Okay, great. Thanks everyone for joining us. I'm here with Bobby Azamian, Chief Executive Officer, and Jeff Ferro, Chief Financial Officer and Chief Strategy Officer of Tarsus Pharmaceuticals. We're gonna be doing a fireside chat here today, so I'll go through a number of questions, and then, assuming we'll have a few minutes at the end for some Q&A, so I'm gonna start with the ongoing XDEMVY launch. How soon do you think you'll be able to feel the impact of some of the initiatives you're implementing now, including the DTC campaign, sales force expansion, and new commercial and Medicare contracts?
Yeah. First off, Connie, thank you for having us here. It's a real pleasure to be here at this conference and be back in Boston, where I spent a lot of my formative years. It's also a great time in our launch. We're actually one year in, almost to the date, of deploying our sales force and starting this launch. Why don't I just hit a few high points, and then I'll cover some of the growth drivers that you asked about. This launch is really something we haven't seen in eye care in a long time, and that's because we're creating an entirely new category, which means we have a root-cause-driven treatment for a very highly prevalent disease called Demodex blepharitis.
That's inflammation in our eyelids caused by mites, and that affects 25 million Americans, with seven million as an addressable market that we can serve, so to date, we've had incredible traction on really three key stakeholders that are involved in any launch, and that's firstly, sort of in a reverse order in some ways, the payers. We've had very strong traction with commercial and now starting with Medicare payers. That's reflected in a gross- to- net discount. We announced at the Q2 earnings of 56% net, so well ahead of our own projections there. We've also been able to call on already 15,000 doctors, but get 11,000 of those with direct experience with XDEMVY, so that adoption curve by our eye care providers is well ahead of schedule.
Over 60% of those have already had multiple experiences with XDEMVY, meaning they've written and had dispensed their patients more than one script. And then finally, we're really just scratching the surface of the patients we can serve. We've served about 100,000 patients so far, and we see seven million that we can serve. So to answer your questions about some of the upcoming growth drivers, there's really three things that we're excited about. First is happening right now. That's the expansion of our sales force. We've gone from 100 salespeople to 150 salespeople, and those people are actively deploying in the field. We're actually seeing some signs in the numbers of an increase from that deployment, and that's really about education.
One of our sales leaders says it very well, "When we show up, the mites show up." And that means that we need to bring doctors along their own journey of learning how to find these patients, how to treat them, and having that experience that we know creates a positive feedback loop. The next big thing we're doing is a direct-to-consumer campaign, and that's due to launch in the Q4. We can talk more about that a little bit. Very hard-hitting, very action-oriented. We really wanna drive that education of patients to go into the office, seek treatment. And then, you know, you mentioned the ongoing payer wins. We actually feel really good about where we sit today, and we're kind of in the home stretch of getting the last commercial and Medicare payers on board here.
And, Jeff can talk a little bit more about how that affects the gross-to-net evolution we see. The other thing I wanna mention as the third key driver is other educational efforts, and that involves peer-to-peer education, which we've seen be very productive, and also involves ongoing data dissemination, giving doctors an additional understanding of the disease and additional understanding of the effects of XDEMVY.
Great. Thank you. So maybe digging into the launch trajectory a little bit more. At this point in the launch, you've alluded to the possibility of retreatment beginning to be more significant in the near term. What proportion of treated patients do you ultimately expect will need or want retreatment based on natural history and the 40% recurrence rate that you saw in the Phase 3 study?
Yeah, it's a very important question. You know, this is such a valuable drug because you give one bottle, six-week course, and you see lasting effects, and that's allowed us to drive a great value proposition for the doctor, the patient, and the payer. Having said that, this is a chronic disease, and patients get Demodex blepharitis because they have some underlying risk factor, often driven by aging. It's not the patient's fault, and what we expect to see based on the Phase 3 data that we followed up for a year, those patients is about 40% of patients recur between six and 12 months. Right now, we're already seeing some retreatments, mid-single-digit rates of retreatments, and we expect that to go to double- digits and eventually get to 20, 30% retreatment rates based on the fact that we see about 40% recurring by one year.
Got it. Bigger picture, you've alluded to a billion-dollar peak sales potential for Demodex blepharitis alone. Could you speak to what the trajectory looks like to get there, and it looks like consensus at the moment is assuming probably a more pronounced inflection in 2026 relative to 2025.
Maybe I'll pass to you on that one, Jeff.
