Good morning, everyone. Welcome back to the 2025 Guggenheim SMID Cap Biotech Conference . My name is Eddie Hickman, and I'm one of the analysts here. I'm joined here by Tarsus Pharmaceuticals CFO, Jeff Farrow. Thank you for being here, Jeff. Exciting year for Tarsus, the launch of Xdemvy and the recent announcement of a new product and another new indication. Do any of you just want to spend a few minutes highlighting some of the 2024 progress, and then we'll get into some of the 2025 expectations?
Sure. Yeah. Thank you for having us here today, Eddie. It's a pleasure to be here. So Tarsus Pharmaceuticals is a commercial stage company. We launched Xdemvy, which is for a disease called Demodex blepharitis, in September of 2023. And I would say from the get-go, there was a little bit of skepticism about the disease state, but I think we've shown that this is, in fact, a category-creating disease, and we've got a really unique therapy with Xdemvy. For the nine-months ended Q3, we recorded over $113 million in revenues. And of the 15,000 doctors that we're targeting, we've had 13,000 of them write scripts, and over 70% of those have written more than one script. So really quickly got out of the gate and have started to detail the physicians. The launch, as I said, has gone really well.
It really kind of focuses on four pillars that we look at: evidence generation, education, ease of access, and execution. And that's sort of our mantra as we think about launching Xdemvy. And as we think about the potential next therapy that you highlighted there for ocular rosacea, which is another, what we think, complete white space for us. There's really no competition or anything out there that can treat these patients. It's a disease that's probably around the same patient population as Demodex blepharitis that we're going to be targeting. So somewhere probably around the nine million patient population. And the majority of those patients have Demodex mites. And so we know our therapy is very efficacious against those mites. And so that is an area that we're excited about, and we talked a little bit about earlier this year.
We'll probably initiate that study in the second half of this year of 2025 and have a readout in a phase II study in 2026 on that one. We also have a program that we announced, topline data, in Q1 of 2024 in Lyme disease. It's an oral prophylactic for the treatment of Lyme disease. The data showed that we killed the tick prior to the tick transmitting the bacteria that causes Lyme disease. It's not an immediate sort of bacterial infection of the patients. It takes 24-36 hours, and we killed about 98% of the ticks prior to that transmission period there. So we'll have an update on that program and the thoughts on that moving forward on our Q4 call here in the coming weeks.
Great. So yeah, it's been a great year. So I want to start with Xdemvy. Obviously, it's been a strong first year in a new category. But those of us who watch the sort of weekly scripts notice some bumpiness. So can you sort of remind us what has caused some of that bumpiness and seasonality? And should we anticipate that similarly going forward into 2025? And how should we sort of model that going forward, some of that bumpiness?
Sure. Yeah. No, you highlighted it's been consistent quarter-over-quarter growth and continued revenues, but some of the growth has tempered over a period of time. I think the key thing to remind people is right now we're an NRx product, right? Our treatment is a six-week treatment. And over time, we expect to see refills because we did see in our phase III clinical study that patients start to develop the disease again somewhere within six months to 12 months post-therapy. But since we just launched relatively recently, we're not really seeing those refills, that big impact of the refills at this stage. So we do see the impact of things like holidays, conferences, medical meetings, and things like that that could impact the weekly script numbers there.
Thinking forward to 2025, we do expect, based on what we saw last year, as well as our research in other eye care products, to see some seasonality, primarily in the first quarter and the third quarter. In the first quarter, as everybody knows, a lot of people change insurance carriers, copays, reset, and things like that. Beyond sort of the gross-to-net impact of that, we also expect to see maybe some of the tempering of growth on the scripts as well, too, as patients sometimes wait until the second quarter before they start going to see their eye care doctors. Then, as you highlighted in the third quarter, we had some summer seasonality there where the physicians are out of the office. Patients frequently have holidays and summer vacations. We expect to see growth there, but probably tempered growth.
Big picture, I would expect to see some tempered growth in Q1, a ramp-up in growth in Q2, again, a little bit of tempering of growth in Q3 because of the summer seasonality, and then a ramp-up in growth in the fourth quarter.
Can you help us sort of dissect the volume versus the gross-to-net when you talk about those things? The seasonality sometimes in 1 Q is due to the gross-to-net, whereas the volume seasonality is 3 Q. So how should we sort of dissect the two of those? Is the volume seasonality on those holiday missed days or conferences? As people get retreatments, will those still be seasonal impacts, or will those be refills eventually where people don't need to go see a physician and those holidays won't impact? Or should we expect that year-over-year?
