Krystal Biotech, Inc.KRYS
Krystal Biotech, Inc. Stock Compensation Disclosure
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 of common stock 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 remaining available for grant under the Plan were 2.0 million at December 31, 2025
Stock Options
Options granted to employees and non-employees vest ratably over a four-year period and stock options granted to directors of the company vest ratably over one-year or three-year periods. Stock options have a life of ten years.
The following table summarizes the Company’s stock option activity for the years ended December 31, 2025 and 2024:
| Stock Options Outstanding | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value(1) (in thousands) | ||||||||||||||||||||
Balance as of January 1, 2024 | 2,606,592 | $ | 66.39 | 7.9 | $ | 150,405 | |||||||||||||||||
| Granted | 348,642 | $ | 168.67 | ||||||||||||||||||||
| Exercised | (525,857) | $ | 61.62 | ||||||||||||||||||||
| Cancelled or forfeited | (380,314) | $ | 78.98 | ||||||||||||||||||||
Balance as of December 31, 2024 | 2,049,063 | $ | 82.69 | 7.3 | $ | 156,404 | |||||||||||||||||
| Granted | 395,903 | $ | 168.08 | ||||||||||||||||||||
| Exercised | (310,323) | $ | 73.02 | ||||||||||||||||||||
| Cancelled or forfeited | (104,226) | $ | 109.35 | ||||||||||||||||||||
Balance as of December 31, 2025 | 2,030,417 | $ | 99.45 | 6.8 | $ | 298,662 | |||||||||||||||||
Exercisable as of December 31, 2025 | 1,140,898 | $ | 73.28 | 5.8 | $ | 197,676 | |||||||||||||||||
(1)Aggregate intrinsic value represents the difference between the closing stock price of our common stock on December 31, 2025, 2024 and 2023, respectively, and the exercise price of outstanding in-the-money options on the respective date.
The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised during the years ended December 31, 2025, 2024 and 2023 was $35.4 million, $54.8 million and $43.8 million, respectively.
The weighted-average grant-date fair value per share of options granted to employees, non-employees and directors during the years ended December 31, 2025, 2024 and 2023 was $110.50, $114.31 and $63.38, respectively.
There was $58.6 million of unrecognized stock-based compensation expense related to employees’, non-employees’ and directors’ options that is expected to be recognized over a weighted-average period of 2.7 years as of December 31, 2025.
The fair value of options granted was estimated at the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions for the years ended December 31, 2025, 2024 and 2023:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected stock price volatility | 69 | % | 73 | % | 73 | % | |||||||||||
| Expected term of the award (years) | 6.2 | 6.1 | 6.0 | ||||||||||||||
| Risk-free interest rate | 4.06 | % | 4.21 | % | 3.96 | % | |||||||||||
Weighted-average exercise price | $ | 168.08 | $ | 168.67 | $ | 92.14 | |||||||||||
| Dividend Yield | — | % | — | % | — | % | |||||||||||
Restricted Stock Awards
The following table summarizes the Company’s RSA activity for the years ended December 31, 2025 and 2024:
| Number of Shares | Weighted- Average Grant Date Fair Value | ||||||||||
Non-vested RSAs as of January 1, 2024 | 44,400 | $ | 78.89 | ||||||||
| Vested | (14,523) | $ | 78.89 | ||||||||
Surrendered for taxes | (7,677) | $ | 78.89 | ||||||||
Non-vested RSAs as of December 31, 2024 | 22,200 | $ | 78.89 | ||||||||
| Vested | (11,925) | $ | 78.89 | ||||||||
| Surrendered for taxes | (10,275) | $ | 78.89 | ||||||||
Non-vested RSAs as of December 31, 2025 | — | $ | — | ||||||||
Restricted Stock Units
RSUs granted to employees vest ratably over a four-year period. The following table summarizes the Company’s RSU activity for the years ended December 31, 2025 and 2024:
| Number of Shares | Weighted- Average Grant Date Fair Value | ||||||||||
Non-vested RSUs as of January 1, 2024 | 160,900 | $ | 81.91 | ||||||||
| Granted | 230,403 | $ | 160.15 | ||||||||
Vested | (40,084) | $ | 81.93 | ||||||||
Forfeited | (43,123) | $ | 119.02 | ||||||||
Non-vested RSUs as of December 31, 2024 | 308,096 | $ | 135.22 | ||||||||
| Granted | 139,256 | $ | 178.51 | ||||||||
| Vested | (84,524) | $ | 129.82 | ||||||||
Forfeited | (31,254) | $ | 154.42 | ||||||||
Non-vested RSUs as of December 31, 2025 | 331,574 | $ | 152.97 | ||||||||
There was $37.7 million of unrecognized stock-based compensation expense related to employees’ RSU awards that is expected to be recognized over a weighted-average period of 2.6 years as of December 31, 2025.
Performance-Based Restricted Stock Units
PSUs granted to employees vest ratably over two years based upon continued service through the vesting date and the achievement of specific regulatory and commercial performance criteria as determined by the Compensation Committee of the Company’s Board of Directors. The performance criteria are to be completed by the end of the year in which the PSU awards were granted. Each PSU represents the right to receive one share of the Company's common stock upon vesting. The Company recognizes stock-based compensation expense for the fair value of the PSU awards relating to the portion of the awards that are probable of vesting over the service period.
The following table summarizes the Company’s PSU activity for the years ended December 31, 2025 and 2024:
| Number of Shares | Weighted- Average Grant Date Fair Value | ||||||||||
Non-vested PSUs as of January 1, 2024 | 50,000 | $ | 81.91 | ||||||||
| Granted | 112,500 | $ | 159.47 | ||||||||
Forfeited | — | $ | — | ||||||||
Vested | (25,000) | $ | 81.91 | ||||||||
Non-vested PSUs as of December 31, 2024 | 137,500 | $ | 145.37 | ||||||||
| Granted | — | $ | — | ||||||||
Forfeited | — | $ | — | ||||||||
| Vested | (81,250) | $ | 135.61 | ||||||||
Non-vested PSUs as of December 31, 2025 | 56,250 | $ | 159.47 | ||||||||
There was $1.4 million of unrecognized stock-based compensation expense related to employees’ PSU awards that is expected to be recognized over a weighted-average period of two months as of December 31, 2025.
Stock-Based Compensation Expense, Net
The Company recorded stock-based compensation expense, net related to stock options, RSAs, RSUs and PSUs in the consolidated statements of operations and comprehensive income for the years ended December 31, 2025, 2024 and 2023 as follows:
| Years Ended December 31, | |||||||||||||||||
(in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Research and development | $ | 10,375 | $ | 9,237 | $ | 10,054 | |||||||||||
| Selling, general and administrative | 44,139 | 39,890 | 29,879 | ||||||||||||||
| Total stock-based compensation | $ | 54,514 | $ | 49,127 | $ | 39,933 | |||||||||||
After the FDA approval of VYJUVEK in May 2023, the Company began capitalizing stock-based compensation associated with the allocation of labor costs related to work performed to manufacture VYJUVEK. For the years ended December 31, 2025, 2024, and 2023 the Company capitalized $3.8 million, $3.3 million, and $1.1 million, respectively, into inventory.
Historically, the Company also capitalized the portion of stock-based compensation related to work performed on the construction of our manufacturing facilities. For the years ended December 31, 2025, 2024 and 2023, the Company capitalized zero, zero and $0.2 million, respectively, into property, plant and equipmentAbout Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.