Thanks for joining this session with Krystal Biotech. My name is Alec Stranahan. I'm Vice President and Senior Biotech Analyst covering Krystal here at B of A, and I'm pleased to be joined by Krish Krishnan, Chairman and CEO of Krystal. Krish, thanks for being here.
Alec, thanks for having me.
Yeah. Great. Great. So, we'll just jump straight into the Q&A. I have a few here, but I also welcome those in the audience to ask questions throughout. And if you have a question, just raise your hand, and someone will be by with a mic. So Krish, maybe just jumping straight into it, on VYJUVEK. This is your drug that's been approved for almost a year, almost exactly at this point, for DEB. I guess, you know, at a high level, how is the launch going? And, you know, what are some of the major trends you'd highlight from 1Q?
I'm pleased to say the launch is going really well. The patient experience on drug has been great. The physician experience has been great. And, when we launched, we always thought, given that it's a chronic application, that the patient experience was vitally important to the launch and that they should be well-educated and well-informed before they get on drug. And, so we spent a lot of time paying attention to that. Our goal when we launched was looking at the label and the attributes of the drug was to hit 60% to 65% penetration in, like, two years. And I'm pleased to report that we so to date, we've been tracking pretty nicely against that trajectory. Access has ended up in a really good place.
We pretty much have 96% to 97% of the access, which is the payers reimbursing for the drug, whether it's on the government side or the commercial side. The remaining percentage is maybe a payer or so who does not have a patient on drug. Compliance has been extremely good. We're north of 90%, which is a remarkable number for a chronic application, compared to many drugs in the market. We hope that continues for a while. Our position has been that you should expect a high level of compliance for the first 15 months or so, after which a lot of the wounds potentially are healed and you may not need as much dose and shift to a maintenance dosage, which could be different, a lot different than the induction dose. To date, 91% compliance has been good.
We continue to get patients both from Centers of Excellence and the community. So the U.S. launch is really, in my mind, in a very stable, very good, moving forward kind of stage, as we march towards trying to capture as much of the 1,200 patients that we would like to. By the same token, Europe has been very good too. We're in the middle of an EMA review process. We're expecting to get approval before the end of the year and hopefully launch first half of next year in one of the EU4 countries. Japan's progressing well. So I would say globally, we feel good about where VYJUVEK is commercial in the U.S., and going through approval in the other countries.
Great. So a couple of hooks to jump off of there. Maybe just circling back on the compliance point, because I think this is maybe a point that was a little bit confusing for people on the 1Q call. But correct me if I'm wrong, but essentially, if a patient, so it's a weekly dosing. If a patient skips a week, that's labeled as a non-compliant event, right? Even if, you know, they skipped it because the drug's working and their wounds are closing for longer.
Yeah. I mean, simplest way to think about it, like, hypothetically, if a patient has been on drug for 10 weeks and missed a week, compliance, we would calculate compliance to be 90%. So that's a very simple way to think about. For now, since compliance is so high, it's easy to calculate compliance that way. At some point in the future, say starting next year, I think you're going to see some patients stopping treatment because the wounds are healed for a few weeks and getting back on. And then the calculation of compliance gets a little bit more complicated than simply dividing by how many weeks, how many vials. But for now, we're in this stage where, like you were saying, if you miss a week, out of 10 weeks, you're at 90% compliance.
So on that basis, it's actually an extraordinary level of compliance, given that life gets in the way of a lot of patients, whether you're on vacation, comorbidity, or stuck in a hospital for GI or blood transfusion, like any nurse not showing up for some reason. And we've been able to avoid most of that and be at a pretty high compliance level.
Yeah. Yeah. So 91% is actually really good. I guess in terms of pushes and pulls, there's that dynamic in terms of, you know, changing the dosing interval as patients, you know, respond to therapy. There's also a $900,000 cap built into the access piece too. I guess assuming a patient is dosed every week, which the majority of patients still are, what's sort of the most aggressive math to when this cap could be reached for patients on therapy?
