Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the consolidated financial statements and related notes thereto included in this Annual Report on Form 10-K. In addition to historical information, this report contains forward-looking statements that involve risks and uncertainties which may cause our actual results to differ materially from plans and results discussed in forward-looking statements. We encourage you to review the risks and uncertainties discussed in the sections entitled Item 1A. “Risk Factors” and “Forward-Looking Statements” included at the beginning of this Annual Report on Form 10-K. The risks and uncertainties can cause actual results to differ significantly from those forecast in forward-looking statements or implied in historical results and trends. We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the U.S. Securities and Exchange Commission, or SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

This section of this Annual Report on Form 10-K generally discusses 2024, 2023 and 2022 items and year-to-year comparisons between 2024 and 2023, and 2023 and 2022 of the Company’s results of operations and cash flows.

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. 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 and EMA-inspected, commercial scale Current Good Manufacturing Practice (“CGMP”) manufacturing facility and a second, completed and qualified, commercial scale CGMP facility to support future expansion. Refer to Part I, Item 1 - Business for more information about our FDA approved product, VYJUVEK®, clinical development pipeline and research programs, and the status of our product candidates.

Our FDA Approved Commercial Product

VYJUVEK (beremagene geperpavec-svdt or B-VEC; referred to as B-VEC outside the United States)

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, a rare and severe monogenic disease that affects the skin and mucosal tissues and is caused by one or more mutations in a gene called COL7A1. VYJUVEK is a redosable topical gel containing our novel vector designed to deliver two copies of the COL7A1 transgene to a patient’s skin cells to produce the COL7 protein. VYJUVEK is the first and only corrective medicine approved by the FDA for the treatment of DEB, both recessive and dominant, that can be administered by a healthcare professional in either a clinical setting or in the home. We possess exclusive rights to develop, manufacture, and commercialize VYJUVEK and all our pipeline product candidates throughout the world.

Net VYJUVEK product revenue was $290.5 million for the year ended December 31, 2024. Since launch in 2023, we have reported cumulative net product revenue of 341.2 million.

Gross margin for the year ended December 31, 2024 was 93%. We define gross margin as product revenue, net less cost of goods sold expressed as a percentage of product revenue, net.

We have secured strong nationwide access and reimbursement for VYJUVEK in the United States since launch and, as of February 2025, positive access determinations have been achieved for 97% of lives covered under commercial and Medicaid plans. In January 2024, we announced that the United States Centers for Medicare & Medicaid Services, or CMS, had assigned a permanent and product-specific J-code for VYJUVEK, effective on January 1, 2024.

As of February 2025, we have secured over 510 reimbursement approvals for VYJUVEK in the United States.

We seek to make the experience of starting and continuing on VYJUVEK treatment seamless for the patient. Since launch, the infrastructure has been in place for patients to be treated in their home by a healthcare professional, reducing the need for regular visits to a clinic or hospital. Krystal ConnectTM, our United States in-house patient services call center, has been active since FDA approval and assists patients, caregivers and healthcare professionals interested in accessing VYJUVEK. Since launch and through the fourth quarter of 2024, patient compliance with once weekly treatment while on VYJUVEK remains high at 85%.

Preparations and infrastructure buildout are underway in Europe and Japan to support our planned direct commercial launch in these regions in 2025.

In October 2023, we submitted a MAA to the EMA for B-VEC for the treatment of DEB. In February 2024, the EMA completed inspection of our manufacturing facility as part of the MAA review process and, in May 2024, EU GMP certification was granted by the EMA. EMA review of our MAA is ongoing and we currently expect a CHMP opinion the first quarter of 2025.

In September 2024, the Haute Autorité de Santé in France approved pre-marketing early reimbursed access to B-VEC under the Accès Précoce (“AP1”) program. AP1 allows for early access to innovative therapies in France prior to European regulatory approval when a positive benefit/risk ratio is recognized and when no other therapeutic alternatives are available.

In October 2024, we filed a JNDA with Japan’s PMDA. The JNDA includes the results from the Japan OLE study, the design of which had been approved by the PMDA in July 2023. The efficacy portion of the Japan OLE study was completed in April 2024 and results closely mirrored those of our Phase 3 study in the United States, with B-VEC exhibiting a safety profile consistent with previous studies and all four patients that completed the study achieving the primary endpoint of complete wound closure at six months. The JNDA is under priority review and a decision by the PMDA is expected in the second half of 2025.

Pipeline Highlights and Recent Developments

Ophthalmology

KB803 is a redosable eye drop formulation of B-VEC, designed for the treatment of ocular complications that are thought to affect over 25% of DEB patients. These complications, which include corneal erosions, abrasions, blistering and scarring, can lead to progressive vision loss. There is currently no corrective therapy available.

Based on early clinical evidence of safety and potential benefit following topical B-VEC application to the eye of a DEB patient under compassionate use, we started discussions with the FDA on a potential clinical development path for KB803 and, in February 2024, we aligned with the FDA on our proposed single arm, open label registrational Phase 3 study to enable approval of KB803 to treat ocular complications of DEB. We expect to initiate the study in the first half of 2025 and plan to enroll up to 30 DEB patients.

In August 2024, we initiated a natural history study to prospectively collect data on the frequency of corneal abrasions in patients with DEB and serve as a run-in period for patients who may be eligible to participate in the Phase 3 study. Enrollment in the study is ongoing and, as of February 2025, we had enrolled approximately 50 patients in the study.

We are also actively evaluating multiple, internal preclinical-stage genetic medicine candidates for the treatment of front and back of the eye diseases.

Respiratory

KB407 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the full-length CFTR transgene for the treatment of CF, a serious rare lung disease caused by missing or mutated CFTR protein. In July 2023, we announced that we had dosed the first patient in CORAL-1, a Phase 1 multi-center, dose-escalation study evaluating KB407, delivered via a nebulizer, in patients with CF, regardless of their underlying genotype. In December 2024, we announced an interim safety data update for patients treated with KB407 in the first two dose escalation cohorts, in which we found single and repeat inhaled administration of KB407 to be safe and well tolerated. In January 2025, the CFF TDN Clinical Research Executive Committee granted full sanctioning of our KB407 Phase 1 CORAL-1 study protocol. We expect to report safety and CFTR delivery data from patients in the third and final cohort in mid-2025.

KB408 is an inhaled (nebulized) formulation of our novel vector designed to deliver two copies of the SERPINA1 transgene, that encodes for normal human AAT protein, for the treatment of AATD, a serious rare lung disease. In February 2024, we announced that we had dosed the first patient in SERPENTINE-1, a Phase 1, open-label, single dose escalation study evaluating KB408, delivered via a nebulizer, in adult patients with AATD with a Pi*ZZ or a Pi*ZNull genotype. In December 2024, we announced an interim clinical update from the first two dose escalation cohorts of SERPENTINE-1. Inhaled KB408 was safe and well-tolerated at both tested dose levels and clear evidence of successful SERPINA1 delivery and AAT expression was observed in both patients that underwent bronchoscopies. Following this data update, we simultaneously expanded the second cohort and opened enrollment in the third and final cohort of SERPENTINE-1 for more comprehensive molecular assessments at both dose levels. We expect to report results for both cohorts in the second half of 2025.

Oncology

KB707 is a redosable, immunotherapy designed to deliver genes encoding both human IL-2 and 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. Both intratumoral and inhaled KB707 have been granted RPDD and Fast Track Designations by the FDA.

Inhaled KB707 is currently under evaluation in KYANITE-1, an open-label, multi-center, dose escalation and expansion Phase 1/2 study, evaluating inhaled KB707, as monotherapy or in combination, in patients with locally advanced or metastatic solid tumors of the lung. In December 2024, we announced an initial clinical update for the monotherapy dose escalation and expansion cohorts of KYANITE-1. Early evidence of monotherapy activity was observed in the evaluable cohort of 11 patients with heavily pre-treated advanced NSCLC, achieving an ORR of 27% and a DCR of 73% as of data cut-off. Inhaled KB707 was also reported to be safe and generally well tolerated as monotherapy in the 37 patients included in the safety analysis. The majority of treatment-related adverse events have been mild to moderate in severity and transient with no Grade 4 or 5 adverse events observed. Evaluation of inhaled KB707 in monotherapy and combination dose expansion cohorts is ongoing.

Intratumoral KB707 is currently under evaluation in OPAL-1, an open-label, multi-center, dose escalation and expansion Phase 1/2 study, evaluating intratumoral KB707, as monotherapy or in combination, in 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 of administration. The final monotherapy dose escalation cohort was cleared in May 2024 and evaluation of intratumoral KB707 in monotherapy and combination dose expansion cohorts is ongoing.

Dermatology

KB105 is a topical gel containing our novel vector designed to deliver two copies of the TGM1 transgene encoding the human enzyme TGM1 for the treatment of TGM1-deficient LI, a serious rare skin disorder most often caused by missing or mutated TGM1 protein. We expect to initiate the Phase 2 portion of JADE-1, a randomized, placebo-controlled Phase 1/2 study evaluating KB105 for the treatment of TGM1-deficient LI in 2026.

Aesthetics

In addition to focusing on genetic medicines to treat patients with diseases with high unmet medical needs, we are leveraging the ability of our platform to deliver proteins of interest to cells in the skin in the context of aesthetic medicine via our wholly-owned subsidiary, Jeune Aesthetics. Jeune Aesthethics’ lead program, KB301, is a solution formulation of our novel vector for intradermal injection designed to deliver two copies of the COL3A1 transgene to address signs of aging or damaged skin caused by declining levels of, or damaged proteins within the extracellular matrix, including COL3. In August 2024, Jeune Aesthetics announced positive interim safety and efficacy results from Cohorts 3 and 4 of the Phase 1 study PEARL-1, open label studies evaluating KB301 in the treatment of lateral canthal lines at rest and dynamic wrinkles of the décolleté, respectively. Meaningful and sustained improvements in multiple skin aesthetic attributes, including wrinkles, crepiness, hydration, and radiance, were reported by the study investigators and subjects alike in both the décolleté and lateral canthal regions. Increased subject satisfaction with wrinkle appearance was also reported. Based on these Phase 1 results, Jeune Aesthetics has selected treatment of the dynamic wrinkles of the décolleté for advanced clinical development. Jeune Aesthetics has initiated development of a décolleté-specific evaluation scale and expects to start a Phase 2 study evaluating KB301 in this indication in the second half of 2025.

