Krystal Biotech, Inc.

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Thank you for standing by. and welcome to Crystal Biotech's second quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode. After the speakers' presentations, there will be a question-and-answer session. During the question-and-answer session, there will be a limit of two questions per participant. As a reminder, today's conference is being recorded. I would now like to hand the conference over to your host, Stéphane Paquette, Vice President of Corporate Development. Please begin.

Good morning and thank you all for joining today's call. Earlier today, we released our financial results for the second quarter of 2024. The press release is available on our website at www.crystalbio.com. We also filed our earnings 8K and 10Q with the SEC earlier today. Joining me today will be Krish Krishnan, Chairman and Chief Executive Officer, Suma Krishnan, President of Research and Development, Jennifer McDonough, Senior Vice President of Patient Access, Analytics, and Operations, Christine Wilson, Senior Vice President and Head of US Sales and Marketing, and Kate Romano, Chief Accounting Officer. This conference call will, and our responses to questions may, contain forward-looking statements. You are cautioned not to rely on these forward-looking statements which are based on current expectations using the information available as of the date of this call and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties, and other factors can be found in our SEC filings. With that, I will turn the call over to Krish.

Thank you, Stephane. Thank you all for joining the call. Q2 2024 was a great quarter for us. during which we continued to make great progress, both with respect to Vizuvac launch and on the clinical pipeline. More importantly, it was quiet, quiet from external disruptions that we faced in one queue of this year. Today's strong results reflect our commitment to improving the lives of patients suffering from DEB. The benefits that deaf patients are realizing on Vizuvac the first and only corrective therapy for this debilitating disease, serve as a powerful reminder of what we can achieve as an organization. They also push us forward in our mission to treat death comprehensively and to develop new medicines for urgent unmet needs. As we will discuss in a moment, strong fundamentals continue to propel our US launch. Patient demand remains high, and we are increasingly seeing positive impacts both in patient starts and in new patient identification. Access, as you are aware, is in a great place, and compliance remains strong. Net product revenue growth in the quarter was up over 55% compared to 1Q 2024. We look forward to delivering further growth both in the U.S. and in overseas markets as we progress to its launches in Europe and Japan in 2025. We're also on the verge of a wave of clinical data readouts. Later this quarter, we expect to announce the first of these clinical updates for our Jeune Aesthetics Program KB301, which is being evaluated in two parallel phase one cohorts for the treatment of wrinkles in unmet aesthetic areas. And before year end, we expect to issue interim clinical updates both for KB408 for the treatment of alpha-1 antitrypsin deficiency and intratumoral KB707 for the treatment of injection-accessible solid tumors. Additional clinical updates are expected in 2025 as enrollment continues across our expanding clinical pipeline. We continue to invest in our manufacturing infrastructure and are presently working with the FDA on a scale-up of our current approved manufacturing process to increase both Vajravec yields and margins with the potential for approval by end of the year. The scaled-up process would increase the number of vials produced per manufacturing run by fourfold. As you can discern, this will further improve margins, require fewer packaging slots at our vendor, and ease any potential supply chain constraints to meet the growing demand from global markets. We're also on track to start tech transfer of our commercial process to Astra later this year. Finally, I'm happy to report another profitable quarter for Crystal at 54 cents per share, up sequentially from 3 cents per share in the first quarter of 2024. In Q2, we accrued $12.5 million in litigation expenses that once again mitigated our EPS, as it did in Q1. We presently anticipate one more final accrual of the litigation expense this year. With strong and growing capital reserves, climbing revenues, and two commercial-scale CGMP facilities, we're well positioned as ever to execute on our long-term growth plans, expand our global footprint, and bring to market a portfolio of highly differentiated genetic medicines. Moving now to our results. Net vis-a-vis revenues for the quarter came in at $70.3 million, an increase of 55.3% compared to revenues from the first quarter of 2024. Note that this prior quarter had been affected by one-time disruptions. So looking back over our first four full quarters since first sale in August of 2023, Total net Vyjavec revenues now exceed $166 million, and we continue to keep pace with the top tier of rare disease launches. Gross margins were 91% for the quarter. We continue to expect margins to be above 90% in the coming quarters, gradually improving to over 95% within a few years. Gross net adjustments in the first quarter were 18%. We expect gross to net will remain in the high teens, reflecting a roughly even split of debt patients on commercial and government plans. As we disclosed last quarter, please note that the net Vycevic revenues reported today also include an accrual for patients on contracted commercial plans who are projected to potentially hit the cap of $900,000 gross per patient per calendar year in 2024. Our rapid revenue growth in the quarter was driven by strong launch fundamentals and the tireless contributions of our team at Crystal. I'll now hand it off to Jen and Christine, who will provide more color on our successes, helping patients get on Vijavec and stay on therapy. Jennifer?

