What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-03 compared with 2026-05-04 · 141 added, 74 removed, 208 unchanged (51% of the section changed)

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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;

• our commercialization plans in the United States, the European Union (the “EU”), Japan, the United Kingdom (the “UK”), 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;

• 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;

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

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.

Forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referenced in Part I, Item 1A of the 2025 Form 10-K 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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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 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.

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

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 a non-invasive, topical, redosable gene therapy approved in the United States, the EU, the UK, 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 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 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.

VYJUVEK was first approved by the United States Food and Drug Administration (“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, caregiver, or directly by the patient themselves, either at home or in a healthcare setting.

VYJUVEK was approved in Japan and the EU in 2025 and, in May 2026, received approval in the UK, making it the first and only corrective therapy approved for the treatment of DEB in each of those markets.

All three 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 are commercializing VYJUVEK directly in the United States, major European markets, and Japan, and are building a specialty distributor network to support the commercialization of VYJUVEK outside of our direct markets.

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 are underway in both Germany and France and are expected to continue until at least 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 are also advancing pricing discussions across Europe and the UK, including discussions with Italian and Spanish reimbursement authorities to enable potential launches in both Italy and Spain in the second half of 2026.

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

We are preparing multiple additional marketing authorization applications for VYJUVEK, including for Switzerland and Australia, which we expect to submit in the second half of 2026.

Net VYJUVEK product revenue was $119.2 million for the three months ended June 30, 2026, and $965.9 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 June 30, 2026 was 95%.

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

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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.

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.

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.

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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.

We expect to complete enrollment before the end of the year.

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

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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.

We are now working closely with the FDA, the Cystic Fibrosis Foundation (“CFF"), and the CF Therapeutics Development Network Coordinating Center at Seattle Children’s Research Institute (“TDNCC”) on development pathways to support potential registration of KB407.

Based on our interactions with the FDA, we initiated an open label, single-arm study to evaluate the 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.

Enrollment in the study is ongoing.

We expect to complete enrollment and report interim 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.

Concurrently, we are in discussions with the FDA, CFF, and TDNCC regarding a potential innovative registrational study design and statistical analysis plan that explores using prospectively collected natural history data from the CFF and TDNCC 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.

KB408 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the serpin family A member 1 (“ 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 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.

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We expect to report interim safety and SERPINA1 delivery data from the repeat dose Cohort 2B in 2027.

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.

KB111 is a topical gel formulation of our novel vector designed to deliver two copies of the calcium-transporting ATPase type 2C member 1 (“ ATP2C1 ”) transgene 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.

We have developed and are currently validating an HHD-specific severity scale required for the clinical evaluation of KB111.

We have also initiated an open label, single-arm study, HALITE-1, to evaluate the safety of repeat dose KB111, administered once weekly for 12 weeks, in approximately seven patients with HHD.

Enrollment in HALITE-1 is ongoing.

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

We expect to complete enrollment and report HALITE-1 interim study results before the end of the year.

We plan to submit the results from HALITE-1 along with the registrational study design and scale for discussions with the FDA before year end to enable a potential registrational study start in 2027.

KB707 for Solid Tumors

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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%.

Inhaled KB707 for NSCLC

We are developing inhaled KB707 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.

In June 2025, we disclosed our most recent clinical update on patients treated with inhaled KB707 as monotherapy in KYANITE-1.

In an evaluable cohort of 11 patients with heavily pre-treated advanced NSCLC, patients treated with inhaled KB707 as monotherapy achieved an objective response rate (“ORR”) of 36% and a disease control rate (“DCR”) of 54%.

Inhaled KB707 was also reported to be safe and generally well tolerated as monotherapy in the 39 patients included in the safety analysis.

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

We 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.

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

In May 2026, we disclosed interim clinical results from a KYANITE-1 dose expansion cohort evaluating the safety and efficacy of inhaled KB707 plus pembrolizumab in patients with advanced NSCLC.

The safety analysis included 21 patients who received at least one dose of the combination regimen of which 16 patients were also evaluable for efficacy.

The combination regimen was well tolerated and effective in a late-line setting, achieving an ORR of 31% and a DCR of 75%.

Responses were also durable with median duration of response and progression free survival not reached as of data cut-off.

Enrollment is ongoing in the final dose expansion cohort of KYANITE-1 evaluating a fixed dose of inhaled KB707 in combination with chemotherapy in patients with advanced NSCLC.

We expect to complete enrollment later this year and report updated interim clinical results, as well as potential registrational study plans, in the first half of 2027.

