial recognition of right-of-use assets $ — $ 1,802

5 unchanged sentences

Krystal Biotech, Inc.

(the “Company,” or “we” or other similar pronouns) commenced operations in April 2016.

In March 2017, we converted from a California limited liability company to a Delaware C-corporation, and changed our name from Krystal Biotech LLC to Krystal Biotech, Inc.

In April 2019, we incorporated Jeune Aesthetics, Inc.

(“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.

(together with its wholly-owned subsidiaries, the “Company,” or “we” or other similar pronouns), a Delaware C-corporation, is a fully integrated, global, commercial-stage biotechnology company.

We are 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.

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

As of September 30, 2025, the Company had an accumulated deficit of $ 27.2 million.

As of March 31, 2026, the Company had a retained earnings balance of $ 80.1 million.

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

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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 further potential global regulatory and reimbursement approvals of VYJUVEK.

The Company believes that its cash, cash equivalents and short-term investments of approximately $ 731.1 million as of September 30, 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 Quarterly Report on Form 10-Q.

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 and cash equivalents and short-term investments of approximately $ 823.4 million as of March 31, 2026 will be sufficient to allow the Company to fund its planned operations for at least the next 12 months from the date of this Quarterly Report on Form 10-Q.

Summary of Significant Accounting Policies

9 unchanged sentences

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and

accompanying notes.

Actual results could materially differ from those estimates.

Management considers many factors in developing the estimates and assumptions that are used in the preparation of these financial statements.

Management must apply significant judgment in this process.

In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends.

The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates.

Management considers many factors and applies significant judgment in developing the estimates and assumptions that are used in the preparation of these financial statements.

If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates in the period these variances become known.

3 unchanged sentences

See Note 2 to our consolidated financial statements included in the 2025 10-K.

There were no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2025.

There were no material changes to the Company’s significant accounting policies during the three months ended March 31, 2026.

Recently Issued Accounting Pronouncements, Not Yet Adopted

There were no accounting pronouncements issued or adopted during the nine months ended September 30, 2025 that had or are expected to have a material impact on the Company’s condensed consolidated financial statements.

In December 2023, the Financial Accounting Standards Board (“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.

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

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):

There were no accounting pronouncements issued or adopted during the three months ended March 31, 2026 that had or are expected to have a material impact on the Company’s condensed consolidated financial statements.

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

Disaggregation of Income Statement Expenses.

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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 condensed consolidated financial statement disclosures.

Product Revenue, Accounts Receivable and Reserves for Product Sales

The Company’s product revenue, net of sales discounts and allowances totaled $ 97.8 million and $ 83.8 million for the three months ended September 30, 2025 and September 30, 2024, respectively, and $ 282.0 million and $ 199.4 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.

The Company’s accounts receivable, net balance relating to VYJUVEK sales was $ 129.6 million as of September 30, 2025 and $ 104.7 million as of December 31, 2024.

The Company’s product revenue, net of sales discounts and allowances totaled $ 116.4 million and $ 88.2 million for the three months ended March 31, 2026 and March 31, 2025, respectively.

Product revenue by significant geographic region is as follows:

Three Months Ended March 31,

United States

$ 87,489 $ 88,183

Total product revenue, net

$ 116,357 $ 88,183

The Company’s accounts receivable, net balance relating to VYJUVEK sales was $ 127.0 million as of March 31, 2026 and $ 127.4 million as of December 31, 2025.

Accounts receivable, net from the Company’s customers who individually accounted for 10% or more of accounts receivable, net consisted of the following:

Percent of Accounts Receivable, Net

September 30,

2026 December 31,

All other single customers represent less than 10% of outstanding accounts receivable, net in the applicable period.

The following table summarizes changes in allowances and discounts for the nine months ended September 30, 2025:

The following table summarizes changes in allowances and discounts for the three months ended March 31, 2026:

(in thousands) Rebates Prompt Pay Other Accruals Total

3 unchanged sentences

Payments/Credits ( 8,399 ) ( 3,845 ) ( 278 ) ( 12,522 )

Balance as of September 30, 2025

Balance as of March 31, 2026

$ 75,841 $ 5,338 $ 160 $ 81,339

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

Other long-term liabilities are comprised of $ 3.1 million and $ 1.4 million of long-term accrued rebates as of September 30, 2025 and December 31, 2024, respectively.

