All right, great. Thanks, everyone, for joining on Day 2 of the Oppenheimer Healthcare Conference. My name is Frank Brisebois . I'm one of the biotech analysts at Oppenheimer. Next company presenting here is Tarsus Pharmaceuticals. I've covered Tarsus with an outperform rating. It's been a great story. So thanks for joining. I know you guys are busy. Lot going on. Launch is going on. We're looking at new indications as well here. A ppreciate the time. In terms of a format, we're just going to do a fireside chat. We've got a good chunk of the team here to go over some stuff. So thanks again, and just for those that might not be as familiar with the story, if you could just start off and let us know what Tarsus is, what you guys do, and where you're at at this point.
Sure. And thank you, Frank, for having us here. We really appreciate attending the conference. Tarsus is a commercial stage company really dedicated to creating new categories in eye care. Since our founding, we've been really proud of the fact that we've done things very differently, really intentionally focused on the disease area, how we develop and deliver new medicines, really focused on the root cause of the diseases. And as part of that, we've established a really great culture that we're very proud of. We're one of the top-rated biotech companies to work for. That's something that we're aiming to continue. Our commercially approved product is XDEMVY. It's for the treatment of a disease called Demodex blepharitis. It's highly prevalent, a disease of the eye, and it impacts as many as 25 million Americans. It's essentially caused by infestation of these Demodex mites.
We all have them, but some people have an overproliferation of them. And our therapy is the only FDA-approved therapy for this disease, and it targets the root cause. It kills these mites. 2024, as you've highlighted, Frank, has been a great year. It's our first full year on the market, and we look forward to even more growth as we look into 2025. We also, as you highlighted, identified another white space opportunity in ocular rosacea. This is a disease also thought to be caused by Demodex blepharitis, and we know that our therapy is very efficacious on killing those mites. And so we think it's an exciting area that has no other therapies out there to treat this disease. And then we also have a pipeline product that probably is best suited for a larger company. It's a potential prophylactic treatment for Lyme disease.
We had some exciting phase II data that we presented last year, and we'll have an update on our fourth quarter call, more about that. I would say our focus has really been on sort of four characteristics. I think that has driven the launch really well is evidence generation, continued education of the eye care professionals, making sure that patients had ease of access, and fundamentally execution. And that's something we take with us as we think about moving into ocular rosacea and other disease spaces. Through the end of the third quarter, the nine months ended Q3, we had served well over 100,000 patients. We have engaged all of our 15,000 ECPs, and about 13,000 have written at least one script, with 70% of those writing multiple scripts.
Really great penetration within that eye care professional group, and they continue to be very impacted by the efficacy and the safety profile. W e could expect that to continue to go forward. And as part of that, we've generated revenues of over $113 million in net product sales for XDEMVY for the nine months ended Q3. But we've got a lot more to go. Those over 100,000, we're targeting actually nine million patients that are going into the eye care professionals' offices. W e're just scratching the surface on the opportunity here. A s we think about growth levers, I think there's a couple of things that we're thinking about. One, we've got broad coverage now. We have over 80% of the patient population covered. And most recently, we announced that we've got Medicare covered as of Q3.
W e think that will open up the opportunity for some doctors that were saying, "It's just too difficult for me to go through the prior auths and medical exceptions for Medicare patients. I'm just going to wait." So we expect that to be a driving force. We've also increased the sales reps by about 50%. We're having 150%, started at 100%. And then we've initiated a direct-to-consumer campaign, and I know you've seen the ad out there as well, Frank, and it seems to be pretty impactful. We get some really great feedback on that. And then I highlighted ocular rosacea. We talked about this at J.P. Morgan. It's, again, a white space. We think there's about 15 million -18 million patients in the U.S. that are impacted by this disease. It's also easy to diagnose, much like Demodex blepharitis. You can see it in the slit lamp.
It's characterized by redness around the eye and a proliferation of vessels in the eyelid as well, and we're looking to start a phase II study in the back half of this year there with a data readout in 2026 from a proof of concept, so to wrap up the quick summary, we think there's much more we can do here. We do think that XDEMVY has blockbuster potential, and we've got some other exciting category creating assets in our pipeline, including ocular rosacea and Lyme there.
Awesome. Okay. That was a very—I think we can stop here. I think we're good.
See you later.
See you later. Good. No, great. And so I think the big question is, obviously, you've got your doc penetration. You've reached out to all of them, the 15,000. I guess the question is, for the growth going forward, what are the biggest challenges? How can investors feel comfortable? And part of the answer here is, can you touch on these repeat writers? And because of the curative nature of the treatment, are these patients coming back, or is this still an NRx market here?
