雅虎香港財經 Krystal Biotech, Inc. (NASDAQ:KRYS) Q1 2024 Earnings Call Transcript
Krystal Biotech, Inc. (NASDAQ:KRYS) Q1 2024 Earnings Call Transcript May 6, 2024
Krystal Biotech, Inc. misses on earnings expectations. Reported EPS is $0.03182 EPS, expectations were $0.2. Krystal Biotech, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by and welcome to Krystal Biotech's First Quarter 2024 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speakers' presentations, there will be a question-and-answer session. During the question-and-answer session, there will be a limit of two questions per participants. As a reminder, today's conference is being recorded. I would now like to hand the conference over to your host, Stéphane Paquette, Vice President of Corporate Development. Please begin.
Stéphane Paquette : Good morning and thank you all for joining today's call. Earlier today, we released our financial results for the first quarter of 2024. The press release is available on our website at www.krystalbio.com. We also filed our earnings 8-K and 10-Q with the SEC earlier today. Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer; Suma Krishnan, President of Research and Development; Jennifer McDonough, Senior Vice President of Patient Access, Analytics and Operations; Christine Wilson, Senior Vice President and Head of U.S. Sales and Marketing, and Kate Romano, Chief Accounting Officer. This conference call will, and our responses to questions may, contain forward-looking statements.
You are cautioned that not to rely on these forward-looking statements, which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties, then they cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties, and other factors can be found in our SEC filings. With that, I will turn the call over to Krish.
Krish Krishnan : Thank you, Stefan, and thank you all for joining Krystal's conference call. I'm pleased to share that the momentum in 2023 continues with a strong start to 2024, driven by excellent execution across all parts of our business, commercial, clinical, and manufacturing. VYJUVEK is reaching more and more patients by the day and is rapidly changing the treatment paradigm for patients suffering from this debilitating disease, Dystrophic Epidermolysis Bullosa or DEB. Increasingly, DEB patients are able to benefit from the durable wound healing afforded by VYJUVEK through fundamental genetic correction and also the convenience of being administered at home as a topical [chap] (ph). As real-world experiences with VYJUVEK grows, it has been immensely rewarding to hear and see the improvements that patients have made while on therapy.
As you will hear this morning, our US Commercial launch continues to progress very well, driven by robust demand, rapid growth and reimbursement approvals, and high patient compliance. We're also moving quickly towards launching VYJUVEK outside of the US. We recently successfully completed the efficacy portion of our open-label extension study in Japan, putting us on track to file with the Japanese regulators before year-end. This will be our second ex-US filing after submitting to the EMA last year. Global infrastructure buildout is underway in anticipation of commercial launches in both Japan and Europe next year. At the same time, we are building momentum across our clinical pipeline, with accelerating enrollment and new trial starts, setting us up for a wave of data readouts starting later this year.
With the recent initiation of KYANITE-1, our study evaluating inhaled [KB707] (ph) for treatment of solid tumors of the lung, we now have five active clinical trials and are poised to add a sixth for Ophthalmic B-VEC in the second half of this year. We expect that these studies, which span multiple tissues and target both rare and common diseases, will showcase the breadth and power of our proprietary HSV-based gene delivery platform. We also continue to build out our manufacturing infrastructure in support of global VYJUVEK commercialization and pipeline expansion, including scale-up of our current approved manufacturing process, ongoing process improvements, and initiation of a tech transfer of our current production process to Astra later this year to increase VYJUVEK yields and margins.
Finally, I want to highlight that strong execution in our launch yielded another profitable quarter for Krystal, even while accruing for previously settled litigation payments. And excluding litigation payment accruals, EPS this quarter would have been $0.47 per share, up sequentially from $0.31 per share in the last quarter of 2023. With a strong balance sheet, growing revenues, and two commercial-scale GMP facilities, we have the resources we need to execute on our long-term growth plans and to continue building shareholder value through VYJUVEK and our clinical pipeline. Before jumping into our VYJUVEK launch update, it's my pleasure to introduce Christine Wilson and Jennifer McDonough, two senior U.S. Commercial leaders at Krystal, who are joining me today on the call.
