On Monday, Citi adjusted its price target for Krystal Biotech (NASDAQ:KRYS) shares, a biopharmaceutical company, increasing it to $206.00 from the previous $204.00. Despite this change, Citi has maintained a Neutral rating. The adjustment comes after an evaluation of Krystal Biotech's sales and management guidance.
Krystal Biotech reported sales of Vyjuvek, its gene therapy product, totaling $83.8 million, which aligned with Citi's and the consensus estimates of $82.3 million and $83.4 million, respectively. However, Citi noted some concerns, particularly with the trend in patient compliance with the treatment.
According to the management, compliance rates have shown a downward trend, from 90% at the end of the second quarter of 2024 to 87% at the end of the third quarter of the same year.
Citi also highlighted the positive aspect of 70% of new writers prescribing the therapy in the third quarter of 2024. Nevertheless, the anticipated 720 reimbursement approvals two years post-launch suggest a deceleration over 2025.
So far, the company has achieved 460 reimbursement approvals, with an average run-rate of about 100 per quarter since August 2023. This rate is expected to slow down to approximately 65 per quarter moving forward.
Citi's model takes into account the softening compliance, forecasting an average utilization of about three vials per month in 2025, which is predicted to drop to approximately two vials per year by 2027 and beyond. Despite these projections, Citi remains comfortable with its estimation of US peak sales reaching around $700 million.
The firm also pointed to Krystal Biotech's pipeline as a potential upside, with multiple data catalysts expected, including KB408 for Alpha-1 Antitrypsin Deficiency by the end of 2024, KB707 for solid tumors also by the year-end, KB407 for Cystic Fibrosis in the first half of 2025, and an ophthalmic B-VEC therapy in 2025.
While these programs are currently heavily risk-adjusted, Citi suggests that achieving initial proof of concept (PoC) could significantly de-risk these projects and prompt a reassessment of their investment thesis.
In other recent news, Krystal Biotech has seen a series of positive developments. Stifel maintained a Buy rating on Krystal Biotech shares, citing strong fundamentals and consistent growth. The firm also highlighted the potential for sustained growth of Vyjuvek, driven by robust market fundamentals and positive treatment outcomes.
Similarly, TD Cowen reiterated its Buy rating for the company, following the disclosure of results from their Phase 1 'PEARL-1' trial for KB301, an investigational treatment aimed at reducing dynamic wrinkles.
H.C. Wainwright increased its price target for Krystal Biotech from $200 to $221, maintaining a Buy rating following the announcement of positive interim safety and efficacy results from the PEARL-1 study for KB301. The firm highlighted the potential of KB301 in the aesthetic skincare market.
Stifel also emphasized the potential of Krystal's engineered HSV-1 viral vectors, used in various treatments, and noted that the market may have underestimated the value of Krystal's respiratory disease pipeline and its aesthetics program through Jeune Aesthetics, a subsidiary of Krystal Biotech.
Jeune Aesthetics reported positive interim safety and efficacy results from a Phase 1 study of KB301, planning to advance this investigational aesthetic treatment into Phase 2 development for the treatment of dynamic wrinkles of the décolleté. These are all recent developments in the company's journey.
InvestingPro Insights
Krystal Biotech's financial metrics and market performance offer additional context to Citi's analysis. According to InvestingPro data, the company's market capitalization stands at $4.93 billion, with a price-to-earnings (P/E) ratio of 45.38. This relatively high P/E ratio aligns with Citi's neutral stance, suggesting that the market has already priced in significant growth expectations.
InvestingPro Tips highlight that Krystal Biotech holds more cash than debt on its balance sheet, which could provide financial flexibility as the company navigates the challenges and opportunities outlined in Citi's report. Additionally, analysts anticipate sales growth in the current year, supporting Citi's focus on Vyjuvek's sales performance and future projections.
The company's impressive gross profit margin of 93.07% for the last twelve months ending Q2 2024 underscores the potential profitability of Vyjuvek, even as Citi notes concerns about patient compliance trends. This high margin could provide a buffer as the company works to maintain and expand its market position.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for Krystal Biotech, providing a deeper dive into the company's financial health and market position.
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