Oops. Okay. Are we good to go? Oh, okay, cool. Thank you. Good afternoon, everyone. Thank you for joining us here at our 46th Annual Healthcare Conference. I am Vishwesh Shah, a part of the biotechnology team here at TD Cowen, and I work with analyst Stacy Ku. We're very happy to be hosting the Tarsus team today with us. We have Bobak Azamian, the CEO, Jeff Farrow, CFO, and in the audience, we also have David Nakasone, Head of IR. Let's get started with maybe like more broad kind of an overview because we've been following Tarsus, there's been a lot of exciting recent updates from the company. Can you, maybe Bobby, you can start.
Can you start by providing a brief overview of the company, the evolution with XDEMVY and the pipeline programs that you have going on?
Yeah. Thank you. It's great to be here with you, Vish. It's great to be in Boston, a snowy day. We're a Southern California-based company, we don't see that too often. You know, thanks for following us and mentioning some of the highlights. We're really proud that we're building a fully integrated pharmaceutical company. Tarsus is really pioneering new categories. We're doing that with a focus on eye care. How have we done that? Well, we started with, I think, having a really exceptional team. I'm proud to have built a team that, because we're in Southern Cal, has some of the leaders in eye care, but also has integrated some of the best leaders in biotech, like Jeff, who bring a very fresh perspective. That's been key to our success.
We just talked about earnings last week. Probably the big figure that I was excited about is we had over $450 million in revenue in our second year of launch of XDEMVY. That puts that drug on a path to a blockbuster, which we said is now $2 billion plus at peak. That has been unusual in eye care, and I think it's been because we've created a new category, because we've gone after a disease, Demodex blepharitis, that people knew about but didn't really pay attention to, but in fact, a disease of 25 million Americans. I can tell you, we've changed the practice of eye care.
We've done that by treating a disease, by having a new standard of care, by delivering a medicine that really works and that has really captured the value for such a great effect it's having on patients. We plan to do more at Tarsus. We have a pipeline that now is being talked about and recognized as having potentially two more blockbusters. One is Ocular Rosacea, which is another disease that doctors told us they're seeing the same amount as DB, and they have nothing for. We have a candidate, TP-04, that's in phase 2 currently.
All around the same novel API lidocaine, we have another product, candidate, TP-05, that's designed to treat, or I should say, to prevent Lyme disease, which is a massive problem, obviously here in Northeast, but around the country, a on-demand prophylactic tablet. Yet again, creating a new category of medicine. That's what Tarsus is all about, and I'm excited to hear your questions and talk more about the story.
Amazing. I want to drill down on one of those big numbers that you alluded to, which is, you know, talking about XDEMVY's long-term potential. You've talked about reaching half a million patients already. You are guiding to $2 billion in peak sales. Can you help us contextualize that peak sales potential in terms of the size of the market, and maybe talk about kind of how that funnel of patients is growing? Because previously you've talked about low-hanging fruit with 9 million or so patients, but then you're also talking about these different types of kind of indications or subsets of patients, maybe with like Meibomian Gland Disease or with dysfunction or with dry eye disease. Can you just help us contextualize how you get to that $2 billion from the $450 million that you've reported recently?
Why don't I start a little bit, and then I'll pass to you.
Sure.
A couple things are top of mind there for me. I just came from one of the biggest optometry conferences last week after earnings called SECO. As I talked to about 50 doctors there, with every doctor, I said, "You know what? We've treated half a million patients." I was proud of that. What I got was actually shock. "You've only treated half a million patients? I see this in half of my patients." Now doctors are very aware that this is a 25 million patient opportunity, they're surprised that with as many of them has described, this is the best medicine they've seen in their career. We've only treated half a million, and there's 25 million in their clinic.
What they also said, and that's qualitatively different from a year ago, they're not looking at the segments. They're not looking at, oh, does this patient have dry eye? Do they have MGD? Do they have, you know, contact lens intolerance, cataract surgery? They're saying XDEMVY works. We know the patient benefits. The patient doesn't have to be symptomatic. They don't have to have visual fluctuations. We need to treat this first. Because XDEMVY is 6 weeks, has great results, is broadly covered, and now patients are coming in based on our advertising, education, asking, "Do I have mites? Do I need XDEMVY?" Doctors are seeing that this is something they should be thinking about first.
Qualitatively, that's what makes me really excited about our path to $2 billion+ and sort of getting out of the segmentation and thinking more about, there's $9 million in the office today, but there's $25 million we can treat.
