Thank you for joining us on this afternoon session. For those of you who don't know me, I'm Tim Lugo. I'm the head of Biotech and Pharma Research here at William Blair, and it's my pleasure to welcome Jeff Farrow the first time as CFO of Tarsus. I'm not sure if you've attended the conference in the past, though. He's been at several successful companies, and Tarsus Pharmaceuticals looks to continue the trend. So, before we go any further, we do need to mention that you should check out williamblair.com for any relevant disclosures. And with that, I'll let Jeff run through a couple slides to kind of orient you on the Tarsus Pharmaceuticals story, but then we'll host very much a conversational discussion after that. So thank you, Jeff, for joining us.
Thanks, Tim, and pleasure to be here. So Tarsus. I will be making forward-looking statements, so I encourage you to take a look at our SEC filings, our 10-Qs and 10-K. Tarsus is a commercial stage company focused on eye care. We also have a very compelling late-stage pipeline that really is a pipeline and a product that all comes from the same active ingredient. Our medicine, Xdemvy, got approved for the treatment of DB or Demodex blepharitis last year in July, and we shortly thereafter launched it. Demodex blepharitis is a highly prevalent disease. There's thought to be about 25 million patients in the United States that have it. And it's characterized by redness in the eye, around the eyelid. You get this itchy, painful sort of feeling in the eye.
Out of the gate, you know, the launch has been really successful. In our second full quarter of sales, we recorded almost $24.7 million. We almost recorded $25 million of product sales. It is the only FDA-approved product for the treatment of Demodex blepharitis. And, you know, we continue to expect to see growth over time. I would say the reasons for our success, you know, quarter-over-quarter, was really fourfold. One, you know, there really was a great disease education process a year ahead of launch, so there was a well-known, from the ECPs or our eye care professionals about the disease. Two, it's very easy to diagnose, and it doesn't change per, you know, behavior on the doc's part at all.
You probably have all been to your eye doctor, where you put your chin in the slit lamp. All you need to do is ask the patient to look down and take a look at their eyelids. If you see collarettes there, or sort of this scruff all around the eyelids, that's pathognomonic or really the hallmark of the disease. So very easy to diagnose. And then, really, almost the holy grail of a product launch is the fact that these patients feel better and look better, within a very short period of time. The treatment course is just six weeks, and during that six weeks, 85% of the patients per clinical study saw clinically meaningful improvements. And then finally, the payers have really reacted positively to this.
They understand, you know, the value of this and understand the potential pharmacoeconomic value of it. These were a couple stats that we shared at our last earnings call. As of the beginning of May, we had 8,000 of our 15,000 eye care professionals starting patients on Xdemvy, and over 50% of those were repeat prescribers. We also had about 26,000 bottles dispensed to patients, and just three quarters into launch, we're at a gross-to-net discount of 55%, which is really quite surprising, you know, given this space, but also this early in the launch. We do think that Xdemvy has the potential to be a blockbuster opportunity. I mentioned there's 25 million patients that are thought to be impacted by this disease. We're targeting 7 million out of the gate.
As you can imagine, these 1.5 million patients here are probably the early adopters. These are patients that have come into the office seeking treatment for Demodex blepharitis, but there hasn't been an efficacious therapy prior to this. There's just been over-the-counter therapies, including lid wipes and tea tree oil. So these are obviously the people that are probably coming in in the greatest numbers at this point. But as you look down the pike here, there's also other patients that could potentially be impacted by DB. So even if we just get that 1.5 million patients, that's a billion-dollar opportunity there. We've categorized our prescribers into three buckets, really, the early adopters, the eager treaters, and the new to DB. The early adopters were ready to prescribe out of the gate, you know, day one.
They might have been involved in a clinical study or a KOL. The eager treaters are aware of DB and, you know, wanna have some experience with the drug prior to more broadly prescribing it. Then there are some of the KOLs or the docs that we're targeting that are just new to DB and perhaps don't understand how many of their patients actually have DB. So that takes a little bit more of an interaction, you know, maybe 5-10 sales rep calls before they actually start prescribing it. So we do know, and we have data that shows the higher frequency of engagement with the doctors leads to more patients being served, meaning more prescriptions.
That's one of the reasons we are planning on hiring an incremental 50 sales reps, to not really broaden the reach, but really to have more frequent interactions with the physicians, and bring those new to DB patients, get more prescriptions. We're also looking at direct-to-consumer streaming television in the Q4. You know, assuming that we continue to see, you know, the increase in payer coverage, as well as having the field force out there in earnest. That's our plan, to initiate something like that in the Q4. I'd mentioned that we have a pipeline. Some of it is outside of eye care. We do have something that's all really based on the same active ingredient in different formulations.