In November 2024, Jeune Aesthetics dosed the first subject in the PEARL-2 study, an ongoing, 2:1 randomized and placebo-controlled Phase 1 study evaluating its second clinical-stage investigational aesthetic therapy KB304 for the treatment of wrinkles. KB304 is a solution formulation of our novel vector for intradermal injection designed to deliver one copy of the COL3A1 transgene and one copy of the ELN transgene to address various signs of skin aging including elasticity loss. Jeune Aesthetics expects to report top-line results from the study in the second half of 2025.

Jeune Aesthetics has several other aesthetic medicine product candidates in various stages of preclinical development.

Financial Overview

Product Revenue, Net

After FDA approval of VYJUVEK in May 2023, we began commercial marketing and sales and began recognizing revenue during the third quarter of 2023. Our future revenue will fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any such sales.

The transaction price that we recognize as revenue for VYJUVEK sales includes an estimate of variable consideration, which includes discounts, returns, copay assistance and rebates that are offered within contracts. Refer to Note 2 of the notes to the consolidated financial statements included in this Form 10-K for additional information.

Cost of Goods Sold

Cost of goods sold includes direct and indirect costs related to the manufacturing of VYJUVEK. These costs consist of manufacturing costs, personnel costs including stock-based compensation, facility costs, and other indirect overhead costs. Cost of goods sold may also include period costs related to certain manufacturing services and inventory adjustment charges.

Prior to receiving FDA approval in May 2023, costs associated with the manufacturing of VYJUVEK were expensed as research and development expenses.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred to advance our preclinical and clinical candidates, which include:

•expenses incurred under agreements with contract manufacturing organizations, contract research organizations, consultants and other vendors that conduct our preclinical activities;

•costs of acquiring, developing and manufacturing clinical trial materials and lab supplies;

•facility costs, depreciation and other expenses, which include direct expenses for rent and maintenance of facilities and other supplies; and

•payroll related expenses, including stock-based compensation expense.

We expense internal research and development costs to operations as incurred. We expense third-party costs for research and development activities, such as the manufacturing of preclinical and clinical materials, based on an evaluation of the progress to completion of specific tasks such as manufacturing of drug substance, fill/finish and stability testing, which is provided to us by our vendors.

We expect our research and development expenses will increase as we continue the manufacturing of preclinical and clinical materials and manage the clinical trials of, and seek regulatory approval for, our product candidates and as we expand our product portfolio. Due to the numerous risks and uncertainties associated with product development, we cannot determine with certainty the duration, costs and timing of clinical trials, and, as a result, the actual costs to complete clinical trials may exceed the expected costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist principally of salaries and other related costs, including stock-based compensation for personnel in our executive, finance, legal, commercial, business development, information technology and other general and administrative functions. Selling, general and administrative expenses also include professional fees associated with corporate and intellectual property-related legal expenses, consulting and accounting services, insurance, facility-related costs and expenses associated with obtaining and maintaining patents. Other selling, general and administrative costs include travel expenses, patient access program costs, management service fees, marketing expenses, and selling expenses which include transportation, shipping and handling fees.

We anticipate that our selling, general and administrative expenses will increase in the future relating to our commercialization efforts and to support the development of our product candidates. These increases will likely include increased costs for insurance, costs related to the hiring of additional personnel and payments to outside consultants, lawyers and accountants, among other expenses. Additionally, we anticipate that we will continue to increase our salary and personnel costs and other expenses to support B-VEC commercialization globally.

ASTRA Capital Expenditures

In March 2021, we closed on the purchase of the building that was constructed to house our second commercial scale CGMP facility, ASTRA. In March 2023, we received the permanent occupancy permit for ASTRA which allowed the Company to begin utilizing certain parts of the building for research and development operations once qualification was completed and a portion of the assets were placed into service throughout 2023 and 2024. We incurred significant capital expenditures related to the construction of ASTRA in 2023 and expect to continue to incur capital expenditures related to ASTRA throughout the operational life of the facility.

Gains from Sale of Priority Review Voucher (“PRV”)

Gain from sale of priority review voucher relates to proceeds from sale of the rare pediatric PRV we received in connection with the FDA’s approval of VYJUVEK.

Interest and Other Income, Net

Interest and other income, net consists primarily of income earned from our cash, cash equivalents and investments.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial position and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate estimates which include, but are not limited to, variable consideration associated with revenue recognition, stock-based compensation expense, accrued expenses, the fair value of financial instruments, and the valuation allowance included in the deferred income tax calculation during the period. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions.

While our significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

After FDA approval of VYJUVEK in May 2023, we began commercial marketing and made our first product sales in 3Q 2023. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“ASC 606”) requires us to make estimates of variable consideration, included in our contracts, to be included in the transaction price.

Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring control of the promised good to the customer. The only performance obligation in the Company’s contracts with customers is the timely delivery of the product to the customer’s designated location.

The Company sells VYJUVEK to a limited number of specialty pharmacy (“SPs”) providers that mix the medication to be administered by a healthcare professional in either a healthcare professional or home setting and to a limited number of hospitals or specialty distributors (“SDs”) who deliver to hospitals where patients are administered the medication in a healthcare setting. Revenue is recognized when the customer obtains control of the product, which occurs at a point in time, upon delivery to the customer.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring VYJUVEK and is generally based upon a list price and is recorded at the net sales price upon delivery and transfer of control to the customer, and includes an estimate of variable consideration, which results from discounts, rebates, copay assistance, and returns that are offered within contracts between the Company and its customers. These reserves, representing the Company’s best estimates of the amount of consideration to which the Company is entitled, are based on the terms of the contract.

Variable consideration reduces the transaction price to reflect the Company’s best estimate of the amount of consideration to which the Company is entitled based on the terms of the contracts and is recorded in the same period the related product revenue is recognized. The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is considered probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, the Company will adjust these estimates in the period these variances become known.

•Prompt Pay Discounts: As an incentive for prompt payment, the Company may offer cash discounts to its counterparties. The Company estimates accrued prompt pay discounts using the most likely amount method. The Company expects that all eligible counterparties will comply with the contractual terms to earn the discount. The Company records the discount as a reduction of revenue on the consolidated statements of operations and as an allowance against accounts receivable, net on the consolidated balance sheets.

•Government Rebates: The Company participates in certain government rebate programs including Medicaid, Medicare and Tricare. For Medicare, the Company estimates the accrued liability based on the estimated number of patients in the prescription drug coverage gap under the Medicare Part D program. The Company also estimates accrued government rebates using the expected value method based on estimated percentages of VYJUVEK that will be prescribed to qualified patients, estimated rebate percentages and estimated levels of inventory in the distribution channel that will be prescribed to qualified patients and records the rebates as a reduction of revenue on the consolidated statements of operations and accrued rebates and other long-term liabilities on the consolidated balance sheets.

Accrued commercial rebates are estimated using the expected value method based on estimated percentages of VYJUVEK that will be prescribed to qualified patients and estimated levels of inventory in the distribution channel. Accrued commercial rebates are recorded as a reduction of revenue on the consolidated statements of operations and are included in accrued rebates on the consolidated balance sheets.

•Copay Assistance: The Company provides copay assistance to qualified patients with commercial insurance in states that allow copay assistance, helping them meet copay obligations to their insurance provider. The Company reimburses pharmacies for this discount through third-party vendors. The Company estimates copay assistance costs using the expected value method based on estimated percentages of VYJUVEK that will be prescribed to qualified patients, average assistance paid based on reporting from third-party vendors and estimated levels of inventory in the distribution channel. Copay assistance costs are recorded as reductions to revenue on the consolidated statements of operations and are recorded in accrued expenses and other current liabilities on the consolidated balance sheets.

•Product Returns: The Company offers limited return rights relating only to product damage or defects identified upon receipt, and therefore the Company expects minimal returns. Returns are estimated taking into consideration several factors including these limited product return rights, historical return activity, and other relevant factors. The Company has not experienced significant product returns to date, and accordingly no allowance for returns was recorded for the year ended December 31, 2024.

Accrued Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses, prepaid assets and other current liabilities. This process involves reviewing open contracts and commitments, communicating with our personnel to identify services that have been performed for us and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued research and development expenses and other current liabilities as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of accrued research and development expenses, prepaid assets and other current liabilities include fees paid to contract manufacturers made in connection with the manufacturing of preclinical and clinical trials materials.

We record our expenses related to clinical manufacturing based on our estimates of the services performed pursuant to contracts with the entities producing clinical materials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. Payments under these types of contracts depend heavily upon the successful completion of many separate tasks involved in the manufacturing of drug product. In accruing service fees, we estimate the time period over which services will be performed, and the actual services performed in each period. If actual results in the future vary from our estimates, we will adjust these estimates in the period these variances become known.

Stock-Based Compensation

We have applied the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification, or ASC, Topic 718, Compensation—Stock Compensation (“ASC 718”), to account for stock-based compensation. We recognize compensation costs related to stock granted based on the estimated fair value of the awards on the date of grant.

ASC 718 requires all stock-based payments, including grants of stock options and restricted stock, to be recognized in the consolidated statements of operations and comprehensive income (loss) based on their grant-date fair values. Compensation expense for stock options, restricted stock awards and restricted stock units is recognized on a straight-line basis based on the grant-date fair value over the associated service period of the award, which is generally the vesting term. Compensation expense for performance-based restricted stock units is recognized for the awards that are probable of vesting over the service period of the award. On a quarterly basis, management estimates the probable number of performance-based restricted stock units that would vest until such time that the ultimate achievement of the performance criteria are known.