Sure, yeah. No, we feel really good about the opportunity here, and the reason we think a billion is doable, there's 1.5 million patients that have been identified in seeking treatment with Demodex blepharitis. So if you just take that, multiplied by our WAC, times the gross-to-net discount of about 50%, which was our prior guidance of sort of steady state. We now think it's lower than that. You get to over a billion dollars, and then there's an incremental, say, 6.5 million or 5.5 million patients that could be treated within different segments. So we think that it's a billion-plus opportunity. And to your point, I think we're gonna see steady growth coming off of the Q4 here, with probably a peak around seven years from now.
That's in Demodex alone. So if we think about maybe expansion into other complementary eye diseases, have you seen any early uptake in any of those populations, whether it be dry eye, cataracts, et cetera?
We have. It's been more anecdotal at this point. You know, we're gonna go back and do some chart reviews and take a harder look at the actual data. But the anecdotal data shows that, you know, we're getting patients that have cataract surgery seeking, getting treatment prior to that surgery, t heoretically, getting a better outcome. We're running a contact lens study, so that'll be data that'll be coming out next year that will support that, that segment. And then I think the area we're most excited about, as well as KOLs, is in meibomian gland disease, which is, you know, one of the causes of dry eye disease.
And so we saw in a clinical study, Phase IIa study, objective evidence of improvement, you know, in the both meibomian gland secretion score, moving from moderate to actually normal, and the same thing on the clearance of the meibomian glands. You know, at baseline, less than one gland was clear, and then at the end of the treatment course, about six glands were cleared. About three is considered clinically meaningful. So that's an opportunity for us to also expand into dry eye in a bigger segment.
One other segment we hear a lot about is cataract surgery. Because these are older patients, they're presenting for cataract surgery, and the doctors are saying, I want to have a great outcome. I want you treated of all the other things that could be impacting your ocular surface. So we're getting a lot of interest in that segment. And just to add to the anecdotal feedback Jeff mentioned, you know, I'm out there with doctors all the time, whether it's in group settings, you know, ad boards, et cetera, or in their own clinics, and I'm always asking, "Okay, who are you seeing? Is it patients coming in with a chief complaint, or is it patients coming in for other reasons?
Yeah.
And I always see a combination of those two in each clinic. And then I also ask, "Have you exhausted the number of patients you can see? Are you looking at every case?" And they say, "No, no, I'm looking at the patients who are coming in with a chief complaint, but now that I see the effects of the drug- I'm gonna look more," and so that's exactly the journey that our reps are taking with each doctor to get them enough experience so they have conviction to go back and look more and more.
Right. And so along those lines, as physicians are becoming more comfortable and XDEMVY is available, have the diagnosis rates for Demodex blepharitis gone up as well? Like, as they kind of start to look for patients a bit more or are able to identify the underlying cause of some of their problems.
Yeah. No, we don't know yet. We haven't been able to look at the ICD-10 codes to see at this point whether that's increased from that 1.5 million. But we do think that. We know that docs are taking a harder look now, right? Looking for those collarettes, which are pathognomonic for the disease. Our expectation is, over time, that will increase that number.
Yeah. Okay. In terms of guidance, at what point would you begin thinking about providing either annual or quarterly guidance around not only sales, but perhaps gross- to- net prescribers, some combination of, you know, various commercial metrics?
Yeah. No, we're looking forward to getting to the point where we can give revenue guidance and get that out there. But, you know, our goal is really not to provide good, you know, guidance until we can give good guidance.
Yeah.
And so there's a little bit of uncertainty right now. This is a completely new disease state. There's not any really good analogs out there. So wanna get a little more history under our belt, you know, get the incremental sales reps out there, see the impact of the DTC campaign and then we should be able to give revenue guidance. On the other aspects, you know, we've been giving guidance as it relates to gross-to-net and a little bit longer gross-to-net. We expect. You know, at Q2, we had about a 44% gross-to-net discount. We expect that discount to increase maybe by a point or two, primarily given the fact that we didn't see the Medicare donut hole impact us in the first half of this year, so we think that's gonna come through in the second half of this year.
And then, of course, Q1, everybody knows, co-pays reset. There's a lot of transitions between insurance carriers, and so we'll probably bridge a little bit more in that, and so we could see some gross-to-net increase in that area. But at steady state, once we get Medicare on, we think the gross-to-net discount is gonna be at the low end of the 40%, so somewhere 42%-43% at steady state.
