Hi, good afternoon, and welcome, everyone, to the Tarsus session. Having started out with diseases of the islands, with the very successful development and commercial launch of Xdem-V for demodex blepharitis, I think Tarsus is starting to expand out on the other unmet needs, specifically Lyme disease and ocular rosacea. But, of course, Xdem-V is front of mind for everyone, so if I may, it's our pleasure to have Aziz Motawala, who's chief business officer at Tarsus. And maybe you can just start by giving the overview of Tarsus and the launch to level set everyone and we'll launch to Q&A.

That's great, Annabelle. Thanks so much and appreciate the opportunity to be here and 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, Xdenbi, which is indicated for Demodex Blufferitis in 2023. It's a disease that affects 25 million Americans. It's categorized by redness, inflammation, and irritation of the eyelids that's caused by a parasitic mite. And we have a drug that targets the mite and kills the mite and resolves the disease in the vast majority of patients. So we've had really good success on the market. And to your point, we are looking beyond Xdenvy as well. We've got two pipeline programs in the clinic as we speak, one for ocularization, 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. And then beyond that, we're looking at the prevention of Lyme disease. Both those pipeline opportunities are in phase two with data readouts expected early next year.

Great, great. So 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. And 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. So 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. And a lot of these patients will present that way, but they actually have underlying demodex blepharitis. So 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. So it's ophthalmology day. So I'm assuming everybody knows, but 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 and they'll just scan the eyelid. And if they see crusting and redness, that's a telltale hallmark sign of demodex blepharitis. So they don't need any special equipment. There's no special training. It literally takes a few seconds and they can make a definitive diagnosis. And a lot of these patients, for instance, that are coming in for cataract surgery, more than half of these patients have it. So 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 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 into the 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 to any eye care clinic have some degree of bufferitis. So they're there. What's evolved as we've invested in direct-to-consumer and patient education and access, we've started to prime the patient. So it's much more common now that the patient might come in and say, hey, noticing my eyes are getting a little red and crusty. Can you check to see if I have the mites? So 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 and raising their hands as well.

So two years in, are physicians now proactively looking or you're still training them to start proactively looking?

Yeah. So we've had over 20,000 doctors prescribed and our core audience is about 15,000. We've made great headway. So I'd say a lot of doctors are proactively looking, more and more are doing so. But again, it's two years in. So 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, but maybe doctors that are new are still getting their clinical experience might start with the specific patient type, and 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 patient, or maybe they can't stay in their contact. So 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. So what was your initial target prescriber base? And I guess you've recently added 50% more salespeople. So 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. And since then, we've had, like you said, over 20,000 doctors prescribed, but it's really that 15,000 that account for about 80 to 90% of the total volume. So 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, Annabelle. And when we launched, we launched 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. And then 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 a product long-term. So 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. And so you haven't actually, with the expanded sales space, 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 the 20,000 that we've seen. But our sales team really focuses on the 15,000. That's really where the bulk of the patients sit. And again, even our top, top prescribers haven't capped out yet. So there's a tremendous opportunity in that core 15,000 audience to continue to grow and deepen the prescribing.

So, you know, you mentioned your 50% ophthalmologists 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 two-thirds optometry and about a third ophthalmology. And 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. So they don't have as much clinic time, say, as an optometrist. So that makes sense. And then 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, and that reimburses roughly $50 to $75 a visit. But if the optometrist can make a diagnosis that's codable by, say, ICD-10, then they can have this billed as a medical visit. And a lot more of the optometrists are starting to build medical practices. So 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. So there is some added reasons why optometry is really accelerating, but 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. So we're seeing great traction across both, but the two market drivers there, the unique reimbursement for optometrists and the fact that they just have more clinic time really explains why we have about two thirds of our volume in optometry. Okay. Got it.

And you mentioned earlier, you have 20,000 physicians that are prescribing today. Your target was 15,000. So how well penetrated are you in that 15,000 right now? And is the fact that you're adding more prescribers suggesting that you want to go broader than 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 weekly, 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. So 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. So the more to come there, but I think we're seeing great traction. And, you know, the other factor here is more and more doctors get their experience. They're sharing that at the conferences, on the podium, and that's another big driver for us, right? So 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. So you sort of see this force multiplier of our sales team, education, peer-to-peer, really building that depth of prescribing over time.