Determining the amount of stock-based compensation to be recorded requires us to develop estimates of the fair value of stock-based awards as of their measurement date. We recognize stock-based compensation expense over the requisite service period, which is the vesting period of the award. Calculating the fair value of stock-based awards requires that we make assumptions. We estimate the fair value of its stock options using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including: (i) the expected stock price volatility; (ii) the expected term of the award; (iii) the risk-free interest rate; and (iv) expected dividends.

We estimate the expected term of stock options using the “simplified” method as prescribed by SEC Staff Accounting Bulletin No. 107, Share-Based Payments, whereby the expected term equals the arithmetic mean of the vesting term and the

original contractual term of the option. The risk-free interest rates are based on US Treasury securities with a maturity date commensurate with the expected term of the associated award. The Company has never paid and does not expect to pay dividends in the foreseeable future. The Company accounts for forfeitures as they occur. Stock-based compensation expense recognized in the financial statements is based on awards for which service conditions are expected to be satisfied.

Results of Operations

Years Ended December 31, 2024, 2023 and 2022

Years Ended December 31, Change

Operating expenses

Other income

Product Revenue, Net

Product revenue, net was $290.5 million for the year ended December 31, 2024 as compared to $50.7 million for the year ended December 31, 2023 and zero for the year ended December 31, 2022 due to initial sales of VYJUVEK after FDA approval was obtained on May 19, 2023. The increase in product revenue, net from 2023 to 2024 was driven by an increase in VYJUVEK sales following initial commercial sales recorded in August 2023.

Cost of Goods Sold

Cost of goods sold was $20.1 million for the year ended December 31, 2024 as compared to $3.1 million for the year ended December 31, 2023 and zero for the year ended December 31, 2022 due to initial sales of VYJUVEK after FDA approval was obtained on May 19, 2023. The increase in cost of goods sold from 2023 to 2024 was driven by an increase in VYJUVEK sales following initial commercial sales recorded in August 2023. Prior to receiving FDA approval for VYJUVEK in May 2023, costs associated with the manufacturing of VYJUVEK were expensed as research and development expense.

Research and Development Expenses

Research and development expenses increased approximately $7.1 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The increase was primarily driven by the following:

•an increase of $4.2 million in payroll related expenses, including stock-based compensation, primarily driven by an increase in headcount to support overall growth,

•an increase of $3.8 million in manufacturing expenses related to our product candidates,

•an increase of $3.6 million in clinical development costs,

•an increase of $3.6 million in other research and development expenses primarily relating to licensing and regulatory costs and facilities and equipment related costs, and

•an increase of $602 thousand in depreciation due to the Company’s second CGMP facility being placed into service throughout 2023 and 2024 partially offset by the capitalization of depreciation associated with increased commercial batches of VYJUVEK.

The increases were partially offset by:

•a decrease of $7.4 million due to the capitalization of allocated overhead costs for increased commercial batches of VYJUVEK and

•a net decrease of $1.4 million in direct manufacturing expenses due to the costs to manufacture VYJUVEK being capitalized into inventory and cost of goods sold.

Research and development expenses increased $4.0 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily driven by the following:

•an increase of $5.8 million in payroll related expenses which was primarily driven by an increase in personnel to support overall growth and includes a $2.2 million increase in stock-based compensation,

•an increase of $2.2 million in depreciation, and

•an increase of $428 thousand in other research and development expenses, primarily due to increases in facilities expenses.

These decreases were partially offset by:

•a decrease of $2.0 million in preclinical, clinical and pre-commercial manufacturing due to the costs related to the manufacturing of VYJUVEK following FDA approval being recorded as inventory and due to fewer receipts of raw materials and lab supplies period over period that were purchased for planned manufacturing runs of our products,

•a decrease of $1.3 million from overhead allocations to inventory, and

•a decrease of $1.2 million from outsourced research and development costs.

The following table summarizes our research and development expenses by product candidate or program, and for unallocated expenses, by type, for the years ended December 31, 2024, 2023 and 2022:

Years Ended December 31, Change

Other dermatology programs — 2 500 (2) (498)

(1)Unallocated manufacturing expenses consist of shared pre-commercial manufacturing costs, primarily relating to raw materials, contract manufacturing, contract testing, process development, quality control and quality assurance activities and other manufacturing costs which support the development of multiple product candidates in our preclinical and clinical development programs.

(2)Other unallocated expenses include rental, storage, depreciation, and other facility related costs that we do not allocate to our individual product candidates.

As noted above, research and development expenses increased approximately $7.1 million in the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase was primarily driven by the following:

•an aggregated increase of $4.9 million related to KB304 costs, KB105 costs, KB408 costs, KB803 costs, other ophthalmology programs and other aesthetics programs all related to increases in manufacturing expenses, payroll costs and professional services related to pre-clinical contracts,

•an increase of $4.8 million in KB707 costs following the expansion of our research and development pipeline to oncology consisting of an increase in payroll related costs to support our research, an increase in contract research expenses in preparation for clinical trials, and an increase in clinical trial costs associated with our Phase 1/2 clinical trial of KB707 that commenced in 2024,

•an increase of $978 thousand in other unallocated expenses, which largely relates to (1) depreciation due to the Company’s second CGMP facility being placed into service throughout 2023 and 2024 partially offset by the capitalization of depreciation associated with increased commercial batches of VYJUVEK and (2) other facilities and equipment related costs, and

•an increase of $707 thousand in other research programs.

The increases were partially offset by:

•a decrease of $3.5 million in other unallocated manufacturing expenses primarily due to the costs related to the manufacturing of VYJUVEK following FDA approval being recorded as inventory and cost of goods sold, and

•a decrease of $814 thousand in stock-based compensation due to the allocation of labor costs related to work performed to manufacture VYJUVEK to inventory.

Research and development expenses increased $4.0 million in the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily driven by the following:

•an increase of $3.4 million in KB707 spending due to increased payroll related costs and increased contract research costs in preparation for the Phase 1/2 clinical trial,

•an increase of $2.2 million in stock-based compensation due to an increase in internal resources to support overall research and development growth,

•an increase of $1.4 million in other unallocated expenses primarily due to increases in depreciation expense offset by a decrease from rent expense allocated to inventory, and

•an increase of $943 thousand in KB103 expenses primarily due to increased payroll related expenses to support VYJUVEK’s preapproval activities, clinical trial costs, license and regulatory costs, costs associated with overseas clinical trials and regulatory agency filings, and increased allocated research.

These increases were partially offset by:

•a decrease of $2.5 million in other unallocated manufacturing expenses primarily due to the costs related to the manufacturing of VYJUVEK following FDA approval being recorded as inventory and due to fewer receipts of raw materials period over period that were purchased for planned manufacturing runs of our products and product candidates,

•a decrease of $852 thousand in KB301 expenses due to the timing of clinical research costs, and

•a increase of $6 thousand in KB105 expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $15.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase was primarily driven by the following:

•an increase of $10.0 million in stock-based compensation,

•an increase of $3.7 million in selling expenses related to the commercial launch of VYJUVEK, which includes $1.2 million related to our patient access program, and

•an increase of $3.3 million related to professional services incurred to support our commercial growth.

The increases were partially offset by:

•a decrease of $2.0 million in marketing costs due to the timing of marketing activities ahead of the VYJUVEK commercial launch.

Selling, general and administrative expenses increased $20.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily driven by the following:

•an increase of $15.1 million in payroll related expenses which is primarily driven by an increase in personnel to support overall growth and includes a $4.5 million increase in stock-based compensation,

•an increase of $1.7 million in selling expenses related to the launch of VYJUVEK,

•an increase of $2.1 million in information technology infrastructure costs,

•an increase of $1.3 million in software-related costs,

•an increase of $1.1 million in travel costs,

•an increase of $425 thousand in sponsorships,

•an increase of $381 thousand in net legal costs, which consists of a decrease in litigation proceeds of $570 thousand, offset by a increase in legal and professional fees of $189 thousand, and

•an increase of $676 thousand in other selling, general and administrative expense, primarily due to increases in depreciation and rent expense.

These increases were partially offset by:

•a decrease of $1.2 million of commercial preparedness expenses,

•a decrease of $466 thousand in medical affairs costs, and

•a decrease of $428 thousand in business development costs.

Litigation Settlement

Litigation settlement for the years ended December 31, 2024, 2023 and 2022 was $37.5 million, $12.5 million and $25.0 million, respectively, and consisted of amounts related to the settlement of litigation with PeriphaGen. See “Legal Proceedings” in Note 7 of the notes to consolidated financial statements included in this Form 10-K for more information.

Gain from Sale of Priority Review Voucher

Gain from sale of priority review voucher for the year ended December 31, 2023 was $100.0 million and was related to the sale of our rare pediatric PRV, which was awarded to the Company in connection with the FDA’s approval of VYJUVEK.

Interest and Other Income, Net

Interest and other income, net for the years ended December 31, 2024, 2023 and 2022 was $29.7 million, $22.6 million and $5.2 million, respectively, and consisted of interest and dividend income earned from our cash, cash equivalents and investments. The increase in interest and dividend income is the result of increased investment activity and more favorable interest rates as compared to the prior period and an increase in our balance of cash, cash equivalents, and investments.

Income Tax Expense

Income tax expense for the years ended December 31, 2024, 2023 and 2022 was $6.2 million, $2.0 million, and zero, respectively. In 2023 and 2024, income tax expense related to state, federal and foreign income taxes. See Note 11 of the notes to consolidated financial statements included in this Form 10-K for more information.

Liquidity and Capital Resources

Overview

As of December 31, 2024, our cash, cash equivalents and short-term investments balance was approximately $597.5 million. As of December 31, 2024, we had an accumulated deficit of $180.7 million. We believe that our cash, cash equivalents and short-term investments will be sufficient to allow us to fund our operations for at least 12 months from the filing date of this Annual Report on Form 10-K.

