Hello, everyone. Thank you for joining us. I'm here with Aziz Mottiwala, Chief Commercial Officer of Tarsus Pharmaceuticals for our fireside chat. Aziz, congratulations on all of the progress since the launch in the recent quarter. It's been really amazing to follow the trajectory of XDEMVY over the last two years. You provided guidance on the quarter for 3Q, and that was 95,000 - 100,000 bottles distributed for 3Q. Walk us through what this contemplates or necessitates in terms of prescriber engagement, particularly as it relates to the metrics you've been providing us, total prescribers and weekly prescribers.
Sure. Maybe before that, I'll just give a quick overview of the company. First off, just pleased to be here. Thank you for the opportunity to be at the Wells conference and provide an update on what we're doing at Tarsus Pharmaceuticals. We think about Tarsus Pharmaceuticals, Southern California-based biotech company, fully integrated commercial and development stage. As you mentioned, we're advancing the launch two years into our launch in Demodex blepharitis with XDEMVY. You know, this disease affects about 25 million Americans. It's the only therapy that's approved for these patients, and we've seen great progress through the launch. Last quarter, we reported net revenues of $102.7 million. As you mentioned, we provided guidance into Q3 that really contemplates our ability to continue to deepen the prescribing in the marketplace.
I would say when you look at the launch, this has been a great story of progressing where we've effectively educated the market. We'll continue to do so. We've had over 20,000 eye doctors prescribe the product successfully and have great results. We've got great coverage, over 90% of lives covered across both commercial and Medicare. Now we've activated direct-to-consumer. When we think about Q3 and beyond, there's really an effort to continually educate and engage the physicians to deepen the prescribing patterns. What that looks like is the doctors oftentimes will start with the most obvious blepharitis patients, and then we see them progressing their utilization as they have success, where they start looking at across the other patient types. Your dry eye patients who have failed therapies, their screening patients coming in for cataract surgery who have Demodex blepharitis.
Optometrists will often look at patients who are having a hard time staying in their contact lenses. These are all incremental use cases that once a physician gets that initial experience, they start looking for these patients. A lot of our guidance going forward is based on that. That's being supported, obviously, with a great effort in DTC where we're empowering the patient to come in and say, "Hey, I actually am having trouble being in my contact lenses," or, "I'm coming in for surgery. Can you take a closer look, doc?" Those are complementary strategies where our sales force is out there engaging the doctor, deepening the education. On the other hand, we've got a direct-to-consumer effort that's empowering the patient to come in and self-identify.
Great. Another question on the guidance for 3Q. It suggests a little bit of an attenuation in the quarterly growth that we've seen so far year to date, but there is, I understand, an element of seasonality. How should we be thinking about seasonal trends on a go-forward basis?
Yeah, certainly. When we think about the disease as a whole, there's not a real seasonality to the disease. The seasonality is really driven by market dynamics. In particular, in Q3, you've got the end of summer, you've got the holidays. It's just a time where physicians and patients both are taking more vacation. You see less patient flow into the eye doctor offices, and that's really the driver. We expect Q4 to be a much more robust growth quarter, given that people are typically going back to the doctor. You have post-back-to-school, and you also have people trying to get into the doctor before their deductibles reset at the beginning of the year. Typically, you see this seasonality over the year where Q1 is a little bit more challenging. You have insurance company resets, deductible resets. Q2 tends to be a little bit better than Q1.
Q3 is a little bit slower given the vacation times, and then Q4 tends to be pretty robust. We see that as consistent, not just for XDEMVY and in our marketplace, but across the eye care market. We're not immune to that market dynamic. What we've seen despite that is a steady cadence of growth. We'd anticipate despite that seasonality, you'd expect to see that the launch will continue to grow sequentially every quarter. We'd expect to grow.
Great. You also provided guidance on gross-to-net coming down to 43% - 45% for 3Q and closer to the low 40% by the end of the year. Could you talk through some of the levers you have at your disposal to further lower gross-to-net?
Sure. Gross-to-net progresses through the year. The first quarter is typically the highest discount because you've got the insurance resets, you're doing some copay offsets, and that sort of thing. Every quarter there, you're able to bring it down as those patients work through their deductibles. You're providing less discounts. That's really our main driver. It's essentially our bridge, which is our free product, starts to come down, and our patient discounts start to come down every quarter. As you said, we exited the second quarter at about a 45% discount rate. We'd expect that to come down sequentially in Q3 and then again in Q4. We'd probably expect it to tick up a little bit again Q1 of next year and then follow the same trend where Q1 would be our highest discount quarter and then progressively come down.