Christine recently joined Krystal as Senior Vice President and Head of US Sales and Marketing. She brings over 20 years of experience in specialty and rare disease launches and is an expert in patient finding, having previously launched multiple rare disease products with a community focus, including [GATX] (ph) an ultra-rare condition of short bowel syndrome, and more recently [spill sparry] (ph) for IGA and nephropathy. Jennifer McDonough is Senior Vice President of Patient Access, Patient Services, Analytics, and Ops at Krystal, and has been instrumental in achieving the broad access and compliance we have today for VYJUVEK. Jennifer has over 25 years experience in biotech and specialty pharmacy with a focus on rare diseases. We are fortunate to have them both on the team.
Now turning to our results, Net VYJUVEK revenues for the quarter came in at $45.3 million. Looking back over our first three quarters since launch, total Net VYJUVEK revenues now exceed $95 million, keeping us on pace with the top tier of recent rare disease launches. We're especially pleased to be reporting revenue growth Q-over-Q in spite of the one-time headwinds that we faced to start 2024 due to the permanent J-code switch. While the permanent J-code is a huge tailwind for reimbursement, the switch negatively impacted revenues one time in the first quarter. In order to ensure continuity of therapy, we bridged patients with free vials. In total, we estimate that approximately 400 free vials were dispensed in one queue, as a result of one-time disruptions.
That said, the J-code issue requiring bridging patients with free drugs is resolved and the fundamentals of the launch look very good for the remainder of 2024. We are confident in our ability to meet, if not exceed, 2024 net revenue projections. Christine and Jennifer will elaborate more in their sections. Gross margins were 95% for the quarter, up 2 percentage points over last quarter. We continue to expect margins to be above 90% in the coming quarters, gradually improving to over 95% in a couple of years. gross-to-net adjustments in the first quarter were 14% in-line with the previous quarter. Our long-term guidance on gross-to-net is unchanged and we expect it will settle into the high-teens, reflecting a roughly even split of DEB patients between commercial and government plans.
Please note that the net VYJUVEK revenues reported today also include an accrual for patients on contracted commercial plans who are projected to potentially hit the cap of $900,000 gross per patient per calendar year in 2024. Overall, I'm really pleased with the growth in the underlying drivers of our commercial launch. And we'll now hand the call over to Jennifer to share additional details on the launch, including recent successes in securing patient access to VYJUVEK. Jennifer?
Jennifer McDonough : Thank you, Krish. Moving to Slide 5, it has been exceptionally rewarding to lead patient access and Krystal Connect team in support of this transformational product. With hundreds of US patients now benefiting from access to VYJUVEK, we really are changing the treatment paradigm for this terrible disease. Commercial and Medicaid access continues to improve for VYJUVEK. We now have received positive policies or decisions for roughly 96% of all covered lives. This is up from over 93% in our last report and driven mostly by an additional 7 state Medicaid program, including Texas now providing coverage for VYJUVEK, following the issuance of the Permanent J-Code earlier this year. As we entered the first quarter, we were prepared for the challenges of January insurance verification season and the VYJUVEK Permanent J-code reauthorization process.
So we are very proud of the team's success in supporting continuing coverage for existing patients. At the same time, new patient conversions continue to progress well, and as of April, we have secured over 330 patient reimbursement approvals. We did see a one-time impact to our overall reimbursement approvals in Q1 due to a cybersecurity incident affecting our specialty pharmacy provider, but this has now been resolved. This incident is not unique to us and affected many of our other colleagues in the pharmaceutical industry. With strong payer access, the permanent J code assigned, and ongoing operational improvements, the team is laser focused on patient experience and optimizing time to first VYJUVEK application. With that, conversion times continue to shorten, albeit at a slower pace than we previously expected.
As patients are increasingly identified in the community setting where physicians are a bit less familiar with the Dystrophic EB and the reimbursement process for rare disease medicines. We are finding that additional support is needed to navigate these patients and their physicians to access. This is of course exactly what Krystal Connect, patient services team is built to do, and as we work through each patient case, we are seeing great results of ultimately authorizations for VYJUVEK therapy. We continue to implement additional education and tools to support the process and are still on a trajectory for conversion times to compress down to under a month later this year. With most VYJUVEK reimbursement approvals covering an initial treatment period of six months or more, we have still not encountered a large number of reauthorizations, but same as last quarter, all reauthorizations to-date have been either approved or in process.
