Tarsus Pharmaceuticals, Inc. (TARS) May 12, 2026 Conference Transcript

Next company presenter at the BFA Annual Health Care Conference in Nevada. We've got Tarsus Pharmaceuticals, Jeff Farrow, CFO, and Aziz Ottawala, Chief Commercial Officer. I'm Jason Gerber. I cover biotech and pharma at BFA. We've been covering you guys for a couple of years now. You're kind of hitting a real inflection point with the commercial launch of Xtem-V for Demonex Bluffaritis. And by all signs, there's a lot of growth runway still in front of you and some pipeline in the story as well that is going to be coming more apparent to investors over the next year. So I think we have a lot to talk about. Maybe we can just start with maybe, Jeff, just post one cue, Xtendv takeaways, where you saw performance. Any surprises as you think about that in the context of the full year outlook? Happy to answer that.

So, Jason, thanks for having us. It's great to be here. Maybe it's a big picture. You alluded to some of our pipeline. I'll just quickly give an overview of Tarsus. So we are a commercial stage company. Our lead product is Xdenvi for the treatment of demodexplifitis. It's a disease of the eye. We've got an exciting pipeline, two assets in phase two, one for ocular rosacea. It's a type of rosacea that's around the ocular area. And then also we have a phase two program for the prophylactic treatment of Lyme disease. And we talk a little bit more about that later. But in terms of the Tarsus, you know, expectations for the year, we're really excited and pleased with how the tempo of growth has been. You know, Q1 came in much like we had anticipated. We knew that with the deductibles resetting, there would be probably less patients visiting their offices until they get through that deductible reset. And so it came in line with our expectations. The one unusual aspect was we had some more heavy winter than what we were anticipating, but I think that impacted a lot of other therapeutics in the first quarter. But we firmly believe that our guidance of $670 million to $700 million for the year is still valid and achievable. and our revenues of $145 million for the quarter really are showing strong indicators of continued growth. All the underlying facts that's in that quarter continue to grow, including depth of prescribing, employee engagement. And then we also had some really interesting phase four data that came out. So we feel really good about the tempo for Q1. And as we lead into Q2, we've had some nice all-time highs that we've seen in terms of the script data.

And so, as we look ahead, you seem like you have an established quarterly cadence in terms of some of the seasonality factors. And, you know, you caught out a few things in 1Q. So, I think ahead to the next three quarters, similar quarterly cadence. Any catch-up that comes with maybe some of the headwinds that you experienced in 1Q?

Yeah, no, you highlighted our seasonality that we typically see. We still are primarily an NRX business, and so we're impacted by quarterly issues like holidays, vacations, conferences, and things like that. But typically, Q1, we see the deductibles reset. We see a little bit of less visits to the eye care professionals, and we saw that in this quarter. Q2, we expect to see a nice step up in growth. And then Q3, while we expect to see continued growth, it's a little more tempered than what we see between Q1 and Q2. And then Q4 tends to be one of our biggest quarters from a pure bottle perspective, and we saw that in the fourth quarter. So that's kind of how we see things play out. But we might get a little bit of tailwinds, as you highlighted, because of some of the snow days and some of the weather impact, you know, with those people being rescheduled into the second quarter as well.

Okay. What do you see as the catalyst for growth from here? What kind of ROI do you see from DTC? And, you know, as you and if you do see good ROI, does that sort of imply that maybe you should be doing more of it in subsequent years?

