Brown Capital Management, an investment management company, released its first quarter 2026 investor letter for “The Brown Capital Management Small Company Fund”. A copy of the letter can be downloaded here. In the first quarter of 2026, the Small Company Fund (Investor shares) fell 19.78%, significantly lagging the Russell 2000 Growth index’s 2.81% decline. Worsened market conditions due to the Iran war, driving the oil price spike and increased volatility in equities. Despite stabilization in the performance as the quarter progressed, early declines and weakness in large positions significantly impacted the Fund’s performance. Please review the Fund’s top five holdings to gain insights into their key selections for 2026.
In its first-quarter 2026 investor letter, The Brown Capital Management Small Company Fund highlighted Krystal Biotech, Inc. (NASDAQ:KRYS). Krystal Biotech, Inc. (NASDAQ:KRYS) is a US-based commercial-stage biotechnology company that focuses on discovering, developing, and commercializing genetic medicines to treat diseases with high unmet medical needs. On June 23, 2026, Krystal Biotech, Inc. (NASDAQ:KRYS) closed at $340.21 per share. One-month return of Krystal Biotech, Inc. (NASDAQ:KRYS) was 10.95%, and its shares gained 138.74% over the past 52 weeks. Krystal Biotech, Inc. (NASDAQ:KRYS) has a market capitalization of $10.03 billion.
The Brown Capital Management Small Company Fund stated the following regarding Krystal Biotech, Inc. (NASDAQ:KRYS) in its Q1 2026 investor letter:
“We added four companies to the Small Company Fund in the first quarter of 2026—Credo Technology (CRDO), Krystal Biotech, Inc. (NASDAQ:KRYS), SiTime (SITM) and Xpel (XPEL).
Krystal Biotech is a commercial-stage gene therapy company that makes treatments patients can apply and reapply to the skin, using its own technology to deliver them. Specifically, that technology is the use of a certain virus as a delivery vehicle, one that is engineered to safely carry healthy genes into skin cells. This allows for localized, repeat dosing with non-invasive administration, creating both clinical and commercial advantages over traditional gene therapies. Krystal’s lead product, VYJUVEK, is the first topical, re-dosable gene therapy to receive FDA approval for dystrophic epidermolysis bullosa (DEB), a rare and debilitating genetic skin disorder. Early commercialization of VYJUVEK has exceeded expectations, with rapid patient adoption, strong payer acceptance and high levels of patient compliance. This has driven meaningful revenue scale and profitability. With a near monopolistic position in DEB and demand driven by medical necessity rather than economic cycles, Krystal offers a durable and recession-resistant revenue stream supported by unit economics that we find attractive, including gross margins near 94% and strong free-cash-flow generation. The company’s model of doing its own manufacturing and drug-delivery technology differentiates it from many gene-therapy peers, giving Krystal the advantages of scalability and patient-friendly treatments. The company is expanding into other dermatologic and respiratory indications, positioning the company as a platform-driven growth engine rather than a single-product story.
Our investment thesis is based on further penetration of the U.S. market, expansion into Europe and Japan, and Krystal’s broad pipeline. Krystal had revenue of $389 million in 2025 and we expect around 30% in annual revenue growth in the next few years. Krystal is highly profitable with 42% GAAP operating margin in 2025, which we expect to rise to 50% in the next few years. While risks include pipeline execution and emerging competition, we believe Krystal’s first-mover advantage, strong balance sheet and scalable platform position it to sustain leadership in rare-disease gene therapy while expanding into new therapeutic areas.”
Krystal Biotech, Inc. (NASDAQ:KRYS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 33 hedge fund portfolios held Krystal Biotech, Inc. (NASDAQ:KRYS) at the end of the first quarter, up from 32 in the previous quarter. While we acknowledge the risk and potential of Krystal Biotech, Inc. (NASDAQ:KRYS) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Krystal Biotech, Inc. (NASDAQ:KRYS) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Krystal Biotech, Inc. (NASDAQ:KRYS) and shared a bullish thesis on the company. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
