krys-20231231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

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(Mark One)

For the fiscal year ended December 31, 2023

Commission File Number 001-38210

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Krystal Biotech, Inc.

(Exact name of Registrant as specified in its Charter)

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Pittsburgh

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (412) 586-5830

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Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock KRYS NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☒ No ☐

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐No☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of common stock held by non-affiliates of the Registrant, based on the closing sales price for such stock on June 30, 2023 as reported by The Nasdaq Stock Market, was $2.8 billion.

The number of shares of Registrant’s common stock outstanding as of February 19, 2024 was 28,292,616.

Portions of the Registrant’s definitive proxy statement relating to its 2024 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report where indicated. Such proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

Table of Contents

Page

PART I

Item 1. Business 5

Item 1A. Risk Factors 29

Item 1B. Unresolved Staff Comments 64

Item 1C. Cybersecurity 65

Item 2. Properties 66

Item 3. Legal Proceedings 66

Item 4. Mine Safety Disclosures 66

PART II

Item 6. [Reserved] 70

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 83

Item 8. Financial Statements and Supplementary Data F-1

Item 9A. Controls and Procedures 110

Item 9B. Other Information 112

Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections 112

PART III

Item 10. Directors, Executive Officers and Corporate Governance 112

Item 11. Executive Compensation 112

Item 14. Principal Accountant Fees and Services 112

PART IV

Item 15. Exhibits and Financial Statement Schedules 113

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict”, “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms. These statements relate to future events or to our future operating or financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

Forward-looking statements appearing in a number of places throughout this Annual Report on Form 10-K include, but are not limited to, statements about the following, among other things:

•our commercialization plans in the United States for our first commercial product, VYJUVEK® (beremagene geperpavec-svdt, or B-VEC; referred to as B-VEC outside the U.S.), which was approved by the United States Food and Drug Administration (“FDA”) in May 2023 for the treatment of dystrophic epidermolysis bullosa (“DEB”);

•our expectations regarding reimbursement of VYJUVEK in the U.S., including coverage determinations and the timing thereof from commercial health plans and Medicaid;

•the timing, scope and results of our regulatory filings and potential approvals for marketing authorizations for B-VEC in the European Union and Japan,

•our expectations regarding the timing of completion of our open label extension study of B-VEC in Japanese patients, and our plans and expected timing of commercial launch in Europe and Japan;

•our plans for commercialization of B-VEC outside of Germany, France, Italy, Spain, the United Kingdom, and Japan;

•the potential clinical development path for ophthalmic B-VEC for the treatment of ocular complications of DEB;

•the initiation, timing, progress and results of clinical trials for KB407, KB408, KB707 (intratumoral and inhaled), KB105, KB104, KB301, and any other product candidates, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, the timing of our disclosure of study data, and our research and development programs;

•the timing, scope or results of regulatory filings and approvals, marketing and other regulatory approval of our product candidates;

•our ability to achieve certain accelerated, orphan drug, and other designations from the FDA or other regulatory authorities;

•our estimates regarding the potential market opportunity for any of our product candidates;

•our research and development programs for our product candidates;

•our plans and ability to successfully develop and commercialize our product candidates;

•our ability to identify and develop new product candidates;

•our beliefs about our proprietary HSV-1 based vector platform, including its ability to deliver multiple genes and other effectors, which could enable development of therapies for more common conditions that are not necessarily the result of an inherited genetic defect;

•our ability to identify, recruit and retain key personnel;

•our commercialization, marketing and manufacturing capabilities and strategy;

•the implementation of our business model, strategic plans for our business, product candidates and technology;

•the scalability and commercial viability of our proprietary manufacturing methods and processes;

•the rate and degree of market acceptance and clinical utility of VYJUVEK and our product candidates and gene therapy, in general;

•our competitive position;

•our intellectual property position and our ability to protect and enforce our intellectual property;

•our financial performance;

•our estimates regarding expenses, revenue, capital requirements and needs for or ability to obtain additional capital;

•developments and projections relating to our competitors and our industry;

•our ability to establish and maintain collaborations;

•our ability to successfully resolve any intellectual property or other claims that may be brought against us;

•the impact of laws and regulations; and

•any statements regarding U.S. or global economic conditions and the impact on our business, or performance and any statement of assumptions underlying any of the foregoing.

Forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. You should read this Annual Report completely and with the understanding that our actual future results may be materially different from what we expect.

Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Annual Report. Except as required by law, we assume no obligation to update or revise these forward-looking statements publicly as a result of subsequent events, developments or otherwise, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

This Annual Report on Form 10-K also contains estimates and other statistical data made by independent parties and by the Company that involves a number of assumptions and limitations. Neither the Company nor any other person makes any representation as to the accuracy or completeness of such data or undertakes any obligation to update such data after the date of this Annual Report.

Throughout this Annual Report, unless the context requires otherwise, all references to “Krystal,” “the Company,” “we,” “our,” “us” or similar terms refer to Krystal Biotech, Inc., together with its consolidated subsidiaries.

Summary Risk Factors

Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. These summary risks provide an overview of many of the risks we are exposed to in the normal course of our business and are discussed more fully in “Risk Factors” herein. These risks include, but are not limited to, the following:

•We are substantially dependent on the commercial success of VYJUVEK.

•If we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.

•We face significant competition in an environment of rapid technological change and the possibility that our competitors may achieve regulatory approval before us or develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully market or commercialize VYJUVEK or our product candidates, if approved.

•If any product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit commercialization of VYJUVEK or our product candidates.

•Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.

•We are subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy and security laws, and if we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

•Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer a cyber-security incident, such as a data breach or computer virus, which could harm our business by damaging our reputation, exposing us to liability, or materially disrupting our operations, including production of VYJUVEK or our product development programs.

•Our international operations may expose us to business, regulatory, political, operational, financial, pricing and reimbursement and economic risks associated with doing business outside of the United States.

•If we are unable to manage expected growth in the scale and complexity of our operations, our performance may suffer.

•If we are unable to advance our product candidates through clinical trials, obtain regulatory approval and ultimately commercialize our product candidates, or if we experience significant delays in doing so, our business will be materially harmed.

•Our products may cause undesirable side effects or have other properties that could delay or prevent regulatory approval, limit the commercial potential or result in significant negative consequences following any potential marketing approval.

•We rely on third parties to conduct certain aspects of our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for, or commercialize, our product candidates.

•We may encounter substantial delays in our clinical trials, or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

•VYJUVEK and our product candidates remain subject to regulatory oversight even after regulatory approval. We will continue to incur costs related to regulatory compliance and are subject to risks related to non-compliance with or changes to applicable laws and regulations, which could cause VYJUVEK or any of our product candidates that obtain regulatory approval to lose that approval.

•Even though we have obtained FDA approval of VYJUVEK and even if we obtain and maintain approval for our product candidates from the FDA, we may never obtain approval for them outside of the United States, which would limit our market opportunities and adversely affect our business.

•Delays in obtaining regulatory approvals of the process and facilities needed to manufacture our product candidates or disruptions in our manufacturing process may disrupt our production of VYJUVEK or delay or disrupt our development and commercialization efforts with respect to our product candidates.

•Although we have established our own manufacturing facilities for VYJUVEK and our product candidates, we may also utilize third parties to conduct our product manufacturing or components thereof. Therefore, we are subject to the risk that these third parties may not perform satisfactorily.

•Any contamination in our manufacturing process, shortages of raw materials or failure of any of our key suppliers to deliver necessary components could result in delays in our ability to produce VYJUVEK for commercial supply or any product candidate for clinical development.

•We have limited experience as a commercial company and the sales, marketing, and distribution of VYJUVEK or any future approved products may be unsuccessful or less successful than anticipated.

•If we are unable to maintain our agreements with third parties to distribute VYJUVEK to patients in the United States, our results of operations and business could be adversely affected.

•If we are unable to expand our medical affairs, marketing, market access, sales, and distribution capabilities or collaborate with third parties to market and sell our product candidates for which we obtain marketing approval, we may be unable to generate sufficient product revenue.