And what are you seeing as far as, I don't want to even say repeat treatment because once you get rid of them, you want to say you got rid of them. But 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? Or is there something specific about their ire, 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, it's important to understand. There's no social or hygiene issues here. 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. And 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 And that's a normal thing. It'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. So we say about 40 to 50 percent of patients will recur within 12 months. What we've said is to expect a steady state retreatment rate of about 20 percent. So we've discounted that based on, you know, the frequency in which people come into the doctor's office, maybe the severity level in which they get treated for the second time. So we say expect in steady state about a 20% retreatment rate in any given week. And where we are today is we're in the teens. So we've seen that steadily progress as doctors build their algorithms, and we expect that to continue eventually settling in around 20%.

Okay. And 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. So 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 meibomine glands. So it's a target-rich environment for the mites, if you will. So they eventually make their way back there. But it has nothing to do with sort of the completion of therapy. You know, 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.

So you got it to $670 million to $700 million this year. So that's a nice leap, actually a pretty dramatic leap from 2025. So what gives you that confidence and what are you expecting as far as cadence and what gets you from that 2025 level up to six, seven to seven hundred?

So there's about there's three things that we really see driving this right from a fundamental strategy perspective, as 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 percent of the folks are using this weekly now. So continuing to drive that depth of prescribing is a big factor. A second factor is activating the consumer. So we've had a really strong response from our direct-to-consumer advertising. We're seeing a positive and scaling ROI there. And we believe that's a great opportunity to continue to hit the other end of the funnel, right? So you have doctors prescribing, but patients coming in and 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. So those are your three driving factors. And when we look at how that plays out over the year, we said this pretty consistently. You know, 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. And 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. And then the fourth quarter tends to be really strong. So 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. So that's sort of the cadence for the year.

That's a pattern that's been set in the prior quarters as well.

I'd say just now coming out, you know, 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 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. So I think, you know, 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. But with that said, when we look at the first quarter, we still outperform the market pretty significantly. A lot of other products were down low to mid-teens. We were down mid-single digits. So I think we're still pacing the market on a trajectory. But yes, you're going to see a seasonality that affects everybody.

Okay, got it. And then recently you took your total peak sales for Extendby up to $2 billion. So 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, so when we provided our first year of guidance, which is at the beginning of this year, the 670, 700, we put it in the context of what we thought the peak potential is, which is $2 billion in the U.S. for Extendia loan. And 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. So 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? So you talked about the different patient types. Historically, we've focused on about 9 million patients out of the 25 at the bottom of the funnel. And this is previously diagnosed patients, dry patients, cataract patients, 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. But 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. So 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. And the $2 billion that you have there, is that based on a full 25 or is just only up to like 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. But 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? So this is about continuing to broaden the treatment rate by accessing a broader set of physicians, increasing the depth of prescribing, and they need more consumers to come into the funnel. So 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 prescribed doctors and we're adding more patients in. So I don't think it's anchored on one or the other, but really the synergy you see by doing both.

And 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 with the market.

That's correct. Yeah. We just had just over 500,000 patients treated. So we've just scratched the surface. So again, it speaks to the fact that you don't need to boil the ocean here to get to that peak potential.

Got it. 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. And we've been able to land that with all the major plans. And we sort of hit our steady state on gross tenets, right? So it's well-established at this point. I think we've guided to about 43% to 45% annually on the gross net. 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% to 45%. And 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, they've been really strong.

Great, great. And what is the level of sales that you need to reach EBITDA profitability if you give any guidance there?

So we haven't provided specific guidance around profitability. What I can say is that when you look at Xdenvia 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. But 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?

Yes, let's do it.

Sure. So ocular rosacea seems totally up your alley as an offshoot of mites. So 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 to 18 million patients coming in, nothing approved. And 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. So this is something that patients are really frustrated by, and doctors don't have a good solution today. And 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. And more and more eye doctors are telling us, hey, we love Xdembia. It's treating the blepharitis, but I also see a lot of ocularization. If I had something to treat that, you know, if I could take the drop and spread it around the eye, that would be amazing. So we took that idea and ran with it. We formulated the product in a sterile gel, ophthalmic gel that is able to be spread, you know, sort of around the eye. So think about from the brow to the top of the cheek where the disease is most prominent for these patients. And what we're targeting there is the broad redness, the erythema, and then dilated blood vessels on the eyelid. And 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. So we launched that phase two study at the end of last year. We're actively enrolling that study right now, and we'd expect to have a data readout early next year.

