krys-20260331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________

FORM 10-Q

_____________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38210

_____________________________________________________

Krystal Biotech, Inc.

(Exact name of registrant as specified in its charter)

_____________________________________________________


Delaware						82-1080209
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


2100 Wharton Street,	Suite 701
Pittsburgh,	Pennsylvania	15203
(Address of principal executive offices)		(zip code)

(412) 586-5830

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	KRYS	Nasdaq Global Select Market

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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company ☐

If 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 April 29, 2026, there were 29,479,756 shares of the registrant’s common stock issued and outstanding.

Krystal Biotech, Inc.

TABLE OF CONTENTS


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025	3
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended March 31, 2026 and 2025 (unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2026 and 2025 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27

SIGNATURES		28

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Krystal Biotech, Inc.

Condensed Consolidated Balance Sheets

(unaudited)



(in thousands, except par value)	March 31, 2026		December 31, 2025
Assets
Current assets
Cash and cash equivalents	$	501,313	$	496,304
Short-term investments	322,092		331,487
Accounts receivable, net	127,022		127,425
Inventory	42,646		40,475
Prepaid taxes	10,642		14,006
Prepaid expenses and other current assets	16,026		14,905
Total current assets	1,019,741		1,024,602
Property and equipment, net	153,582		150,776
Long-term investments	193,485		128,066
Right-of-use assets	7,035		7,239
Deferred tax asset, net of valuation allowance	22,824		22,824
Other non-current assets	300		287
Total assets	$	1,396,967	$	1,333,794
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	4,089	$	3,238
Current portion of lease liability	1,800		1,771
Accrued rebates	70,717		58,181
Accrued expenses and other current liabilities	31,196		39,752
Total current liabilities	107,802		102,942
Lease liability	7,312		7,568
Other long-term liabilities	5,124		3,724
Total liabilities	120,238		114,234
Commitments and contingencies (see note 7)
Stockholders’ equity
Common stock; $0.00001 par value; 80,000 shares authorized as of March 31, 2026 and December 31, 2025; 29,437 and 29,192 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively.	—		—
Additional paid-in capital	1,198,257		1,194,261
Accumulated other comprehensive (loss) gain	(1,623)		1,136
Retained earnings	80,095		24,163
Total stockholders’ equity	1,276,729		1,219,560
Total liabilities and stockholders’ equity	$	1,396,967	$	1,333,794

The accompanying notes are an integral part of these condensed consolidated financial statements.

Krystal Biotech, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income

(unaudited)


	Three Months Ended March 31,
(in thousands, except per share data)		2026		2025
Product revenue, net		$	116,357	$	88,183
Operating expenses
Cost of goods sold		6,323		5,028
Research and development		15,331		14,256
Selling, general and administrative		41,014		32,647

Total operating expenses		62,668		51,931
Income from operations		53,689		36,252
Other income
Interest and other income, net		7,753		7,345
Income before income taxes		61,442		43,597
Income tax expense		(5,510)		(7,864)
Net income		55,932		35,733
Unrealized (loss) gain on available-for-sale securities		(1,577)		344
Foreign currency translation		(1,182)		236
Comprehensive income		$	53,173	$	36,313

Net income per common share:
Basic		$	1.91	$	1.24
Diluted		$	1.83	$	1.20

Weighted-average common shares outstanding:
Basic		29,288		28,815
Diluted		30,507		29,871

The accompanying notes are an integral part of these condensed consolidated financial statements.

Krystal Biotech, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
(in thousands)	Shares	Amount
Balances as of January 1, 2026	29,192	$	—	$	1,194,261	$	1,136	$	24,163	$	1,219,560
Issuance of common stock upon exercise of stock options	145	—		6,501		—		—		6,501
Vesting of restricted stock units, net of shares withheld for taxes	100	—		(16,960)		—		—		(16,960)

Stock-based compensation	—	—		14,455		—		—		14,455
Unrealized loss on investments	—	—		—		(1,577)		—		(1,577)
Foreign currency translation	—	—		—		(1,182)		—		(1,182)
Net income	—	—		—		—		55,932		55,932
Balances as of March 31, 2026	29,437	—		$	1,198,257	$	(1,623)	$	80,095	$	1,276,729