So this is a really great time for us in terms of, as Jeff mentioned, once we work through this Q1 seasonality, the underlying business, all the factors here look really positive and progressed nicely in Q1. Everything around depth of prescribing, our consumers, and physician response to the evidence we're generating. And those are really three catalysts that I think can continue to expand the impact of the business. So let's talk about depth of prescribing. We have more and more doctors writing this with heavy frequency. They're looking for incremental patient types. are opening up their aperture. And to help accelerate that, we're employing a key account leader position. We expanded by about 10% with very high-level talent in the industry, experienced folks that are going to focus on the most valuable positions and most valuable targets out there for us. They're being trained right now and will be out in the field and having impact in the back half of the year. So that's a catalyst that will help accelerate that depth of prescribing. DTC, we do a lot of work in modeling. And to answer your question, all the data and analytics support our approximate $80 million spend, which is in line with what we did last year. The difference this year is the ROI continues to scale. So we're getting even better ROI now as we've gotten time on this. It's ahead of our expectations as well as on the high end of benchmarks. So that gives us a lot of confidence that we can execute differently with DTC. So we've got some big plans in the coming weeks to refresh the campaign, accelerate some of the noise around the business that I think will really open up a lot of eyes and create a lot of attention, which is going to be great. And the other factor that the team is able to do is because we've been doing this for a year, we're smarter, right? We know where to put the ads to get the best bang for the buck. So to your question, could we do more? I believe that with the 80 million we're spending, we're going to be able to do more just because of the way we're executing the knowledge we're applying. And then some of the creative things we're going to be doing in the coming weeks. So DTC, I think it's going to continue to be a very impactful lever. And we'd anticipate the ROI to continue to scale in a positive way. The last catalyst, as Jeff mentioned, is some of the data generation. And Q1 was actually one of the record-breaking quarters for us in terms of the number of podium presentations and posters, including ones that really open up the TAM, give doctors new patients to think about. And we highlighted on our call the idea of like Hortiolum and Chalasia, which is an area that patients come in all the time. They get lumps and bumps on their eyelids. Doctors don't like treating this. Sometimes it involves invasive procedures, and there's a high correlation of Demodex in these patients, and there may be benefit for those patients. And those doctors are hearing that from the podium. So when you look at where we are today, overall great underlying mechanics on the business, and then really clear and actionable catalysts to continue the growth as we go through the rest of the year to achieve the guidance that Jeff alluded to. Okay.

You, you up the peak sales guide to greater than two billion um maybe can you uh talk about are you seeing a is your expectation around the tam proved that is that an underlying factor there and you know you you were involved with pristasis and creating dry eye category you know maybe a similar point in time how do you see the evolution of uh ademonex plifuritis as a condition uh where doctors are focusing on it and sort of the the metrics there how do they how do they stack up so we're really excited when we talked about the potential of this product and to be clear you know the two billion peak is u.s sales for extend the only so it's actually very very impactful to think about that and i look at

historically right where stasis is a good good example and why is this different well this is even more impactful because it's not just how patients feel it's a visible disease right they get the redness the crusting and impact so patients are more motivated here particularly with the mechanism of knowing its mites, that's different. The diagnostic criteria is really easy for doctors to employ. It's a simple slit lamp exam. They just need to check your eyelids for crusting. They can make a definitive diagnosis. So these are things that we believe allow Xdemy to be an even bigger impact in the eye care market, i.e. a $2 billion peak versus, you know, say dry eye products, I think is a billion, billion and a half. What are the underlying assumptions there? One is, as you alluded to, Jason, the expanding TAM. We started and said, hey, there's 25 million Americans out there. We started with about 9 million. What we're hearing from doctors very clearly is that there's far more use cases for this product. They're having really good success. They're contemplating different patient types. We talked about Hordeol and Chalasia. There's several other use cases. So beyond just the obvious, right? We talked about dry eye, cataract surgery, myoboming gland disease. These become very obvious cases, but there's even more. So we think an expanding TAM is one factor. The other factor, which is really exciting is a broadening prescriber base. When we started, we thought about about 15,000 or so doctors. And a couple of quarters ago, we said, hey, we had over 20,000 doctors writing this product. So we have more doctors. So you're actually accessing the other part of the funnel, not just the TAM, but actually the ability to convert because you have a larger landing pad for these patients with over 20,000 doctors writing. And when you look at the most recent quarter, we actually saw a good step up in terms of depth of prescribing.