We have recent data in rosacea that showed positive data for the treatment of a type of rosacea called papulopustular rosacea. These are also caused by the mites that cause Demodex blepharitis. And then one of the most exciting programs that probably is better suited in somebody else's hand is a Lyme disease prophylactic. So this is essentially something that you would take prior to going out into a tick-infested area. The drug gets to therapeutic levels within 8, 8 hours, and the PK seems to suggest, and our data suggests that the durability is 30 days. And so the objective here is to kill the ticks before it transmits the bacteria that causes Lyme disease, which happens in about 36-48 hours. So that's really it, Tim, in terms of sort of the background on the company.
Well, thank you for the overview, and maybe we could start with Xdemvy, and I know that's the focus of investors, and sometimes it's a bit of a hyperfocus. So maybe we could start there. Is there any... You know, you're early into the launch. It's been very successful so far. Is there any sort of seasonality or any sort of, you know, something that investors should be aware of as you look over the next few quarters? Do you expect that launch to continue to be strong? Can you just talk a bit about the, what you're seeing from the, from the ground?
Sure. No, we do expect quarter-over-quarter growth in dispenses as well as revenues. But I think the one point that I think is important to reiterate with investors is we don't have the benefit of refills at this point. You know, each script represents a new patient, so every quarter we start at zero. Though we do expect refills to happen in subsequent years, but right now it's really about, you know, continuing to drive new scripts quarter over quarter. So we do expect, you know, that growth to continue. It's not gonna be a hockey stick type growth at this stage, but it'll continue, you know, nice, steady growth, you know, as we proceed throughout this year and into next year.
You know, when you look at the volume side, it sounds like growth is kind of progressing. The swing factor has always been GTN. You know, for the first couple quarters, it's been strong. That's somewhat of an outlier-
Yeah
... in the industry.
Yeah.
Can you just talk a bit about the dynamics around what has led to that strength in GTN?
Yeah. No, we were super pleased, and it's exceeded our expectations as well. You know, and I think really that's kudos to our payer team for getting out there and educating the payers on the disease state and the pharmacoeconomic benefit of treating these patients, such that they're not, you know, continually going back to their physicians. As well as, you know, potentially being prescribed off-label use of dry eye medications, which are not inexpensive. And so, a single course of six weeks is very efficacious. As I highlighted, 85% of the patients see clinically meaningful improvement. So, you know, in essence, one treatment per year, you know, could cover that course of treatment for DB.
So we saw a 58%, you know, gross to net discount, for the year last year, ended Q4 with about 55% gross to net discount, and it was flat for Q1, primarily because of the copay issues and sort of the donut hole issues. But we do expect that to improve, you know, quarter-over-quarter to get to a steady state of about 50% by the middle of next year. The real gating item for that will be the Medicare Part D coverage, which is a little bit of a black box. We're starting the negotiation now, but that will be ongoing. We'll have the formulary discussion here in spring, and then once we see the approval, we'll start pulling through, the Medicare in the beginning of Q1, 2025.
That's very helpful. And so in terms of GTN trends, it's been relatively stable, and you're, say you're going to 50%. Is there any rockiness expected between that 58%-50%?
Generally, we think it'll be slow, incremental improvement.
Okay
... but, behind the scenes, there'll be some changes. You know, in our bridging and as you know, we start to rebate on some of the commercial side as well as on the Medicare side. So there'll be some, you know, ups and downs in the single components, but generally, we would expect to see improvement quarter-over-quarter in the gross-to-net discount.
I guess what's been a bit of the driver of that strength? Is it, that's a one and done almost therapy, although I know that there will eventually be retreatments.
Right.
But has that been a driver of it? Is it... or is it that you've just had very good payer interactions and some of the dry eye therapies out there are chronically dosed and brand priced, so?
Yeah, yeah. No, I think, you know, fundamentally, there's just the reason we were so pleased and I think why we're seeing such a good growth in a discount is, it's a very efficacious therapy. There's not anything else out there that can be prescribed to these patients. So it's not like dry eye disease, where you've got a bunch of generics and a bunch of other products that you're having to step through potentially. That's just not the case here with Xdemvy.
