Good afternoon, everyone, and welcome back to the Sixth Annual Guggenheim Biotechnology Conference. My name is Eddie Hickman, and I'm one of the biotech analysts here at Guggenheim. I'm joined now by Tarsus Pharmaceuticals CEO, Bobby Azamian, CFO, Jeff Farrow, and Chief Commercial Officer, Aziz Mottiwala. Gentlemen, thank you so much for being here during this exciting time for Tarsus. Maybe before we get into the Q&A on the XDEMVY launch and pipeline progress, Bobby, do you maybe want to spend a few minutes giving us a brief overview of the company before we get into Q&A?
Yeah, pleasure, Eddie. Thank you, and thanks for the opportunity to be here. It's an exciting time at Tarsus, as we're just a few months into our launch, and we are an emerging leader in the eye care pharmaceutical space. Our company, Tarsus, is focused first and foremost on Demodex blepharitis, a very large chronic disease affecting 25 million Americans, something that's been known about for a long time, but never had a solution, never had an approved pharmaceutical until now with our drug, XDEMVY. We have a couple of key advantages, I think, in terms of launch, and you asked me three reasons to be excited about Tarsus. I think there's three things. One is the launch, first and foremost.
When we think about our launch, what we're doing is creating an entirely new category. There's never been a drug for this disease, yet it's very commonly diagnosed, and there's a large prevalence. When we look at eye care, some of the really important drugs, especially in the front of the eyes, the blockbusters, have been category-creating medicines. So that's the first thing to be excited about, is we're launching a new category, and we're seeing tremendous uptake by physicians. We're seeing great patient experiences. And, you know, being the only drug, that's a great opportunity for us. But the drug has some other attributes. It really works well.
So we saw that in our phase III data, such strong, consistent responses. We have a six-week course of therapy, a defined course with lasting effects, and that creates a great value proposition for, most importantly, patients, but also physicians and payers. And when I think about our early launch, we've been very pleased, both in terms of the patients served and in terms of the early response by payers. So we're feeling very good about a category-creating launch, number one. Secondly, we have the ability to create other new categories. We have a pipeline and a product with three phase II studies that have either read out or are about to read out, and that's in, y ou know, three diseases don't have great solutions.
One is meibomian gland disease. It's really the biggest disease of the back of the eyelid, just like we're treating the biggest disease of the front of the eyelid. And we just read out a very, very strong, positive phase IIa data set. We have a rosacea product. And, you know, rosacea is a disease that's had solutions, but we think we can be differentiated there. We have a phase IIa reading out by the end of this quarter. And finally, we have a very novel drug to prevent Lyme disease, and that's with a tablet. Same molecule, same novel chemistry, but a drug to prevent Lyme disease before exposure to the tick. So that's the second reason. And I think the third reason, I'm really grateful to share this stage here with Aziz Mottiwala, our Chief Commercial Officer, and Jeff Farrow, our Chief Financial and Strategy Officer.
We have an incredible team, and these are two key leaders on our team. And just to brag a little bit, Aziz has led a blockbuster launch before when Restasis really gained its blockbuster status. When we think about educating an entirely new market, when we think about physician engagement and patient engagement, you know, I think you're writing the playbook once again here at Tarsus with XDEMVY. The launch metrics you'll hear, the execution that you hear about, that's Aziz's brainchild and Aziz's execution. I'm so proud of him and our team, and there's really a leading sales and marketing team at Tarsus now under Aziz's leadership. And then Jeff Farrow, one of the most accomplished CFOs in biotech, commercial stage biotech. And Jeff is not only ensuring that we do right by our investors and, you know, manage our money carefully, but also expand Tarsus.
We think we can become the leading eye care pharmaceutical company, but we know that's gonna take one step at a time, starting with launch, then pipeline, and then we think we can create, ultimately, other categories in eye care. So I'm excited to share this stage and, you know, your questions with Aziz and Jeff, and that's really just a flavor of the type of team we have at Tarsus.
Great! No, thank you so much. That was a great intro. Obviously, starting with the XDEMVY launch, where, you know, we're still getting a lot of questions. It's early days. You're building a new market, as you said. What can you tell us about what the uptake has been compared to your early expectations? Who's the average patient on the drug right now? How are they being diagnosed? And what feedback are you getting from KOLs early on?