Yeah. So a few things to clarify. The cap only applies to patients reimbursed through the commercial side. Does not apply to Medicaid or government-paid patients. Cap is calculated on a calendar year basis. Even though the cap is calculated, we calculate cap at a patient level, eventually, the cap applies at a plan level. So if a plan had X number of patients, half of them beat the cap and half of them did not beat the cap, it would be more like a blended average as opposed to saying, hey, five people beat the cap. So it's a bit more tricky than simply patient cap.
I think if a patient has to be on 38 vials in a calendar year to hit the cap, and so what we do at the beginning of the year is kind of figure out how many patients we have on commercial drug, how many do we expect in the next three to four months, because beyond mid-year, it's inconceivable that a new patient's going to beat the cap. So we make an estimate and then we accrue for it over the four quarters. Every quarter, we kind of dynamically adjust that based on what we see. So there's no vol, so there's no big spike up or down at the end of the year. We were hoping to kind of smooth out net revenues.
Right in that process.
Which might sort of naturally happen as patients, you know, have a 2-week dosing interval or something like that.
Right. Exactly.
Yeah. Okay. And on 1Q, I guess one of the dynamics we saw, you know, was that there was a J-code transition impact of maybe 400 vials, I think you said. Do you see this as sort of being an isolated event? And, you know, how could having the formal J-code now be a tailwind, actually, for the rest of the year?
Yeah. I agree on both counts that it's a one-time event. We did not want to disrupt patients from being on drug, as you saw from the high compliance. So we had to jump in quickly and do the right thing, which is to substitute free vials while our specialty pharmacy was figuring out and getting reimbursed for the revised J-code. I think it was the right thing to do, and I'm glad we did it. Going forward, the reason I say it's a tailwind is prior to the J-code, there are a bunch of states, a handful of states that will not reimburse a Medicaid patient without a formal, without a permanent J-code. And once we got that, most of those states are starting to reimburse.
And so, which is why, when we reported access in 1Q, the number was as high as 96%, irrespective of commercial or Medicaid. So, long term, look, it's definitely a huge tailwind. But we were a bit surprised, but I think we did the right thing in 1Q by having the ability to keep the patient on drug on a continuous basis.
Yeah. Great. And I think another dynamic that was mentioned on the 1Q call is reauthorization of patients on therapy. It sounds like, you know, of the patients that are up for reauthorization, there's been zero pushback to date from payers. You know, could you maybe walk us through this dynamic and, you know, how frequently does the reauthorization need to happen for patients?
Yeah. Happens every six months. What payers typically need is notes from the clinician or clinical notes or physician notes, attesting, hey, the drug is working. So the physician usually has a conversation with the patient to get their experiences on the drug. And like you were saying, to date, we've had; it's been going really well. Like, we've had no denials. However, I just want to point out, we just launched in August, so we've only had a small number of patients going through the reauthorization. We don't expect anything to change. What I'm merely pointing out. We haven't had that much experience to speak definitively about reauthorizations at this point.
Is there a read-through that if a patient were to be reauthorized once, that it would be smoother the next time? Or is it really like depending on their case at that point?
That is my expectation. Like, you got to if you step back, what we're finding is there are not that many patients per payer. So, even the best of you know, I'm not saying it's across everybody, but so it's not unlike other indications like hemophilia A or other larger indications, it's not a big hit to the payer, given the small concentration of patients within a payer. And so if the reauthorization goes well, our expectation is that that continues.
We'll see. Yeah. Right. That makes sense. You mentioned, earlier on, you've got the EU approval potentially coming in the second half. Japan could be in the cards too. I guess how are you thinking about launches in ex-US geographies? Is this something you'd try to do yourself, or, you know, are there some, maybe a handful of partners you'd be looking through to, you know, to help support it?
