Tarsus Pharmaceuticals Inc Stock

Hello, and welcome to Tarsus Pharmaceuticals Second Quarter 2026 Financial Results Conference Call and announcement to acquire Alkeus Pharmaceuticals. As a reminder, this call is being recorded. [Operator Instructions]

At this time, I would like to turn the call over to Sarah Nives, Investor Relations, to lead off the call.

Thank you. Before we begin, I encourage everyone to visit the Investors section of the Tarsus website to view the press releases issued today and related materials we will be discussing today.

Joining me on the call are Bobby Azamian, our Chief Executive Officer and Chairman; Neera Clase, our Interim Chief Commercial Officer; Sesha Neervannan, our Chief Operating Officer; and Jeff Farrow, our Chief Financial Officer and Chief Strategy Officer. And joining us for Q&A is Dr. Liz Yeu, our Chief Medical Officer.

I'd like to draw your attention to Slide 3, which contains our forward-looking statements. During this call, we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional details.

With that, I'll turn the call over to Bobby.

Hello, and thank you for joining us. Today is an important day for Tarsus. We're reporting another exceptional quarter for XDEMVY and announcing the acquisition of Alkeus Pharmaceuticals and gildeuretinol or ALK-001, a late-stage investigational therapy for Stargardt disease. When we launched XDEMVY, we believed Demodex blepharitis or DB was one of the largest diseases in eye care, hiding in plain sight. Our ambition was never simply to commercialize a single medicine. It was to demonstrate that by identifying diseases that have been overlooked for years, creating categories, developing medicines with the potential to redefine the standard of care and executing with excellence, we can fundamentally change patient care while building a leading eye care company.

XDEMVY continues to prove that thesis. Nearly 3 years after launch, more than 700,000 patients have been treated. XDEMVY has generated almost $1 billion in net product sales reported to date, and we are well on our way to over $2 billion in potential annual peak sales. This quarter alone, XDEMVY generated approximately $174 million in net product sales, representing more than 69% year-over-year growth. XDEMVY has never been stronger, and we believe we are still in the early stages of realizing its full commercial opportunity.

What's more, XDEMVY is powering innovation at Tarsus, and that's precisely why we have the confidence to make strategic investments like the one we are announcing today. We are investing in assets with novel disease-modifying approaches, compelling clinical evidence and a clear strategic fit to build a leading eye care company. ALK-001 is exactly that as it has the potential to preserve vision for longer and become a foundational treatment for Stargardt disease. This devastating inherited retinal disease often affects children and young adults. And today, there are no FDA-approved treatment options. It also broadens our presence in retina, one of the largest and most important specialties in eye care. We've already begun building capabilities through our recent acquisition of IRX-101 and aim to create a distinct portfolio positioned to address serious retinal diseases over time.

I would like to take a moment and thank the Alkeus team for all their passion and commitment in developing ALK-001, a truly novel medicine. To date, they have developed one of the most robust clinical data sets, and we believe ALK-001 has the potential to preserve vision longer in patients suffering from Stargardt disease. XDEMVY remains a cornerstone from which we're building a leading eye care company, one with the capability, pipeline and innovation to repeatedly bring meaningful medicines to patients. And with today's announcement, we took an important step on this journey. This acquisition is expected to build upon the commercial success of XDEMVY and with the addition of ALK-001, creates one of the most exciting pipelines in eye care and beyond, one that is positioned to deliver multiple potential blockbuster medicines over the next several years.

Before I turn the call over, I would like to welcome Neera Clase, our Interim Chief Commercial Officer, to her first earnings call. Neera has been instrumental in building our commercial organization and ensuring the ongoing success of XDEMVY, and we are thrilled to apply her leadership and expertise to this new chapter. Neera, over to you.

Thank you, Bobby. I'm honored to step into this role at such an exciting time for Tarsus, and I look forward to advancing the playbook that has put XDEMVY on the path to more than $2 billion in potential peak sales. As Bobby mentioned, XDEMVY is the cornerstone of our company and across every metric that matters, eye care professional adoption, consumer activation and commercial execution, the business has never been stronger. These 3 priorities are reinforcing one another, which is exactly why XDEMVY continues to outperform.

The clearest evidence is the change we're seeing in ECP behavior. I recently spent time in the field hearing firsthand from doctors about how the conversation around DB has evolved. Eye care professionals or ECPs are no longer asking whether they should treat DB, they're asking how broadly they should be screening for it and how many more patients can they treat. And the numbers reinforce the acceleration we are seeing. Over the past year, the number of ECPs prescribing XDEMVY at a near daily cadence has doubled, and our top doctors have continued to increase prescribing month after month. That's an important shift.