Yes, I can comment on this. It's actually really exciting, though, we're really pleased with how the launch is progressing so far. I really characterize three really key things that we're excited about. One is the physician receptivity. At the beginning of January, we shared that we have over 4,000 doctors that have started patients on therapy. And to put it in context, we believe the core audience is about 15,000 doctors, so we're a quarter to a third of the way penetrated our core audience. That is a great testament to the market need, as well as to the product performance, but it also bodes well for the future, of this launch, where you've already got broad utilization in eye care, and we see that this is gonna trend positively. That was as of the beginning of January.
That number is far north since then, and we think that this is gonna be a broadly used product in a whole new category in eye care, and that early marker is a great indicator of that. The other thing we're really pleased about is how we're progressing on the payer side, our gross-to-net, even when we reported Q3 earnings, which is just a few weeks into the launch, was ahead of schedule. We anticipated discounts of about 80%. We came in at about 73%, so better than expected there, and that's continuing to progress nicely. And then lastly, as Bobby alluded to, the feedback in the real world has been remarkable. When you ask, you know, who are the patients, and what's the feedback been?
You know, for the most part, we think these early patients, when we think about our segmentation, really, there's 7 million patients in the clinic today. There's a 1.5 that are sort of already diagnosed, your clear, likely Demodex blepharitis patients. Those are the first set of patients we think we get that utilization in, right? And I think what's happening is that as doctors get experience in that patient set, and typically it's about 5-10 cases, then they start to think about this more broadly, and we think about other patient segments, i.e., a recalcitrant dry eye patient who's failed, a dry eyes prescription. Maybe they didn't have dry eye, maybe they were misdiagnosed, and they actually have blepharitis, and I've got 10 positive cases here where I had great outcomes. Let me try that here.
Mm-hmm.
Or I'm a busy cataract refractive surgeon, and I want to start thinking about pre-treating my cataract patients because I want them to see better after surgery, but I also want them, I want their eyes to look better and feel better. So again, I get good proof of concept. I get good experience on my traditional blepharitis cases, and then I start to think about where else I can use this. And I think that positive reinforcement of how the product performs is a big potentiator. I think it's one of the reasons we are getting such rapid uptake in terms of the market response with a number of doctors, because these doctors are not only having great experience, but they're openly sharing that experience.
Mm-hmm.
They're going online, they're going to conferences on the podium and saying, "Wow, look at these before and afters." This is a visual disease, right? So they can show, like, "Look how bad this was before. I can't believe I missed this. Now I'm diagnosing this, and look at the outcomes I'm getting. Why wouldn't I use this for a broader population?"
Do you know the types of patients, like, in those buckets of patients you talk about, based on who the prescribers are or the channel that you're looking at? Can you sort of infer how you're doing in penetrating some of those different buckets that you've spoken about?
Yes, a lot of it's based on, like, qualitative s urvey feedback. We're going out in the field. I mean, Bobby, myself, Jeff, we're all out in the field. We're seeing doctors every day, so a lot of it's gathering that. As we progress, we'll obviously quantify that through research and, and eventually through claims data as that matures. So there's other ways to triangulate it, but early on, it's a lot of just feedback from the customer. The boots on the ground, tacit knowledge as we're out in the field.
Got it. So in 3Q, when you reported the numbers that you had, they were pretty close to where some of the third-party sites had been, and obviously, not all of them are accurate now, and you're seeing some bumpiness. So what can you tell us about how comfortable you are with some of the numbers that are coming out in terms of script data from the fourth quarter, given you're going to have earnings maybe in a couple of weeks here? How should we think about how to, you know, reconcile those reported numbers with, you know, where the consensus is and things like that?
Aziz or Jeff?
Yeah, sure. So, I think the number of providers has dropped to one now. You know, apparently, Symphony is no longer reporting on Bloomberg, so IQVIA is the sole remaining one at this point. You know, it, it's always tough at the beginning of a launch, not just for XDEMVY, but for any launch, just particularly in a narrow channel, focused channel, where they might not have the access to, say, as a retail channel. So I would say it's, you know, early days, it was very bumpy. You saw a couple of restatements, not just of our drug, but also the Bausch + Lomb drug, because they're getting their arms around it. But as time has gone on, it's gotten better. You know, I would say don't focus on a particular point in time at this stage.