Our ability to continue to achieve operating profitability is dependent upon the continued successful commercialization of VYJUVEK and the successful development, approval, manufacturing, and commercialization of product candidates. Furthermore, we expect to incur increasing costs associated with satisfying regulatory and quality standards, maintaining and initiating product clinical trials, and furthering our efforts to discover, develop, manufacture, and commercialize current and future product candidates. We intend to fund future operations through on hand cash and cash equivalents, revenue generated from the sale of VYJUVEK, the sale of equity, debt financings, and we may also seek additional capital through arrangements with strategic partners or other sources.

Costs related to clinical trials can be unpredictable and, therefore, there can be no guarantee that we will have sufficient capital to fund the continued or planned pre-clinical and clinical studies for our product candidates, or our operations.

Further, we expect future revenue to fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any product sales. While we are in the process of building out our internal vector manufacturing capacity, some of our manufacturing activities will be contracted out to third parties. Additionally, we currently utilize third-party contract research organizations to carry out some of our clinical development activities. As we seek to obtain regulatory approval for our product candidates, we expect to continue to incur significant manufacturing and commercialization expenses as we prepare for product sales, marketing, commercial manufacturing, packaging, labeling and distribution. Furthermore, pursuant to our settlement agreement with PeriphaGen, we will be required to pay a $6.25 million milestone payment as a result of reporting $100.0 million in cumulative sales during the second quarter of 2024 payable within 120 days following December 31, 2024 and two additional $12.5 million milestone payments as a result of reporting $200.0 million in cumulative sales during the third quarter of 2024 and $300.0 million in cumulative sales during the fourth quarter of 2024, both of which are payable within 30 days following the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 2024. Our funds may not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for or commercially launch our product candidates. Accordingly, to obtain marketing approval for and to commercialize these or any other product candidates, we may be required to obtain further funding through public or private equity offerings, debt financings, collaboration and licensing arrangements or other sources. Adequate additional financing may not be available to us on acceptable terms, if at all. Our failure to raise capital when needed could have a negative effect on our financial condition and our ability to pursue our business strategy.

ATM Program

On December 31, 2020, the Company entered into a sales agreement with Cowen and Company, LLC ("Cowen") with respect to an at-the-market equity offering program (“2020 ATM Program”), under which the Company issued and sold from time to time through Cowen, acting as agent and/or principal, shares of its common stock, par value $0.0001 per share, having an aggregate offering price up to $150.0 million (“2020 Placement Shares”). The issuance and sale of the 2020 Placement Shares were made pursuant to the Company's effective “shelf” registration statement on Form S-3 that was filed with the SEC on May 4, 2020 (the “2020 Shelf Registration Statement”). During the year ended December 31, 2022, the Company issued and sold 434,782 2020 Placement Shares at a weighted average price of $69.00 per share for net proceeds of $29.1 million after deducting selling commissions of approximately $900 thousand.

The Company’s 2020 Shelf Registration Statement expired on May 4, 2023, and the Company put in place a new at-the-market equity offering program under substantially the same terms as the 2020 ATM Program (the “New ATM Program”). Accordingly, on May 8, 2023, the Company entered into a sales agreement with Cowen under which the Company may issue and sell from time to time through Cowen, acting as agent and/or principal, shares of its common stock having an aggregate offering price up to $150.0 million (“Placement Shares”).

The Placement Shares will be offered and sold pursuant to the Company’s effective shelf registration statement on Form S-3 filed with the SEC on April 6, 2023 (the “Form S-3”), and a prospectus supplement relating to the Placement Shares that was filed with the SEC on May 8, 2023. We may terminate the New ATM Program at any time upon 10 days’ notice to Cowen. If not earlier terminated, the New ATM Program will automatically terminate upon issuance of all of the Placement Shares or the expiration of the Form S-3 on April 6, 2026.

The New ATM Program is not and has never been active.

2023 Private Placement Offering

On May 22, 2023 and May 23, 2023, the Company sold 1,720,100 and 9,629 shares of Common Stock, respectively, in a private placement to certain institutional investors at a price of $92.50 per share for aggregate net proceeds of $160.0 million. In addition, the Company entered into a Registration Rights Agreement that required the Company to file a registration statement with the SEC within 60 days of the date of the Registration Rights Agreement registering the resale of the shares of Common Stock issued in the private placement. On July 18, 2023, the Company filed the resale registration statement on Form S-3ASR with the SEC, which became effective upon filing.

Operating Capital Requirements

Our primary uses of capital are, and we expect will continue to be for the near future, compensation and related expenses, manufacturing costs for preclinical and clinical materials, regulatory expenses, third-party clinical trial research and development services, laboratory and related supplies, selling expenses, costs to manufacture our commercial product, legal expenses, payments of settlement amounts to PeriphaGen and general overhead costs. In order to complete the process of obtaining regulatory approval for any of our product candidates and to build the sales, manufacturing, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we may require substantial additional funding.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development, manufacturing and commercialization of genetic medicines, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

•the costs needed to commercialize and market our lead product, VYJUVEK;

•the progress, timing and costs of clinical trials of our current product candidates;

•the progress, timing and costs of manufacturing of VYJUVEK and revenue received from commercial sale of VYJUVEK;

•the continued development and the filing of an IND application for current and future product candidates;

•the initiation, scope, progress, timing, costs and results of drug discovery, laboratory testing, manufacturing, preclinical studies and clinical trials for any product candidates that we may pursue in the future, if any;

•the costs of maintaining our own commercial-scale CGMP manufacturing facilities;

•the outcome, timing and costs of seeking regulatory approvals;

•the costs associated with the manufacturing process development and evaluation of third-party manufacturers;

•the extent to which the costs of VYJUVEK and our product candidates, if approved, will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or will be reimbursed by government authorities, private health coverage insurers and other third-party payors;

•the costs of commercialization activities for our current and future product candidates if we receive marketing approval for such product candidates, including the costs and timing of establishing product sales, medical affairs, marketing, distribution and manufacturing capabilities;

•subject to receipt of marketing approval, if any, revenue received from commercial sale of our current and future product candidates;

•the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may establish;

•the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or other intellectual property rights, including milestone and royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements;

•our current license agreements remaining in effect and our achievement of milestones under those agreements;

•our ability to establish and maintain collaborations and licenses on favorable terms, if at all; and

•the extent to which we acquire or in-license other product candidates and technologies.

We may need to obtain substantial additional funding in order to receive regulatory approval and to commercialize our product candidates. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interests of our existing stockholders may be materially diluted and the terms of these securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders. In addition, debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely affect our ability to conduct our business. If we are unable to raise capital when needed or on attractive terms, we could be forced to significantly delay, scale back or discontinue the development or commercialization of our product candidates, seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, our rights to our product candidates that we otherwise would seek to develop or commercialize ourselves.

Contractual Obligations

Operating Leases

Operating lease payments represent our commitments for future minimum rent made under non-cancelable leases for our corporate headquarters in Pittsburgh, Pennsylvania and our global office locations, and for the ground lease associated with our second CGMP manufacturing facility, ASTRA. The total future payments for our operating lease obligations that had commenced as of December 31, 2024 are $14.6 million, of which $1.3 million is due in the next twelve months and the

remaining payments are due over the terms of the respective leases. For additional details regarding our leases, see Note 8 and Note 14 to our consolidated financial statements included in this Annual Report on Form 10-K.

Clinical Supply and Product Manufacturing Agreements

We enter into various agreements in the normal course of business with Contract Research Organizations, Contract Manufacturing Organizations and other third parties for preclinical research studies, clinical trials and testing and manufacturing services. We are obligated to make milestone payments under certain of these agreements. The estimated remaining commitment as of December 31, 2024 under these agreements is approximately $627 thousand, all of which is expected to be due in the next twelve months.

Sources and Uses of Cash

The following table summarizes our sources and uses of cash:

Years Ended December 31,

Effect of exchange rate changes on cash and cash equivalents (458) (156) (41)

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2024 was $123.4 million and consisted primarily of net income of $89.2 million adjusted for $48.7 million of non-cash items and a $14.5 million decrease in cash due to an increase in net working capital. Non-cash adjustments included depreciation of $6.0 million, amortization of operating lease right-of-use assets of $747 thousand, stock-based compensation expense, net of $49.1 million, and other adjustments of $652 thousand offset by realized gain on investments of $6.1 million and accretion on marketable securities of $1.7 million.

Net cash used by operating activities for the year ended December 31, 2023 was $88.8 million and consisted primarily of net income of $10.9 million adjusted for $61.2 million of non-cash items and a $38.5 million decrease in cash due to an increase in net working capital. Non-cash adjustments included gain on sale of priority review voucher of $100.0 million, which is classified as an investing activity, realized gain on investments of $5.1 million and accretion on marketable securities of $2.2 million, partially offset by stock-based compensation expense, net of $39.9 million, depreciation of $5.0 million, amortization of operating lease right-of-use assets of $904 thousand and other adjustments of $217 thousand.

Net cash used in operating activities for the year December 31, 2022 was $100.6 million and consisted primarily of a net loss of $140.0 million adjusted for $36.7 million of non-cash items and an increase in cash due to a decrease in net working capital of $2.7 million. Non-cash adjustments included stock-based compensation expense, net of $33.2 million, depreciation of $2.6 million, amortization of operating lease right-of-use assets of $742 thousand, amortization of marketable securities of $670 thousand and other adjustments of $34 thousand, partially offset by realized gain on investments of $570 thousand.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2024 was $163.4 million and consisted of $457.7 million in purchases of short-term and long-term investments and $4.2 million in purchases of property and equipment, partially offset by $298.5 million received from the maturities of investments.

Net cash provided by investing activities for the year ended December 31, 2023 was $82.6 million and consisted of $503.2 million received from the maturities of investments and $100.0 million in proceeds from the sale of priority review voucher, partially offset by $508.8 million in purchases of short-term and long-term investments and $11.8 million in purchases of property and equipment.

Net cash used in investing activities for the year ended December 31, 2022 was approximately $114.1 million and consisted of $318.8 million in purchases of short-term and long-term investments and $53.0 million in purchases of property and equipment on the build-out of our ASTRA facility, leasehold improvement of new office space and computer and laboratory equipment, partially offset by $257.7 million received from the maturities of short-term investments.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2024 was $27.0 million and consisted of proceeds of $32.4 million from exercises of stock options, partially offset by $4.2 million used for employee tax withholding

payments related to vested restricted stock units and $1.2 million used for employee tax withholding payments for settlement of vested restricted stock awards.