Yeah. I can give a little bit of color there, Frank. I think you're hitting on some of the key elements of our strategy going forward, which is to really drive the depth of adoption. If you think about 2024, it was the year, the first full year of launch, and there were a couple of key things we wanted to establish in that first year, which is great trial by the physician community. And as of our third quarter earnings, we shared that 13,000 of our 15,000 doctors have already tried the product, right? W e've got over 80% of the market tried it. And of course, that number has grown since we reported earnings, and we feel really great about our initial use in the market that almost every doctor we talk to that would potentially write a script has written a script.
The second thing we want to establish is, as Jeff mentioned, the ease of access, that coverage to make sure that the process for both physicians and patients was easy. Now that both of those things are accomplished, 2025 is really about driving the depth of adoption. W e're not even thinking about repeat prescribing anymore. We're thinking about doctors that are writing this once a month, once a week, once a day, multiple times a day. And how do we move physicians down that progression of utilization and deep adoption? The tailwinds we have there are, again, the ease of access, as Jeff mentioned. That's probably the biggest hurdle we heard through the end of the year, particularly for those Medicare patients where we could potentially get it covered, but the process was cumbersome for the doctors, multiple rounds of PAs and/or letters of medical necessity.
In some cases, these patients are getting free product, and I think as evidenced by our gross- to- net progression, we've been able to bring the free product down and really leverage the coverage. We want to continue to do that, and where we have the opportunity with coverage in 2025 is that ease of access, right? The process is much more straightforward. It's covered. It's on formulary. If there's a PA, it's very simple and intuitive, and we've got a great pharmacy program to pull that through, so the coverage is a big tailwind. Second tailwind is continued evidence generation. There was data released at the end of last year around Meibomian gland disease. This does two things. It's expanding our TAM. We had about 7 million patients at the bottom of the funnel. This expands it to about 9 million patients.
These are patients at MGD, dry eye, cataract surgery, and contact lens. This gives the doctors another reason to treat as well. It expands the market opportunity at the bottom of the funnel, but it also creates significant evidence for the doctors to say, "This is a reason to treat Demodex. There's significant incremental benefits that I wasn't aware of," where we can talk about the improvement in things like fluctuating vision, as well as the redness, the crusting, and the gland function, which are objective measures of disease. The second one is that evidence generation. The third is increased horsepower. This comes in two waves, right? The increased sales force that Jeff mentioned, we're able to get to these doctors more frequently. The number one driver of increased use is increased visits from our sales force because they can continue to drive that conversation.
And the other lever there is our consumer efforts, which we just started in the fourth quarter, getting patients to raise their hands, streamlining that conversation for the patient and the doctor, I think, is also going to be a great catalyst for us, so three big pillars to drive that depth of adoption to move from that trial, right? Where we were talking last year about how many doctors have tried the drug, we're now getting to how many doctors are using this on a routine basis, either once a month, once a week, daily, or multiple times a day. The last part you asked about was, is this still an NRx market? I think for the most part, in this part of the year, it's going to be an NRx market. I think it's still early days.
The number of patients that were treated a year ago relative to how many are getting treated today is still a small numerator over a much larger denominator. But I think that's something we'll track. If folks are looking at secondary data like IQVIA, you're probably seeing a mid-single digit refill rate or repeat treatment rate. That's consistent with how we see it. And that's something that we expect to progress as this year moves on. But our focus right now is to continue to drive that depth of adoption and getting these doctors to really implement XDEMVY and treating DB in their practice.
Okay. Great. And on the MGD side, what can the sales force do here? Is it in terms of labor or promotion or evidence? How can they bring this up to doctors?
Yeah. W e've got a pretty robust effort across multiple fronts, right? There's the scientific platforms, the conferences, and I always remind people on eye care, the most powerful dissemination of data comes from thought leaders and at the conferences. So that's a big pillar of our strategy where this data was presented at the Academy of Optometry last year. It's slated to be presented multiple times in the first half of this year at major conferences. The thought leaders are very excited about it. They're talking about it from the podium unprompted. That's a huge lever for us. We've got a very robust medical affairs effort where we can do data exchange. And then the sales force can talk about the benefits of treating DB in different patient types, whether that's an MGD patient, a cataract patient, a DB, or a contact lens patient.