So these audience of 20,000 doctors is actually continuing to progress how they're activating patients in their practice so expanding tam and expanding debt the prescribing are the two levers that we believe are going to untap the full potential okay and this is you somewhat of a promotion sensitive category you know as we think about how you're resourcing the brand today do you feel like the incremental growth from here is with a high degree of favorable operating leverage meaning you know Have you kind of reached a high point in terms of resourcing? Is the incremental dollar spent in OPEX, is it something that you can allocate to R&D in different clinical programs or make an acquisition and place funding towards that? Or do you feel like investment in OPEX still has to scale with the growth of the brand? I mean, the support of sales and marketing dollars to support the brand as opposed to other things that could drive alternative sources of growth.

Yes, I'll talk about the commercial and then I'll let Jeff speak to where else we can deploy capital. But from a commercial perspective, we're in a really good spot. We have one of the largest sales forces in the iCare space. So we're well resourced there. We talked about DTC, all of our analytics and data support the level of spending we're at today. And again, we're looking for ways to get even more impact out of that investment. I think the only area we will continue to scale is there's always variable fees that go along with our business, right? So pharmacy fees, co-pay fees, et cetera. The more bottles you sell, those fees will go up in commensurate levels. So we see that as the only thing that scales, but implied there is to continue to generate operating leverage on the base commercial business. We're starting to show that in 2026, and I've committed to Jeff that I'm going to continue to do that going forward, and that hopefully frees up capital to do other exciting things to grow the company, which Jeff can speak to.

Yeah. No, I think right now the Xtempi business is a profitable business if you think about it from a product P&L perspective. And so that leverage is going to continue as the revenues grow. And then we are really priority number one on capital allocation is continuing the growth of Xtempi, but we're also really excited about our pipeline and investing in the ocular rosacea and the line programs as well. And then BD, we want to be an eye care leader, and that means really focusing on the anterior segment, bringing more things into the bag for our sales team, and then at some point as we continue to grow, thinking about moving into the back of the eye as well.

Yeah. Okay. And then maybe just thinking about sources of the business and uptake, be it either a patient profile or patients with comorbidities more likely to get treatment. And from a prescriber's perspective, I'm just curious why ophthalmologists may be like ODs at this point. I think at the time when you guys IPO'd, it was an expectation to be more of a 50-50 balance. I think it's a little bit more skewed to ODs. And so I'm just kind of curious if your thoughts around maybe why ODs have gravitated to the product more so than MDs.

Yeah, and I think to clarify, the products have formed really well across both segments. Ophthalmology, you know, as mentioned, like it's actually not actually, some of our top prescribers are ophthalmologists. It really has to do with practice dynamics more than a bias towards whether or not they see success with the product. So ophthalmologists, keep in mind that they spend a good proportion of their time outside the clinic. They're in the OR, so they have inherently less clinic days to treat these patients. With that said, some of the most prolific prescribers of the product are ophthalmologists who are doing cataract surgery and are pretreating these patients that are seeing a high preponderance of them at explepharitis. So we see a real value there. Optometry being, you know, say two-thirds of the business is really predicated. One, they're in the clinic all the time. Two, a lot of optometrists are actually in clinic with ophthalmologists. So it's hiding the fact that, you know, going back to what the 50-50 was, well, a lot of that prescribing that's happening in ophthalmology clinics is done by the OD, the optometrist. The surgeon is saying, I'm going to do the surgery, and the optometrist is going to manage So you have co-management. That's a factor there. And then third, for your standalone optometrist, this is a huge practice builder. They see this as a way to expand the practice. More and more optometrists are practicing medically. Those visits tend to reimburse significantly better than just a standard vision exam. And with this type of disease where we know there's a potential for recurrence, there's a dynamic output where they can see the palpable impact of the drug, there's a desire to bring these patients back. So they're coming in for a follow-up visit to see the impact of the treatment and also to see recurrence down the line. So for an optometrist, this becomes a great way to retain patients in the practice, bring them back, and really create value for the practice. So all of those factors would tell you it's right where it should be, and if anything, we continue to see great response in both specialties.

