ABBV - Krystal Biotech: 2 Potential Regulatory Approvals To Carry It Forward

2023-05-08 14:27:28 ET

Summary

• Krystal Biotech, Inc. has a PDUFA date of May 19, 2023, established for the FDA to review B-VEC for potential U.S. marketing approval to treat patients with Dystrophic Epidermolysis Bullosa.
• There is potential European approval of B-VEC for the treatment of patients with Dystrophic Epidermolysis Bullosa expected in early 2024.
• IND clearance to begin the phase 1 CORAL-1 study, using KB407 for the treatment of patients with Cystic Fibrosis was received in August of 2022.
• It is expected the Cystic Fibrosis market is expected to reach $13.9 billion by 2025.

Krystal Biotech, Inc. ( KRYS ) is a good speculative biotech play to look into. The reason why I state that is because it has the potential to receive a few regulatory approvals within the next few years. The first possible regulatory approval would be with respect to the filing of the Biologics Licensing Application [BLA] of B-VEC for the treatment of patients with Dystrophic Epidermolysis Bullosa [DEB]. The FDA has set a PDUFA date of May 19, 2023, to review this drug for potential U.S. marketing approval.

Not only that, but Krystal Biotech holds the potential to also obtain European approval of this treatment for this patient population in early 2024. It had a slight delay with respect to the marketing authorization application [MAA] of B-VEC for DEB because the European Medicines Agency [EMA] wanted it to update its application to include another pool of patients. As such, the review of the EMA application is not expected to start until the 2nd half of 2023 and lead to potential regulatory approval for the European territories possibly by early 2024.

Lastly, this biotech has the potential to go after a multi-billion dollar market opportunity, which is the targeting of Cystic Fibrosis [CF] using its clinical candidate known as KB407. Vertex Pharmaceuticals Incorporated ( VRTX ) is the only major competitor in this space, especially when you consider that AbbVie Inc. ( ABBV ) had to terminate its CF program . This leaves an opening for Krystal Biotech to potentially challenge Vertex in this segment.

B-VEC For The Treatment Of Patients With Dystrophic Epidermolysis Bullosa

The main clinical program to go over in the pipeline is the use of B-VEC, which is being developed for the treatment of patients with dystrophic epidermolysis bullosa [DEB]. Dystrophic Epidermolysis Bullosa is a disorder characterized by a rare, inherited disorder in which blisters form on the skin and the moist inner lining of some organs and body cavities. In other words, the skin becomes very fragile and starts to blister easily. Such blistering of the skin occurs with minor injury or friction. In mild cases, blistering can occur on many parts of the body such as the following:

• Feet.
• Hands.
• Elbows.
• Knees.

This disease can even take on a more severe form, which leads to major issues such as: vision loss, scarring, and other serious medical issues. It can even lead to skin cancer, which then becomes an even larger problem for a patient to deal with. As I stated above, this biotech has the potential to create a lot of value for shareholders because of the ability to obtain two regulatory approvals.

One potential regulatory approval of B-VEC for DEB would be with the U.S. market and then the other possible regulatory approval could happen for the European territories. Krystal Biotech has a PDUFA date of May 19, 2023, established for the FDA to review B-VEC for potential U.S. marketing approval to treat patients with DEB.

The second regulatory approval for the European territories is still expected to happen, but delayed until early 2024. That's because the company received notification from the European Medicines Agency [EMA] in January of 2023 and was told to modify the application. The modification noted was so that it could include DEB patients between birth and 6 months. The MAA procedure then is not expected to start until the 2nd half of 2023, which would then put possible regulatory approval of B-VEC for the treatment of patients with DEB in early 2024.

It's hard to say for sure if Krystal Biotech will end up receiving regulatory approvals of B-VEC for DEB in both of these territories. However, there is a good chance of doing so because of positive results from the phase 3 GEM-3 study, which used B-VEC to treat these patients with DEB. Not only were positive results obtained for this late-stage study, but they were also published in the New England Journal of Medicine under the title " Trial of Beremagene Geperpavec [B-VEC] for Dystrophic Epidermolysis Bullosa. " It was noted that B-VEC was able to meet the primary and secondary endpoints of wound healing compared to placebo in 31 DEB patients. That is, the number of primary wounds with complete wound healing was significantly better with B-VEC at both 3-months and 6-month timepoints compared to placebo. Both of these timepoints were achieved with statistical significance with a p-value of p<0.005.