Prompt pay is recorded as an allowance against accounts receivable, net on the

condensed consolidated balance sheets.

Other long-term liabilities are comprised of $ 5.1 million and $ 3.7 million of long-term accrued rebates as of March 31, 2026 and December 31, 2025, respectively.

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

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

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

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

Net Income Per Share Attributable to Common Stockholders

2 unchanged sentences

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 three months ended September 30, 2025 and 2024, respectively, there were 664 thousand and 229 thousand common stock equivalents outstanding in the form of stock options and 125 thousand and zero 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.

For the nine months ended September 30, 2025 and 2024, respectively, there were 568 thousand and 207 thousand common stock equivalents outstanding in the form of stock options and 98 thousand and 134 in unvested restricted stock, that have each been excluded from the calculation of diluted net income per common share as their effect would be anti-dilutive.

Three Months Ended September 30, Nine Months Ended September 30,

For the three months ended March 31, 2026 and 2025, respectively, there were 376 thousand and 413 thousand common stock equivalents outstanding in the form of stock options and 50 thousand and 48 thousand in unvested restricted stock, that have each been excluded from the calculation of diluted net income per common share as their effect would be anti-dilutive.

Three Months Ended March 31,

(in thousands, except per share data)

$ 55,932 $ 35,733

$ 79,365 $ 27,180 $ 153,431 $ 43,680

Weighted-average basic common shares

6 unchanged sentences

Fair Value Instruments

The following tables show the Company’s cash, cash equivalents and available-for-sale securities by significant investment category as of September 30, 2025 and December 31, 2024:

September 30, 2025

The following tables show the Company’s cash and cash equivalents and available-for-sale securities by significant investment category as of March 31, 2026 and December 31, 2025:

March 31, 2026

(in thousands)

7 unchanged sentences

Subtotal 501,313 — — 501,313 501,313 — —

Commercial paper 15,317 15 — 15,332 — 15,332 —

Corporate bonds 229,575 125 ( 348 ) 229,352 — 147,369 81,983

2 unchanged sentences

Total $ 1,017,286 $ 290 $ ( 686 ) $ 1,016,890 $ 501,313 $ 322,092 $ 193,485

(1) The Company’s short-term marketable securities mature in one year or less.

(2) The Company’s long-term marketable securities mature between one and two years .

December 31, 2025

18 unchanged sentences

(in thousands)

September 30,

2026 December 31,

6 unchanged sentences

(in thousands)

September 30,

2026 December 31,

2 unchanged sentences

Leasehold improvements 27,227 27,227

Laboratory equipment 3,640 3,183

Construction in progress

Laboratory equipment 3,521 3,490

Computer equipment and software 2,616 2,559

3 unchanged sentences

Property and equipment, net $ 153,582 $ 150,776

Depreciation expense was $ 1.4 million and $ 1.3 million for the three months ended September 30, 2025 and 2024, respectively, and $ 4.2 million and $ 4.6 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.

Depreciation expense capitalized into inventory was $ 1.1 million and $ 1.0 million for the three months ended September 30, 2025 and 2024, respectively, and $ 3.1 million and $ 2.4 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.

Depreciation expense was $ 1.5 million and $ 1.4 million for the three months ended March 31, 2026 and 2025, respectively.

Depreciation expense capitalized into inventory was $ 1.0 million for the three months ended March 31, 2026 and 2025.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following as of September 30, 2025 and December 31, 2024:

Accrued expenses and other current liabilities consisted of the following as of March 31, 2026 and December 31, 2025:

(in thousands)

September 30,

2026 December 31,

6 unchanged sentences

Accrued construction in progress 784 2,189

Accrued litigation settlement — 31,250

Accrued expenses and other current liabilities

$ 31,196 $ 39,752

In May 2020, PeriphaGen, Inc.

(“PeriphaGen”) commenced litigation against the Company alleging breach of contract and misappropriation of trade secrets.

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

In accordance with the settlement agreement, the Company paid PeriphaGen total consideration of $ 75.0 million to settle the dispute, acquire certain assets and receive an exclusive license from PeriphaGen to certain intellectual property assets and biological materials which was paid over time upon completion of certain milestones, with the final payment occurring during the three months ended March 31, 2025.

