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Item 2. Management’s Discussion and Analysis

2026-05-04 compared with 2025-11-03 · 131 added, 265 removed, 151 unchanged (72% of the section changed)

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

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

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

Food and Drug Administration (“FDA”) in May 2023, the European Commission (“EC”) in April 2025, and Japan’s Ministry of Health, Labour and Welfare (“MHLW”) in July 2025 for the treatment of dystrophic epidermolysis bullosa (“DEB”);

• our plans and expected timing of commercial launches of VYJUVEK in Europe outside of Germany and France and expected timing of pricing negotiations in Germany and France;

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

• the initiation, timing, progress, and results of clinical trials for our product candidates, as well as expected timing of reporting of data readouts from our clinical trials;

• the timing of regulatory filings;

• our expectations regarding revenue, research and development expenses, selling, general and administrative expenses, and our primary uses of capital;

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

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

• our commercialization plans in the United States, the European Union, Japan, and elsewhere for our first commercial product, VYJUVEK ® (beremagene geperpavec-svdt) for the treatment of dystrophic epidermolysis bullosa (“DEB”), including timing of pricing negotiations and potential commercial launches in Europe;

• the design, initiation, enrollment, timing, progress, and results of clinical trials for our product candidates, as well as expected timing of regulatory filings and reporting of data readouts from our clinical trials;

• our beliefs about our proprietary HSV-1 based vector platform;

• our expectations regarding future fluctuations in revenue and anticipated increases in certain expenses;

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

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

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

Forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referenced in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and other filings we make with the SEC from time to time.

Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time.

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In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Given these uncertainties, you should not place undue reliance on these forward-looking statements.

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

You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.

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

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

links throughout this Quarterly Report on Form 10-Q are provided for convenience only and are not intended to be active hyperlinks to the referenced websites.

Web links throughout this Quarterly Report on Form 10-Q are provided for convenience only and are not intended to be active hyperlinks to the referenced websites.

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

We are a fully integrated, commercial-stage, 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.

We are a fully integrated, global, commercial-stage 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 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.

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 CGMP manufacturing facilities.

Our Commercial Product

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

referred to as B-VEC outside the U.S., Europe, and Japan)

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

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

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

VYJUVEK was first approved by the FDA in May 2023 for the treatment of wounds in patients, six months of age or older, suffering from DEB, making it the first ever redosable gene therapy and the first and only corrective medicine approved by the FDA for the treatment of both recessive and dominant subtypes of DEB.

VYJUVEK was first approved by the FDA in May 2023 for the treatment of wounds in patients, six months of age or older, suffering from DEB, making it the first and only corrective medicine approved by the FDA for the treatment of both recessive and dominant subtypes of DEB.

In September 2025, the FDA approved a label update for VYJUVEK that expanded the treatment eligible population to include DEB patients from birth and provided patients with greater dosing flexibility, including the option for VYJUVEK to be applied by a healthcare professional (“HCP”), caregiver, or directly by the patient themselves, either at home or in a healthcare setting.

VYJUVEK was also approved in Japan and Europe earlier this year, making it the first and only corrective therapy approved for the treatment of DEB in each of those respective markets.

In April 2025, the EC granted marketing authorization to VYJUVEK for the treatment of wounds in patients with DEB who have mutations in the COL7A1 gene, starting from birth.

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

In July 2025, Japan’s MHLW approved VYJUVEK for the treatment of patients with DEB, starting from birth.

The Japanese approval allows for dosing at home or in a healthcare setting, with the option for administration by patients or their family members.

As per the approval issued by the MHLW, VYJUVEK is intended for use only in patients with a definite diagnosis of dystrophic epidermolysis bullosa.

Genetic testing is not a requirement for treatment.

The re-examination period for VYJUVEK in Japan is ten years.

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

We launched VYJUVEK in the United States in 2023 and recently commenced the commercial launch of VYJUVEK in Europe and Japan.

In August 2025, we launched VYJUVEK in Germany, our first commercial launch outside the United States.

In September 2025, the Autorité de Santé (“HAS”) in France approved early reimbursed access to VYJUVEK under the post-marketing authorization Accès Précoce program, including the option to dispense VYJUVEK outside of the hospital setting, and, in October 2025, we launched VYJUVEK in France.

Also in October, the HAS appraised VYJUVEK as Amélioration du Service Médical Rendu III, a designation which recognizes the added clinical benefit of VYJUVEK and is an important milestone as the Company advances access discussions in France.

Pricing negotiations are underway in both Germany and France and are expected to continue until at least the second half of 2026.

The Company is also preparing regulatory filings for the United Kingdom and Switzerland, as well as initiating pricing discussions with relevant authorities in other key Western European markets.

The timing of European launches outside of France and Germany will depend on the cadence and outcomes of pricing negotiations.

In October 2025, VYJUVEK was awarded the Prix Galien Italia in the Advanced Therapy Medicinal Products category in Italy.

The Prix Galien is an international awards program recognizing excellence in scientific innovation that improves the state of human health.