Yeah, no, you know, for maybe big picture context, there's 25 million patients that were thought to have demodicosis in the United States. To get to $2 billion, it's less than 10% penetration, very achievable. I think one of the reasons that we have such strong belief in is, one, it's easy to diagnose. You know, you just take a look in the slit lamp, and you see the collarettes. Secondly, it's extremely efficacious. You talk to any doctors it says it works for all my patients. Third, you know, that it's very safe. Fourth, finally, there's an economic incentive for these doctors to take a look, you know, for the collarettes and see if they've got demodicosis. Those four things continue to make us believe that this is, you know, at least a $2 billion-plus opportunity.
Okay. Perfect. You know, thinking more and about that $2 billion opportunity, so for some of the people who might be less familiar, the $2 billion peak sales is especially notable because it's a vast majority of NRX driven, like grabbing of new patients. You know, which kind of is a testament to the XDEMVY sales force. When it comes to these peak sales, what is your assumptions around refill rates? Where do they trend currently? I think you've talked about it 20% at some point that you might reach that at steady state. You know, how has it progressed since launch? Could it be closer to the 40% that you've seen in the, in the clinical trials?
Yeah. As you highlighted, Vish, our clinical study showed that there's about a 40% recurrence rate. We all have mites on our face, and it's very efficacious in killing the mites, but they like that oily sebaceous environment, so they tend to migrate back up into those eyelashes, and we saw a 40% recurrence rate. That's in a clinical environment, right? Where we're having these patients come back regularly, we can monitor. In a real-world experience, you know, you're probably not gonna see that 40% out of the gate. What we've done is we've cut that in half and said, you know, model 20% to be conservative. It could be higher, you know, and we're collecting that real-world evidence as we speak.
Mm-hmm.
What I can tell you now, if you take a look at the data that IQVIA reports, it's about 10% of the weekly scripts are based on refills, which is imperfect data. It's probably higher just because, you know, if you don't go within that same calendar year, you're not gonna capture it. If they don't check the box on the allow refill, it might not be captured. More importantly, on the cohort basis, if you go back to, you know, maybe a year ago, you're starting to see, you know, in a mid- to high teens. We're very much approaching that 20%. It could be higher, but we'd rather, you know, provide that update perhaps in a medical meeting or some other aspect of it.
Okay. I see. Yeah. Sometimes we also think about that if it is above 20%, that's additional upside.
Exactly
... potentially to the $2 billion.
Yeah.
You know, with this market, something that, Bobby, you alluded to was that you've basically had to create this category. When we talk to clinicians, we do get a lot of good feedback on the legwork that you guys have done on the awareness and education from the company. What are you seeing now in terms of the prescriber base and the physician habits? Maybe discuss kind of how as we think about, you know, patient growth versus adding more prescribers in the context of how we expect sales to grow.
Sure.
Yeah, sure. Yeah. Thank you for noting the education. I think that's been central to our success. We started that two years before launch. Our team, you know, our commercial team especially set about saying, "Hey, we're gonna do this very methodically. We're gonna start with education. We're gonna build great access, and then we're gonna actually double down on patient education.
Mm-hmm.
I think we're seeing all that play out. To answer your question about the ECPs, we've been frankly surprised by how broadly this has been adopted. Over 20,000 doctors prescribing XDEMVY. Our target call point is 15,000 because that is historically the doctors, and it's about half MDs and half optometrists. That's historically the ones prescribing most of the medicine. You know, our strategy of growth is really about depth.
Mm-hmm.
It's about activating prescribers to get to daily prescribing. Once they get to daily, we've not seen people slowing down. We've even seen them, you know, prescribing to 5, 10+ patients a day. We know that's possible because half or more of the patients in their clinics have this disease. That's our approach to growth, is really going from monthly to weekly to daily. You know, maybe, Jeff, you can talk about the sales force, how we're thinking about that going forward to really drive that depth.
Yeah. What Bobby's referring to on the Q4 call, we announced that we're expanding our sales force incrementally. We're adding about 15 to 20 key account leaders, these are really gonna be the best of the best in terms of the sales reps. They'll come from a mix of internal hires as well as maybe externally, and they're gonna be focused on the physicians and territories that have the greatest sort of depth of population that we can continue to tap into. They'll be really focused on driving depth in those high potential prescribers there. We're in the midst of hiring those now. They'll be up and running once they're trained, probably in the back half of this year.
Okay. One thing that is notable about the XDEMVY launch is that it historically has been optometrist-driven. You know, with this kind of stable prescriber base now that you have in strategyOf, you know, going after, like, depth of prescribing. Do you expect the prescriber base to change on who is leading the launch? Or do you expect it to change? If so, how between the optometrists and ophthalmologists?
