Krystal Biotech, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Krystal is a clinical-stage biotechnology company developing genetic medicines using an engineered HSV-1 vector platform. It had no approved products and generated no revenue.
Financial performance and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $42.5 million | $27.9 million |
| General and administrative expense | $77.7 million | $40.4 million |
| Total operating expenses | $145.2 million | $68.3 million |
| Net loss | $140.0 million | $69.6 million |
| Basic and diluted loss per share | $5.49 | $3.13 |
| Net cash used in operating activities | $100.6 million | $47.9 million |
Gross margin and operating margin are not meaningful because the company had no product revenue. At year-end, cash and cash equivalents were $161.9 million, short-term investments $217.3 million, and long-term investments $4.6 million. Current assets were $383.8 million versus current liabilities of $28.8 million. Total liabilities were $36.2 million, including $8.9 million of lease liabilities; the filing reports no conventional borrowings.
Investing activities used $114.1 million, including $53.0 million for property and equipment, principally ASTRA construction. Financing activities provided $35.3 million, primarily from $29.1 million of net ATM offering proceeds and employee equity activity. Accumulated deficit was $280.8 million. The company reported approximately $379.2 million of cash, cash equivalents and short-term investments and believes this is sufficient for at least 12 months from the filing date.
Material changes and notable items
- Net loss roughly doubled year over year, as R&D and G&A expenses rose with pipeline development, staffing, commercialization preparation and stock-based compensation.
- G&A included higher commercial readiness and medical affairs spending. Stock-based compensation expense was $33.2 million, compared with $15.3 million in 2021.
- A $25.0 million litigation settlement expense reflected the PeriphaGen settlement. Further payments of $12.5 million are due upon FDA approval of the company’s first product, plus three $12.5 million sales milestones at cumulative sales thresholds of $100 million, $200 million and $300 million; these contingent payments were not accrued at year-end.
- Operating cash use increased to $100.6 million from $47.9 million. Year-end cash and cash equivalents declined from $341.2 million to $161.9 million, while investments shifted across maturity categories.
Outlook, management commentary and risks
- B-VEC: The lead candidate for dystrophic epidermolysis bullosa (DEB) had positive Phase 3 results, and its BLA was under FDA priority review. After the reporting year, FDA revised the PDUFA date to May 19, 2023; the agency indicated no advisory committee meeting or REMS was needed. The company was preparing for a potential U.S. launch. Its EMA application process was expected to begin in the second half of 2023, with approval anticipated by the company in early 2024.
- Pipeline plans: Management planned to resume KB105 Phase 2 enrollment and initiate KB301 Phase 2 and KB407 Phase 1 studies in 2023; it also planned an IND and clinical trial for KB104 and an IND filing for KB408. These are forward-looking plans, not assured milestones.
- Manufacturing: FDA completed an audit of the ANCORIS facility in December 2022 as part of B-VEC review. ASTRA was expected to be completed and validated in 2023; the company planned its first GMP run in the first half of 2023. Remaining ASTRA commitments were $16.3 million at year-end.
- Funding and execution risks: The company expects continuing losses and may need additional capital. Its prospects depend substantially on B-VEC approval and commercial success, clinical and regulatory outcomes, manufacturing scale-up, market access and reimbursement. Gene-therapy safety, competition, intellectual property disputes, and regulatory or pricing changes are also material risks.
- Other year-end commitments included $8.4 million for commercial preparedness and $2.1 million under clinical supply/manufacturing agreements, generally expected to be paid within 12 months. Future operating lease payments totaled $17.8 million.
Important facts for investors to verify
- Current FDA and EMA status, approval scope, launch timing and any post-approval requirements for B-VEC.
- Actual cash runway, spending pace, commercial launch costs and whether additional financing is needed.
- Clinical progress and results for KB105, KB301, KB104, KB407 and KB408 against stated plans.
- ASTRA completion, validation, production readiness, remaining costs and manufacturing capacity.
- Potential PeriphaGen milestone payments and how commercial sales would trigger them.
- Ability to secure coverage and reimbursement, and patient and physician adoption if B-VEC is approved.