In October 2025, the Company launched VYJUVEK in Japan following successful completion of pricing negotiations with Japan’s MHLW.

We have initiated distribution arrangements with specialty distributors to commercialize VYJUVEK in territories outside of the United States, major European markets, and Japan.

To date, we have entered into agreements with leading regional specialty distributors covering key markets in Central and Eastern Europe, the Middle East, and Turkey, and we expect to further expand our specialty distributor network in 2026.

Net VYJUVEK product revenue was $97.8 million for the three months ended September 30, 2025, and $623.2 million in cumulative net product revenue since launch.

Gross margin for the three months ended September 30, 2025 was 96%.

VYJUVEK was also approved in Japan and the EU in 2025, making it the first and only corrective therapy approved for the treatment of DEB in each of those respective markets.

Both approvals include flexible dosing options with the potential for patient or caregiver administration in the home setting.

We possess exclusive rights to develop, manufacture, and commercialize VYJUVEK throughout the world.

We are commercializing VYJUVEK directly in the United States, major European markets, and Japan.

We launched VYJUVEK in the United States in 2023, in Germany in August 2025, and in France and Japan in October 2025.

The launch in France is under the post-marketing authorization early reimbursed access Accès Précoce program.

Pricing negotiations are underway in both Germany and France and are expected to continue until the second half of 2026 in Germany and 2027 in France.

Pricing negotiations were successfully completed in Japan prior to launch.

We are also advancing pricing discussions with Italian and Spanish reimbursement authorities to enable potential launches in both Italy and Spain in the second half of 2026, as well as initiating pricing discussions with relevant authorities in other key Western European markets.

The timing of additional European launches is uncertain will depend on the cadence and outcomes of ongoing and planned regulatory interaction and pricing negotiations.

We continue to expand our specialty distributor network to support the commercialization of VYJUVEK in territories outside of the United States, major European markets, and Japan.

Net VYJUVEK product revenue was $116.4 million for the three months ended March 31, 2026, and $846.7 million in cumulative net product revenue since our first launch of VYJUVEK in the United States in 2023.

Gross margin for the three months ended March 31, 2026 was 95%.

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

Pipeline Highlights and Recent Developments

KB407 for Cystic Fibrosis (“CF”)

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

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

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

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

Enrollment in CORAL-1 is ongoing and we expect to report safety and CFTR delivery data from patients in the third and final cohort of CORAL-1 before year end.

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

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

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

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

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

We have since confirmed SERPINA1 delivery and functional AAT expression in a third patient dosed with KB408 in Cohort 2 and amended the SERPENTINE-1 protocol to investigate repeat dosing at the Cohort 2 dose level (the repeat dose cohort now referred to as “Cohort 2B”).

A total of five patients were dosed in Cohort 2 of which three underwent bronchoscopy.

The first patient in Cohort 2B was dosed in August 2025 and enrollment in this repeat dose cohort is ongoing.

We expect to report interim safety and SERPINA1 delivery data from the repeat dose Cohort 2B in the first half of 2026.

Enrollment in single dose cohorts is now closed.

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

Ophthalmology

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There is currently no corrective therapy available.

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

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

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

The patient presented with severe cicatrizing conjunctivitis secondary to DEB.

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

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

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

Regular eye drop administration of B-VEC was well tolerated by the patient with no drug-related adverse events noted.

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

In June 2025, we announced that we dosed the first patient in IOLITE, an intra-patient, double-blind, placebo-controlled, multicenter Phase 3 registrational study with a crossover design to evaluate KB803 for the treatment and prevention of corneal abrasions in DEB patients, six months of age or older.

We expect to enroll approximately 16 patients in the IOLITE study.

Enrolled patients will initially receive either a single eye drop of placebo or KB803, at a concentration of 10 9 PFU/mL, to each eye once weekly for 12 weeks.

At the conclusion of the first 12 weeks, patients will be switched from placebo to KB803, or vice versa, and continue with once weekly administration for a second 12 week period.

IOLITE is a decentralized study and drug administration will occur at the patient’s home by a HCP.

The primary study endpoint will be the change in the average number of days per month with corneal abrasion symptoms while receiving KB803 versus placebo.

Safety and secondary efficacy data, including weekly assessments of eye pain and monthly Epidermolysis Bullosa Eye Disease Index questionnaires, will be collected through to the end of the 24-week study period.

We continue to enroll patients in IOLITE and expect to complete enrollment by the end of the year.

More details of the IOLITE study can be found at www.clinicaltrials.gov under NCT identifier NCT07016750.

Patients seeking to participate in IOLITE must first enroll in an ongoing natural history study and complete a 12-week run-in period, during which they report the number of days that they experience symptoms of corneal abrasions.

Patients meeting the inclusion criteria following the 12-week run-in are eligible to participate in the IOLITE trial.

The natural history study was initiated in August 2024 and remains open for enrollment.

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

After observing a promising clinical safety profile in the initial patients treated with Krystal’s eye drop gene therapies, we modified the KB803 dosing schedule to reduce the potential impact

of human error in eye drop administration.