Refer to Note 7 of our consolidated financial statements in the 2024 10-K for additional information.

The Company recorded litigation settlement expense of zero and $ 12.5 million for the three months ended September 30, 2025 and 2024, respectively, and zero and $ 37.5 million for the nine months ended September 30, 2025 and 2024, respectively, on the condensed consolidated statements of operations and comprehensive income.

As of March 31, 2025, the Company has fully paid the $ 75.0 million of total consideration discussed above.

Commitments and Contingencies

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

The Company has incurred research and development expenses related to commitments under these agreements of $ 2.3 million and $ 6.6 million for the three and nine months ended September 30, 2025, respectively, and $ 2.7 million and $ 5.8 million for the three and nine months ended September 30, 2024, respectively.

Contingencies

The Company incurred research and development expenses related to commitments under these agreements of $ 2.5 million for the three months ended March 31, 2026 and $ 2.2 million for the three months ended March 31, 2025.

Legal Proceedings

In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes, or claims.

2 unchanged sentences

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.

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 purported 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.

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

As of September 30, 2025, future minimum commitments under the Company’s operating leases with lease terms in excess of 12 months were as follows:

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 alleged 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 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 upon the conclusion of a settlement hearing concerning the fairness of the terms of the proposed settlement.

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

The Company has recorded a liability for an estimated amount of the settlement.

The estimated amount of settlement is not material to the condensed consolidated financial statements.

As of March 31, 2026, future minimum commitments under the Company’s operating leases with lease terms in excess of 12 months were as follows:

(in thousands)

Operating Leases

2025 (remaining three months)

2026 (remaining nine months)

Thereafter 7,279

2 unchanged sentences

Present value of lease liability $ 9,112

As of September 30, 2025 and December 31, 2024, the Company’s weighted-average remaining lease term for operating leases was 10.2 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 September 30, 2025 and December 31, 2024, respectively.

As of March 31, 2026 and December 31, 2025, the Company’s weighted-average remaining lease term for operating leases was 10.0 years and 10.1 years, respectively, and the Company’s weighted-average discount rate for operating leases was 9.7 % as of March 31, 2026 and December 31, 2025.

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

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2026 2025

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

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

Shares remaining available for grant under the Plan were 2.0 million as of September 30, 2025.

Shares of common stock remaining available for grant under the Plan were approximately 1.6 million as of March 31, 2026.

Stock Options

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2025:

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2026:

Stock Options Outstanding Weighted-Average Exercise Price

7 unchanged sentences

Cancelled or forfeited ( 53,605 ) $ 156.67

Outstanding as of September 30, 2025

Outstanding as of March 31, 2026

2,107,182 $ 124.76 7.0 $ 286,111

Exercisable as of September 30, 2025

Exercisable as of March 31, 2026

1,268,779 $ 82.98 5.8 $ 222,474

(1) Aggregate intrinsic value represents the difference between the closing stock price of our Common Stock on December 31, 2024 and September 30, 2025 and the exercise price of outstanding in-the-money options.

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2024:

(1) Aggregate intrinsic value represents the difference between the closing stock price of our common stock on December 31, 2025 and March 31, 2026 and the exercise price of outstanding in-the-money options on the respective date.

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2025:

Stock Options Outstanding Weighted-Average Exercise Price

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Cancelled or forfeited ( 25,240 ) $ 107.01

Outstanding as of September 30, 2024

2,079,193 $ 81.53 7.5 $ 209,854

Exercisable as of September 30, 2024

867,025 $ 63.68 6.7 $ 102,627

(1) Aggregate intrinsic value represents the difference between the closing stock price of our Common Stock on December 31, 2023 and September 30, 2024 and the exercise price of outstanding in-the-money options.

The total intrinsic value (the amount by which the fair market value exceeds the exercise price) of stock options exercised was $ 4.8 million and $ 5.9 million during the three months ended September 30, 2025 and 2024, respectively, and $ 8.1 million and $ 50.2 million for the nine months ended September 30, 2025 and 2024, respectively.

The weighted-average grant-date fair value per share of options granted to employees and directors was $ 108.46 and $ 130.85 during the three months ended September 30, 2025 and 2024, respectively, and $ 109.74 and $ 114.29 for the nine months ended September 30, 2025 and 2024, respectively.