Yeah. Right now it's about 60% optometrists, about 40% ophthalmologists, and it might change a little bit, you know, perhaps like 55%, 45%, but generally within that same sort of mix.
I'll say, just coming off of a major optometry conference, there's tremendous untapped potential there. The word of mouth amongst optometrists is very real. You know, we see residents learning about Demodex and then prescribing out as they get into practice. We've seen some really young doctors on both MDs and ODs be really strong adopters. You know, as we've said before, this is a way to build your practice. We've transformed practice, in optometry, you can actually become a medical doctor, and you can, you know, allow your practice to build by seeing those patients back, and I think that's been a driver. Similarly on the MD side, they're really motivated by, you know, doing great surgery, having great results for their patients. I've heard XDEMVY described as having surgical-like outcomes for patients.
You know, our medical team is really driving toward describing that evidence more and more. What I saw in, in Sicca is, as we get some evidence out there, doctors just really start to think of new ways they can use XDEMVY. They want more. I think that'll continue to drive the growth and the depth in both the MD and OD communities.
Okay. Perfect. You've also worked on activating patients. When we think about DTC, how have the trends shifted with patient activation and patient seeking treatment? You do expect to continue investing in DTC, so what impact do you expect to drive from that? How do you funnel that sort of patient demand to your prescriber base?
We've spent about $80 million in direct-to-consumer advertising in 2025, and that's inclusive of network TV, streaming TV, but also social media and other venues. That's all-encompassing. We've guided to a similar amount for 2026. That said, we've learned a lot in 2025, like what are the most efficient markets to advertise in, what's the best time to do it. We think we can get more bang from the buck from that $80 million. We've also tailored a disease education ad that we might roll out as well as a 30-second spot. We're sort of changing things up a little bit to get, you know, more out of that investment. It's definitely had an impact on the awareness. I mean, I don't think anybody heard of Demodex blepharitis two years ago. I certainly didn't.
Awareness was 0 when you went in and talked to your patients at the doctor's office. Now it's at 25%. Because of that direct-to-consumer advertising, 1 out of 4 patients who go into the office know about Demodex blepharitis, and that will continue to grow over time. We've already surpassed the return, the investment we've made, and the return is a positive return, and it's gonna get even better as the year goes on. Big impact. We might think about, in 2027, paring back a little bit on the direct to consumer. We'll experiment with that. Perhaps we pulse it as opposed to having it throughout the years. We'll do some experiments and see if we can sort of pare back on the edges there.
I'll just add, I mean, the advertising has allowed us to load the top of the funnel. It's brought new patients into the office. I've heard that from almost every doctor. They've had patients come in saying, "Do I have mites? Can you check me for Demodex?" It's made the conversations easier. You know, a year or 2 ago we were debating, do you even say the word mite? Should the doctor say that to a patient if they haven't heard of the disease? Now those conversations are obvious and comfortable. It's both helped us at the top of the funnel and at the bottom of the funnel.
Okay. Staying on this topic of DTC then, you know, one thing regarding that is also then thinking about access. Patients need to get the drug. How... You know, my understanding is that appears to be very favorable dynamics for XDEMVY, good coverage. Can you just discuss that patient access and reimbursement and sort of what friction points has the company addressed to, or executed on to have this kind of access?
Yeah. Great question. I have to hand it to the commercial team. They took a very methodical approach in terms of how they were doing doctor education as well as patient education. We always had on our plan that we were not gonna roll out DTC until we had very broad payer coverage because there's nothing more frustrating to a patient and the doctors having a patient come in and say, "Hey, do I have mites in my eye?" He's, "Oh yeah, there's a drug for this, but it's gonna be $2,200 for you out of pocket," right? We wanted to make sure we had broad coverage, and so we waited until, in earnest, in the essentially beginning of 2024 when we had the Medicare coverage come on, and that's really when we kicked off the network TV.
As I highlighted, we've got 90% payer coverage now, and that's across the board. That's inclusive of commercial, Medicare, and Medicaid as well. The team has done a really good job of educating the payers on the pharmacoeconomic benefit of treating them, and really that's been reinforcing to our story and our launch.
Perfect. You know, so it's great to hear about kind of like the long-term dynamics, but another thing that investors contemplate is also the short-term or near-term expectations.
Mm-hmm.
This is the first time we're providing an actual sales guidance. The guidance at midpoint is assumes about 50% growth.
Yeah.
What are you seeing in terms of adoption and prescribing habits that kind of now gives you conviction to provide a guidance? What are the determining factors to get you to the lower, middle, and higher end of the range? Maybe you can talk about some seasonality expectations as well that you might have.
