All right, so I guess we'll get started here. Welcome, everyone. My name is Matthew Caufield. I'm a Senior Biotech analyst here at H.C. Wainwright. Our next speaker, our next guest, will be Tarsus Pharmaceuticals, and we're joined by Jeff Farrow, CFO and Chief Strategy Officer. So, Jeff, thank you so much for joining us.
Thank you for having us.
Welcome to Tarsus. To start off, maybe we could discuss the approved product XDEMVY at a high level, and what exactly are Demodex blepharitis mites and how that can affect eyelid inflammation.
Sure, happy to do so. XDEMVY was approved in August of 2023, and we launched shortly thereafter in September of 2023. The launch has gone very well, exceeded our already high expectations, but quarter over quarter, we've increased the number of scripts as well as revenues. I think it's important to highlight, too, that the way the drug works is it essentially attacks the GABA-chloride channels of the mites that we'll talk about in a second here and kills them and gets to the root cause of the disease, Demodex blepharitis. It's a six-week course of treatment. Take it once in the morning and once in the evening, and you get, we saw in our clinical study, 85% of the patients saw clinically meaningful improvement on their disease, Demodex blepharitis. Getting to the mites, we see that everybody has these mites.
It's, you know, everybody in the world has them on their body. There's no difference in socioeconomic status, ethnicity, socioeconomic status. It's all, everybody has it, just some people have an overproliferation of it. That overproliferation is the mites just migrating up into the eyelashes. They like that oily, sebaceous environment, and they push out bacteria, waste products, and other gross stuff that ultimately cause this redness, this irritation in the eye, this feeling of sand in the eye. In worst-case scenarios, it can lead to corneal abrasions and things like that.
Very helpful. Thinking about standard of care, so there's upwards of 25 million Americans affected by Demodex blepharitis. How is the condition formally treated and/or identified by optometrists or ophthalmologists?
It's interesting, yeah. I think most people say 25 million Americans, and I've never heard of Demodex blepharitis. It is a very prevalent disease. Prior to XDEMVY, you know, being launched in September of 2023, it was really sort of homeopathic medicines that were being used to treat it, and they weren't getting to the root cause like XDEMVY does, which kills the mites. They were really, there was lid wipes, which were essentially just wiping away the collarets, which are pathognomonic for the disease, or tea tree oil, which, you know, could kill, you know, some of the mites, theoretically. The problem is it was, it stings the patients. It's not very efficacious. There was nothing really efficacious out there for the eye care professionals to treat these patients until XDEMVY came along.
It really was a game changer, category creators, we like to say, and it provides now doctors an opportunity to meaningfully impact these patients' lives by treating them with our drug.
Great. I mean, I don't want to underemphasize this. There's been a tremendous start to the XDEMVY launch. This includes $180 million in net sales full year 2024, $78 million in first quarter 2025 alone. So you guys have generated over a quarter of a billion in revenues for a new product, which is really incredible. Can you discuss some of the driving forces around the launch success?
Sure. No, it's really, I think, a confluence of events that really have led to the success. It's really thoughtfully thinking about the opportunity, educating the eye care professionals on the disease state ahead of the launch. It was educating the payers on the importance of treating these patients and showing that there's a pharmacoeconomic benefit to treating these patients with this therapy versus some of the unefficacious therapies that were out there before and having these patients come back to the doctor's office over and over again. I think one of the highlights that we saw was out of the gate, there was a quick awareness of the disease by the eye care professionals. We're still doing some disease education. You know, it continues to grow. We're targeting 9 million patients that are actively seeking care of some sort that are going into the doctor's office.
It is something that the payer coverage was well ahead of where we anticipated. If you look at analogs, you know, well ahead of what most drug launches have done, we got commercial coverage within 12 months. In the back half of last year, we got Medicare coverage. The importance of those two is we have 45% of our patients are thought to be commercial and 45% are Medicare. We are now at 90% payer coverage, which has been a big benefit, you know, for our patients, but also for the launch fundamentally. We recently, you know, have been focused on driving depth within the 15,000 prescribers that we are targeting. We hired 50 incremental sales reps in September of last year.