It signals that the market has moved beyond initial adoption and towards the standard of care. We are also seeing retreatment rates advance into the high teens, creating an increasing source of demand alongside new patient prescriptions. Combined with broader ECP adoption, that gives us even greater confidence in the long-term trajectory of the business.

Our growing body of clinical evidence is also helping to deepen that conviction. Recent studies have shown that DB is common in patients with Thelazia, which further reinforces XDEMVY as the standard of care over tea tree oil and highlights the potential infection risk associated with Demodex and bacterial coinfestation. Together, these findings are encouraging ECPs to screen more consistently during routine eye exams and identify patients with DB they may not have diagnosed previously. In addition, our key account leaders or KALs, are now fully deployed across their highest potential practices.

They are helping those practices embed screening more consistently, identify more patients and expand treatment over time. And the field feedback I'm hearing was echoed in a recent survey of these same doctors. More than 80% of physicians told us that they expect to increase XDEMVY prescribing over the next year and beyond. This strongly signals continued momentum as we work to reach the estimated 25 million Americans living with DB.

While ECP behavior is deepening the market, our consumer efforts are expanding the top of the funnel. Our consumer campaigns are introducing millions of people to a disease that they never heard of.

John Cena, our celebrity spokesperson, brings credibility and authenticity through his own experience with DB, while our new unbranded DTC campaign featuring Barry the Cat helps patients recognize symptoms in a way that's approachable, memorable and easy to understand. As a result of these efforts, many patients are now asking for XDEMVY by name. We've also seen a 19% increase in high-value actions on the XDEMVY.com website, including the use of our Find a Doctor tool and lastly, our AI-powered concierge, which helps patients better understand their symptoms and take the next step with their ECP.

Unaided awareness of DB has also climbed to approximately 30%, which is remarkable when you think about how far we've come since we first launched our DTC campaign. The response has been powerful and clearly resonates with patients. They aren't simply hearing the message, they're becoming educated, engaged and motivated to seek care. Our commercial pillars are working in concert just the way we envisioned. Greater awareness brings more and more patients into eye care practices, stronger evidence and field execution help physicians identify and treat more patients and positive clinical experience further reinforces confidence and adoption.

When I look at the business today, I see a potential $2 billion opportunity that is unfolding exactly as we planned. That's why my confidence in XDEMVY has never been stronger. Its continued success is not only driving growth, it is creating the foundation for Tarsus to invest in programs like gildeuretinol and expand our impact for patients across eye care.

With that, I'll turn it over to Sesha.

Thank you, Neera. This is a momentous day for Tarsus and our mission to serve patients. We believe ALK-001 is the most compelling program in development for Stargardt disease. And as you heard from Bobby, it has the potential to become a foundational medicine for patients with no approved therapies today. Stargardt is a serious inherited retinal disease that often begins in childhood or adolescents with more than 36,000 diagnosed patients and a total estimated 86,000 patients in the United States. Vitamin A is essential for healthy vision and is a key component of the visual cycle.

Stargardt is caused by a genetic mutation that leads to formation of toxic vitamin A dimers known as bisretinoids. These toxic dimers can damage the retinal cells responsible for central vision and over time can cause blindness.

The consequences can be devastating. Half of patients diagnosed before age of 20 are expected to become legally blind within 7 years, 7 years. That's a reality facing many children and young adults living with Stargardt disease today, and it's also the urgency for this program. ALK-001 is an investigational modified vitamin A analog designed to slow the formation of these toxic byproducts while preserving the normal visual cycle. It has the potential to address the dimensions that matter most to patients, slowing the progression of a blinding disease and preserving visual function.

To date, the program has generated encouraging evidence of visual function preservation with no evidence of negative treatment-related effects on night vision, dark adaptation or color vision. As you can see here, the TEASE studies showed ALK-001's potential to preserve the visual cycle and acuity, slow retinal atrophy and its unmatched long-term tolerability profile.

Together, these studies give us confidence that ALK-001 can be a breakthrough medicine that can potentially prevent the progression of Stargardt disease. As with any chronic therapy, especially one that impacts pediatric and adolescent patients that may ultimately be taken for a lifetime, the long-term safety profile is paramount. ALK-001 has been evaluated in more than 400 patients, demonstrating a favorable tolerability profile and with treatment exposure extending up to 7 years. This is exactly the type of program we look for, differentiated disease-modifying approach, compelling long-term tolerability and a potential to meaningfully alter the course of the disease for patients with no approved treatment options today.

Turning to next steps in the program. NORTHSTAR, the ongoing Phase III study is designed to demonstrate that ALK-001 can slow disease progression in patients with Stargardt disease. The study is expected to enroll approximately 230 patients between ages of 8 and 45. The primary endpoint will measure the rate of retinal lesion growth over 24 months, and the secondary endpoint will assess a key aspect of visual function, change in low-luminescence visual acuity. Coupled with the compelling data from these trials, ALK-001 is expected to generate a differentiated and the most robust clinical data set in Stargardt disease.