Sure. Yeah. We've never given guidance until the fourth quarter. We gave one quarter guidance, Our philosophy has always been, we're not gonna give guidance till we can give good guidance.
Mm-hmm.
There's no analog out there that's appropriate for us to model against. That's why we hesitated to do it. Now we've got two years under our belt of history, and to your point, we have some seasonality information, but we also have a sense of, you know, what the script exit rate has been, you know, at various points in time. We had a really strong exit in the fourth quarter. We continue to expect the typical seasonality that we have seen in the past couple of years. There tends to be, and this is across all therapeutic areas, Q1 tends to be an area that is people visit their office less frequently because the deductibles have reset, co-pays have reset, so they tend to avoid that, particularly in the eye care space.
Also gross to net discounts tend to be a little bit more.
Yeah.
you know, heavy on the, on the first quarter because of those factors. We factor that into our estimates, then we typically see a really robust growth in Q2 coming off of Q1, then a little bit more muted growth in the third quarter because of the summer. As you highlighted, it's primarily an NRX business, when doctors aren't in the office to write, we tend to see a little bit of slippage on the script writing. We see a little bit of tempered growth in the third quarter, then in the fourth quarter it ramps up pretty significantly because of FSAs, you know, wanting to be maxed out. Deductibles have already been sent through. All of that kind of goes into our guidance of $670 million-$700 million.
Okay. For extremely near-term for Q1 sales, what should we expect? What should we assume, flat from Q4? Tiny bit of growth?
Yeah. Our anticipation, and what we said on the call was we expect flat to down, slightly down.
Mm-hmm.
In terms of revenue because of those factors.
Yeah.
Last year we had a little bit of tailwind because Medicare came on board, but you know, we don't have that tailwind now, so.
Excellent. Behind XDEMVY, the company's also progressing some pipeline programs. Let's start with TP-04. Can you give us an overview of the asset, and how do you settle on Ocular Rosacea as the next indication? You kinda talked about the unmet need there, but can you kind of go into a bit more detail there? What is the current KOL feedback on that and you know, level of awareness and potential opportunity there?
Yeah. No, we're excited that XDEMVY is becoming more than a single product company. TP-04 is a great example of basically replicating the blueprint of category creation. We had rosacea on our radar for some time, and we did a study in rosacea of the face, and what we found is, as we shared that data with people, they said, "Well, you should look at Ocular Rosacea. I'm seeing more and more of that, and I have nothing for those patients." We didn't hear that a couple of years before, and I think it's because people have been looking at the eyelids a lot more because of XDEMVY, because of our education. As we dug in, we saw this is a similar scope of opportunity as DB.
It's, you know, sometimes half the patients in an eye care clinic. We estimate 15 million-18 million Americans with OR. There's no approved therapy. There's nothing really used for this if you go out there and talk to doctors. It's another problem that is in need of a solution, but that people haven't been talking about as much because there is no solution. The solution we believe is to target Demodex mites. This is caused, in most cases, Ocular Rosacea is caused by Demodex. Our Phase II trial, just like we did before our Phase threes in DB, is designed to demonstrate proof of concept and prepare us for success in Phase III. What we're doing is we've kicked off as of December a Phase II study that will look at patients with Ocular Rosacea.
It's a first ever study. There's never been any study done before for OR. We'll look at some novel endpoints that should give us a path to registration if we can meet them. Those are erythema and telangiectasia. It's basically forms of redness around the eye, not in the eye itself. Just like in Demodex blepharitis, we've carefully developed the right endpoints, the right scales. We're socializing those and validating those with a number of centers across the United States. We expect to learn a lot this year, and we think the drug has a high chance of showing success. You know, if we're able to demonstrate a proven concept, we feel that the FDA has a clear path forward for approval. You know, just to think about the commercial potential here a little bit, it's the same call point.
It's the eye care professional, the same 15,000 doctors. We know how to pioneer that from an education, access, marketing perspective. We're excited to be able to do that hopefully. You know, we're certainly speeding this program forward as fast as we possibly can.
Perfect. Related to that, when can we expect the data? You talked about the symptoms that you're looking at. How do you define the success criteria there? How do you know that you've demonstrated enough proof of concept, you're confident moving into registrational study?
Yeah. You know, we think there are many ways to win here. We are likely to read the study out in the first half of 2027. That's what we've said. That allows us to enroll over the course of the year. We have a 16-week treatment period compared to 6 weeks with XTANDI or TP-03 before it was approved. That causes a little bit longer study timeline. Because it's a first-ever study, we really wanna take the time to ensure that we have the best shot of success here. If we're successful in the study, I think the FDA has said you need to show a difference between active and vehicle on one of the two endpoints, of telangiectasias or erythema. There's a number of different ways to categorize that and show that difference.