•If the market opportunities for VYJUVEK or our product candidates are smaller than we believe they are, our product revenue may be adversely impacted, and our business may suffer.

•Government price controls or other changes in pricing regulation could restrict the amount that we are able to charge for VYJUVEK and our product candidates, if approved, which would adversely affect our revenue and results of operations.

•The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for VYJUVEK or our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate product revenue.

•If we are unable to obtain and maintain adequate United States and foreign patent protection for VYJUVEK, our current product candidates, and any future product candidates we may develop, and/or our vector platform, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technologies similar or identical to ours, and our ability to successfully commercialize VYJUVEK, our current product candidates, any future product candidates we may develop, and our platform technologies may be adversely affected.

•Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

•Intellectual property rights and regulatory exclusivity rights do not necessarily address all potential threats.

•Risks related to our financial position and need for additional capital.

•Our Chief Executive Officer and Chairman of the Board of Directors and our founder, President of R&D and director will have the ability to substantially influence all matters submitted to stockholders for approval.

Item 1. Business.

Overview

We are a fully integrated, commercial-stage biotechnology company focused on the discovery, development, and commercialization of genetic medicines to treat diseases with high unmet medical needs. Our first commercial product, VYJUVEK®, was approved by the FDA on May 19, 2023 for the treatment of DEB, and we subsequently initiated our U.S. commercial launch. VYJUVEK is the first medicine approved by the FDA for the treatment of DEB.

Using our patented gene therapy technology platform that is based on engineered HSV-1, we create vectors that efficiently deliver therapeutic transgenes to cells of interest in multiple organ systems. The cell’s own machinery then transcribes and translates the encoded effector to treat or prevent disease. We formulate our vectors for non-invasive or minimally invasive routes of administration at a healthcare professional’s office or in the patient’s home by a healthcare professional. Our goal is to develop easy-to-use medicines to dramatically improve the lives of patients living with rare and serious diseases. Our innovative technology platform is supported by an in-house, FDA-inspected commercial scale Current Good Manufacturing Practice (“CGMP”) manufacturing facility and a second, completed and qualified, commercial scale CGMP facility to support future expansion.

Our development pipeline includes multiple clinical stage programs for rare and serious diseases, and we are investing in research and development to advance and grow this pipeline. We possess exclusive rights to develop, manufacture, and commercialize our FDA approved product and our pipeline candidates throughout the world.

While our focus is on the development of gene therapies to treat patients with severe, life‐threatening, or rare diseases with high unmet medical needs, we are also evaluating the potential of our platform to address more prevalent and/or non-genetic conditions. To that end, in April 2019, we incorporated Jeune Aesthetics, Inc. (“Jeune Aesthetics”), a wholly-owned subsidiary, for the purposes of undertaking preclinical and clinical studies for aesthetic skin conditions.

Our Redosable Gene Therapy Platform

We believe that certain inherent features of the HSV-1 virus, combined with the modifications we have made to the viral backbone provides our proprietary gene therapy platform with specific advantages over other viral and non-viral vector platforms and represents an opportunity to generate a portfolio of highly differentiated and potentially first-in-class or best-in-class genetic medicines. Advantages of our gene therapy technology platform include the following:

•Repeat Administration: One of the major challenges with many viral vector platforms is that the host immune system may recognizethem as foreign agents and launch a robust immune response, resulting in toxicity and rapid removal of the virus. Wild-type HSV-1 is known to persist in the body by becoming latent and hiding from the immune system. We have harnessed the natural ability of HSV-1 to evade host-mediated immunogenicity, while removing specific viral elements that exacerbate host immunity, thus making our viral vector safer for repeat administration as needed to achieve durability of effect. The immune evasive properties of our vector also enable us to treat patients who may have baseline antibodies to HSV-1, ensuring that prior exposure to the wild-type virus will not limit the number of patients who may be amenable to treatment with VYJUVEK or our product candidates.

•Non-Integrating Nature: Upon entry into cells, the HSV-1 vector persists as an episomal unit in the nucleus, meaning it remainsphysically separate from the host cell chromosome. Certain other viral vectors currently being used in the development of gene therapy treatments, such as the lentiviral and retroviral vectors, integrate into the host cell DNA to achieve gene expression. Integration into the host cell DNA carries the risk of disrupting host genes. In contrast, a non-integrating vector such as our HSV-1-based vector does not carry the same risk of disrupting the expression of host cell genes.

•Payload Capacity: HSV-1 is a large virus, approximately 150 kilobases, or Kb, of DNA in size. We have made strategic deletionswithin this genome to remove critical “immediate early”, or IE, genes. These IE genes are required for expression of most of the downstream genes that allow the HSV-1 virus to replicate and destroy host cells. Deletion of these IE genes inhibits expression of most of the viral proteins, making the resulting viral vector replication-deficient and non-toxic. These deletions also enable the vector to easily accommodate a payload of 35 Kb or greater without any significant impact on yield or titer. In VYJUVEK, we have successfully inserted two functional copies of the complete ~9 Kb human COL7A1 gene. In contrast, packaging capacity for most other vectors being used is at or under ~10 Kb, which limits their ability to deliver large transgenes. In addition, we believe the high payload capacity of our viral vector will allow us to insert multiple and/or combinations of genes or effectors that could enable the treatment of non-monogenic conditions.

•High Transduction Efficiency: Poor transduction efficiency has remained a major hurdle for direct delivery of most vectorsparticularly in the epithelia of the skin and lung. HSV-1 has a natural affinity, or tropism, for epithelial cells. Consequently, we believe our vector penetrates and delivers its payload much more efficiently than other vectors,

resulting in transduction efficiencies or cell penetration as high as 95% in cell-based studies. The greater payload capacity of our vector and the high transduction efficiencies achieved allow us to deliver a full gene (or genes) directly to any patient’s tissues for off-the-shelf, in vivo gene expression without additional manipulation.

•Direct Delivery: Our engineered HSV-1 vector allows for noninvasive or minimally invasive local gene delivery. The advantages ofdirect delivery are that our products can be administered in a doctor’s office or the patient’s home, requiring no hospitalization or expensive, invasive, and time-consuming procedures or sophisticated medical teams. Taking gene therapy to the patient minimizes patient travel and circumvents upfront logistical burdens typical of other gene therapy approaches.

•Stability: HSV-1 is extremely stable and resistant to degradation by physical shearing, solvents, and enzymes, facilitating purificationand flexibility with final formulation of our product candidates. Our vectors are stable frozen for long-term storage, under refrigerated conditions for short-term storage and shipment, in addition to being stable over several freeze-thaw cycles. This facilitates our ability to ship VYJUVEK and our product candidates globally from our manufacturing facilities in Pennsylvania.

•Reproducible and Scalable Manufacturing: Successful production of viral vectors involves two steps: (i) the ‘upstream’ process,which yields a bulk virus harvest; and (ii) the ‘downstream’ process, which involves purification and concentration of the clinical product. Successful and reproducible execution of both processes is critical for commercial manufacturing. Our scientific team’s collective decades of experience and expertise in HSV engineering and purification has allowed us to successfully optimize our engineered HSV-1 vector production process and develop in-house Chemistry, Manufacturing and Control (“CMC”) capabilities.

•First Approval for Platform Builds on Existing Regulatory Precedent: The first FDA and European Medicines Agency (“EMA”)-approved oncolytic virus product,Imlygic® by Amgen, for treatment of melanoma, a skin cancer, is based on a genetically engineered HSV-1 virus. Because this product also employs an HSV-1 backbone for chronic administration, it created a regulatory precedent for approval of an HSV-1-based chronic gene therapy. Now, with the FDA approval our first platform product, VYJUVEK, regulatory precedent for our proprietary HSV-1-based platform has also been established, and regulator familiarity with HSV-1 and our platform continues to grow.

The above listed benefits of our innovative platform, and compatibility with formulation for topical, injectable, and inhaled delivery, make it the ideal choice to treat diseases and conditions of the skin, lung, and eye.