Mm-hmm.
You know, continue to sort of watch it, but watch the trend. It continues to be, you know, upward and to the right, which is the most important aspect to watch.
Yeah. So thinking specifically about volume, would you think about giving, or when would you think about providing guidance, like, in terms of when you're confident in those numbers? And then we'll get to the sort of revenue in a second, but just in terms of those volume numbers-
Yeah, the-
How predictable will those be in over the next couple of years?
Mm-hmm. I think what we'll do is, on each conference call, give actuals. You know, here's what we had, and it'll be a good comparison. It's also a good way for these providers to sort of level set their numbers as well. You know, we're continuing to work with them to try to do it, but I think this is a good true-up point, so we'll provide those on a quarterly basis.
Great. And then, obviously, next, in terms of gross- to- net, which you've given, you know, great guidance and commentary on how you think that will evolve over the next couple of years. Given you didn't have payer coverage or you weren't on formularies in 4Q, you know, can you help us sort of think about from that 73%, should we expect it to be the same in this quarter? And then, given your early conversations in 2024, how should we expect that to move towards the end of the year?
Yeah, no, we, you know, this is a new category. There's not a lot of analogs to point to in terms of how the contracting might proceed. So we were pretty cautious on the Q3 call and said, you know, expect essentially flat gross- to- nets. You know, as time goes on and we start contracting, we expect that to improve. We expect broad coverage, which means greater than 80% coverage in the commercial by the end of this year. And then once we have the formulary discussions with Medicare, we expect in 2025 to get to the Medicare component and have a steady state gross- to- net of about 50%. So over time, you know, in Q1 through Q4 of this year, I would expect to see our bridging go down, as our gross- to- nets to improve at that same time.
Right. Yeah, actually, you mentioned bridging. I was going to ask you next. Can you sort of just, like, quickly walk through sort of how that reimbursement and bridging process works for a patient, and about how long it takes for them to know whether they're going to be covered and to get the drug?
Yeah. So, one of the benefits of our focused pharmacy network is that it manages that process very tightly, right? And then there really winds up being two real core opportunities there. One is, it streamlines that process for the provider and the patient, and then obviously, it allows us to optimize our bridging and gross- to- net strategy. So what happens is the claim gets submitted, because we're not fully contracted, and we're still appealing and PA-ing these things. We'll submit it, it may get rejected, we'll appeal it. If it ultimately gets covered, then, depending on the out-of-pocket, we'll discount the difference, making sure every patient is paying less than $100. In the case that those are completely rejected, then we'll bridge those.
Timing varies by plan, but certainly, we keep timing in mind, right? As we've progressed the launch, we've gotten a better understanding of which plans are likely to come on at what time, so we can manage expectations with the patient. We also know if the first and second round didn't go through, we know that the likelihood of a third is not there, and then we'll bridge those patients.
Yeah.
But to be clear, every single patient, the claim is submitted and we take a shot on goal in terms of getting reimbursement. If we don't get that, then we will bridge. So we don't automatically bridge anybody. Ultimately, we want to create a reimbursed model here, and that does a couple of things, right? It optimizes our discounting programs, but it also, it also lets the payer know that there's a need in the marketplace, right? That these patients are asking for this drug, the physicians are asking for this drug, and we want to demonstrate that need because that helps our payer negotiations as well.
Yeah. So I assume you're expecting some formulary wins in the next couple of months. You know, like, what are the conversations you're having? What are the questions that they're sort of seem to be focused on when securing those, like, final contracts and getting on those formularies, you know, for the big plans that you're hoping for this year?
Yeah, I mean, we've started that process, you know, quite frankly, a while back, right? Educating the payers on the disease state, the value of the product. The overall, the response is relatively positive, right? Payer negotiations can be very tough, but the response on this product has been as good as you can hope for in the sense that they like the fact that this is a targeted mechanism, gets to the root cause, it's a fixed course of therapy at six weeks, and it has a great outcome, right? The response rates are remarkable. 85% of patients get to a subclinical level after treatment. So the value prop is good. So I wouldn't say there's a lot of pushback per se.