In April 2026, we completed study enrollment, with a total of 16 patients enrolled under the updated IOLITE protocol.

We expect to report top-line results from IOLITE before the end of the year.

The primary efficacy endpoint of the IOLITE study is the change in the average number of days per month with corneal abrasion symptoms while receiving KB803 versus placebo.

Safety and secondary efficacy data, including weekly assessments of eye pain and monthly Epidermolysis Bullosa Eye Disease Index questionnaires, are being collected through to the end of the 24-week study period.

To enroll in IOLITE, patients first completed a 12-week run-in period in our natural history study, during which they reported the number of days they experienced symptoms of corneal abrasions.

Additional details on both studies are available at www.clinicaltrials.gov under NCT identifiers NCT07016750 for IOLITE and NCT06563414 for the natural history study.

KB801 for Neurotrophic Keratitis (“NK”)

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

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

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

In July 2025, we announced that we dosed the first patient in EMERALD-1, a randomized, double-masked, multicenter, placebo-controlled study evaluating KB801, administered as an eye drop, for the treatment of NK.

We expect to enroll up to 27 adult patients with Stage 2 or Stage 3 NK, as defined by the Mackie criteria.

Patients will be randomized 2:1 to receive either KB801, at a concentration of 10 10 PFU/mL, or placebo topically to the study eye twice weekly for eight weeks.

The primary objective of EMERALD-1 is to evaluate the safety and tolerability of topical ocular administration of KB801 in patients with NK.

The secondary objective is evaluation of efficacy based on the proportion of patients with complete durable healing of corneal epithelium at eight weeks.

Additional exploratory efficacy measures will include change in corneal lesion size from baseline, each assessed at weeks 4, 6, 8, 10, and 20, as well as evaluations of corneal sensation and patient-reported symptom burden.

In October 2025, the FDA granted platform technology designation to the engineered HSV-1 viral vector used in KB801, a designation which affords development and manufacturing efficiencies for the development of KB801.

Following receipt of this designation, we amended the EMERALD-1 protocol to enable the study to serve as a registrational trial supporting the potential registration of KB801.

Under the updated protocol, we expect to enroll approximately 60 adult patients with Stage 2 or Stage 3 NK, as defined by the Mackie criteria, randomized 1:1 to receive either KB801 or placebo.

The primary efficacy endpoint of EMERALD-1 is the proportion of patients with complete healing of corneal epithelium at eight weeks.

Enrollment in EMERALD-1 is ongoing.

We expect to complete enrollment and report top-line results from EMERALD-1 before the end of the year.

More details of the EMERALD-1 study can be found at www.clinicaltrials.gov under NCT identifier NCT06999733.

In October 2025, the FDA granted platform technology designation to the engineered HSV-1 viral vector used in KB801.

The FDA’s platform technology designation program is intended to provide efficiencies in drug development, manufacturing, and review processes for drug product applications that incorporate designated platform technologies, with potential benefits including more frequent engagement with the FDA during clinical development, as well as opportunities to leverage manufacturing and nonclinical safety data from FDA-approved products that incorporate designated platform technologies, such as VYJUVEK, in submissions to the FDA.

KB407 for Cystic Fibrosis (“CF”)

In July 2023, we announced that we had dosed the first patient in our Phase 1 CORAL-1 study, a multi-center, dose-escalation trial of KB407 in patients with CF that included molecular assessments of CFTR delivery and expression in the third and highest dose cohort.

In December 2024, we announced an interim safety data update from the first two dose cohorts of CORAL-1 and, in January 2026, interim safety and molecular data updates from the third dose cohort.

KB407 was generally well tolerated across all three dose cohorts, and molecular assessments by bronchoscopy confirmed the successful delivery and expression of wild-type CFTR protein in patient’s lungs, with broad airway distribution and confirmation of KB407 transduction in all six CF patients with successful bronchoscopies.

We are now working closely with the FDA and the Cystic Fibrosis Foundation (“CFF") on development pathways to support potential registration of KB407.

In April 2026, the FDA also granted platform technology designation to the engineered HSV-1 viral vector used in KB407, affording the program the same potential development and manufacturing efficiencies as KB801.

Based on recent interactions with the FDA, we are initiating an open label, single-arm study to evaluate safety of repeat dose KB407 for 24 weeks in five patients with CF who are ineligible for, do not tolerate, or do not benefit from modulator therapy.

We expect to dose the first patient in the open-label study later this month, complete enrollment in the second quarter of 2026, and report results before the end of the year.

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

Concurrently, we are in discussions with the FDA and CFF regarding a potential innovative registrational study design and statistical analysis plan that explores using prospectively collected natural history data from the CFF to supplement placebo control data for evaluation of KB407 treatment effect.

We expect to share the design

and associated statistical analysis of the registrational study following alignment with the FDA, which is anticipated in the second half of 2026, and initiate the registrational study in 2027.

