Krystal Biotech, Inc. (NASDAQ: KRYS) is a pioneering commercial-stage biotechnology company dedicated to transforming the lives of patients by developing and commercializing genetic medicines. The company’s innovative approach to gene therapy has positioned it at the forefront of the industry, with a focus on addressing rare and devastating diseases.
Business Overview and History
Krystal Biotech was founded in 2016 with a mission to leverage its proprietary gene therapy platform to develop life-changing treatments for patients. The company’s technological breakthrough lies in its use of engineered herpes simplex virus-1 (HSV-1) as a vector to efficiently deliver therapeutic transgenes to target cells. This novel platform allows Krystal Biotech to create vectors that can effectively transduce a wide range of cell types, opening up the potential for treating a diverse array of genetic disorders.
In the years following its founding, Krystal Biotech focused on advancing its preclinical programs and building out its internal manufacturing capabilities. A significant milestone was reached in 2021 with the opening of ANCORIS, the company’s first commercial-scale current Good Manufacturing Practice (cGMP) facility. This investment in manufacturing infrastructure demonstrated Krystal’s commitment to controlling its production processes and ensuring the highest quality standards for its gene therapies.
The company’s first commercialized product, VYJUVEK (beremagene geperpavec-svdt), was approved by the FDA in May 2023 for the treatment of dystrophic epidermolysis bullosa (DEB), a rare and severe monogenic disease that affects the skin and mucosal tissues. VYJUVEK’s approval marked a significant milestone, as it became the first-ever redosable gene therapy approved for a genetic disorder. Following the successful launch of VYJUVEK in the United States, Krystal Biotech is now preparing for its global expansion, with regulatory submissions and approvals underway in Europe and Japan.
The commercial launch of VYJUVEK in the second quarter of 2023 presented some initial challenges, particularly in navigating the complexities of reimbursement and patient access. However, Krystal Biotech demonstrated agility and commitment by rapidly building out its sales, marketing, and patient services infrastructure to support the launch effectively. This strategic focus on commercialization capabilities has contributed to the product’s success, with cumulative net product revenue exceeding $250 million by the third quarter of 2024.
To further support both commercial production and clinical development, Krystal Biotech opened a second commercial-scale cGMP facility, ASTRA, in 2023. This expansion of manufacturing capabilities underscores the company’s commitment to meeting growing demand for its therapies and supporting its pipeline of genetic medicine candidates.
Financial Performance and Ratios
Financials
Krystal Biotech’s financial performance has been impressive since the launch of VYJUVEK. For the third quarter of 2024, the company reported net product revenue of $83.8 million, bringing the total net revenue since launch in August 2023 to over $250 million. The company’s gross margin for the quarter stood at an exceptional 92%, demonstrating the efficiency and scalability of its manufacturing processes.
For the most recent fiscal year (2023), Krystal Biotech reported revenue of $50.70 million and a net income of $10.93 million. The operating cash flow (OCF) was -$88.80 million, and free cash flow (FCF) was -$100.60 million. However, the company’s financial performance improved significantly in the most recent quarter (Q3 2024), with revenue reaching $83.84 million, net income of $27.18 million, OCF of $58.86 million, and FCF of $57.81 million. The year-over-year revenue growth for Q3 2024 was an impressive 880%, driven by the successful commercial launch of VYJUVEK.
Liquidity
As of September 30, 2024, Krystal Biotech reported a strong balance sheet, with $694.2 million in total cash, cash equivalents, and investments. The company’s current ratio, a measure of liquidity, stood at a robust 7.97, indicating its ability to meet short-term obligations. Additionally, the company’s debt-to-equity ratio of 0.0015 suggests a conservative and well-capitalized financial structure, providing ample resources to fund its ongoing research and development efforts. The quick ratio of 7.76 further underscores the company’s strong liquidity position.
Pipeline and Growth Opportunities
While the successful launch of VYJUVEK has been a significant driver of Krystal Biotech’s growth, the company’s pipeline of genetic medicine candidates promises continued momentum. The company’s robust pipeline includes programs targeting a diverse range of rare and devastating diseases, such as alpha-1 antitrypsin deficiency (AATD), cystic fibrosis (CF), and various oncological indications.
