Krystal Biotech, Inc. (KRYS) Q2 2025 Earnings Call Transcript

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Overview

The earnings call presents a positive outlook with a 95% revenue increase YoY and strong long-term growth prospects. Despite some delays in CF data and patient onboarding, management remains confident in achieving market share goals and maintaining financial stability. The Q&A session reveals productive EU engagements and manageable risks, supporting a positive sentiment. However, some uncertainty remains due to delays and lack of specific guidance, tempering the overall positivity.

Key Financial Performance

Net VYJUVEK Revenue (Q2 2025) $96 million, marking a 9% growth over Q1 2025. The return to growth was attributed to patients resuming treatment after pausing and the impact of ongoing sales team expansion.

Total Net VYJUVEK Revenue Since Launch Over $525 million. Growth driven by patient restarts and sales expansion efforts.

Gross Margin (Q2 2025) 93%, consistent with prior quarters.

Cost of Goods Sold (Q2 2025) $7.2 million, compared to $6 million in Q2 2024. The increase was due to higher production volumes.

Research and Development Expense (Q2 2025) $14.4 million, compared to $15.6 million in Q2 2024. The decrease was due to the timing of manufacturing runs, offset slightly by increased clinical development costs.

General and Administrative Expenses (Q2 2025) $35.2 million, compared to $27.6 million in Q2 2024. The increase was due to higher professional service fees and personnel-related costs, including stock-based compensation.

Net Income (Q2 2025) $38.3 million, compared to $15.6 million in Q2 2024. This increase reflects higher revenue and operational efficiency.

Cash and Investments (End of Q2 2025) Over $820 million, supported by growth in net cash provided by operating activities.

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Operating Highlights

VYJUVEK launch: Progressing well in the U.S. with upcoming launches in Europe and Japan. Q2 net revenue was $96 million, bringing total revenue since launch to over $525 million. Japan's Ministry of Health approved VYJUVEK with a broad label, and launches in Germany and France are planned for the second half of 2025.

Pipeline development: Progress in multiple areas including KB408 for AATD, KB707 for NSCLC, KB407 for CF, and KB304 for aesthetics. New ophthalmology clinical trials (IOLITE and EMERALD-1) have started.

Global expansion: Launches in Europe (Germany and France) and Japan are expected to drive growth. Japan's approval includes a broad label and home administration options. European launch teams are in place, with the first commercial patient in Germany expected in August 2025.

Financial performance: Q2 net product revenue for VYJUVEK was $96 million, with a gross margin of 93%. Net income for the quarter was $38.3 million, and the company has over $820 million in cash and investments.

Operational discipline: Maintained profitability with $1.29 EPS fully diluted. Sales force expansion is ongoing, with full impact expected in upcoming quarters.

Strategic growth: Focus on expanding VYJUVEK globally and advancing a robust pipeline of genetic medicines. The company is pursuing opportunities in rest-of-world markets through distributors and partners.

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Risk or Challenges

Sales Force Hiring and Training: Sales force hiring is still underway, and the full impact of new hires will only be felt over the next few quarters. This delay in operational readiness could impact short-term sales performance.

Compliance Trends: Compliance rates are expected to trend down in the coming quarters as severe patients achieve durable wound closure and the mix shifts to moderate and mild patients. This could affect revenue predictability.

Revenue Variability: There is inherent unpredictability in quarter-to-quarter revenue due to the pausing and restarting dynamic of VYJUVEK treatment. This variability could impact financial forecasting and investor confidence.

European Launch Challenges: The launch in France is subject to the continuity of the Accès Précoce or early access program, which requires close coordination with local authorities. Any delays or issues could impact the European rollout.

Japanese Market Entry: While the Japanese market presents an opportunity, the company still needs to secure a pricing decision and complete the launch by year-end. Delays in these steps could postpone revenue generation.

Operational Costs: Increased general and administrative expenses, including marketing, consulting, and legal fees, as well as personnel-related costs, could pressure margins.

Pipeline Development Risks: The company is pursuing multiple clinical programs, including KB408 and KB707, which are in early stages. Any setbacks in clinical trials could delay product launches and impact future revenue streams.

