Krystal Biotech, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a quarterly report. Krystal is a clinical-stage biotechnology company developing redosable gene therapies using an engineered HSV-1 platform. It had no approved products and generated no revenue in 2021.
Financial performance and position
| Metric | FY2021 / December 31, 2021 | FY2020 / December 31, 2020 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $27.9 million | $17.9 million |
| General and administrative expense | $40.4 million | $15.1 million |
| Total operating expenses | $68.3 million | $33.0 million |
| Net loss | $69.6 million; $3.13 per share | $32.2 million; $1.71 per share |
| Operating cash flow | $(47.9) million | $(26.1) million |
| Cash, cash equivalents and investments | $502.5 million fair value; management cited approximately $438.1 million of cash, cash equivalents and short-term investments | $271.3 million fair value |
| Total assets / stockholders’ equity | $626.3 million / $593.6 million | $310.8 million / $292.1 million |
The balance sheet reported $341.2 million of cash and cash equivalents, $96.9 million of short-term investments and $64.4 million of long-term investments. Total liabilities were $32.7 million, including $8.0 million of lease liabilities; the filing reports no conventional borrowings. Profit margins are not meaningful because the company had no revenue.
Investing cash outflow was $226.8 million, including $68.3 million of property and equipment purchases, primarily for ASTRA, and net purchases of investments. Financing cash inflow was $347.7 million, primarily from equity issuance. The February and December public offerings generated net proceeds of $134.9 million and $201.9 million; the ATM program added $16.9 million net. Accumulated deficit was $140.8 million.
Material changes and business developments
- Net loss more than doubled year over year, with operating expenses rising $35.3 million. G&A increased $25.3 million, largely from higher personnel and stock-based compensation, commercial preparation, and legal and professional costs. R&D rose $9.9 million as clinical, preclinical and manufacturing work expanded.
- In November 2021, Krystal reported positive topline Phase 3 GEM-3 results for Vyjuvek in dystrophic epidermolysis bullosa (EB). Complete wound healing at six months was reported for 67% of treated wounds versus 22% of placebo wounds; at three months, 71% versus 20%. The company reported one mild drug-related adverse event and no drug-related serious adverse events or treatment discontinuations.
- ASTRA, the company’s second manufacturing facility, remained under construction. Property and equipment rose to $112.4 million, including $104.3 million of construction-in-progress.
- Stock-based compensation expense increased to $15.3 million from $3.3 million. Common shares outstanding rose to 25.2 million from 19.7 million.
Outlook, risks and contingencies
- Management expected to file a Vyjuvek BLA with the FDA in the first half of 2022 and an MAA with the EMA in the second half of 2022. These were plans, not approvals. Management expected available cash, cash equivalents and short-term investments to fund operations for at least 12 months from the filing date, but anticipated continued losses and may need additional capital.
- Other stated plans included resuming KB105 Phase 2 enrollment in 2022; initiating a KB104 trial and Australian KB407 Phase 1 study in 2022; filing a U.S. IND and starting a KB407 Phase 1 study in the second half of 2022; and reporting KB301 efficacy-cohort topline data in the first quarter of 2022.
- ASTRA construction and long-lead purchase commitments were estimated at $24.7 million at year-end. The Whiting-Turner contract had an $80.8 million guaranteed maximum price, described as only a portion of ASTRA’s total estimated building and equipment costs. Other disclosed near-term commitments included $3.0 million for clinical supply and manufacturing agreements and $2.4 million for commercial preparedness.
- PeriphaGen litigation alleges breach of contract and trade-secret misappropriation and names the CEO and COO. Krystal denies the allegations and intends to defend the case; discovery was ongoing. The company said it could not estimate litigation costs, timing or potential damages.
- Key risks include clinical or regulatory delay or failure, manufacturing scale-up and facility validation, reliance on third parties, ability to commercialize and secure reimbursement, competition, financing needs, and intellectual-property claims. COVID-19 had minimal reported impact on U.S. trials but delayed clinical-trial initiation in Australia.
Important facts for investors to verify
- Whether and when Vyjuvek submissions were made, and subsequent FDA and EMA decisions, labeling and any additional requirements.
- Full GEM-3 data, including durability, safety follow-up and the basis for regulatory review; topline results are not an approval.
- Actual cash burn, investment liquidity and funding runway as development and commercialization spending increases.
- ASTRA completion, validation, total remaining cost and ability to support clinical and potential commercial supply.
- Developments and potential financial exposure in the PeriphaGen case, for which the filing provided no estimable loss amount.
The auditor issued an unqualified opinion on the financial statements and internal controls and reported no critical audit matters.