I wouldn't say that we're relying on any one of those individually. We're thinking about a holistic effort across multiple fronts to get that data out there. And the one thing I can tell you is every time doctors are exposed to that data, they get very excited. And doctors are saying, "Wow, I've been treating. I've been using XDEMVY. I've been good success." It's consistent with what I'm seeing, but this is actually incremental information that's going to motivate me to think about more patients.
Okay. Great. And then you talked about IQVIA. It's obviously a funky time. You guys are about to report in a few weeks or so. But I was just wondering, I think you had mentioned on the third quarter call that it seemed like there was a little bit of an overestimation on the IQVIA side. In general, it's been a little bit of a nightmare to try to predict what's going on here with the correlation between IQVIA and the numbers. Any comment there? We saw your guidance of $50 million to $55 million. Obviously, IQVIA looks great, looks above that by quite a bit. But I just wanted to make sure people kind of heard your comments in the past about overestimation.
Yeah. No, thanks for highlighting that. That, we did highlight that on the third-quarter call, that IQVIA has been running a little bit higher than typical. I think people that have been following us have seen the delta being around 5% previously. That spread has increased, and we've been working with that third-party provider to try to help them, but they have their own algorithm. It's somewhat of a black box, and so they've been slow to implement any changes. But that number has continued to spread, so we stand by our guidance of $50 million-$55 million. We've gotten pretty good at that looking one quarter ahead, so I would say, think about looking at our guidance as really being kind of the baseline.
Okay. Great. And then on the seasonality side, and you've been over this on some of the calls, I just want to make sure people understand not just the TRx, but also the gross- to- net. And there's been talks about donut holes. I just want to make sure everyone understands what that means.
Sure. Yeah.
And so any look there on the first quarter, second quarter, third quarter, fourth quarter seasonality on both TRx and gross-to-net?
Yeah. So the gross-to-net that we had in Q3, we ended at 40%, but that included the impact of about a 3% or $3 million reversal of an accrual related to that donut hole that you had highlighted. And the donut hole is really something that impacts Medicare patients, and it reflects sort of our contribution to that payment. Typically, patients run through it in the first half of the year prior to IRA, meaning last year. We did not see that. We saw that really more impacting us in the back half of this year. And so absent that adjustment, the gross-to-net would have been about 43%. And we expect that to increase in the fourth quarter by 1 to 2 points.
And then looking about 2025, much like every other manufacturer out there, there tends to be a little more pressure on the gross-to-net. W e expect it to go up a couple of points from the Q4 number as well, just because of the copays and people changing plans and various other support that we might provide. But it should decrease quarter over quarter from there. And we expect at steady state to be in the low 40% for our gross-to-net discount. On the seasonality and the sort of scripts dispense question that you had, Frank, what we expect to see in the first quarter is growth, but probably more muted growth than what we saw between Q3 and Q4, much like every other manufacturer. A lot of patients defer going into the office until the second quarter.
We do expect sort of relatively, I would say, more of a muted growth than what we saw in Q3 to Q4. But we do expect to see a ramp up in Q2 pretty materially. And then you might remember we had some summer seasonality that we typically see in the eye care space where the growth sort of flattened again in the third quarter. But then again, we expect to see robust growth coming off into the fourth quarter between Q3 and Q4 there. So that's sort of how we anticipate that seasonality to play out there.
Okay. And the DTC side, so how do we know this is working? Are we looking at website visits? And how much depth can you look into those websites? Is it just how many times they're clicking? How much do you know of the impact of the DTCs?
Yeah. No, it's still early, right? If you think about DTC campaigns, they do take some time to really build. Patients typically have to see the ad multiple times. They have to make an appointment. They have to get in and get the prescription. So there's definitely some time to build that effort. We do track some of the metrics very closely, as you mentioned, the website traffic. But even within the website, we're able to get pretty granular to see what patients are doing on the website, right? Are they just looking at information? Are they trying to find a doctor, right? There's a tool on our website. You put your zip code in. That's typically indicative of somebody wanting to go make an appointment or they're downloading patient brochure materials. Are they taking a quiz? Are they self-identifying?
We focus a lot on those high-value actions, things like finding a doctor, taking a quiz, which would be indicative of a patient that's priming themselves to go make that visit. And as we see those metrics progress, as we did in the fourth quarter, we saw some positive signals there. We've progressed our efforts. So if you recall, we started in the fourth quarter with a streaming effort across multiple streaming platforms. At the beginning of this year, we progressed that to trialing some things on network TV. People may have seen we had some spots on the NFL playoffs, the Golden Globes, the Grammys. And the early read on those are pretty positive. But again, it's still very early to say what the long-term prognosis here.