Our FDA Approved Product and Pipeline

The following table summarizes information regarding our FDA approved product, VYJUVEK, and product candidates in various stages of clinical and preclinical development as of the date of this Annual Report:

Our FDA Approved Commercial Product

VYJUVEK (beremagene geperpavec-svdt, or B-VEC; referred to as B-VEC outside the U.S.)

Disease Background

DEB is a rare and severe monogenic skin disease. DEB affects the skin and mucosal tissues and is caused by one or more mutations in a gene called COL7A1, which is responsible for the formation of the protein type VII collagen (“COL7”). COL7 forms anchoring fibrils that bind the dermis (inner layer of the skin) to the epidermis (outer layer of the skin). In DEB patients, the genetic defect in COL7A1 results in loss or malfunctioning of these anchoring fibrils, leading to extremely fragile skin that blisters and tears from minor friction or trauma. Those who are born with DEB are sometimes called “butterfly children,” because their skin is likened to be as fragile as the wings of a butterfly. DEB patients may suffer from open wounds, skin infections, fusion of fingers and toes, ocular complications that can result in severe vision loss, and gastrointestinal tract problems throughout their lifetime, and may eventually develop squamous cell carcinoma, a potentially fatal condition. We believe that there are, at present, approximately 3,000 DEB patients in the United States and approximately 9,000 worldwide. Prior to the approval of VYJUVEK, the standard of care for DEB patients had been limited to palliative measures that seek to provide relief from some of the symptoms of DEB but do not meaningfully impact disease outcomes.

B-VEC

B-VEC is a redosable, off-the-shelf gene therapy designed to deliver two copies of the COL7A1 gene when applied topically, directly onto an open wound. Unlike the previous standard of care, B-VEC treats DEB at the molecular level by providing the patient’s skin cells the template to make normal COL7 protein, thereby addressing the fundamental disease-causing mechanism. B-VEC was specifically designed to be easily administered by a healthcare professional in a doctor’s office or at the patient’s home. B-VEC was approved by the FDA in May 2023 and is marketed as VYJUVEK in the United States.

We believe our approach to treating DEB is positively differentiated relative to palliative approaches, which do not address the underlying genetic cause of DEB or impact the durability of wound closure, and other known efforts to develop corrective treatments that employ autologous approaches. Autologous treatments use a patient’s own tissues and cells to manufacture an individualized therapy. Such therapies tend to be expensive, invasive and time consuming to use, and require extensive patient travel, extended hospital stays, highly sophisticated medical teams and procedures.

Commercial Launch

We launched VYJUVEK, the first FDA approved treatment for DEB and the first and only corrective therapy for DEB globally, in the United States in the second quarter of 2023. We estimate that there are approximately 3,000 patients in the United States suffering from DEB, of which 1,200 were identified at launch through claims analytics and pre-launch patient identification activities conducted by our commercial field force. Since our commercial launch of VYJUVEK in the United States in the second quarter of 2023, we have reported $50.7 million in net product revenue.

Commercial readiness efforts had been underway over two years prior to the FDA approval of VYJUVEK. In the United States, prior to FDA approval and VYJUVEK launch, as part of our disease awareness program, our medical science liaisons had been interacting with and educating health care professionals (“HCPs”) on DEB and the importance of genetic testing in ensuring an accurate diagnosis. We also built-out Krystal ConnectTM, our U.S. in-house patient services call center staffed with Krystal employees, which was launched subsequent to FDA approval to assist patients, caregivers and HCPs interested in accessing VYJUVEK. Additionally, we hired, trained and deployed commercial field teams to educate on DEB and to prepare for launch of VYJUVEK. Our field force has been fully deployed since launch and is covering both centers of excellence and community physicians treating patients with DEB.

Our market access team had successfully secured positive policies or coverage decisions from plans covering over 93% of commercial and Medicaid lives in the United States, including positive coverage determinations from all major commercial national health plans and several regional health plans. In January 2024, we announced that the United States Centers for Medicare & Medicaid Services (“CMS”) had assigned a permanent and product-specific J-code (J3401) for VYJUVEK, effective on January 1, 2024.

VYJUVEK is distributed in the U.S. through a limited network of specialty pharmacy providers that administer the medication to patients in their homes and specialty distributors that distribute VYJUVEK for administration to patients at the site of care.

Preparations and infrastructure buildout are underway in Europe and Japan to support direct commercial launch by Krystal in these regions, which is expected by 2025. We have also initiated a named patient program in Europe to provide initial access to VYJUVEK. Outside of Germany, France, Italy, Spain, the United Kingdom, and Japan, our strategy is to enter into distribution arrangements with local distributors to commercialize VYJUVEK.

Regulatory Status

On May 19, 2023, the FDA approved VYJUVEK, the first ever redosable gene therapy, for treating patients, six months of age or older, suffering from DEB. No clinical post-marketing commitments or Risk Evaluation and Mitigation Strategies program were required by the FDA. With the approval, the FDA issued a Rare Pediatric Disease Priority Review Voucher (“PRV”), which confers priority review to a subsequent drug application that would not otherwise qualify for priority review. We sold the PRV in the third quarter of 2023 for $100.0 million.

The FDA had previously granted B-VEC Orphan Drug Designation (“ODD”), Fast Track Designation, Rare Pediatric Designation, and granted Regenerative Medicine Advanced Therapy to B-VEC for the treatment of DEB.

In September 2023, we received a positive opinion from the EMA Pediatric Committee on the Pediatric Investigation Plan for B-VEC for the treatment of DEB. Based on this positive opinion, we expect to be eligible for up to an additional two years of marketing exclusivity in the European Union (“EU”), on top of the ten-year EU market exclusivity after market approval in the EU. The European regulatory authorities have also granted B-VEC Orphan Designation and PRIority MEdicines eligibility for B-VEC to treat DEB.

In October 2023, we submitted a marketing authorization application (“MAA”) to the EMA for B-VEC for the treatment of DEB in patients from birth. In November 2023, we were notified that the MAA had been validated and was now under Committee for Medicinal Products for Human Use review. We currently expect an EMA decision on our MAA in the second half of 2024.

In December 2023, B-VEC was granted ODD status for the treatment of DEB by the Japan Ministry of Health, Labour and Welfare, a designation which confers specific benefits for orphan drug development including priority review of applications, extended registration validity, and reduced development costs. We anticipate filing our Japan New Drug Application with Japan’s Pharmaceuticals and Medical Devices Agency (“PMDA”) in the second half of 2024 enabling a potential authorization in 2025.

Clinical Development

We initiated Phase 1 testing of a topical formulation of B-VEC in May 2018 at Stanford University, and we announced positive interim results from this clinical study on two patients in October 2018. The Phase 2 portion of the trial commenced in December 2018 at Stanford University, and we announced positive interim results from this clinical study on June 24, 2019. In March 2022, results from the complete Phase 1/2 study of topical B-VEC for the treatment of DEB were published in Nature Medicine.

We initiated a pivotal Phase 3 trial (“GEM-3 trial”) in July 2020. The GEM-3 trial of topical B-VEC for the treatment of DEB was a randomized, double-blind, intra-patient placebo-controlled multicenter study designed to evaluate the efficacy and safety of B-VEC for patients suffering from both recessive and dominant forms of DEB. The trial enrolled 31 participants with DEB, aged 6 months or older at time of consent. In each patient, a primary wound pair was identified by the investigator; one wound was randomized to receive a weekly topical application of B-VEC and the other to receive placebo. These primary wounds were treated once weekly for six months until wound closure. If a wound re-opened at any point during the study, weekly dosage resumed until closure. The dose administered to each wound was dependent on the size of the wound. A maximum vector dose per patient per week was defined on the basis of preclinical and clinical safety data. In the event that the maximum dose per patient had not been reached based on dosing of the primary wounds, the study investigators and patients had the opportunity to select additional “secondary” wounds across which the remaining weekly dose was applied. We announced positive results from the GEM-3 trial in November 2021 and in December 2022 full results from the GEM-3 trial were published in the New England Journal of Medicine.