As we move to Slide 6, the split between RDEB and DDEB patients at the reimbursement level is roughly in-line with the start form split we reported previously and consistent with the steady progression through to conversion. We are also very happy to report that we are seeing reimbursement approvals across all ages as we continue to communicate to patients, physicians, and payers that all wounds matter and that it is never too late to change the course of this disease. At the same time, it is also encouraging to see strong uptake in the pediatric segment, [we’re] (ph) establishing corrective therapy early has the potential to change the trajectory of these patient lives. Moving to Slide 7. Moving to the patient experience and compliance, we continue to report strong patient preference for at-home administration with 97% of the weekly treatments occurring in the patient's home.
And even with the increase in both the patient base and average length of therapy, we are pleased to report that compliance to weekly application remains above 90%, particularly when compared against many other chronic therapies with compliance rates often around 50%, which we believe is a reflection of the clinical benefit VYJUVEK is bringing to patients while on drug. Although, our work is just beginning, I am proud of the progress our team has made to-date, rapidly growing the number of patients accessing VYJUVEK and once started ensuring they are able to treat their wounds conveniently at home. I will now hand it off to Christine to talk about what comes next for our US VYJUVEK launch. Christine.
Christine Wilson : Thank you Jen. I'm incredibly excited to have joined Krystal and to build on the great early momentum we are seeing in the VYJUVEK launch. I know firsthand the challenges that come with launching a rare disease medicine in the community setting. Patients are often undiagnosed or lost to follow up. Genetic tests have never been run. Familiarity with innovative therapies and navigating reimbursement is low. And sadly, disillusionment with the healthcare system is all too common. Even if you would expect a patient suffering from a severe disease to proactively seek care, many of these patients have been disappointed by their treatment options in the past and have disengaged. However, none of these issues are unique and we have at our disposal an extensive toolkit to help find and activate rare disease patients wherever they are in the US.
We are also starting from a strong position with great early adoption of VYJUVEK, giving us plenty of success stories to amplify and disseminate. Today I would like to touch on some of the key strategic initiatives which we are pursuing to drive sustained long-term growth of VYJUVEK in the U.S. Our commercial efforts can be grouped together into three main pillars. The first is data analysis. Our analytics hub includes real-time claims alerts to identify potential patients. Through this data, we can quickly deploy our seasoned rare disease sales team while in parallel engaging HCPs through non-personal promotion. The combination of these two activities drives awareness and education of VYJUVEK to our targeted HCP audience and is already helping to grow our identified patient pool.
There are also future opportunities to expand the scope of our analytics work to include DEB-adjacent claims codes on our path to finding all DEB patients across the US. Importantly, these clean-based patient finding efforts are distinct from our sponsor genetic testing program, DecodeDEB, which has had great uptake and is helping clinicians identify previously undiagnosed patients. Education of HCPs is also a key strategic imperative and is being expanded through peer-to-peer programs by leading KOLs in EB as well as early VYJUVEK adopters. Peer-to-peer educational programs are the most impactful approach of bringing information to new EB treaters, and early adopters who do not always practice in major centers bring unique perspectives relevant for potential community prescribers.
With over 5,000 HCPs now having been reached by the sales team, The desire for ongoing education and dialogue amongst the HCP community for better patient outcomes continues to grow. The open label extension study demonstrating long-term at safety, efficacy, and durability results will be published the second half of this year. These top-line results were well received during a late breaker session at the AAD meeting in March. The results solidify VYJUVEK’s impact on the DEB patient population and further establishes VYJUVEK's safety profile. Patient engagement is our third top priority. In-person and digital programs are providing the patient community an opportunity to hear real-world VYJUVEK experiences from other patients and their caregivers.
This is a powerful approach to establishing understanding and confidence in the benefits of VYJUVEK to the patient community. Social media has become a powerful tool in reaching patients, particularly those who may not be engaged with a healthcare team. Targeted ads have been deployed on the most established social platforms and we are expanding to other social media channels in the second half. An example of one of our social media ads is shown here. This approach allows us to engage patients where they are at, raises awareness levels, and allows them to engage digitally to learn more and seek treatment. Altogether by amplifying initial patient and physician experiences with VYJUVEK, we expect to drive adoption, build on a prescriber base that is already in the hundreds, and deliver on our mission of reaching as many DEB patients as possible.
Before handing the call off to Suma for pipeline updates, I will also take the opportunity today to highlight a few trends that we are already seeing in the field that we expect will reinforce VYJUVEK’s leadership position in DEB and sustain our launch in the long term. First, patients are seeing the compounding benefits of corrective therapy of VYJUVEK, as they treat more wounds. Unlike palliative approaches, we are able to deliver the collagen 7A1 gene, directly and to patient wounds and enable durable wound closure. As patients treat and close more and more wounds, they are increasingly able to get control over their disease. The positive patient experiences are building excitement amongst patients and HCPs. In addition, thanks to the work of Jennifer's team, Home Administration is becoming further entrenched as a standard-of-care for patients with DEB.
