Krystal Biotech, Inc.

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Thank you for standing by, and welcome to the Crystal Biotech Q4 2024 earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentations, there will be a question and answer session. As a reminder, today's conference is being recorded. I would now like to hand the conference over to your host, Stephane Paquette, Vice President of Corporate Development. You may begin.

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the fourth quarter and full year of 2024. The press release is available on our website at .crystalbio.com. We also filed our earnings 8K and 10K with ESCC 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. 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 filing. With that, I will turn the call over to Krish.

Stefan, thank you. Good morning and welcome to the call. 2024 was a strong year for Crystal. Vizuvac US launch continued to progress well and tracks in the top tier of rare disease launches. The strength of the launch speaks to the robust efficacy and safety profile of Vizuvac and our relentless focus on patient and physician experience. In addition, in 2024, we demonstrated that we can safely and repeatedly deliver genes to the lung with a nebulizer across our cystic fibrosis, -1-antitrypsin, and NSCLC programs, clearly validating the lung as a second target tissue for our platform. There were also strong early signs of efficacy in our readouts, and we fully understood that. We expect the data to mature later this year. Looking ahead at 2025, we have three primary things to accomplish. First, a successful Vizuvac launch in EU and Japan. Second, to translate the early signs of efficacy into strong results across our CF and A1AT programs. And the third is to prepare for the anticipated launch of Vizuvac to treat lesions in the eye of deaf patients. If we do this right, we believe the company will be in a much stronger place with respect to revenue, net income, and market cap going into 2026. For the year, net income per share was $3.12 per share, up sequentially from $0.40 per share in 2023. This is our sixth straight quarter of positive EPS and fourth straight quarter of sequential earnings growth. In addition to operational success, we have also put ourselves in a strong financial position of future growth. In aesthetics, June Aesthetics reported a strong KB301 Phase 1 data for the treatment of Deklatae and we plan to start a phase 2 study later this year. We're in the process of building out a season management team at Genesthetics with more to come on this later in 2025. $341 million in net revenue within 18 months of launch and sequential revenue growth for six straight quarters is a tremendous achievement and a testament to the tireless contributions by our commercial and patient support teams on behalf of patients with DEB. Net Vizuvac revenue for the Q came in at $91.1 million, bringing revenue for 2024 to $290.5 million. Gross margins and GTN were consistent with prior cues. I'll now turn it over to Jen and Christine to share more details on the US launch.

Thank you Krish. Looking back on 2024 and now the early days of 2025, I'm incredibly proud of what our team has been able to accomplish. With steady progress over the entire year and a strong access landscape carrying over from 2024 into 2025, a growing number of DEB patients have or will soon benefit from fundamentally corrective Vizuvac therapy. I'm also happy to share a major milestone achievement for our United States team as we recently crossed 500 reimbursement approvals nationwide. As of February, the number of patients with reimbursement approvals exceeds 510. This is despite of losing a few weeks to holidays in the fourth quarter. With a good pickup of the pace of approvals to start 2025, as well as strong underlying demand trends, we remain confident in our ability to hit our ambitious pre-launch penetration targets. Reimbursement approval splits were again largely in line with recent quarters and roughly evenly split between commercial and government plans. Approvals continue to come across the entire DEB population including patients of all ages and with either dominant or recessive forms of the disease. With effectively full nationwide commercial and Medicaid coverage, the access landscape for Vizuvac remains strong. Reauthorizations are getting processed smoothly. All have either been approved or are in process. In the community, we are still seeing a lag from prescription to approval dictated primarily by the availability of genetic test results and prescriber familiarity with access pathways. As always, our Crystal Connect team is working closely with home healthcare providers to meet patient needs and preferences. It is this infrastructure and patient-centric approach that has allowed us to navigate scheduling constraints and holidays to ensure patients can get on and stay on treatment. Patient preference for at-home administration is again effectively unchanged with 97% of the weekly treatments occurring in the home setting. Patient compliance to weekly treatments while on-drug was 85% as of the end of the fourth quarter. In the third quarter, it was at 87%. As we progress our U.S. launch, we are thrilled to see that patients are achieving durable wound closure and getting to live fuller, more active lives. This, of course, is the whole point of Vizuvac. As patients enjoy their first pauses in therapy and then settle into a more regular maintenance regimen, we do expect to see compliance to continue to trend towards the rates that we guided at launch. We are learning from real-world experience that the treatment journey for each patient is unique and dynamic. A -year-old initiating therapy after decades of blistering and wounding may have a very different journey than a very active toddler. The time to wound closure and durability are dependent on a myriad of inputs, including nutritional status and iron levels, as well as the patient's age, their mobility and activity levels, and of course the location and the age of the specific wound treated. Because each patient in each wound area is unique, the length and frequency of treatment pauses are personalized to the patient. Critically, patients and their prescribers understand the importance of treatment persistence, and patients that have benefited from a pause due to full wound closure are now transitioning into an ongoing wound maintenance routine with Vizuvac helped by our Crystal Connect team. As always, our team will be with them every step of the way to ensure they have a steady access and can continue to enjoy the benefits of regular Vizuvac treatment. I will now hand it off to Christine to discuss recent sales and marketing activities which are keeping us on our top tier launch trajectory. Christine.