Our, we would like to self-launch in EU4, U.K., and Japan. We've always had that, because it's a rare disease. It's a huge unmet medical need and doesn't require a huge salesforce, marketing infrastructure to launch in a country like Germany or France. It's still difficult, but it, like other rare disease launches, can be done. So that's the path we're on for EU4, U.K., and Japan. We do enter into distributor-type relationships in, for example, Saudi Arabia, the Middle East, Eastern Europe, Israel, maybe someday Brazil, some of the other countries. Our expectation is not to partner with a big pharma.
Yeah.
Slowly but surely, either self-launch or use distributor agreements to get the drug to the patient.
Similar to.
With respect to B-VEC.
Yeah. Similar to the agreements that you have in the U.S. in terms of the at-home piece?
The EMA seems very aligned on giving us home dosing in Europe. We do not have an official word from the PMDA yet. I think it makes sense to have home dosing because A, it's chronic, patient convenience drives compliance. Like, there's so many benefits of home dosing for the patient, for the payer, for the sponsor. And so we're hoping that we were able to get the EMA on our side with respect to home dosing, and we're hoping to do that with some of the other countries.
Okay. Okay. I guess one more question on the VYJUVEK launch. A year in, right, the shape of the launch curve is still coming into form. I guess, is there a point where you'd feel comfortable to begin giving forward-looking revenue guidance? And how would you, what would you need to see to step through that?
You know, look, I don't as a company. We guided on cash OpEx at the beginning of the year. I we would like a little more experience. You saw Q1 was like a couple one-time events. Would not have been a great quarter to guide, right, because we did not expect them to happen. We're kind of surprised. Our thinking is to at least let 2024 go by before we think about guiding on revenue. Once you kind of hit steady state, we have a good idea of how much of the 1,200 we have penetrated. And then it's about finding new patients. And we can be more we can predict with a better accuracy of how the launch curve's going to stabilize. So that's how we're thinking about it.
Okay. Because you'll have the base of patients that are on the chronic therapy, and then you'll have 4 full quarters to, you know, track seasonality and things like that.
Yeah. So hopefully.
Okay. Okay. That makes sense. You know, maybe one question just on gross margins. You know, it's a it's a pretty good business for you guys. You know, where should we expect this maybe settling over the next few years?
I think it would settle around like, like we did in Q2, like 95%. The only point I'd make is, we may still be in the 90s%, or in that range, like a very high gross margin, especially as we launch into Europe and we kind of don't know where it's all going to end up. But for sure, given some of the work we're doing with respect to scaling up our manufacturing process, with respect to thinking about process improvements, over the next, like you say, year and a half too, we expect it to be in the mid-90s% with respect to gross margin.
Okay.
But could be going up or down a little bit in the interim.
Okay. That's very good. You know, for VYJUVEK, you've obviously, you're driving the, the DEB launch, but there could be a path forward either, you know, a separate label or a label expansion in, ophthalmic B-VEC, like the complications, for the eye from B-VEC patients. For those less familiar with this, could you maybe paint a picture of what percentage of, of DEB patients suffer from this and, you know, the data that we've seen, in, you know, timing around filing for that?
Yeah. About 50% of the RDEB, which is recessive DEB patients, have lesions in the eye. And while we were going through the approval of VYJUVEK, we had a physician apply for compassionate use of B-VEC in the eye for one of his patients. And the patient literally went from hand movement, which is a proxy for blindness, to a vision of like 20/20 or 20/25 over a period, like in both eyes. Like, we treated one eye, and then we went to the next eye. It was featured in the New England Journal of Medicine. The kid's been on TV, very happy because the eye is like, you're not, you're blind, and then all of a sudden, you're able to see and play games. And it was a remarkable improvement.
So we approached the agency earlier this year saying, look, what kind of clinical trial do we have to run to get the drug approved for RDEB patients with lesions in the eye? So we aligned on an open-label study, which we plan to start in the second half of this year, and hopefully file a BLA next year. The BLA would be a much it'll be a concise BLA compared to because it's predominantly a clinical section, and some of the other platform CMC areas have been previously validated by the agency. And then once we get that approved in the U.S., we'll think about Europe and some of the other countries. So presently, we are on track for a 2026 launch for B-VEC in the eye, and it affects roughly about half the RDEB population.
