Krystal Biotech, Inc. Common Stock 12th Annual Cantor Fitzgerald Global Healthcare Conference

Yeah. So today, Krystal's a commercial genetic medicines company that's fully integrated. Integrated as in everything from research and development to manufacturing to packaging. We launched VYJUVEK in the U.S. three years ago. The launch went, has gone really well in the U.S., and now we're in the somewhat early days of launching in Europe and Japan. And our expectation is that the launch, given the efficacy of the drug and the profile of the drug, will do just as well in ROW as it did in the U.S. But more importantly, there's a bunch of pipeline readouts upcoming over the next few months to a year, and that could transform Krystal from being a single product commercial story to an actual genetic medicines company with the potential to have multiple products launched over the next few years. So that's pretty exciting. And the fundamental technology is a platform technology using the same herpes simplex virus vector for all the different pipeline compounds.

So that's quick, but in addition, Krystal has been EPS positive, meaning earnings positive, for the last three years, which is somewhat of a different thing in this industry. And the reason I mention that is that as we develop our pipeline, a lot of the pipeline will get developed without the need for the company to be in any financing mode. So we're not expecting to be in financing, which is kind of great that you can realize your pipeline potential without diluting the shareholders. So that's a quick rundown on the company. We're based in Pittsburgh, about 340, 350 employees worldwide, and really in a very nice place financially and operationally to transform the company to the next stage.

Yeah, there are two drivers of VYJUVEK launch in the U.S. at the present moment. One is just pure demand, and pure demand is reflected in the number of new reimbursement approvals we announce every quarter, and that's been trending at about 40 to 45, roughly, over the last few quarters. That's pure demand. A huge percentage of reimbursement approvals turn into patients. The patients are moderate to mild as we go further into the launch, but that's a pure demand driver. On the utilization side, we announced 730 reimbursement approvals to date, so there's a lot of patients who've been on the drug for 3 years, 2 years, 1 year, and a lot of the wounds are starting to heal, so they start taking pauses. But they get back on drug once a new wound comes and opens up. So those are the two dynamics.

One is a pure demand, and the other is utilization. The utilization component, you're right, is somewhat getting close to steady state with about 50%-60% utilization, but the demand continues to grow. So if you look out, our expectation is that the revenue line will continue to increase, but not at the rate it did when we first launched in the U.S. At a decreasing rate, but we expect the revenue line to continue to go up. Such is not the case in Europe and Japan, where we are in the early stages of launch and expect them to be good.

Yeah. We believe Europe, in terms of number of patients, could be twice what we got in the U.S., like Europe as a whole. Pricings may be not as great as we got in the U.S., given that that's what happens in Europe. But if Japan pricing is any indicator, we are very optimistic about, at least presently, about what pricing we can end up in Europe. So if you combine the two, Europe should be just as good as the market of the U.S., if not better. Japan, as a whole, for rare diseases, has always been a good market for rare diseases, and so we expect that to go. So overall, we feel really good about the VYJUVEK franchise, not just what happened in the past, but about what's going to happen over the next 12 to 18 months.

Yeah, one of the fortunate things for Krystal is we are not yet fully launched in many of the countries, right? We just launched in Germany, and we have launched in France, and in terms of negotiations, while we do hope and believe that MFN does not really apply to rare diseases of a certain size and prevalence, we are very cognizant going into the negotiations that we could potentially impact the U.S. prices. So we have an opportunity to make that part of the discussion. We are less concerned in some of the early discussions. So for example, we are upcoming in Germany this quarter, like pretty soon, followed by Spain, followed by Italy, and I think France happens summer of next year. Then, of course, NICE, which is U.K., which traditionally has been much more difficult for companies to navigate.

But that is out in the future, and we have plenty of time, A, to figure out to do it right in the first few countries, see how MFN evolves in the U.S., and then make a decision in the U.K. at some point in the future.

Yeah. Germany was a bit of an aberration. The fundamental demand continued to grow really nicely, but we have to accrue. There is a concept in accounting called accrual, where the company kind of does its best guess at what pricing should be ahead of the actual outcome of the pricing negotiations. While we try to be as close to the actual number as possible, companies tend to be more conservative in their estimate, as opposed to aggressive in their estimate. That is generally what companies do. That pressure that was reflected in Europe being flat in Q2, we are hoping will get alleviated pretty quickly once we have established pricing in Germany. France continues to accrue until the middle of next year. In all the other countries, Spain, Italy, Japan, we launch after we get a pricing, so there is no accrual concept.

A little bit in Spain, but since we are going to get pricing in Spain pretty quickly, we are hoping that alleviates. Yes, Q2 was the first full quarter where accrual had an impact on how demand looked. If you really think about demand and pricing, Europe is actually doing pretty well right now, and we do not have the issue yet in Japan or anything. We are hoping that by the summer of next year, any accrual that tends to dampen the outlook will get alleviated.