Discussing the sales force expansion, so bringing on 50 new reps, is that a benefit kind of starting soon? Is this, sometimes there can be disruptions when you have kind of territories being split? And there is, you know, sales forces sometimes don't appreciate that. You know, there is, it can go several ways.
Yeah.
Can you just talk about kind of what's been the early experience for that expansion?
No, 100%, it can be disruptive. I would say our Chief Commercial Officer was very thoughtful, along with our VP of Sales, of designing the territories with that potential growth in mind. So it was really sort of laid out that way. It was always communicated to our sales team that if we're successful, we'll probably see expansion, you know, in the sales reps. And then fundamentally, from a salary perspective, we've incented teamwork, and as opposed to sort of just making sure that you're just thinking about yourself. So that is a big component as well. So we're making sure that everybody feels good about this growth.
Okay, fair enough. Then you have this bucket of 1.5 million, kind of initial patients which you're addressing. Has that work, has that been a majority of where the growth has come early on? And when do you start to see kind of movement outside of the patient bucket, or what's been kind of that percentage breakdowns?
You know, it's more anecdotal at this point. I mean, we'll have an opportunity as time goes on to, you know, do some chart reviews and get a little bit more data here, but we suspect most of that growth is coming initially from the, you know, the DB-diagnosed patients. But we are hearing, you know, anecdotally from, you know, cataract surgeons that they are starting to implement it. They want to see a good outcome, so they're prescribing it in advance of cataract surgery, such that they've completed the six weeks prior to the surgery.
And then we're also hearing dry eye docs are, you know, starting to take a look and see if there are collarettes there indicating DB. Probably the last to come online will be the contact lens patients. That'll probably take a little bit more time and, you know, to work through that type of detailing. But, you know, we are seeing across-the-board usage of Xdemvy, but at this stage, the bulk is really coming from the DB patients.
And do you feel like the real world efficacy is measuring up to the label? Is it maybe looking a little bit better, or is it maybe looking a little worse? What's-
Yeah. More anecdotal again at this point, but we're hearing, I mean, it's profound. You know, docs are stopping us in the hall saying, "You know, my patients are saying this is a game changer for me. This is really, you know, amazing drug." We have, we had to create a different database just to get a storage place for the before and after pictures because the doctors are so enthused about, you know, the impact of it. We do have a registry ongoing. You know, and we'll have some data coming out of that over a period of time. But anecdotally, we're hearing the real-world evidence is even better than the clinical study-
Okay
... which is unusual.
Yeah, that's unusual for sure. And physician education, you were very proactive in your education efforts before the launch. Is that kind of, has that groundwork been laid already, or are you continuing education? What's the, yeah, what's kind of the current state of your physician education?
Yeah, no, I think the groundwork was laid quite nicely. But it's a good thing to continue to remind the docs, right? You know, if you continue to say, "Make it part of your standard practice to take a look down at the patient's eyelashes when they're in the slit lamp." And then, you know, I think these patient, these category of docs that are new to DB will continue to require, you know, more time than, say, some of the other categories of it. So we're continuing to focus on them, but also going back and reminding the other categories of docs about, you know, the importance of looking for the collarettes and DB.
Will the new 50 reps, will that help improve kind of the depth of penetration for the current accounts?
Yeah, that's exactly what we're focused on, is not so much breadth. We think the 15,000 docs that we're targeting is the right ones. So it's really about more frequency of interaction, because we know from the data that we've collected, the more frequent the interactions, that drives more script writing. It's a good reminder for the docs to take a look for it.
And so the look-down diagnostic approach-
Yeah
... how much is that being embraced now? Is it almost every patient for, you know, that's undergoing the slit lamp procedure, are they looking down now, or what's kind of that traction you've been seeing with it?
You know, I think there's certainly some doctors, you know, that are making it a regular part of their practice, and I think, you know, there's other docs that are sort of getting their arms around it and need to be reminded to continue to look. And in some cases, we've had doctors say, "Hey, look, I, I only have a handful of patients that have DB."
And so what we do is encourage them to say, "All right, just take a piece of paper, and every time you see a patient that has collarettes, you know, just jot a number down, right? And continue to count how many you have, you know, by the end of the day." And almost for every doc that we've talked to and asked them to do that, they have been surprised at how many patients that they have, have the collarettes and have Demodex blepharitis, and that is very eye-opening for those docs. And so, you know, I think we continue to, you know, need to do the disease education on that, but it's starting to evolve over time.