Thank you, Jen. As we enter 2025, it is my pleasure to report that tactics that we developed in 2024 continue to pay dividends, driving significant growth in reimbursement approvals and strong patient demand across the country. Prescribing claims analytics and patient engagement all point to strong and sustained underlying demand. Education and patient activation remain core focus areas for our field team as we look to further penetrate into the identified patient pool. We partnered with multiple advocacy groups in EB in the fourth quarter to host live webinars led by prescribing physicians and patients who share their experience with Vizuvac and positive progress that they've experienced since starting on therapy in 2023. In addition, and in honor of EB Awareness Week, we hosted a national broadcast led by Dr. John Browning. The virtual platform allowed us to reach healthcare professionals across the United States and showcase our clinical trial data, longer-term safety and efficacy data, and case studies of patients on Vizuvac. This event also included a patient ambassador on Vizuvac sharing their first-hand experience. This comprehensive showcase of trial data and real-world insights emphasize the clear and durable benefits of therapy and critically demonstrated the significant impact it can have for patients. We also equipped our sales team with new promotional material that emphasizes the long-term safety and efficacy of Vizuvac. These materials not only reinforce the durable wound healing benefits that can be achieved only with a corrective therapy like Vizuvac, they also underscore that all dead patients can benefit from therapy with actual patient images demonstrating healing in both the RDEB and DDEB subtypes across both the adult and pediatric spectrum. Most importantly, these efforts have yielded tangible results. Not only did we achieve significant reimbursement approval growth over the past few months, we also continue to expand our prescriber base. Over 65 percent of prescribers in the fourth quarter were new writers. With each new prescriber, awareness of DEB and Vizuvac grows, extending our reach in the new community. As the number of patients on therapy grows, I would also like to highlight that we have personalized and ongoing communication with patients and their caregivers to ensure they are supported throughout their journey. These communications are via phone call, email, or text, all based on the preferences of patients and their families. These touch points are another part of our commitment to patients, allowing us to move proactively to meet their needs with practical resources and EB community connections, while also gaining valuable insights to support new patient starts. With strong underlying demand, growing awareness, and a broadening prescriber base, we are excited to continue growing the number of patients on Vizuvac across the US. Now I will hand it back to Krush to share an overview of our global expansion plans for 2025.

Thanks, Christine. We expect a positive CHMP opinion on our application later this month, and based on this timeline, we expect our first EU launch in Germany around mid-year, along with commencing an Access Precoce AP2 program in France. The opportunity that exists in Europe is significant, with many already identified DEB patients in urgent need of corrective therapy. In Germany and France alone, there are over 1,000 identified DEB patients. As in the US, our initial focus will be to penetrate the identified patient pool. We are also on track for a regulatory decision in Japan later this year, enabling launch into another market with hundreds of already identified DEB patients. In support of this filing and our launch, we have established our head office team in Tokyo and have started hiring our field force. It has always been our goal to treat DEB globally and comprehensively, and thanks to the continued efforts of our development team, we're also working steadily towards treating lesions in the eye of patients. Summa will now share more detail on both our Ophthalmic BVAC program and our broader pipeline.

Thank you, Krish. As

Krish just noted, we are committed to treating DEB comprehensively, and are very excited to be progressing our second product, KB803, towards a potential approval to address the ocular complications associated with DEB. In support of this goal, we initiated a natural history study last year to prospectively collect data on the frequency of corneal abrasions in DEB patients. This study is providing valuable information on the burden of disease and is helping us refine endpoint selection for our phase three study. The natural history study may also serve as a run-in to our registrational trial, adding more baseline data to contextualize our phase three results. The high rate of enrollment in the study with approximately 50 patients enrolled underscores the unmet need and demand for a corrective therapy for the eye, and given the run-in options should provide as an opportunity to rapidly enroll our phase three once initiated. We are finalizing the study design and statistical analysis plan with the agency and remain on track to initiate our registrational phase three, which we refer to as our IOLITE study in the first half of the year. Assuming rapid enrollment, given the run-in option, we continue to expect top-line data before year end. We look forward to sharing updates on IOLITE and our natural history study in the coming months. We also announced a series of updates on our inhaled programs last quarter that in our view validate the lung as a second target tissue for our HSV1-based gene delivery platform. Included in these updates was a first look at safety and gene delivery data for our KB408 program, which collectively demonstrated that we could safely deliver functional genetic cargo to the lung. KB408 is our redosable inhaled therapy for the treatment of AATD, a serious disease linked to the absence of functional AAT in the lung. KB408 is designed to deliver two copies of the Serpent1 transgene, which encodes for normal human AAT protein to enable local AAT production in the lung itself. KB408 is currently being evaluated in our first in human phase one Serpentine1 study, an open-label single-dose escalation study in adult patients with AATD. Serpentine1 is designed to include up to three dose escalation cohorts evaluating single administration of 10E9, 10E10, and 10E11-PFU of KB408 via inhalation. In December of last year, we announced an interim clinical data update, including safety data for seven patients enrolled in the first two-dose escalation cohort of Serpentine1, as well as molecular data from two patients in the second cohort that had consented to bronchoscopy. KB408 was found to be well tolerated at both tested dose levels with only mild to moderate and transient adverse events observed. No serious adverse events or dose-limiting toxicities were reported. In addition, clear evidence of successful gene delivery was observed in both patients that underwent bronchoscopies with the proportion of conducting airway epithelial cells positive for AAT increasing from 0% to 39% in one patient and from 3% to 35% in the other. Secretion and functionality of encoded AAT was also demonstrated in the patient with available LVAD samples. With AAT levels in epithelial lining fluid reaching 729 nanomolar and the from .2% to .2% after a single KB408 dose. Following this data update, we simultaneously expanded the second Serpentine1 cohort and open enrollment in the third for more comprehensive molecular assessment at both dose levels. We are working closely with the Alpha-1 Foundation and the Therapeutic Development Network on the Serpentine1 study and expect to announce complete study results later this year. Our second rare respiratory disease program, KB407, is also progressing well. KB407 is a reducible inhale therapy designed to deliver two copies of full-length CFTR transgene for the mutation agnostic treatment of cystic fibrosis. As summarized on this slide, we have built out a robustly clinical data package that demonstrates that KB407 efficiently transduces target airway epithelial cells leading to the expression of full-length, properly localized glycosylated and functional CFTR. On the back of this data, a growing clinical data set, I'm pleased to report that we recently received full sanctioning of our KB407 phase 1 protocol, providing further validation of our program and opening up access to network trial sites for future clinical development efforts. We also recently announced an initial safety update on cystic fibrosis patients treated with KB407 in the first two-dose escalation cohorts of Coral1, our ongoing first in-human phase 1 study. Both single and repeat inhaled administration of KB407 was well tolerated with only mild to moderate and transient adverse events. Again, there were no reports of serious adverse events or dose-limiting toxicities, reinforcing the attractive safety profile of our vector when delivered via inhalation. With the first two cohorts successfully cleared and KB407 well tolerated, we have progressed to our third cohort and expect to report top-line results, including molecular data, around the middle of this year. These are just a few of the recent highlights from our clinical stage pipeline. We also recently reported early evidence of monotherapy activity with inhaled KB707 in heavily pre-treated patients with advanced lung cancer, and earlier in the year, shared safety and efficacy results of our aesthetic candidate KB301, which we are progressing into phase 2. As we look forward, 2025 is shaping up to be another busy year. Some of the key development milestones for our team are laid out here. In addition to the initiation and completion of our registrational study evaluating KB803 for ocular complications of death, we are also expecting to provide molecular data updates for our rare respiratory disease program, KB408 and KB407, as well as first in human data for our second aesthetic product candidate, KB304, which encodes both type 3 collagen and elastin. Our oncology programs will continue to progress with potential of interim updates later in the year. As our recent data announcement have demonstrated, the potential HSV1-based gene delivery goes well beyond the skin. We are looking forward to making rapid progress of our pipeline in 2025 and further validating the breadth of the opportunities in front of us, targeting the skin, lung and eye. With that, I would like to turn the call to Kate.