The program has been developed with the FDA, and we anticipate top line results in the second half of 2029. We are also considering a potential second Phase III trial to support approval. The trial to be discussed with the FDA is envisioned to focus on younger and faster progressors and include additional exploratory endpoints.

We believe ALK-001 has the potential to become a foundational treatment for patients with Stargardt disease, one which can blind a child within 7 years. ALK-001 is a differentiated disease-modifying medicine that protects the retina without impacting the normal visual cycle. It advances our pipeline in retina and most importantly, gives these patients something they have never had, an investigational medicine with the potential to meaningfully slow progression of this blinding disease. Jeff, over to you.

Thank you, Sesha, and good morning, everyone. All around, this was another outstanding quarter for Tarsus. We delivered record XDEMVY revenue, continue expanding our leadership in eye care and another important step in our long-term growth strategy through the acquisition of iRenix and today's announced pending acquisition of Alkeus.

In the second quarter, XDEMVY net product sales were $173.9 million, representing more than 69% growth year-over-year and approximately 20% growth quarter-over-quarter. Gross margins were flat at approximately 93%, and we ended the quarter with cash, cash equivalents and marketable securities of $449.7 million. For additional details on our Q2 financial performance, please refer to the earnings release we issued today.

Turning to guidance. We have updated our outlook for the remainder of 2026 and increased XDEMVY full year net product sales guidance to $685 million to $705 million from our prior guidance of $670 million to $700 million. This increase reflects our confidence in the underlying strength of the business. As we have previously discussed, we expect the quarterly revenue progression throughout the remainder of the year to reflect normal seasonality in the eye care market.

The summer period typically includes fewer physician office delayed case due to vacations, holidays and conferences, and we expect tempered growth in the [Technical Difficulty]. We then expect more robust growth in the fourth quarter, supported by the usual year-end patient dynamics, and this cadence is reflected in our increased full year guidance.

Moving to operating expenses. We continue to expect gross margins of approximately 93% and SG&A expenses of $545 million to $565 million. We now expect full year R&D expense to be in the range of $190 million to $210 million, an increase from our previous guidance of $115 million to $135 million. The increase reflects the upfront consideration of $75 million for the acquisition of iRenix Medical. This guidance does not include the pending acquisition of Alkeus.

Turning to the financial terms of the Alkeus transaction. The upfront consideration is $450 million, consisting of $270 million in cash and $180 million in Tarsus common stock. The transaction includes up to $350 million in potential milestones like a regulatory approval in the United States and the first commercial sale as well as low single-digit tiered decreasing royalties on future net sales.

In addition, we secured $125 million through a private placement financing from a syndicate of leading health care investors, including several shareholders of Alkeus. This transaction reflects the disciplined [Technical Difficulty], which we've discussed with investors over the past several years. We're investing from a position of strength while maintaining the financial flexibility to continue executing on XDEMVY and advancing our broader pipeline.

The Alkeus transaction is expected to close later this year, subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. Financially, this transaction strengthens our long-term growth profile while remaining consistent with our strategic approach to capital allocation. It expands our presence in retina and adds a differentiated late-stage program with significant potential. [Technical Difficulty] the entire Tarsus team, it represents a significant and potentially transformative opportunity to help patients, particularly children and adolescents, maintain vision longer by slowing the progression of this blinding disease. We look forward to updating you as the transaction progresses.

With that, I'll turn the call back to Bobby.

Thank you, Jeff. Before we open the lines this morning, let me leave you with one final thought. Everything we've talked about today starts with XDEMVY. Its success has changed the standard of eye care, created extraordinary momentum for our business and most importantly, what's possible for Tarsus.

Today's announcement is another important step in that journey. Together with our other retina acquisition, IRX-101, strengthens our retina portfolio and reinforces our mission to build one of the most innovative and differentiated companies in eye care. We're incredibly excited about the opportunity ahead.

Operator, please open the line for questions.

[Operator Instructions] And our first question comes from Graig Suvannavejh of Mizuho.

This is Ryan Ries on today for Graig Suvannavejh. Just wanted to ask a little bit about the new asset and how you see it comparing an efficacy to tinlarebant, the Stargardt medication in Phase III trials for Belite, which has a head start. Is there any differentiating factor that you think could help [indiscernible] to capture more market share relative to tinlarebant?

Thank you, Ryan. Yes, this is Bobby. We're really excited about this asset. As mentioned, we are really serving the landscape and found a very compelling late-stage opportunity. And we understand that we're likely going to second here. And we're still very compelled by this.

So in terms of overall profile, we see something that can really change the course of this disease that demonstrated effectiveness in a couple of dimensions that are really important patients, both the progression of disease is measured by atrophy and the progression of disease measured by visual acuity, low-light visual acuity in particular. And that's unique in this field.