Wound care in the home is an established routine for DEB patients and families. Home administration with VYJUVEK integrates into this routine, and we are seeing the overwhelming majority of patients choose it as part of their improved standard-of-care. Our specialty pharmacy provider and home dosing infrastructure is supporting compliance, ongoing patient progress monitoring, and integrating into a patient's lifestyle and treatment approach. Momentum continues to grow. Familiarity with VYJUVEK is rapidly increasing, and positive patient experiences are expanding utilization inclusive of the DDEB population. Altogether, we expect these trends to establish VYJUVEK as the standard of care for DEB in the years to come. Now I will hand it off to Suma to share pipeline highlights.
Suma Krishnan: Thank you, Christine. Our development team has made great progress to start 2024 as we work towards our ultimate goal for treating DEB comprehensively and globally, while simultaneously advancing a broader pipeline of redosable genetic medicines for many of the other rare and serious diseases that lack adequate treatment options. With respect to our B-VEC development, steady progress towards European and Japanese regulatory authorization has us on track for launches in both regions by 2025. In Europe, EMA's review of our marketing authorization application continues. In February, manufacturing facility inspections were completed, and we expect to receive GMP certification in the second half of this year. Based on recent discussions, we believe EMA, like the FDA, is also supportive of home dosing.
We continue to expect a decision on our marketing authorization application before the end of the year. In Japan, we have now successfully completed the efficacy portion of our open-label bridging study in Japanese patients enabling us to proceed with the Japanese new drug application, which we expect to file in the second half of the year. Having previously received orphan drug designation by Japan's Pharmaceuticals and Medical Device Agency, a designation which confers specific benefits for orphan drug development including priority review application, we remain on a trajectory for both a decision by Japanese authorities, as well as launch in 2025. With respect to our broader clinical pipeline, there were two major themes in the first quarter, expansion and acceleration, with an expanding pipeline and accelerating enrollment we are setting up for a number of exciting data readouts starting later this year.
Our oncology program, KB707 has been progressing rapidly to start 2024. Recall that KB707 is the modified HSV-1 vector designed to deliver genes and coding both IL-12 and IL-2 to the tumor microenvironment and promote systemic immune-mediated tumor clearance. We have two formulations of KB707 in development, a liquid formulation for intratumoral injection and an inhaled formulation from nebulization and lung delivery. Our Phase I study to evaluate intratumor KB707 monotherapy is moving ahead well. Since dosing our first patient in October of last year, we now have cleared the first two dose levels in our study and completed enrollment in the third. KB707 has so far been generally well tolerated across a diverse population that includes patients with sarcomas, colon, breast and cutaneous cancers.
No patient has experienced dose-limiting toxicities or drug-related Grade 3 or greater adverse events. Based on the current pace of enrollment, we expect to be able to report interim data before the end of this year. We also recently dosed the first patient in our inhaled KB707 Phase I study KYANITE-1, an open-label, multi-center dose escalation and expansion study evaluating [In-health] (ph) KB707 monotherapy in patients with advanced solid tumor malignancies affecting the lungs. This is another exciting milestone, as we look to extend the clinical utility of cytokine therapy and make a new class of medicines to treat a wide range of otherwise difficult to treat solid tumors. It is also gratifying to report that both intratumoral and inhaled formulations of KB707 have now received Fast Track designation by the FDA after inhaled KB707 was granted Fast Track earlier this year for treatment of patients with solid tumors with pulmonary metastasis that are relapsed or refractive to standard-of-care therapy.
Turning to our respiratory program. We are pleased to report a pickup in enrollment year as well. On KB407, our redoseable inhaled gene therapy for the treatment of cystic fibrosis, we have now completed dosing in Cohort 2 of the CORAL-1 study are on track to start dosing in the third and final Cohort later this quarter. Recall that this cohort is scheduled to include bronchoscopies that will allow for evaluation of airway epithelial cell transactions and expression of CFTR transcript and protein. Cohort 3 also includes minimum enrollment thresholds for patients that are not eligible for modulators, an important patient population for which no effective disease [modern fine] (ph) therapies exist. KB408, are redoseable inhaled therapy for alpha-1 antitrypsin deficiency, we dosed the first patient in our SERPENTINE-1 study in February of this year.