Thank you, Krish. The number of dystrophic EV patients gaining access to VIJUVEC and benefiting from fundamentally corrective therapy grew significantly in the second quarter of 2024. I am pleased to say that commercial and Medicaid access remain strong nationwide. We now receive positive policies or decisions from roughly 97% of all covered lives. This is up from 96% in our last report as we approach effectively full coverage across the country. With positive policies in place at all major plans, we are progressing patients steadily to treatment. And as of July, we have secured over 400 patient reimbursement approvals. As you can see on the slide, reimbursement approvals continue to be roughly evenly split across commercial and government plans. More importantly, we continue to see reimbursement approvals across the dead patient population, including patients of both dead subtypes and of all ages in similar proportions as reported last quarter. I would like to point out that while reimbursement approvals are a good leading indicator of revenue, they do not immediately translate to revenue. As you know, it often takes two to three weeks after insurance authorization to schedule a first home visit by a nurse and sometimes further exasperated over the summer where usual routines are disrupted. Conversion times held steady over the last quarter, and on average, it takes us four to six weeks to obtain insurance authorization and complete the first home treatment. Although the team continues to make process improvements, these were offset in the quarter by a high proportion of prescriptions coming from community prescribers less familiar with rare disease reimbursement that required more active management by our team. Albeit taking a bit longer, thanks to the hands-on expertise and support of Crystal Connect, even in these cases, we are able to achieve successful access outcomes. And finally, as we enter into our second year since approval, the volume of reauthorizations required each month continues to grow. And same as in our previous quarters, all reauthorizations to date have been approved or are in process. Moving to the patient experience compliance. Patient preference for at-home administration remains effectively unchanged, with 96% of the weekly treatments again occurring in the patient's home. And we are pleased to report that compliance to weekly application through the end of the second quarter remains high at 90%, even as patient-based and average length of therapy continues to grow. We believe that the high Vijuvac compliance is driven not only by the profound impact of corrective therapy has on the patient's lives, but also the convenience of home administration facilitated by our team at Crystal Connect. As we forecast in our launch, we remain unwavering in our focus on the patient experience and ensuring patients are able to access Vijuvac promptly and conveniently to ensure maximal clinical benefits. I will now hand it off to Christine to discuss recent sales and marketing activities, driving awareness, and new DEB patient starts on Byjuvec. Christine. Thank you, Jen. I'm happy to share today that Crystal's integrated commercial strategy, organized around our three pillars of claim analytics, medical education, and patient activation, is driving significant growth of Byjuvec in the U.S. Our claims monitoring infrastructure continues to flag new alerts enabling targeted deployments of our field force. We're also making great progress raising DEV and Vijuvic awareness among the medical community through our educational efforts, including recent publications and virtual speaker events. And perhaps most importantly, we are connecting to patients and enabling patient-to-patient dialogue, amplifying early successes and activating patients that may have otherwise resigned themselves to their disease. Although our primary commercial focus remains on penetration of the 1,200 dead patients identified at launch, and we continue to make rapid progress on this front, our commercial efforts are also organically expanding the dead patient pool. This will take on greater emphasis as we progress in our launch and as we work to ensure all dead patients, whether diagnosed today or not, ultimately have the chance to access Vigevec therapy. I would also like to feature today a few recent highlights from our work to raise awareness and activate DEB patients across the U.S. Earlier this quarter, a review article was published to serve as a practical guide for real-world use of iJUVIC. The article, authored in collaboration with DEB key opinion leaders, is now available open access and provides to readers an overview of the DEB disease burden, iJUVIC clinical trial outcomes, as well as physician, patient, and caregiver recommendations. And later this year, we expect to publish detailed results from the OLE study, providing additional information to prescribers and the DEP community on the extended use of iJUVIC. These publications and related educational materials provide the medical community with easy access to critical data on the many benefits of iJUVIC therapy and best practices on its use. They also help enrich our medical team's interactions with care providers. either during one-on-ones or in the increasing number of virtual and in-person events that we put on across the country. At the same time, we are making progress in facilitating patient-to-patient interactions, including holding our first patient webinar with EB Lifestyle this quarter. With testimonies from multiple Vijuvik advocates, these virtual events allow us to disseminate their learnings and successes across the country at events such as the Deborah Care Conference recently held in July. We will be supplementing our virtual efforts with multiple in-person events in the second half of the year and a meeting series covering four major metropolitan areas across the U.S. Thanks to these initiatives and others, we made excellent progress in both raising the profile of Deb and communicating the value proposition of iJuvec to patients and their caregivers. It is gratifying to see this work translate into new patient starts and Deb diagnosis and look forward to the path ahead. Now I will hand it off to Suma to share pipeline highlights.

