Hi. Good afternoon. Welcome, everyone, to the Tarsus s ession. Having started out with diseases of the eyelids, with a very successful development and commercial launch of XDEMVY for Demodex blepharitis, I think Tarsus is starting to expand down the other unmet needs, specifically Lyme disease and ocular rosacea. Of course, XDEMVY is front of mind for everyone. If I may, it's our pleasure to have Aziz Mottiwala, who's Chief Commercial Officer at Tarsus Pharmaceuticals, and maybe you can just start by giving the overview of Tarsus Pharmaceuticals and the launch. We'll set everyone and we'll launch to Q&A.
That's great, Annabel. Thanks so much, and I appreciate the opportunity to be here to talk a little bit about our story. As you mentioned, Tarsus is based in Southern California. We're commercial stage. We launched our first product, XDEMVY, which is indicated for Demodex blepharitis in 2023. It's a disease that affects 25 million Americans. It's characterized by redness, inflammation, and irritation of the eyelids that's caused by a parasitic mite. We have a drug that targets the mite, kills the mite, and resolves the disease in the vast majority of patients. We've had really good success on the market. To your point, we are looking beyond XDEMVY as well. We've got two pipeline programs in the clinic as we speak. One for ocular rosacea, which is very similar to Demodex blepharitis. We can talk about this.
It's redness and irritation around the eye that's also believed to be caused by the same sort of parasite. Beyond that, we're looking at the prevention of Lyme disease. Both those pipeline opportunities are in phase II with data readouts expected early next year.
Great. Why don't we start with the Demodex blepharitis market. Sorry, it's a mouthful. I'm just going to say DB. Where do patients sit? How long does it take to get diagnosed? What are you finding about the market as you've been out there for a couple of years now?
Yeah, it's interesting. One of the most pervasive diseases in eye care has been blepharitis. The sort of epiphany we had is that the vast majority of the blepharitis is actually caused by the Demodex mites, which we can target with our drug and kill. These patients are there. Oftentimes, they overlap with some of the most common seen diseases. These are patients that are coming in for things like cataract surgery, dry eye, maybe they can't stay in their contact lenses, maybe they have meibomian gland disease. A lot of these patients will present that way, but they actually have underlying Demodex blepharitis. The patients are in the clinic. What's unique here is that the diagnosis is intuitive, it's easy, and it's very specific to the disease.
It just takes a few minutes for the doctor, or a few seconds, I should say, for the doctor to make a diagnosis at the slit lamp. It's ophthalmology day. I'm assuming everybody knows, but it's when you go into the office, you put your chin on, they look at your eye. The doctor may ask the patient to look down, they'll just scan the eyelid. If they see crusting and redness, that's a telltale hallmark sign of Demodex blepharitis. They don't need any special equipment. There's no special training. It literally takes a few seconds, they can make a definitive diagnosis. A lot of these patients, for instance, that are coming in for cataract surgery, more than half these patients have it.
The doctor may screen every cataract patient coming in and say, "Hey, if you have this, I'm going to treat this before we do the surgery to optimize your lid margin and your ocular health before we do a surgery." Likewise, dry is very common. A lot of these patients may have cycled through multiple dry eye therapies, and what's really going on is there's an underlying problem there that's been misdiagnosed or missed in the past, and the doctor can make that diagnosis and help those patients.
They have this or they just find out when they go in to get cataract surgery or when they go in for dry eye?
It's evolving. Part of our strategy early on was to really educate the physician and get them to start having the patients look down, start to diagnose these patients. It's common. It's about 58% of patients coming into any eye care clinic have some degree of blepharitis. They're there. What's evolved is we've invested in direct-to-consumer and patient education and access. We've started to prime the patient. It's much more common now that the patient might come in and say, "Hey, I'm noticing my eyes are getting a little red and crusty. Can you check to see if I have the mite?" We're seeing both ends of the diagnostic spectrum sort of driving our business today, where the doctors are proactively looking, but the patients are also coming in raising their hands as well.
Two years in, are physicians now proactively looking, or you're still training them to start proactively looking?