Following completion of the GEM-3 trial, we initiated an open label extension study (“OLE”) to provide extension of B-VEC treatment for participants who completed study GEM-3 (“rollover participants”) and B-VEC treatment for newly enrolling (“naïve participants”) participants with DEB. The OLE was a multi-center, open-label study of B-VEC for the topical treatment of DEB wounds. The study enrolled 47 participants in total, comprising of 24 rollover participants and 23 naïve participants, at five sites in the United States. In April 2022, following feedback from the FDA, we announced that patients enrolled in the OLE study would have the option to be dosed in their homes by a health care professional. The primary study objective was the assessment of safety and tolerability of extended dosing with B-VEC in a broader patient population. Various quality of life and participant satisfaction metrics were also assessed. The OLE study was concluded in the third quarter of 2023, and the safety profile continued to support the overall benefit-risk of B-VEC, with no new safety concerns noted with extended duration of dosing of B-VEC. We expect to disclose detailed study data at upcoming scientific meetings or in scientific publications.

In July 2023, the PMDA in Japan officially accepted our OLE study of B-VEC in Japanese patients (the “Japan OLE”). Following that acceptance, we initiated the Japan OLE study and completed study enrollment. A total of 5 Japanese DEB patients have been enrolled. Details of the study can be found at jrct.niph.go.jp under JRCT ID jRCT2053230075. Nothing

included on this website shall be deemed incorporated by reference into this Annual Report on Form 10-K. We expect to complete the study in 2024.

Our Pipeline Programs

Ophthalmology

Ophthalmic B-VEC for Ocular Complications of DEB

Disease Background

DEB is a rare and severe monogenic blistering disease that affects not only the skin, but also mucosal tissues dependent on COL7 anchoring fibrils for maintaining epithelial lining integrity. This includes the eye, where COL7 anchors the corneal epithelium. For a meaningful proportion of DEB patients, the genetic defect in COL7A1 results in loss or malfunctioning of these anchoring fibrils causing ocular complications, such as corneal erosions, abrasions, blistering and scarring, that can lead to progressive vision loss.

Over 50% of patients with recessive form of DEB are thought to suffer from ocular complications. Correspondingly, we believe there are over 750 patients in the United States and over 2,000 worldwide that are affected. Disease management varies from supportive care and wound management to surgical interventions to remove scar tissue. No corrective or FDA approved therapies are presently available.

Ophthalmic B-VEC

Ophthalmic B-VEC is a redosable eye drop formulation of B-VEC, designed to deliver two copies of the COL7A1 transgene to the epithelial cells in a patient’s eye to produce COL7 protein. As with VYJUVEK, the goal of therapy with ophthalmic B-VEC is to treat the disease locally, at the molecular level, by providing the patient’s epithelial cells of the eye the template to make normal COL7 protein, and thereby address the fundamental disease-causing mechanism. In preclinical studies, single and repeated topical B-VEC administration to the eye in a mouse corneal lesion model resulted in localized COL7A1 expression with no adverse effects noted histologically.

Ophthalmic B-VEC has been applied topically to the eye of one DEB patient under a compassionate use protocol. The clinical observations of this compassionate use case were published in the New England Journal of Medicine in February 2024. The patient presented with severe cicatrizing conjunctivitis secondary to DEB. Surgical symblepharon lysis of the patient’s right eye with pannus removal was conducted and regular administration of B-VEC as an eye drop directly to the eye (5×109 PFU/mL) were added to routine post-surgical care, three times weekly for the first two weeks and then once weekly. B-VEC application frequency was further decreased to once monthly once the corneal epithelium was healed. B-VEC was well tolerated with no drug related adverse events noted. Full corneal healing was observed at 3 months, as well as significant visual acuity improvement from hand motion to 20/25 by 8 months.

In February 2024, the FDA agreed with our proposed single arm, open label study in approximately 10 patients to enable approval of B-VEC eyedrops to treat ocular complications secondary to DEB. We plan to initiate this study in the second half of 2024.

Respiratory

KB407 for Cystic Fibrosis (“CF”)

Disease Background

CF is the most common inherited genetic disorder in the United States and is caused by mutations in the cystic fibrosis transmembrane conductance regulator (“CFTR”) gene. Lack of functional CFTR protein in secretory airway epithelia results in defective Cl-, bicarbonate, and thiocyanate secretion, coupled with enhanced Na+ absorption and mucus production, leading to dehydration and acidification of the airway surface liquid. CF is characterized by recurrent chest infections, increased airway secretions, and eventually, respiratory failure. While CF comprises a multiorgan pathology affecting the upper and lower airways, gastrointestinal and reproductive tracts, and the endocrine system, the primary cause of morbidity and mortality in CF is due to progressive lung destruction.

According to the U.S. Cystic Fibrosis Foundation (“CFF”), the median age at death for patients with CF in the United States was 36.6 years in 2022. Currently approved CFTR modulating therapies are limited to patients with specific genetic mutations and there is a significant unmet medical need for the approximately 10%-15% of patients with CF who have genetic mutations non-amenable to currently approved CFTR small molecule “modulators”. The CFF estimates that there are close to 40,000 children and adults living with CF in the United States, and an estimated 105,000 people diagnosed with CF across 94 countries. People of every racial and ethnic group are affected by this debilitating disease.

KB407

KB407 is a redosable off the-shelf gene therapy designed to deliver two copies of the full-length CFTR transgene directly to the airway epithelia via inhaled (nebulized) administration. By inducing expression of full length, normal CFTR protein in the lung, treatment with KB407 has potential to restore ion and water flow into and out of lung cells to correct the lung manifestations of the disease in patients regardless of their underlying genetic mutation. Preclinical efforts to date have shown that KB407 successfully transduces patient-derived epithelial cells and delivers functional CFTR in vitro in 2D and 3D organotypic systems, and is amendable to non-invasive inhaled administration in vivo, as indicated by successful delivery to the lungs through the use of a clinically relevant nebulizer in small animal models. Successful delivery and distribution throughout the lung also was observed in a nonhuman primate.

The FDA and the EMA have granted KB407 ODD and Orphan Designation, respectively, for the treatment of cystic fibrosis, and the FDA has granted KB407 Rare Pediatric Designation for the treatment of cystic fibrosis.

Clinical Development of KB407

In July 2023, we announced that we had dosed the first patient in our Phase 1 CORAL-1 study evaluating KB407, delivered via a nebulizer, for the treatment of patients with CF. The CORAL-1 study is a multi-center, dose-escalation trial of KB407 in patients with CF, regardless of their underlying genotype. In the fourth quarter of 2023, we completed the first cohort of the CORAL-1 study with no severe or serious adverse events and, in January 2024, we initiated dosing in the second of three cohorts. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT05504837. Nothing included on this website shall be deemed incorporated by reference into this Annual Report on Form 10-K.

KB408 for Alpha-1 Antitrypsin Deficiency (“AATD”)

Disease Background

AATD is a genetic condition caused by mutations that lead to decreased levels and/or decreased functionality of the alpha-1- antitrypsin (“AAT”) protein. AATD lung disease is a consequence of diminished or absent functional protein in the lungs due to impaired transport into, and low concentrations in, patient plasma. Low AAT serum levels can result in life threatening, progressive pulmonary impairment and severe respiratory insufficiency, manifesting as chronic obstructive pulmonary disease and panacinar emphysema. The lung degeneration observed in AATD patients derives from an unopposed, and therefore enhanced, neutrophil elastase (“NE”) activity, leading to an excessive degradation of elastin, collagen, and fibronectin. The absence of proper NE inactivation by functional AAT ultimately results in lung tissue destruction, airway obstruction, and an increased inflammation state that compromises the integrity of the organ and contributes to an inadequate response to insults, including inefficient pulmonary bacterial clearance.

We estimate that there are over 60,000 patients in the United States and over 250,000 patients globally suffering from severe AATD. Currently, many AATD patients undergo “augmentation therapy” consisting of weekly intravenous (“IV”) infusions of either plasma-purified AAT or recombinant AAT. This therapy requires burdensome weekly IV infusions and often includes the risk of exposure to bloodborne pathogens connected with the use of blood-derived products.

