aibioKrystal Biotech reports DOJ subpoenas on VYJUVEK testing program, director pay suit settlement
Tickers KRYS
The company and certain employees received Justice Department subpoenas in early 2025. A Delaware derivative suit over non-employee director pay has a fairness hearing set for September 14, 2026.
Key facts
- Company
- Krystal Biotech, Inc. (NASDAQ: KRYS)
- News type
- Legal
- Primary source
- Krystal Biotech 10-Q for the quarter ended June 30, 2026 (SEC EDGAR)
Krystal Biotech, Inc. (Nasdaq: KRYS) disclosed several legal matters in its 10-Q filed August 3, 2026. Two are covered here. One is a set of U.S. Department of Justice subpoenas about its sponsored genetic testing program for VYJUVEK. The other is a Delaware derivative suit over non-employee director pay, with a settlement fairness hearing set for September 14, 2026.
The subpoenas went to the company and certain of its employees, whom the 10-Q does not name. The derivative complaint, filed September 18, 2025 in the Delaware Court of Chancery, names Krystal's directors as defendants and Krystal as a nominal defendant. The 10-Q does not list the directors or give a case number. The claims described here are allegations.
The case
In the first quarter of 2025, the company and certain employees received subpoenas from the Justice Department asking Krystal to produce documents about the genetic testing program and related commercial practices. Krystal says it is cooperating and providing information. The 10-Q does not say which Justice Department office issued the subpoenas and describes no charge or lawsuit arising from them. Krystal's 10-K notes that patients must undergo genetic testing before receiving VYJUVEK.
The derivative complaint alleges breach of fiduciary duty, unjust enrichment and waste of corporate assets. It rests on allegedly excessive non-employee director compensation in each of 2021 through 2024. According to the 10-K, it seeks unspecified damages in favor of the company, restitution of compensation and other benefits from the individual defendants, governance reforms, and costs and attorneys' fees.
Defendants
The 10-Q says the complaint names the company's directors as defendants, with the company as nominal defendant, but it does not list them. Krystal's board, according to its 10-K signed February 17, 2026, the board list filed nearest the complaint date, was: Krish S. Krishnan, president, chief executive officer and director; Suma M. Krishnan, president, R&D and director; and directors Daniel S. Janney, Dino A. Rossi, Julian Gangolli, Chris Mason, E. Rand Sutherland and Catherine Mazzacco.
The proxy statement filed April 3, 2025 also lists Kirti Ganorkar, who it says declined to receive any compensation for his service. No filing says which individuals the complaint names.
For 2024, the proxy reported total compensation of $702,694 for Janney, $670,194 each for Rossi and Gangolli, $648,194 for Mason, $655,194 for Sutherland and $650,194 for Mazzacco. It says Mr. and Ms. Krishnan received no separate pay for board service.
Where it stands
The 10-Q for the first quarter said the parties had reached an agreement in principle. The latest 10-Q says they have since entered a settlement agreement, which was filed with the court and needs its approval after a fairness hearing on September 14, 2026. If the court approves it, Krystal will adopt, implement and maintain certain corporate governance reforms for five years. The company has recorded a liability for the plaintiff's attorneys' fees and expenses, which it describes as the settlement amount and not material to its financial statements.
On the subpoenas, the latest filing repeats the earlier description and reports no change in status. We found no later Krystal filing that reports the outcome of the September 14 hearing.
Why it matters to shareholders
Krystal says it cannot estimate the amount or range of any loss from the Justice Department inquiry, and that unfavorable or unexpected developments or outcomes could materially affect its results of operations.
The derivative settlement, as described, carries a monetary cost the company calls not material and adds five years of governance commitments.
Related matters
On May 29, 2026, Jonathan Forman sued Krystal in the U.S. District Court for the District of Delaware (Docket No. 1:26-cv-00628), asking the court to correct the named inventors on two patents tied to its KB407 cystic fibrosis candidate. Krystal says the claims are without merit.