Yeah. We've had over 20,000 doctors prescribe, and our core audience is about 15,000. We've made great headway. I'd say a lot of doctors are proactively looking. More and more are doing so. Again, it's two years in. A lot of our efforts today are to continue that depth of prescribing where doctors have had good success and then encouraging them to look for more patients. Maybe they're looking for the very obvious patients early in their journey, and our heavy adopters are screening everybody. Maybe doctors that are newer, still getting their clinical experience might start with a specific patient type. That's where our team will go in and continue to educate the physician to say, "Hey.
Well, let's think about this patient type, or a cataract patient, or a dry eye patient, or maybe they can't stay in their contact. The idea is to go deeper with the physicians that have tried the product, and again, get them to look more proactively across their entire spectrum of patients.
Got it. What was your initial target prescriber base? I guess you've recently added 50% more salespeople. How have you expanded that target base from your initial prescribers?
Yeah. Our initial target base was about 15,000 doctors, and that's an equal mix of ophthalmologists and optometrists. Since then, we've had, like you said, over 20,000 doctors prescribe. It's really that 15,000 that account for about 80%-90% of the total volume. That's still the core audience. What we saw as an opportunity to increase our frequency, to sort of continue that dialogue that we alluded to just a second ago, Annabel. When we launched, we launched with about 85 people in the field, and management, so about 100 people all in. About a year into the launch, we expanded by 50% to go to about 150.
This year, we added roughly 10%, and what we did is we overlaid some key account people to really focus on the top accounts or accounts that have the highest propensity to use the product long term. The real message here is that it's a focused audience of about 15,000, and our goal here is to continue to go deeper in that audience, right? To see them more frequently, continue to educate them around the different patient types that could benefit from diagnosis and treatment.
Okay. You haven't actually, with the expanded sales base, you haven't shifted your strategy on how to most optimally tap this market. You just want to keep on going deeper, but you don't feel like you need to go broader?
I think you're going to always have some breadth of prescribing beyond the typical, and we've got sort of virtual salespeople that can reach the broader audience beyond 20,000 that we've seen. Our sales team really focuses on the 16,000. That's really where the bulk of the patients sit. Again, even our top prescribers haven't tapped out yet. There's a tremendous opportunity in that core 15,000 audience to continue to grow and deepen the prescribing.
Got it. You mentioned your 50% ophthalmologist and 50% optometrists. Is there a group that's more accessible than another, or are they both equally accessible and equally willing to treat?
Yeah, they're both equally accessible and willing to treat. What we see in our volume, so our call panel is about 50/50. Our contribution is about 2/3 optometry and about 1/3 ophthalmology. There's a couple of reasons for that. One is, keep in mind, most ophthalmologists split their time in the clinic and in the OR. They're doing surgery. They don't have as much clinic time as, say, as an optometrist. That makes sense. The second aspect here is for an optometrist, there's a lot of incentive. There's reimbursement incentive. A lot of their initial visits may come in on a vision exam, like a VSP. That reimburses roughly $50-$75 a visit. If the optometrist can make a diagnosis that's codable by, say, ICD-10, they can have this billed as a medical visit.
A lot more of the optometrists are starting to build medical practices. Being able to diagnose and treat a significant disease like Demodex blepharitis winds up becoming a practice builder for them, and it allows them to provide more holistic care to their patients. There is some added reasons why optometry is really accelerating. Ophthalmologists as well do quite a lot of volume because they may pre-screen their cataract patients. They may be seeing tertiary patients that are coming in that were on multiple dry meds. We're seeing great traction across both. The two market drivers there are the unique reimbursement for optometrists and the fact that they just have more clinic time really explains why we have about 2/3 of our volume in optometry.
Okay, got it. You mentioned earlier you have 20,000 physicians that are prescribing today. Your target was 15,000. How well penetrated are you in that 15,000 right now? Is the fact that you're adding more prescribers suggesting that you want to go broader rather than just deeper?