When you look at the long range, we'd be somewhere in the low 40% steady state.
Okay. Great. It sounds like you've seen some stability in your inventory levels at this point around 2.5 weeks. Should we be thinking about that as kind of a good go-forward rate here?
Yeah, we manage our inventories very tightly with our wholesalers. Two and a half weeks is where we like to be, and we've been there pretty consistently. We'd anticipate being there. Obviously, the value of that 2.5 weeks goes up as the demand increases, right? As our weekly volumes increase, that value of that 2.5x , but it would always be, you know, 2.5x or whatever that weekly rate is for a quarter.
Great. Insurance coverage on the product has been very strong. I think you were over 90% as of the last quarter. Do you expect those levels to kind of hold where they are, or is there a possibility of further improving insurance coverage closer to 100%?
Absolutely. One of the strengths of this launch has actually been the great response from payers. We worked on that very early in the process. We mentioned how education is a key component of our launch strategy. We work with the payers very early on to educate them. I think that's allowed us two things. One is that great coverage, 90% plus, and allowed us to really optimize our gross-to-net discounts because we're able to get that coverage at a really reasonable discount rate. In terms of going forward, 90% is actually very remarkable. A lot of companies will tell you that steady-state coverage looks good at 70%+ . Being at 90% is above average, I would say, significantly above average. It addresses almost every patient type that we'd want to be able to serve. We'd expect to maintain that going forward, which is a great place to be.
That gives us extensive coverage across commercial, which is about half of our business, Medicare, which is about the other half, as well as Medicaid, which also makes up another component of the business. You're able to address these big patient populations, and there's a very small segment of patients that don't have coverage but still have access to the drugs through different programs that we have.
Okay. Thinking a little bit bigger picture, you mentioned that you're at a prescriber base of 20,000 already, which exceeded your kind of initial target of a core prescriber base of 15,000. How much room do you think there is for that to continue expanding, and how much room do you think as well do you have to increase the number of weekly prescribers from the about 1/3 where you are today?
Yeah, actually, the growth in prescribers is one of the really nice outcomes that we shared at the last earnings call. We feel that this is a great reflection of the impact of DTC and the fact that direct-to-consumer is working. We've always had a great foundation of being able to reach those 15,000 doctors with our sales force. They've got the capacity to handle this. What we saw is once we activated DTC, just the demand of patients coming in actually helped extend the prescriber base to that 20,000, which is pretty remarkable. I think at 20,000 prescribers, you're sort of at the high end. You might get some incremental prescriber growth at the margin. Our real focus now is what you mentioned, which is that depth of prescribing, getting as many doctors to go from monthly to weekly, weekly to daily.
We'd love to see that weekly number continue to grow every quarter. That's where our sales force is focused. That's where our education efforts are focused. Now that we've really reached sort of the big sort of segment of the market, all of our efforts is now how do we increase that prescribing potential for each given physician? It goes back to what we talked about earlier, which is getting them to look at different patient types in their practice. They're getting good early experience in your Demodex blepharitis patients that are the primary reason for the visit, but maybe they can start thinking about patients that have concomitant dry eye disease or patients that are coming in for surgery or having a hard time staying in their contact lenses.
The other thing we haven't talked about is our data that we had in Meibomian gland disease last year, which is also a huge potentiator for these doctors. It gives them an incremental reason to prescribe to a new patient segment, patients that they're seeing with meibomian gland disease. That data also is motivating to these doctors across the segments because there's endpoints like fluctuating vision, which is relevant for a cataract surgery patient. There's irritation, which is relevant to a dry eye patient. That also underpins the potential to prescribe across all the segments. I think the point here is that we've reached a broad base of prescribers. We want to continue to advance the utilization or depth of prescribing.
We've got the right levers in place, our sales force, our DTC, and data generation, evidence generation, if you will, that would continue to support use across those different segments, which would increase the use cases that the doctors can think about in their practice.
On the topic of the DTC campaign, that's made huge strides in the launch over the course of the last year in terms of driving awareness and demand. What are you hoping to see the next 12 months bring from the DTC campaign?
Yeah, our DTC campaign has been great. It's been really effective. Particularly in the last couple of quarters, we've seen some real significant impacts there. As you mentioned, real significant growth and awareness of the disease. Our metrics that we track around the website and engagement have been escalating very nicely as well. Of course, we talked about the growth in the prescriber base. We're definitely seeing that trickle through and driving meaningful volumes to the marketplace. Our goal is that this would drive multiples of ROI. We said that we're spending about $70- $80 million at steady-state for DTC. That's the number for 2025. We expect a very similar expense for DTC in 2026. Our expectation is that we continue to see a growth in awareness, continue to drive that depth of prescribing, and engaging those patients.