In the AATD program, Krystal Biotech is evaluating its lead candidate, KB408, in a Phase 1 clinical trial. The company recently reported that it has amended the trial protocol to include mandatory bronchoscopies in Cohort 2, which will allow for a more comprehensive evaluation of the therapy’s impact on alpha-1 antitrypsin expression and key pharmacodynamic biomarkers. The company expects to provide an interim data update on the AATD program before the end of 2024.
Additionally, Krystal Biotech is advancing its oncology candidate, KB707, which is designed to deliver genes encoding interleukin-2 (IL-2) and interleukin-12 (IL-12) to the tumor microenvironment, promoting systemic immune-mediated tumor clearance. The company has initiated Phase 1 studies for both intratumoral and inhaled formulations of KB707, and plans to share interim data updates on the program by the end of the year.
Beyond its rare disease and oncology programs, Krystal Biotech is also leveraging its gene therapy platform in the aesthetics space through its wholly-owned subsidiary, Jeune Aesthetics, Inc. The company recently reported positive interim results from its Phase 1 study of KB301, a topical gel formulation designed to address signs of aging and damaged skin by delivering the COL3A1 transgene. Based on these encouraging findings, Krystal Biotech plans to initiate a Phase 2 study of KB301 in 2025.
Competitive Landscape and Risks
Krystal Biotech operates in a highly competitive landscape, as numerous companies are also pursuing gene therapy solutions for rare and genetic diseases. The company faces competition from both established pharmaceutical giants and emerging biotechnology firms, all of which are vying for a share of the rapidly growing gene therapy market.
One of the key risks facing Krystal Biotech is the inherent complexity and regulatory challenges associated with the development and commercialization of gene therapy products. The company must navigate a stringent regulatory environment, with the potential for delays or denials in the approval process for its pipeline candidates. Additionally, the manufacturing of gene therapy products requires specialized expertise and infrastructure, which could pose scalability challenges as the company seeks to meet growing demand for its therapies.
Furthermore, the commercial success of VYJUVEK and the company’s other product candidates is dependent on their ability to gain widespread adoption and reimbursement from healthcare providers and payors. Any failure to secure favorable coverage and pricing decisions could significantly impact Krystal Biotech’s revenue and profitability.
Geographic Markets and Expansion
Currently, Krystal Biotech focuses its commercial efforts on the United States. However, the company is actively pursuing global expansion opportunities. A Marketing Authorization Application (MAA) has been submitted to the European Medicines Agency (EMA) for VYJUVEK (referred to as B-VEC outside the U.S.) for the treatment of DEB. The MAA has been validated and is currently under review by the Committee for Medicinal Products for Human Use (CHMP). Krystal expects a CHMP opinion on the MAA in the fourth quarter of 2024 and anticipates launching in Germany in the first half of 2025.
In addition to the European market, Krystal Biotech has filed a Japan New Drug Application (JNDA) with Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) for B-VEC. The company expects to launch B-VEC in Japan in 2025, further expanding its global presence.
Guidance and Future Outlook
Krystal Biotech has set an ambitious target of achieving 60% penetration of the identified patient pool for VYJUVEK, which equates to roughly 720 reimbursement approvals, within two years of the product’s launch. The company reports that it remains on track to achieve this goal based on its progress to date, ongoing sales and marketing efforts, and the sustained demand observed in the field.
For the full year ending December 31, 2024, Krystal Biotech has reduced and narrowed the range of its non-GAAP R&D and SG&A expense guidance, which is now expected to be between $115 million and $125 million. This guidance excludes the non-cash impact of stock-based compensation.
While the company has not provided specific revenue guidance for 2025, citing the uncertainties surrounding the upcoming European and Japanese launches, management has indicated that they will have a better understanding of the U.S. market by the end of the year. At that time, they will consider providing U.S. revenue guidance for 2025.
Conclusion
Krystal Biotech’s innovative approach to gene therapy and its successful launch of VYJUVEK have positioned the company as a leader in the rare disease space. With a robust pipeline of genetic medicine candidates, a strong financial position, and a commitment to addressing unmet medical needs, Krystal Biotech is poised to continue its transformative impact on the lives of patients and their families. As the company navigates the competitive landscape and regulatory hurdles, its ability to execute on its strategic vision will be crucial to its long-term success. The company’s strong financial performance, particularly in the most recent quarter, coupled with its ambitious expansion plans and pipeline development, suggest a promising future for Krystal Biotech in the rapidly evolving field of gene therapy.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.