Yeah. I think our focus now is to continue to deepen the prescribing in that core audience. That's really been our focus, and we're seeing good traction with that 15,000. We're seeing steady progression of doctors going from writing this occasionally to monthly to weekly. We've got a large percentage of these doctors writing this multiple times a week now, and we're seeing that continue to progress every quarter. Our focus has been to increase that depth of prescribing, and when we look at that opportunity, we see even our top docs have room to grow, and we see a continuous progression of doctors writing at least weekly. More to come there, I think we're seeing great traction. The other factor here is more and more doctors get their experience.
They're sharing that at the conferences on the podium. That's another big driver for us, right? It's sort of a top-down method where our most successful users are sharing their experience at the major conferences. We're supporting that with medical education, with new data sets that our medical affairs team is developing. You sort of see this force multiplier of our sales team, education, peer to peer really building that depth of prescribing over time.
Got it. What do you see as far as, I don't want even say repeat treatment because once you get rid of them, you want to say you got rid of them. Do you see that this is something that continues to come back for patients? Once you are susceptible to them, you tend to get them more often? Is there something specific about their eye or is their pillowcase, their cleanliness? I don't even want to go down that rabbit hole, but what do you see as far as repeat treatments, repeat patients?
Yeah. That's important to understand. There's no social or hygiene issues here. It's once you have them, you sort of have them. Everybody's got some mites on their body and their face. It's when they overgrow on the lids, that causes the problem. What happens is these patients will get treated, and the drug is effective at getting rid of the mites in the eyes, but eventually the mites will wind up back in the eye over time. That's a normal thing that's going to recur in everybody at some point. What we saw in our clinical studies is about half the patients recurred at about one year. We say about 40%-50% of patients will recur within 12 months. What we've said is to expect a steady state retreatment rate of about 20%.
We've discounted that based on the frequency in which people come into the doctor's office, maybe the severity level in which they get treated for the second time. We say expect at steady state about a 20% retreatment rate in any given week. Where we are today is we're in the teens. We've seen that steadily progress as doctors build their algorithms, and we expect that to continue eventually settling at around 20%.
Okay, that's because it wasn't fully resolved when they finished their treatment or just because they are prone to it?
It's really because the mites live on other parts of the body, the face, the scalp, and they migrate back to the eye over time. The drug is very effective at getting rid of the mites, but eventually they're going to go back. It's a great food source. The mites eat the oils that are in the lash follicles and in the meibomian gland. It's a target-rich environment for the mites, if you will. They eventually make their way back there. It has nothing to do with sort of the completion of therapy. They'll get complete resolution for the vast majority of patients. It's just that over time, the mites will come back.
Okay, got it. It's like an oasis for them, I'm guessing.
Yeah, pretty much.
You guided to $670 million-$700 million this year. That's a nice leap, actually a pretty dramatic leap from 2025. What gives you that confidence and what are you expecting as far as cadence, and what gets you from that 2025 level up to $670 million-$700 million?
There's three things that we really see driving this from a fundamental strategy perspective is we talked about a little earlier, the depth of prescribing. We've got a large audience now actively using the product. We mentioned about 50% of the folks are using this weekly now. Continuing to drive that depth of prescribing is a big factor. A second factor is activating the consumer. We've had a really strong response from our direct-to-consumer advertising. We're seeing a positive and scaling ROI there. We believe that's a great opportunity to continue to hit the other end of the funnel, right? You have doctors prescribing, but patients coming in, broadening the type of patients that are getting treated. The third aspect we talked about a little bit is continued evidence generation.
We had a record number of posters and presentations so far this year at major conferences. We intend to keep that level of excitement from the podium coming to encourage physicians to continue to drive it. Those are your three driving factors. When we look at how that plays out over the year, we said this pretty consistently. The first quarter was sort of flattened down from the fourth quarter, just slightly below, which is expected with the seasonality you typically see that everybody experiences in the first quarter. We'd expect the second quarter to have a pretty good step up once you work through the deductibles, weather, et cetera. I think we're seeing that in the weekly IQVIA data already. Some really great trends. The third quarter is always a little bit more challenging in terms of growth just because of vacations and summer breaks.
The fourth quarter tends to be really strong. You typically see this seasonality in the marketplace where the first and third quarter are a little bit lighter in terms of quarter-on-quarter growth, but the second and the fourth quarter tend to be pretty strong. That's sort of the cadence for the year.