Right, and can you maybe just outline for optometrists, I know that there's an opportunity to sort of get a greater value capture for the medical diagnosis versus the optical. Is that something that's realized upon the initial script and the use of the slit lamp or is also a confirmatory follow-up visit to make sure that the therapy has accomplished the goal of clinical cure?

It's both. So a lot of times they'll initiate the therapy on the first visit, and if they can code an ICD-10, then they can bill because they're not treating a medical condition versus just doing a vision exam. So they're essentially converting this to a medical visit. And then the vast majority of optometrists will then bring the patient back a couple of months later. It's a six-week course of therapy. So they'll bring them back in two months to see the response. And actually, that's a real driver of patient satisfaction. Hey, I found a problem that's been bugging you for a long time. I gave you a targeted solution. They bring them back and say, look how great the outcomes were. Isn't this wonderful? It's a great way to retain the patient as well as drive value for the practice.

And then we were getting more questions from investors about competitor phase two glaucose data? And, you know, any insights you guys have in terms of the antiparasitic API that they use in their therapy and how that may work as well, or maybe doesn't work as well as Lodalantner?

Yeah, no, we have a very good competitive intelligence group. And so we're aware of this and monitoring it as well. So what we understand is they've got a clinical study that they are looking at a, it's a part of their gel-based formulation that they plan on putting on the eyelid, and I guess they're doing it BID, which is twice a day, and then they also are trying it out once a day as well. I do think, you know, we did explore method of application when we thought about Lodalaner, and, you know, based on our work, the preferred method was via eye drops. I think patients are more familiar with eye drops for, you know, those type of things, and so that's the route we chose. And I do think it's going to, from a competitive perspective, it's going to be a high bar to really exceed what Xtemi's been able to accomplish, right, in terms of very good efficacy. You know, I think in real world, you're probably hearing nine out of 10 patients are extremely satisfied. It's extraordinarily safe. And there's a great deal of, you know, patient satisfaction in being able to see, you know, those cholerets disappear. So I think it's going to be challenging for anybody to come in and exceed that. And I would also say our mechanism is very specific and it's targeted at the mite. So it targets the GABA chloride channel of the mites and there's no off-target human implications of that. So it's very specific to the parasite and kills the parasite directly.

Okay. So as Xtembic grows and expands, Usually there's a target on any drugs back with payers as you get above a billion-dollar threshold. And so I'm just curious how you're thinking about the net pricing dynamics evolving as you get bigger. Are you seeing coverage, restrictions around coverage getting more difficult or status quo over the past year or two?

Yeah, so for coverage, this has been an area of strength for the business. We have over 90% of lives covered across both commercial and part D. and reminding folks it's about an equal split, about 45% of the business, commercial 45% of the business Part D and the rest other government channels. And we've got great coverage across both, and that continues to persist. We don't anticipate any major changes to that because this is such a great value to patients. And when we sit across from payers, we talk about high rate of effectiveness, as Jeff outlined, super safe. This is not something that people have to take every single month. They take one, maybe two treatments a year. You know, we talked about a 20% retreatment rate, which is a great value. You sit across from a pair and say, how many drugs do you pay for today that almost every single patient has a really robust response that can get you a durability of effect for almost a year? And they'll say, okay, well, we pay for a lot of things that don't work very well, but we do it because it's there. So this is a very differentiated offering when it comes to the pair. And we've got a really great team that's established a really strong value proposition. I think the other thing we'll continue to do is generate more data, generate more use cases of how this can positively impact patient outcomes for patients that would otherwise make multiple visits, get unnecessary procedures, use unnecessary medications. Those are all cost savings for the payer. But as XMV grows, it's actually an offset. So the more we can model that through pharmacoeconomic modeling, that'll be a great value offering. So we don't see any risk of significant price erosion over time. I think we've said that we're in that kind of target gross to net range. and we're going to be really diligent with our relationships with the payers to maintain that.