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

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

Patients enrolled in OPAL-1 continue to be followed and based on safety and efficacy results from the study, the Company may adjust development plans for intratumoral KB707.

Intratumoral KB707 for Gorlin Syndrome

After detecting promising early efficacy signals among basal cell carcinoma (“BCC”) patients treated with the lowest dose of intratumoral KB707 in the dose escalation phase of OPAL-1, our open label, multi-center, dose escalation and expansion Phase 1/2 study, we expanded the scope of the study to evaluate the safety and efficacy of this intratumoral KB707 dose in the treatment of patients with Gorlin syndrome.

Gorlin syndrome is a rare genetic disease characterized by a significantly increased risk of developing BCC.

Patients with Gorlin syndrome may have hundreds of BCCs over their lifetimes requiring frequent and potentially disfiguring surgeries.

We have enrolled three patients with Gorlin syndrome in OPAL-1 and expect to provide an interim clinical update on these patients as well as outline potential development plans for intratumoral KB707 for the treatment of Gorlin syndrome later this year.

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

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.

Jeune’s lead clinical program, KB304, is a solution formulation of our novel vector for intradermal injection designed to deliver two copies of the collagen type III alpha 1 chain transgene and one copy of the elastin 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.

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We expense research and development costs to operations as incurred.

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

product portfolio.

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

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Critical Accounting Policies, Significant Judgments and Estimates

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.

There have been no material changes during the six months ended June 30, 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

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

Three Months Ended March 31, 2026 and 2025

Three Months Ended March 31, Change

Three Months Ended June 30, 2026 and 2025

Three Months Ended June 30, Change

(in thousands) (unaudited)

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Product Revenue, Net

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.

Product revenue, net was $119.2 million for the three months ended June 30, 2026, as compared to $96.0 million for the three months ended June 30, 2025.

The increase in product revenue, net was driven by an increase in VYJUVEK sales as compared to the prior year, primarily due to launches in our Europe and Japan markets, partially offset by a reduction in United States VYJUVEK sales.

Cost of Goods 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.

Cost of goods sold was $6.4 million for the three months ended June 30, 2026, as compared to $7.2 million for the three months ended June 30, 2025.

The decrease was driven by manufacturing process optimizations that resulted in lower average costs per unit partially offset by an increase in VYJUVEK sales.

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 March 31, 2026 and 2025.

Three Months Ended March 31, 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 June 30, 2026 and 2025.

Three Months Ended June 30, Change

(in thousands) (unaudited)

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487 408 79 19 %

Other programs

Other product candidates 745 626 119 19 %

Stock-based compensation 2,463 2,627 (164) (6) %

Other unallocated expenses (1)

4,017 3,878 139 4 %

Research and development expense $ 14,518 $ 14,410 $ 108 1 %

(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 $0.1 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.

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

• a net increase of $0.8 million in clinical development costs, primarily due to increased costs for KB407, KB707, KB801, and KB803 partially offset by a decrease in KB304 costs;

• an increase of $0.5 million in unallocated materials and other support costs for our product candidates.

These increases were partially offset by:

• a net decrease of $0.5 million in research and development payroll and manufacturing costs driven by the timing of production runs across our product candidates, mainly due to a decrease in B-VEC, KB111 and other unallocated expenses, partially offset by increases in KB707 and KB801;

• a decrease of $0.4 million in B-VEC pre-commercialization regulatory fees.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $4.8 million in the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.

The increase was primarily driven by the following:

• an increase of $2.5 million in payroll costs, including stock-based compensation;

• an increase of $1.4 million in other general and administrative costs primarily related to $0.6 million in travel and conferences and $0.3 million in subscriptions;

• an increase of $1.0 million in selling expenses.

Interest and Other Income, Net

Interest and other income, net was $7.7 million and $7.4 million for the three months ended June 30, 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 expense was $11.3 million and $8.4 million for the three months ended June 30, 2026 and June 30, 2025, respectively, which relates to state, federal and foreign income taxes.

Six Months Ended June 30, 2026 and 2025

Six Months Ended June 30, Change

(in thousands)

Product revenue, net

$ 235,579 $ 184,225 $ 51,354 28 %

Cost of goods sold

12,760 12,193 567 5 %

Research and development 29,849 28,666 1,183 4 %

Selling, general and administrative

80,863 67,714 13,149 19 %

Total operating expenses 123,472 108,573 14,899 14 %

Income from operations

112,107 75,652 36,455 48 %

Interest and other income, net 15,414 14,720 694 5 %

Income before income taxes

127,521 90,372 37,149 41 %

Income tax expense (16,821) (16,305) (516) 3 %

$ 110,700 $ 74,067 $ 36,633 49 %

Products Revenue, Net

Product revenue, net was $235.6 million for the six months ended June 30, 2026 as compared to $184.2 million for the six months ended June 30, 2025.