Mm-hmm. That's a pattern that's been set in the prior quarters as well.
I'd say-
Is it just now coming out?
As we get to this stage of the launch in the third full year, you're starting to see a little bit more of that seasonality. We definitely saw some of it last year, but I think obviously the first quarter of this year, being slightly down versus the fourth quarter, I think that was part of the seasonality. We also had significant days of inclement weather. I think, as you mature in your launch, you're going to be a little bit more susceptible to seasonality, but it's pretty in line, overall with what we see. With that said, when we look at the first quarter, we still outperformed the market pretty significantly. A lot of other products were down low to mid-teens. We were down mid-single digits. I think we're still outpacing the market on a trajectory.
Yes, you're going to see a seasonality that affects everybody.
Okay, got it. Recently you took your total peak sales for XDEMVY up to $2 billion. What was the basis for this increase, and what will it take for you to get there? Maybe you can break down the population for us, and is this maybe still conservative?
Yeah. When we provided our first year of guidance, which is at the beginning of this year, the $670 million-$700 million, we put it in the context of what we thought the peak potential is, which is $2 billion in the U.S. for XDEMVY alone. What gave us that confidence is a couple of things. One, the broadening prescriber base. The fact that we were able to penetrate every doctor and go even beyond our initial target audience, really spoke to the broad utility of the product. Two, the consumer receptivity. We see this as a big driver. You think about doctors being at the bottom of the funnel, being able to convert patients. We've got more of those doctors accessible to us than we anticipated. We also see a great consumer response, which will allow us to grow the TAM, right?
You talked about the different patient types. Historically, we focused on about 9 million patients out of the 25 at the bottom of the funnel. This is previously diagnosed patients, dry eye patients, cataract patients with contact lens discomfort, and meibomian gland disease, which are very commonly seen diseases where we say, "Hey, these are the easiest, most obvious use cases." As we've expanded the prescriber base, as we've seen the consumer response, we're actually seeing the opportunity to grow the TAM, to pull more patients from the 25 million into that 9 million. You can imagine if that sort of accessible out of the 25 gets to 10, 12, 15 million, we only need a small percentage of patients treated at peak to get to that $2 billion.
Okay. The $2 billion that you have there is that based on a full 2025 or it's just only up to, say, 10 or 15 million patients that you're tapping?
Yeah, we haven't given specificity there. I would say that it entails obviously broadening beyond the $9 million. Again, if you even took, say, a $10 million or $12 million number, the actual penetration of that, the treatment rates don't need to be overwhelmingly high, right? This is about continuing to broaden the treatment rate by accessing a broader set of physicians, increasing the depth of prescribing, and then getting more consumers to come into the funnel. Either way you cut it, right? It doesn't have to be a specific number. What you're seeing is you're working on both ends of the funnel, right? We're adding better conversion by deepening the prescribing with the doctors, and we're adding more patients in. I don't think it's anchored on one or the other, but really the synergy you see by doing both.
Have you mentioned how many patients you have on treatment now? I think I saw a number of 500,000, so you're still very modestly penetrated in the market.
That's correct. Yeah. We just have just over 500,000 patients treated. We've just scratched the surface. Again, it speaks to the fact that you don't need to boil the ocean here to get to that peak potential.
Got it. Maybe you can talk quickly about the reimbursement landscape. It doesn't seem to have been a problem with you and relatively well-controlled gross net. Can you talk about those?
It's actually been a real strength. For the launch, is our reimbursement. We have over 90% of lives covered, which is remarkable. Most patients pay under $30 for a full course of treatment, which is also remarkable. We've been able to land that with all the major plans. We sort of hit our steady state on gross-to-nets, right? It's well established at this point. I think we've guided to about 43%-45% annually on the gross. Now you'll see a little bit of fluctuation, but that's seasonality. But what we anchor to is on a full year basis, you're looking at that 43%-45%. We don't anticipate any major changes to coverage. It's really locked in and good. It's a great deal for the payer, right? Most of these patients get one course of treatment, maybe two in a year. It's highly effective.
The response rates are great, and our relationships with the payer have been really strong.