KB408

KB408 is an inhaled (nebulized) formulation of our proprietary vector, designed to deliver two copies of the SERPINA1 transgene that encodes functional, full-length human AAT protein, for the treatment of AATD. Preclinical studies have shown that KB408 successfully transduces patient-derived lung epithelial cells in vitro, leading to production and secretion of full-length human AAT protein capable of irreversibly binding its cognate target NE. In small animal models, analysis of lung tissue biopsies, serum, and bronchoalveolar lavage fluid harvested 24 and 48 hours after inhalation of KB408 shows secretion of full-length AAT protein, with no evidence of significant or systemic toxicity.

In September 2023, the FDA granted KB408 ODD for the treatment of AATD.

Clinical Development of KB408

In September 2023, we announced that the FDA had accepted our Investigational New Drug (“IND”) application to evaluate KB408, delivered via a nebulizer, in a clinical trial to treat patients with AATD. In February 2024, the Company dosed the first patient in the KB408 Phase 1 SERPENTINE-1 study for the treatment of Alpha-1 Antitrypsin Deficiency. SERPENTINE-1 is a Phase 1 open-label, single dose escalation study in adult patients with AATD with a PI*ZZ genotype. Three planned dose levels of KB408 will be evaluated in up to 12 patients to evaluate the safety, tolerability, and proof-of-mechanism of KB408. Cohorts 1 and 2 will focus predominantly on safety with dose escalation and pharmacodynamic activity in the lung will be assessed at the highest dose by bronchoscopy in Cohort 3. The Company is working closely with the Alpha-1 Foundation and their Therapeutic Development Network on the SERPENTINE-1 study and intends to announce interim data from the study in the second half of 2024. Details about the Phase 1 study can be found at www.clinicaltrials.gov under NCT

identifier: NCT06049082. Nothing included on this website shall be deemed incorporated by reference into this Annual Report on Form 10-K.

Oncology

KB707 for Solid Tumors

Disease Background

Cancer is progressive and typically fatal disease for which adequate treatment options are lacking. Despite recent advancements, the treatment of locally advanced or metastatic solid tumors remains particularly difficult and long-term outcomes are poor. Standard of care treatments are rarely curative, therapeutic benefits are transient, and the majority of patients with locally advanced or metastatic solid tumors are either ineligible for, or will eventually exhaust, currently available therapies. Many available therapies are also highly toxic and poorly tolerated by patients.

Cancer imposes a heavy burden on patients worldwide. The World Health Organization lists cancer as a leading cause of death globally and estimates that the disease was responsible for nearly 10 million deaths in 2020. Of these, an estimated 5 million deaths were attributed to solid tumor malignancies of the lung, colon and rectum, liver, stomach, and breast alone. Solid tumor malignancies similarly impose a heavy burden on patients in the U.S., with the National Cancer Institute estimating that over 300,000 patients will have died from lung, colon and rectum, pancreas, breast, prostate, liver and bile duct, and melanoma of the skin cancers in 2023.

KB707

KB707is a redosable, immunotherapy designed to deliver genes encoding both human interleukin-2 (“IL-2”) and interleukin-12 (“IL-12”) to the tumor microenvironment and promote systemic immune-mediated tumor clearance. Two formulations of KB707 are in development, a solution formulation for transcutaneous injection and an inhaled (nebulized) formulation for lung delivery. IL-2 and IL-12 are secreted cytokines with complementary functions promoting cell-mediated immunity in humans. Both IL-2 and IL-12 have been shown to elicit anti-tumor immune responses in preclinical or clinical models and have been extensively studied for their potential in cancer immunotherapy. Despite promising signs of efficacy, it has proven difficult to effectively harness IL-2 and IL-12 for therapeutic benefit, as systemic administration is often poorly tolerated, and the inherently short half-lives of these cytokines necessitate high dose levels and extremely frequent dose intervals. KB707 leverages the Company’s HSV-1 vector platform – and its ability to efficiently deliver a durable DNA payload without active replication and minimal cytotoxicity – to drive local and sustained cytokine expression within the tumor microenvironment and maximize the therapeutic window and benefit of IL-2 and IL-12.

In preclinical studies, KB707 has been shown to efficiently transduce mammalian cells in vitro leading to the secretion of bioactive IL-2 and IL-12 and drive localized, durable cytokine expression in mouse skin after intradermal injection. Furthermore, in stringent, checkpoint inhibitor refractory ‘cold’ syngeneic mouse models, HSV-1 vector based delivery of murine equivalent IL2 and IL12 elicited robust antitumor responses and survival benefits, including via intratumoral injection in single and dual flank B16F10 melanoma models, as well as via intratracheal delivery in a metastatic K7M2 osteosarcoma model, with evidence of protection from tumor rechallenge in both models suggestive of prolonged adaptive immunity.

In July 2023, the FDA granted intratumoral KB707 Fast Track Designation for the treatment of anti-programmed cell death protein-1 (“PD-1”) relapsed/refractory locally advanced or metastatic melanoma. In February 2024, the FDA also granted inhaled KB707 Fast Track Designation for the treatment of patients with solid tumors with pulmonary metastases that are relapsed or refractory to standard of care therapy.

Clinical Development of KB707

In July 2023, we announced that the FDA had accepted our IND application to evaluate intratumoral KB707 in a clinical trial to treat patients with locally advanced or metastatic solid tumors. The study, OPAL-1, is an open-label, multi-center, monotherapy, dose escalation and expansion Phase 1 study, enrolling patients with locally advanced or metastatic solid tumors, who relapsed or are refractory to standard of care, with at least one measurable and injectable tumor accessible by transcutaneous route. The primary objective of the study is to evaluate safety and tolerability of KB707. Efficacy will also be assessed by multiple measures including overall response rate, progression free survival, and overall survival, and the immune effects of KB707 monotherapy will be assessed in tumor tissue, lymph nodes, and blood. The first patient in OPAL-1 was dosed in October 2023 and enrollment is ongoing. Details of the OPAL-1 study can be found at www.clinicaltrials.gov under NCT identifier NCT05970497. Nothing included on this website shall be deemed incorporated by reference into this Annual Report on Form 10-K.

In January 2024, the FDA accepted an amendment to our IND application to evaluate inhaled KB707 in a clinical trial to treat patients with locally advanced or metastatic solid tumors of the lung. We plan on initiating this open-label, multi-center, monotherapy, dose escalation and expansion Phase 1 study, KYANITE-1, in the first half of 2024. Details of the KYANITE-1

study can be found at www.clinicaltrials.gov under NCT identifier NCT06228326. Nothing included on this website shall be deemed incorporated by reference into this Annual Report on Form 10-K.

Dermatology

KB105 for TGM1-Deficient Autosomal Recessive Congenital Ichthyosis (“ARCI”)

Disease Background

ARCI is a life-long, severe monogenic skin disease. While a number of genetic mutations have been associated with the development of ARCI, the most common cause of ARCI is an inactivating mutation in the human TGM1 gene encoding the enzyme transglutaminase-1 (“TGM1”), a protein that is essential for the proper formation of the skin barrier. Mutations in the TGM1 gene, and the subsequent disruption to the epidermal barrier, leads to pronounced dehydration, trans-epidermal exposure to unwanted toxins and surface microorganisms, and a greatly increased risk of infection. Transglutaminase-1 deficiency is associated with increased mortality in the neonatal period and has a dramatic impact on quality of life.

Patients suffering from ARCI often exhibit life-long pronounced plate-like scaling of the skin, which is often of a dark color and can cover the whole body. Such patients frequently suffer from exposure of the inner eyelid surface due to turning away of the eyelids from the eye (ectropion), the turning outwards of the lips (eclabium), deformities of joint and nasal cartilage (hypoplasia), scarring alopecia (especially at the edge of the scalp) and a thickening of the skin on the palms of the hands and soles of the feet (palmoplantar keratoderma). Additional complications experienced by ARCI patients include episodes of sepsis, fluid and electrolyte imbalances due to impaired skin barrier function, and failure to thrive, especially during the neonatal period and infancy. Severe heat intolerance and nail dystrophy are also frequently observed. There are currently no treatments targeting molecular correction of this disease. We estimate there are approximately 2,000 to 6,000 patients with of TGM1-deficient ARCI in the United States and Europe.