You're early in the launch, so I assume that conversion, because there are so many of these patients out there, onto actual drug now is probably pretty low. Is that fair to say? Or, you know, do you have a sense of that kind of conversion now?
Conversion in terms of the total population, how much we've got? Mm.
If you tell a doctor, you know, every time someone looks down, you see some collarettes.
Right.
How many of them get script? You know.
Yeah, you know, if they are, you know, the enthusiastic doctors that were out of the gate, they're gonna write a script automatically. You know they'll look for it and write it. You know, the ones that are the eager treaters, I would say, wanna see four or five patients before they get to that almost autopilot type of thing. And then, of course, that last category takes a little bit more time to get them to write that first script even. But once we get to, say, 8, 10 scripts, they start to actively write more.
And you mentioned potentially going for DTC in Q4. But I think in my discussions with you, you were always hoping that the payer side would be very nailed down first, and obviously, you're talking to Medicare now. Is Q4, I guess, walk us through what occurs once you turn on DTC?
Right. Right. Yeah, the objective there, to your point, is, you know, we don't wanna provide a bunch of free goods. So, you know, unless we're feeling really good about the payer discussions across all payer types, you know, we probably wouldn't pull the trigger and maybe delay it a quarter or so. The other aspect is we wanna make sure that all the physicians that might encounter a patient coming in saying, "Hey, I saw this commercial on TV about mites, you know, do I have them?" We wanna make sure that they are aware of it and are able to get out there. So, basically, you know, we're looking at signs. I mean, we're very pleased with how things are going. If the trend continues, I suspect we will pull the trigger on, you know, the Q4.
Yep. Yep.
If that's the case, we'll start that, essentially the streaming TV you know, very focused effort, not the broad network type of direct-to-consumer advertising.
Anecdotally, this is the only company I've ever talked about, and my seven-year-old son has asked me follow-up questions.
Interesting. Yeah.
But, Dad, is there still the mite company that- where you treat your eye?" And, yeah, he just asked me that last week.
Yeah. Yeah.
So I'm gonna see them at the William Blair office. So...
No, I think this is one of the, you know, potential therapeutics that's very suited for direct-to-consumer advertising, right? You just don't wanna make it too scary.
Exactly. I know. Oh, and we have a question from the audience. And I'll repeat it for the audience.
Okay.
There's a question on just the MOA of how the drug works, and how de-risk are the additional indications?
Yeah. No, it's a great question. Xdemvy or TP-03 gets to the root cause of the disease. It kills the mites that cause Demodex blepharitis. And so it is, you know, one of those few things where we don't treat the symptoms, we actually get to the root cause there. The rosacea, we're targeting a type of rosacea that's called papulopustular rosacea. It is also hypothesized to be caused by these mites that are in the skin. And frequently, what happens is these mites will migrate back up to the eyes, and that's why we think retreatments in DB are likely to happen. But we showed a very efficacious phase IIA study that showed we reduced the lesions as well as the rosacea, the redness in the skin.
On the Lyme disease, it kills the tick prior to transmitting the bacteria. So again, it gets to the root cause of the disease and kills the ticks. And so our phase IIA data showed 98% of the ticks were killed within 24 hours, and it was durable up to 30 days. I think we had, like, over 90% of the ticks killed after 30 days on that single dose. So,
Yeah, and the ticks are very correlated to collarettes, which could be observed during any eye exam from an optometrist or ophthalmologist.
So the treatment is a six-week treatment. And what we have seen is based on our clinical study, and we're getting real-world data as we speak, but generally, you know, most of the patients saw continued improvement, you know, through most of the year. We started to see a diminishment, you know, around month nine. We didn't follow up beyond 12 months, but our assumption is, at some point, that these patients will... You know, some of them will have to come back for retreatment because the mites migrate back up to the eyes again, and so they'll seek treatment again.
Another question. A dumb question. If you said you cure or you address the root cause of the disease, the mites are never eliminated, they just kind of go away from the face and the eyes, but they're somewhere else in the body?
That's right. That's a—no, it's a very, you know, thoughtful question. It's—we have it all over our body, and it's not uncommon, you know, to kill them around the, you know, the eyes and then have them migrate back up, you know, into the eyelids. They like that oily, sebaceous area.
And, you know, I do get these questions sometimes where... Have you seen any payer pushback initially during the launch, and do you are now in the sole, you know, DB approval category, so I assume that helps. But are they asking people to, you know, fail these kind of homeopathic treatments, or what's kind of the, you know, what, what are some of the obstacles that some payers?