Great. What is the level of sales that you need to reach EBITDA profitability? Do you have any guidance there?
We haven't provided specific guidance around profitability. What I can say is that when you look at XDEMVY alone, just as a product line, it's already providing a positive contribution back to the organization. You can probably impute from our top and bottom-line guidance that it is in the realm of possibility to hit profitability. I'd say that the focus of the company is to continue to invest in the pipeline and scale the company. We've got the two programs we talked about. We'd love to scale and add at least one more program every year to continue to broaden the impact we can have and solve more problems.
Great. Can we talk about your other programs?
Yeah. Let's do it.
Sure. Ocular rosacea seems totally up your alley as an offshoot of mites. Maybe you can talk about how much this is caused by mites and what got you interested in this area.
Yeah. This is another area where it's a very significant issue in eye care practices. You've got 15 million-18 million patients coming in, nothing approved. In some ways, this is even more impactful than Demodex blepharitis because the redness is more visible, it's broader. You get broad redness around the eye. You get eyelid irritation, you get redness in the eye. This is something that patients are really frustrated by, and doctors don't have a good solution today. What really prompted us to look at this is two things. One is we had a positive data set in facial rosacea, so we know there's a proof of concept here that it can work. More and more eye doctors are telling us, "Hey, we love XDEMVY. It's treating the blepharitis. But I also see a lot of ocular rosacea.
If I had something to treat that, if I could take the drop and spread it around the eye, that would be amazing. We took that idea and ran with it. We formulated the product in a sterile gel, ophthalmic gel that is able to be spread around the eye. Think about from the brow to the top of the cheek where the disease is most prominent for these patients. What we're targeting there is the broad redness, the erythema, and then dilated blood vessels on the eyelid. Here, because of the nature of the disease, all you have to show is some improvement across the board here in either one of those, and that would be a successful outcome for us. We launched that phase II study at the end of last year.
We're actively enrolling that study right now, and we expect to have a data readout early next year.
Okay. Do these patients feel symptoms of the rosacea, or it's just itching, or do they have major irritation of the eyes as well?
It's a lot of irritation and a lot of diffuse redness.
Okay.
The way that the patients appear, you see like blotchy redness around the eye, really dilated blood vessels on the lids, and their eyes are just sort of grainy and irritated. This is something that is very visible. It's easily diagnosable for the physician. Both the physician and patient are pretty motivated to treat it.
Have they noticed any of their patients with mites that they have rosacea, and they're seeing resolution with drops, or is it only they need to have topical administration?
Yeah, it's interesting. What we see there is doctors will actually tell us that they treat the blepharitis and that the lid margin looks really good, but the area around the lid still looks really red f or these overlapping patients. They say like, "Wow, that tells me the drug works if I could get it around." The challenge is you can't really spread an eye drop around the eye. That's what really prompted us to think about this as a unique opportunity.
The way to think about this is you've got a very distinct population that has ocular rosacea, maybe they don't have blepharitis. Then you've got patients that may have both, and both of those are segments that we could address with this product. Right? You could think about patients being able to use potentially XDEMVY in the eye for the lid margin and then TP-04 or ocular rosacea product around the eye for the broader ocular rosacea component of the disease.
Yeah. The holistic treatment of that for these mites.
Yeah.
Let's take it to Lyme disease in the few minutes that we have, because that takes you away from the focus on the eyes. Maybe you can talk to us how you can leverage your knowledge now, or your infrastructure right now to Lyme disease specifically. It seemed like it would be a completely different target audience. Let's talk about that.
Yeah, it is a different audience. What's similar here is the API. We're using the same molecule, lotilaner. Here it's being applied in an oral dose form. The idea is Lyme prevention on demand. We hear about it every day. You can't go a day without looking at something in the newspaper or on the headlines coming in around the impact of Lyme disease. The incidence rates are growing. It's becoming a bigger issue. The government is focused on this as a priority health issue. This is something that affects millions and millions of Americans. The idea here is that you could take a tablet that would essentially prevent you from getting Lyme disease. The way it works is somebody could take the drug, and within 24 hours, they're sort of immunized.