But if we continue to see great results, we would certainly look to scale that effort over time because we do think ultimately, as we build this market, that the consumer or patient activation is a critical component here. It's a very consumer-friendly disease state. It's a very intuitive, right? You've got a very clear mechanism of action. People can understand what's the cause of the disease. You've got a clear solution with XDEMVY. And there's great precedents in the eye care space of DTC being effective. W e do think, and we're optimistic, that this will continue to be a great driver for us. But I think I want to be mindful about where we are in that process today. And it's still early, and we're learning a lot, but we're pleased with what we're seeing so far.
Awesome. And then ocular rosacea. Or should we stay on DB for longer? Should I have asked anything else on the DB side?
We're pretty good.
Okay. Excellent. I think I just want to give enough time to ocular rosacea because I think it's interesting. It was just brought up at JPM. You guys spent a little more time on it. And what's interesting from my perspective is this was brought up to you guys by the physicians. Is that fair?
Yeah, that's absolutely right, Frank. I think as the doctors were examining the patient's lids, looking for collarettes, they started noticing the redness around the lashes, around the lids, as well as prominent blood vessels. These are all the hallmark features of ocular rosacea, and as they started seeing more and more of this, they weren't paying particular attention because they were not really looking at the lids the way they started doing this, and as they saw it, they came to us and said, "I'm seeing more and more of these ocular rosacea patients," and then as we started digging in, they don't have really an option to treat well. They don't have a lot of options that are really addressing the root cause and treating it well. There is no approved product in the market for this particular condition.
As we further explored this particular disease, we found that it's widely prevalent. It's actually a fairly highly prevalent condition or disease. Roughly 15 million -18 million patients have this condition. This is what gave us a fuel to further look into this area. Not only that, we actually conducted a study in papulopustular rosacea about a year ago as we provided the phase II results, which are very robust results that actually resolved a lot of the features of the papulopustular rosacea, which is just on the face, on the cheeks, and the forehead, and the nasal area. Ocular rosacea is really the same disease. It's an extension of that condition, but the manifestation is in the eye, is in and around the eye, within the orbital of the eye. That gave us a lot of confidence.
Both of them have very clear Demodex link. Demodex mites is one of the major root causes of ocular rosacea. Majority of the ocular rosacea patients also have Demodex infestation, so it's a very clear connection to us, an extension of Demodex blepharitis, and that gave us a lot of confidence to go into this particular disease, and we are very excited to further develop this particular condition, and as Jeff mentioned earlier, we will be doing, and we'll be starting our phase II trial in the second half of this year, and we are really excited and looking forward to those studies and the results.
This is a gel formulation?
Yeah. So this is the same active as XDEMVY, lotilaner, which is, again, the root cause is the same as Demodex mites. So our approach is to kill the mites and resolve the condition. So it's the same drug, but it's a highly customized ophthalmic gel. It's a sterile ophthalmic gel that is customized for application on the eyelid. So this is not an eye drop like XDEMVY, but this is formulated to apply on the eyelid where the disease is presented. On the eyelid, around the eye, on the periocular skin, the skin just below the lower lid, and all the way into extending into parts of the cheek. So that's really what it's designed for, and it's a slightly different concentration than XDEMVY because it's a different tissue that we're applying to. W e have developed a new product, new formulation for this particular condition.
What are the patients with ocular rosacea currently using?
They don't have a lot of options. As we looked into it, talked to a lot of physicians, they typically give them oral antibiotics because rosacea has been a pretty common treatment. They use other measures such as IPL to relieve some of the symptoms of these conditions. Really, they're treating the symptoms rather than the disease itself in many cases. And that too, not very well because they don't really have a clear option. There is no drug or therapeutic that is designed to apply on the eyes and really relieve the major features of the disease.
Okay. And is there any reason to believe that the ocular rosacea would actually just get better from XDEMVY itself? Or is this really a different area where you need to do this on top of XDEMVY?
Yeah, we think this is really a unique condition that is manifesting in other parts of the eye. Obviously, the link is the Demodex mites. If you have Demodex present, that's going to have that impact. But when you apply the eye drop for XDEMVY, for Demodex blepharitis, the drug actually reaches the eyelid margin. But really, the manifestation is not only on the eyelid itself, but also on the periocular skin. So XDEMVY doesn't necessarily reach those areas. W e don't think XDEMVY is going to be particularly effective. It may have some effect. It may have some effect on the lid itself, the lid margin. We know that XDEMVY reduces the lid margin erythema from our DB trials.