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

KB408 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the SERPINA1 transgene, that encodes for normal human alpha-1 antitrypsin (“AAT”) protein, for the treatment of AATD, a serious rare lung disease characterized by diminished or absent functional AAT protein in the lungs and unopposed neutrophil elastase activity resulting in progressive lung function decline.

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

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

A total of five patients were dosed in Cohort 2 of which three underwent bronchoscopy.

The first patient in Cohort 2B was dosed in August 2025 and enrollment in this repeat dose cohort is ongoing.

We expect to report interim safety and SERPINA1 delivery data from the repeat dose Cohort 2B in 2026.

Enrollment in single dose cohorts is now closed.

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

KB111 for Hailey-Hailey Disease (“HHD”)

KB111 is a topical gel formulation of our novel vector designed to deliver two copies of the ATP2C1 transgene encoding the human calcium-transporting ATPase type 2C member 1 (“ATP2C1”) for the treatment of HHD, a serious and rare monogenic skin disorder characterized by painful rash and blistering in skin folds and linked to low ATP2C1 expression levels in keratinocytes.

In October 2025, the FDA cleared our investigational new drug application to evaluate KB111 in the clinic and, in January 2026, the FDA granted KB111 Fast Track Designation for the treatment of HHD.

In April 2026, the FDA also granted platform technology designation to the engineered HSV-1 viral vector used in KB111, affording the program the same potential development and manufacturing efficiencies as KB801 and KB407.

We are currently developing an HHD-specific severity scale required for the clinical evaluation of KB111.

We expect to complete development and validation of the scale in the first half of 2026.

We also plan to initiate an open-label safety study later this month, HALITE-1, evaluating repeat dose KB111, administered once weekly for 12 weeks, in approximately seven patients with HHD.

We expect to report HALITE-1 study results in the second half of 2026.

We also plan to submit the results from HALITE-1 along with the registrational study design for discussions with the FDA in the second half of 2026 to enable a potential registrational study start in 2027.

KB707 for Solid Tumors

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Both intratumoral and inhaled KB707 have been granted Rare Pediatric Disease Designations and Fast Track Designations by the FDA.

We have prioritized development of the inhaled KB707 formulation for the treatment of non-small cell lung cancer (“NSCLC”) based on early evidence of efficacy from KYANITE-1, an open-label, multi-center, dose escalation and expansion

Phase 1/2 study, evaluating inhaled KB707, as monotherapy or in combination, in patients with locally advanced or metastatic solid tumors of the lung.

In February 2026, the FDA also granted Regenerative Medicine Advanced Therapy designation to KB707 for the treatment of advanced or metastatic non-small cell lung cancer (“NSCLC”).

We have prioritized development of the inhaled KB707 formulation for the treatment of NSCLC based on early evidence of efficacy from KYANITE-1, an open-label, multi-center, dose escalation and expansion Phase 1/2 study, evaluating inhaled KB707, as monotherapy or in combination, in patients with locally advanced or metastatic solid tumors of the lung.

As of the latest data cut-off disclosed in June 2025, in an evaluable cohort of 11 patients with heavily pre-treated advanced NSCLC, we observed monotherapy activity with inhaled KB707 therapy, achieving an objective response rate of 36% and a disease control rate of 54%.

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

In August 2025, we were granted an End of Phase 2 meeting with the FDA to discuss the inhaled KB707 program and based on the FDA’s feedback, we now expect that a single Phase 3 registrational study, evaluating inhaled KB707 in combination with chemotherapy against chemotherapy alone in patients with advanced NSCLC, would be sufficient to support potential registration of inhaled KB707 in combination with chemotherapy as a second-line treatment for NSCLC.

In support of this potential registrational pathway, we have opened a new cohort in KYANITE-1 to evaluate a fixed dose of inhaled KB707 in combination with chemotherapy in patients with advanced NSCLC.

Enrollment is ongoing, and we expect to report interim efficacy data from KYANITE-1 and potential registrational study plans in the second half of 2026.

We continue to enroll patients with advanced NSCLC in a cohort evaluating a fixed dose of inhaled KB707 in combination with chemotherapy in patients with advanced NSCLC and expect to report additional interim efficacy data from KYANITE-1, as well as potential registrational study plans for inhaled KB707, later this year.

Details of the KYANITE-1 study can be found at www.clinicaltrials.gov under NCT identifier NCT06228326.

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Details of the OPAL-1 study can be found at www.clinicaltrials.gov under NCT identifier NCT05970497.

KB111 for Hailey-Hailey Disease (“HHD”)

Patients with HHD report debilitating symptoms of pain, itch, burning, infections, and body odor, as well severe, negative impacts on quality of life and psychological distress.

The prevalence of HHD is not well characterized and is most commonly estimated at roughly 1 per 50,000, although underreporting is possible.

Current disease management is supportive in nature and no specific therapy for HHD has been approved by the FDA or EMA.

In preclinical studies presented at the Society for Investigative Dermatology 2025 Annual Meeting in May 2025, KB111 was shown to efficiently deliver ATP2C1 to keratinocytes in vitro and in vivo resulting in increased expression of functional ATP2C1.