Mm
It's just negotiations, right? Optimizing what we think the right position on the formulary is, vis-à-vis what the appropriate rebating strategy would be. And then every payer is different, right? So they have different processes, i.e., you got to meet with the formulary manager, you got to meet with their medical committee and go to a sort of that review, and then you've got to sign through the contracts and legal review. So there's a process there, and each of those payers is unique, but overall, we feel very confident in what we've outlined in terms of building commercial coverage throughout 2024, and then Part D coverage kicking in in 2025. And as Jeff mentioned, as those escalate, the bridging will come down.
No, that's, that's really helpful. You mentioned your last earnings call, some odd prior auths that would come through. Are those still happening? Have those gone down at all, and do you anticipate any of those making their way onto any of those prior auth discussions?
You see those in pockets? Yeah, so all of those sort of odd PAs are really where we have non-contracted coverage.
Okay.
Right? So the good news there is, even without a contract, there's a path for the patient getting reimbursed, which I think is great. That's one of the reasons we want a contract, is to manage those, because under a contract, we'd simplify the PAs. And our goal with contracting is really threefold, right? Anybody that's not covered today, we want to get them covered. Any PAs that are kind of out there are a little obtuse, we want to streamline those, make those PAs simple and consistent. And third is if it's a non-contracted coverage, it may be at a higher out-of-pocket, and we want to get those out-of-pockets to be more reasonable so that when we're discounting the patient, we're only having to do so at a nominal value to get, again, those patients under $100.
So you do see those from time to time, but that's because it's not contracted yet, and I actually think as we build contracts, those PAs will overall simplify and be more consistent.
Yeah. Now, I want to move to the sales force. That's really helpful, and you mentioned, I think, that you'd hit maybe a quarter of your sales force targets, or, or your doc targets from your sales force. Should we expect any inflection in terms of your, how you're funding your sales force or any increases there, given what you're seeing so far? And then sort of should we expect any inflections in the ramp based on that over the next six or 6 months- 18 months, or should we expect to continue gradual as you just continue to penetrate those markets?
Yeah, I think when we designed the commercial strategy here, we were mindful of exactly what it was going to take, right? So we feel really good about how we built this organization, the resources we have. Jeff has done a great job of ensuring that we've got the capital to fund this organization appropriately. I think as the launch is successful, of course, we're going to look at ways to continue to accelerate the launch, and we think about things like, okay, what's the right sales force number? How can we convert more doctors? We think about things down the line, like direct to consumer. Both of those things are going to be predicated on objective measures and KPIs that we've identified internally.
We took a very disciplined approach here, and I think we'll evaluate those as the launch progresses, and at the right time, we would look at those opportunities, right? And I think the most obvious ones would be down the line of potential sales force and then potential direct to consumer, probably in that order over time, right? We want to use the opportunity to grow the physician base, and then in the background, also optimize coverage and gross- to- nets, and then we think about consumer marketing.
Post-2025 then, or even this year potentially?
Yeah, we're not giving specific guidance on when we do that. I think the message we'd like to share is that we'll be very disciplined and thoughtful about when and how we do that. And I think the benefit to that is we're in a launch mode. We're going to learn, and we can see where we can get the best return when we do those things, right?
Got it.
Because we have a lot more data to inform when and how, and then what approach we take.
Got it.
And I'd just add to that, I mean, Aziz has been so methodical about a strategy around educating the doctor, getting reimbursement, and then driving in patients to the clinic. So I think we want to see traction as we are on each of those three things in that order. And Aziz mentioned how promotion sensitive this is. We've got six-week therapy. We don't have refills. So we really want to engage more and more doctors and then get them on their own journey, and you've done a great job capturing this, Aziz, in terms of once doctors prescribe a certain number and see those results in their own hands, they become believers.
They see it in their own hands, and they think of more and more patients that have collarettes that they can prescribe this for, not just the ones that are coming in historically with itchy, burning eyes.
One question we, you know, we get a lot, or I get a lot on this, is given the unique nature of this six-week course, only once a year, is sort of how do you plan on sort of year-over-year measuring patient retention or discontinuation rates, and do you need to sort of maintain those patients on drug to sort of continue your growth rate and get to your peak sales numbers? Can you sort of talk about how you're thinking about the need to penetrate those markets and also retain patients, and, and sort of when the, those information would come to us?