Thank you, Christine. Our development team's strong momentum to start 2024 continued throughout this past quarter, as we made significant progress towards our goal of treating DEB comprehensively and globally, while also advancing a broad pipeline of urgently needed redosable genetic medicines. With respect to the global development of BVAC, we remain on track for launches in both Europe and Japan by 2025. In Europe, EMA's review of our marketing authorization application is progressing well, and in May, GMP certification of our commercial manufacturing facility, Ancoris, was granted by the European authorities. As we shared last quarter, Based on recent discussion, we believe EMA, like the FDA, is also supportive of home dosing. We continue to expect a decision on our marketing authorization application before the end of the year and a first launch in Germany in 2025. In Japan, we remain on track to file the Japanese new drug application on BVAC in second half of the year. Having previously received orphan drug designation by Japan's Pharmaceuticals and Medical Device Agency, a designation which confers specific benefits for orphan drug development, including priority review of applications, we remain on a trajectory for both a decision by the Japanese authorities as well as launch in 2025. Our application to the Japanese authorities will include the results of our open-label extension study in the Japanese patients that was completed earlier this year. Key details including safety and efficacy observations from the Japanese open-label extension studies are shown here. Overall, results closely mirrored those from our Registrational Phase III trial. The Japanese study was a multicenter open-label extension study in Japanese patients with DAP. The primary endpoint was the same as in our registrational study, complete closure of a pre-specified primary wound at the six-month time point. Key inclusion criteria and dosing are shown on the slide. Importantly, We aligned with the Japanese regulatory authorities on the study design, number of patients for the Japanese study, and the use of U.S. clinical data to fulfill requirement for the Japanese new drug application submission. In total, we enrolled five patients with one dropping out due to scheduling challenges. All enrolled patients had recessive death and covered a wide age range. As shown on the right, all four patients that completed the study achieved complete wound closure at the six-month time point. In addition, BVAC was well tolerated in the Japanese population, and both efficacy and safety profile was consistent with previous U.S. studies. We view these results as supportive of our application to the Japanese regulators and look forward to filing later this year. Moving now to our broader pipeline. Here, as well as we have made rapid progress, putting us on track for three readouts before the end of the year. We expect to share the first of these readouts later this quarter with interim top line results for both cohort three and four of our KB301 phase one study. Both cohorts are running concurrently to evaluate our aesthetic medicine candidate, KB301, in two potential target indication. Improvement of lateral canthal lines at rest and improvement of dynamic wrinkles of the decollete. Following readouts from cohort three and four, we expect to select a single indication for phase two development. In the fourth quarter, we also expect to disclose interim data updates from both our KB408 and intratumoral KB707 programs. KB408 is our Redosable Inhale Therapy for Alpha-1 Antitrypsin Deficiency, which is currently being evaluated in a Phase 1 Serpentine-1 study. Serpentine-1 is open-label, single-dose escalation study in adult patients with AATD to allow assessment of safety, tolerability, Alpha-1 antitrypsin levels, and key pharmacodynamic biomarkers. We have completed cohort one and are currently enrolling cohort two. With strong support from the Alpha-1 research community, we remain on track for an interim data readout before the end of 2024. Intratumoral KB707 is an injectable formulation of our modified HSV-1 vector designed to deliver genes encoding both human IL-12 and IL-2 to the tumor microenvironment and promote systemic immune-mediated tumor clearance. It is being evaluated in a Phase I dose escalation and expansion study of OPAL-1. We have now completed all three dose escalation cohorts and dose expansion is underway. We'll issue an interim data update before year end. I'm happy to share that intratumor KB707 was recently granted a rare pediatric disease designation for the treatment of osteosarcoma. This is in addition to a fast track designation granted last year. We are also making progress in our phase one studies evaluating inhaled KB407 for cystic fibrosis and inhaled KB707 for solid tumors of the lung. We have now completed cohort two in our phase one CORAL1 study evaluating KB407 and completed the first dose level, phase one KINITE1 study evaluating in-health KB707. We look forward to providing data updates on these programs as they advance. Finally, we are moving ahead in our work towards developing an ophthalmic formulation of BVAC for treatment of ocular complications in deaf patients. Earlier this year, we reached alignment with the FDA on single-arm open-label study to enable approval of BVAC eye drops for the treatment of lesions in the eye of DEP patients. In support of this development strategy, earlier this month, we initiated a natural history study to prospectively collect data on the frequency and severity of coronal abrasions in patients with DEP. This study will also serve as a running period for patients who may be eligible to participate in the registrational study. We remain on track to start the study before the end of this year with potential for top line data read in 2025. The next 12 months have the potential to be transformational for Crystal as we read out on trials that showcase the breadth of our gene therapy platform. We look forward to sharing these updates as they come and progressing our pipeline of highly differentiated genetic medicines. With that, I would like to turn the call to Kate. Thank you, Suma.