Right. Maybe switching gears to prescriber patterns, in a little bit more detail, but could you speak to some of the steps that you're taking to enhance depth of prescribing, in particular with prescribers who are newer to therapy?
Yeah. No, it's all about depth right now for us, Connie. I mean, having had 11,000 come on board, we know that there's a lot more potential to unlock there, and you know, there's really, b esides the sales force, and I'll talk a little about that, there's a couple other things we're doing. The sales force itself, what we see there is, we've been limited by the number of reps we have. So we have had 85 reps, about 100 salespeople total. We expanded it by about 50 reps.
So we're a 150 total now. And, you know, there's two ways you can go with that. You can try to get new doctors on board, or you can try to drive more awareness and frequency. And so we're taking the latter path. Now, if you think about it, a given rep can call on a doctor multiple times a month, if needed, to get them educated about, h ow do I prescribe this? Who should I look for? What's the early feedback? And we find time and again that once a doctor has about five to 10 experiences with XDEMVY under their belt, they just start to look more and more.
And then the conversation shifts toward, "Okay, are you treating patients coming in with that chief complaint, itchy, burning red eyelids, or are you seeing patients come in with dry eye, and then maybe they have MGD and DB cataract contact lens?" So that's the frequency of education that we can drive depth through. The other thing we see, especially with newer physicians, is when we have a peer-to-peer engagement, and we have some really curated, speakers programs, where we're getting doctors that have had a lot of experience and a lot of doctors that have had no experience, we see very high success rates coming out of those programs. So we see that as a really important investment opportunity for peer-to-peer education.
And there's a number of other things we're doing with conference engagements, with, you know, other CME to drive that awareness. And then, you know, the final thing that really does help educate everybody is that DTC campaign - which we can talk more about.
Okay. In terms of where you're at from a repeat prescribers, you're at roughly 60% today. What is a reasonable long-term target for where that could grow to?
Yeah. So as I said, that's just scratching the surface. You know, when you say eleven thousand doctors, that's tremendous three quarters in. To have the majority of those prescribing more than one is amazing. But we think doctors can prescribe, you know, any doctor really can prescribe multiple a day, based on the prevalence of patients in their clinic and the need of those patients for XDEMVY. So I would, we're not ready to talk about depth metrics yet. but I would expect us to migrate eventually from those metrics of, you know, how many lifetime have prescribed one or multiple, to something more representative of the depth that we're seeing.
Okay, so maybe we can dig into the DTC campaign a little bit and how you expect that to shorten the time it takes for physicians to become prescribers. Because currently, I think the guidance is maybe it takes about five to 10 visits before they're prescribing actively to patients. How do you think the DTC campaign is going to affect that?
Yeah. So maybe I'll start and have Jeff talk a little bit about the ongoing investments there that we plan to make. So with DTC, it's one of the most scaled things we can do to drive education. We can only have so many reps out there calling so frequently. But we know there are seven million patients already coming to the clinic, so we are planning a very hard-hitting, a very action-oriented campaign. And just think about how compelling this marketing opportunity is. We literally have mites in our eyelids causing inflammation and affecting how we look, how we feel, and how we see. So our marketing team, which is, you know, very experienced, having done this for eye care and other products before, is looking carefully at what will be the most hard-hitting campaign based on real data, real market research.
And, you know, we're moving to get that campaign out there as quickly as we can. It'll start in the Q4 with connected TV, where we can target patients that are in the right demographics, and then we can get some feedback on how that early campaign is going. And we know historically it takes multiple views of an ad to drive action. So we expect to see ROI there, but it's not gonna be overnight. And, you know, to the question about the five to 10 visits, that's really for a given doctor, how many engagements with XDEMVY, how many patients they have to see on XDEMVY to prescribe more.
So a little different than the number of views of the campaign, but it's probably in a similar ballpark, frankly, of how many times somebody has to see an ad before they go into the office and say: Do I have this? Do you have something for me? And, Jeff, maybe you can talk a little bit about, you know, the investment we're planning to make there.
Sure. We want to make sure that we're making a right capital allocation here. So we are gonna, to Bobby's point, really focus on streaming, where you can get real-time data. You know, are people, after seeing a campaign, Googling, you know, "Do I have mites," or, "What's XDEMVY?" You know, we'll get that kind of feedback and what's resonating with them. And then assuming, you know, we get a good return, you know, as Bobby highlighted, it probably takes about a quarter before we start to see that sort of, t he patient has to make an appointment, get into the office before we see that type of action. So it's probably about Q1, where we'll see that.