Net cash provided by financing activities for the year ended December 31, 2023 was $202.8 million and consisted of proceeds of $159.7 million from issuances of common stock, net of offering costs and proceeds of $43.8 million from exercises of stock options, partially offset by $749 thousand used for employee tax withholding payments for settlement of vested restricted stock awards.

Net cash provided by financing activities for the year ended December 31, 2022 was $35.3 million and was primarily from proceeds from public offerings of 434,782 shares of our common stock at a weighted-average price of $69.00 per share through our at-the-market equity offering program. Our net proceeds from the offerings were $29.0 million after deducting underwriting discounts and commissions of approximately $900 thousand. Additionally, we received $7.0 million from exercises of stock options, offset by $649 thousand used for employee tax withholding payments for settlement of vested restricted stock awards.

Recent Accounting Pronouncements

See Note 2 to our consolidated financial statements.

Item 7A. Qualitative and Quantitative Disclosures About Market Risk

We had cash, cash equivalents and short-term investments of approximately $597.5 million as of December 31, 2024, which consisted primarily of money market funds, commercial paper, corporate bonds and U.S. government agency securities. The investments in these financial instruments are made in accordance with an investment policy which specifies the categories, allocations and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. Some of the financial instruments in which we invest could be subject to market risk. This means that a change in prevailing interest rates may cause the value of the instruments to fluctuate. For example, if we purchase a security that was issued with a fixed interest rate and the prevailing interest rate later rises, the value of that security will probably decline. To minimize this risk, we intend to maintain a portfolio which may include cash, cash equivalents and short-term investment securities available-for-sale in a variety of securities which may include money market funds, government and non-government debt securities and commercial paper, all with various maturity dates. Based on our current investment portfolio, we do not believe that our results of operations or our financial position would be materially affected by an immediate change of 10% in interest rates.

We also have established operations in Europe and Japan and hold cash in Swiss Francs, Euros and Japanese Yen. We are subject to foreign exchange rate risk arising from transactions conducted in the aforementioned foreign currencies, however, our foreign operations are not currently material to our business. We do not believe that our results of operations or our financial position would be materially affected by an immediate change of 10% in foreign currency exchange rates

We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for speculative trading purposes. Further, we do not believe our cash, cash equivalents and short-term investments have significant risk of default or illiquidity. While we believe our cash, cash equivalents and short-term investments do not contain excessive risk, we cannot provide absolute assurance that any investments we make in the future will not be subject to adverse changes in market value. Our cash, cash equivalents and short-term investments are recorded at fair value.

Item 8. Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS

Consolidated Balance Sheets as of December 31, 2024 and 2023 F-4

Notes to Consolidated Financial Statements F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Krystal Biotech, Inc.:

Opinion on theConsolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Krystal Biotech, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 19, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the sufficiency of audit evidence over the Medicaid rebate accrual

As discussed in Notes 2 and 3 to the consolidated financial statements, the Company recognizes product revenue on sales of VYJUVEK when the customer obtains control of the product, which occurs at a point in time, upon delivery to the customer. Product revenue, net is recorded at the net sales price, or transaction price, and includes an estimate of variable consideration, which results from discounts, rebates and returns that are offered within the Company’s contracts. Government rebates, which include Medicaid, are accrued based on estimated percentages of VYJUVEK that will be prescribed to qualified patients, estimated rebate percentages and estimated levels of inventory in the distribution channel that will be prescribed to qualified patients and are recorded as a reduction of

F-2

revenue. Rebates were $38.2 million as of December 31, 2024, of which a portion relates to the Medicaid rebate accrual.

We identified the evaluation of the sufficiency of audit evidence over the Medicaid rebate accrual as a critical audit matter. Subjective auditor judgment was required to evaluate the Medicaid rebate accrual because of the audit effort involved in determining the nature and extent of procedures to be performed.

The following are the primary procedures we performed to address the critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the Medicaid rebate accrual. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s Medicaid rebate accrual process. We evaluated the relevance and reliability of the historical customer data used by the Company in developing the estimate of the Medicaid rebate accrual by obtaining the data directly from the third party and comparing it to what the Company reported. We evaluated the Company’s ability to accurately estimate the Medicaid rebate accrual by comparing the estimated Medicaid rebate accrual to the actual units delivered to the customer that were dispensed to qualified Medicaid patients subsequent to period end. We developed an independent estimate of the Medicaid rebate accrual using historical data and compared the result to the Company’s estimated Medicaid rebate accrual. We assessed the sufficiency of evidence obtained over the Medicaid rebate accrual by assessing the results of procedures performed, including the appropriateness of the nature and extent of audit effort.

/s/ KPMG LLP

We have served as the Company’s auditor since 2022.

Pittsburgh, Pennsylvania

February 19, 2025

F-3

Krystal Biotech, Inc.

Consolidated Balance Sheets

December 31,

(in thousands, except par value) 2024 2023

Assets

Current assets

Prepaid expenses and other current assets 13,274 6,706

Other non-current assets 231 263

Liabilities and Stockholders’ Equity

Current liabilities

Current portion of lease liability 1,217 1,474

Accrued expenses and other current liabilities 58,989 21,511

Other long-term liabilities 1,419 —

Commitments and contingencies (see note 7)

Stockholders' equity

Accumulated other comprehensive (loss) gain (190) 638

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Krystal Biotech, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

Years Ended December 31,

Operating expenses

Other income (expense)

Gain from sale of priority review voucher — 100,000 —

Net income (loss) per common share:

Weighted-average common shares outstanding:

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Krystal Biotech, Inc.

Consolidated Statements of Stockholders' Equity

(in thousands) Shares Amount

Issuance of common stock upon exercise of stock options 139 — 7,008 — — 7,008

Shares of restricted stock awards surrendered for taxes (18) — (649) — — (649)

Unrealized loss on investments and other(1) — — — (565) — (565)

Issuance of common stock upon exercise of stock options 753 — 43,773 — — 43,773

Shares of restricted stock awards surrendered for taxes (10) — (749) — — (749)

Unrealized gain on investments and other(1) — — — 1,366 — 1,366

Issuance of common stock upon exercise of stock options 526 — 32,400 — — 32,400

Unrealized loss on investments and other(1) — — — (828) — (828)

(1)Includes foreign currency translation losses of $388 thousand, $66 thousand and $78 thousand for the years ended December 31, 2024, 2023, and 2022, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Krystal Biotech, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31,

Operating Activities

Gain from sale of priority review voucher — (100,000) —

(Accretion) amortization of marketable securities (1,706) (2,183) 670

Amortization of operating lease right-of-use assets 747 904 742

Changes in operating assets and liabilities

Other long-term liabilities 1,419 — —

Accrued expenses and other current liabilities 5,391 4,558 5,173

Accrued legal settlement 31,250 — —

Investing Activities

Proceeds from sale of priority review voucher — 100,000 —

Financing Activities

Proceeds from issuance of common stock, net — 159,726 28,988

Taxes paid related to settlement of restricted stock awards (1,205) (749) (649)

Effect of exchange rate changes on cash and cash equivalents (458) (156) (41)

Supplemental Disclosures of Non-Cash Investing and Financing Activities

Unpaid purchases of property and equipment $ 8,497 $ 8,602 $ 14,927

Initial recognition of right-of-use assets $ — $ — $ 1,556

Supplemental Disclosure of Cash Flow Information

Income taxes paid $ 5,665 $ — $ —

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements

1. Organization

Krystal Biotech, Inc. (the “Company,” or “we” or other similar pronouns) commenced operations in April 2016. In March 2017, we converted from a California limited liability company to a Delaware C-corporation, and changed our name from Krystal Biotech LLC to Krystal Biotech, Inc. In April 2019, we incorporated Jeune Aesthetics, Inc. (“Jeune Aesthetics”), in Delaware, a wholly-owned subsidiary, for the purpose of undertaking preclinical and clinical studies for aesthetic skin conditions. In January 2022, August 2022, December 2022, August 2023, March 2024, November 2024, and December 2024 we incorporated wholly-owned subsidiaries in Switzerland, Netherlands, France, Germany, Japan, Italy, and Spain respectively, for the purpose of establishing initial operations in Europe and Japan for the commercialization of VYJUVEK and our product pipeline.

Liquidity

As of December 31, 2024, the Company had an accumulated deficit of $180.7 million. Our transition to continued operating profitability is dependent upon the continued successful commercialization of VYJUVEK®, as well as successful development, approval and commercialization of our other product candidates. Management intends to fund future operations through its on hand cash and cash equivalents, revenue generated from the sale of VYJUVEK and the sale of equity, and may also seek additional capital through arrangements with strategic partners, debt financings or other sources. There can be no assurance that additional funding will be available on terms acceptable to the Company, if at all.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to the failure of product candidates in clinical and preclinical studies, the development of competing product candidates or other technological innovations by competitors, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to commercialize product candidates. The Company expects to incur significant costs to further its pipeline and to expand its commercialization capabilities in advance of the potential global regulatory approvals of VYJUVEK. The Company believes that its cash, cash equivalents and short-term investments of approximately $597.5 million as of December 31, 2024 will be sufficient to allow the Company to fund its planned operations for at least the next 12 months from the date of this Annual Report on Form 10-K.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassified amounts have no impact on the Company’s previously reported financial position or results of operations.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates in the period these variances

F-8

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

become known. Estimates are used in the following areas, among others: variable consideration associated with revenue recognition, stock-based compensation expense, accrued expenses, and income taxes.

Segment and Geographical Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company operates as one operating segment, which is focused on the discovery, development, manufacturing and commercialization of pharmaceutical products. See Note 13 to these consolidated financial statements for additional discussion.

Cash, Cash Equivalents and Investments

Cash and cash equivalents consist of money market funds and bank deposits. Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase.