Yeah
... you know, maybe are applying?
Yeah. Generally, we've been pretty lucky, you know, like almost any non-generic drug, you're gonna get prior auth off label. So that's the most of what we've seen. We've seen some occasional payer pushback and say, "You must fail ivermectin, oral ivermectin." Which docs usually say, "Well, that's, you know, that's not on label." So typically that's overturned. You know, there's a scenario as we go down through some of these negotiations, we might see some more of these step edits. We don't anticipate that, and certainly, if we're going to contract with these payers and provide a rebate, we would not expect to have any kind of prior auth that was onerous, if that was the case.
And for Lyme disease, you mentioned that maybe this is an indication that should be developed outside of Tarsus. Can you just expand on that? And when's kind of the deciding point for, you know, out-licensing or partnership?
Yeah. No, I, I think it's a very exciting program and really maybe a paradigm shift in how we think about prophylactic treatment for this disease. It is an oral version of Xdemvy, or TP-03. And we're, we're in the midst of discussions with the agency on what a path forward might look like. You know, we could potentially do an abbreviated biomarker study in a phase IIB study, but it's highly likely the agency's gonna require a Lyme disease prevention study as a pivotal study. And just for context, you know, Pfizer's doing with Valneva their Lyme disease vaccine, which requires an initial shot and then three boosters before you get to therapeutic levels. That required about 3,000 patients to enroll, and that took... it is planned to be over two tick season.
So it's a lot of money, you know, for a lot of patients over a long period of time. But even more importantly, from a commercial perspective, it's probably a GP call point, which is gonna be a big sales force, which we just don't really wanna have to manage. It's probably better suited for one of the big pharmas of the world.
MGD or rosacea, what's kind of the step forward in talking about maybe is there a phase IIB coming up-
Yeah.
or phase III?
Yeah. No, MGD, we're all really excited about that program, you know, primarily because we saw in our study objective measures of improvement of MGD, which hasn't been historically seen in some clinical studies. That, you know, so basically, that is the glands underneath your lower eyelid, and, you know, they essentially produce an olive oil-like solution in an ideal situation that keeps it moist and helps prevent teardrop evaporation.
But in patients that have MGD, you get these clogged glands, and so we saw an improvement in the number of clean glands, as well as an improvement of the secretion score. So we're gonna have a discussion with the agency on the path forward there. And, you know, we could take one of two approaches. One is either to do a full pivotal phase IIB, phase III, or perhaps we take more of a phase IV approach and do disease education and just inform people, you know, about the outcome of these studies. Because they had to have both DB as well as MGD, so technically, you know, they were on label.
Mm-hmm. And, you know, given the pipeline where it sits now, given how successful XDEMVY has been and probably will continue to be, how do you think about business development? Are you going to build around kind of the eye care call points, or, you know, you obviously have your pipeline. What's your-
Yeah
... thoughts on DB?
No, we want to be, you know, one of the world's eye care leaders. You know, initially, we're focused on the anterior segment very synergistic with our call point. But over time, you know, we recognize we probably need to get involved in the back of the eye. So we're taking a look at all aspects in the anterior segment from preclinical to on market. I would say there's nothing near term at this point, but, you know, continuing to evaluate the landscape, and as our market cap grows, it gives us more flexibility as well. And then at some point, start to take a look at the back of the eye as well and think about opportunities in that space as well.
Okay. Interesting. And, oh, we have another question. Yep.
So the question was about MGD and rosacea and the other programs in terms of timing. So, we plan on providing updates just by nature of the time that it takes to have the interactions with the FDA and sometimes like Lyme to interrogate the full data set. Probably by the Q4, we'll have some sense on, here's the pathway forward that we're thinking about for MGD, as well as rosacea and Lyme disease.
One last question, sure.
Talking about, so funding or access for, yeah.
Yeah, no, we're fortunate that we have a robust balance sheet. We've got about $300 million at the end of the Q1. And then we also have access to a term loan that we recently entered into with Pharmakon, a well-known biotech lender, of about $125 million. So, you know, we feel that cash balance, plus the ability to tap into the term loan, is sufficient to, you know, get us to those key milestones, you know, including continuing the commercial launch, hiring the 50 sales reps, doing the DTC programs, as well as moving the pipeline along there.
With that, I think we're at time. Thank you so much, Jeff, for joining us.
Thank you, Tim, for having us.
The breakout is in Burnham A.