I think in the near term, expect that sort of seasonality for a period of time. Yeah.
So you guided for 50,000-55,000 bottles for Q4, and the numbers are sort of out now, and it looks like you may have come in significantly higher than that. How accurate are those third-party reporting, and will we see that sort of come to 100% capture rate eventually? And what causes them to over-report?
It's a little bit of a black box, and it's an algorithm that they don't really share with us, and we do talk to them and try to help them think about what they might be missing, but sometimes they don't listen, and so we would say that the data is imperfect, and it will probably always be imperfect. One thing we did highlight on the Q3 call is we've noticed that it's diverging a little bit more on the higher end of things, so for whatever reason, it's a little bit incrementally higher there, so I think the thing we encourage people to do is take a look at the trend long term and see how it's going, not week to week, and importantly, listen to our guidance because we have a little bit more clarity into how we think it might look as opposed to the Q.
And so how are you thinking about providing that guidance going forward into 2025? Will you continue to give sort of bottom guidance quarter-over-quarter, and would you think about providing sort of full-year financial guidance at some point as well?
Our goal is to get to full-year financial guidance. I think we want to make sure that when we do provide guidance, it's good guidance, and there's a couple of things that we're sort of playing out here. There's a lot that we've implemented over the last couple of quarters, including the introductions of the incremental sales reps. We hired 50 more. We've initiated the direct-to-consumer campaign, so once we get a clear line of sight of how that's impacting the revenues and the bottles, we'll be able to give that guidance, so I think in the near term, we'll continue to provide bottle guidance as well as expectations on the gross-to-net side until we get through some clarity on that side.
Great. So as we start to think about 2025 and beyond that we can't sort of track week over week, how do we think about the role of, first, the expanded sales force? How much of the new 50 that you've hired recently have really impacted that, and how much of the growth that we're seeing is coming just from further penetration? And then how much is this recent DTC campaign that we've been seeing? I've seen it many times watching football. So I'm curious to see what you've seen in these first couple of weeks of the quarter based on that, and how should we think about 2025?
Yeah. Yeah. I mean, it's a little early to talk about. We'll talk about it more in detail on the fourth quarter call. But I would say the impact probably in the near term has been more by the incremental sales reps. The DTC campaigns typically take a little bit longer. They usually say it takes four to five views of a TV commercial ad before the patient activates and maybe goes to the website, finds a doctor, and then it could take several months before they actually get in to see the doctor. So it can take probably three to six months before you start to really see the lift from the DTC campaign. I would say we've been very pleased with the data we've seen from patients going to the website and being very activated by that.
It's not just clicking on the website and then going back to Google. They are diving in and looking at questionnaires. They're asking to find docs. They've been very engaged. We've been encouraged by that. That's one of the reasons you saw it on network TV as well. We decided, based on some early signs there, to dip our toes into the network TV there. We did it with some of the playoff games. We did it on the Golden Globes, as well as recently on the Grammys as well.
So when we think about 1Q spend, should we expect that to be increased from sort of what your previous guidance was, given you moved to network over streaming, which is probably a bit more expensive?
No, I think we're staying within those boundaries at this stage. So we've been very targeted in terms of that network buying. So I think we're still within the guidance that we provided previously.
Awesome. So there's a couple of other levers in 2025 that could impact things. The first one I want to talk about is MGD. So these are patients that have collarettes and have DB, but they're coming into the office with their primary complaint as MGD, or they're getting diagnosed primarily with MGD. So how many patients is that? And as the understanding of the link between these diseases increases, should we expect more people just looking at the slit lamp first, like DB would be the first diagnosis, right? So at what point should we expect to see all DB diagnosis versus MGD first?
Yeah. No, you're absolutely right, so essentially, these patients have both DB and MGD, and that's probably an incremental 1.5-2 million patients that are available coming into the doctor seeking treatment for MGD. The data we showed was pretty profound and really excited the eye care professionals. They basically had never seen objective measures of improvements in the secretions or the clearing of the glands like that ever before from a therapeutic perspective, and so our expectations are probably these patients are coming in and complaining about dry eye or being treated currently for MGD, and so what we're asking the physicians to do is take a look in the slit lamp and see if they have collarettes as well, and if they have collarettes, they probably have Demodex blepharitis.