Thank you, Summa. In the fourth quarter, Crystal saw continued Vyjevec revenue growth with net product revenue of $91.1 million, representing an increase of approximately $49 million over the fourth quarter of 2023, which was the first full quarter that Crystal had revenue after our approval in May of 2023. Cost of goods sold for the quarter was $4.9 million, resulting in a gross margin of 95%. In the fourth quarter of 2023, cost of goods sold was $2.9 million, resulting in a 93% gross margin. Research and development expenses for the quarter were $13.5 million, inclusive of stock-based compensation of $2.3 million, compared to $11.4 million for the prior year's fourth quarter, inclusive of $2.4 million of stock-based compensation. Higher research and development expenses in the fourth quarter of 2024 were mainly due to increased clinical trial-related costs, increased R&D manufacturing costs for our pipeline candidates, and increased license and regulatory fees. Selling general and administrative expenses for the quarter were $31.3 million, inclusive of stock-based compensation of $11 million, compared to $24.8 million for the prior year's fourth quarter, which was inclusive of stock-based compensation of $7.5 million. Higher selling general and administrative expenses in the fourth quarter of 2024 were primarily the result of increased personnel-related costs, increased professional service fees, and increased Visevec sales and marketing costs as compared to prior year's fourth quarter. Net income for the quarter was $45.5 million, which represented $1.58 per basic and $1.52 per diluted share. I'd also like to provide some perspective on our forecast for operating expenses in 2025. We expect to incur between $150 and $175 million in combined non-GAAP R&D and SG&A costs this year. This projection excludes stock-based compensation. This expected increase in operating expenses compared to 2024 is driven primarily by increased SG&A costs for our planned commercial launches outside of the United States and increased R&D costs from our continued clinical and regulatory costs associated with our expanded pipeline programs. In closing, we ended the fourth quarter with $344.9 million in cash on hand and $749.6 million in total cash plus short-term and long-term investments, noting quarterly growth in our overall cash and investments position with an increase over our third quarter of 2024 cash and investments balance by about $55 million.

And

now

I will turn the call back over to Krish.