So let's shift the pipeline in the last 10 minutes. We've got phase two ocularization data, first F27. This is the same API in Xtendv, just given in a different dosage format. Maybe just how much confidence can you derive from what you've seen in WNX bupharitis to that study result?

Sure. So a little background on ocular rosacea, it impacts about 15 to 18 million patients, and there's no other approved FDA therapeutic out there for it. And of those 15 to 18 million patients, the vast majority of ocular rosacea is caused by Demodex mites. And so we knew with Xtenvi, we're very good at killing the mites. And so we've created this sterile gel formulation, which is better suited for around the orbital area and are moving forward with the phase two study. We initiated the clinical study in December of last year and are enrolling it with top-line data in the first half of 27. And the objective here, based on discussions with the FDA, is to show improvement in two of the hallmarks of the disease. One is, of course, the redness that you typically see in ocular rosacea or any type of rosacea. And the second is a reduction in these pronounced vessels that are one of the hallmarks of the disease on the upper eyelid and the lower eyelid. And so, importantly, we don't have to show a cure, but just an improvement based on that feedback. And so, we've developed a proprietary scale that we've developed and trained all the clinical sites on. And the goal here is to show a one-level improvement in either the redness reduction or in the reduction in vestals. And what gives us confidence is, as you might recall, Jason, that we had a phase two study in papillary pustular rosacea, which is also caused by Demodex mites. And so in that study, we showed a stat-sig reduction in the redness, but also a stat-sig reduction in the pustules that are caused by these Demodex mites. And so that gives us some good confidence that we will be successful in this study as well.

Can you talk a little bit about the patients you'll be enrolling in this study, the severity of the rosacea, the phenotype of these patients, and just trying to get a sense of how that might compare to the supportive phase two study that you cited there in rosacea?

Yeah. So in general, we're taking a fairly broad patient population that have ocular rosacea because we want to get some data there. And so they generally will be present with a certain form of both the redness as well as the vessels that we see there.

What do you see as the biggest risks then to this trial?

I think it's really the execution on the scale, right, and making sure that the sites are consistently reading. Dr. A is reading a one-point reduction as is Dr. B at a different site and continuing to sort of read that scale of improvement.

And your FDA interactions so far and how that informs the data that we see if that's going to be a repeatable registrational type study?

The feedback we've gotten is either one of those endpoints would be something that would be an approvable endpoint in a phase three.

And how much overlap is there with them and expliferitis? We think about this marketplace and that 15 million or so patients, how much general overlap do you have? Are you going to be getting both of these therapies potentially to have a more holistic strategy to eradicate the mite?

Yeah, so we're doing a lot of work now to really understand that prevalence and overlap. It's thought to be a decent amount, but keep in mind, this is a distinct disease and a distinct therapy for that disease. So there's going to be patients that have demodex blepharitis that will get Xdenby. There's going to be patients that have ocular rosacea that will get TPO4. And then there's a cohort of patients that are going to have both manifestations, both diseases, and they would get potentially both to target each disease. And this is actually something we even heard even in early days when we're exploring this as an opportunity. a lot of doctors were telling us that they saw these overlapping patients that were treating the blepharitis with XMV and almost that contrast was very notable that the eyelid margin was clear but there was still a lot of periocular redness or telangiectases and they said wow if you had something that would fix this and we said okay we might have something up our sleeve which kind of helped prompted us to accelerate and move this program into phase two so we think that's a really unique opportunity again it's the exact same call point so there's tremendous commercial synergy We're already talking about it. Doctors are spending more time looking at the lids because of demodex blepharitis. And there's an opportunity to treat each of these diseases with a unique and tailored therapy.

Talk about the work you've done to profile who the prescriber is and, you know, are eye care professionals thinking about treating a dermatologic, you know, manifestation and what role will derms ultimately play?