By increasing functional ATP2C1 levels in the skin, KB111 has the potential to accelerate lesion healing and meaningfully reduce disease burden for HHD patients.

In October 2025, the FDA cleared our investigational new drug application to evaluate KB111 in the clinic, and we expect to dose HHD patients in an intra-patient randomized, double-blind, placebo-controlled, multi-center study evaluating KB111 in HHD patients in the first half of 2026.

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

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

In July 2025, Jeune announced positive safety and efficacy results, including significant improvements in key skin aesthetic attributes such as wrinkles and elasticity, in PEARL-2, a 2:1 randomized, double-blind, placebo-controlled Phase 1 study evaluating KB304, for the treatment of wrinkles of the décolleté.

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

Meaningful aesthetic improvements were reported by the investigator and subjects alike following KB304 treatment, with clear and statistically significant advantages over placebo.

Improvements were reported not only for wrinkles but also multiple additional skin attributes, including elasticity, crepiness, hydration, and radiance.

Increased subject satisfaction with wrinkle appearance was also reported, with clear separation from placebo.

All adverse events were mild-to-moderate in severity and transient and no serious or severe adverse events were reported.

The frequency and duration of adverse events also decreased with subsequent doses of KB304.

Details of the PEARL-2 study can be found at www.clinicaltrials.gov under NCT identifier NCT06724900.

Based on the broad aesthetic improvements observed following KB304 treatment in PEARL-2, Jeune is progressing KB304 into a Phase 2 study for the treatment of wrinkles of the décolleté.

In support of the Phase 2 study, Jeune has developed

and validated a décolleté-specific photonumeric scale (“JDWS”) and, following feedback from the FDA in the second half of 2025, expects to initiate the Phase 2 study in the first half of 2026.

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

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

Meaningful and sustained improvements in multiple skin aesthetic attributes, as well as increased subject satisfaction with wrinkle appearance, were reported.

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

Jeune is currently evaluating aesthetic indications most suitable for the advanced clinical development of KB301.

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

Based on the broad aesthetic improvements observed in PEARL-2, Jeune is progressing KB304 into a Phase 2 study for the treatment of wrinkles of the décolleté.

In support of the Phase 2 study, Jeune developed and validated a décolleté-specific photonumeric scale (“JDWS”) which was submitted to the FDA in the second half of 2025.

Jeune has aligned with the FDA on the JDWS and expects to initiate the Phase 2 study in 2027.

Financial Overview

Product Revenue, Net

After FDA approval of VYJUVEK in May 2023, we began commercial marketing and sales and began recognizing revenue during the third quarter of 2023.

Subsequently in April 2025 and July 2025, VYJUVEK was approved in Europe and Japan, respectively.

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

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

After FDA approval of VYJUVEK in May 2023, we launched VYJUVEK in the United States in 2023, in Germany in August 2025, and in France and Japan in October 2025.

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

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

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

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We expense research and development costs to operations as incurred.

A significant portion of our research and development expenses are not allocated to individual products or programs, as certain expenses benefit multiple product candidates and preclinical development programs.

For example, we do not allocate costs associated with stock-based compensation, certain manufacturing related costs, rent, storage, depreciation, or other facility related costs.

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

product portfolio.

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist principally of salaries and other related costs, including stock-based compensation for personnel in our executive, finance, legal, commercial, business development, information technology

and other general and administrative functions.

Selling, general and administrative expenses also include professional fees associated with corporate and intellectual property-related legal expenses, consulting and accounting services, insurance, facility-related costs and expenses associated with obtaining and maintaining patents.

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These increases will likely include increased costs for insurance, costs related to the hiring of additional personnel and payments to outside consultants, lawyers and accountants, among other expenses.

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

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

Interest and Other Income, Net

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Critical Accounting Policies, Significant Judgments and Estimates

There have been no significant changes during the nine months ended September 30, 2025 to our critical accounting policies, significant judgments and estimates as disclosed in our management’s discussion and analysis of financial condition and results of operations included in the 2024 10-K.

There have been no material changes during the three months ended March 31, 2026 to our critical accounting policies, significant judgments and estimates as disclosed in our management’s discussion and analysis of financial condition and results of operations included in the 2025 10-K.

Results of Operations

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles, or GAAP.

Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP.

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

Three Months Ended September 30, 2025 and 2024

Three Months Ended September 30, Change

Three Months Ended March 31, 2026 and 2025

Three Months Ended March 31, Change

(in thousands) (unaudited)

Product revenue, net $ 116,357 $ 88,183 $ 28,174 32 %

Operating expenses

Cost of goods sold 6,323 5,028 1,295 26 %

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Selling, general and administrative 41,014 32,647 8,367 26 %

Litigation settlement — 12,500 (12,500) (100) %

Total operating expenses 62,668 51,931 10,737 21 %

Income from operations 53,689 36,252 17,437 48 %

41,374 22,472 18,902 84 %

Interest and other income, net 7,753 7,345 408 6 %

Income before income taxes 61,442 43,597 17,845 41 %

47,967 29,769 18,198 61 %

Income tax benefit (expense)

31,398 (2,589) 33,987 (1313) %

Income tax expense

(5,510) (7,864) 2,354 (30) %

Net income $ 55,932 $ 35,733 $ 20,199 57 %

Product Revenue, Net

Product revenue, net was $97.8 million for the three months ended September 30, 2025, as compared to $83.8 million for the three months ended September 30, 2024.