Investments with maturities of less than one year are classified as short-term investments on the consolidated balance sheets and consist of commercial paper, corporate bonds and U.S. government agency securities and treasuries. Investments with maturities of greater than one year are classified as long-term investments on the consolidated balance sheets and consist of corporate bonds and U.S. government agency securities and treasuries. Accrued interest on investments is also classified as short-term investments on the consolidated balance sheets.

As the Company’s entire investment portfolio is considered available for use in current operations, it classifies all investments as available-for-sale securities. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive gain (loss), which is a separate component of stockholders’ equity on the consolidated balance sheets. Any premium arising at purchase is amortized to the earliest call date and any discount arising at purchase is accreted to maturity. Amortization and accretion of premiums and discounts are recorded in interest and other income, net on the consolidated statements of operations and comprehensive (loss) income.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a three-level hierarchy that prioritizes the inputs used in determining fair value by their reliability and preferred use, as follows:

•Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities.

•Level 2—Valuations based on quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in inactive markets, or other inputs that are observable, or can be corroborated by observable market data.

•Level 3—Valuations based on inputs that are both significant to the fair value measurement and unobservable.

To the extent that a valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized within Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

There have been no (1) significant changes to the valuation methods utilized by the Company or (2) transfers between Level 1, Level 2 and Level 3 during the years ended December 31, 2024, 2023 and 2022.

The carrying amounts of financial instruments consisting of cash and cash equivalents, investments, accounts receivable, net, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities included in the Company’s consolidated balance sheets, are reasonable estimates of fair value, primarily due to their short maturities.

Our available-for-sale, short-term and long-term investments, which consist of commercial paper, corporate bonds, and U.S. government agency securities and treasuries are considered to be Level 2 financial instruments. The fair value of Level 2 financial assets is determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis.

F-9

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Revenue Recognition

The Company recognizes product revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company is required to complete the following five steps:

(i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Variable Consideration

The following are the Company’s significant categories of variable consideration:

•Commercial Rebates: The Company participates in certain commercial rebate programs. Under these rebate programs, the Company pays a rebate to the commercial entity or third-party administrator of the program. Accrued commercial rebates are estimated using the expected value method based on estimated percentages of VYJUVEK that will be prescribed to qualified patients and estimated levels of inventory in the distribution channel. Accrued commercial rebates are recorded as a reduction of revenue on the consolidated statements of operations and are included in accrued rebates on the consolidated balance sheets.

F-10

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

qualified patients, average assistance paid based on reporting from third-party vendors and estimated levels of inventory in the distribution channel. Copay assistance costs are recorded as reductions to revenue on the consolidated statements of operations and are recorded in accrued expenses and other current liabilities on the consolidated balance sheets.

Cost of Goods Sold

Prior to receiving FDA approval in May 2023, costs associated with the manufacturing of VYJUVEK were expensed as research and development expenses.

Accounts Receivable

Accounts receivable represents amounts arising from product sales and is recorded net of allowances for prompt payment discounts, returns, and credit losses. The Company estimates an allowance for credit losses by considering factors such as credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The Company has no historical write-offs of its accounts receivable and its payment terms are generally less than 90 days from the invoice date. The Company evaluates the creditworthiness of each counterparty on a regular basis. As of December 31, 2024, the credit profiles for these counterparties were deemed to be in good standing and, as such, an allowance for credit losses was not recorded.

Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents, short-term investments, long-term investments, and accounts receivable, net. The Company maintains its cash and cash equivalent balances with high-quality financial institutions and, consequently, the Company believes that such funds are subject to minimal credit risk. The Company is exposed to credit risk in the event of default by the financial institutions to the extent amounts recorded on the consolidated balance sheets are in excess of insured limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. The Company’s marketable securities, which primarily consist of U.S. government agency securities and treasuries, corporate bonds and commercial paper, potentially subject the Company to concentrations of credit risk. The Company has no financial instruments with off-balance sheet risk of loss.

Inventories

The Company capitalizes inventory costs associated with products when future economic benefit is expected to be realized. These costs consist of raw materials, manufacturing-related costs, personnel costs including stock-based compensation, facility costs, and other indirect overhead costs. Prior to receiving FDA approval for VYJUVEK in May 2023, the Company expensed costs related to inventory for clinical and pre-commercial purposes directly to research and development expense. Following the FDA’s approval of VYJUVEK, the Company began capitalizing inventory related to commercialized products held for sale, in-process of production for sale, and raw materials to be used in the manufacturing of inventory.

The Company values its inventories at the lower-of-cost and net realizable value, on a first-in, first-out basis. The Company adjusts the net realizable value of any excess, obsolete or unsalable inventories in the period in which they are identified. For the years ended December 31, 2024, 2023 and 2022, there were no inventory write-downs. See Note 6 to these consolidated financial statements for additional discussion.

Property and Equipment, Net

Property and equipment, net, is stated at cost, less accumulated depreciation. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred, while costs of major additions and betterments are capitalized. Upon disposal, the related cost and accumulated depreciation is removed from the accounts and any

F-11

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

resulting gain or loss is included in the results of operations. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets, which are as follows:

Buildings and building improvements 7 - 47 years

Computer equipment and software 3 - 7 years

Manufacturing equipment 3 - 20 years

Laboratory equipment 3 - 15 years

Furniture and fixtures 3 - 7 years

The Company reviews the estimated useful lives of its property and equipment on a continuing basis. In evaluating the useful lives, the Company considers how long assets will remain functionally effective, whether the technology continues to be relevant and considers other competitive and economic factors. If the assessment indicates that the assets will be used for a shorter or longer period than previously anticipated, the useful life of the assets is adjusted, resulting in a change in estimate. Changes in estimates are accounted for on a prospective basis by depreciating the current carrying values of the assets over their revised remaining useful lives.

Construction in progress is not depreciated until the asset is placed in service.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets for potential impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. The Company reviews the recoverability of the net book value of long-lived assets whenever events and circumstances indicate (“triggering events”) that the net book value of an asset may not be recoverable from the estimated undiscounted future cash flows expected to result from its use and eventual disposition. In cases where a triggering event occurs and undiscounted expected future cash flows are less than the net book value, the Company recognizes an impairment loss equal to an amount by which the net book value exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. The Company has not experienced any triggering events or recognized any impairment losses for the years ended December 31, 2024, 2023 and 2022.

Leases

The Company accounts for its lease agreements in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, Leases. Right-of-use lease assets represent the right to use an underlying asset during the lease term and the lease liabilities represent the commitment to make lease payments arising from the lease. Right-of-use lease assets and obligations are recognized based on the present value of remaining lease payments over the lease term. As the Company’s existing lease agreements do not provide an implicit rate and as the Company does not have any external borrowings, the Company has used an estimated incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for the payment is incurred. In addition, the Company also has made an accounting policy election to exclude leases with an initial term of twelve months or less from its consolidated balance sheets and to account for lease and non-lease components of its operating leases as a single component.

Research and Development Expenses

Research and development costs are charged to expense as incurred in performing research and development activities. These costs include employee compensation costs, facilities and overhead, preclinical and clinical activities, clinical manufacturing costs, contract management services, regulatory and other related costs.

The Company estimates contract research and manufacturing expenses based on the services performed pursuant to contracts with research organizations and manufacturing organizations that manufacture materials used in the Company’s ongoing preclinical and clinical studies. Non-refundable advanced payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. These estimates are based on communications with third-party service providers and the Company’s estimates of accrued expenses using information available at each balance sheet date. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly.

F-12

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Stock-Based Compensation Expense

The Company has applied the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification, or ASC, Topic 718, Compensation—Stock Compensation (“ASC 718”), to account for stock-based compensation. The Company recognizes compensation costs related to stock-based awards based on the estimated fair value of the awards on the date of grant.

The Company estimates the fair value of its stock options using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including: (i) the expected stock price volatility; (ii) the expected term of the award; (iii) the risk-free interest rate; and (iv) expected dividends.

The Company estimates the expected term of its stock options using the “simplified” method, whereby the expected term equals the arithmetic mean of the vesting term and the original contractual term of the option. The risk-free interest rates are based on US Treasury securities with a maturity date commensurate with the expected term of the associated award. The Company has never paid and does not expect to pay dividends in the foreseeable future. The Company accounts for forfeitures as they occur. Stock-based compensation expense recognized in the financial statements is based on awards for which service conditions are expected to be satisfied.

Income Taxes

For the years ended December 31, 2024, 2023 and 2022, income taxes were recorded in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. Under this method, the Company records deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect when the differences are expected to reverse. Valuation allowances are provided when necessary to reduce net deferred tax assets to the amount that is more likely than not to be realized. Based on the available evidence, the Company is unable, at this time, to support the determination that it is more likely than not that our deferred tax assets will be utilized in the future. Accordingly, the Company recorded a full valuation allowance as of December 31, 2024 and 2023. The Company intends to maintain a valuation allowance until sufficient evidence exists to support its reversal.

The Company accounts for unrecognized tax benefits in accordance with the provisions of ASC 740. When unrecognized tax benefits exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2024 and 2023, the Company had $4.2 million and zero, respectively in unrecognized tax benefits.

The Company may recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2024 and 2023, the Company had recognized $218 thousand and zero, respectively in interest or penalties related to unrecognized tax benefits.

See Note 11 to these consolidated financial statements for additional discussion.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions from non-owner sources. Unrealized gains or losses on available-for-sale securities is a component of other comprehensive gains or losses and is presented net of taxes. The Company records reclassifications from other comprehensive gains or losses to interest and other income, net on the consolidated statements of operations and comprehensive income (loss) related to realized gains on sales of available-for-sale securities.

The Company reviews its securities quarterly to determine whether an other-than-temporary impairment has occurred. The Company determined that there were no other-than-temporary impairments during the years ended December 31, 2024, 2023 and 2022.