Thanks, Kate. As you heard from Christine and Jen, patients are achieving profound benefits with Vizovec and getting to live fuller, more active lives. We're steadily expanding our prescriber base and further penetration into the community setting. With one full calendar year of launch in the U.S. behind us and increasing presence in key European markets in Japan, our conviction in the global peach sales estimate of over $1 billion for Vizovec has only strengthened. As we look forward, I'd like to share a few key lessons we have learned since launch so we're aligned on how we get to realize the opportunity in front of us. The first lesson has to do with timing, from initial patient interest to starting treatment. As Jen mentioned earlier, patients and prescribers in the community often need more support to navigate the path to success. Our turnaround time on average is still between 45 and 60 days with respect to these patients. The second lesson is the realization that we never really get a full quarter when we are talking about Vizovec. Vizovec is a weekly therapy administered at home by a HCP and life gets in the way for these patients in each quarter. In the first quarter, many families will be changing insurance. In the second, we have to work through summer holidays. In the third, Labor Day and back to school for families. And in the fourth, we navigate around major U.S. holidays. In spite of that, I'm pleased and proud to report sequential net Vizovec revenue growth and continue to have strong conviction in our global Vizovec peak sales estimates. The third lesson has to do with high compliance, which has been well above what we estimated at the time of launch. That said, we are entering a phase where some patients are now able to take initial pauses, enjoy the benefits of durable wound closure, and come back on drug when there is a wound disruption. This is a fantastic outcome for patients and their families. Our critical connect team remains in close contact with all of our patients and when new wounds emerge, reinitiation of treatment is seamless. Our relationship with our patients is for the long term and we want them to feel the freedom of being able to live their lives as they choose, independently, actively, with the confidence of knowing that they can now control their wounds with Vizovec. Finally, we've done a terrific job of accruing for the price cap of Vizovec. We've had no volatility in net revenues in 2024 and we do not expect to have any going forward. Finally, in closing, as you can see from the slide, we have several important clinical and regulatory milestones in 2025 to demonstrate the full breadth of our platform and we're excited for 2025 with what we can deliver to patients and shareholders. I'd like to thank my Crystal colleagues for their dedication and perseverance that underscore our excitement in the long term outlook for Crystal and the patients we aim to serve. Thanks for listening and I'd like 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 one on your phone at this time. We ask that while posing your question, you please 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 with Bank of America.

Hey guys, thanks for taking our questions and congrats on the continued progress. Just two from us. First on Vizovec, wondering if you saw any year-end stocking in 4Q and maybe you could just remind us how accounting for patient annual cap fed into the 4Q results and sequentially into 1Q25 as this is reset.

Thanks, Alex. Thanks for your question. Nothing substantially different in Q4 versus any other quarters. So there was no any change in stocking or inventory with respect to Q4 as compared to Q3 or Q2 or Q1. And in terms of price cap, I think I've gone through this many times. At the end of every quarter, we look back, you know, starting at the beginning of 2024, see how we're going to, how patients are doing. We revisit that calculation at the end of Q2, Q3, and Q4. So we actually believe, as I said in my speech, that we do a really good job of making sure there's no volatility in revenue. Of course, cap calculation is complicated because it is at a pay level and has a lot to do with the mix within each payer, the number of patients, and when they start during the year. But we've done a pretty good job of maintaining, taking volatility out of the equation.

Okay, that makes sense. And maybe one quick one on the CF study. I guess, how is enrollment going? Is cohort three maybe accruing faster or in line with cohorts one and two? And maybe walk us through how the CFF TDN sanctioning maybe helps with this.

Thank

you.

No, it's definitely super helpful, but we just got started. So there's always a time lag when you just get started. It takes a few months to get a few patients on drug. But enrollment in cohort three has already begun and I'll add some more color to this story.

Absolutely. I mean, obviously getting TDN sanctioning was very important because all of these academic major sites that can do bronch and have expertise in CF and have these patients now are very excited. In fact, many of them reached out to us directly to participate. We have seven to eight sites active. We are in the process of doing all of the administrative stuff, service contracts, budgets, as Krish mentioned, but we have two sites that are part of TDN that are up and running. And we have already enrolled patients for this cohort.

That's moving pretty well. Thank you.