Meaning, if they got bit by a tick, the drug in their system would kill the tick before the tick was able to transmit the bacteria that causes Lyme disease. A really unique use case. There's folks developing vaccines, so there's a good predicate in terms of the need for prevention. What's really great here is that this doesn't require multiple doses or multiple visits to the doctor. It's self-administered. The way we're looking at it is, in our last study, a patient's essentially covered for about 30 days with one round of treatment. If they live in an endemic area, they could take it for the whole season. If they're just visiting, they could just take it for that one month. It's really tailored to the patient need.
What is one treatment? Is it a month-long treatment?
Yeah. It would depend. Yeah.
They're covered for 30 days after that?
That's right.
Okay. It's not as simple as the dog where you give them one pill, and they're good for 30 days, and you give them another pill, and they're good for 30 days.
It could be. It could be just like that for humans.
In our phase II study right now, we're looking across the season. We are dosing multiple times for multiple months of immunogenicity. Right? You could have somebody take this for an extended period of time to get through an entire Lyme season or potentially even take it full-time if they live in an area where they're worried about getting exposed at any point in time.
It would just be a daily treatment for the duration of time.
It would be once a month.
Oh, once a month.
Yes.
Okay. Is it a course of treatment, like a five-day treatment maybe, or no?
No, it's just.
One time, one dose.
One dose. Yeah, one dose.
Just like the dogs.
Yeah, just very similar application, except here it's a tablet you swallow, in dogs, it's a beef-flavored chew. This is just a simple tablet that a patient can take.
Yeah. I guess, when you think about what the endpoints would be, I guess you have to have a really, really heavy tick season or a high incidence of Lyme disease. How difficult is it going to be to show separation between placebo and the active arm in a, I don't know, maybe. Are you able to predict Lyme season? Is there an area you go to specifically that you know has a very heavy tick season with Lyme disease? I mean, how do you establish that?
You're right in the sense that we are enrolling the study in areas that are highly endemic in terms of Lyme disease. We are enrolling in, really, areas that have rich risk factors for Lyme disease. We are enrolling in the peak Lyme season, which is right now. The study's not necessarily designed to look at a prevention rate. It's a phase II study, but we're really looking at drug levels over time.
Okay.
Are we sustaining the required drug levels? Think of this as an analogy to vaccine titers, where you're looking at, do you have therapeutic levels of drug that would be suitable for Lyme disease prevention over the course of the treatment period? We're looking at this over several months to make sure that every month that a patient gets dosed, they're still in a therapeutic range. Obviously, we're looking at the safety over that range. What we hope that this study will show is that the drug is safe to be used the entire season, that you're able to maintain adequate levels of therapeutic dose in your system for the entire season. What we'd hope to see there with a positive readout is eventually being phase III-ready next year. That would be a great opportunity.
As you mentioned, this is outside the eye, so we do see this as a partnering opportunity.
Okay.
We've had some interest inbound coming in from this, and we believe that by doing this study, by taking this to essentially phase III-ready, that that'll really prompt a lot of excitement and interest in the marketplace around this.
Will the phase III be based on the same drug levels, or do you then have to have some kind of outcome study?
It's likely we'd have to do a larger scale study there. That would be determined once we have the phase II data and go back to the agency. Again, there's a lot of interest and motivation from the government side on getting therapeutics and preventative agents in the marketplace, so more to come there. I think the next step would be to get a positive phase II readout, have a post phase II meeting, and then align as to what the phase III requirements are. The base case would be that we'd have to do a large prevention study on a large end to show that incidence rate versus a standard placebo.
Got it. With all these studies and you expanding the sales force and DTC, what is your cash position, and how's it looking for cash flow positivity?
Yeah. Again, we haven't guided to specific positivity. We've got roughly $400 million in cash, I believe, in the last quarter that we reported. We have a strong balance sheet. We're well-funded to be able to do what we need to do, and continue to grow XDEMVY and continue to progress the pipeline.
Okay, great. I think we're just about out of time, so thank you for that great description, and glad to see this is launching very nicely.
Great. Thanks so much, Annab el, I appreciate the time today.
Okay. Take care.