KB105

KB105 is a redosable, off the-shelf gene therapy designed to deliver two copies of the TGM1 gene when applied topically, directly to a patient’s exfoliated skin. The goal of direct supplementation of TGM1 protein at the site of administration is local correction and phenotypic improvement. Like B-VEC, KB105 was designed to be easily administered by a healthcare professional in the doctor’s office or, potentially, at the patient’s home.

The FDA and the EMA have each granted KB105 ODD and Orphan Designation, respectively, for the treatment of TGM1-ARCI, and the FDA has granted KB105 Fast Track Designation and Rare Pediatric Designation for the treatment of TGM1-ARCI.

Clinical Development of KB105

In September 2019, we initiated a Phase 1/2 trial in TGM1-ARCI patients. In May 2020, initial clinical data from the Phase 1 portion of the study which enrolled adult patients were presented at the Society for Investigative Dermatology (“SID”) meeting. In August 2020, we initiated the second phase of our Phase 2 portion of the clinical trial of KB105 to treat ARCI. We enrolled one patient in whom four rectangular 100cm2 (4-inch x 4-inch) areas of skin were selected as Target Areas (TAs). Each treatment area was assigned to receive repeat doses of 4.0x109 PFU (n=2 treatment areas) or 1.0x1010 PFU (n=2 treatment areas). Each area was dosed on Day 1 and 3, after which dosing continued either every 3 days (n=2 treatment areas) or every 6 days (n=2 treatment areas) up to day 30. Treatment areas were clinically evaluated at pre- and post-KB105 application timepoints using a 5-point IGA scale (0 = clear; 1 = almost clear; 2 = mild; 3 = moderate; 4 = very severe). In July 2021, we announced initial Phase 2 data.

Repeated topical doses of KB105 were well tolerated, and no drug-related adverse effects were reported. No vector shedding or systemic viral exposure was detected at any time point. Improvement on the IGA scale was observed in each treatment area, with the maximum effect observed in TA3 and TA4 that received the highest dose; at day 27, the investigator assigned an IGA score of 2, which was improved as compared to baseline score of 4 in each area. Variable 1-point improvements were observed at other time points and in the treatment areas that received the lowest dose. As in the Phase 1 portion of the trial, TGM1 turnover was observed to be variable but relatively rapid, and the observed IGA improvements were not sustained through day 60.

We plan to resume enrollment in the Phase 2 portion of this trial later in 2024.

KB104 for Netherton Syndrome

Disease Background

Netherton Syndrome is a debilitating monogenic autosomal recessive skin disorder. The disease arises due to mutations in the SPINK5 gene, resulting in loss of activity of its encoded serine protease inhibitor Kazal-type 5 (“SPINK5”), also known as Lympho-Epithelial Kazal type-related Inhibitor. In healthy individuals, SPINK5 is one of the serine protease inhibitors

expressed in the outermost layers of the skin, and it plays a critical role in the regulation of serine proteases which hydrolyze extracellular proteins that hold corneocytes together. In patients suffering from Netherton Syndrome, the suppressive effects of SPINK5 on these serine proteases are abolished due to underlying genetic mutations in the SPINK5 gene. Consequently, hyperactivated serine proteases in the skin cause uncontrolled desquamation, leading to a defective skin barrier.

In infants, severe Netherton Syndrome can be associated with failure to thrive, hypernatremic dehydration secondary to excess fluid loss, delayed growth, short stature, and recurrent infections. Clinically, Netherton Syndrome is characterized by congenital ichthyosiform erythroderma, hair shaft defects, recurrent infections, and a defective skin barrier. A predisposition to allergies, asthma, and eczema is also characteristic of Netherton Syndrome. Ultimately, those afflicted by Netherton Syndrome often experience chronic skin inflammation, severe dehydration, and stunted growth.

There are approximately 38,000 cases of patients with Netherton Syndrome worldwide and about 700 new cases per year globally. There are no current approved treatments for Netherton Syndrome. Existing approaches are limited to palliative treatments, including topical moisturizers, repair formulas and steroids.

KB104

KB104 is a redosable off-the-shelf gene therapy designed to deliver two copies of the SPINK5 gene to relevant skin cells when applied topically. By directly supplementing the skin with functional SPINK5, the goal of therapy is to locally correct the desquamation and improve the barrier function of the skin. In preclinical testing, a properly localized human SPINK5 gene was detected 48 hours after topical KB104 application in mice without toxicity. KB104-mediated human SPINK5 was expressed in the correct layer of skin at the transcript and protein levels.

The FDA has granted KB104 Rare Pediatric Designation for the treatment of Netherton Syndrome.

We plan to file an IND application with the FDA and initiate a clinical trial of KB104 in Netherton Syndrome following initiation of the KB105 Phase 2 study.

Aesthetics

While our focus is on the development of gene therapies to treat patients with severe, life‐threatening, or rare diseases with high unmet medical needs, we are also evaluating the potential of our platform to address more prevalent and/or non-genetic conditions. To that end, in April 2019, we incorporated Jeune Aesthetics, a wholly-owned subsidiary, for the purposes of undertaking preclinical and clinical studies for aesthetic skin conditions.

KB301 for Aesthetic Skin Conditions

Background

The skin is largely composed of collagen-rich connective tissue, with dermal collagen, composed primarily of types 1 and 3 collagen fibrils, representing >90% (dry weight) of human skin. The characteristics of skin aging are largely due to aberrant collagen homeostasis, including reduced collagen biosynthesis, increased collagen fibril fragmentation, and progressive loss of dermal collagen culminating in a net collagen deficiency, resulting from both intrinsic (e.g., passage of time, genetics) and extrinsic (e.g., chronic light exposure, pollution) pressures.

Facial injectables, including hyaluronic acid, botulinum toxin type A, collagen, polymer fillers, and calcium hydroxyapatite microparticles, are intended to correct perceived facial defects (e.g., fine lines, shallow wrinkles, and deeper furrows), and are administered for both cosmetic and therapeutic indications. The global aesthetic injectable market was valued at $8.5 billion in 2022 and is projected to grow to $13.8 billion by 2030. The United States remains the largest market but emerging markets’ growth rates are significant. The growth drivers are expanded access to services at medical spas and beauty bars combined with growing consumer purchasing power, especially in emerging markets. Shifting consumer attitudes about wellness, beauty and healthy aging have increased awareness and acceptance of aesthetics, generating demand from new patient segments, including men and millennials.

KB301

KB301 leverages our clinical experience in delivering genes of interest to the skin and is designed to stimulate biorejuvenation of the skin via delivery of the gene that encodes for type III collagen when administered via intradermal injection. We believe that our approach of directed expression of full-length human type III collagen via intradermal application of KB301 provides a unique and straightforward approach to restoring collagen homeostasis, and by extension, reconstructing an optimal physiologic environment in the skin to treat wrinkles or other presentations of aged or damaged skin.

Clinical Development of KB301

We initiated a Phase 1 clinical trial, the PEARL-1 trial, for the treatment of aesthetic skin conditions in August 2020. The Phase 1 dose-ranging trial evaluated the safety, tolerability, and initial efficacy of intradermal injections of KB301 in adult

subjects aged 18-75. KB301 was well tolerated, and we were able to biopsy and demonstrate proof-of-mechanism. Complete results from Cohort 1 focused on safety were presented at the 2021 SID Annual Meeting.

In March 2022, we announced positive proof-of-concept efficacy and safety data from Cohort 2 of the PEARL-1 study of KB301 for the treatment of aesthetic skin indications. Cohort 2 was a randomized, double-blind, placebo-controlled clinical trial that evaluated the safety and efficacy of KB301 for the improvement of fine lines and skin texture in the lower and upper cheek and for improvement in skin thickness in the knee. Cohort 2 enrolled 27 subjects across two trial sites. Bilateral treatment areas included the neck behind the ear to assess initial safety and on the cheek below and above the zygomatic arch (lower and upper cheek), and around the knee. Subjects were randomized 2:1 to receive low dose KB301 or placebo in the upper cheek and knee as multiple micro depot injections over the selected treatment area with a 33 G needle. Subjects receiving KB301 in the lower check were randomized 2:1 to receive either low dose KB301, high dose KB301 or placebo. Four patients dropped out of the Cohort 2 study – one subject following the initial safety assessment behind the ear, two subjects for unspecified reasons, and one subject due to unevenness in face between active and placebo during the study.