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

Product revenue, net was $116.4 million for the three months ended March 31, 2026, as compared to $88.2 million for the three months ended March 31, 2025.

The increase in product revenue, net was driven by an increase in VYJUVEK sales as compared to the prior year, primarily due to continued growth in our Europe and Japan markets.

Cost of Goods Sold

Cost of goods sold was $4.3 million for the three months ended September 30, 2025, as compared to $6.7 million for the three months ended September 30, 2024, representing a decrease primarily due to manufacturing process optimizations that resulted in lower average costs per unit of VYJUVEK partially offset by an increase in units sold.

Cost of goods sold was $6.3 million for the three months ended March 31, 2026, as compared to $5.0 million for the three months ended March 31, 2025, representing an increase in units of VYJUVEK sold.

Research and Development Expenses

The following table summarizes our research and development expenses by product candidate or program, and for unallocated expenses, by type, for the three months ended September 30, 2025 and 2024.

Three Months Ended September 30, Change

The following table summarizes our research and development expenses by product candidate or program, and for unallocated expenses, by type, for the three months ended March 31, 2026 and 2025.

Three Months Ended March 31, Change

(in thousands) (unaudited)

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992 27 965 3574 %

KB301 120 138 (18) (13) %

3 242 (239) (99) %

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1,142 486 656 135 %

Other dermatology programs 1 449 (448) (100) %

Other ophthalmology programs

3 137 (134) (98) %

Other research programs 379 247 132 53 %

Other development programs 219 171 48 28 %

Stock-based compensation 2,583 2,267 316 14 %

Other unallocated expenses (1)

3,861 4,210 (349) (8) %

Research and development expense $ 14,585 $ 13,512 $ 1,073 8 %

(1) Unallocated expenses consist of shared pre-commercial manufacturing costs, primarily relating to certain raw materials, process development, quality control and quality assurance activities, as well as other manufacturing and facility related costs including rent, storage and depreciation which support the development of multiple product candidates.

Research and development expenses increased by $1.1 million for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

The increase in research and development expenses was primarily attributable to:

• a net increase of $549 thousand in manufacturing costs driven by the timing of production runs across our product candidates and programs, mainly due to an increase in B-VEC and KB407 runs offset by a decrease in KB408 and KB707 runs;

• a net increase of $797 thousand in payroll related costs, inclusive of $316 thousand in stock-based compensation, to support our research and development across our product candidates and programs, primarily due to an increase in KB111, KB801, and other research programs.

These increases were partially offset by:

• a decrease of $349 thousand in other unallocated expenses due to fewer facilities and equipment related costs in the period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $8.9 million in the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

The increase was primarily driven by the following:

• an increase of $3.5 million related to professional services, including legal and consulting services;

• an increase of $1.8 million in payroll-related costs;

• an increase of $1.8 million in marketing costs to support commercial sales of VYJUVEK;

• an increase of $1.2 million in other general and administrative costs, including $286 thousand in subscription expense, $250 thousand in charitable contributions, and $222 thousand in facilities expense;

• an increase of $663 thousand primarily related to higher costs associated with our patient access program.

The increases were partially offset by:

• a decrease of $479 thousand in stock-based compensation.

Litigation Settlement

Litigation settlement for the three months ended September 30, 2025 and 2024 was zero and $12.5 million, respectively, and consisted of amounts related to the settlement of litigation with PeriphaGen.

See discussion in Note 7 of the notes to consolidated financial statements included in the 2024 10-K and in this Quarterly Report on Form 10-Q for more information.

Interest and Other Income, Net

Interest and other income, net was $6.6 million and $7.3 million for the three months ended September 30, 2025 and 2024, respectively, and consisted of interest and dividend income earned from our cash, cash equivalents and investments as well as the effects of foreign exchange rates.

Income Tax Expense

Income tax benefit for the three months ended September 30, 2025 was $31.4 million and income tax expense was $2.6 million for the three months ended September 30, 2024,, which relates to state, federal and foreign income taxes.

In the third quarter of 2025, we determined that it was more likely than not that the benefit from certain of our deferred tax assets will be realized.

Accordingly, the related valuation allowance was released and a one-time benefit was recognized.