With our growing demand for Vigevec in the U.S., our net product revenue for the quarter was $70.3 million, which represents a 55% increase over the first quarter of 2024. As Vigevec was approved by the FDA in May of 2023, and our first sales occurred in August of 2023, there was no comparative period revenue. Cost of goods sold was $6 million for the quarter, or about 9% of net product revenue, resulting in a gross margin of 91%. Before our approval in May of 2023, costs associated with the manufacturing of Vigevec were expensed as research and development, and as previously mentioned, our first sales occurred in the third quarter of 2023. Therefore, there was no comparative period cost of goods sold in the second quarter of 2023. Research and development expenses for the quarter were $15.6 million, inclusive of stock-based compensation of 2.8 million, compared to $12.1 million for the prior year's second quarter, inclusive of 2.9 million of stock-based compensation. Higher research and development expenses in the second quarter of 2024 were due to increased R&D related manufacturing and process optimization expenses for our product candidates, increased R&D depreciation expense, increased clinical development costs, as well as increased license and regulatory costs this quarter. These increases were partially offset by capitalization of direct and indirect overhead costs to manufacture Vigevec being charged inventory following FDA approval. Selling general and administrative expenses for the quarter were $27.6 million, inclusive of stock-based compensation of $10.4 million, compared to $25.9 million for the prior year's second quarter, inclusive of stock-based compensation of $8.5 million. Higher selling general and administrative expenses in the second quarter of 2024 compared to the prior year's similar quarter were primarily the result of increased stock-based compensation, increased commercial-related professional services fees, increased VICEVEC selling expenses, and increased VICEVEC patient access program costs. These increases were partially offset by a decrease in launch-related marketing costs incurred prior to our VICEVEC launch in the second quarter of 2023. This quarter, we again recorded litigation settlement expense of $12.5 million due to our anticipation of reaching the second milestone payment in the Perficient Settlement, which is triggered at $200 million in cumulative sales payable following the filing of our Form 10-K in which the $200 million milestone is achieved. The third and final milestone will be triggered by reaching $300 million in total cumulative revenue from sales of the company's products. Net income for the quarter was $15.6 million, which represented 54 cents per basic and 53 cents per diluted share. Our non-GAAP operating expense guidance for 2024 remains unchanged. This guidance excludes the non-cash impact of stock-based compensation. Finally, we ended the second quarter with $345.8 million in cash on hand and $628.9 million in total cash plus short-term and long-term investments, marking quarterly growth in our overall cash and investments position with an increase over our first quarter of 2024 cash and investments by about $7 million. And now I will turn the call back over to Krish.

Thanks, Kate. With an annualized product revenue run rate already over $250 million and four quarters of positive EPS, we've been able to deliver significant value to our shareholders through the U.S. launch of Vizivac. And yet, we see opportunities for significantly more value creation in the years ahead, both through the global expansion of Vizivac launch and the advancement of our clinical stage programs. each of which addresses a clear unmet need and showcases the breadth of our platform. With the benefit of commercial-scale in-house GMP manufacturing infrastructure, we're uniquely positioned to rapidly execute against these goals and bring to market a portfolio of highly differentiated, re-dosable genetic medicines. Thanks for listening. I'd like to now open the call for Q&A.

Certainly. At this time, we will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. As a reminder, during the question and answer session, there will be a limit of two questions per participant. We ask that you pick up your handset if listening on speakerphone for optimum sound quality. Please hold while we poll for questions. Your first question for today is from Alex Stranahan with Bank of America.

Hey, guys. Thanks for taking our questions, and congrats on the strong quarter. Two questions from us. First, just on patient compliance, how do you expect this to trend in the second half? Do you think it's reasonable to expect this to reach some steady state as new patients go on therapy and older patients, you know, maybe see a benefit from therapy. And then, second question, any changes in the way you plan to approach the international markets if IAGFX approves, say, in the EU or Japan? Thanks.

Hey, Alec. Thank you. And the second question, which is quicker, no change in the approach we've had to date. We want to self launch in the EU or UK and Japan. And we're looking to do distributor agreements in countries outside of that and the ROWs. So really no change to the way we're looking at international markets. And the compliance trend, I will say I'll make a couple anecdotes. We also track the OLE patients who on average have been to date on drugs for about 35 months or so. And we are seeing a minority of patients drop below max compliance. And we define max compliance as north of 90%. This is always a situation where someone misses a vial for personal issues, whatever. So we're starting to see at this point in time, especially with the OLE patients, that says the majority of them are still tracking to pretty high compliance at four bios, noting that most of the patients in the OLE were severe. And so from a patient severity perspective, we're starting to see some good trends with respect to compliance. On the mild to moderate, look, most of the dominant patients have been on drugs since the launch. And I'll ask, I'll turn it over to Jennifer to talk a little bit more about what she's seeing in compliance in a commercial setting.