There was $ 66.3 million of unrecognized stock-based compensation expense related to employees’ and directors’ options that is expected to be recognized over a weighted-average period of 2.8 years as of September 30, 2025.

Restricted Stock Awards

The following table summarizes the Company’s RSA activity:

Nine Months Ended September 30,

Number of Shares Weighted-Average Grant Date Fair Value

Non-vested RSAs, beginning of period

Outstanding as of March 31, 2025

2,262,473 $ 92.94 7.4 $ 198,813

Granted — $ — — $ —

Vested ( 11,925 ) $ 78.89 ( 14,523 ) $ 78.89

Surrendered for taxes ( 10,275 ) $ 78.89 ( 7,677 ) $ 78.89

Non-vested RSAs, end of period

Exercisable as of March 31, 2025

1,168,812 $ 69.13 6.4 $ 130,018

(1) Aggregate intrinsic value represents the difference between the closing stock price of our Common Stock on December 31, 2024 and March 31, 2025 and the exercise price of outstanding in-the-money options on the respective date.

The total intrinsic value (the amount by which the fair market value exceeds the exercise price) of stock options exercised was $ 32.1 million and $ 1.4 million during the three months ended March 31, 2026 and 2025, respectively.

The weighted-average grant-date fair value per share of options granted to employees and directors was $ 175.20 and $ 116.88 during the three months ended March 31, 2026 and 2025, respectively.

There was $ 92.8 million of unrecognized stock-based compensation expense related to employees’ and directors’ options that is expected to be recognized over a weighted-average period of 3.2 years as of March 31, 2026.

Restricted Stock Units

The following table summarizes the Company’s RSU activity:

Nine Months Ended September 30,

Three Months Ended March 31,

Number of Shares Weighted-Average Grant Date Fair Value

7 unchanged sentences

310,184 $ 194.16 348,757 $ 152.75

There was $ 41.2 million of unrecognized stock-based compensation expense related to employees’ RSU awards that is expected to be recognized over a weighted-average period of 2.8 years as of September 30, 2025.

There was $ 58.1 million of unrecognized stock-based compensation expense related to employees’ RSU awards that is expected to be recognized over a weighted-average period of 3.1 years as of March 31, 2026.

Performance-Based Restricted Stock Units

The following table summarizes the Company’s PSU activity:

Nine Months Ended September 30,

Three Months Ended March 31,

Number of Shares Weighted-Average Grant Date Fair Value

6 unchanged sentences

43,536 $ 275.64 56,250 $ 159.47

PSUs vest ratably over two years based upon continued service through the vesting date and the achievement of specific regulatory and commercial performance criteria as determined by the Compensation Committee of the Company’s Board of Directors which were met by the end of the year in which the PSU awards were granted.

There was $ 3.7 million of unrecognized stock-based compensation expense related to employees’ PSU awards that is expected to be recognized over a weighted-average period of five months as of September 30, 2025.

PSUs granted during the period are subject to regulatory performance-based vesting conditions, as determined by the Compensation Committee of the Company’s Board of Directors, and vest on a three year cliff basis upon satisfaction of such conditions.

There was $ 11.6 million of unrecognized stock-based compensation expense related to employees’ PSU awards that is expected to be recognized over a weighted-average period of 2.9 years as of March 31, 2026.

Stock-Based Compensation Expense, Net

The Company recorded stock-based compensation expense, net related to its stock options and restricted stock in the condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2025 and 2024 as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2026 2025

2 unchanged sentences

Total stock-based compensation $ 13,609 $ 13,478

The Company capitalized stock-based compensation associated with the allocation of labor costs related to work performed to manufacture VYJUVEK of $ 1.1 million and $ 946 thousand for the three months ended September 30, 2025 and 2024, respectively, and $ 3.0 million and $ 2.3 million for the nine months ended September 30, 2025 and 2024, respectively.

The Company recorded an income tax benefit of $ 31.4 million and $ 15.1 million for the three and nine months ended September 30, 2025, respectively.

The tax benefit for interim periods is calculated using an estimate of the annual effective tax rate, adjusted for discrete items.

The Company capitalized stock-based compensation associated with the allocation of labor costs related to work performed to manufacture VYJUVEK of $ 0.8 million and $ 1.0 million for the three months ended March 31, 2026 and 2025, respectively, into inventory.

