krys-20210331

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, 2021


☐			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 and 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

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 30, 2021, there were 22,204,627 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 (unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended M arch 31, 2021 and 2020	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	60

SIGNATURES		61

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Krystal Biotech, Inc.

Condensed Consolidated Balance Sheets


	(unaudited)
(In thousands, except shares and per share data)	March 31, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	402,172	$	268,269
Short-term investments	1,248		2,993
Prepaid expenses and other current assets	2,406		3,796
Total current assets	405,826		275,058
Property and equipment, net	33,883		30,876
Right-of-use assets	3,200		3,298
Other non-current assets	109		1,612
Total assets	$	443,018	$	310,844
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	1,844	$	2,105
Current portion of lease liability	648		638
Accrued expenses and other current liabilities	6,652		5,109
Build to suit lease liability	—		7,600
Total current liabilities	9,144		15,452
Lease liability	3,222		3,308
Total liabilities	12,366		18,760
Commitments and contingencies (Note 6)
Stockholders' equity
Preferred stock; $0.00001 par value; 20,000,000 shares authorized at March 31, 2021 (unaudited) and December 31, 2020; 2,061,773 shares issued, and no shares outstanding at March 31, 2021 (unaudited) and December 31, 2020	—		—
Common stock; $0.00001 par value; 80,000,000 shares authorized at March 31, 2021 (unaudited) and December 31, 2020; 22,204,057 and 19,714,220 shares issued and outstanding at March 31, 2021 (unaudited) and December 31, 2020, respectively	—		—
Additional paid-in capital	517,675		363,292
Accumulated other comprehensive income	3		6
Accumulated deficit	(87,026)		(71,214)
Total stockholders' equity	430,652		292,084
Total liabilities and stockholders' equity	$	443,018	$	310,844

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

Krystal Biotech, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)


	Three Months Ended March 31,
(In thousands, except share and per share data)	2021		2020
Expenses
Research and development	$	6,201	$	3,525
General and administrative	8,152		2,421
Total operating expenses	14,353		5,946
Loss from operations	(14,353)		(5,946)
Other Income (Expense)
Interest and other income, net	33		605
Interest expense	(1,492)		—
Net loss	(15,812)		(5,341)
Unrealized gain (loss) on available-for-sale securities	(3)		14
Comprehensive loss	$	(15,815)	$	(5,327)

Net loss per common share: Basic and diluted	$	(0.74)	$	(0.31)

Weighted-average common shares outstanding: Basic and diluted	21,253,508		17,359,356

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

Krystal Biotech, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(unaudited)



	Common Stock			Additional Paid-in		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
(In thousands, except shares)	Shares	Amount		Capital		Income		Deficit		Equity
Balances at January 1, 2021	19,714,220	$	—	$	363,292	$	6	$	(71,214)	$	292,084
Issuance of common stock, net	2,489,837	—		152,033		—		—		152,033
Stock-based compensation expense	—	—		2,350		—		—		2,350
Unrealized loss on investments	—	—		—		(3)		—		(3)
Net loss	—	—		—		—		(15,812)		(15,812)
Balances at March 31, 2021	22,204,057	$	—	$	517,675	$	3	$	(87,026)	$	430,652



	Common Stock			Additional Paid-in		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
(In thousands, except shares)	Shares	Amount		Capital		Income		Deficit		Equity
Balances at January 1, 2020	17,354,310	$	—	$	241,951	$	10	$	(39,047)	$	202,914
Issuance of common stock, net	16,254	—		243		—		—		243
Stock-based compensation expense	—	—		539		—		—		539
Unrealized gain on investments	—	—		—		14		—		14
Net loss	—	—		—		—		(5,341)		(5,341)
Balances at March 31, 2020	17,370,564	$	—	$	242,733	$	24	$	(44,388)	$	198,369

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

Krystal Biotech, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Three Months Ended March 31,
(In thousands)	2021		2020
Operating Activities
Net loss	$	(15,812)	$	(5,341)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	536		412
Stock-based compensation expense	2,313		539
Non-cash interest expense	1,492		—

Changes in operating assets and liabilities
Prepaid expenses and other current assets	1,312		108
Prepaid rent	—		(2,400)
Lease liability	(77)		(51)
Accounts payable	294		244
Accrued expenses and other current liabilities	288		262
Net cash used in operating activities	(9,654)		(6,227)

Investing Activities
Purchases of property and equipment	(2,473)		(1,508)