Yeah, so there's a couple of factors there, right? When we look at how the product performed in clinical studies, a year out, you know, we saw pretty good durability, right? At six months, almost complete durability, and then at 12 months, between six and 12 months, you see about 40% or so of the patients recur within that 12-month period. So certainly, there's going to be an opportunity for these patients to get retreated within a calendar year, within a 12-month period. We anticipate that's just to really start trickling in probably in 2025 to some amount, and I'd imagine that'll scale over time. I don't think overnight you're going to get a 40% retreatment rate. I think that'll scale over time.
The other thing we have to keep in mind is mechanistically and biologically, this will recur in almost every single patient. So at some point, everyone will get retreated. It's just a matter of when. So we think the studies indicate that, okay, that 40% within that 12 months, and then at some point, everybody else will get retreated. So I think there is a retreatment opportunity, but with that said, I think our core focus is really converting that population of patients that's out there. This is a new category, right? We're building this market. We're the only ones out there. There's 25 million Americans that suffer from this disease, 1.5 million already diagnosed. You know, if we treated even just 1.5 million, at our guidance of what-
Yeah
The gross-to-net would be in a right price . We've got a very substantial opportunity there.
Yeah.
So I think driving new patients in, as Bobby mentioned, is really critical. And I think, you know, we think about retreatments as a factor there, but we really are focused on opening up the patient segments, thinking about broader swaths of patients, your dry patients, your cataract patients, your contact lens patients. Ultimately, that's going to be the foundation of the wide success.
Then before we get into sort of some of the pipeline things you have going on, I just wanted to mention, I think consensus, last I checked for the quarter, was around $5.3 million for 4Q. Hasn't moved recently. I'm curious if you're still comfortable with that number and, and where, sort of in terms of the gross-to-net volume, we could see up, up or down from that.
Yeah, I can't really comment on specifics until we announce, you know, our fourth quarter earnings, but, you know, our goal is always to make sure the street understands the headwinds and some of the potential upsides. So, you know, I think we feel comfortable with where the consensus l anded at.
I want to move quickly to MGD. You had some nice data at the end of last year, from your study looking at meibomian gland dysfunction. Can you maybe just give us a quick summary of those data and then what your sort of strategy is going forward, to sort of expand use of XDEMVY into those patients, like you said?
Sure. Yeah, happy to. So yeah, we're really excited about the data. It's objective measures of meibomian gland disease. We shared it recently at Hawaiian Eye to our ad board, and they were quite excited about the data. There's really nothing out there from a therapeutic perspective that's FDA-approved that treats meibomian gland disease. So this could be the first potential treatment there. So what we looked at is two sort of objective measures, meibomian gland secretion score, where the physicians measure the 15 glands that are underneath the eyelid and measure the secretion. And the secretion score is either 0, which means it's essentially atrophied and not secreting anything, to 3, which is this olive oil type of secretion, the best secretion you.
So you take in all of those gland measurements, multiply it by that score, and come up with an overall score that ranges from zero, which is bad, to 45, which is optimal. We started, o ur baseline data was in the 22 range, which is moderate severity. Over the course of 85 days, that score got into the 33, 34 range, which is clinically significant. Considered normal is above 30.
Right.
So we essentially brought moderate patients up to, normal patient levels. The other objective measure we looked at was the actual secretion numbers, glands that secrete the best secretion score, which is number three.
Mm-hmm
And how many of those glands were secreting from the baseline amount. Baseline was below one gland on average per patient, up to, you know, at the end of the 85-day course was six glands that were secreting. Three glands are considered meaningful.
Mm-hmm.
So, six glands back into the normal range there. Both studies were stat sig at day 85.
Did the sort of TID dosing have any impact, or did you have-- were you able to look at the actual mite clearance, or is it hard, I know it's difficult to do in the back of the eye?
Yeah. Yeah. So, we can't measure the mites there like we did with the eyelashes. We can't, you know, we can pluck the eyelashes and see the mites. These are really embedded within the gland, so that's not, that's not available to us, so.
So then, what's next, you know, for MGD, you know, going forward?