As a reminder, please limit yourself to two questions. Your next question for today is from Ritu Baral with TD Cowan.

Good morning, guys. Thanks for taking the question. I wanted to ask a little bit about what you guys are expecting from Europe in the second half of the year. Krish, I believe you mentioned that there are about a thousand patients totaled between Germany and France that are identified. Can you give any additional breakdown of that 1,000 between the two geographies? Are they treated at centers of excellence like in the US? And if so, is there a number between the two geographies? And then I have my second question. My follow-up question is on pricing. How right now are you thinking about the initial sort of German free price range and the French at least expanded access price? And how should we be thinking about modeling longer-term price in Europe?

Thanks, Ritu. At a high level, both Germany and France are a bit more concentrated than the United States. That said, Germany is closer to the US and France is much more concentrated among centers of excellence. And the spread of the thousand is about 600 in Germany, at a very high level 400 in France. In terms of pricing, in Germany, for the first six months, we get to launch with the US price as we put the dossier in place and start the negotiations. At the end of six months, depending on how we feel, how the negotiations are going, we start up growing for the next six months. And the expectation is in 12 months, we would get an actual German price and be steady-state from that point on. In France, we're under the AP2 program and it kind of forces us to start up growing from day one. So the expectation, I mean, so the AP2 program should start maybe slightly after the German launch, but not too far out. And in France, maybe in about 15, 18 months from approval, we expect to get a price in France and that's how they're laid out.

Got it. Very quick follow-up. Should we be thinking about home dosing in Europe as well?

Yes, you

should. For sure. Okay.

Thanks for taking all the questions. Your next question is from Gavin Clark Gartner with

Evercore ISI.

Good morning. Thanks for taking the questions. Just on the reimbursement approvals first, if I'm doing my math correctly, last quarter about 50% of new patients coming on were dominant patients and this quarter that seems to be about up to 75% dominant patients. Is that math correct? Do you think this trend will continue and how do you account for that in your compliance assumptions?

Gavin, look, the percentage of dominant and recessive varies quarter by quarter. As we go into that community, I mean, your math is right that we did see more dominant in Q4 than we saw in Q3 as we go into the community. But although at a high level, people think about recessive being more severe than dominant, there are a lot of patients who are in the cusp. There are dominant patients who are just as severe as recessive and recessive patients who are just as mild as dominant. So I would not, I mean, in terms of compliance going forward, I do not expect a material change in the way, I do not expect a big change based on the percentage of dominant in the community. But that said, we do not, like when we report Q1, our expectation is not that dominant will continue to go up. It could easily shift back to what it was in Q3 or Q2.

Very helpful. And then just one bigger picture question. So you have about 750 million cash in the balance sheet. Consensus has you doing around 250 million cash flow this year, ballpark 300 million next year, depending on how exactly XUS launch goes. So even if you did want to allocate a good chunk of capital to additional R&D, you still have a lot of financial flexibility. So how are you thinking about buybacks, capital allocation overall as you kind of progress to the next phase here? Thank you.

Look, I mean, it is a valid point. It is definitely a discussion point in Crystal. We are just figuring out the timing of such a buyback and the extent that is meaningful and measurable. So definitely a valid question, Gavin, and we are thinking about it pretty seriously going forward.

Got

it. Thank you.

Thank you. Your next question for today is from Sammy Corwin with William Blair.

Thanks. Good morning. Thanks for taking my question. Congrats on the progress. I was wondering if you could provide a high-level update on the EU regulatory process. I think we initially expected to hear a decision from CHMP in late 2024. So I was curious if you had any insight into the reason behind the delay. And then my second question is, given you could face DEB commercial competition as early as 2Q, just how you are kind of thinking about maintaining and expanding market share in the face of that competition. Thank you.

Yeah. I can address the first question. Obviously, the delay was because we were trying to get the best label. I mean, we have a very favorable label as the S&PC. So obviously the home dosing and care administration, all of those nuances needed to be ironed out. So there were training materials that needed to be prepared to support that on the label. So that was the reason for the delay. And I think the two months helped us get all of those documentations and training materials in place to achieve that, to get a favorable label.

