Business description of Krystal-Biotech-Inc from last 10-k form

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2017

Commission File Number 001-38210

Krystal Biotech, Inc.

(Exact name of Registrant as specified in its Charter)

Registrant’s telephone number, including area code: (412) 586-5830

Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par Value $0.00001 Per Share; Common stock traded on the NASDAQ stock market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ☐    NO  ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    YES  ☐    NO  ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ☒    NO  ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    YES  ☒    NO  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ☐    NO  ☒

As of June 30, 2017, the last business day of the Registrant’s most recently completed second fiscal quarter, the Registrant’s common equity was not listed on a domestic exchange or an over-the-counter market. The Registrant’s common stock began trading on the NASDAQ Capital Market on September 20, 2017.  

The number of shares of Registrant’s Common Stock outstanding as of February 28, 2018 was 10,307,247.

Portions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Shareholders, scheduled to be held on May 31, 2018, are incorporated by reference into Part III of this Report.

Table of Contents

Item 1. Business.

Overview

Krystal Biotech, Inc. (the “Company,” “we” or “us” or other similar pronouns) is a gene therapy company dedicated to developing and commercializing novel treatments for patients suffering from dermatological diseases. We have developed a proprietary gene therapy platform, which we refer to as the Skin TARgeted Delivery platform, or STAR-D platform, that consists of a patented engineered viral vector based on herpes simplex virus 1, or HSV-1, and skin-optimized gene transfer technology, to develop off-the-shelf treatments for dermatological diseases for which we believe there are no known effective treatments. We are initially using the STAR-D platform to develop treatments for rare or orphan dermatological indications caused by the absence of or a mutation in a single gene, and plan to leverage our platform to expand our pipeline to include other dermatological indications in the future.

Our lead candidate, KB103, a gene therapy product, is currently in preclinical development to treat dystrophic epidermolysis bullosa, or DEB, a rare and severe genetic disease, for which there is currently no approved treatment. Investigational New Drug (“IND”) enabling preclinical studies evaluating intradermal and topical delivery of KB103 have been completed, and we intend to file an IND application for KB103 with the U.S. Food and Drug Administration (“FDA”) in the first quarter of 2018.

DEB affects the skin and mucosal tissues, and is caused by one or more mutations in a gene called COL7A1, which is responsible for the production of protein type VII collagen, or COL7, that forms anchoring fibrils that bind the dermis, or inner layer of the skin, to the epidermis, or outer layer of the skin. In DEB patients, the genetic defect in COL7A1 results in loss or malfunctioning of these anchoring fibrils, leading to extremely fragile skin that blisters and tears from minor friction or trauma. Those born with DEB are sometimes called “butterfly children,” because their skin is likened to be as fragile as the wings of a butterfly. DEB patients may suffer from open wounds, skin infections, fusion of fingers and toes and gastrointestinal tract problems throughout their lifetime, and may eventually develop squamous cell carcinoma, a potentially fatal condition. Based on information from DEBRA International, a worldwide alliance of patient support groups for epidermolysis bullosa, or EB, of which DEB is a subset, we believe there may be as many as 125,000 patients worldwide who suffer from DEB. We estimate that there are presently 3,200 to 3,500 diagnosed DEB patients in the European Union, or EU, United States, Japan and Canada.

We believe our approach to treating DEB with KB103, which has not yet been approved by either the FDA, or the European Medicine Agency (“EMA”), is novel. The current standard of care for DEB patients is limited to palliative measures that seek to provide relief from some of the symptoms of DEB but do not meaningfully impact disease outcomes. Other known efforts to develop DEB treatments are employing autologous approaches to creating therapeutic products. Autologous treatments use a patient’s own tissues and cells to manufacture an individualized therapy. Such therapies are expensive, invasive and time consuming to use, and require highly sophisticated medical teams and procedures. In contrast, KB103 is designed to be an off-the-shelf treatment for DEB that can be applied as needed, either intra-dermally or topically to a patient’s skin, . Unlike the current standard of care, KB103 seeks to treat DEB at the molecular level through gene therapy, and is intended to be a non-invasive treatment that can be used without requiring hospitalization or individually customized treatment.

KB103 is a replication-defective, non-integrating viral vector that has been engineered using our STAR-D platform to deliver functional human COL7A1 genes directly to patients’ dividing and non-dividing skin cells. Non-integrating vectors do not combine with the host cell’s DNA and express proteins separately from it. As a result, they do not disrupt the functioning of the host genes or present the cancer-causing risks associated with such disruption. We believe our STAR-D platform provides an optimal approach for treating dermatological conditions due to the nature of the HSV-1 viral vector we have created. Our viral vector has a natural tropism to the outermost layer of the epidermis, or skin epithelium, and we believe it can penetrate skin cells more efficiently than other viral vectors used in gene therapy. Our viral vector also has a high capacity or payload relative to most vectors, so it can accommodate multiple copies of large genes like COL7A1 and may allow us to insert multiple genes to develop combinatorial therapies for dermatological conditions like psoriasis and chronic wounds in the future.

Recent Developments

On November 2, 2017, the FDA granted Orphan Drug Designation to our lead product candidate, KB103, for the treatment of DEB. The FDA’s Office of Orphan Drug Products grants orphan drug designation to support the development of medicines for underserved patient populations, or rare disorders, that affect fewer than 200,000 people in the United States.

Orphan drug designation makes us eligible for a seven-year period of United States marketing exclusivity upon approval of KB103, tax credits for certain clinical research costs, and a waiver of the Prescription Drug User Fee Act (“PDUFA”) filing fees, subject to certain conditions.

On November 3, 2017, we announced receipt of an equity-based award totaling $770,000 from the EB Research Partnership (“EBRP”) and the EB Medical Research Foundation (“EBMRF”).  EBRP and EBMRF provided this funding following a highly competitive application and screening process overseen by EBRP’s Scientific Advisory Board (“SAB”), which is composed of leading scientists and physicians.  The SAB recommends awards and grants to academic institutions and commercial parties based on its evaluation of the potential for development of commercially viable treatments and cures for EB.

Our success also depends in part on our ability to protect our intellectual property, including the STAR-D platform. We have adopted a strategy of seeking patent protection in the United States and abroad where appropriate with respect to certain of our technologies relating to our products and process. On January 16, 2018 we announced that the United States Patent Office (“USPTO”) has granted U.S. Patent No. 9,877,990 which covers compositions comprising herpes simplex viral (“HSV”) vectors and methods of using the same for providing prophylactic, palliative or therapeutic relief of a wound, disorder or disease of the skin in a subject. We believe that the granting of this patent, that is 100% owned by us, protects our core STAR-D viral platform and affords us freedom to use this platform for several skin diseases. We continue to actively develop our portfolio through the filing of new patent applications, divisionals and continuations relating to our technologies as we deem appropriate.

Our vision is to become a fully integrated biotechnology company. In pursuit of this goal, we are executing on our core strategic initiatives, which include the development of proprietary in-house manufacturing capabilities and the expansion of our pipeline.  We maintain full global rights to all of our product candidates.

Our Strengths  

We believe we are the first biotechnology company to develop a gene therapy for dermatological indications that can be used without requiring individually customized treatment, which we refer to as an “off-the-shelf” treatment. We believe our organization and technology benefit from a singular set of strengths that will allow us to create and establish a leadership position in developing gene therapy treatments for dermatological indications. These strengths include: