Q1 2024 Krystal Biotech Inc Earnings Call

Participants

Stéphane Paquette; VP, Business Development; Krystal Biotech Inc

Krish Krishnan; Chairman of the Board, President, Chief Executive Officer; Krystal Biotech Inc

Jennifer McDonough; SVP, Patient Access, Analytics and Operations; Krystal Biotech Inc

Christine Wilson; Head of U.S. Sales and Marketing; Krystal Biotech Inc

Suma Krishnan; President, Research and Development; Krystal Biotech Inc

Kathryn Romano; Chief Accounting Officer; Krystal Biotech Inc

Alec Stranahan; Analyst; BofA Securities

Tim Lugo; Analyst; William Blair & Company L.L.C.

Ritu Baral; Analyst; TD Cowen

Benazir Ali; Analyst; Stifel Bank

Andrea Tan; Analyst; Goldman Sachs

Gavin Clark-Gartner; Analyst; Evercore ISI

Yigal Nochomovitz; Analyst; Citigroup Inc.

Presentation

Operator

Thank you for standing by, and welcome to Krystal biotech's First Quarter 2024 earnings conference call. (Operator Instructions) 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.

Stéphane Paquette

Good morning, and thank you all for joining today's call. Earlier today, we released our financial results for the first quarter of 2024 the press release is available on our website at www.krystalbio.com. We also filed our earnings 8-K and 10-Q with the SEC earlier today.
Joining me 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.
And with that, I will turn the call over to Krish.

Krish Krishnan

Thank you, Stefan, and thank you all for joining Krystal's conference call. I'm pleased to share that the momentum in 2023 continues with a strong start to 2024, driven by excellent execution across all parts of our business, commercial clinical and manufacturing vice versa is reaching more and more patients by the day and is rapidly changing the treatment paradigm for patients suffering from this debilitating disease.
Dystrophic epidermolysis bullosa or dep increasingly that patients are able to benefit from the durable wound healing afforded by Vijay, back to the fundamental genetic correction and also the convenience of being administered at home as a topical gel.
As real-world experiences with Visor it grows, it has been immensely rewarding to hear and see the improvements that patients have made while on tenancy as you will hear this morning. Our U.S. commercial launch continues to progress very well, driven by robust demand, rapid growth and reimbursement approvals and high patient compliance. We're also moving quickly towards launching BioVex outside of the U.S. We recently successfully completed the efficacy portion of our open label extension study in Japan, putting us on track to file with the Japanese regulators before year end. This will be our second ex-US filing after submitting to the EMA last year. Global infrastructure buildout is underway in anticipation of commercial launches in both Japan and Europe next year.
At the same time, we are building momentum across our clinical pipeline with accelerating enrollment and new trial starts setting us up for a wave of data readouts starting later. This year, but the recent initiation of Kinect one, our study evaluating inhaled KV for oh seven oh seven for treatment of solid tumors of the lung. We now have five active clinical trials and it points to add a sixth, but opthalmics be back in the second half of this year. We expect that these studies, which spanned multiple tissues and target both rare and common diseases will showcase the breadth and power of our proprietary.
It is fee-based gene delivery platform. We also continue to build out our manufacturing infrastructure in support of global version of our commercialization and pipeline expansion, including scale-up of our current approved manufacturing process, ongoing process improvements and initiation of a tech transfer of our current production process to answer later this year to increase advisory revenues and margins.
Finally, I want to highlight that strong execution in our launch yielded another profitable quarter for Krystal, even while accruing for previously settled litigation payments and excluding litigation payment accruals, EPS this quarter would have been $0.47 per share, up sequentially from $0.31 per share in the last quarter of 2023 with a strong balance sheet, growing revenues and two commercial scale GMP facilities. We have the resources we need to execute on our long-term growth plans and to continue building shareholder value provided your back and our clinical pipeline.
Before jumping into our advisor client update, it's my pleasure to introduce Christine Wilson and Jennifer MacDonald to senior U.S. commercial leaders across all for joining me today on the call to see recently John Caruso as Senior Vice President and Head of U.S. sales and marketing. She brings over 20 years of experience in specialty and rare disease launches and is an expert in patient finding having previously launched multiple rare disease products with a community focus, including Gattex and ultra rare condition of short bowel syndrome and more recently filled expiry for IGA nephropathy. Jennifer Madonna is Senior Vice President of patient access, patient services, analytics and ops a cross-stock and has been instrumental in achieving the broad access and compliance. We have today for adviser that Jennifer has over 25 years experience in biotech and specialty pharmacy with a focus on rare diseases. We are fortunate you have them both on the team.
Now turning to our results. Net VC-backed revenues for the quarter came in at $45.3 million. Looking back over our first three quarters since launch, total net basic revenues now exceed $95 million. Keeping us on pace for the top tier of recent rare disease launches were especially pleased to be reporting revenue growth Q over Q in spite of the onetime headwinds that we face to start 2024 due to the permanent J-Code switch. While the permanent J-code is a huge tailwind for reimbursement.
The switch negatively impacted revenues onetime in the first quarter. In order to ensure continuity of therapy, we bridged patients with free vials. In total, we estimate that approximately 403 vials were dispensed in 1Q as a result of one-time disruption. That said, the J-code issue requiring bridging patients with free drug is resolved and the fundamentals of the launch look very good for the remainder of 2024. We are confident in our ability to meet if not exceed 2020 for net revenue projections for Sina. And Jennifer, we'll elaborate more in their sections.
Gross margins were 95% for the quarter, up two percentage points over last quarter. We continue to expect margins to be above 90% in the coming quarters gradually improving to over 95% in a couple of years. Gross-to-net adjustments in the first quarter were 14% in line with the previous quarter. Our long-term guidance on gross-to-net is unchanged and we expect it will settle into the high teens, reflecting a roughly even split of their patients between commercial and government plan.
Please note that the net basic 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. Overall, I'm really pleased with the growth in the underlying drivers of our commercial launch, and I will now hand the call over to Jennifer to share additional details on the launch, including recent successes in securing patient access to patients. Jennifer?

Jennifer McDonough

Thank you, Krish. Moving to slide 5, it has been exceptionally rewarding to lead patient access and Krystal Connect team in support of this transformational products, but hundreds of US patients now benefiting from access to value that we really are changing the treatment paradigm for this terrible disease commercial and Medicaid access continues to improve for Vijay, that we now have received positive policies or decisions for roughly 96% of all covered lives.
This is up from over 93% in our last report and driven mostly by an additional seven state Medicaid programs, including taxes now providing coverage for Vijay following the issuance of the permanent J-Code earlier this year. As we entered the first quarter, we were prepared for the challenges of January insurance verification season and the VIG that permanent J-Code reauthorization process. We are very proud of the team's success in supporting continuing coverage for existing patients.
At the same time, new patient conversions continue to progress well, and as of April, we have secured over 330 patient reimbursement approvals. We did see a onetime impact to our overall reimbursement approvals in Q1 due to a cybersecurity incident affecting our specialty pharmacy provider. But this has now been resolved. This incident is not unique to us and affected many of our other colleagues in the pharmaceutical industry with strong payer access, the permanent J-Code assigned and ongoing operational improvements. The team is laser focused on patient experience and optimizing time to first buy back application with that conversion times continue to shorten, albeit at a slower pace than we previously expected.
As patients are increasingly identified in the community setting where physicians are a bit less familiar with dystrophic EB and the reimbursement process for rare disease medicines. We are finding that additional support is needed to navigate these patients and their physicians to access this is, of course, exactly what Krystal Connect patient services team is built to do, and we work the as we work through each patient case, we are seeing great results and ultimately authorizations for Vijay back therapy.
We continue to implement additional education and tools to support the process and are still on a trajectory for conversion times to compress down to under a month later this year, we've notified you that reimbursement approvals covering an initial treatment period of six months or more we have still not encountered a large number of reauthorizations, same as last quarter, albeit reauthorizations to date have been either approved or in process.
As we move to slide 6, the split between our debt and the debt patients at the reimbursement level is roughly in line with the start forms what we've reported previously, and consistent with the steady progression through to conversion. We are also very happy to report that we are seeing reimbursement approvals across all ages as we continue to communicate to patients, physicians and payers that all winds matter and it is never too late to change the course of this disease. At the same time, it is also encouraging to see strong uptake in the pediatric segment where establishing corrective therapy early has the potential to change the trajectory of these patients' lives.
Moving to slide 7, turning to the patient experience and compliance, we continue to report strong patient preference for at-home administration with 97% of the weekly treatments occurring in the patient's home. And even with the increase in both the patient base and average length of therapy, we are pleased to report, the compliance to weekly application remains above 90%, particularly when compared against many other chronic therapy with compliance rates often around 50%, which we believe is a reflection of the clinical benefit Vijay is bringing to patients while on drug. Although our work is just beginning, I am proud of the progress our team has made to date rapidly growing the number of patients accessing baijiu back and one start and ensuring they are able to treat their was conveniently at home.
I will now hand it off to Christine to talk about what comes next for our US 5grec launch. Christine?

Christine Wilson

Thank you, Jen. I'm incredibly excited to have joined Krystal and to build on the great early momentum. We are seeing. And if I do the launch, I know firsthand the challenges that come with launching a rare disease medicine in the community setting, patients are often undiagnosed or lost to follow-up. Genetic tests have never been run familiarity with innovative therapies and navigating reimbursement is low. And sadly, disillusionment with a health care system is all too common, even if you would expect a patient suffering from a severe disease to proactively seek care. Many of these patients have been disappointed by their treatment options in the past and have this engaged. However, none of these issues are unique and we have at our disposal an extensive toolkit to help find and activate rare disease patients wherever they are in the US. We are also starting from a strong position with great early adoption of IG that giving us plenty of success stories to amplify and disseminate.
Today, I would like to touch on some of the key strategic initiatives, which we are pursuing to drive sustained long-term growth of IGATE in the U.S., our commercial efforts can be grouped together into three main pillars. The first is data analysis our Analytics Hub includes real-time claims alerts to identify potential patients. Through this data, we can quickly deploy our seasoned rare disease sales team, while in parallel engaging HCPs through nonpersonal promotion the combination of these two activities drives awareness and education of IG that to our targeted HCP audience and is already helping to grow our identified patient pool. There are also future opportunities to expand the scope of our analytics work to include dev adjacent claims codes on our path of finding all debt patients across the US.
Importantly, these clean base patient finding efforts are distinct from our sponsored genetic testing program, deCODE DEB, which has had great uptake and is helping clinicians identify previously undiagnosed patient education of HCPs is also a key strategic imperative and is being expanded through peer-to-peer programs by leading KOLs and EB. as well as early 5G adopters.
Peer-to-peer educational programs are the most impactful approach of bringing information to new EV treaters and early adopters who do not always practice in major centers, bring unique perspectives relevant for potential community prescribers with over 5,000 HCPs now having been reached by the sales team, the desire for ongoing education and dialogue amongst the HCP community for better patient outcomes continues to grow the open-label extension study, demonstrating long-term safety, efficacy and durability results will be published in the second half of this year.
These top line results were well received during a late breaker session at the AAD meeting in March. The results solidify the GVIX. impact on the debt patient population and further establishes 5G. The safety profile, patient engagement as our third top priority, in-person and digital programs are providing the patient community and opportunity here a real world by Cubic experiences from other patients and their caregivers. This is a powerful approach to establishing understanding and confidence in the benefits of a view that to the patient community, social media has become a powerful tool in reaching patients, particularly those who may not be engaged with the health care team. Targeted ads have been deployed on the most established social platforms. And we are expanding to other social media channels.
Second half, an example of one of our social media. As is shown here, this approach allows us to engage patients where their ad raises awareness levels and allows them to engage digitally to learn more and seek treatment altogether by amplifying initial patient and physician experiences with buyback we expect to drive adoption build on a prescriber base that is already in the hundreds and deliver on our mission of reaching as many patients as possible.
Before handing the call off to some of our pipeline updates. I will also take the opportunity today to highlight a few trends that we are already seeing in the field that we expect will reinforce by Cubix leadership position in data and sustain our launch in the long term. First, patients are seeing the compounding benefits of corrective therapy of IGVAC. as they treat more wounds. Unlike palliative approaches, we are able to deliver the collagen seven A. one gene directly and to patient winds and enable durable wound closure as patients treat and close more and more wins, they are increasingly able to get control over their disease. The positive patient experiences are building excitement amongst patients and HCPs.
In addition, thanks to the work of Jennifer's team, home and administration is becoming further entrenched as a standard of care for patients with data wound care in the home is an established routine for patients and families, home administration with 5G that integrates into this routine. And we are seeing the overwhelming majority of patients choose that as part of their improved standard of care, our specialty pharmacy provider and home dosing infrastructure is supporting compliance, ongoing patient progress monitoring and integrating into a patient's lifestyle treatment approach. Momentum continues to grow familiarity with IG that is rapidly increasing and positive patient experiences are expanding utilization, inclusive of the DD population. Altogether, we expect these trends to establish Vigeo act as a standard of care for debt in the years to come.
Now I will hand it off to Suma to share pipeline highlights.

Suma Krishnan

Thank you, Christine. Our development team has made great progress to start 2024 as we work towards our ultimate goal for treating debt comprehensively and globally, while simultaneously advancing a broader pipeline of producible genetic medicines for many of the other rare and serious diseases that lack adequate treatment option.
With respect to our direct development, steady progress towards European and Japanese regulatory authorization has is on track for launches in both regions by 2025.
In Europe, the EMA's review of our marketing authorization application continues in February, manufacturing facility inspections were completed and we expect to receive GMP certification in the second half of this year. Based on recent discussions, 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 in Japan, we have now successfully completed the efficacy portion of our open-label bridging study in Japanese patients, enabling us to proceed with the Japanese New Drug Application, which we expect to file in the 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 application. We remain on a trajectory for both a decision by Japanese authorities as well as launch in 2025.
With respect to our broader clinical pipeline, there were two major themes in the first quarter expansion and acceleration with an expanding pipeline and accelerating enrollment. We are setting up for a number of exciting data readouts starting later this year. Our oncology program, KBseven has been progressing rapidly to start 2024. Recall that KB77 is a modified HSV. one vector designed to deliver genes and putting both IL-12 and IO two to the tumor microenvironment and promote systemic immune-mediated tumor clearance. We have two formulations of KB. seven seven in development, a liquid formulation for intra-tumoral injection and an inhaled formulation from nebulization and lung delivery.
Our Phase one study to evaluate intra-tumoral KB. 77 monotherapy is moving ahead well since dosing, our first patient in October of last year, we now have cleared the first two dose levels in our study and completed enrollment in the dose. KB. 77 has so far been generally well-tolerated across a diverse population that includes patients but sarcomas, colon, breast and cutaneous cancers, no patient as experienced dose-limiting toxicity. These are drug-related grade three or greater adverse events based on the current pace of enrollment, we expect to be able to report interim data before the end of this year.
We also recently dosed the first patient in our inhaled KB. seven or seven Phase one study, Kinect one, an open-label, multi-center dose escalation and expansion study evaluating inhaled KB. 7.7 monotherapy in patients with advanced solid tumor malignancies affecting the lungs. This is another exciting milestone as we look to extend the clinical utility of cytokine therapy and make a new class of medicines to treat a wide range of otherwise difficult to treat solid tumors. It is also gratifying to report that both intra-tumoral and inhaled formulations of KD. seven seven. I've now received fast-track designation by the FDA after NLKB. seven oh seven was granted fast-track earlier this year for treatment of patients with solid tumors, but pulmonary metastases that are relapse or refractory to standard of care therapy.
Turning to our respiratory program. We are pleased to report a pickup in enrollment here as well on KB. four or seven, our redosing in the healthy gene therapy for the treatment of cystic fibrosis. We have now completed dosing in cohort two of the total one study are on track to start dosing in the third and final cohort later this quarter. Recall that this cohort is scheduled include bronchoscopies that will allow for evaluation of airway epithelial cell transactions and expression of CFTR Transcrypt and protein.
Cohort three also includes minimum enrollment thresholds for patients that are not eligible for modulators, an important patient population for which no effective disease-modifying fine therapies exist. KB. four oh eight are reusable inhaled therapy for alpha-1 antitrypsin deficiency. We dosed the first patient in a certain time, one study in February of this year. Certain one is the Phase one open label single dose escalation study in adult patients with ATD. two allow assessment of safety, tolerability, alpha-1 antitrypsin levels and key pharmacodynamic biomarkers, but strong support from the Alpha-1 research community. We are on track for an interim data readout before the end of 2024.
Our development activities in ophthalmology are also ramping up working towards our goal of treating debt comprehensively. In February, we disclosed that we had reached alignment with the FDA on single-arm open-label study enabled approval of the back eyedrops for the treatment of lesions in the eye of DEB patients. We have since initiated clinical operations enable a study start in the second half of the year.
And finally, we look forward to reporting results from cohort three and four of our KB. three oh one Phase one study later this year. Both cohorts are running concurrently to evaluate KB. three oh one in two potential target indications. Improvement of the lateral can lines address and improvement of dynamic wrinkles of the degradation following readouts from cohort three and four, we expect to select a single indication for Phase two development. Our HSV. one flip from has the potential to yield a large number of highly differentiated redosing gene therapies. We look forward to making continued progress in 2024 and sharing data updates on our clinical pipeline later this year. With this, I would like to turn the call to Kate.

Kathryn Romano

Thank you, Suma. We ended the first quarter with $359 million in cash on hand and $622.3 million in total cash and investments, an increase over year end. Cash and investments of about $28.1 million buyback net product revenue for the quarter was $45.3 million as Weisberg was approved by the FDA in May of 2023. There was no comparative period revenue cost of goods sold was $2.4 million for the quarter or about 5% of net product revenue, making gross margin 95% in the first quarter of 2023 costs associated with the manufacturing of Visor back were expensed as research and development costs prior to approval. And therefore, there are no comparative period costs in the first quarter of 2023.
Research and development expenses for the quarter were $11 million, inclusive of stock-based compensation of $1.9 million compared to $12.3 million for the prior year's first quarter, inclusive of $2.5 million of stock-based compensation, lower research and development expenses in the first quarter of 2024 for due to decreased advisor back manufacturing and overhead costs as following FDA approval, those costs are now recorded as part of our cost of inventory.
This decrease was partially offset by additional clinical development costs and R&D related depreciation, Banta's selling, general and administrative expenses for the quarter were $26.1 million, inclusive of stock-based compensation of $7.4 million compared to $24 million for the prior year's first quarter, inclusive of stock-based compensation of $7.9 million.
Higher selling, general and administrative expenses in the first quarter of 2024 compared to the prior year's first quarter were primarily the result of increased selling expenses related to the launch of Ivex, in particular, an increase of about $1.5 million related to the additional patient access program related costs that were incurred in light of the J-code transition that was previously discussed.
Other increases included higher professional services, payroll and other administrative costs, offset by lower marketing related expenses compared to the prior year's first quarter this quarter, we also recorded litigation settlement expense of $12.5 million due to our anticipation of reaching the first milestone payment in the peripheral and settlement at $100 million in net product revenues. Our net income for the quarter was $932,000, which represented $0.03 per basic and diluted share. We would also like to reiterate our previously issued guidance of between $150 million to $175 million in combined non-GAAP R&D and SG&A costs in 2024.
As a reminder, this projection excludes an estimate for stock-based compensation. We continue to expect higher research and development costs relating to our several active pipeline projects and higher selling, general and administrative costs relating to the continued launch of back across the United States and our pre-commercial activities in Europe and Japan and now I will turn the call back over to Krish.

Krish Krishnan

Thanks, Kate. If there's one message that I hope you take away from today's call, it is our excitement for the path ahead at Krystal. Our US launch continues to progress very well with high compliance, broad access and a growing number of patient conversions, putting us on an excellent trajectory. Momentum is also building outside of the US with the rapid completion of our Japan royalty and soon to be second regulatory filing in the major ex-US market, we look forward to further expanding access devices at here and abroad, all while progressing and deep clinical pipeline addressing urgent unmet need in rare and serious diseases.
Thanks for listening, and I'd like to now open the call for Q&A.

Question and Answer Session

Operator

(Operator Instructions) Alec Stranahan, Bank of America.

Alec Stranahan

Hey, guys. Thanks for the questions. Just two quick ones from me. First, could you maybe talk about patient compliance that you saw in the quarter? What has the feedback been I'm from the field on this today and then I didn't see any mention of new start forms on, but any trends here that you would have highlight?
I guess what else needs to happen to shorten that time to less than a month for conversion.

Krish Krishnan

Thanks, Alec. Hey, on your question on compliance, I'm going to turn it over to Jennifer.

Jennifer McDonough

Sure. Thanks, Alec. So what when it comes to compliance, we are just thrilled with the patient experience. Overall. Patients continue to see the impact of Vigeo back in because it's dosed weekly. They understand that it's important to keep up with those weekly doses. That's definitely what we're hearing with that. They continue. You know, the home dosing is important for them. And but with that in the time on therapies, are opportunities potentially miss a week here or there?
So overall, patients are completely, I think, aligned with the idea that weekly is important that the dosing is important for wound healing. They're thrilled with the outcomes that they're receiving with Vijay, that and we work with them for flexibility. And, you know, understanding that life happens and then they may miss a week or two here or there. But overall, compliance has just been stellar.

Krish Krishnan

Alec, on the start from question, look, we stopped talking about cell phones last quarter, we think reimbursement approvals is a much closer predictor of net revenue than PSS at this stage of the launch. But having said that, demand, it used to be really good with respect to patients coming on drug. And I'll turn it over to Christine to maybe say, a sentence or two, having come into the story over the last couple of months.

Christine Wilson

Yes. Thank you, crash. We continue to be very pleased by the volume of new starts we're seeing and we are beginning to see that transition from and the COEs into the community base. But as that awareness continues to grow, the education, the clinical experiences we intend to build on that momentum that we're currently seeing.

Operator

Tim Lugo, William Blair.

Tim Lugo

Thank you for taking the question. Chris, I believe you mentioned that you're confident in hitting revenue projections in 2024? And despite you what was a disruption this quarter given the J code switch, can you just talk a bit about I see consensus around $255 million this year. Is that just something we are generally comfortable with?

Krish Krishnan

Look without getting into the specifics of what I think about is what I see the analysts projecting and the consensus estimate, but that would be average or median. I realize that 1Q was light on the revenue side, but not on the fundamentals of the commercial launch, right, when the J code issue surfaced two things happened, I think our specialty pharmacy probably underestimated the time it would take to convert. We probably assume that that was right, but when the actual issue surfaced because the dosing is at a weekly level, we don't have time to think about what we could have done in the past. We had to jump and quickly provide access to free vials.
And we ended up I'm spending about 400 C. bios, as I mentioned in the call, but by the time we started to learn to figure out how to address such an issue, either now or in the future. The issue was well behind us. So it was a very transitory and resulted in about 400 free vials, which you can imagine is about slightly north of $8 million in net revenue. But we were really pleased.
So we keep the patients on drug and provide continuity without having to slip up on that front. That's more important to us. And since patient experiences at the forefront of what of the sludge out before a over everything else on the story. But but then coming back to your question, we feel good about generally where we think we're going to end up in 2024.

Tim Lugo

Understood. Thank you. And maybe switching to the pipeline a bit for KB. four seven. The third cohort is about to begin enrollment. Can you narrow down when we should expect first data coming out of this study, given the first two cohorts are behind us now? And is there are there any trends maybe in the second cohort that make you more or less confident in the program?

Suma Krishnan

And this is Suma. I'm going to take that question. I mean, again, we are very excited about 47. We are working with two sites because remember, we need sites that have the capability to do bronchoscopy because this is a procedure that needs a lot of specific. How do you biopsy the patient to make sure we increase the chances of getting the right tissues to show expression. So yes, we are working on that. Also remember that we are looking at now patients potentially patients that are not on modulators or correctors. So we see I mean, there is no interference from that.
So again, it's that kind of population that we're looking for. We have identified patients we are actively actively working with the sites to get the study up and running. Our goal is to tried to enroll all of them by the end of the year. We're going to work hard at it. I mean, again, remember, we're looking for a specific this patient population that is not on modulators of correctors. So there will I mean, again, we are working to get those patients enrolled.

Krish Krishnan

And I think we have to be able to complete that because we're outside the TD and we're not guiding. We have never guided on CF, we never know, but things are trending in a positive direction.

Operator

Ritu Baral, TD Cowen.

Ritu Baral

I wanted to ask about on Europe and Japan on specifically why you guys are planning on commercial build-out for Europe right now. And if you can just give us an update on the M&A and the story and a process whether you're past the 180-day questions and whether you anticipate oral arguments there.

Krish Krishnan

Thanks, Ritu. On the commercial side, we anticipate a first launch to be Germany either very late this year or early next year, depending on when we get approval. We do have two German GM in place with data coming from Shire. And so we're super excited about the launch in Germany. Meanwhile, we're setting up for named patient sales, expanded access, whatever, and the demand has been really good in Europe in terms of experience with the drug prior to actual launch and approvals. And Japan is maybe a little bit behind relative to Europe, maybe six months or so. We do have a GM in Japan in place and us and I'll now turn it over to Suma talk about where we are with respect to timelines and approval in both these countries.

Suma Krishnan

Thanks, Krish. Yes, I mean, we have received the 120-day questions. We we also have remember, we have at scientific discussions to them throughout the process. That was so no surprises in the questions.
We also met with the EMA recently to go over some of the key questions that we needed for the clarification. I think the meeting went pretty well. We have clear clarity on what the expectations are, and we expect to respond to the LOQ. in the next couple of months. And I think the process the time line is on track for an approval end of this year. So overall, we're very pleased with the process and as you know, the inspection was also completed. I think we had a very successful inspection and are based on the feedback looks like we should get GMP certification in a couple of months from now.

Ritu Baral

Got it.

Suma Krishnan

And in Japan, we have, as Chris mentioned, we have completed the phase the open-label Japanese patient population study. The data looks very promising we are in the process of writing up the study report. We have a meeting scheduled with the PMDA to talk about the Japanese NDA, and we are on track for filing the Japanese application. We are working with the CRO. The process of converting the European and the U.S. BLA to the Japanese NDA has begun, and we anticipate filing this application end of this year.

Ritu Baral

Got it. And then and then moving back to the US, can you tell us what is current conversion time to commercial? I could move quickly on Ken you mentioned that it was starting, I think it was, Christine, you mentioned that it was getting a little longer than expected. And can you discuss what's from some of the headwinds on to shorten that to the target 30 days has been? Thanks.

Krish Krishnan

Let me start and I'll turn it over to Jen to provide specifics. Look, there are three pieces, right, first that the part in the middle is access. Once you get access, it's about how quickly can you get a nurse into the home that you like and get treatment going. The piece before access is once the doctor thinks about writing a prescription is the genetic information in place, whether you're in the community setting or in a COE. setting getting all the paperwork and genetic information in place. I'll start by saying the access part is fairly quick, maybe less than a week. So anytime we're spending is either on the front end, depending on the type of the patient or on the back end where the caregiver is being pretty picky on the nurse that comes home and scheduling of the nurse to come home. But that said, in terms of turnaround time, Jen, maybe you can weigh in?

Jennifer McDonough

Just like Chris explained, there are several dynamics when it comes to getting that patient on their first treatment working with the payer, assuming those clinicals definitely takes time as we move into the community setting, some of those offices are not as they don't have the staffing some of that chart worker and the lab work as you maybe potentially in the center. So that takes some time. So we continue to work our team. And we have a great field team is working with the offices supporting providing the education at the payer level.
And so we expect that to kind of shorten as we continue that education on once we submitted to the payer, as Chris said, that really is a very positive our process for the most part, our payers are well aligned. We have a great policy. We understand what they need to be able to provide the approval. So that kind of turnaround time on determination on seems to seems to be shortening for sure the payers are much more on understanding of what's needed.
And then that third part is scheduling with the family. Part of that, of course, is getting the nurses, making sure we have a trained IG that nurse and that we have the schedule and the flexibility that the family needs and that just takes a little bit of time. But once we are the exciting part is once we get a patient on their routines established on, they have a great experience and we'll continue to kind of shorten that up. We understand that needs to be as short as possible. We need to get these patients on therapy and as fast as possible, that's our goal.

Operator

Benazir Ali, Stifel.

Benazir Ali

Hi, this is Benazir on for Dae Gon Ha. Can you guys hear me? Okay.

Krish Krishnan

Yep.

Benazir Ali

Okay. Just a couple of questions. First on Christine, based on your experience with the full story, which one of those three priorities have you find most impactful and onboarding patients? And any sense of what kind of growth we can kind of envision going forward?

Christine Wilson

Thanks for the question. And so really, all three of those pillars continue to be very important into this launch. And I find out there's some uniqueness certainly and in the debit space, but there's also some consistency that you see in the rare space. And so they're all three of those priorities continue to be important in the education of the HCP., the patient outreach and activation. And so when you take a look across this right, where our focus is in the three pillars that we talked about previously. And we want to make sure that only not only are we educating the HCPs, but that we're really working with the patient population to share that education with them to make sure that we're building on the momentum that has been created thus far.

Benazir Ali

And then just one more question for either you or Krish on think you mentioned about like 5,000 HCPs are aware, Vijay, what's the geographic distribution and what areas you're going to focus on in the rest of 2024?

Christine Wilson

Yeah, I can take that question. I mean, really what's exciting is that we are starting to identify patients, not just in the COEs but outside the community. And really we are seeing those patients all across the country. And this population really can set in some more rural locations. And it also sets, obviously in our COE. setting. So that's the exciting, I think evolution of this launch and that we're really starting to understand that the alerts are helping us with really identify patients across and across the country, but also across different specialties. We're starting to see as well.

Operator

Andrea Tan, Goldman Sachs.

Andrea Tan

Good morning. Thanks for taking our question. And Krish, maybe one for you just on as patients have been on commercial drug now for quite a bit of time. Just wondering if you could provide an update on what you're hearing on the experience of these patients with respect to wound closure, curious if you're starting to hear of any patient starting to come off therapy as their wounds closure Do you still believe the induction phase on that previously you had projected at two years is still intact? Thanks so much.

Krish Krishnan

So to start with your last question, I think we continue to see a very high level of compliance, and it has been what almost a year of actually August was the first time a patient got on both direct in a commercial setting, but compliance seems to be high and we are continuing to say for the induction period, would we expect induction to last maybe 15 to 18 months afterwards, you should expect patients to consume less number of vials going forward as the wounds heal.
Now look at 91% or 93% on a high over 90% compliance, if you think about 200, 300 patients on drug on a weekly administration to get to 91%, we're talking a handful of patients maybe missing a week here and there. So for all practical purposes, most of the patients are still on drug. Now that have been one or two instances with dominant patients where we've actually heard look, all the ones appear to be healed, especially in really on patient and calling us to ask, hey, can we take a pause and resume if we see some kind of disruption in the world on hasn't happened a lot. It just happens with young kids predominantly on dominant or DDEB., but it does have happened.
Anything else Jen, you want to add to that question?

Jennifer McDonough

No. I think again, I think rollout experience, we continue to hear very, very positive on feedback from patients and pictures that we're seeing from our patient showing the improvement in the skin, the durability of the scan, just the skin feeling different all over. And so their patients are very excited and we're happy that they are where they're at.

Andrea Tan

Perfect. Just to confirm that a majority of your patients, you are still seeing on receive about one vial per week portfolio.

Jennifer McDonough

Absolutely. Yes.

Operator

(Operator Instructions) Gavin Clark-Gartner, Evercore ISI.

Gavin Clark-Gartner

Hey, thanks for taking my questions. I have a few, so I'll just go one by one off first for the reimbursement approvals. Are all these patients going on to receive paid drug? Or is there any leakage along the way?

Jennifer McDonough

Sure. So while the definitely the majority are going on therapy. We continue to work with those that are, you know, as we go through the process, but for the most part, they are all going on therapy. Yes.

Gavin Clark-Gartner

Okay. And you noted, I believe you noted that the Change Healthcare has resulted in a lower number of reimbursement approvals in the quarter. Can you help us quantify what that impact is?

Jennifer McDonough

Yeah, I don't have that quantifying it and thus far it slowed it down a bit on as you're aware that when it came to change some of that claim adjudication and some of the benefit verification had to pause because our partner relied on change exclusively. I think they definitely had a pause there. So it's back to normal and were vascular kind of expediting those approvals as fast as possible.

Krish Krishnan

Hey Gavin, I would say, look, if you do track something at reimbursement approvals on a weekly basis, the disruption can be quantified as a week to two weeks of disruption.

Gavin Clark-Gartner

Okay, that helps. Thanks. And I wanted to just clarify on the compliance metric, that 91% that you provided, I think you noted was 91% of patients who were on once weekly therapy is the other 90 -- but the other 9% are they on less frequent therapy? Or is there a different group of patients who have kind of discontinued treatment altogether?

Jennifer McDonough

No, that measurement is actually compliance to weekly therapy. How many patients receive their treatments weekly on if they miss a dose and that would negatively impact. If I in general, 91% of patients receive it weekly. And then if they miss a dose, again, it could take it down a bit, but does not mean that patients are getting at any alternative way. It's weekly. That's how it's prescribed. That's how it does.

Gavin Clark-Gartner

Okay. Like is there a different group of patients who have discontinued?

Jennifer McDonough

No. No. It's just the balance of that, as I said, just missed a dose.

Operator

Yigal Nochomovitz, Citigroup.

Yigal Nochomovitz

Hi, Krish and team. Thank you for taking the question. I just had a question on the ophthalmic study, this small open-label study in 10 patients. Could you just explain obese patients, ones that are existing budget patients or could they have been or is the use of video of it on exclusion criteria for those 10 patients.
And then regarding your inhaled technology, I think you've talked a lot about the on the delivery system there. Could you just explain or using a nebulizer, how long is the inhalation session per dose? And could you just explain a little bit more about the way that's delivered? Thank you.

Suma Krishnan

Yes, this is Suma, I'll answer the first part of your question with regarding to the eye. Yes, a good chunk of the patients that are in a phase three study also have a manifestation any impact on their eye. They have in a severe blistering are holding as a result, they can't open the eye and it's very painful. So we already have a good chunk of patients who know about the study and are actually proactively want to enroll in the study.
So we feel pretty good we should be able to enroll these patients pretty rapidly again, as I said, as we discussed with the agency seven to eight patients, a small number of patients that we need to show wound-healing compared to their natural history here pretty straightforward study, and we anticipate enrolling the study pretty rapidly because we already know patients that are lining up for the study.
With regarding to your second question with the installation, yes, it's a standard nebulizer that is off the shelf that's available. The beauty of our product is unlike some of the mRNA deliveries because of the nature of the material you have to dilute it a lot for it to go through the mash. In our case, I mean, this is you can nebulized product in less than 15 minutes. So it's a pretty rapid fast in a lead nebulization time for these patients.

Yigal Nochomovitz

Okay, thanks. And just one quick follow-up on Japan. In Europe, I assume that those approvals would be for the skin application first and then the ophthalmic application later? Or is there any possibility that the up the data from the ophthalmic product could be included with those submissions?

Suma Krishnan

I mean, obviously at the moment, it's all for the scheme, it's the same. But once we complete the US study, we may use the same strategy to go into these two countries can use the US data due to seek approval in those regions.

Operator

Thank you. And there were no other questions at this time, and this does conclude today's conference call. At this time. Thank you all participants for joining the Krystal Biotech First Quarter 2024 earnings conference call. You may now disconnect.