They really hit the field right after Labor Day and have been, you know, telling the physicians that they should look at all their patients. It's very easy to diagnose. You commonly go in for an eye exam, you put your head in the slit lamp, you ask the patients to look down, you could see this collarette buildup there, and that is pathognomonic for the disease, as I had mentioned before. It's very easy to diagnose. We know there's no such thing as an asymptomatic patient, that all these patients that have these collarettes have some sort of deal problem with the disease that they've got. It's really, that has been something that's been a new initiative that we kicked off in the fourth quarter and, you know, having the eye care professionals just be reminded to take a look at all of their patients.
That has been something that's been recent. We recently launched our direct-to-consumer campaign, started with streaming and then have moved on into network TV recently, starting in the first quarter of this year.
It is a very entertaining commercial.
Oh, good, good.
If you haven't seen it, I recommend checking it out.
Very memorable.
That's very helpful. I appreciate that. So thinking about the prescription trends, do you get a sense that the initial commercial success has been affected at all by the substantial pent-up demand for an approved therapy, or do you feel that these growth trends can be continued in the coming quarters?
No, that's a great question. We've gotten questions about it, you know, was this a bolus that was waiting for, you know, some therapy? No, we think the growth will continue and we're just at the cusp of it, where, you know, as I highlighted earlier, we're going after about 9 million patients that are going in actively seeking, you know, treatment for either Demodex blepharitis, MGD, contact lens intolerance, cataract lens surgery. We've issued probably about 200,000 plus scripts. We're just really scratching the surface there. There is a big opportunity here that will continue to grow. That's why we're continuing to really make investments in the DTC campaign, making the consumers aware about this disease. That seems to be resonating quite well.
We see that through active insights on our website traffic and the fact that they're spending time on the website, not just one click, but they're actually taking quizzes such as, do I have Demodex blepharitis or seeking a doctor? You know, where can I find a doctor? It is really engaged activity that we're seeing there. Long story short, we think it's a long, we have a long opportunity there. We do think it's a billion-dollar-plus opportunity as well.
Very encouraging. I mean, at this stage, do you feel there's more educational work to be done on the prescriber side or the patient side? Is there a way to differentiate between those two?
I think we can do, continue to do both, right? I think, you know, there are, you know, we've touched all the 15,000 doctors. Some of them are actively writing daily. Our goal is to get the doctors to move some of the, you know, slower prescribers to move from monthly prescribing to weekly prescribing to daily prescribing. I still think there's some education that we can do on that front. That's what the sales force is doing. On the consumer front, I think we've got some, you know, you know, sort of heavy lifting to do there, right? Because it's a relatively unknown disease. That's why we kicked off the DTC campaign in the fourth quarter of last year and are making more investments in 2025.
It is really about disease education, getting patients to see if they've got some of those symptoms, taking the quiz on the website, you know, making an appointment with a prescriber, and then seeing through, you know, that ultimate visit to see if they need to get a script at that point. I think we have probably a little more education on the payers, on the patient side, but still some room to, you know, further educate on the prescriber side as well.
Understood. Now, are there ever repeat patients, or is it typically that, you know, that they're cured effectively with the one prescription, or can they have a recurrence? Is that sort of a minority?
What we saw in our clinical study that we saw in month six to twelve, we saw about 40% of the patients started to see collarets again. We started to see a recurrence of it. It's likely because the mites are migrating from other parts of the skin, maybe the cheek or the hair back into the eyelashes. They like this oily, sebaceous environment, so they tend to migrate back there. That 40%, what we've said to the street, absent, you know, real-world data at this point, or lack of material real-world data, is, you know, thinking about maybe 20% of the patients returning on an annual basis. Absent, you know, getting some more registry data, more real-world data, that's probably our best proxy for now.
Fundamentally, we do think most patients will recur, but whether they come back in six months, 12 months, 24 months, we'll have to see. We're gathering, you know, more scientific evidence there.
That relationship's already established at that point with the prescribers.
That's right. That's exactly. Yeah.
Excellent. Thinking more broadly to the global opportunity, can you walk us through the XUS opportunities and considerations around preservative-free formulation, stability trials, potential commercialization in Europe, maybe partnership conversations that could be on the horizon or presently?