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

Nine Months Ended September 30, 2025 and 2024

Nine Months Ended September 30, Change

(in thousands)

Product revenue, net

$ 282,025 $ 199,376 $ 82,649 41 %

Cost of goods sold

16,457 15,112 1,345 9 %

Research and development 43,251 40,052 3,199 8 %

Selling, general and administrative

105,292 82,339 22,953 28 %

Litigation settlement — 37,500 (37,500) (100) %

Total operating expenses 165,000 175,003 (10,003) (6) %

Income from operations

117,025 24,373 92,652 380 %

Interest and other income, net 21,315 22,373 (1,058) (5) %

Income before income taxes

138,340 46,746 91,594 196 %

Income tax benefit (expense)

15,091 (3,066) 18,157 (592) %

$ 153,431 $ 43,680 $ 109,751 251 %

Products Revenue, net

Product revenue, net was $282.0 million for the nine months ended September 30, 2025 as compared to $199.4 million for the nine months ended September 30, 2024.

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

Cost of Goods Sold

Cost of goods sold was $16.5 million for the nine months ended September 30, 2025 as compared to $15.1 million for the nine months ended September 30, 2024, due to an increase in units sold partially offset by manufacturing process optimizations that resulted in lower average costs per unit of VYJUVEK.

Research and Development Expenses

The following table summarizes our research and development expenses by product candidate or program, and for unallocated expenses, by type, for the nine months ended September 30, 2025 and 2024:

Nine Months Ended September 30, Change

2025 2024 $ %

(in thousands) (unaudited)

B-VEC $ 6,144 $ 7,068 $ (924) (13) %

1,309 — 1,309 — %

KB301 185 521 (336) (64) %

KB304 906 1,146 (240) (21) %

KB407 1,272 1,631 (359) (22) %

KB408 763 1,107 (344) (31) %

KB707 8,342 6,469 1,873 29 %

1,233 372 861 231 %

1,291 394 897 228 %

Other dermatology programs 10 484 (474) (98) %

Other ophthalmology programs

Other programs

736 692 44 6 %

Other research programs 1,123 890 233 26 %

Other development programs 679 596 83 14 %

Stock-based compensation 2,177 2,469 (292) (12) %

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Research and development expense $ 15,331 $ 14,256 $ 1,075 8 %

Research and development expenses increased by $3.2 million in the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.

(1) Other unallocated expenses consist of shared pre-commercial manufacturing costs, primarily relating to certain raw materials, process development, quality control and quality assurance activities, as well as other manufacturing and facility related costs including rent, storage and depreciation which support the development of multiple product candidates.

Research and development expenses increased by $1.1 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

The increase in research and development expenses was primarily attributable to:

• a net increase of $1.3 million in clinical development costs, primarily due to an increase in KB707 costs related to our Phase 1/2 clinical trials for inhaled KB707;

• a net increase of $2.2 million in payroll related expenses, inclusive of $772 thousand of stock-based compensation, to support our research and development primarily due to an increase in KB111, KB707, KB801, KB803, and other research programs;

• an increase of $900 thousand in R&D support fees, inclusive of $310 thousand of lab supplies primarily related to KB707, $270 thousand of subscription costs primarily related to KB803, and $270 thousand of regulatory fees primarily related to B-VEC.

• a net increase of $0.9 million in unallocated materials and other support costs for our pipeline products;

• a net increase of $0.8 million in R&D payroll and manufacturing costs driven by the timing of production runs across our product candidates and programs, mainly due to an increase in KB111, KB407, and KB803, partially offset by a decrease in B-VEC.

These increases were partially offset by:

• a net decrease of $1.4 million in manufacturing costs mainly driven by the timing of production runs across our product candidates and programs primarily due to a decrease in B-VEC, KB304, KB407, KB707 and other dermatology programs partially offset by an increase in KB111

• a decrease of $0.4 million in B-VEC regulatory fees due to timing of international expansion.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $23.0 million in the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.

Selling, general and administrative expenses increased $8.4 million in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

The increase was primarily driven by the following:

• an increase of $8.0 million related to professional services, including legal and consulting services;

• an increase of $7.2 million in payroll-related expenses, including stock-based compensation;

• an increase of $4.3 million in other general and administrative costs, including $1.3 million in charitable contributions, $725 thousand in facilities expenses, $718 thousand in subscription expenses, $521 thousand in other taxes, and $406 thousand in insurance expenses;

• an increase of $3.6 million in marketing costs to support commercial sales of VYJUVEK.

The increases were partially offset by:

• a decrease of $523 thousand primarily related to lower costs associated with our patient access program.

Litigation Settlement

Litigation settlement for the nine months ended September 30, 2025 and 2024 was zero and $37.5 million, respectively, and consisted of amounts related to the settlement of litigation with PeriphaGen.

See discussion in Note 7 of the notes to consolidated financial statements included in the 2024 10-K and in this Quarterly Report on Form 10-Q for more information.

• an increase of $3.8 million in payroll costs, including stock-based compensation;

• an increase of $2.3 million in costs related to our global commercialization efforts;

• an increase of $2.0 million in professional services, including legal and consulting fees.