A subset of subjects from the PEARL-1 Cohort 2 trial were enrolled into a durability trial to look for duration of effect, reduction of the unevenness in placebo treated sites, and for long term safety monitoring. Ten subjects were enrolled in the durability trial, an open-label extension study to assess duration of effect below the zygomatic arch (the lower cheek area). The durability trial enrolled subjects who had received the high dose regimen of KB301 during the PEARL-1 Cohort 2 trial in one or both of their lower cheeks. Subject Satisfaction Scores and Investigator Assessments were measured monthly for three consecutive visits that correspond to timepoints up to nine-months following administration of the last dose of KB301. In addition, subjects with placebo-treated lower cheeks were dosed with KB301 during the durability trial to normalize their appearance. In November 2022, we announced nine-month durability of effect in Cohort 2 of the PEARL-1 study of KB301.

In April 2023, we initiated and treated the first subject in the PEARL-1 Cohort 3 study. The PEARL-1 Cohort 3 study is an open label study to evaluate different doses of KB301 for the improvement of lateral canthal lines (“LCL”) at rest in up to 20 subjects. Jeune Aesthetics initiated and treated the first subject in the PEARL-1 Cohort 4 study in January 2024, an open label study to evaluate KB301 for the improvement of dynamic wrinkles of the décolleté in up to 20 subjects. The Cohort 3 and Cohort 4 studies are running simultaneously and Jeune Aesthetics expects to announce results for both cohorts in the first half of 2024. Following completion of these cohorts, Jeune Aesthetics plans to initiate a Phase 2 study of KB301. Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT identifier NCT04540900. Nothing included on this website shall be deemed incorporated by reference into this Annual Report on Form 10-K.

Future Opportunities

In addition to the programs specified herein, we are also conducting exploratory preclinical research and development to expand potential applications of proprietary HSV-1 based vector platform. Research focus areas include the development of new candidates for the treatment of additional monogenic rare diseases in the skin, lung, and eye, as well as exploration of new routes of administration to treat diseases in additional tissues. We also believe the ability to redose, as well as the large payload capacity of our proprietary vectors, will allow us to deliver multiple genes and other effectors, which could enable development of therapies for more common conditions that are not necessarily the result of an inherited genetic defect, such as KB707. As additional proof-of concept we have generated a library of vectors designed to deliver anti-inflammatory antibodies. Further, we evaluated one of these vectors in an animal model of atopic dermatitis where expression of the vector-encoded-antibody was confirmed, and efficacy was observed.

If we are able to successfully generate product candidates to treat these more common conditions, we intend to seek collaborative alliances towards the development and potential commercialization of these therapies.

Manufacturing

In-House CGMP Facilities

We have built in-house CGMP facilities to enable better quality control, shorten lead times, lower costs and strengthen command over our intellectual property. Our first facility, ANCORIS, a commercial scale CGMP-compliant manufacturing facility, is producing VYJUVEK for commercial sales. In December 2022, the FDA completed a successful audit of our ANCORIS facility.

Our second commercial scale CGMP facility, ASTRA, was completed and qualified in 2023. It is a state-of-the-art CGMP manufacturing facility that, in addition to adding significant capacity to support our growing pipeline, also allows for in-house incorporation of raw material preparation, excipient manufacturing, testing, packaging, labeling and distribution, thereby fully integrating all components of the supply chain from starting materials to patient experience. We announced the ground breaking of ASTRA in January 2020 and began operational production in the third quarter of 2023.

Our proprietary manufacturing process which was initially developed for B-VEC and is now being used across our platform, was developed and optimized internally and involves both an upstream production process and downstream

purification process. Recombinant viral vectors are rendered incapable of, or attenuated for, replacing in human cells by removal of specific viral machinery, including packaging proteins. However, to produce the recombinant virus, these viral proteins have to be re-introduced into the virus production process so that the viral vector can be packaged. In most other viral vector production systems, the missing viral proteins are supplied in one or more individual helper plasmids, along with the base viral vector plasmid. All the plasmids are then co-transfected into a production cell line in the presence of a transfection agent to facilitate viral vector production and packaging. The difficulty of this approach is that it requires c-scale manufacturing and qualification of each of the packaging plasmids and optimization of the transfection method. Even with optimized reagents and methods, significant batch-to-batch variability is seen in viral vector yield and titer that, we believe, drives up the cost of viral vector manufacturing and scale-up and increases the risk of failure during manufacturing.

Our proprietary upstream process for HSV-1 production avoids the aforementioned issues. Our process requires three critical components:

•Production of a master virus seed stock (“MVSS”);

•Production of complementing master cell bank (“MCB”); and

•Optimized transduction parameters.

For VYJUVEK and each of our product candidates, we generate a MVSS which is scaled up from a single purified clone of the modified HSV-1 vector expressing the therapeutic effector. The MCB is a complementing cell line that stably expresses the HSV-1 viral proteins that are required for HSV-1 growth but have been deleted from the recombinant HSV-1 backbone. By introducing the deleted proteins into the MCB, as opposed to including them in the viral replication process via co-transfection of individual plasmids, we eliminate the need for multiple qualifications of the plasmids or variability in transfection efficiency from batch to batch, that other production processes face. Infection of the MCB with the MVSS at the optimal concentration results in production of the viral particle. Once the MCB, the MVSS, and the conditions of infection are established, virus production and resultant yield and titer are highly reproducible and scalable over multiple runs, and the risk of failure is minimal.

Optimization of MCB, MVSS and production methods requires extensive knowledge and technical experience with the HSV-1 genome and significant upfront effort to design and select the best virus seed stock and complementing cell line. We have screened hundreds of cell line clones to find the best complementing cell lines, and similarly designed and generated the optimal virus seed stocks for VYJUVEK and each of our product candidates. The viral seed stock expresses the therapeutic proteins under the control of strong constitutive or tissue-specific promoters and additional non-coding regulatory sequences have been included to optimize gene expression. We also have optimized the transduction conditions to reproducibly obtain high yields of the virus.

Unlike the upstream process, steps used to purify and concentrate the viral vector product are often common across different viral vector platforms and usually involve multiple stages of purification, clarification, concentration, and diafiltration, with the ultimate goal to remove contaminants and concentrate the product. We have developed a robust and reproducible process for purifying our viral vector to required concentrations for commercial and clinical use, while successfully removing contaminants to meet FDA guidelines.

We believe that the MVSS and MCB are a vital part of the production of VYJUVEK and our product candidates, as they ensure the reproducible production of multiple commercial and clinical batches in a short six-week cycle time frame and in a cost-effective manner.

We have made significant investments in developing the most comprehensive and optimized manufacturing process for VYJUVEK and our vector product candidates, including:

•A proprietary vector manufacturing technique and a series of high-efficiency purification processes that produce highly purified therapeutic vectors and can be adapted for each product candidate; and

•A critical list of CGMP assays to accurately characterize our process and the HSV-1 vectors we produce.

Competition

The biotechnology and pharmaceutical industries are highly competitive. In particular, the field of gene therapy is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. Some of our competitors have substantially greater financial resources and larger research and development organizations. In addition, our experience in clinical trials, obtaining FDA and other regulatory approvals, and manufacturing and commercialization of products may be more limited.

VYJUVEK / B-VEC

Dystrophic Epidermolysis Bullosa

A number of companies are developing drug candidates for the treatment of DEB. VYJUVEK is the only corrective therapy for DEB approved worldwide. We believe our competitors fall into two broad categories:

•Corrective Approaches: We are aware of two companies, Abeona Therapeutics Inc. and Castle Creek Biosciences, Inc., which are developing autologous orgrafting gene therapy approaches to treating DEB. We are also aware of a recombinant-protein based approach being developed by BridgeBio Pharma, Inc.’s affiliate company, Phoenix Tissue Repair.

