Redmile Group Invests $3M in Krystal Biotech Amid $389M Revenue Milestone, but DeepValue Report Flags Valuation and Growth Risks

What happened

Redmile Group purchased approximately $3.43 million in Krystal Biotech shares, boosting their position value by $50.33 million as the company reported $389 million in revenue for 2025. However, the latest DeepValue master report rates KRYS as a 'POTENTIAL SELL' with a conviction of 4.0, citing a high valuation at ~40x P/E and ~69x EV/EBITDA on 2025 earnings. The report critically notes that Vyjuvek, KRYS's lead product, faces a finite U.S. patient pool with reimbursement approvals nearing saturation and potential pricing pressures in European markets like Germany and France. Despite the positive revenue headline, operational challenges such as declining patient compliance to the low-80s and unpredictable pausing introduce volatility that filings often downplay. This investor move underscores short-term confidence but does not address the deeper concerns about growth sustainability and margin compression highlighted in the analytical review.

Implication

For investors, Redmile's $3 million addition signals ongoing institutional interest in KRYS, potentially supporting near-term sentiment amid high revenue figures. However, the DeepValue analysis warns that KRYS's current price already embeds optimistic scenarios, with limited margin of safety if Vyjuvek growth plateaus or European pricing decisions compress margins below 90%. Key risks include the approaching U.S. market saturation, where reimbursement approvals target ~720 out of a finite pool, and upcoming HTA outcomes in Germany and France that could restrict access and net pricing. Additionally, while revenue hit $389 million in 2025, growth is decelerating, and pipeline programs like KB407 in cystic fibrosis lack pivotal clinical data, keeping platform value speculative. Therefore, this news reinforces the report's advice: existing holders should consider trimming on strength rather than adding new positions, as incremental capital faces an unfavorable risk-reward at current levels.

Thesis delta

The news of Redmile's investment does not materially shift the investment thesis; it merely reflects continued market enthusiasm that is already priced into KRYS's elevated valuation. The DeepValue report's 'POTENTIAL SELL' rating remains intact, as core concerns about Vyjuvek's growth sustainability, European pricing pressures, and pipeline execution persist unchanged. Investors should view this as minor noise, not a signal to alter strategy, and focus on the underlying operational risks highlighted in the critical analysis.