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders’ Equity
(in thousands)	Shares	Amount
Balances as of January 1, 2025	28,794	$	—	$	1,127,238	$	(190)	$	(180,668)	$	946,380
Issuance of common stock upon exercise of stock options	17	—		1,462		—		—		1,462
Vesting of restricted stock units, net of shares withheld for taxes	98	—		(12,116)		—		—		(12,116)
Shares of restricted stock awards surrendered for taxes	(10)	—		(1,812)		—		—		(1,812)
Stock-based compensation	—	—		14,447				—		14,447
Unrealized gain on investments	—	—		—		344		—		344
Foreign currency translation	—	—		—		236				236
Net income	—	—		—		—		35,733		35,733
Balances as of March 31, 2025	28,899	$	—	$	1,129,219	$	390	$	(144,935)	$	984,674

The accompanying notes are an integral part of these condensed consolidated financial statements.

Krystal Biotech, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Three Months Ended March 31,
(in thousands)	2026		2025
Operating Activities
Net income	$	55,932	$	35,733
Adjustments to reconcile net income to net cash provided by operating activities

Depreciation	1,522		1,410
Accretion on marketable securities	(576)		(453)
Amortization of operating lease right-of-use assets	204		224
Stock-based compensation expense, net	13,609		13,478

Realized gain on investments	(529)		(1,502)
Other, net	136		614
Changes in operating assets and liabilities
Accounts receivable, net	58		1,486
Inventory	(243)		(1,395)
Prepaid taxes	3,365		457
Prepaid expenses and other current assets	(1,699)		(3,433)
Lease liability	(227)		(136)
Other long-term liabilities	1,435		534
Accounts payable	1,022		906
Accrued rebates	12,685		10,601
Accrued expenses and other current liabilities	(6,312)		3,695
Accrued legal settlement	—		(31,250)
Net cash provided by operating activities	80,382		30,969

Investing Activities
Proceeds from disposal of assets	—		435
Purchases of property and equipment	(7,148)		(6,204)
Purchases of investments	(160,033)		(137,806)
Maturities of investments	103,598		88,806

Net cash (used in) investing activities	(63,583)		(54,769)

Financing Activities
Proceeds from exercise of stock options	6,501		1,462
Taxes paid for employee tax withholding related to restricted stock units	(16,960)		(12,116)
Taxes paid related to settlement of restricted stock awards	—		(1,812)

Net cash (used in) financing activities	(10,459)		(12,466)

Effect of exchange rate changes on cash and cash equivalents	(1,331)		171

Net increase (decrease) in cash and cash equivalents	5,009		(36,095)

Cash and cash equivalents at beginning of period	496,304		344,865
Cash and cash equivalents at end of period	$	501,313	$	308,770

Supplemental Disclosures of Non-Cash Activities
Unpaid purchases of property and equipment	$	1,218	$	1,397

Initial recognition of right-of-use assets	$	—	$	1,802
Supplemental Cash Flow Information
Income taxes paid	$	627	$	400

The accompanying notes are an integral part of these condensed consolidated financial statements.

Krystal Biotech, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization

Krystal Biotech, Inc. (together with its wholly-owned subsidiaries, the “Company,” or “we” or other similar pronouns), a Delaware C-corporation, is a fully integrated, global, commercial-stage biotechnology company. We are focused on the discovery, development, manufacturing, and commercialization of genetic medicines to treat diseases with high unmet medical needs. Using our patented gene therapy technology platform that is based on engineered herpes simplex virus-1 (“HSV-1”), we create vectors that efficiently deliver therapeutic transgenes to cells of interest in multiple organ systems. The cell’s own machinery then transcribes and translates the transgene to treat the disease. Our vectors are amenable to formulation for non-invasive or minimally invasive routes of administration at a healthcare professional’s office or in the patient’s home. Our innovative technology platform is supported by two in-house, commercial scale Current Good Manufacturing Practice (“CGMP”) manufacturing facilities.

Liquidity

As of March 31, 2026, the Company had a retained earnings balance of $80.1 million. Our operating profitability is dependent upon the continued successful commercialization of VYJUVEK, our U.S. Food and Drug Administration (“FDA”), European Commission (“EC”), and Japan’s Ministry of Health, Labour, and Welfare (“MHLW”) approved product, as well as successful development, approval and commercialization of our product candidates. Management intends to fund future operations through its on hand cash and cash equivalents and revenue generated from the sale of VYJUVEK, and may also seek additional capital through arrangements with strategic partners, the sale of equity, debt financings or other sources.