Okay. And the competition look, at a high level, it's tough to beat the value proposition of Vise-Vec, both in terms of, and if you look at how 98% of our patients are opting for home dosing and not even going to the local physician office, we have learned that the profile of Vise-Vec is well aligned with the expectations of the patients. But that said, we are putting in, we are not ignoring that the market could potentially become more competitive later in the year. And our medical affairs team is having the right kind of conversations with the physicians. Our patient services team having the right kind of conversation with patients. And we feel pretty good about our ability to hit the two-year target and the overall peak sales

in

spite of the

competitive nature of the market.

Got it. Thank you.

Your next question for today is from Rai Forseth with Guggenheim. Hi,

this is Rai from DevJet's team. For 407, how are you thinking about FEV1 in terms of the bar for advancing the program? And is that bar sort of consistent across genotypes?

Look, it's a, we're just starting to dose our patient in the FFCC cohort. I realize that the long-term direction for Crystal is to target the null population, which is a complete unmet medical need. There have been comments made in press from other competing companies that in null patients, any kind of a FEV improvement over 3%, 4%, 5%, all the way up to 10, is considered a very positive outcome for these patients. But please realize we are a reducing paradigm. So no matter where we start with these patients, we have the opportunity to build upon the FEV levels over time. And so we feel really good about our focused strategy on going after the null mutation. And then as a secondary effort, maybe as Summa mentioned in her speech, become mutation agnostic.

Yeah. I mean, there's null patients and there's a subset of population where they don't get, you know, correct those, these kind of therapies. They're not conducive to it. So it's both these populations that we're targeting. And obviously, as Chris mentioned, we are reducible. So we have that flexibility. We will look at improvements in FEV1. There's flexibility from a regulatory strategy for us to go, just like we did in the DI, to do a single label, open label study with some sort of natural history. So I think from a regulatory perspective, if we have any improvements in, I mean, we show functionality, we show some expression, and we show even slight improvement in FEV1, I think we have a very favorable regulatory environment and a pathway to move this program very rapidly into the, into clinic and into an overpass.

Just like we did the DI. Thanks for that.

Your next question for today is from Josh

Schimmer with Cantor.

Great. Thanks for taking the questions. Two quick ones. First, can you help quantify the impact of annual cap on VJVAC in 2024 and how you think that might impact in 2025 and whether you're planning any changes to that cap? And then second, the 10K has some new language around VJVAC manufacturing process changes and some risks around that, at least theoretical. Have there been any changes to the VJVAC manufacturing process? And if so, can you explain that?

So for the, for the cap, we have been seeing about 8% of commercial patients on the cap consistently from the beginning.

For

the manufacturing process, we just scaled up. And so we have gone to the higher level bioreactor level and we have, we filed a PS and we got approval for it. So again, so we have a scale up process that is approved by the FDA and the beauty about it is this process is, can be adaptable across our pipeline. So if you see 407, I mean, the limitation is not going to be CMC anymore. We can scale up, we can make the material, the process is pretty much cut and paste across all of our pipeline products. So CMC, we de-risk CMC from, you know, for these other products that may need more commercial, you know, material. So I think that was very positive for us getting that scale up approved

by the FDA. Thank you.

Your next question is from Nigal. Now Chovomit with Citi.

Hi, this is Rena on Freegal. Thanks for taking my question. I just wanted to ask on AATG, could you give us a little bit more color on what we should expect to see from the expanded core 2 and core 3 data? What are more comprehensive molecular assessments that you're considering beyond AATG levels and what therapeutic effect do you hope to see that you would consider clinically meaningful for these patients? And I have a follow-up.