Depending upon the ROI on the investment, we could consider moving to more broad network type of ads, which are more expensive, but have much more eyeballs on that, which could drive it. So we're thinking about $10 million-$15 million in incremental spend, probably allocated between Q4 and Q1, and based on that data that we see in terms of scripts that are being driven, patients going in to see their doctors. We'll make an assessment at that point, whether we want to continue with streaming or potentially expand into network ads as well.
Got it. Jeff, you already commented on, kind of from a margin perspective, kind of, you know, some of the levers that you'll look to deploy to kind of bring it down to the low 40s.
Right.
You know, I think you've also mentioned in some of your public statements that front-of-eye products can command more pronounced gross-to-net discounts. What is the standard there, and acknowledging that the disease that fall within front of the eye category can be pretty varied, do you feel like that's kind of the level that you're looking for? Is the low 40s the goal?
it. It's exactly right. I mean, we had initially anticipated a gross-to-net discount, sort of steady state around 50%. We now think it's gonna be. The gross-to-net discount's gonna be around 40%, 42-ish, 43-ish. So much better. To your point on the proxies, if you look at, say, glaucoma, dry eye, a much more competitive space where rebates are generally higher, you could see gross-to-net discounts, you know, approaching 70%-80%. So we're profoundly better just g iven the fact that, one, I think the payers see the value of this. The team did a great job educating about the pharmacoeconomic benefit and the fact that there's just nothing else out there that's efficacious from a therapeutic perspective, so that all helps us.
Okay. And how should people be thinking about the donut hole coverage gap year to year? Will this cause softening in margins in the second half of the year, or do you expect that to level out?
We do think that we will probably see, you know, one to two points increase in the gross-to-net discount in Q3, Q4, because we had anticipated seeing that donut hole impact in the first half of the year, just didn't see it. What appears is that these patients just don't have a lot of other underlying diseases, which would cause them to go through the donut hole. Typically, you see that being impacted in the first half of the year, but we just haven't seen that, so we expect that in the back half of the year.
And you raise an interesting question about next year. Given the IRA impact, you know, our expectation on this donut hole, which goes away, will have more of an impact across the year. So we shouldn't see this volatility. It should be more steady state. So the gross-to-net discount shouldn't be as volatile, say, beyond quarter one, when all the co-pays reset and people change. We expect it to be fairly steady state beyond that.
Got it. We've talked a good amount about some of the additional investments coming in around the XDEMVY launch, particularly around the sales force, DTC. How should investors be thinking about the magnitude of maybe any sales force disruption related to training of new hires? Is there any lost business and just part of that process?
Yeah. So we had given guidance on the Q2 call about seeing bottles dispensed increasing by about 10% to about 41,000 bottles, and that considers the impact of some of those things that you've talked about. So it's really three factors. One, we had to pull some of our sales reps out of the field to interview, hire, train our sales reps. We also had a national sales meeting last month that pulls people out of the field, all of which. This is a very promotionally sensitive therapeutic. So we know that the more contact we have with the physician to remind them to look for these collarettes drives more scripts. It's just sort of that reminder. So when you pull them out of the office, you're gonna see a reduction in scripts.
That's one factor there. The second factor is there's typically a seasonality in eye care products that you see a reduction because kids go to school, parents take vacations, eye care professionals take vacations. It's normal to see a little bit of a dip in IQVIA scripts around that timeframe. And then finally, we've got some of those holidays. We've got Fourth of July and the Labor Day holiday. That's why we guided to that 10% increase there. But we think that disruption's behind us now. And so we expect, and we are starting to see an increase in scripts as a result of the sales force being deployed out there with the incremental 50, and we expect that robustness to continue into the Q4.
Okay. And then on, around the DTC, you mentioned $10 million-$15 million of spend between Q4 and Q1. Does that, you know, after the initial launch of the campaign, do you expect that OpEx to kind of normalize then from a run rate perspective?
Yeah, that'll next year in Q1, Q2, that'll be the decision point. We'll take a look and take a hard look at that ROI. and see if it makes sense. It could be sort of steady state. We could say, "All right, streaming is the best way to go. You know, it's being very effective. We're reaching all of our target populations." Or it could be like, "Well, you know, we need to reach maybe some of the Medicare patients that typically don't go to Hulu or Netflix. You know, they go for more of the network news." So we could consider expanding. So that could drive OpEx up more, just to get that incremental lift on the revenue. And then, of course, if we don't see a positive return on investment, we'll probably pull that as a campaign, so.