Recently Issued Accounting Pronouncements, Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The purpose of this guidance is to enhance the transparency and usefulness of income tax disclosures and provide

F-13

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

comprehensive income tax information, particularly in relation to rate reconciliation and income taxes paid in the U.S. and foreign jurisdictions. This new standard will be effective for fiscal years starting after December 15, 2024, with the option to apply it retrospectively. Early adoption is also allowed. Currently, the company is assessing the potential impact of this guidance on its consolidated financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This standard calls for enhanced disclosures about components of expense captions on the face of the income statement. This standard will be effective for fiscal years beginning after December 15, 2026, with the option to apply it retrospectively. Early adoption is allowed. Currently, the Company is assessing the potential impact of this guidance on its consolidated financial statement disclosures.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, requiring public companies to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. The Company adopted ASU 2023-07 during the year ended December 31, 2024. See Note 13 to these consolidated financial statements for additional discussion.

3. Product Revenue, Accounts Receivable and Reserves for Product Sales

Following FDA approval in May 2023, the Company began commercial marketing and sales of VYJUVEK and began recognizing revenue in the third quarter of 2023. The Company’s product revenue, net of sales discounts and allowances totaled $290.5 million, $50.7 million and zero for the years ended December 31, 2024, 2023 and 2022, respectively. For the years ended December 31, 2024 and 2023, approximately 87% and 100%, respectively, of the Company’s product revenue, net was generated from a single customer in the U.S. No other customer exceeded 10% of the Company’s product revenue, net.

The Company’s accounts receivable, net balance relating to VYJUVEK sales was $104.7 million as of December 31, 2024 and $42.0 million as of December 31, 2023. Net product revenue receivable from the Company’s customers who individually accounted for 10% or more of net product revenue receivable consisted of the following:

Percent of Net Product Revenue Receivable

Year Ended December 31,

Customer B 13 % *

* Indicates the customer represents less than 10% and/or not a customer in the applicable year

The following table summarizes changes in allowances and discounts for the year ended December 31, 2024:

(in thousands) Rebates Prompt Pay Other Accruals Total

Balance as of December 31, 2022 $ — $ — $ — $ —

Rebates are included in accrued rebates and other long-term liabilities on the consolidated balance sheets. Prompt pay is recorded as an allowance against accounts receivable, net on the consolidated balance sheets. Other long-term liabilities includes $1.4 million of long-term accrued rebates. Other accruals are included in accrued expenses and other current liabilities on the consolidated balance sheets. Provisions for rebates, prompt pay and other accruals are recorded as a reduction to product revenue, net on the consolidated statements of operations and comprehensive income (loss).

F-14

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

4. Net Income (Loss) Per Share Attributable to Common Stockholders

Basic net income per share attributable to common stockholders is calculated by dividing net income attributable to common stockholders by the weighted-average shares outstanding during the period, without consideration for common stock equivalents. Diluted net income per share attributable to common stockholders is computed by dividing the net income by the weighted-average number of shares of common stock and common stock equivalents outstanding for the period. Common stock equivalents consist of common stock issuable upon (1) exercise of stock options and (2) vesting of restricted stock awards, restricted stock units and performance-based restricted stock units (collectively, “restricted stock”).

For the years ended December 31, 2024, 2023 and 2022, there were (1) 236 thousand, 897 thousand and 3.6 million, respectively, common stock equivalents outstanding in the form of stock options, and (2) 1 thousand, zero and 67 thousand, respectively, in unvested restricted stock that have been excluded from the calculation of diluted net income (loss) per common share as their effect would be anti-dilutive.

Years Ended December 31,

Numerator:

Denominator:

Dilutive effect of stock options and unvested restricted stock 1,148 598 —

Net income (loss) per common share—basic $ 3.12 $ 0.40 $ (5.49)

Net income (loss) per common share—diluted $ 3.00 $ 0.39 $ (5.49)

F-15

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

5. Fair Value Instruments

The following tables show the Company’s cash, cash equivalents and available-for-sale securities by significant investment category as of December 31, 2024 and 2023:

Level 1:

Level 2:

Level 1:

Level 2:

(1)The Company’s short-term marketable securities mature in one year or less.

(2)The Company’s long-term marketable securities mature between one year and two years.

See Note 2 to these consolidated financial statements for additional discussion regarding the Company’s fair value measurements.

F-16

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

6. Balance Sheet Components

Inventory

Inventory consisted of the following:

December 31,

Property and Equipment, Net

Property and equipment, net consisted of the following:

December 31,

Computer equipment and software 2,032 1,614

Depreciation expense was $6.0 million, $5.0 million and $2.6 million for the years ended December 31, 2024, 2023 and 2022, respectively. Depreciation expense capitalized into inventory was $3.5 million, $1.1 million and zero for the years ended December 31, 2024, 2023 and 2022, respectively.

In March 2023, the Company received the permanent occupancy permit for its second commercial scale CGMP facility, ASTRA, which allowed the Company to begin utilizing certain portions of the building. As a result, and as qualification of assets occurred through 2023 and the first half of 2024, the majority of assets relating to ASTRA were reclassified from construction in progress to leasehold improvements, manufacturing equipment, buildings and building improvements, furniture and fixtures, or computer equipment and software as it was determined that assets were ready for their intended use. As certain pieces of equipment are not yet qualified, the Company will continue to hold the remaining assets within construction in progress until qualification has been completed and the assets are ready for their intended use.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

December 31,

Accrued litigation settlement $ 31,250 —

Accrued construction in progress 5,077 5,182

Accrued preclinical and clinical expenses 2,537 1,248

F-17

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

7. Commitments and Contingencies

Agreements with Contract Manufacturing Organizations and Contract Research Organizations

The Company enters into various agreements in the normal course of business with Contract Manufacturing Organizations (“CMOs”), Contract Research Organizations (“CROs”) and other third parties for preclinical research studies, clinical trials and testing and manufacturing services. The agreements with CMOs primarily relate to the manufacturing of our sterile gel that is mixed with in-house produced vectors as part of the final drug product for VYJUVEK. Agreements with third parties may also include research and development consulting activities, clinical-trial agreements, testing of our clinical-stage, pre-commercial and commercial stage products and/or storage, packaging and labeling. The Company is obligated to make milestone payments under certain of these contracts. The Company may also be responsible for the payment of a monthly service fee for project management services for the duration of any agreements. The estimated remaining commitment as of December 31, 2024 under these agreements is approximately $627 thousand. The Company has incurred research and development expenses related to commitments under these agreements of $7.1 million, $5.2 million and $6.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Legal Proceedings

In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes, or claims. In accordance with FASB ASC Topic 450, Contingencies (“ASC 450”), the Company accrues a liability for legal contingencies when it is probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. If there is at least a reasonable possibility that a loss may be incurred, ASC 450 requires disclosure of a loss contingency.

In May 2020, PeriphaGen, Inc. (“PeriphaGen”) commenced litigation against the Company alleging breach of contract and misappropriation of trade secrets. In April 2022, the Company and PeriphaGen entered into a final settlement agreement. In exchange for an upfront payment of $25.0 million and four contingent milestone payments of $12.5 million each triggered upon FDA approval of VYJUVEK and the Company reaching $100.0 million, $200.0 million and $300.0 million in cumulative sales, respectively, PeriphaGen (i) released all claims in the litigation; (ii) transferred certain assets to the Company and (iii) granted the Company a license for dermatological applications.

In May 2024, the parties entered into an amendment to the final settlement agreement (“Amendment”). As defined in the final settlement agreement and clarified in the Amendment, cumulative sales means the total cumulative revenue from sales of the Company’s products by the Company and its affiliates and licensees. The Amendment modified the timing of the $12.5 million contingent milestone payment triggered by the Company reaching $100.0 million in cumulative sales, such that $6.25 million would be payable following the Company’s filing of a Quarterly Report on Form 10-Q that reports $100.0 million in cumulative sales, and the remaining $6.25 million would be payable within 120 days following the end of the fiscal year in which the initial $6.25 million is paid. There were no other revisions to the final settlement agreement.

In May 2023, the Company obtained FDA approval of VYJUVEK and paid PeriphaGen $12.5 million in June 2023. During the year ended December 31, 2024, the Company reached cumulative sales of $100.0 million, $200.0 million and $300.0 million. In accordance with the Amendment, the Company paid PeriphaGen $6.25 million in September 2024 following the filing of the Company’s Q2 2024 Form 10-Q that reported $100.0 million in cumulative sales and is required to make the remaining $6.25 million milestone payment within 120 days following December 31, 2024. Pursuant to the final settlement agreement, the two additional $12.5 million milestone payments triggered by the Company reaching $200.0 million and $300.0 million of cumulative sales are required to be paid within 30 days following the filing of this Annual Report on Form 10-K.

The Company recorded litigation settlement expense of $37.5 million, $12.5 million and $25.0 million for the years ended December 31, 2024, 2023, and 2022, respectively, on the consolidated statements of operations and comprehensive income (loss). As of December 31, 2024, the Company has paid $43.75 million of the total $75.0 million of total consideration discussed above and has recorded accrued litigation expense within accrued expenses and other current liabilities on its consolidated balance sheet for the remaining $31.25 million.

The Company has received zero, zero and $1.1 million of insurance proceeds during the years ended December 31, 2024, 2023, and 2022, respectively. The reimbursements have been recorded as an offset to our legal fees included in selling, general and administrative expenses on the consolidated statements of operations and comprehensive income (loss) and within operating activities on the consolidated statements of cash flows.

8. Leases

Lease Agreements

In May 2016, the Company signed an operating lease for laboratory and office space in Pittsburgh, Pennsylvania that commenced in June 2016 (the “Wharton Lease”). The Wharton Lease has been amended several times to increase the area

F-18

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

leased and currently consists of approximately 54,000 square feet, including our commercial scale CGMP-compliant manufacturing facility (“ANCORIS”). In September 2022, the Company amended the Wharton Lease to add approximately 7,000 square feet of additional office space commencing in October 2022 for a 12-month term (the “Short Term Space”) and subsequently amended the Wharton Lease again in September 2023 to extend the term of the Short Term Space for an additional 12-month term through September 30, 2024. Due to the short-term nature of these amendments for the Short Term Space and the Company's lease accounting policy, the Company did not record a right-of-use asset or corresponding lease liability. In September 2024, the Company amended the Wharton Lease to (i) add approximately 20,000 square feet of office and manufacturing support space commencing after completion of certain improvements and (ii) extend the term of the Short Term Space on a day-by-day basis until the Company occupies the new office space, after which the lease of the Short Term Space will end. When the Company takes possession of the approximately 20,000 square feet of additional office and manufacturing support space and the lease of the Short Term Space ends, the Lease will be for approximately 67,000 square feet of office, lab, manufacturing, manufacturing support, and warehouse space for a term ending on October 31, 2031. The landlord provided access to approximately 20,000 square feet of additional office and manufacturing support space to the Company in January 2025. See Note 13 to these consolidated financial statements for additional discussion.