And, you know ultimately would you need to perhaps expand the field force do you see derms playing a role at all in the treatment of ocular rosacea potentially we we see this really as an eye care focus play though um and this is the same call point so this is optometrists and ophthalmologists that are essentially interior segment focused they focus on front of the eye diseases like dry eye like them at x blepharitis and they see this all the time and they don't really think about this as treating a dermatological disease they think about this as treating an eye disease and they've been for a long time looking for solutions for ocularization there's nothing today um you know some of these folks are trying to use IPLs so there's a precedent that people are trying to solve this problem this conundrum um and that gives us even more confidence in the potential

of this you know this gets across the line this is going to have a high utility for these doctors they see these patients all the time okay then maybe we'll we'll go to Lyme uh disease this is also little antler but in an oral dosage format that's right and so um maybe just you know the the initial learnings from the um i'm trying to forget how it's like a tick kill study right right um but to the the differences in the in the phase two that you're running um and and how that could provide additional learnings and and to risk the program uh more more fulsome sure yeah no we got a lot of interest in that since we announced the the study starting.

We talked a lot about it here. There's a lot of interest in it, a huge unmet need, as you know. So we, just as a reminder, that tick kill study was basically a bunch of college students that were exposed to non-Lyme infected ticks. And we, you know, pardon me, lucky them. Well, they were paid, so good beer money. But what we did is we exposed them to the ticks and And then they took an oral dose. And then we measured the number of ticks that were killed within 24 hours. And then we reintroduced the ticks within 30 days. And within 24 hours, we killed about 98% of the ticks. And 30 days later, with that same dose, it killed about over 95% of the ticks. So it's fast-acting within eight hours, and it's durable. And so based on that data, we've decided to move forward in this Phase 2 study. It's about 700 patients that we're going to be enrolling in this one tick season, and very similar in terms of design. So it'll be a once-monthly dose that these patients will be taking, and what we'll be measuring, since it is essentially a prophylactic, safety is going to be critical. So safety is the primary endpoint, but we'll also be measuring PKA levels, drug levels, knowing what we saw in the phase 2A study and tickle study, what was required in terms of drug levels to kill the ticks will be one of the other endpoints that we'll be looking at. And then we're looking at some other biomarkers to potentially identify Lyme disease as well, too. So, and then of course, we'll be measuring the number of patients that get Lyme versus don't get Lyme, but they're, you know, in all reality, we're not going to likely see a statistic signal there. You know, we'll be measuring because it's going to be a very small N. What will be the N roughly? What will be the N? About 700 patients.

700 patients. And, you know, confidence that you can get this done in one season. I think Pfizer had a trial and there was a lower incidence. But I guess this won't be incidence-driven. This will be just driven by enrollment factors.

Yeah, that's right. But we are doing it in high endemic areas because, you know, we did learn, you know, from, I think, TARS's or from Pfizer's enrollment. So we're going into some of those areas and really seeing if there's an opportunity to maybe pull something from the biomarkers, you know, as well.

How do you see this competitively? I don't know if you have a view on if Pfizer is going to be able to get through FDA with its results right on the pre and then the second specified analysis. But, you know, if it is approved, ultimately it's a four dose vaccination. So I guess there's a question A of how does it competitively stack up against that? And then B, you know, what would be a regulatory development pathway for an oral agent like this that's taken presumably a sonorous, you know, schedule than a four-injection vaccine schedule?

Yeah, great questions. I think, you know, it's hard to say on, you know, the Pfizer regulatory pathway. I do note that there's a huge I'm at need, and this administration has highlighted this as being an important criteria for them to be focused on. So, you know, they could see approval. I think we have had discussions with the agency about a phase three study. They have sort of reverted to the clinical study that the Pfizer team did at Lyme disease prevention study. So it would be of similar magnitude in terms of size. However, given the Lyme-X program that the FDA has pushed forward, Kennedy's pushing on getting more therapies out there, we are having some discussions with parties within the FDA and other government agencies to see if there's a more abbreviated pathway in which to see approval more quickly okay well we're out of time uh so uh let the cut it off there but thank you guys so much for joining us thank you jason appreciate it