Got it. Maybe just spending a few minutes around the next levers of growth for the company. I'll start with maybe the preservative-free formulation of TP-03, XDEMVY. Could you just talk through maybe next steps around that program?
Yeah. So that preservative-free program really relates to the European opportunity for XDEMVY, for DB. The European regulators typically don't like to have preservatives in their eye care products, and so our anticipation is that's gonna be the common theme we'll hear from the regulators, and we started that process of the manufacturing, started stability, which will be kind of the rate-limiting step to getting this to on market. But we're gonna have some discussions with the European regulators about, are they gonna require a bridging study of some sort, or can we just rely on the U.S. data? So that will be coming out later in this year, probably the Q4. We'll give an update on sort of the regulatory path on that. Additionally, we're looking at the commercial opportunity in Europe.
I think everybody understands it's a little more challenging on the pricing side in Europe than it is in the U.S., and so we wanna be thoughtful about that approach. So we're doing some pricing research, and we're gonna take a look and see what the math looks like, and does it make sense for us to build an infrastructure, or does it make sense for us to partner that? So that'll also be part of that update we provide later this year.
Okay. For the other development assets, could you maybe just outline potential paths forward with the FDA, and specifically, if there's any opportunity to pursue accelerated approval for any of the programs?
You want me to take that, Jamie Brick?
Yeah.
Yeah. So there's really three key programs, and we expect to have additional information and plans on each of them by the end of this year. So the first is meibomian gland disease, that is highly overlapping with DB. We published some really compelling Phase IIa data showing that we could essentially normalize meibomian gland function. And we've got a lot of inbound interest from doctors about that. So we want to determine what is the next step on that program. Is it run a bigger study? Is it actually get this data out there at scale with medical affairs? I think either of those is a compelling pathway. We'll have more information by the end of this year, as well as a fuller data set from that Phase IIa, not just the top line, but the complete data. So stay tuned there.
A really important growth driver for XDEMVY in either scenario. The next is rosacea, and remember, we have this pipeline of product. We have a highly effective, long-acting, anti-parasitic molecule. And rosacea is caused, in a lot of cases, by the same mite that causes DB. So we had another Phase IIa that was successfully read out in early this year, Q1 of this year. We showed that we could improve, really to standard of care levels, the lesions and the overall redness scores in patients with rosacea. But we know rosacea is a pretty well-served market as it stands, so we really wanna find a differentiated path. And what we've heard from our eye care customers is they see rosacea around the eyes, something called ocular rosacea.
So we're exploring whether that could be a differentiated path, and we expect to have more information about what we plan to do with rosacea by the end of this year, based on further discussions with the FDA as well. And then finally, Lyme disease. So a really out-of-the-box program for an eye care company, but one that I think could serve a lot of patients, a lot of people like us in this room, who are exposed to ticks, maybe when we travel, or people living in tick areas that have Lyme endemic. And the idea here is a on-demand tablet that anybody could take. It would act within twenty-four hours, kill almost all the ticks within that time, and then lasts for upwards of a month.
Our Phase IIa data showed that we did kill ticks at 90% + rates at day one and at day 30. So very compelling proxy for effectiveness, but a very new product profile. We've had vaccines in this field. We haven't had prophylactic tablets. So we also wanna engage the FDA, which we're actively doing, and say, "What is the next step? Is it a massive Lyme prevention study, or is there something intermediate that we can do?" And once we have that information, we know that, you know, our ambitions are to become an eye care leader. We will ultimately partner this program with a party that has more depth in infectious disease and ultimately serves the thousands of doctors that are different than the eye care doctors. So, not to mention, do a larger, much more costly Phase 3 study than we probably wanna fund.
So, we expect to have a fuller sense of that opportunity and the next steps by the end of this year. So- [cosstalk]
Okay.
So a very full end of the year when we think about- [crosstalk]
Yep
The future growth catalyst for the company.
That's great. Yeah, no, all exciting programs. I think we're obviously gonna stay tuned for the updates coming towards the end of the year. I wanna leave a few minutes for Q&A, or people to have the opportunity to ask questions if you have them. So with that, to the extent you do, just raise your hand, and we can go from there.