Potential To Capture Cystic Fibrosis Space With KB407

A good thing about Krystal Biotech is that it might be able to capture the Cystic Fibrosis [CF] space with the use of its clinical candidate known as KB407. That's because it announced in August of 2022 that the FDA had accepted its IND application so that it may initiate the phase 1 CORAL-1 study in the United States using KB407 for the treatment of patients with CF. It expects to initiate such a study in the 1st half of 2023, but before then it is validating clinical protocols with the "Therapeutics Development Network of the Cystic Fibrosis Foundation". Cystic Fibrosis is an inherited life-threatening disorder in which the lungs and digestive system become damaged. This genetic disorder causes mucus to become thick and glue-like and when this occurs in the lungs it is very devastating. That's because mucus is supposed to be thin and slippery to help your organs work. The CF market continues to grow and is a large market. It is expected the Cystic Fibrosis market is expected to reach $13.9 billion by 2025 . In order to determine if a treatment works for CF, FEV1 is used to measure lung function. This is a highly devastating disease because there are many symptoms associated with it. These symptoms are as follows:

• Shortness of breath.
• Wheezing.
• Constant Coughing with phlegm.
• Frequent lung infections taking place.
• Weight gain despite not eating as much.

In the meantime, it is screening patients for enrollment in a phase 1 study in Australia . The goal of this Australian study is to determine safety and frequency of dosing for this CF patient population.

Financials

According to the 10-Q SEC Filing , Krystal Biotech had cash, cash equivalents and investments of $383.8 million as of December 31, 2022. It believes that it has enough cash to fund its operations for at least the next 12 months from the date of the SEC Filing, which was filed on May 8, 2023. Based on this amount of cash on hand, it is highly likely that it will need to raise cash in the coming months. I believe that it may choose to raise cash should it receive FDA approval of B-VEC for the treatment of patients with DEB on May 19, 2023. Matter of fact, I believe that it would raise cash the very same day as FDA approval is achieved. That's because with less than 12 months of cash available, it is going to need to look to raise additional cash to keep its pipeline funded.

Risks To Business

There are several risks that traders/investors should be aware of before investing in this biotech. The first risk to consider would be with respect to the ongoing FDA review, which is looking at B-VEC for the treatment of patients with Dystrophic Epidermolysis Bullosa [DEB]. That's because there is no guarantee that Krystal Biotech will receive FDA approval of B-VEC for this specific indication in May of 2023.

A second risk to consider would be with respect to the ongoing European review of B-VEC for the treatment of patients with DEB. That's because even though the European Medicines Agency [EMA] wanted an update on the regulatory application to include another batch of patients, there is no guarantee that this biotech will receive regulatory approval of this drug for this indication in this territory.

A third risk to consider would be with respect to the soon to be initiated phase 1 study, which is using KB407 for the treatment of patients with Cystic Fibrosis [CF]. That's because there is no human proof of concept clinical data established yet with this clinical candidate. In addition, there is no guarantee that the final results to be released from this phase 1 study will end up being successful.

Conclusion

The final conclusion is that Krystal Biotech, Inc. is a good speculative biotech play to look into. The reason why I state that is because within the next few years, it holds the potential to receive regulatory approvals for B-VEC for the treatment of patients with DEB in both the U.S. and European territories. FDA approval of B-VEC for this patient population in the United States is expected in 2023, barring a positive review by the FDA.

With respect to the potential European approval of B-VEC for the DEB patient population, this is another market in which the biotech could receive approval for. However, the Marketing Authorization Application [MAA] of B-VEC for this territory is not expected to be initiated until the 2nd half of 2023. That would then put EMA approval of this drug for the treatment of this patient population in early 2024. Lastly, a good thing about this biotech is that it holds the potential to go after the very large multi-billion dollar Cystic Fibrosis [CF] market. It is expected the Cystic Fibrosis market is expected to reach $13.9 billion by 2025. It is scheduled to initiate the phase 1 CORAL-1 study in the United States in the 1st half of 2023, which is going to use KB407 for the treatment of patients with CF.

With two potential regulatory approvals of B-VEC for the treatment of patients with DEB on deck over the next few years, plus the ability to go after the very large CF market, these are the reasons why I believe that Krystal Biotech, Inc. is a good speculative biotech play to look into.

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