The great thing is when DTC is effective, like it has been for us, the ROI continues to improve. Certainly, over the next several quarters, we'd expect the ROI to improve, getting us that multiple of ROI on that spend that we have. Certainly, we can think about long-term how to optimize that. Right now, we think that there's a huge opportunity to continue to educate the patients, and we're seeing great response. We continue to keep our foot on the gas there.
Great. You talked in your opening remarks about the 25 million kind of total addressable patients in the U.S. Of that, 9 million are seeking treatment, and that's been kind of the low-hanging fruit. We've talked about a number of drivers of continued demand in the launch from here. How do you think about the expansion potential from that 9 million- 25 million, and which of these elements could kind of take you to that larger market opportunity?
Yeah, so I think when you look at the TAM, I'd say there's really three distinct opportunities there. One is growth in the segments that comprise the 9 million. We're just scratching the surface, right? A lot of our doctors have had great success, but they still have yet to go across all those segments. Now, they're all using to some extent. I think we said 80% of doctors are using across all the segments, which is great, but we can get them to use more in each of those segments. That's one opportunity, to deepen the prescribing in each of these segments. We're just scratching the surface there. The second level is as you continue to do DTC, you'd expect that out of that 25 million, more patients will drop down, and that 9 million TAM could potentially increase, right?
You're going to get some of those 25 million patients fall into that 9 million. That TAM at the bottom of the funnel, if you will, should increase. That's the second opportunity. The third, which we get a lot of questions about, is obviously patient retreatment. Can we keep patients in the funnel? We're seeing a nice trend there. We said that we'd like to be at a steady-state retreatment of about 20% on an annualized basis. We mentioned last quarter that we've just tipped over 10%, which is a good bump over where we were prior quarters, which is in that mid to high single digit. Good steady progression there. I would think about that TAM as evolving over time where you're going to continue to see deepening prescribing in the existing segments.
You're going to see those segments evolve as the 25 million patients start to progress into that 9 million bucket, and that 9 million will grow. Obviously, the opportunity to retreat those patients once they're on therapy to get them on that second or third course of therapy in the long term.
This is a good segue to my next question about the retreatment rates. What has been catalyzing the increase in retreatment rates, and what is going to get you from almost 10% today to that 20% target?
Yeah, so fundamentally, the way the drug works and the way the disease is, is these patients are going to recur. We saw this in our pivotal studies where about 40% of the patients recur within 12 months. Biologically, we expect almost everybody to recur at some point because while the drug is extremely effective at getting the mites out of the eyes, the mites live on other parts of your body, live on your face, scalp, etc. They will migrate back to the eyes. That's really kind of the driving factor. What's really driving this now is you've got physicians that have had a large patient base that's been treated 12 months ago or longer ago, and now they're seeing those follow-ups. While the patients have had a great response, you are seeing that recurrence.
I think it's a good combination for the patient here where they had a good successful outcome the first time. The doctor has confidence in the treatment. They know it's going to work. They're apt to provide that second course of therapy. I think what we're seeing evolve is what is the underlying behavior, right? What we're still learning is what percentage of the doctors are proactive saying, "I'm going to bring you back every six months, evaluate you, and the second I see something, I'm going to treat it." Or they're going to say, "Hey, you know, you're good. You just call me when it comes back." How much are they putting on the patient? That underscores, again, the importance of both physician education and patient education.
I think as that number continues to progress, we're learning, you know, where those levers lie and how we can continue to catalyze that further. We're really happy with the progression we're seeing. We're seeing the doctors take note. I think the fundamental thing is that patients are getting a good response the first time. The doctors are very confident in retreating the patients again. It's just a matter of how we can make sure we keep those patients into the practice and have a steady course, which we're learning. I think we've got some good things in place now. I think that will continue to evolve as we get closer and closer to that steady-state 20%.
Yeah. Great. Before we move on to the pipeline, can we talk a little bit about the go-to-market strategy in Europe and Japan, maybe a larger view of these markets? How important will DTC be in these regions?
Yeah, so we see Demodex blepharitis is certainly a disease that is prevalent across the globe. Europe is a significant market, as is Japan. These are patients that, again, don't have any treatments today. We see a significant opportunity there. We also see an opportunity in China where we have a partner that's actively working on approval there. We've got an NDA accepted in China, and our partner, Grand Pharma, is working on a launch strategy there. When it comes to Europe and Japan, very similar. I'll start with Europe where we've had discussions with the regulatory body. They've told us we don't need to do any incremental registration studies. The studies we have are sufficient. What we do need to do is develop a non-preserved unit dose formulation, which is now on stability. The rate-limiting step there is just finishing that stability work.
That'll be done sometime next year, and that'll allow us to file with a potential approval in 2027. While we're working on that, we're building the market case. We're working with the payers in Europe. We're working with the KOLs, generating data there to really understand what the right approach is, what the pricing dynamic will be, what the right go-to-market strategy will be. I think there's two factors, right? Do we do it on our own? Do we work with a partner or a distributor? What's the go-to-market strategy? Then what's the pricing and reimbursement environment look like? Of course, that's affected by U.S. policy and some of the other things. We're watching that closely. We have a little bit of time, but it's really those two things, right? Determining how we go to market in terms of pricing and reimbursement, and then what's the right approach?
Do we do it ourselves or partner? That's kind of the gestalt for Europe. Japan, very similar, just a little bit earlier, where we plan to meet with the regulatory body before the end of the year, get guidance on what the regulatory requirements would be, and then subsequent to that, very similar approach, right? Building out the market education, disease awareness, and then thinking about what's the right approach? Go it alone, finding the suitable partner, that sort of thing. More to come there. In terms of DTC, it's pretty limited outside the U.S. I think what is going to be consistent is a real strong effort in physician education where we've already started that work in Europe, for instance. I can tell you, I was at a conference earlier this year, and the European doctors are very excited. They see the disease. They see the prevalence.
If anything, their awareness is actually even higher than the US doctors' was at launch. They are also hearing about the positive experience their colleagues in the U.S. are having, which is potentiating. We are really excited about the market potential there. Again, largely underserved patient population, very prime physician opportunity. It is really going to come down to pricing, reimbursement, and go-to-market strategy.
Makes sense. Turning to the pipeline, ahead of the initiation of the phase 2 trial of TP-04 in ocular rosacea later this year, could you talk us through what the most relevant clinical endpoints are and how to think about the bar for success given there are no treatment options today?
Yeah, ocular rosacea is a very exciting opportunity. It's one that has a lot of parallels to what we've done in Demodex blepharitis. In fact, a lot of the feedback we've got from our users of XDEMVY is what really informed our approach in ocular rosacea. They're seeing a lot of redness and irritation still around the eyes. I think as you're educating these doctors to look more closely, they're seeing more and more ocular rosacea in their practice as well. They're telling us that this is the need. We've honed in on two specific areas that we think could be very compelling from an endpoint perspective: erythema or redness around the eye, and then telangiectasias, which is these deep blood vessels that get red and irritated and very distinct on the lids and in the periorbital space.
You can think about the redness and then the dilated blood vessels as the two endpoints that we'd pursue in the phase 2 trial to show impact. With this, we don't need to show complete resolution, but meaningful improvement. We haven't gotten further into the study design yet. Obviously, more to come there. What I'd say is we're working really diligently on picking the right sites, doing the right training and preparation for those sites, coming up with the right protocol to set the study up for success, knowing that that's such a huge opportunity for these patients. All the feedback we're hearing from doctors is they're excited about it. We're really being intentional about designing the study in a way that allows us to see the best outcomes, with the right investigators or what have you. Really clear defined endpoints and opportunity.
Of course, this is the first time anybody's doing this, right? We're being very thoughtful about our approach here to make sure we're taking all the right steps to ensure a good study.
Makes sense. How big of a market do you think ocular rosacea could be? I think you've pointed to 15 million- 18 million affected individuals. Is there kind of a cohort of those that are actively seeking treatment that would be low-hanging fruit?
Yeah, I think we're still doing a lot of that market development work, but it is a larger market, 15 million- 18 million. So, you know, pretty comparable to what we're seeing in DV. I think these patients are probably even more affected. If you look at the presentation, it's more redness around the eye. These patients are probably even more primed for treatment. If you talk to doctors, it's actually easier to see because you can even see some of this without magnification, whereas with Demodex blepharitis, they need the slit lamp. They're looking for the collarettes. With ocular rosacea, oftentimes, it's very visible, and you can see in our deck, right, some of the images where these patients are very clear rosacea patients, and they have redness not just on the lids, but around the eye as well.
I think that the patient population may be a little bit smaller than DV, still very significant, but when you think about the impact on these patients, it's more significant. The ability for the doctor to find these patients is even easier, particularly as we continue to progress the education and market development with DV, these patients become more obvious to the doctors. You'd expect a very similar playbook here where we'd work to educate the physicians even more so on ocular rosacea, think about the role that Demodex mites play here because that's what the drug is targeting. There's probably a subset of that 15- 18 that's really mite-driven that we'd hone in on. I think we're still doing the market development work to understand how do we identify that ideal patient.