Sure, sure. Thanks, Krish. So, yeah, I think as we look at our one-year anniversary, as Kate said, our first expense was in August. So we are able to start analyzing some of those cohorts that came on early, and we are really excited around their adherence to the weekly dosing. So from an overall weekly application, the in-home nursing, that seems to be working really well. Patients are able to schedule within their normal schedules, you know, the same day of the week, which really seems to be well. For those folks that Chris mentioned, there's an open-label extension that has been on a relatively long period of time, several years. They may, you know, pause treatment, you know, for the most part because they may have no open wounds. And then they cycle back as life continues to happen for them. So overall, as we analyze those first cohorts, we see very, very high compliance in that one-year period, which is kind of that threshold that we're looking at. And again, we believe that weekly convenience of home application and the impact that by GVEX making on their daily lives is driving that high compliance percentage. So we're really happy with what we're seeing in the real world.

Thank you.

The next question is from Ritu Baral from TD Cowen.

Hi, guys. Good morning. Thanks for taking the question. I wanted to ask about the status of manufacturing, the manufacturing approvals for expanded capacity, and then my follow-up is on the European application. It sounds like you are seeking sort of FDA sign-off on expansion in the ANCORUS plant, will there be any sort of new inspection required, new assays? Are you taking, like, another floor in ANCORUS, or will it be the same sort of square footage?

I'll turn it over to Summer to do that.

So, where we stand with ANCORUS is ANCORUS has the capacity to fully meet the commercial demand for the U.S. and potentially in Europe. So as far as with the current scale, obviously we are, we are, you know, going into the large scale production. We have filed the PAS for that filing and we anticipate that should, we hope to get that approved by end of the year. So we're pretty excited about our scale up. With regarding to inspection of Tancor's facility, again, As you know, we have been inspected by the FDA with very minimal 483s or any findings. Same with the email. Again, they were very pleased with the inspection. The inspection results went pretty well. I mean, obviously, you know, every two years we have routine inspections. I think we are prepared. We know the agency. We know all of the, you know, what they look for. I think we're well prepared. With regarding to scale-up, we may not receive inspections again we don't know but if we do we are absolutely prepared with regarding to astra we have already transferred some of our team uh starting materials into astra and that's files that's i mean we are already talking with the agency of getting astro food for this key starting raw materials so we anticipate transfer of our actual process which is the scalar process to astra sometime this year. So I think we're in good shape with manufacturing. We feel very, manufacturing is going pretty smoothly.

Great. And then on the European applications, can you give us the status on like 120-day questions or have you moved on to the 180-day questions? And basically, are the topics covered in those questions related to home dosing? Are they materially different than what the FDA asked during its review period? And any points of note there?

Yes. I mean, we have completed, I mean, responding to all of the questions. We should be submitting it shortly. But pretty much the questions were very aligned and predictable. So the little surprises, Ritu, it was because, again, because we have the prime designation, We had many scientific meetings with the EMA. So I think there were no surprises. Obviously, you know, EMA is thorough because we have the Rappaport and core Rappaport countries. So again, the questions, we were, all of them were addressable. Yes, home dosing was in that list of questions. And we have obviously, you know, responded to some of their questions regarding home dosing. So home dosing is very much in the discussion point. And if you look at our SMPC right now, home dosing is part of our SMPC. So again, I think with regards to all of the questions and our responses, we feel very comfortable because there's no surprises. Very similar trend from the FDA, and we're very prepared. We feel confident for responding to those questions in a timely manner.

Understood. Just to clarify, these were the 180-day questions that you spoke of or the 120?

I mean, the 120, that's the, I mean, review is done, and we should get the 180 shortly.

Okay, got it. Thank you. Your next question for today is from Andrea Tan with Goldman Sachs.

Good morning. Thanks for taking our questions. I was just wondering if you could provide color on the proportion of VigeVac patients who are coming from centers of excellence, and to what extent are you seeing uptake amongst other patients who might have stepped away from these centers previously and thus require a little bit more work to bring back into the system? And then I have a follow-up.

Sure. Thanks, Andrea. Jen?

Yeah, sure. So, as we look at the analytics around measuring, you know, who's coming from a COE versus community, we do know, you know, the majority of our patients are really seen in both areas, both sites of care. You know, we see a trend towards the community for sure. However, you know, the centers are strong. They continue to, as they prescribe, as they see new patients or new patients are being diagnosed, we see them coming in earlier and earlier, which is a great trend. The second point of that question, sorry.