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, the failure of product candidates in clinical and preclinical studies, the development of competing product candidates or other technological innovations by competitors, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to commercialize product candidates. The Company expects to incur significant costs in connection with, among other things, advancing its product pipeline, expanding its commercialization capabilities, and complying with EU post-authorization regulatory requirements and EU member state-specific pricing, reimbursement, and market access activities. The Company believes that its cash and cash equivalents and short-term investments of approximately $823.4 million as of March 31, 2026 will be sufficient to allow the Company to fund its planned operations for at least the next 12 months from the date of this Quarterly Report on Form 10-Q.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). In the opinion of management, all adjustments, which consist of all normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods presented, are reflected in the interim condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.

Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassified amounts have no impact on the Company’s previously reported financial position or results of operations.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “2025 10-K”), as filed with the U.S. Securities and Exchange Commission (“SEC”) on February 17, 2026.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors and applies significant judgment in developing the estimates and assumptions that are used in the preparation of these financial statements. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates in the period these variances become known. Estimates are used in the following areas, among others: variable consideration associated with revenue recognition, stock-based compensation expense, accrued expenses, and income taxes.

Summary of Significant Accounting Policies

See Note 2 to our consolidated financial statements included in the 2025 10-K. There were no material changes to the Company’s significant accounting policies during the three months ended March 31, 2026.

Recently Issued Accounting Pronouncements, Not Yet Adopted

There were no accounting pronouncements issued or adopted during the three months ended March 31, 2026 that had or are expected to have a material impact on the Company’s condensed consolidated financial statements.

In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This standard calls for enhanced disclosures about components of expense captions on the face of the income statement. This standard will be effective for fiscal years beginning after December 15, 2026, with the option to apply it retrospectively. Early adoption is allowed. Currently, the Company is assessing the potential impact of this guidance on its consolidated financial statement disclosures.

In December 2025, the FASB issued ASU 2025-11 Interim Reporting (Topic 270): Narrow-Scope Improvements. This standard clarifies current interim reporting requirements on Topic 270 and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. This standard will be effective for fiscal years beginning after December 15, 2027, with the option to apply it retrospectively. Early adoption is allowed. Currently, the Company is assessing the potential impact of this guidance on its condensed consolidated financial statement disclosures.

3. Product Revenue, Accounts Receivable and Reserves for Product Sales

The Company’s product revenue, net of sales discounts and allowances totaled $116.4 million and $88.2 million for the three months ended March 31, 2026 and March 31, 2025, respectively. Product revenue by significant geographic region is as follows:


	Three Months Ended March 31,
		2026		2025
United States		$	87,489	$	88,183
Europe		20,677		—
Japan		8,191		—
Total product revenue, net		$	116,357	$	88,183

The Company’s accounts receivable, net balance relating to VYJUVEK sales was $127.0 million as of March 31, 2026 and $127.4 million as of December 31, 2025. Accounts receivable, net from the Company’s customers who individually accounted for 10% or more of accounts receivable, net consisted of the following:


	Percent of Accounts Receivable, Net
	March 31, 2026		December 31, 2025
Customer A	62	%	66	%
Customer B	13	%	14	%

All other single customers represent less than 10% of outstanding accounts receivable, net in the applicable period.

The following table summarizes changes in allowances and discounts for the three months ended March 31, 2026:


(in thousands)	Rebates		Prompt Pay		Other Accruals		Total
Balance as of December 31, 2025	$	61,905	$	5,834	$	378	$	68,117
Provisions	22,335		3,349		60		25,744
Payments/Credits	(8,399)		(3,845)		(278)		(12,522)
Balance as of March 31, 2026	$	75,841	$	5,338	$	160	$	81,339

Rebates are included in accrued rebates and other long-term liabilities on the condensed consolidated balance sheets. Other long-term liabilities are comprised of $5.1 million and $3.7 million of long-term accrued rebates as of March 31, 2026 and December 31, 2025, respectively. Prompt pay discount is recorded as an allowance against accounts receivable, net on the condensed consolidated balance sheets. Other accruals are included in accrued expenses and other current liabilities on the condensed consolidated balance sheets. Provisions for rebates, prompt pay discounts and other accruals are recorded reductions to product revenue, net on the condensed consolidated statements of operations and comprehensive income.

