KRYS - Krystal Biotech: FDA Approval Of Vyjuvek And Further Pipeline Enhancement

2023-09-22 09:54:38 ET

Summary

• Krystal Biotech, Inc. received FDA approval of Vyjuvek, for the treatment of patients with dystrophic epidermolysis bullosa in May of 2023.
• FDA IND clearance of KB408 for the treatment of patients with antitrypsin deficiency given; Phase 1 study expected to begin Q1 of 2024.
• The market size for AATD treatment is expected to reach $3.48 billion in 2031.
• Results from the phase 1 CORAL-1 study, using KB407 for the treatment of patients with Cystic Fibrosis, are expected in 2024.

Krystal Biotech, Inc. ( KRYS ) has made great progress in advancing its pipeline. Especially, since the last time I wrote about this biotech, the FDA was gearing up to decide upon whether or not Krystal's therapy B-VEC should be approved for the treatment of patients with dystrophic epidermolysis bullosa [DEB]. The drug, now marketed as Vyjuvek, was approved by the FDA to treat this patient population in May of 2023. In the prior article, I also discussed the IND clearance for the phase 1 CORAL-1 study it had received.

This was so that it could initiate this study using KB407 to treat patients with Cystic Fibrosis. Results from this phase 1 study are expected to be released in 2024. The key thing here is that KB407 is to be given to patients in nebulized form as a gene therapy. To further study the ability to nebulize gene therapy for lung disorders, it has been able to receive IND clearance for KB408, which is being used to treat patients with alpha-1 antitrypsin deficiency [AATD]. A phase 1 study using this gene therapy for this patient population is expected to begin in Q1 of 2024.

FDA Approval of Vyjuvek Is Only The Beginning For Its Extensive Pipeline

The ability for Krystal Biotech to receive FDA approval of Vyjuvek for the treatment of patients with dystrophic epidermolysis bullosa [DEB] was a huge milestone for the company and its shareholders. However, this biotech has a large pipeline full of candidates that it continues to make progress on. As I stated above, it already was able to have an IND cleared to initiate a phase 1 study using KB407 to treat patients with Cystic Fibrosis [CF] . Results from this trial are expected to be released in 2024, and this will be the first proof-of-concept of using a nebulized form of gene therapy for this company.

However, it is not intending to wait to see data from the CF study first, before moving on to test out a nebulized form of gene therapy to treat patients with alpha-1 antitrypsin deficiency [AATD]. The market size for AATD treatment is expected to reach $3.48 billion in 2031 . The goal for KB408 is to be able to deliver two full length copies of the gene SERPINA1. Why is this necessary? Cause this gene would then allow for the expression of alpha-1 antitrypsin [protein in the lungs] responsible for protecting the lungs from and other organs from damage. Krystal Biotech was able to receive IND clearance for the initiation of a phase 1 study using KB408 for the treatment of patients with AATD. This early-stage study is expected to begin in Q1 of 2024.

A major challenge is that gene therapy being given in inhaled [nebulized] form has been studied many years without success. It believes that it can overcome many challenges because of the success it achieved with its gene therapy vector in treating patients with DEB, for starters. Plus, the ability to be able to re-dose patients many times without toxicity, along with nebulization treatment being given in under 30 minutes. It remains to be seen if KB407 for CF and KB408 live up to expectations, but the ability to change care for these patient populations would be huge. Especially, since standard of care [SOC] augmentation therapy for patients with AATD must be given as weekly intravenous infusions . Should KB408 succeed in upcoming studies, not only could it possibly improve upon safety/efficacy as a treatment for these patients, but it could also provide an easier mode of administration.

Financials

According to the 10-Q SEC Filing , Krystal Biotech had cash, cash equivalents and investments of $505.9 million as of June 30, 2023. The reason for the cash on hand is because it entered into a securities purchase agreement, whereby it sold 1.72 million shares of its common stock at a price of 92.50 per share in a private placement agreement to certain institutional buyers. From this PIPE, it generated gross proceeds of $160 million before deducting expenses. It believes that it has enough cash on hand to fund its operations for at least the next 12 months from the filing date of the 10-Q SEC Filing, which was filed on August 7th 2023.

This is likely not enough cash on hand to fund its pipeline, and thus, it is going to have to start looking for ways to raise cash. I believe that it may choose to raise cash upon release of several catalysts expected in the coming months. This would be with respect to the release of data from the phase 1 CORAL-1 study, using KB407 for the treatment of patients with CF, which is expected in 2024 or from the oncology program. With respect to its oncology program, it hopes to dose the first patient with KB707 for the treatment of patients with solid tumors in the phase 1 OPAL-1 study, in the 2nd half of 2023.

Risks To Business

There are several risks that investors should be aware of before investing in Krystal Biotech. The first risk to consider would be with respect to VYJUVEK, which was approved to treat patients with dystrophic epidermolysis bullosa [DEB]. Even though the drug has been approved by the FDA, there is no assurance that sales will live up to expectations. If this happens, then it will have to rely on its other products in its pipeline to carry it forward. A second risk to consider would be with the ongoing phase 1 CORAL-1 study, which is using KB407 for the treatment of patients with CF. That's because results from this are expected in 2024 and there is no guarantee that positive results will be released from this phase 1 study.

Not only that, but this study is intended to provide proof of concept of a gene therapy being delivered successfully in nebulized form into the lungs. Should this proof-of-concept be established in CF patients, then it could also work for KB408 in AATD and KB707 in solid tumor PD-1 refractory patients as well. A third and final risk to consider would be with respect to the company's financials. That's because it believes that its cash on hand will only be enough to fund its operations for at least the next 12 months. Being that it only has roughly one years' worth of cash, it may need to find a way to raise cash in the coming months.

Conclusion

Krystal Biotech has made extensive progress with respect to its pipeline. It has already received FDA approval of its gene therapy Vyjuvek, which is given to DEB patients in topical form. The hope is that this biotech can extend its gene platform to be able to be given to patients in nebulized form. It has already dosed the first patient in the phase 1 CORAL-1 study using KB407 for the treatment of patients with CF to see if its nebulized version of this gene therapy helps these patients. From there, it expects to establish additional proof of concept of nebulized delivery of KB408 for the treatment of patients with AATD. It will do so with the launch of a phase 1 study, which is expected to start in Q1 of 2024. With FDA approval of Vyjuvek for DEB obtained, plus the ability to expand its gene therapy expertise towards other candidates in its pipeline, I believe that possible gains for investors can be made here.

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