Purchases of short-term investments	—		(1,967)
Proceeds from maturities of short-term investments	1,726		2,170
Net cash used in investing activities	(747)		(1,305)

Financing Activities
Issuance of common stock, net	152,264		243
Repayment of ASTRA build to suit liability	(7,960)		—
Net cash provided by financing activities	144,304		243

Net increase (decrease) in cash and cash equivalents	133,903		(7,289)

Cash and cash equivalents at beginning of period	268,269		187,514
Cash and cash equivalents at end of period	$	402,172	$	180,225

Supplemental Disclosures of Non-Cash Investing and Financing Activities
Unpaid purchases of property and equipment	$	2,615	$	1,302
Unpaid offering costs	$	214	$	22

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

Krystal Biotech, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization

Krystal Biotech, Inc. (the “Company,” or “we” or other similar pronouns) commenced operations on April 15, 2016. On March 31, 2017, the Company converted from a California limited liability company to a Delaware C-corporation, and changed its name from Krystal Biotech LLC to Krystal Biotech, Inc. On June 19, 2018, the Company incorporated Krystal Australia Pty Ltd., an Australian proprietary limited company, for the purpose of undertaking preclinical and clinical studies in Australia. On April 24, 2019, the Company incorporated Jeune, Inc. in Delaware, a wholly-owned subsidiary, for the purpose of undertaking preclinical and clinical studies for aesthetic skin conditions.

We are a clinical stage biotechnology company leading the field of redosable gene therapy for the treatment of serious rare diseases. Using our patented platform that is based on engineered herpes simplex virus type 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 encoded effector to treat or prevent disease. We formulate our vectors for non-invasive or minimally invasive routes of administration at a doctor’s office or potentially in the patient’s home. Our goal is to develop easy to use, redosable gene therapies to dramatically improve the lives of patients living with rare diseases. Our innovative technology platform is supported by in-house, commercial scale current good manufacturing practices ("cGMP") manufacturing capabilities.

Liquidity

As of March 31, 2021, the Company had an accumulated deficit of $87.0 million. With the net proceeds raised from its public and private securities offerings, including the public offering of its common stock completed on February 1, 2021, the Company believes that its cash, cash equivalents and short-term investments of approximately $403.4 million as of March 31, 2021 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. As the Company continues to incur losses, a transition to profitability is dependent upon the successful development, approval and commercialization of its product candidates and the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability and unless and until it does, the Company will continue to need to raise additional capital or obtain financing from other sources. Management intends to fund future operations through the sale of equity and debt financings and may also seek additional capital through arrangements with strategic partners or other sources. There can be no assurance that additional funding will be available on terms acceptable to the Company, if at all.

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.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), as found in the Accounting Standards Codification (“ASC”), the Accounting Standards Update (“ASU”), of the Financial Accounting Standards Board (“FASB”), and the rules and regulations of the US Securities and Exchange Commission (“SEC”). 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 operation.

These unaudited interim condensed 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, 2020, as filed with the SEC on March 1, 2021.

Risks and Uncertainties

The novel coronavirus ("COVID-19") pandemic has resulted, and is likely to continue to result, in significant national and global economic uncertainty and may adversely affect our business. The Company is continuing to actively monitor the impact of the COVID-19 pandemic and the related effects on its financial condition, liquidity, operations, suppliers, industry, and workforce. However, the full extent, consequences, and duration of the COVID-19 pandemic and the resulting impact on the Company cannot currently be predicted. The Company will continue to evaluate the impact that these events could have on the operations, financial position, and the results of operations and cash flows during fiscal year 2021.

Use of Estimates

The preparation of 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 in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements. Estimates are used in the following areas including stock-based compensation expense, accrued expenses, the fair value of financial instruments, the incremental borrowing rate for lease liabilities, and the valuation allowance included in the deferred income tax calculation.

Segment and Geographical Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company and the Company’s chief operating decision maker view the Company’s operations and manage its business in one operating segment, which is the business of developing and commercializing pharmaceuticals.

Concentrations of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially subject the Company to credit risk consist of cash, cash equivalents and investments. The Company’s policy is to invest its cash, cash equivalents and investments in money market funds, certificates of deposit and various other bank deposit accounts. The counterparties to the agreements relating to the Company’s investments consist of financial institutions of high credit standing. The Company is exposed to credit risk in the event of default by the financial institutions to the extent amounts recorded on the balance sheets are in excess of insured limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. The Company has no financial instruments with off-balance sheet risk of loss.