That is the bar for success with the regulators. As I talk to doctors like I did last week, I asked them, "What do you need to see to use this?" They said, "Just show me an improvement versus vehicle. I have nothing for these patients." A cure is not required here.
Mm-hmm.
An improvement is the bar for success, and I think that would lead to, you know, a game-changing opportunity, much like we've done with XDEMVY.
Perfect. Your second program. Thankfully or fortunately, maybe you have to worry less about Lyme disease being in Southern California. For TP-05, you know, can you give us an overview of the asset, data that you've disclosed so far, and then, the Phase II study design that you've planned? Yep.
Yeah, no, we're excited about this program, and we hear a lot from folks, particularly on the East Coast, that would love to have something out there. This is an oral potential prophylactic for the treatment. Basically what it does the theory here is it would kill the ticks before the window in which it transmits the bacteria that causes Lyme disease. We had some really nice Phase IIa data, which was we call our tick kill study or Carpo trial, and it showed that we killed 95% of the ticks within 24 hours, and it was durable to 30 days as well. The thought here is you could take this drug, you know, the start of the tick season, it gets to therapeutic levels the next morning, and it's durable for 30 days.
You could potentially take this once a month for four months and then, you know, be covered for that tick season. In discussion with the agency, we have designed a study. It's about 700 patients.
Mm-hmm.
It's gonna be focused on safety because it is a prophylactic. That will be really important. Then we're gonna be measuring blood levels because we knew that a certain blood level was required to kill the ticks in the tick kill study. Analogize this to maybe an antiviral study where blood levels are really the key threshold in which to measure proof of concept. So we'll be measuring that, and then we'll do a few biomarkers as well, that will be, you know, potentially leading into a phase III study. So we're gonna kick that one off here, and it will enroll within this year's tick season. We'll have proof of concept data sometime in the first half of 2027.
Mm-hmm.
Our goal there is to basically have a phase III ready partner package that we could, you know, partner with, you know, perhaps big pharma or some other virology company that would be interested in, you know, taking this through phase III and then ultimately on market.
Okay. Perfect. Yeah, that's actually, was gonna be my next question 'cause competitors like Pfizer and Valneva are running large patient multi-season studies. It's, it's good to understand how you're thinking about the opportunity versus the cost there. Thank you for that. Then, maybe lastly, you know, with so much going on, what do you think may be underappreciated. Actually, one thing that we think seems to be underappreciated, sorry, is that you are also looking to expand your pipeline. How is the team thinking about potential expansion strategy? How do you go about assessing those opportunities?
Yeah. Maybe I'll start and Bobby, you can feel free to add to it. We have now the second-largest sales force out there in the front of the eye, and frankly, I think it's the best one, you know, out there. I think there's capacity there to add to the bag, you know, both from a retention perspective, but also it's an opportunity to have further discussions with the physicians or the Eye Care Professionals. At some point, they're gonna say, "I know everything about demodicosis. I've seen the commercial a bunch of times. I don't need to talk to you." Having something else to talk to them about is gonna be really important. We've got a BD team that has taken a look at everything in the anterior segment of the eye, which is synergistic with our call point.
There are some areas that are essentially what we like to call category creating, much like demodicosis, like the Ocular Rosacea program, where there's nothing else out there from a therapeutic perspective, that we can really get through the clinic quickly, as we've demonstrated in the past, and get on market and, you know, really think about how best to educate and commercialize that product. There's a couple areas that we've actually already bid on in terms of, and small investments that we've made.
Mm-hmm.
Two, it's two programs in particular. We're looking at a few others there as well. Fundamentally, you know, down the road, I think what we'll do, you know, as our market cap grows, our cash balance grows, we'll think about moving into the back of the eye as well and think about, you know, retinal diseases. I, again, I think we're not focused on me-too type products, but really something that's category creating.
Okay.
Bobby, I don't know if there's anything else.
Yeah. I think just, you know, adding some fine points. Our mission is to create new categories. We think that's the path to generating multiple blockbuster medicines. We think we have a couple of those in our current pipeline, and the bar is very high for us. We wanna go after areas in the eye that have high enough unmet need, and where we can treat the root cause and generate a blockbuster. That's our approach in BD. You know, as Jeff said, it's across all stages. Even commercial stage, we're looking at potential opportunities because our team can do more.
Perfect. Okay. A great point, a great note to end the discussion on. Bobby, Jeff, David, thank you so much for your time. Thank you all for being here.
Thank you.
Thank you, Vish.