4. Net Income Per Share Attributable to Common Stockholders

Basic net income per share attributable to common stockholders is calculated by dividing net income attributable to common stockholders by the weighted-average shares outstanding during the period, without consideration for common stock equivalents. Diluted net income per share attributable to common stockholders is computed by dividing the net income by the weighted-average number of shares of common stock and common stock equivalents outstanding for the period. Common stock equivalents consist of common stock issuable upon (1) exercise of stock options and (2) vesting of restricted stock awards, restricted stock units and performance-based restricted stock units (collectively, “restricted stock”).

For the three months ended March 31, 2026 and 2025, respectively, there were 376 thousand and 413 thousand common stock equivalents outstanding in the form of stock options and 50 thousand and 48 thousand in unvested restricted stock, that have each been excluded from the calculation of diluted net income per common share as their effect would be anti-dilutive.


	Three Months Ended March 31,
(in thousands, except per share data)		2026		2025
Numerator:
Net income		$	55,932	$	35,733
Denominator:
Weighted-average basic common shares		29,288		28,815
Dilutive effect of stock options and unvested restricted stock		1,219		1,056
Weighted-average diluted common shares		30,507		29,871

Net income per common share—basic		$	1.91	$	1.24
Net income per common share—diluted		$	1.83	$	1.20

5. Fair Value Instruments

The following tables show the Company’s cash and cash equivalents and available-for-sale securities by significant investment category as of March 31, 2026 and December 31, 2025:


	March 31, 2026
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Aggregate Fair Value		Cash and Cash Equivalents		Short-term Marketable Securities(1)		Long-term Marketable Securities(2)
Level 1:
Cash and cash equivalents	$	501,313	$	—	$	—	$	501,313	$	501,313	$	—	$	—
Subtotal	501,313		—		—		501,313		501,313		—		—
Level 2:


Corporate bonds	229,575		125		(348)		229,352		—		147,369		81,983
U.S. government agency securities	286,398		165		(338)		286,225		—		174,723		111,502
Subtotal	515,973		290		(686)		515,577		—		322,092		193,485
Total	$	1,017,286	$	290	$	(686)	$	1,016,890	$	501,313	$	322,092	$	193,485


	December 31, 2025
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Aggregate Fair Value		Cash and Cash Equivalents		Short-term Marketable Securities(1)		Long-term Marketable Securities(2)
Level 1:
Cash and cash equivalents	$	496,304	$	—	$	—	$	496,304	$	496,304	$	—	$	—
Subtotal	496,304		—		—		496,304		496,304		—		—
Level 2:
Commercial paper	12,887		2		(1)		12,888		—		12,888		—
Corporate bonds	211,268		535		(6)		211,797		—		142,801		68,996
U.S. government agency securities	234,216		653		(1)		234,868		—		175,798		59,070
Subtotal	458,371		1,190		(8)		459,553		—		331,487		128,066
Total	$	954,675	$	1,190	$	(8)	$	955,857	$	496,304	$	331,487	$	128,066

(1)The Company’s short-term marketable securities mature in one year or less.

(2)The Company’s long-term marketable securities mature between one and two years.

6. Balance Sheet Components

Inventory

Inventory consisted of the following:


(in thousands)	March 31, 2026		December 31, 2025
Raw materials	$	15,173	$	15,938
Work-in-process	15,115		15,224
Finished goods	12,358		9,313
Inventory	$	42,646	$	40,475

Property and Equipment, Net

Property and equipment, net consisted of the following:


(in thousands)	March 31, 2026		December 31, 2025

Building and building improvements	$	109,256	$	109,242
Manufacturing equipment	30,202		29,279
Leasehold improvements	27,227		27,227
Construction in progress	12,341		8,108
Laboratory equipment	3,521		3,490
Computer equipment and software	2,616		2,559
Furniture and fixtures	2,191		2,152
Total property and equipment	187,354		182,057
Accumulated depreciation	(33,772)		(31,281)
Property and equipment, net	$	153,582	$	150,776

Depreciation expense was $1.5 million and $1.4 million for the three months ended March 31, 2026 and 2025, respectively. Depreciation expense capitalized into inventory was $1.0 million for the three months ended March 31, 2026 and 2025.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following as of March 31, 2026 and December 31, 2025:


(in thousands)	March 31, 2026		December 31, 2025
Accrued taxes	$	13,110	$	10,919
Accrued payroll and benefits	4,938		11,457
Accrued professional fees	4,347		5,936
Accrued preclinical and clinical expenses	3,801		4,667
Other current liabilities	3,176		3,579
Accrued inventory	1,040		1,005
Accrued construction in progress	784		2,189