Next, we have a vehicle. We have some additional data. That was top-line data that we produced. We have some patient-reported outcome data that will be coming down the road here. We've got a vehicle study that's ongoing.
Mm-hmm
Which will be important for the patient-reported outcome data. After that data's unveiled, we will have a conversation with the agency to talk about what the registrational pathway might be. The other avenue we might pursue is more of a phase IV approach.
Okay.
Because these patients both required in this study to have both DB and MGD, so technically, they are on label. So there could be an approach where we just do incremental phase IV studies, get that out into the public domain, and, you know, have our med affairs, you know, do some disease education on that front.
Great. No, very helpful. Lots, lots going on. So in our just our last few minutes here, I want to talk. You have two trials that you sort of guided to read out this quarter. So I want the first one on, in, on rosacea. It's a topical formulation of lotilaner. Can you maybe just talk about the expectations and, and plan going forward in rosacea, given your eye care focus?
Sure. Yeah, it's a busy quarter. We're going to have two data cards turning over here before the end of the quarter. So rosacea was a type of rosacea. It's called papulopustular rosacea. It impacts about 40% of the patients that have rosacea, so say, 3-5 million patients in the U.S. This is sort of a thought to be caused by mites as well, these Demodex mites. There's a high preponderance of these mites on the skin that of these patients, and so what we did is developed a gel-based version of lotilaner and treated it for a period of 12 weeks, twice a day. You know, this will be a safety study. We'll be taking a look at the typical safety, you know, profile, but also looking at resolution of the rosacea itself.
And so, from an efficacy perspective, that's what we'll be looking for, is really sort of resolution of the-
Are there any comps or any sort of other drugs or studies that you point us to, or?
So ivermectin is out there right now. It's a 1% ivermectin solution, cream. You know, that's sort of the standard care at this point, but, you know, ivermectin has some baggage associated with it.
Yeah.
So we don't quite have that same type of characteristics that, you know, perhaps something like that.
One of the things that eye docs like is that they are even though they don't have to see it, they, there is data that the mites were being killed.
Yeah
Based on the mechanism of the drug. Is there a way to do that in the pores? Can you look at those?
Yeah. No, that's, that's a great observation. One of the things we've been hearing from our KOLs is that they see this ocular rosacea all the time, and they would love to be able to treat these patients. You know, we consistently hear that. We heard it last night, as a matter of fact. So, you know, I think what we want to do is more market research and see, y ou know, if there is an opportunity there for us to potentially have a sort of dual, you know, distribution model, where maybe we detail the eye care professionals for the ocular rosacea, and then we partner with the derm company to go after the derm call point. So, might be a nice opportunity to add to our bag.
To your point, you can actually do skin scraping biopsies, and we are looking at that in our trial to say, "Did the mite count in the skin decrease?"
Down
Exactly.
You have to, are you gonna sort of just meet with the FDA or sort of wait till they see this data and decide fprward?
That's right . Yeah.
Same with the MGD as well.
Exactly. Then, you know, want to develop a TPP, something that would differentiate us from ivermectin, and then go forward and have that discussion with the agency.
Great. I think just last thing is on Lyme, Lyme disease. There's more proof of concept there, so I think maybe you're further behind in terms of bringing that to the clinical or to, like, a pivotal study, but sort of what are your plans for sort of creating value from, from that Lyme program?
Yeah, no, it's an exciting program that we're getting a lot of discussion about. So it's an oral prophylactic where, you know, you could potentially take this before you go out into an area that has a high preponderance of mites or ticks that carry Lyme disease, and so gets to PK, you know, therapeutic levels within eight hours, seems to last over 30 days. And the theory here is to kill the ticks before they can transmit the bacterium that causes Lyme. It's not an instant sort of transmission. It takes anywhere from 24 hours-36 hours before they start to do that. So, you know, proof of concept here will be: Can we kill the mites within that window or prior to that window?
So we're measuring it, you know, one day, two days after taking of the TP-05, and then reintroducing it on day 30 to see how long, you know, it's efficacious for.
Great. So lots going on.
Yeah.
We look forward to, you know, some earnings numbers soon, and then data from these two studies. Congratulations on everything, and thank you so much for being here.
Great. Thank you, Eddie.
Thanks for the opportunity, Eddie.
Thanks.