Global Expansion Risks: The company is expanding into multiple international markets, which involves regulatory, logistical, and operational challenges. Any missteps could affect the success of these expansions.

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Guidance & Outlook

VYJUVEK Revenue Projections: Q3 revenues are expected to be below Q2 levels due to summer pausing trends, but a return to growth is anticipated in Q4 driven by a growing patient funnel, restarts, and sales expansion efforts. Long-term sustainable growth is expected as usage patterns stabilize in the U.S.

Global Expansion of VYJUVEK: The European launch is on track for Q3 2025, starting in Germany and France, with identified patient pools exceeding 500 in each country. Japan's launch is expected before year-end 2025, with meaningful contributions to revenue starting in 2026. Broader global expansion is being pursued through distributors and partners.

Pipeline Development and Clinical Readouts: Multiple near-term readouts are expected in lung and eye diseases, including CF, AATD, NK, and DEB. These readouts are anticipated to validate the platform's breadth and open up blockbuster product opportunities.

Operational and Financial Outlook: The company has over $820 million in cash and investments, providing a strong financial foundation for upcoming launches and R&D objectives. Non-GAAP R&D and SG&A guidance remains unchanged.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Is the revenue growth for this quarter impacted by the sales force expansion, and will the volatility for the next quarters be offset by the sales force expansion and the EU launch?

A:Part of the increase in Q2 was driven by patients resuming treatment and the incremental effect of hiring sales reps since late Q1. The full impact of these hires will be felt over the next couple of quarters as they become fully functional.

Q:Can you provide quantitative commentary on how much slower the first few weeks of the quarter have been versus Q1?

A:Management declined to provide specific details, citing variability and the early stage of the quarter. They noted that summer vacations and holidays typically lead to more pauses.

Q:What is the mix of RDEB versus DDEB patients in reimbursement approvals or start forms for U.S. VYJUVEK?

A:The mix is approximately 64% RDEB and 36% DDEB, with no significant changes observed recently.

Q:How do drug holidays factor into the original guidance of 720 U.S. patients initiating VYJUVEK, and what should we expect for EU pricing and health technology assessments?

A:The goal of 720 patients is on track but delayed by a quarter or two, now expected early next year. EU pricing benefits from free pricing in Germany for the first 12 months post-approval, with negotiations starting soon. Early engagement with EU authorities has been productive, recognizing the unmet medical need and transformational benefits of VYJUVEK.

Q:Will onboarding patients in Europe require treatment in a physician's office, and is there a goal for the reimbursement ramp similar to the U.S. launch?

A:Yes, onboarding in Europe typically requires an appointment at a specialty center. The goal is to reach 60% of the eligible patient pool within the first 2-3 years, but no detailed numbers have been communicated.

Q:Is it possible for patients in Europe to do the initial appointment in a group, and is there a goal for onboarding patients to the drug over a specific period?

A:Initial appointments are patient-specific, not group-based. The goal is to onboard 60% of the eligible patient pool within 2-3 years, but no specific numbers have been provided.

Q:Why has the timeline for CF data shifted from mid-2025 to year-end, and what is the expected patient data for the first readout?

A:The delay is due to longer-than-expected contracting and budgeting processes with academic sites. The first readout will include molecular data on 3 null mutation patients in CF.

Q:Will Japan require patients to be seen by a healthcare practitioner before initiating VYJUVEK, and can you share details on the fifth patient dose in Cohort 2 for AATD?

A:Yes, Japan will require an initial visit in a physician's office. For AATD, all three patients showed expression in biopsy samples, but lavage recovery issues affected data collection for one patient. Two patients showed measurable AAT expression and reduction of neutrophil elastase in lavage.

Q:How would you define steady state for VYJUVEK patients in terms of starts, restarts, and wound reopening?

A:Steady state is defined as an average consumption of 26 vials per year across the patient base, with a 50-50 ratio of RDEB to DDEB patients. This is expected to be achieved in a few months.

Q:What are the key aspects of the regulatory discussions around the photonumeric scale for the décolleté Phase II program?

A:The photonumeric scale captures improvements in skin texture and quality, which are key aspects of the drug's mechanism. Discussions with the FDA will focus on combining this scale with patient-reported outcomes for skin quality and texture.