And so why don't you try treatment with Xdemvy and see if that helps with both the MGD as well as the DB there, so.
Right. But it's probably easier just to look for collarettes than it is to do the expression of the meibomian glands. So I'm wondering, at what point did the physician, when you come in for any complaint, do they just look at the eyes first, right? Is MGD going to be something that people are primarily diagnosed with to get Xdemvy, or will it just be a secondary? I think that's where we're wondering. Are these going to be new patients identified, or are these patients probably already being treated or already active in the field?
So these MGD patients that we've highlighted and that nine million patients that we've targeted are coming in with the primary complaint of MGD. So yeah. But to your point, what we're doing is encouraging the doctors to take a look at all patients under the slit lamp. And if they've got the collarettes, they have Demodex blepharitis. So you should be considering all of your patients, whether it's the DB, MGD, cataracts, contact lens. And I think that number will grow over time because keep in mind, there's 25 million patients in the United States that have Demodex blepharitis. And so those numbers will likely increase over time.
Another potential lever would be potential retreatment starting in the second year. I know probably not a large percentage of that, but you did show retreatments in your clinical trials, so how should we think about retreatments moving forward, and I know I get a lot of questions on people trying to sort of model TRx, NRx sort of split to understand whether that retreatment rate is increasing. Can you sort of help us understand why that's probably not a good idea?
Sure. Yeah. It is challenging because of the unique nature of our therapy, right, where it is a six-week course of treatment. And typically, they only get a script for that one product. If the doctor says, "Allow refills," and the patient does refill it, that will be listed as a TRx, right? So the challenge will be where if the patient doesn't have that box checked and they maybe come in in the subsequent year, it'll probably be listed as an NRx. And so the way it's currently being tracked, it's probably under-reporting what the refills are. Right now, it's coming in sort of the mid-single digits. And over time, we'll be able to provide that data, but it'll be very difficult to see from a third party.
Right. Well, I was thinking sort of at steady state, if we're thinking about that seasonality question, like if you come in in January and you've been treated before and your collarettes are very severe, it might be a situation where that physician could write a script for a refill knowing that you might need one in six months anyway. Right? And so that's a little bit different from somebody having satisfaction over a year or two and then coming back when their mites get worse. So it really just depends on the severity of the patient. So I imagine that something we'll understand once we sort of hit a steady state in the launch and understand how many of these patients are coming back and how often.
That's right. And we have a registry that over time will be able to provide us some of that data as well that we can share.
Great. Actually, I want to move back just quickly to the gross-to-net and how that specifically we should model that for 1 Q and then throughout the year and what goes into your guidance when you're providing us with the gross-to-net guidance that you because you've sort of explained how you expect the cadence to be, but I sort of want to help us understand how you got to that.
Yeah, and it's evolving over time with IRA and Medicare, so it is a little bit complex. But, just as a reminder, we ended up with a gross-to-net discount in the third quarter of about 40% in total. But that included about a 3% reversal of a Medicare accrual that we had taken in the first half of the year and just a little bit of sort of nuance here. Most patients run through the donut hole in the first half of the year. Our patients don't seem to have as many comorbid issues, and so they seem to be not running through it in the first half of the year, but in the back half of the year. And so, because of not seeing that in the first half of the year, we had slightly over-accrued for that and reversed that in the third quarter.
So absent that change, it would have been about 43% gross-to-net discount. And what we said, because of that dynamic with our patient group, we expected to see more Medicare donut hole impact in the fourth quarter. So we expect that to increase by 1% - 2% in the fourth quarter. And then the typical manufacturer's dynamic in the first quarter where copays reset, patients change plans, we might need to bridge a little bit more. So we expect the gross-to-net to increase in the first quarter, gross-to-net discount, and then subsequently drop in the second quarter and then exit 2025 in the low 40s, say 41%, 42% gross-to-net discount.
Gotcha. So increase in Q4 and Q1, but then dropping.
That's right. Yeah. And that should be our steady state essentially when we exit Q4, somewhere around the low 40s. Of course, having that typical Q1 dynamic again like pop-up.
Yeah. And are you seeing a significant Medicare usage here and how is the IRA impacting things? And I'm just sort of curious how.