•Palliative Treatments: We are aware of companies, such as Chiesi Farmaceutici S.p.A. and RHEACELL GmbH & Co., which aredeveloping product candidates taking a palliative approach to treating the disease. Chiesi Farmaceutici S.p.A.’s palliative treatment Filsuvez® (birch triterpenes) was approved by the FDA in the United States in 2023 and was previously approved by the EMA for the EU.

Ophthalmology

Ocular Complications Secondary to Dystrophic Epidermolysis Bullosa

There are no approved therapies for ocular complications secondary to DEB at this time. We are aware of Eliksa Therapeutics’ program evaluating amniotic fluid derived ELK-003 eye drops to treat corneal abrasions in individuals with epidermolysis bullosa.

Respiratory

Cystic Fibrosis

There are no approved therapies for CF patients ineligible or intolerant to modulator regiments. We are aware of several preclinical or early clinical stage nucleic-acid-based programs for treatment of this patient population including Vertex Pharmaceuticals Inc., ReCode Therapeutics, Inc., Spirovant Sciences, Inc., and 4D Molecular Therapeutics, Inc.

Alpha-1 Antitrypsin Deficiency

Currently approved treatments for AATD consist of IV administered alpha-1 antitrypsin augmentation therapy, administered weekly. We are aware of at least three companies marketing augmentation therapies globally: CSL Limited, Takeda Pharmaceutical Company Limited., and Grifols, S.A. We are also aware of several preclinical or clinical stage programs in development for the treatment of various clinical manifestations of AATD. These can be generally classified into four broad categories:

•Gene Silencing Approaches: We are aware of two companies, Takeda Pharmaceutical Company Limited (in partnership with Arrowhead Pharmaceutical Inc.) and Novo Nordisk A/S (in partnership with Alnylam Pharmaceuticals, Inc.), which are developing interfering RNA medicines to treat the liver manifestations of AATD.

•Alternate Augmentation Approaches: We are aware of companies, such as Kamada Ltd. and Sanofi S.A., which aredeveloping new augmentation treatments with modified frequency or routes of administration to treat the lung manifestations of AATD.

•Direct Protease Inhibition: We are aware of companies, such as Peak Bio, Inc. and Mereo BioPharma Group plc, which aredeveloping protease inhibitors to treat the lung manifestations of AATD.

•Gene Editing Approaches: We are aware of companies, such as Intellia Therapeutics, Inc., Wave Life Sciences Ltd., and Beam Therapeutics Inc., which aredeveloping gene editing therapies inhibitors to treat both the lung and liver manifestations of AATD.

Oncology

Solid Tumors

A large number of companies are focused on the development and commercialization of new therapeutics for the treatment of locally advanced or metastatic tumors. We are aware of multiple programs across all stages of development as well as marketed products aiming to improve outcomes for patients with solid tumor malignancies. Some of the most established companies in the marketing and development of new cancer drugs include Merck & Co Inc., Bristol Myers Squibb Company, Johnson & Johnson, and Pfizer Inc.

Dermatology

Autosomal Recessive Congenital Ichthyosis

There are no approved therapies for ARCI at this time. We are aware of LEO Pharma A/S’s clinical stage program evaluating topical isotretinoin for ARCI.

Netherton Syndrome

There are no approved therapies for Netherton Syndrome. We are aware of Quoin Pharmaceutical Ltd.’s clinical stage program evaluating QRX003 for the treatment of Netherton Syndrome and that Novartis Inc. had conducted clinical trials of a product for the treatment of Netherton Syndrome previously.

Aesthetics

Aesthetic Skin Conditions

There are multiple approved therapies for aesthetic skin conditions, including hyaluronic acid and botulinum toxin based products marketed by AbbVie Inc., Revance Therapeutics, Inc., Merz Pharma GmbH & Co., KGaA, Galderma S.A., and others. We are also aware of multiple preclinical and clinical stage programs for improvement in aesthetic skin conditions, including those underway at AbbVie Inc. and Galderma S.A.

Intellectual Property and Proprietary Rights

Our success depends in part upon our ability to obtain and maintain exclusivity for our approved product, product candidates and platform technology. We typically rely on a combination of patent protection and regulatory exclusivity to maintain exclusivity for our approved product and product candidates, whereas exclusivity for our platform technology is generally based on patent protection and trade secret protection. However, trade secrets can be difficult to protect. In addition to patent protection, regulatory exclusivity, and trade secret protection, we also protect our approved product, product candidates and platform technology with trademarks and contractual protections. Additionally, we seek to protect our proprietary technology and processes, and obtain and maintain ownership of certain technologies, in part, through confidentiality agreements and intellectual property assignment agreements with our employees, consultants and commercial partners. We also seek to preserve the integrity and confidentiality of our data, trade secrets, and know-how, including by implementing measures intended to maintain the physical and electronic security of our research and manufacturing facilities, as well as our information technology systems.

We actively seek patent protection for our product candidates and certain of our proprietary technologies by filing patent applications in the U.S. and other countries as appropriate. These patent applications are directed to various inventions. We do not have patents or patent applications in every jurisdiction where there is a potential commercial market for our approved product or our product candidates. For each of our programs, our decision to seek patent protection in specific foreign markets, in addition to the U.S., is based on many factors, including:

•our available resources;

•the number and types of patents already filed or pending;

•the likelihood of success of the product candidate;

•the size of the commercial market;

•the presence of a potential competitor in the market; and

•whether the legal authorities in the market effectively enforce patent rights.

We continually evaluate our patent portfolio and patent strategy and believe our patents and patent applications provide us with a competitive advantage; however, if markets where we do not have patents or patent applications become commercially important, our business may be adversely affected. A discussion of certain risks and uncertainties that may affect our freedom to operate, patent position, regulatory exclusivities, and other proprietary rights is set forth in Item 1A. Risk Factors included in this Annual Report on Form 10-K.

Certain of our product candidates are in therapeutic areas that have been the subject of many years of extensive research and development by academic organizations and third parties who may control patents or other intellectual property that they might assert against us, should one or more of our product candidates in these therapeutic areas succeed in obtaining regulatory approval and thereafter be commercialized. We continually evaluate the intellectual property rights of others in these areas in order to determine whether a claim of infringement may be made by others against us. Should we determine that a third party has intellectual property rights that could impact our ability to freely market a product candidate, we consider a number of factors in determining how best to prepare for the commercialization of any such product candidate. In making this determination we consider, among other things, the stage of development of our product candidate, the anticipated date of first

regulatory approval, whether we believe the intellectual property rights of others are valid, whether we believe we infringe the intellectual property rights of others, whether a license is available upon commercially reasonable terms, whether we will seek to challenge the intellectual property rights of others, the term of the rights, and the likelihood of and liability resulting from an adverse outcome should we be found to infringe the intellectual property rights of others.

Currently, U.S. patents, as well as most foreign patents, are generally effective for 20 years from the date the earliest regular application was filed. In some countries, the patent term may be extended to recapture a portion of the term lost during regulatory review of the product candidate. For example, in the U.S., under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, a patent that covers an FDA-approved biologic may be eligible for patent term extension (for up to 5 years, but not beyond a total of 14 years from the date of product approval) as compensation for patent term lost during the FDA regulatory review process. The application for the extension must be submitted prior to the expiration of the patent and only one patent may be extended for any product based on FDA review delay. The United States Patent and Trademark Office (“USPTO”), in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In addition to patent term extension under the Hatch-Waxman Act, patents in the U.S. may be granted additional term due to delays at the USPTO during prosecution of a patent application. We actively strive to maximize the potential for patent protection for our product and product candidates in accordance with the law.

Patents

Our technology platform, VYJUVEK, and our product candidates are primarily protected by composition of matter and methods of use patents and patent applications. A summary of granted composition of matter and/or methods of use patents that we own, which cover our technology platform, VYJUVEK, and our product candidates in the U.S. and elsewhere, is provided below.

Our Technology Platform