Interest and Other Income, Net

Interest and other income, net for the nine months ended September 30, 2025 and 2024 was $21.3 million and $22.4 million, respectively, and consisted of interest and dividend income earned from our cash, cash equivalents and investments as well as the effects of foreign exchange rates.

Interest and other income, net was $7.8 million and $7.3 million for the three months ended March 31, 2026 and 2025, respectively, and consisted of interest and dividend income earned from our cash, cash equivalents and investments as well as the effects of foreign exchange rates.

Income Tax Expense

Income tax benefit for the nine months ended September 30, 2025 was $15.1 million and income tax expense was $3.1 million for the nine months ended September 30, 2024, which relates to state, federal and foreign income taxes.

In the third quarter of 2025, we determined that it was more likely than not that the benefit from certain of our deferred tax assets will be realized.

Accordingly, the related valuation allowance was released and a one-time benefit was recognized.

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

Income tax expense was $5.5 million and $7.9 million for the three months ended March 31, 2026 and March 31, 2025, respectively, which relates to state, federal and foreign income taxes.

Liquidity and Capital Resources

As of September 30, 2025, our cash, cash equivalents and short-term investments balance was approximately $731.1 million.

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

We believe that our cash, cash equivalents and short-term investments as of September 30, 2025 will be sufficient to allow us to fund our operations for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

Our 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.

We expect our future revenue to fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any product sales.

As of March 31, 2026, our cash, cash equivalents and short-term investments balance was approximately $823.4 million, and we had a retained earnings balance of $80.1 million.

We believe that our cash, cash equivalents and short-term investments as of March 31, 2026 will be sufficient to allow us to fund our operations for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

Costs related to clinical trials can be unpredictable and, therefore, there can be no guarantee that we will have sufficient capital to fund the continued or planned pre-clinical and clinical studies for our product candidates or our operations.

Further, we expect our future revenue to fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any product sales.

While we are in the process of building out our internal vector manufacturing capacity, some of our manufacturing activities will be contracted out to third parties.

Additionally, we currently utilize third-party contract research organizations to carry out some of our clinical development activities.

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

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

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

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We have based our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect.

Because of the numerous risks and uncertainties associated with research, development, manufacturing and commercialization of genetic medicines, we are unable to estimate

the exact amount of our operating capital requirements.

Because of the numerous risks and uncertainties associated with research, development, manufacturing and commercialization of genetic medicines, we are unable to estimate the exact amount of our operating capital requirements.

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

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

• the progress, timing and costs of manufacturing VYJUVEK and revenue received from commercial sale of VYJUVEK;

• the progress, timing and cost of manufacturing VYJUVEK and revenue received from commercial sale of VYJUVEK;

• the continued development and the filing of investigational new drug applications for current and future product candidates;

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Sources and Uses of Cash

The following table summarizes our sources and uses of cash for the nine months ended September 30, 2025 and 2024:

Nine Months Ended September 30,

The following table summarizes our sources and uses of cash for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

(in thousands)

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(63,583) (54,769)

Net cash (used in) provided by financing activities

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

Net increase (decrease) in cash

$ 5,009 $ (36,095)

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2025 was $123.4 million and consisted primarily of net income of $153.4 million adjusted for $15.8 million of non-cash items and a $45.9 million decrease in cash from increased working capital.

Non-cash adjustments included depreciation of $4.2 million, amortization of operating lease right-of-use assets of $627 thousand, stock-based compensation expense of $40.8 million, amortization on marketable securities of $139 thousand, and other adjustments of $395 thousand, offset by a change in our deferred income taxes of $24.7 million and realized gain on investments of $5.5 million.

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

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

Net cash provided by operating activities for the three months ended March 31, 2026 and 2025 was $80.4 million and $31.0 million, respectively.

Increase in operating cash flows was driven by a $31.3 million impact of changes in accrued legal settlement due to the final payment of the PeriphaGen settlement in the first quarter of 2025 and a $20.2 million increase in net income primarily due to increased revenue, partially offset by increased operating expenses.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2025 was $69.6 million and consisted of $350.1 million in purchases of short-term and long-term investments and $9.8 million in purchases of property and equipment, offset by $289.9 million received from the maturities and early calls of short and long-term investments and $435 thousand received in proceeds from disposal of assets.

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

Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was $63.6 million and $54.8 million, respectively.

The increase in cash used in investing activities was driven by increased purchases of investments of $22.2 million, partially offset by increased maturities of investments of $14.8 million.

Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2025 was $7.0 million and consisted of $12.1 million used for employee tax withholding payments related to vested restricted stock units and $1.8 million used for employee tax withholding payments for settlement of vested restricted stock awards partially offset by $7.0 million from exercises of stock options.

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

Net cash used in financing activities for the three months ended March 31, 2026 and 2025 was $10.5 million and $12.5 million, respectively.

The decrease in cash used in financing activities was primarily driven by a $5.0 million increase in proceeds from exercise of stock options and $1.8 million decrease in taxes paid related to settlement of restricted stock awards, offset by $4.8 million increase in taxes paid for employee tax withholding related to restricted stock units.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis