Could This Under-the-Radar Healthcare Stock Set You Up for Life?

Krystal Biotech (NASDAQ: KRYS) has risen in prominence in recent years, with its shares gaining over 230% since 2021. Though it remains a mid-cap biotech with only a single marketed compound, it has an exciting pipeline and, if it executes its strategy effectively, may establish itself as a major drugmaker. However, stocks that generate life-changing returns do so through consistent performance over long periods -- think a few decades. Does Krystal Biotech have what it takes to pull that off?

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Things look promising, but there are risks

First, let's emphasize that Krystal Biotech has proven to be a fairly innovative company. In 2023, it received approval for Vyjuvek, a gene therapy indicated for the treatment of Dystrophic Epidermolysis Bullosa (DEB). This rare condition makes patients' skin extremely fragile, prone to blisters and wounds from otherwise minor friction.

Vyjuvek was the first therapy approved by the U.S. Food and Drug Administration for DEB. And Krystal Biotech is generating solid, growing sales from this product. In 2025, the company's revenue increased by 34% year over year to $389.1 million. What's equally impressive is that Krystal Biotech has turned profitable, a rare feat for biotechs of this size. Last year, the company's earnings per share came in at $6.84, more than double 2024's.

Krystal Biotech became profitable by entering a DEB market with high unmet needs, where it launched the first approved product, granting it significant pricing power. There is still plenty of room to grow. The company is targeting a market of about 1,200 identified DEB patients in the U.S., and roughly 1,300 in Japan and some European nations where the medicine was approved last year.

That's all well and good. To set investors up for life, though, Krystal Biotech will have to launch new products. The company's pipeline features several candidates across various rare diseases, including KB407 for cystic fibrosis, KB408 for alpha-1 antitrypsin deficiency lung disease, and several others. The best-case scenario for Krystal Biotech would go something like this.

First, the company could continue generating steadily growing revenue and profits from its core DEB business. Then, the biotech would launch new products in other areas with high unmet needs, significantly boosting sales and profits. If it can protect its core franchises for the next decade or so, while developing newer therapies, it may perform well over the next 20 years.

However, this long-term trajectory is extremely uncertain. And in the meantime, Krystal Biotech could face significant issues, including potential competition in the DEB market that could erode its pricing power, clinical or regulatory setbacks for other candidates, etc. So what's the verdict? Krystal Biotech is an innovative company that should ride its core therapeutic area for the next five years or so and could generate solid returns over this period.

But the stock has more work to do before demonstrating its ability to perform well over several decades. For that, there are other, better-established healthcare stocks to consider.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Krystal Biotech. The Motley Fool has a disclosure policy.