Okay. And do these patients feel symptoms of the rosacea, or is it just itching? or do they have major irritation of the eyes as well?

So it's a lot of irritation and a lot of diffuse redness. You know, the way that the patients appear, right, 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. So, you know, this is something that is very visible. It's easily diagnosable for the physician, and both the physician and patient are pretty motivated to treat it.

And have they noticed any of their patients with mites that they have realization, 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 for these overlapping patients. And they say, wow, that tells me the drug works if I could get it around. So the challenge is you can't really spread an eye drop around the eye. So that's what really prompted us to think about this as a unique opportunity. So the way to think about this is you've got a very distinct population that has ocularization. Maybe they don't have blepharitis. And 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 X-Denvi in the eye for the lid margin and then TPO4 or ocularization product around the eye for the broader ocularization component of the disease.

Yeah, the holistic treatment for these mites. 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. And so 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. And so how about let's talk about that.

Yeah, it is a different audience. What's similar here is the API. So we're using the same molecule, Lodalaner. Here it's being applied in an oral dose form. And 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. And this is something that affects millions and millions of Americans. And the idea here is that you could take a tablet that would essentially prevent you from getting Lyme disease. And 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. So a really unique use case. There's folks developing vaccines, so there's a good predicate in terms of the need for prevention. but 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. So 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.

So what is one treatment? Is it a month-long treatment? Yeah, it'll depend. You're covered for 30 days after that?

That's right.

So 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. So in our phase two study right now, we're looking across the season. So we are dosing multiple times for multiple months of immunogenicity, right? So 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.

So this is just be a daily treatment for once a month.

It would be once a month. Okay. Is it a course of treatment, like a five-day treatment maybe, or no, it's just one time, one dose, just like the dogs. Yeah. Just a very similar application, except here it's a tablet you swallow and dogs, it's a beef flavored chew. So this is just a simple tablet that a patient can take.

Yeah. Um, and, and I guess, um, when you think about, uh, what the end points would be like, I guess you have to have a really, really heavy tick season or Lyme, like a high incidence of Lyme disease, how difficult is it going to be to show separation, um, between placebo and, and, and, um, the control of the active arm, um, 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 is very heavy tick season with Lyme disease? I mean, how do you establish that?

Yeah. So you're right in the sense that we are enrolling the study in areas that are highly endemic in terms of Lyme disease. So 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. With that said, the study's not necessarily designed to look at a prevention rate, right? As a phase two study, what we're really looking at drug levels over time. Are we explaining the required drug levels? And think of this as an analogy to like vaccine titers, right? Where you're looking at, do you have therapeutic levels of drug that would be suitable for Lyme prevention over the course of the treatment period? Again, so 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. And obviously, we're looking at the safety over that range. So 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. And what we'd hope to see there with a positive readout is eventually being phase three ready next year. And that would be a great opportunity. As you mentioned, this is outside the eye. So we do see this as a partnering opportunity. We had some interest inbound coming in from this, and we believe that by doing this study, by taking this to essentially phase three ready, that that will really prompt a lot of excitement and interest in the marketplace around this.

And will the phase three be based on the same drug levels, or do you then have to have some kind of outcome study?

It's likely we would have to do a larger scale study there, but, you know, that would be determined once we have the phase two data and go back to the agency again. And, you know, 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. But I think the next step would be to get a positive phase two, read out, have a post phase two meeting and then align this to what the phase two requirements. But the base case would be that we'd have to do a large prevention study, a large end to show that incidence rate versus a standard placebo. though.

Got it. And so with all these studies and you expanding the sales force and DTC, what is your cash position and how is it looking for cash flow positivity?

Yeah. So 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. So we have a strong balance sheet. We're well funded to be able to do what we need to do and continue to grow, extend it, 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, Annabelle. Appreciate the time today.

Okay, take care.