It was basically about COE and any overlap between COE and COVID.

Yeah, so again, the community continues to be strong. I think in this past quarter, the majority are coming from community, which is exactly where our strategy is pointing our sales team. So overall, it's just as expected with strong utilization in both the centers and in the community setting.

Great. And then my second question is actually for Suma. I'm hoping you might be able to frame expectations ahead of the AET data later this year. specifically around how many patients we might be able to expect. Will it be from both cohorts one and two? And then what will you be looking for specifically to make a go, no-go decision on the program? Thanks again.

Yeah. So again, cohort two is pretty much fully enrolled. I mean, again, so we expect to go into cohort three pretty shortly. I think cohort three is going to be our important cohort because we're going to go with the highest dose. And this is where we are going to have bronchoscopies. And now evaluate that. So obviously you'll have some data risk regarding to, you know, expression of A1-18, both in the lung, in the lavage, and also look at systemic levels if it's in the plasma. So again, we expect to enroll patients and get some molecular correction using, you know, bronchoscopy data in the patients.

Got it. And to confirm, cohort three data will be the key data set that we're expecting by year end.

Correct. That's what we're targeting. Yes.

I will point out, Andrea, we view the releases, phase one data, like it's tough to predict if all the data would be in on all the patients by the end of the year, but we definitely think that most of them would be in, so we're still calling it interim phase one to update.

Okay, thanks so much. Your next question is from Tim Lugo with William Blair.

Hi, this is John on for Tim. Thanks so much for taking our question. I was wondering if you could talk a little bit more about the number of new patients you've identified outside of the original 1,200 that were identified and talk a little bit more about your current comfort level with the estimated total of around 3,000 patients in the U.S.

Okay, let me start. Look, we definitely are starting to see new patients being identified outside of the 1200. It's basically analytics-driven, and it's not as simple and direct as you can imagine because of the way that how some patients are treated both in the COE and in the community. It's tough to put an exact fine point on it, but our internal view on the matter is that we have expanded on the identified base by close to 10% at the moment.

Okay.

And in your current comfort level around the estimated total around 3,000 patients? Oh, still the same.

Okay. Thank you so much.

Your next question for today is from Yigal Notomovitz with Citi.

Hi, Christian team. I had a question on the ocular formulation. Regarding the natural history run-in, I'm just curious what sort of eligibility criteria would you be using in that run-in to determine who would qualify for the treatment phase of that study?

I mean, the qualification is, I mean, the inclusion criteria is the patient must have at least two episodes of, you know, blisters or incidences of blisters in the past six months. And I can tell you, I mean, the natural history study is going pretty well because there's a lot of patients with blister manifestation. I mean, more than I thought because these patients do have, you know, constant blistering in their eyes. So tube blisters, that's what the agency, we have discussed with, and so that's a requirement.

Okay, thanks. And I recall there was one instance of a compassionate use case in a 13-year-old boy. with Vigevec intraocular. Have there been other instances of compassionate use or use off-label of Vigevec for ocular complications with the commercial drug?

So right now, the boy that had the ocular, so he was in his left eye. Now they have also been treated his right eye. So both his left and right eye has been treated with Vigevec for an extended period of time. So that's the only compassionate team. Obviously we do get a lot of requests, but I think now since we are, you know, in the process of getting clinical studies going in the natural history study has been rolled out. So we have a lot of patients that are going in the natural history study, so we are hoping

Hey, Gal, on your question on off-label use, look, the drug is mixed in the pharmacy. It's almost inconceivable the way it's mixed and delivered to contemplate any, even remotely, off-label use in the drug prison.

Okay, thank you.

Your next question for today is from Gavin Clark Gartner with Evercore ISI.

Hey guys, thanks for taking the questions. I had one more granular one and one higher level question. First, just on the reimbursement approvals, so I believe you had around 420 start forms as of mid-February, and now I'm around 400 reimbursement approvals. I'm just wondering for some of those start forms that didn't come through as reimbursement approvals, what's the current status of them? And just overall, how many of the reimbursement approvals do you expect will ultimately make it to patients on drug at some point?

Hey, so can we not go into the term stock forms because we're never going to talk about stock forms. I'd be excited that we've gotten beaten up on that term for like six months for absolutely no reason. In terms of reimbursement approvals to net revenue, The most important thing to realize that it's not immediate. It still takes two to three weeks to schedule a nurse, in some cases with the summer schedules, comorbidity in some cases. So there's always a time lag, and Jen can elaborate on exactly what it is we track. Now, look, reimbursement approvals, as I see it, immediate predictor of net revenue. So if you look at it that way, I think it's the closest indicator you can have to kind of estimating what net revenues could be in the future. You know, we've always said, look, the start form, we don't call something a start form until it's adjudicated. You can call it a script. And as we go into the community, especially, genetic testing rates are lower, even if they have been done many years ago or they used to be treated in the COE, paperwork gets misplaced. So, more in the community, you should assume that the majority of scripts we get don't convert to start forms until we get the genetic testing done. So, that's important to note. But outside of that, besides the lag in time, Given the high compliance, there isn't anything magical about the way the launch is going. It's going really well. Patients who get on drugs get compliant. We would like to see the patients get on drugs sooner than they do, but life does get in the way. And we are super focused on patient experience, making sure we're not rushing them into something

Yeah, that makes sense. And just one higher level question then. As you kind of transition to a more mature period of the launch, I'm just wondering what we should expect for go-forward metrics. So are you guys going to keep reporting the reimbursement approvals and the compliance every quarter? Will you ever report patients on drug or maybe plan to give any guidance? Just wondering what we should expect for the go-forward metrics. Thanks, guys.

Hey, first, I don't believe we're entering the mature phase of launch. The way we look at We still believe we're in a high growth, you know, I don't want to call it high growth, but we're in a growth phase. Look, when we get to the mature phase of launch, hopefully sometime next year, our present intentions, which can change, is simply to guide on revenue. Because there's more and more people, like, you know how Jen alluded to start and stop, or I'll come back to it after summer, I'm not that severe. Compliance will start to get, as you go into the community, going to dominant, compliance will get less clear over time. We're still at very high numbers. Our expectation, if you remember, at the time of launch was four vials a month for the first 18 months and going to two vials. So we were expecting compliance to drop to 50% in like 18 months post-launch. The trend doesn't look that it's going that way at the moment. but we reserve our judgment on where it's going to end up. We're still in many ways in the early stages of launch. So A, we're in a growth period, early stages of launch, and if we ever get to the mature phase, we'll probably simply guide on net revenues at that point.

Your next question is from Dagon Ha with Stiefel.

Great. Good morning. Thanks for taking our questions. Maybe a question for Krish or Christine. Just in terms of looking at the commercial portion, you put the headwinds behind us since the first quarter. So I'm just kind of wondering, you know, is this kind of community typesetting phase going to continue where we can anticipate a little bit more of a conversion period delay? or if you can maybe comment on sort of the physician and patient behavior transitions or evolution, if you will, since the August 1st commercial launch last year, that would be great. And then second question specifically for Suma, just reverting back to the KB408 expectation, I mean, is the anticipation that you're going to focus more on the lung bronchoscopy measurement of the AAT concentration, and if so, what's the bogey or what's the level that you're kind of seeing as a potentially promising level? Thanks so much.

To see one piece of it.

Sure. Yeah, so I've mentioned our clean monitoring infrastructure continues to fly new alerts, which is what has supported our ability to not just focus on the COEs, but also in the community-based setting. And as we look about that community-based setting, we are finding patients all across the United States, which is really exciting because it gives us an opportunity to introduce Vyvec to both the HCP and the patient. Our intention is to continue on both tracks, right? We continue to cultivate our COEs. Our KO advocacy continues to strengthen as time goes on. But in addition, we are seeing that growth in the community setting And as mentioned, the dynamics are a bit different, as you would imagine, in the community, right, where patients may have been less engaged with the healthcare system as a whole, and therefore it takes a bit more time to get the genetic testing done, the clinical notes that are required for reimbursement approval, et cetera. So we do anticipate that as our growth continues in both platforms, we will see a combination of timelines that are associated amongst both the COE and the community setting for pull-through.

Great. Thanks, Christine. Sunil?

Sure. With regard to 408, obviously, I mean, you want expression in the lungs, right? I mean, that's what's speaking to our key KOLs. That's what we hear. I mean, again, nobody knows what kind of levels we need to see a correction or improvement. But again, you know, obviously, the lung improvement and functions, we're going to tell you as we start measuring them. With regards to AAT, the beauty of AAT is it's a secreted protein. And it's, you know, we already know that from a vector we see high expression of the secreted protein. So we anticipate when you go into the lungs and you nebulize it, it's going to infect any cells that's going to see, and you're going to see a lot of the protein that's being generated. At least based on our animal data and our in vitro data, we expect high expression. So when we look at the bronchoscopy again, when we compare it to baseline, we would, that's where we're going to compare. What is the difference in the levels? And obviously going forward, we're going to start measuring improvement in lung function as part of the efficacy. But again, I think it's 408, the beauty of 408 is, I mean, there is no approved product for this therapy. So we, from a regulatory strategy point for us, we believe We can go to the agency and go with the biomarker approach. If you're seeing expression levels in the lung and we can quantify them, the plan or the intent is for us to obviously sit down with the agency and see if there's a pathway for accelerated approval with this particular indication. So that could be an opportunity for us.