Yeah, so on cohort 2, pretty much not much of a change than what we reported previously. We're just adding more patients to confirm what we saw. We were pretty pleased with what we saw, and we just want to add one or two patients more to confirm both the levels in the lung, the increase in the levels in the systemic circulation, and to quantify in terms of at a molecular level what they are. So cohort 2 and cohort 3 is simply exactly cohort 2 but a higher dose. So do not expect anything dramatically different

between

the two.

I mean, obviously we are looking for dose response. I mean, we know cohort 2. We didn't even expect at the cohort dose level to see this level of AAT in the lung. So we're very pleased to see that. I mean, obviously we can, it's a very safe and we feel it's a dose that showed functional AAT expression at a pretty decent level. So we do want to see what we get at third dose because again, it's safe. So we want to see that's an increase and what does that correlate to levels in the serum too. So it's lung and serum. If we see a good correlation and increase, then maybe that's the dose we will move forward for repeat dose administration and beyond.

Okay, great. Thanks. And just as a quick follow-up, we understand that plasma AATD should be sort of a relevant benchmark if synthesis were to occur in the liver because of the need to transport into the circulatory system to get to the lung. But since you're already synthesizing in the lung to start with, shouldn't we maybe not put too much weight on plasma AATD since it's not as relevant to the therapeutic goals? I guess if you could give more color on that, how we should be thinking about that?

Yeah, I think what you're going to look is correlation, shake up a dose response, how much level are we seeing in the lung and what levels are we seeing in the plasma? So we want to see that correlation, that's increasing and going to the next dose, we want to see what that increases. So once we have that correlation, then we can go to the FDA and let them know that a biomarker approach, we can say, yes, we see this level of lung and the plasma levels to this level in the lung based on the kind of dose that we are giving these patients. This is the ratio. So I think that will help us to go into from a regulatory pathway to sit down with the agency and discuss about biomarker pathway. We don't have to bronch these patients, but can use serum levels that is meaningful for a lung administration for the patient population.

Yeah, I do want to repeat what she just said. We do not care, fundamentally you're right, we do not care about levels in the lung, levels in the systemic circulation, I apologize. We look for levels in the lung and maybe a correlation between the two so we could avoid potentially bronching for molecular approval.

Makes sense, super helpful, thanks so much.

Once again, if you would like to ask a question, please press star one.

Your next question for today is from Andrea Newkirk with Goldman Sachs.

Good morning, thanks for taking our question. For Jen and Christine, I'm just curious here, based off of what you're seeing right now in terms of the rate of reimbursement approvals, what is needed to reaccelerate patients coming onto drug in order to reach your 60% penetration goal within two years of launch?

Yeah, I can start that. I mean, I think we definitely, as I said in the speech, some slowdown over the holidays, virtually with physician offices and payers sort of delaying and not answering the phone during those times. So we feel like we've increased our trajectory already. We have a healthy pipeline right now of potential patients and we're right on path for that. So we already started seeing that come up. Obviously, the first few weeks of January, the same thing was occurring with re-verification season and payers being sort of distracted at that point. So there were delays happening there as well.

Okay, and Krish, just when you think about that billion plus peak sales opportunity globally, just curious if you could provide a little bit more granularity on how the US versus the EU opportunity breaks down across that billion plus or even with Japan as well.

Look, there are 3,000 patients in the US, 3,000 patients in Europe at a high level, and about 3,000 worldwide. The pricing in US versus the pricing in Europe accounts for the ratio. The expectation on pricing in Europe is anywhere at the high end at -70% off the US price to maybe -60% of the US price. But that's it. If you look at our drug, it was a blinded phase three study. The efficacy results were very powerful. The convenience is amazing. It is a loud disease, meaning very visible, loud disease, unmet medical need, some chances of getting squamous carcinoma in a certain percentage of these patients. So we have a compelling case to make in the dossier with respect to pricing in Europe. And so we feel good about going into the negotiations. So to answer your question at a high level, the way you split the billion plus across the nations is purely a function of the ratio of the pricing between across these nations. And so if your assumption is 70% of the US price, then that's how they split because the prevalence is pretty identical across the

three sectors.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.