The increase in product revenue, net was driven by an increase in VYJUVEK sales as compared to the prior period, primarily due to launches in our EU and Japan markets, partially offset by a reduction in United States VYJUVEK sales.

Cost of Goods Sold

Cost of goods sold was $12.8 million for the six months ended June 30, 2026 as compared to $12.2 million for the six months ended June 30, 2025, 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 six months ended June 30, 2026 and 2025:

Six Months Ended June 30, Change

2026 2025 $ %

(in thousands) (unaudited)

B-VEC $ 2,100 $ 4,353 $ (2,253) (52) %

1,339 735 604 82 %

KB304 29 667 (638) (96) %

KB407 1,278 655 623 95 %

KB408 295 516 (221) (43) %

KB707 5,435 5,147 288 6 %

2,006 879 1,127 128 %

1,618 894 724 81 %

Other product candidates 1,481 1,317 164 12 %

Stock-based compensation 4,640 5,096 (456) (9) %

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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.

Research and development expenses increased by $1.2 million in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.

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

• 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.

• an increase of $1.4 million in unallocated materials and other support costs for our product candidates;

• a net increase of $0.8 million in clinical development costs, primarily due to increased costs of KB707, KB801, and KB803 partially offset by a decrease in KB304 costs;

• a net increase of $0.5 million in research and development payroll and manufacturing costs driven by the timing of production runs across our product candidates, mainly due to an increase in KB111, KB407, KB707, KB801, and KB803 partially offset by a decrease in B-VEC, KB304, and KB408.

These increases were partially offset by:

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

• a decrease of $0.8 million in B-VEC pre-commercialization regulatory fees;

• a decrease of $0.5 million in other unallocated costs primarily driven by facilities and equipment related expenses.

Selling, General and Administrative Expenses

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.

Selling, general and administrative expenses increased $13.1 million in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.

The increase was primarily driven by the following:

• an increase of $6.3 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.

• an increase of $3.0 million in other general and administrative costs primarily related to $0.7 million in subscriptions, $1.1 million in travel and conferences and $0.6 million in other taxes;

• an increase of $2.0 million related to professional services, including legal and consulting services;

• an increase of $1.7 million in sales and marketing costs to support the commercial sales of VYJUVEK.

Interest and Other Income, Net

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.

Interest and other income, net for the six months ended June 30, 2026 and 2025 was $15.4 million and $14.7 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.

Income Tax Expense

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.

Income tax expense was $16.8 million and $16.3 million for the six months ended June 30, 2026 and June 30, 2025, respectively, which relates to state, federal and foreign income taxes.

Liquidity and Capital Resources

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.

As of June 30, 2026, our cash, cash equivalents and short-term investments balance was approximately $845.6 million, and we had a retained earnings balance of $134.9 million.

We believe that our cash, cash equivalents and short-term investments as of June 30, 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.

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Sources and Uses of Cash

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,

The following table summarizes our sources and uses of cash for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

(in thousands)

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(225,167) (65,294)

Net cash (used in) financing activities

(10,459) (12,466)

Net cash provided by (used in) financing activities 4,594 (10,670)

Effect of exchange rate changes on cash and cash equivalents (3,162) 1,230

Net increase (decrease) in cash

$ 5,009 $ (36,095)

Net (decrease) increase in cash $ (68,564) $ 8,964

Operating Activities

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.

Net cash provided by operating activities for the six months ended June 30, 2026 and 2025 was $155.2 million and $83.7 million, respectively.

Increase in operating cash flows was driven by a $36.6 million increase in net income primarily due to increased revenue, partially offset by increased operating expenses and 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.

Investing Activities

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.

Net cash used in investing activities for the six months ended June 30, 2026 and 2025 was $225.2 million and $65.3 million, respectively.

The increase in cash used in investing activities was driven by increased purchases of investments of $166.4 million, partially offset by increased maturities of investments of $9.5 million.

Financing Activities

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.

Net cash provided by financing activities for the six months ended June 30, 2026 was $4.6 million as compared to net cash used in financing activities of $10.7 million for the six months ended June 30, 2025.

The increase in cash provided by financing activities was primarily driven by a $18.4 million increase in proceeds from the exercise of stock options, offset by a $5.0 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