Q:What is the timeline for spinning out Jeune as a separate subsidiary of Krystal?

A:Jeune is expected to be spun out as a separate subsidiary by mid to late 2026, before the end of Phase II.

Q:Does the anticipated decline in VYJUVEK revenue for Q3 apply to the U.S. only or worldwide?

A:The anticipated decline applies to the U.S. only, due to summer vacations and pauses.

Q:Why is R&D expense heavily weighted towards the oncology program, and what trends are expected?

A:Cancer trials are expensive, especially with the use of KEYTRUDA and preparations for potential controlled studies. Costs are expected to remain high as the program progresses.

Q:What are the timelines to capture the remaining 40% of the U.S. VYJUVEK market beyond the initial 720 patients?

A:The focus will remain on targeting the entire 1,200-patient base, with efforts continuing beyond the initial 720. The remaining 40% includes more moderate to mild patients, likely older and in the community.

Q:Are there risks to the continuity of the EAP in France during the transition to commercial access?

A:While rare, there is a formal process to transition from pre-marketing to post-authorization EAP. Management is confident in continuity.

Q:What percentage of VYJUVEK patients are using 4 vials versus 3, 2, or 1, and how have recessive patients evolved compared to dominant patients?

A:Compliance ranges between 76% and 84%. Recessive patients are more consistent in drug use, while moderate to mild dominant patients are more likely to pause and restart.

Q:What TPS scores are being enrolled in the combination program for non-small cell lung cancer?

A:Enrollment is agnostic to PD-L1 expression levels, focusing on patients who failed frontline PD-1 or PD-1 plus platinum therapy. Data will be stratified by PD-L1 expression levels.

Q:Review of Unclear Management Responses

A:Management avoided providing specific quantitative details on the magnitude of slower performance in the first few weeks of the quarter, citing variability and the early stage of the quarter. Additionally, they did not provide specific numbers for onboarding patients to VYJUVEK in Europe or detailed timelines for capturing the remaining 40% of the U.S. market.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

KRYS Transcript

Krystal Biotech, Inc. (KRYS) Q3 2025 Earnings Call Transcript

Positive11-3

The earnings call reveals robust financial performance with record-high revenue, improved gross margins, and a strong balance sheet. The optimistic guidance for future growth, driven by global expansion and pipeline development, supports a positive outlook. The absence of full-year guidance is a minor concern, but overall, the strategic initiatives and financial health indicate a strong positive impact on the stock price.

Krystal Biotech, Inc. (KRYS) Q2 2025 Earnings Call Transcript

Positive8-4

Krystal Biotech, Inc. (NASDAQ:KRYS) Q1 2025 Earnings Call Transcript

Unknown5-7

The earnings call presents a mixed picture: strong net product revenue growth and a robust financial position are offset by increased expenses and uncertainties in market expansion and compliance rates. The Q&A highlights potential risks like insurance changes and a DOJ subpoena. Despite positive guidance on market share and compliance improvements, the lack of share buybacks or dividends and the cautious tone on some issues balance out the positives. Without market cap data, the stock's sensitivity remains uncertain, leading to a neutral prediction.

Krystal Biotech, Inc. (KRYS) Q1 2025 Earnings Call Transcript

Positive5-6

The earnings call summary reveals strong financial performance with a 95% increase in VYJUVEK revenue and consistent profitability. Despite some operational challenges, the company maintains a high gross margin of 94% and plans for market expansion in Germany and Japan. The Q&A section suggests confidence in market opportunities and compliance rates, although there are some uncertainties regarding insurance and reimbursement. The overall sentiment is positive, supported by financial stability and growth prospects, likely leading to a stock price increase of 2% to 8%.

KRYS Slides

Krystal Biotech Q1 2025 slides: VYJUVEK revenue up 95% YoY despite sequential dip

2025-05-06

Krystal Biotech Q2 2025 slides: VYJUVEK drives growth amid global expansion

2025-08-04

KRYS Report

Krystal Biotech, Inc. 10-K

10-K

2025-02-19

Krystal Biotech, Inc. 10-Q

10-Q

2024-11-04

Krystal Biotech, Inc. 10-Q

10-Q

2024-08-05

Krystal Biotech, Inc. 10-Q

10-Q

2024-05-06

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