Early days on the IRA impacting. We're still taking a look at that. Our expectation is we won't see sort of that donut hole dynamic where it runs through the first half or the second half of the year. It'll be more even. But we do think a tailwind will be the fact that we've got the broad payer coverage now. So we did secure the last of the large Medicare payers in the third quarter. So that was one of the things we had heard from some of the physicians that it was challenging to get the medical exceptions through with Medicare patients. And now that we have the coverage, that should be a nice tailwind for us.
Got it. I want to move just in our last few minutes here to TP-04. Can you remind us what data you've shown already in rosacea and sort of what led you to sort of consider ocular rosacea as a new indication to go after?
Yeah. It's a rather unique story. So we had actually gone through the more dermatological approach. It's something called papulopustular rosacea. And we showed the typical sort of dynamics there in the rosacea. We saw a reduction in the pustules. We saw a reduction in the redness score there. We actually took mite counts as well off the skin. We knew that was a competitive area and there were some generics out there as well. And so our initial intent was to partner that with a derm company. But when we showed that data to some ad board members and KOLs, they were very excited about taking a look at this in ocular rosacea. It's an area that falls within their purview. It's a type of rosacea that's around the eyes. And there's nothing out there to treat them, inclusive of the dermatologic products that are out there for rosacea.
They're contraindicated for it, so they can't be utilized there, so after doing more market research there and talking to more physicians about this, we realized that this was a big opportunity with nothing out there to treat these patients, and so based on that, we had some discussions with the agency about a path forward there, and so we'll be initiating that study here in the second half of this year.
And so what do those endpoints look like? Is there a pathognomonic collarette equivalent there? And sort of how do you assume that these are patients that have rosacea due to mites where your product would be useful?
Yeah. So based on literature, the majority of these patients, it's probably caused by Demodex mites. And there are pathognomonic signs that are typical for this, much like Demodex blepharitis. And they can be seen in the slit lamp as well, too. So while you're looking for the collarette, you can also take a look and see if these patients have it. And it's typically sort of vessels that are on the eyelid that are not typically noticeable in most patients. And then, of course, the redness. There's almost like a raccoon-type effect there. And so the endpoints would be potentially something like a reduction in the vessels or a reduction in the redness that is seen in the ocular rosacea.
How long did it take? Remind us how long it takes for that cream or gel to kill the mites in that situation.
So on the clinical study we did in the derm, it was a 12-week course of treatment. And so what we're doing is we're developing an ocular formulation, an ocular sort of gel that will be utilized for this. And I would say stay tuned for more information on that as we develop it.
It seems like some of the docs that I've spoken with are using other non-approved creams for ocular rosacea, like.
Maybe ivermectin.
Yeah, ivermectin. Yeah. Dirty word. So it seems like these docs are familiar with prescribing non-retina ophthalmological products. So what is the sort of commercial build going to have to be to sort of convince docs to use a product that's not directly an eye product? Are they comfortable with that?
Yeah. So keep in mind that ivermectin is not sterile and it's contraindicated there and technically not reimbursed by the payers there. And so I think if we can show that our product is similarly efficacious and safe and easy to apply and we get the appropriate label there, we should be in a great space there.
And do you think this will be a what's the sort of scope of this clinical trial? Will this be how many patients do you think you need and how long would you need to treat them for and things like that?
Still developing the nuts and bolts on that, so we'll have some more data as time goes on that we can share there.
Maybe you can't answer this yet either, but how should we think about the size of that market, especially compared to the DB market?
Time will tell. I think we need to do a little bit more work, but it's thought somewhere between 10 million- 15 million patients have ocular rosacea. The vast majority of those are thought to be caused by Demodex.
And do you think this would be a situation where potentially patients would be prescribed both at the same time if they had collarettes and cream? And would there be some sort of commercial advantage to that?
Potentially. Potentially. Yeah. One of the things we've heard is that physicians that have treated patients with Demodex blepharitis, you see the redness of the eyes clear up and the Demodex blepharitis goes away, but they still have this raccoon-like view with the ocular rosacea. So you could potentially see physicians being a little more aggressive and saying, "Take both," right? Or you could just see them maybe do it in stepwise fashion as well.
Great. Well, we'll look forward to hearing more for that. Just our last 10 seconds because I have the CFO. Can you just remind us of your financial position and cash position?
Sure. Yeah. So we ended Q3 with $317 million in cash. And we also have a $100 million term loan that's available for us to tap into.
Have you said yet when you expect Xdemvy to be cash flow positive?
We have not yet.
Okay. Yeah. Thanks for being here.
Yeah. Thanks, Eddie.
Thanks, everyone.