So if you assume prevalence in the U.S. is 3,000, we're talking about 700 patients in the U.S., and I'm sure a similar percentage globally.
Yeah. And you'd be able to leverage the same salesforce, right? So it's pretty much in play.
Yeah. I mean, it would be a new drug. I have a new NDC number at a separate label. But in terms of the patients, like, it's easy to identify those patients because we would hopefully have most of them in our network by then.
Right. Right. Okay. I want to turn to the pipeline, because you're, you're obviously not just a single drug company. And I think the VYJUVEK approval for a lot of people validated the, the HSV platform. So maybe we can talk a little bit, maybe starting in, with 407. You know, any, any details around the data disclosure plans here, I guess, you know, how much follow-up would you need to, to have from the early cohorts before, presenting the data?
Yeah. So for 407, which is our CF program, we announced we've completed two cohorts and we're in the middle of dosing our third. We are working outside the Therapeutic Development Network of the CF Foundation. So enrollment has been a bit slower, and it's tough to guide on when we would get done. But that said, end of the year is not off the table with respect to announcing preliminary data, which involves it's be it was basically a dose-ascending study, three patients in cohort one, three patients in cohort two, and six in cohort three, some of whom, could be without modulating modulator treatment, like a null patient. We are doing bronchoscopy on all the patients in the third cohort.
And so the big readouts would be safety to be the most important, followed by molecular data with respect to transduction translation of protein, DNA levels and protein levels. And because we encode for two full copies of the CFTR gene, we believe there should be a good correlation between expression and functionality. There's still not a sizable number to be definitive about FEV1. We're talking 12 patients. But what I will highlight is the redosability of our platform. And so we don't need to have perfect data on the first dose. We need good data on the first, and we can because of redosing, we can slowly but surely chip away at a lung that's otherwise super inflamed with mucus plugs. And so hopefully, dosing a few times, we can get to the desired outcome as opposed to having to have the desired outcome on dose one.
So we're super excited. Recruitment has been slow. It's been pretty aggravating for us. But we're not that far off from being able to say something about the program.
Okay. Okay. And, you know, this is a new route of delivery by a nebulizer, so a little bit different than VYJUVEK. You know, maybe you could just talk through that route of administration, what you've done to optimize the vector or the delivery, and, you know, what you've seen from your preclinical models in terms of delivery of the CFTR gene.
In our preclinical, and including in the simian study we did, we saw good distribution across the different lobes of the lung. We did not see any AEs at all due to repeat administration, but just realized the simian lung is not a mucus-based lung. So, if you put that aside, but we did see good distribution. I mean, we saw that not just for CF but also for the Alpha-1 antitrypsin program. So preclinical and how we dose is essentially a nebulizer, and it's a quick nebulization. It's about a 15-minute nebulization, pretty straightforward way of administration. And we haven't had any pushback on the administration levels, to date. And the same thing works for the same approach for Alpha-1 antitrypsin and also for the oncology program where we recently dosed our first patient, encoded for cytokines in the lung.
Yeah. Okay. Yeah, actually, that was going to be my next question. You know, could you maybe talk through the similarities and differences between the inhaled 407 for CF and the inhaled 707 for, for lung cancer? Any read-throughs to be made here from either study?
No, they're both pretty similar. I will say the CF lung is probably the toughest one to crack compared to an A1AT lung or if we're dosing in the lung for lung cancer, in terms of, like, occlusion and inflammation and mucus-based and all that. But outside of that, it's essentially the vector being formulated into a nebulizer and inhaled. So there's, I'm guessing, look, I will say this. If we saw great distribution in CF, for sure, it's de-risked in A1AT and in the oncology program with respect to delivery and safety and all that. And vice versa to some extent, although CF lung is a bit more compromised than the other two patient populations.
Okay. Okay. And maybe one question, you know, on the AATD program 408. I think we will be getting a data update from this program in the second half. That study seems to be progressing pretty quickly.