Sure. We are taking a look at Europe as an opportunity, the typical big five in Europe and also Japan as well. We're doing some payer studies over there as we speak to think about what the pricing dynamics might be. In the process of doing the modeling, does it make sense for us to do it ourselves and build an infrastructure, or does it make more sense to partner there? Of course, with the recent news on the executive order, we're following, you know, most favored nation impact as well. To your point, we have some work to do on the regulatory/manufacturing side. We probably wouldn't see a launch in Europe at the earliest until the second half of 2027. What the real gating item there is, the manufacturing in Europe, they typically prefer a preservative-free single-use formulation.
We need to essentially perform a stability study for 12 months on that preservative-free formulation. We've kicked that off, but that's really kind of the gating item. Fortunately, the European regulatory agency has said that we don't need to run any incremental studies. It's really just about this manufacturing side. Once we have that data, we'll be able to submit that and then hopefully get approval in the second half of 2027.
Okay. Excellent. Another great opportunity as well.
That's right. That's right.
Thinking about the pipeline, there is further development for ocular rosacea, eye and eyelid inflammation caused by the Demodex mites, and development that targets the tick-borne infection, Lyme disease. Can you discuss potential read-through and/or de-risking from XDEMVY success for the near-term pipeline?
Sure. We are excited about both of those programs. I think the nearest term winners in the ocular rosacea space. And just by a little bit of a background, most people probably haven't heard of ocular rosacea or think about it as rosacea. It's something that's a little different. It is really just around the orbital region of the eye, while rosacea can cover more of the face. Typically, the ocular rosacea is treated by the eye care professionals as opposed to dermatologists. When we showed some data in rosacea, we were initially studying it in something called PPR, which is a form of rosacea that, you know, creates these pustules and then you also get this redness. We saw clinically meaningful improvements in the rosacea as well as a reduction in the pustules as well.
We had always thought about partnering that out to a derm company just because it's not really within our space. As we showed this data in various forums to eye care professionals, they said, "Have you thought about looking at ocular rosacea as an opportunity? It's something I see in my practice all the time, and there's absolutely nothing out there from an FDA-approved therapeutic perspective that can help these patients." The more work we did there on the market research side, taking a look at this, you know, from a literature perspective, but also talking to the doctors even more, this is a really profound disease. It impacts about 15-18 million patients. The vast majority of those patients are the ocular rosacea is caused by Demodex mites. We know we're very good at killing these mites.
We have developed this gel formulation of XDEMVY that would be utilized to sort of cover the eye orbital area because an eye drop is obviously not the best way to penetrate the skin, and it's obviously a lot more messy, you know, if we were going to go down that pathway. That is a program we're going to start in the second half of this year. We do have agreement on the endpoints with the agency and the path forward. The two endpoints that are meaningful to the patients as well as to the FDA are the rosacea, the reduction in the redness, as well as another telltale sign of ocular rosacea, which is this inflamed vessels that you get on your eyelids. It's another hallmark of the disease. We are developing a scale.
This is, you know, all new because there hasn't been any kind of clinical studies done in ocular rosacea. We're developing a scale to measure each of those. Of course, that'll be really important to make sure that we get consistency of that measurement across clinical sites and physicians. We're spending some time making sure we really develop a great scale that is replicable, you know, in different offices. That is what we're doing. That's what will lead us into the phase two study starting later this year with top line data in the back half of next year. An exciting opportunity, same call point as what we're currently detailing, big patient population, unmet need. Obviously something very exciting for us. It will drop in our bag of our sales team.
Comparable root cause.
Exactly. Exactly. Yeah. So it's a neat program and something we hadn't initially thought of until we listened to the doctors on this. You know, which is kind of in our DNA now is to really sort of focus on what the doctors say and what they need. And then on Lyme, you mentioned Lyme disease. This is, again, something hugely unmet in terms of what, you know, can happen to these patients, particularly in the upper northeast and the middle part of the country. It is, we're starting to see it march across the country with global warming. We even have some cases in California as well. Big unmet need really to help these patients from a prophylactic perspective. There is a vaccine in development, but it does require multiple injections before you get to therapeutic levels of antibody and then annual boosters.