Cash, Cash Equivalents and Investments

Cash and cash equivalents consist of money market funds and bank deposits. Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase.

Investments with maturities of greater than 90 days but less than one year are classified as short-term investments on the consolidated balance sheets and consist of certificates of deposit. Investments with maturities of greater than one year are classified as long-term investments on the consolidated balance sheets and consist of certificates of deposit. Accrued interest on certificates of deposit are also classified as short-term investments.

As our entire investment portfolio is considered available for use in current operations, we classify all investments as available-for-sale securities. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive loss, which is a separate component of stockholders’ equity in the consolidated balance sheets.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a three-level hierarchy that prioritizes the inputs used in determining fair value by their reliability and preferred use, as follows:

•Level 1— Valuations based on quoted prices in active markets for identical assets or liabilities.

•Level 2— Valuations based on quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data.

•Level 3— Valuations based on inputs that are both significant to the fair value measurement and unobservable.

To the extent that a valuation is based on models or inputs that are less observable, or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized within Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

There have been no significant changes to the valuation methods utilized by the Company during the periods presented. There have been no transfers between Level 1, Level 2, and Level 3 in any periods presented.

The carrying amounts of financial instruments consisting of cash and cash equivalents, investments, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities included in the Company’s financial statements, are reasonable estimates of fair value, primarily due to their short maturities. Marketable securities are classified as long-term investments if the Company has the ability and intent to hold them and such holding period is longer than one year. The Company classifies all of its investments as available-for-sale.

Our available-for-sale, short-term investments, which consist of certificates of deposit, are considered to be Level 2 valuations. The fair value of Level 2 financial assets is determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data, such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis.

Property and Equipment, net

Property and equipment, net, is stated at cost, less accumulated depreciation. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred, while costs of major additions and betterments are capitalized. Upon disposal, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets, which are as follows:


Computer equipment and software			3 years
Lab equipment			3 -7 years
Furniture and fixtures			3 years
Leasehold improvement			shorter of 8 years or remaining life of lease

Construction in progress ("CIP") is not depreciated until the asset is placed in service.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets for potential impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount of the asset. The Company has not recognized any impairment losses for the three months ended March 31, 2021 and 2020.

Leases

The Company accounts for its lease agreements in accordance with FASB ASC Topic 842, Leases ("ASC 842"). Right-of-use lease assets represent our right to use the underlying asset during the lease term and the lease obligations represent our commitment to make lease payments arising from the lease. Right-of-use lease assets and obligations were recognized based on the present value of remaining lease payments over the lease term. As the Company’s lease agreements do not provide an implicit rate and as the Company does not have any external borrowings, we have used an estimated incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for the payment is incurred. In addition, the Company also has made an accounting policy election to exclude leases with an initial term of twelve months or less from its balance sheet and to account for lease and non-lease components of its operating leases as a single component.

For lease arrangements where it has been determined that the Company has control over an asset that is under construction and is thus considered the accounting owner of the asset during the construction period, the Company records a construction in progress asset and corresponding financial obligation on the condensed consolidated balance sheet. Once the construction is complete, an assessment is performed to determine whether the lease meets certain "sale-leaseback" criteria. If the sale-leaseback criteria are determined to be met, the Company will remove the asset and related financial obligation from the condensed consolidated balance sheet and treat the building lease as either an operating or finance lease based on our assessment of the guidance. If, upon completion of construction, the project does not meet the "sale-leaseback" criteria, the lease will be treated as a financing obligation and the Company will depreciate the asset over its estimated useful life for financial reporting purposes once the asset has been placed into service.

Research and Development Expenses

Research and development costs are charged to expense as incurred in performing research and development activities. These costs include employee compensation costs, facilities and overhead, preclinical and clinical activities, related clinical manufacturing costs, contract management services, regulatory and other related costs.

The Company estimates contract research and clinical trials materials manufacturing expenses based on the services performed pursuant to contracts with research organizations and manufacturing organizations that manufacture materials used in the Company’s ongoing preclinical and clinical studies. Non-refundable advanced payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. These estimates are based on communications with the third party service providers and the Company’s estimates of accrued expenses using information available at each balance sheet date. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly.

Stock-Based Compensation Expense

The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock, to be recognized in the statements of operations based on their grant-date fair values. Compensation expense is recognized on a straight-line basis based on the grant-date fair value over the associated service period of the award, which is generally the vesting term.

The Company estimates the fair value of its stock options using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including: (i) the expected stock price volatility; (ii) the expected term of the award; (iii) the risk-free interest rate; and (iv) expected dividends. Due to the lack of sufficient history and trading volume of our Common Stock and a lack of Company-specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. When selecting these public companies on which it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected term of the stock-based awards. The Company computes historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Due to the lack of Company-specific historical option activity, the Company has estimated the expected term of its employee stock options using the “simplified” method, whereby the expected term equals the arithmetic mean of the vesting term and the original contractual term of the option. The risk-free interest rates are based on the US Treasury securities with a maturity date commensurate with the expected term of the associated award. The Company has never paid and does not expect to pay dividends in the foreseeable future. The Company accounts for forfeitures as they occur. Stock-based compensation expense recognized in the financial statements is based on awards for which service conditions are expected to be satisfied.

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions from non-owner sources. Unrealized gains or losses on available-for-sale securities is a component of other comprehensive gains or losses and is presented net of taxes. We have not recorded any reclassifications from other comprehensive gains or losses to net loss during any period presented.

3. Net Loss Per Share Attributable to Common Stockholders

Basic net loss per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted-average number of shares of common stock and common share equivalents outstanding for the period. Common share equivalents consist of common stock issuable upon exercise of stock options and vesting of restricted stock awards. There were 1,423,540 and 548,193 common share equivalents outstanding as of March 31, 2021 and 2020, respectively, in the form of stock options and unvested restricted stock awards, that have been excluded from the calculation of diluted net loss per common share as their effect would be anti-dilutive for all periods presented.


	Three Months Ended March 31,
	2021		2020
(In thousands, except shares and per share data)	(Unaudited)
Numerator:
Net loss per common share	$	(15,812)	$	(5,341)
Denominator:
Weighted-average basic and diluted common shares	21,253,508		17,359,356
Basic and diluted net loss per common share	$	(0.74)	$	(0.31)

4. Fair Value Instruments

The following tables show the Company’s cash, cash equivalents and available-for-sale securities by significant investment category as of March 31, 2021 and December 31, 2020, respectively (in thousands):


	March 31, 2021
	(unaudited)
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Aggregate Fair Value		Cash and Cash Equivalents		Short-term Marketable Securities (1)
Level 1:
Cash	$	2,752	$	—	$	—	$	2,752	$	2,752	$	—
Money market instruments	399,420		—		—		399,420		399,420		—
Subtotal	402,172		—		—		402,172		402,172		—
Level 2:
Certificates of deposit	1,248		—		—		1,248		—		1,248
Subtotal	1,248		—		—		1,248		—		1,248
Total	$	403,420	$	—	$	—	$	403,420	$	402,172	$	1,248


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Aggregate Fair Value		Cash and Cash Equivalents		Short-term Marketable Securities (1)
Level 1:
Cash	$	9,463	$	—	$	—	$	9,463	$	9,463	$	—
Money market instruments	258,806		—		—		258,806		258,806		—
Subtotal	268,269		—		—		268,269		268,269		—
Level 2:
Certificates of deposit	2,986		7		—		2,993		—		2,993
Subtotal	2,986		7		—		2,993		—		2,993
Total	$	271,255	$	7	$	—	$	271,262	$	268,269	$	2,993

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

See Note 2 to these unaudited condensed consolidated financial statements for additional discussion regarding the Company’s fair value measurements.

5. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):


	March 31, 2021		December 31, 2020
	(Unaudited)
Construction in progress	$	24,833	$	23,031
Leasehold improvements	5,719		4,631
Furniture and fixtures	877		870
Computer equipment and software	82		82
Laboratory equipment	5,178		4,630
Total property and equipment	36,689		33,244
Accumulated depreciation and amortization	(2,806)		(2,368)
Property and equipment, net	$	33,883	$	30,876

Depreciation expense was $438 thousand and $335 thousand for the three months ended March 31, 2021 and 2020, respectively.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	March 31, 2021		December 31, 2020
	(Unaudited)
Accrued preclinical and clinical expenses	$	2,192	$	1,735
Accrued professional fees	1,100		642
Accrued payroll and benefits	769		1,486
Accrued taxes	51		40
Accrued construction in progress

SEC Form 10-Q filed by Krystal Biotech, Inc.