There may be some partial effect, but to get the full effect on the entirety of the eyelid and skin around the eye, you need to apply it directly on that particular area.
And on a strategic level, maybe this is more for Jeff, but are we busy enough sort of thing? We have ocular rosacea now. We have Lyme disease prevention, where that would probably be more of a partnership we discussed with stay to ophthalmology. But is M&A even on the table for you? Can you just remind us maybe a touch on strategically, where is Tarsus kind of heading with also mentioning the balance sheet right now and where you guys stand?
Sure. Yeah. No, the beauty about the ocular rosacea program is it will fit within our sales rep's bag. It's the same call point. So you couldn't ask for a more strategic fit there. But on the M&A front, I think we do want to be an eye care leader. And we're focused right now on the anterior segment because that's really something that we're adept at at this point and have the sales force there. I would say from a capital allocation as well as time spent, it's really all about the launch at this point. With the increase in sales reps, our focus on the DTC, now that we've got the broad coverage, that is really our focus.
I think as we think about the back half of the year, we could think about, given our balance sheet as you highlighted, really focused maybe some preclinical assets or early-stage clinical assets that could ultimately develop into something that would be a product and we could drop into our bag, but as time goes on, we could look to larger potential acquisitions. I think the other thing that would be very synergistic is maybe an on-market commercial asset that is a front-of-the-eye asset that perhaps is sitting lower in the priority of a sales rep's bag that we could take on, increase sales, but even more importantly, have another reason to talk to the docs about XDEMVY and continuing that dialogue there.
Okay. XDEMVY and ultimately even maybe ocular rosacea. So it's a constant kind of reminder because docs, this is a very promotionally sensitive group of physicians. Is that fair?
They are. They are. And they are, fortunately, willing to be educated and talk, but you have to have something to talk about that's unique and new at some point. They're like, "If you don't have anything new, it's like I know everything about XDEMVY and Demodex blepharitis. I don't need to see anymore." So having that incremental time to talk with them will be helpful.
Yeah. Okay. And optometrist, ophthalmologist, what's been the easiest or hardest? Has it evolved? Was it mostly split half and half, and now it's mostly optometrist? Or how do we - what's the learnings there?
Yeah, we've seen great acceptance and feedback from both sides of the market, both ophthalmology and optometry. I remind folks our target audience is about half and half. As it sits today, the volume is probably about 60% optometry and 40% ophthalmology. But we see great progression in prescribing habits across both fronts. And I think it's because the patient types are there relevant to both audiences, right? So if you're an optometrist, medically minded, you're seeing a lot of these dry eye MGD patients. You have contact lens patients. If you're an ophthalmologist, you have a high-volume cataract surgery practice. That's becoming a very intuitive area to look for Demodex blepharitis. And it's also very compelling for them when they think about the MGD data, where we talk about the impact on fluctuating vision.
So if you're an ophthalmologist, that's very compelling, particularly if you're doing surgery on a patient to optimize their vision. You certainly don't want to do a great surgery and have the patient complaining about fluctuations post-surgically. T here's compelling reasons on both. We're seeing great feedback on both. And I think the other thing we remind folks of is on the optometry side, there is a little bit of additional tailwind in terms of reimbursement, where we do see a trend where optometrists are shifting their vision visits to medical visits. And what we've heard very clearly is that identifying and treating Demodex blepharitis is a catalyst to do that. And that's important because a medical visit for an optometrist typically reimburses about 2x what a vision visit does. So all those initial visits are vision.
They're coming in for glasses or contact lenses, and the doctor's able to make a definitive medical diagnosis, and they've been doing this in dry eye, glaucoma, etc. But now they see an opportunity with Demodex blepharitis, and they say, "Okay, now I can manage and treat this disease. This is another way I can treat these patients more holistically and medically," so that's a great tailwind for optometry. But likewise, in ophthalmology, we're seeing that surgical uptake, the relevance of MGD in dry eye as well, so really, really excited that every time we go to conferences, it doesn't disappoint. The doctors are excited. We still have long lines out the booth on both the ophthalmology front and the optometry front, and I think our upsized sales force is going to continue that momentum as they're able to get to those doctors more frequently.
Awesome. I think we're right on time. This was all super helpful. Thank you, guys. Is there anything I should have asked that we didn't get to?
No, I can't think of anything else. That was pretty complete.
We got to all of it. We almost stopped five minutes in, too. So it's good. All right, guys. Appreciate your time.
Thanks .