Our therapy has a potential to be an oral prophylactic that kills the tick before it transmits the bacteria that causes Lyme disease. It's not an immediate transmission. It essentially takes 24-36 hours to transmit that bacteria. We showed in our phase two study that we can kill the ticks. We killed 98% of the ticks within 24 hours. It's durable to 30 days. The goal here would be, or the ideal use case would be something like something you'd have to plan way in advance, years in advance. Say with a vaccine, you could take something the night before you go into an area that's endemic for ticks and Lyme disease and be at therapeutic levels, you know, by the next morning and then have therapeutic coverage for about 30 days.
You could think about maybe a pill once a month for three months during the tick season, the Lyme season. We're going to, we've had some discussions with the agency. We've got a path forward there. With a phase II-B study that we're looking at, we'd be looking at various biomarkers for Lyme disease, blood-based biomarkers. We're looking at kicking that off in the 2026 timeframe and starting the planning for that. Ultimately, though, we do think this is probably better suited for a partner of size, perhaps a pharma company or somebody that's in the vaccine or infectious disease space that has maybe a GP call point or has other experience in this area. Because the study for the phase III, the agency was very clear that we need to do a Lyme disease prevention study.
In that case, you're talking, you know, anywhere from 7,000-8,000 patients that would need to be studied in a placebo-controlled study. A very expensive study. The fact that, you know, we're not really focused in that area, we don't have that as a call point. We think this is probably better to partner, you know, either prior to the initiation of the phase two study or subsequent prior to the initiation of the phase three study.
Got it. And then kind of along those lines, thinking about cash runway, you had the $135 million raise and then approximately $408 million on hand as of March 31, the end of the quarter. This would seem to cover much of the near-term strategy, presumably. Are there kind of timeframes for the runway?
We haven't given any specific guidance on cash flow break even at this point. We're still holding tight on giving revenue guidance at this stage. The real gating item there is to see the impact of network TD on the back half of this year. I think we'll be in a good position to provide that type of guidance. To your point, I think we have a healthy balance sheet, certainly sufficient to, you know, help us capitalize on the opportunity and extend the endemic blepharitis and start the physical studies on both ocular rosacea as well as the phase II- B study in Lyme disease as well. In a good position from a balance sheet.
Very exciting. I know we're in our last minute or two, but I know we also covered kind of different timeframes during our conversation. For near-term catalysts, what are you most excited about in terms of the early commercial progress for XDEMVY and then also sort of the next steps for the pipeline in terms of timeframe?
Sure. So I think, you know, quarterly script numbers is probably, you know, the key thing that everybody's looking at. We're certainly looking at those on a weekly basis. We think there's plenty of room to grow, you know, there. We do expect some summer seasonality. We've guided to this in the past. We've seen it across the eye care space. It's slightly flatter growth in the third quarter, but acceleration in the fourth quarter.
Interesting.
I think, as I highlighted, you know, we're waiting to see the impact of the DTC campaign and network TV. We expect that in the back half of this year. We should see further acceleration there. On the clinical side, I think the start of the phase two study in ocular rosacea will be something that we're really targeting there as well as the proof of concept readout of that in the back half of 2026. The initiation of the Lyme disease program potentially in 2026.
Great. Anything about the XDEMVY platform or the commercial progress to date that you feel is underappreciated by the market presently?
I think we really, it's cliched, but we really do have a pipeline in a product, right? You know, it's all the same active ingredient in different formulations for, you know, big unmet needs that not, you know, just from a revenue perspective, but from a patient perspective, right? Nothing out there for ocular rosacea and then everybody knows how tragic Lyme disease can be. I think the ability to build on that knowledge and continue to, you know, help treat patients is something that I think is, you know, perhaps not quite seen by the investors yet because, you know, frankly, we haven't started the ocular rosacea study or the phase 2b study, but I think it is something that's an exciting opportunity for investors.
Absolutely. A relatively straightforward mechanism in terms of getting to the root cause of Lyme disease.
Exactly. Exactly.
Great. With that, Jeff and Tarsus Pharma, we really appreciate your time and we enjoy the story and we'll definitely look for the catalyst this year. Very exciting.
Thank you, Matt. Thanks for having us.
Thank you.