The Company recorded an income tax expense of $ 5.5 million for the three months ended March 31, 2026.

The tax expense for interim periods is calculated using an estimate of the annual effective tax rate, adjusted for discrete items.

If there are any changes to the estimated annual effective tax rate, the Company will make a cumulative adjustment to the income tax provision in the period the change becomes known.

The Company recorded an income tax provision of $ 2.6 million and $ 3.1 million for the three and nine months ended September 30, 2024, respectively.

The Company recorded an income tax expense of $ 7.9 million for the three months ended March 31, 2025.

We monitor the realizability of our deferred tax assets taking into consideration all relevant factors at each reporting period.

As of September 30, 2025, based on the relevant weight of positive and negative evidence, including the amount of our income in recent years and the impacts of legislation enacted during the quarter which had material impacts to our deferred tax profile, which are objective and verifiable, as well as consideration of our expected future taxable earnings, we concluded that it is more likely than not that our U.S.

federal and certain state deferred tax assets are realizable.

As such, we released $ 48.4 million of our valuation allowance associated with the U.S.

federal and state deferred tax assets, except for those related to certain state net operating loss carryforwards and tax credit carryforwards.

We continue to maintain a full valuation allowance against certain state attributes as of September 30, 2025, because we concluded they are not more likely than not to be realized as we expect certain state attribute generation in future years to exceed our ability to use these deferred tax assets.

As of March 31, 2026, except for certain state net operating loss carryforward and tax credit carryforward, we do not have valuation allowance against deferred tax assets.

We continue to maintain a full valuation allowance against certain state attributes as of March 31, 2026, because we concluded they are not more likely than not to be realized as we expect certain state attribute generation in future years to exceed our ability to use these deferred tax assets.

We are subject to income taxes in the U.S.

2 unchanged sentences

The determination of the realizability of deferred tax assets requires significant judgment in assessing the likelihood of future tax consequences.

We also rely on our assessment of the Company’s projected future results of business operations, including uncertainty in future operating results relative to historical results being less prevalent, variable conditions impacting our ability to forecast future taxable income such as projected spend for research and development, and changes in business that may affect the existence and magnitude of future taxable income.

Our valuation allowance assessment is based on our best estimate of future results considering all available information.

The Company previously maintained a full valuation allowance against its U.S.

federal and state deferred tax assets due to historical cumulative losses and uncertainty regarding the realization of such assets.

The Company will continue to evaluate all available evidence each reporting period and may adjust the valuation allowance in future periods if estimates of future taxable income or other relevant factors change.

The Company will continue to evaluate all available evidence each

reporting period and may adjust the valuation allowance in future periods if estimates of future taxable income or other relevant factors change.

Segment Information

2 unchanged sentences

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 to allocate resources.

The following table presents selected financial information with respect to the Company’s single operating segment for the three and nine months ended September 30, 2025, and 2024:

The following table presents selected financial information with respect to the Company’s single operating segment for the three months ended March 31, 2026, and 2025:

Three Months Ended

Nine Months Ended

(in thousands) September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024

(in thousands) March 31, 2026 March 31, 2025

Product revenue, net

1 unchanged sentence

Cost of goods sold 6,323 5,028

96 % 92 % 94 % 92 %

B-VEC 547 1,973

568 — 1,309 —

KB407 762 349

2 unchanged sentences

KB803 1,142 486

KB707 3,181 3,311 8,342 6,469

359 167 1,233 372

KB803 401 180 1,291 394

Other dermatology programs 1 449 10 484

Other ophthalmology programs 3 137 44 430

Other research programs 736 692

Other development programs 219 171 679 596

Other research and development costs (1)

6,444 6,477 19,950 18,944

Total research and development

2 unchanged sentences

41,014 32,647

Litigation settlement

— 12,500 — 37,500

Income from operations

1 unchanged sentence

Interest and other income, net

6,593 7,297 21,315 22,373

Income before income taxes

$ 61,442 $ 43,597

Income tax benefit (expense)

Income tax expense

( 5,510 ) ( 7,864 )

3 unchanged sentences

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 recognition or disclosure.

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

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

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

What changed 10-Q

Item 1. Financial Statements