Yeah, Dagon, this is Stephan. You're just adding on top of what Suma said. You know, clearly based on the mechanism here, it's the lung levels that are important. We're measuring systemically, but that's not what's going to drive decision making for us. The PD biomarkers will give us a sense of if we're in a clinically useful AAT range. There's also, you know, in the literature and understanding, levels in ELF, for example, relative to systemic, maybe 5% to 10% in that range. And so there are tools to benchmark what we would expect to be clinically useful AAT, which will then be bracketed by the information we get from baseline, both patients on and off augmentation, and those PD biomarkers of having the effect that we want in the context of the lung. So collective make a decision on progressing into phase two plus.

Hey, Deacon, I do have a final comment. Please realize we're redosable gene therapy, right? And we make the argument for CF, how we chip away at the problem and that unlike other gene therapies, which are, you know, primarily for the most part, one and done, people look at first readout, just always bear in mind as we report data that we have the ability to redose into a more amenable situation than we started with.

On that point, Krish, I guess this cohort three data won't necessarily give us what the redosable frequency may be, right?

I mean, yes, correct. Because it's a single dose, but very quickly, we are going to go in maybe some of those same patients. We can roll them into the extension study where we can start redosing them. Because I think one week, we will have a good understanding what levels we see. And based on that, we are going to roll over those patients and continue to collect that data.

That makes sense.

Thank you very much. The repeat bronchoscopy is tricky, but we'll try. We'll see what we can gather from patients. Many of these patients are amenable. They are open to doing, allowing bronchoscopy because, you know, they seem to be okay with it. So we will find enough patients to collect that data that's reusable, what's being allowed to capture those levels.

Okay, great. Thanks so much.

Once again, if you would like to ask a question, please press star 1 on your phone at this time. Your next question is from Debjit Chattopadhyay with Guggenheim Securities.

Hey, good morning. Chris, could you clarify what you expect steady state given the earlier comments on some of the OLE patients out to month 35? Are these patients now at two vials per month, and what are you assuming steady state revenue per patient?

So, let me just clarify the comment. I don't know. I don't recall saying two, so it could be three or two or one, something that's been forward, but I'll let Jen comment on. What exactly is the chances?

Yeah, so when we look at the cohort of patients, they do vary. We kind of separate into kind of two different cohorts. One that consistently is remaining on therapy for a month for that entire year. And then those folks that potentially are pausing and coming back. And that's the cohort that, as Chris said, is a little, I would say, premature to kind of understand where they're at. They do vary based on their leptotherapy and the other comorbidities that they are dealing with, whether they're in the hospital, et cetera. So we are continuing to trend. I think it is a little early to say where the final results will be based on severity, based on where the wounds are at, based on everything else that's going on in the patient's lives. But overall, again, the patients that are continuing weekly, stay on weekly, and then potentially a pause here and there as life happens for them. So we'll continue to track it, and I think steady state will eventually evolve as patients continue on therapy.

Yeah, and I think net revenue, I mean, sometime next year we'll have a much better idea what the number looks like. We're still less than, I mean, we're almost at 12 months into launch. We're still not at the 18 months yet. So anything we said would be a bit premature, but right now compliance is good. We're tracking ahead of our expectations with respect to launch.

So hopefully next year. Awesome. So a couple of follow-ups here. Do you think you could get to over 700 patients on approved therapy by mid-25, which would roughly be about 60% of the identified 1,200 patients?

Look, our goal in the launch always has been to get to 60% market share in two years, although I will caveat a little bit. At the time, we said that we were talking in terms of start forms and not in terms of patients on drugs. But that said, our internal goal, just to be very clear on the topic, is to work pretty hard to get to that number two years from launch. Yes, that's the goal.

Got it. And the ophthalmic indication, is that a separate BLA or a label expansion? And what should be the pricing assumption for this segment?

It's going to be a different BLA because, again, the volume is going to be different. The safety outcome is going to be different because of the eye. So it is a separate BLA. But, again, as we mentioned, we have agreement with the agency. So what we're embarking on is the registrational trials. which we expect to complete next year.

So it's going to be a new VLA. I was just going to say, if it's a separate VLA, should we also expect a pediatric review voucher along with that?

Yeah, I mean, as for the regulatory guidance, for the same molecular entity, I mean, this is what happened to Bluebird, if you guys remember. I think they do not issue a second It depends on the molecule or entity. So that's the guidance.

Thank you so much.

This now concludes the call. At this time, thank you to all participants for joining the Crystal Biotech Second Quarter 2024 Earnings Conference Call. You may now