Yeah.
From the sound of it. So, you know, any framing around, you know, what we could expect from the interim update, you know, how accrual's been going, et cetera?
Yeah. A1AT, yeah, we're, look, again, it's a dose-ascending, dose-finding escalation study, 3 patients in cohort 1, 3 in 2, and 6 in cohort 3. In terms of data readout outside of safety, pretty much a PKPD-type readout, local A1AT levels, inhibition of, you know, any kind of downstream proteolytic activity or immune levels, binding of that neutrophil elastase, are we able to mitigate its effect, in A1AT? So those are the types of PKPD data we would be looking at. So not as much A1AT in systemic, but local A1AT inhibition of, the enzyme, and any kind of downstream proteolytic activity is what we're looking at.
Okay. Okay. And just going through the, the list of updates. So on aesthetics, I think we should be getting data mid.
Yeah, mid this year.
Right?
Yeah. So we're working on two indications. One, lateral canthal lines, and the other is décolleté. What we're trying to achieve is to find one indication that has a clean path to approval and go into a larger phase II study on that indication. We expect to read out mid this year. Like, the study is progressing pretty well. No SAEs, obviously, to date. It's a matter of figuring out how much improvement did we get at the current dose level.
Okay. When you say, you know, clear regulatory path, is that sort of precedent on a primary endpoint from a previous approval, or, how are you sort of thinking about that path forward?
Yeah. Approval in aesthetics is based on scales. And the question is, how much improvement, so a scale, let's say, on wrinkles goes from severe to normal, severe, moderate, mild, normal. And what they like to see is the patient-reported outcome on a scale post-dosing and an independent assessment by the physician on the same scale post-dosing. And depending on the severity, the agency likes to see a high percentage of 1-point improvement, like 70% of one of the patients, if they have a 1-point improvement, or maybe 25% to 30% of the patients on a 2-point improvement. So those are kind of like the guiding posts for figuring out, is this drug could this drug be potentially approved?
What we're looking for is, we finish this study, we figure out what percentage of improvement do we get will help us design, based on effect size, how big a phase II we have to conduct, and do we have the appropriate scales in place to make the evaluation post-dosing.
Okay. Okay. That's pretty clear. I guess, you know, you've talked about maybe spinning out. Well, Jeune's a subsidiary, but you've talked about maybe partnering for aesthetics versus keeping sort of your internal pipeline for your own development. You know, how are you thinking about Jeune and then more broadly, how are you thinking about the highest ROI and investments in your own pipeline?
Yeah. We've always wanted to spin out Jeune as a separate entity. I think the right time to do it is either during phase II or by the end of phase II, before embarking on a much larger, phase III study. I think we have been planning to do just that. I think being part of Krystal, I do believe Jeune does not get the voice because everyone's talking about rare disease launches. The last one minute of a question, like we saw now, was on Jeune. I think having a separate management team with expertise in aesthetics, it's a different investor base. It's a different analyst type. It's a different type of KOLs we're dealing with. Everything's different, even though the technology is very similar to that of a rare disease.
We still encode for a gene in the back of an HSV backbone. So we definitely have ambitions of spinning it out some hopefully sometime next year.
Okay. And just the capital allocation piece for your internal outside of Jeune?
Look, we'd like to be fully integrated and take a rare disease all the way through and launch an EU4 and EU5 in Japan. However, on larger indications such as immuno-oncology, maybe alpha-1 antitrypsin, we would like to seek a partner. And we would like to seek a partner after we have good evidence of a phase I clinical readout. So that's something we'll be thinking about. But in terms of, like, TGM1 or Netherton or CF for the null patient, we definitely want to hold on to them and be fully integrated in those indications.
Okay. Okay. Very good. Well, unfortunately, I think with that, we're out of time, so we'll have to leave it there. But, Krish, really wanted to thank you for the engaging discussion, for participating in the conference.
Thanks, Alec.
Okay. Thanks a lot.