SERPENTINE-1 is a Phase I open-label single-dose escalation study in adult patients with AATD to allow assessment of safety, tolerability, alpha-1 antitrypsin levels, and key pharmacodynamic biomarkers. With strong support from the Alpha-1 research community, we are on track for an interim data readout before the end of 2024. Our development activities in ophthalmology are also ramping up, working towards our goal of treating DEB comprehensively, in February, we disclosed that we had reached alignment with the FDA on single-arm open-label study to enable approval of B-VEC eye drops for the treatment of lesions in the eye of DEB patients. We have since initiated clinical operations to enable the study start in the second half of the year. And finally, we look forward to reporting results from Cohort 3 and 4 of our KB301 Phase I study later this year.
Both cohorts are running concurrently to evaluate KB301 in two potential target indications. Improvement of the lateral canthal lines at rest and improvement of dynamic wrinkles of the decollete. Following readouts from Cohort 3 and 4, we expect to select a single indication for Phase II development. Our HSV-1 platform has the potential to yield a large number of highly differentiated redoseable gene therapies. We look forward to making continued progress in 2024 and sharing data updates on our clinical pipeline later this year. With this, I would like to turn the call to Kate.
Kate Romano: Thank you, Suma. We ended the first quarter with $359 million in cash on hand and $622.3 million in total cash and investments, an increase over year-end cash and investments of about $28.1 million. VYJUVEK net product revenue for the quarter was $45.3 million. As VYJUVEK was approved by the FDA in May of 2023, there was no comparative period revenue. Cost of goods sold was $2.4 million for the quarter or about 5% of net product revenue, making gross margin 95%. In the first quarter of 2023 costs associated with the manufacturing of VYJUVEK were expensed as research and development costs prior to approval, and therefore there are no comparative period costs in the first quarter of 2023. Research and development expenses for the quarter were $11 million, inclusive of stock-based compensation of $1.9 million compared to $12.3 million for the prior year's first quarter, inclusive of $2.5 million of stock-based compensation.
Lower research and development expenses in the first quarter of 2024 were due to decreased VYJUVEK manufacturing and overhead costs as following FDA approval, those costs are now recorded as part of our cost of inventory. This decrease was partially offset by additional clinical development costs and R&D related depreciation expenses. Selling, general and administrative expenses for the quarter were $26.1 million, inclusive of stock-based compensation of $7.4 million, compared to $24 million for the prior year's first quarter, inclusive of stock-based compensation of $7.9 million. Higher selling, general and administrative expenses in the first quarter of 2024 compared to the prior year's first quarter were primarily the result of increased selling expenses related to the launch of VYJUVEK, in particular an increase of about $1.5 million related to the additional patient access program related costs that were incurred in light of the J code transition that was previously discussed.
Other increases included higher professional services, payroll and other administrative costs, offset by lower marketing related expenses compared to the prior year's first quarter. This quarter, we also recorded litigation settlement expense of $12.5 million due to our anticipation of reaching the first milestone payment in the PeriphaGen settlement at $100 million in net product revenues. Our net income for the quarter was $932,000, which represented $0.03 per basic and diluted share. We would also like to reiterate our previously issued guidance of between $150 million to $175 million in combined non-GAAP, R&D and SG&A costs in 2024. As a reminder, this projection excludes an estimate for stock-based compensation. We continue to expect higher research and development costs relating to our several active pipeline projects and higher selling, general and administrative costs relating to the continued launch of VYJUVEK across the United States and our pre-commercial activities in Europe and Japan.
And now I will turn the call back over to Krish.
Krish Krishnan : Thanks, Kate. If there's one message that I hope you take away from today's call, it is our excitement for the path ahead at Krystal. Our US launch continues to progress very well with high compliance, broad access and a growing number of patient conversions, putting us on an excellent trajectory. Momentum is also building outside of the US, with the rapid completion of our Japan OLE and soon to be the second regulatory filing in a major ex-US market. We look forward to further expanding access to VYJUVEK here and abroad, all while progressing a deep clinical pipeline, addressing urgent unmet needs in rare and serious diseases. Thanks for listening. And I would like to now open the call for Q&A.
Operator: Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] And the first question today is coming from Alec Stranahan from Bank of America. Alec your line is live.
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