In January 2021, in connection with the Company’s second commercial gene therapy manufacturing facility (“ASTRA”) in the Pittsburgh, Pennsylvania area, the Company entered into a ground lease of which lease payments are based on annual payments of $82 thousand, and are subject to a cumulative 10% escalation clause every 5 years through 2071.

In December 2021, the Company entered into a 3-year lease agreement for the Boston, Massachusetts office that commenced in January 2022 and expires in January 2025.

In May 2022, the Company entered into a 16-month lease agreement for the Zug, Switzerland office that commenced in September 2022 and was scheduled to end in December 2023. The Zug lease was renewed on 2 occasions for additional 1-year terms and expires on December 31, 2025. Due to the short-term nature of the agreements and the Company’s lease accounting policy, the Company did not record a right-of-use asset or corresponding lease liability.

The Company has entered into 12-month lease agreements in the Netherlands, Germany, Japan, Italy and Spain. Due to the short term nature of the agreements and the Company’s lease accounting policy, the Company did not record a right-of-use asset or corresponding lease liabilities.

As of December 31, 2024, future minimum commitments under the Company’s operating leases were as follows:

(in thousands) December 31, 2024

Future minimum operating lease payments 14,617

Less: Interest (7,356)

Present value of lease liability $ 7,261

As of December 31, 2024 and 2023, the Company's weighted-average remaining lease term for operating leases was 12.2 years and 12.3 years, respectively, and the Company’s weighted-average discount rate for operating leases was 9.5% as of December 31, 2024 and 2023.

The components of the Company's lease expense are as follows:

Years Ended December 31,

Lease cost:

9. Capitalization

ATM Program

F-19

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

On December 31, 2020, the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”) with respect to an at-the-market equity offering program (“2020 ATM Program”), under which the Company issued and sold from time to time through Cowen, acting as agent and/or principal, shares of its common stock, par value $0.0001 per share, having an aggregate offering price up to $150.0 million (“2020 Placement Shares”). The issuance and sale of the 2020 Placement Shares were made pursuant to the Company's effective “shelf” registration statement on Form S-3 that was filed with the Securities and Exchange Commission (the “SEC”) on May 4, 2020 (the “2020 Shelf Registration Statement”). During the year ended December 31, 2022, the Company issued and sold 434,782 2020 Placement Shares at a weighted average price of $69.00 per share for net proceeds of $29.1 million after deducting selling commissions of approximately $900 thousand.

The Placement Shares will be offered and sold pursuant to the Company’s effective shelf registration statement on Form S-3 filed with the SEC on April 6, 2023 (the “Form S-3”), and a prospectus supplement relating to the Placement Shares that was filed with the SEC on May 8, 2023. The Company may terminate the New ATM Program at any time upon 10 days’ notice to Cowen. If not earlier terminated, the New ATM Program will automatically terminate upon issuance of all of the Placement Shares or the expiration of the Form S-3 on April 6, 2026.

The New ATM Program is not and has never been active.

2023 Private Placement Offering

On May 22, 2023 and May 23, 2023, the Company sold 1,720,100 and 9,629 shares of common stock, respectively, in a private placement to certain institutional investors at a price of $92.50 per share for aggregate net proceeds of $160.0 million. In addition, the Company entered into a Registration Rights Agreement with the investors (“Registration Rights Agreement”) that required the Company to file a registration statement with the SEC within 60 days of the date of the Registration Rights Agreement registering the resale of the shares of common stock issued in the private placement. On July 18, 2023, the Company filed the resale registration statement on Form S-3ASR with the SEC, which became effective upon filing.

10. Stock-Based Compensation

In 2017, the Company adopted the 2017 IPO Stock Incentive Plan (“Plan”), which governs the issuance of equity awards to employees, certain non-employee consultants, and directors. Initially, the Company reserved 900 thousand shares for issuance under the Plan with an initial sublimit for incentive stock options of 900 thousand shares. On an annual basis, the amount of shares available for issuance under the Plan increases by an amount equal to four percent of the total outstanding shares of common stock as of the last day of the preceding calendar year. The sublimit of incentive stock options is not subject to the increase. The Company has historically granted stock options and restricted stock awards (“RSAs”) to its employees. In February 2023, the Company began issuing restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) to certain employees.

Shares remaining available for grant under the Plan were 2,369,021, with a sublimit for incentive stock options of 29,684, at December 31, 2024.

Stock Options

Options granted to employees and non-employees vest ratably over a four-year period and stock options granted to directors of the company vest ratably over one-year to three-year periods. Stock options have a life of ten years.

F-20

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

The following table summarizes the Company’s stock option activity for the years ended December 31, 2024 and 2023:

(1)Aggregate intrinsic value represents the difference between the closing stock price of our common stock on December 31, 2024, 2023 and 2022, respectively, and the exercise price of outstanding in-the-money options on the respective date.

The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised during the years ended December 31, 2024, 2023 and 2022 was $54.8 million, $43.8 million and $2.9 million, respectively.

The weighted-average grant-date fair value per share of options granted to employees, non-employees and directors during the years ended December 31, 2024, 2023 and 2022 was $114.31, $63.38 and $44.50, respectively.

There was $56.5 million of unrecognized stock-based compensation expense related to employees’, non-employees’ and directors’ options that is expected to be recognized over a weighted-average period of 2.5 years as of December 31, 2024.

The fair value of options granted was estimated at the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions for the years ended December 31, 2024, 2023 and 2022:

Years Ended December 31,

Expected stock price volatility 73 % 73 % 78 %

Expected term of the award (years) 6.1 6.0 6.2

Forfeiture Rate — % — % — %

Dividend Yield — % — % — %

Restricted Stock Awards

RSAs granted to employees vest ratably over a four-year period. The following table summarizes the Company’s RSA activity for the years ended December 31, 2024 and 2023:

F-21

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Number of Shares Weighted- AverageGrant DateFair Value

There was $273 thousand of unrecognized stock-based compensation expense related to employees’ awards that is expected to be recognized over a weighted-average period of two months as of December 31, 2024.

Restricted Stock Units

RSUs granted to employees vest ratably over a four-year period. The following table summarizes the Company’s RSU activity for the years ended December 31, 2024 and 2023:

Number of Shares Weighted- AverageGrant DateFair Value

Non-vested RSUs as of January 1, 2023 — $ —

There was $32.5 million of unrecognized stock-based compensation expense related to employees’ RSU awards that is expected to be recognized over a weighted-average period of 3.0 years as of December 31, 2024.

Performance-Based Restricted Stock Units

PSUs granted to employees vest ratably over two years based upon continued service through the vesting date and the achievement of specific regulatory and commercial performance criteria as determined by the Compensation Committee of the Company’s Board of Directors. The performance criteria are to be completed by the end of the year in which the PSU awards were granted. Each PSU represents the right to receive one share of the Company's common stock upon vesting. The Company recognizes stock-based compensation expense for the fair value of the PSU awards relating to the portion of the awards that are probable of vesting over the service period. On a quarterly basis, management estimates the probable number of PSUs that would vest until such time that the ultimate achievement of the performance criteria are known. As of December 31, 2024, the Company determined that 100% of the PSUs granted will be eligible to vest.

The following table summarizes the Company’s PSU activity for the years ended December 31, 2024 and 2023:

F-22

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

Number of Shares Weighted- AverageGrant DateFair Value

Non-vested PSUs as of January 1, 2023 — $ —

There was $10.8 million of unrecognized stock-based compensation expense related to employees’ PSU awards that is expected to be recognized over a weighted-average period of 1.1 years as of December 31, 2024.

Stock-Based Compensation Expense, Net

The Company recorded stock-based compensation expense, net related to stock options, RSAs, RSUs and PSUs in the consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2024, 2023 and 2022 as follows:

Years Ended December 31,

After the FDA approval of VYJUVEK in May 2023, the Company began capitalizing stock-based compensation associated with the allocation of labor costs related to work performed to manufacture VYJUVEK. For the years ended December 31, 2024 and 2023, the Company capitalized $3.3 million and $1.1 million, respectively, into inventory.

Historically, the Company also capitalized the portion of stock-based compensation related to work performed on the construction of our manufacturing facilities. For the years ended December 31, 2024, 2023 and 2022, the Company capitalized zero, $162 thousand and $551 thousand, respectively, into property, plant and equipment.

11. Income Taxes

Income (loss) before income taxes by jurisdiction consisted of the following:

Years Ended December 31,

F-23

Krystal Biotech, Inc.

Notes to Consolidated Financial Statements—Continued

The provision for income taxes consists of the following:

Years Ended December 31,

A reconciliation of income tax expense (benefit) computed at the statutory federal and state income tax rate for the year to income tax expense as reflected in our financial statements for years ended December 31, 2024, 2023 and 2022 are as follows:

Years Ended December 31,

Federal income tax expense (benefit) at statutory rate 20,025 $ 2,708 $ (29,395)

State income tax expense (benefit) net of federal benefit 2,097 7,546 (10,438)

Foreign income deduction (635) — —

Other non-deductible expenses (53) 136 30

Income taxed at foreign rates 6 (468) —

The significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 are as follows:

KRYS US Equity

KRYS · 10-K · period ended 2024-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Qualitative and Quantitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data.

KRYS US Equity☆

KRYS · 10-K · period ended 2024-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Qualitative and Quantitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data.

KRYS US Equity