Accrued expenses and other current liabilities	$	31,196	$	39,752

7. Commitments and Contingencies

Agreements with Contract Manufacturing Organizations and Contract Research Organizations

The Company enters into various agreements in the normal course of business with Contract Manufacturing Organizations (“CMOs”), Contract Research Organizations (“CROs”) and other third parties for preclinical research studies, clinical trials and testing and manufacturing services. The agreements with CMOs primarily relate to the manufacturing of our sterile gel that is mixed with in-house produced vectors as part of the final drug product for VYJUVEK. Agreements with third parties may also include research and development consulting activities, clinical-trial agreements, testing of our clinical-stage, pre-commercial and commercial stage products and/or storage, packaging and labeling. The Company is obligated to make milestone payments under certain of these contracts. The Company incurred research and development expenses related to commitments under these agreements of $2.5 million for the three months ended March 31, 2026 and $2.2 million for the three months ended March 31, 2025.

Legal Proceedings

In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes, or claims. In accordance with FASB ASC Topic 450, Contingencies (“ASC 450”), the Company accrues a liability for legal contingencies when it is probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. If there is at least a reasonable possibility that a loss may be incurred, ASC 450 requires disclosure of a loss contingency.

In the first quarter of 2025, the Company and certain of its employees received subpoenas from the U.S. Department of Justice requesting that the Company produce certain documents regarding its sponsored genetic testing program relating to

VYJUVEK and commercial practices relating thereto. The Company is cooperating and providing information in response to the subpoenas. It is not possible to estimate the amount of any loss or range of possible loss that might result from this inquiry, and because the final outcome cannot be predicted with certainty, unfavorable or unexpected developments or outcomes could result in a material impact to the Company’s results of operations.

On September 18, 2025, a stockholder filed a derivative complaint in the Court of Chancery of the state of Delaware naming the Company’s directors as defendants and the Company as a nominal defendant. The complaint alleged claims for breach of fiduciary duty, unjust enrichment, and waste of corporate assets based on allegedly excessive non-employee director compensation in each of 2021 through 2024. The parties have reached an agreement in principle on settlement terms but must still negotiate and execute a definitive settlement agreement, which will be filed with the Delaware Court of Chancery and is subject to court approval upon the conclusion of a settlement hearing concerning the fairness of the terms of the proposed settlement. If approved, the Company will adopt, implement, and maintain certain corporate governance reforms for a period of five (5) years. The Company has recorded a liability for an estimated amount of the settlement. The estimated amount of settlement is not material to the condensed consolidated financial statements.

8. Leases

As of March 31, 2026, future minimum commitments under the Company’s operating leases with lease terms in excess of 12 months were as follows:


(in thousands)	Operating Leases
2026 (remaining nine months)	$	1,417
2027	1,919
2028	1,954
2029	1,990
2030	2,016
Thereafter	7,279
Future minimum operating lease payments	16,575
Less: Interest	(7,463)
Present value of lease liability	$	9,112

As of March 31, 2026 and December 31, 2025, the Company’s weighted-average remaining lease term for operating leases was 10.0 years and 10.1 years, respectively, and the Company’s weighted-average discount rate for operating leases was 9.7% as of March 31, 2026 and December 31, 2025.

The components of the Company’s lease expense are as follows:



	Three Months Ended March 31,
(in thousands)		2026		2025
Operating lease expense		$	411	$	426
Variable lease expense		63		64
Total lease expense		$	474	$	490

9. Stock-Based Compensation

In 2017, the Company adopted the 2017 IPO Stock Incentive Plan (“Plan”), which governs the issuance of equity awards to employees, certain non-employee consultants, and directors. Initially, the Company reserved 900 thousand shares for issuance under the Plan with an initial sublimit for incentive stock options of 900 thousand shares. On an annual basis, the amount of shares available for issuance under the Plan increases by an amount equal to four percent of the total outstanding shares as of the last day of the preceding calendar year. The sublimit of incentive stock options is not subject to the increase. The Company has historically granted stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) to certain employees.

Shares of common stock remaining available for grant under the Plan were approximately 1.6 million as of March 31, 2026.

Stock Options

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2026:


	Stock Options Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value(1) (in thousands)
Outstanding as of December 31, 2025	2,030,417	$	99.45	6.8	$	298,662
Granted	275,500	$	275.37
Exercised	(145,130)	$	44.79
Cancelled or forfeited

SEC Form 10-Q filed by Krystal Biotech Inc.