Understood. The third asset, TP-05 for Lyme disease prevention, it's a little bit of a different opportunity, similar in that it's also a parasitic disease, but very different manifestation. Could you talk through strategic rationale and how this fits in as kind of the third leg of the stool for Tarsus today?
Yeah, it's another very exciting program. You think about Lyme disease. I don't think a week goes by where we don't hear something around the impact that Lyme is having in the U.S. Cases are growing. Geographically, it's spreading. It's affecting people that are very notable. I think you hear every week somebody's had a bad experience with Lyme disease. We see this as a really great opportunity to help a lot of patients, with a unique approach, right? We're preventing exposure to Lyme disease. The way the drug would work is it's an oral tablet that you could take prophylactically, and within hours, you'd be immune to the disease. The way it would work is that it would essentially kill a tick before it's able to transmit the bacteria that causes Lyme. You're avoiding exposure to the Borrelia bacteria that causes this.
When you think about that patient base, there's millions of patients that are at risk for Lyme, and it affects the healthcare system over well over $1 billion. There's a market case here. There are other companies that are looking at vaccines. We see this unique approach as one that's even better tailored to a broader patient population, knowing that it's on demand. You don't have to take multiple doses. You take that first dose, you're covered. You could take, you know, say, once a month, for three months to get covered for a whole season. We see a very unique opportunity there. I think for us, we want to be an eye care leader. This is definitely complementary.
It's probably something long-term we see as a partnering opportunity, but our goal is to advance this as far as we can, get the right data generated, get this primed, and be able to show the value of this drug so that we can find a suitable partner for it.
Makes sense. For either or both of the pipeline assets, do you think there's an opportunity to pursue an accelerated approval path?
I think it's early. I think what we're doing is working on the guidance we've received so far, based on ocular rosacea. I'd say that that's probably one that's going to follow the traditional route most likely, and similar to Lyme, I think those are most likely that. Where there's opportunities to accelerate the development plan, certainly, we'd look at that. First and foremost, we want to do the right science and the right data generation and the right evidence generation to support approval for these products and do it the right way. More to come there, but I think we're really focused on let's get to the phase II, understand what the phase 3 would look like for rosacea, and then similar thing for Lyme, right? We'd run that study next year during the tick season and then see where we land. That'll inform the go-forward approach.
Understood. Both of these trials are starting kind of imminently, and it may be too early to say, but when do you think people could see a first look at the data coming out of these programs?
Yeah, with rosacea, ocular rosacea, we're going to start the study before the end of the year. We'd potentially see data at the end of next year, early the following. For Lyme, I think it's still early. We'd have to initiate that study. The goal is to get it done in a single tick season. Depending on how that study progresses, we'll have more to come there.
Great. Now, this is a longer way out, but could you comment on the extent to which you could leverage the existing XDEMVY sales force and your direct-to-consumer experience and infrastructure to support these one or two future launches in the future?
For ocular rosacea, this is really exciting because it's a direct complement to what we do. It's the same call point. It would fit right into the bag. It's the same audience of physicians that we would be able to educate, that we have a great relationship and presence in today, in that audience. I think that it would follow a very similar playbook, where we'd invest a lot in market education and market development. We work closely with the payers to inform a really thoughtful reimbursement strategy. Of course, we think patient empowerment and patient education is a key foundation there, particularly with areas of disease where there's no current treatments available. That really allows you to build a market. DTC always makes sense when you have 100% market share, because you get every patient that comes in.
We see a very similar playbook, and one, quite frankly, we're able to do, since we've already done it for XDEMVY, that we might be able to do even better for a pipeline product like ocular rosacea where we've got experience. We're not building the sales force from scratch this time around. They've got embedded relationships. They've got established presence. You've got the platform. Similarly, with the payers, we've got a great relationship and great presence with XDEMVY that we'll be able to piggyback a second product. All these things are a great platform to allow us to do that for ocular rosacea, quite frankly, for other products. We've got an active business development team that's looking at everything from early-stage development to commercial-stage products.
We really see our path to becoming an eye care leader as leveraging our development capabilities as well as our commercial infrastructure, to do this playbook and do it again and again.
Great. Any questions from the audience here? Okay. If not, I think we can wrap up. Thank you very much for your time today and for being here. It was a pleasure.
Yeah, likewise. Thank you, Carmen.