We have to see a great safety profile with up to 7 years of data over 400 patients treated. So we think that presents a compelling opportunity. I'll pass to our Chief Operating Officer, Sesha, to talk a little bit more about that profile, and we can certainly dig deeper here over the course of the call.

Thank you, Bobby, and thanks for the question, Graig (sic) [ Ryan ]. As I mentioned in the prepared remarks, gildeuretinol or ALK-001 is a medicine that has been designed to reduce or curtail the toxic dimers in the eye without impacting the visual cycle. That's a very key gating factor for us with this particular molecule and this particular mechanism.

Toxic dimers are the key cause of retinal cell death. And we also want to make sure that the vitamin A visual -- participation in the visual cycle is not put up. And that's precisely what this medicine does. And it's actually shown in the data that we don't see any night vision adaptation or color disturbances and a very good safety and tolerability profile. So we think this medicine will differentiate itself on those properties and it's very important for the patient, especially in a blinding disease to not impact the visual size.

And Ryan, maybe I'll add -- this is Jeff. Just did some market research on what Sesha just highlighted there, seeing structural benefit, functional benefit with LLVA and just a really nice safety profile. And we surveyed about 100 retinal docs. And based on that, we really think that this is a $1 billion-plus opportunity based on that -- by that differentiation there.

And our next question comes from Eddie Hickman of Guggenheim Securities.

Congrats on all the progress in the deal. So now that you're building towards 2 retina launches sort of on different time lines, can you talk about the difference in sort of call points that you need to sort of build out and sort of how we should think about the sequencing of that commercial build in terms of size and scope? Appreciate it.

Thank you. Yes, Eddie, I'll start, and I'll pass to our Chief Commercial Officer, Neera. So it's a great point. We're entering a new field, retina. We're really excited to have now 2 Phase III drugs. I'd kind of go back to 6 years ago when we were at that same stage with XDEMVY, and we took a very diligent approach to understanding the eye care provider and really educating. And I know we'll do that here as well.

So we have 2 drugs in Phase III, one IRX-101 is a little bit ahead of ALK-001. So I think it positions us well. And I'll pass to Neera to talk about some of the synergies she see.

Yes. Thank you, Bobby. We believe both of these assets are a great commercial fit for Tarsus, really helps us to build the pipeline to become that broad eye care leader. And it plays exactly to what we've been doing with XDEMVY. And here are a couple of reasons why because we're still servicing an underserved population with a high unmet need, we'll plan to deliver evidence to differentiate the science. And what's different here in terms of the call point is we're talking about a more concentrated physician base about 3,500 of the physicians out there today. And our focus will be on securing broad access and launching efficiently into a concentrated physician audience. So it's a different playbook from the DB, but very similar footprint. And as you know, we've proven that we can execute, and we're really excited about this opportunity.

And the other thing I'd point out is there's a lot of lads in the call here. So it's about 500 doctors will be serving with IRX-101, that are doing ITs and then a subset of those actually 2,000 are prescribing, we think we're likely to prescribe over 80% of the Stargardt therapies here. So that presents some real synergy in terms of the sales force itself that we'll be building here.

Got it. And in terms of access, is that the same time line as XDEMVY in terms of sort of getting payer reimbursement set up? Should we think about it the same as XDEMVY? Or is it different for this space?

Different in that it's rare, but very similar in terms of how we've gone about access, right, a differentiated value story, but very comparable in terms of fast access, broad access.

The other thing -- I'll have Liz Yeu, our CMO, talk about, we're front of the eye company, and this is often where patients with Stargardt present. So Liz, you might speak to your experience and how you see kind of the initial assessment in the eye care provider landscape here.

Thank you, Bobby. When we think about the patients that we're taking care of, certainly, I'm taking a view of it from the patient perspective. And while most of the diseases that we see as eye care providers see, they worsen aging what's so unique and so humbling about Stargardt's disease is that almost half the patient population are actually kids and adolescents. And of those who are the fastest progressors, half of them actually go blind within 7 years.

So the opportunity for us to be able to manage them together alongside a lot of patients who are getting seen, especially those who are younger, they may complain or fail vision test at school, but it's going to be more primed by those primary eye care physicians who are seeing them because of those complaints, failed vision test or because they're coming in with glasses will be then diagnosed by the retina specialists. But it will be a shared opportunity. So there is that, yes, we have the blueprint of the education and the evidence generation. But the retina doctors, it is a small subset that we will definitely extend, leverage the relationships, educate and certainly generate the evidence.

And our next question comes from Jason Gerberry of Bank of America.

I'm just trying to think about just, a, the market opportunity here. I think you said something like 30-some thousand patients. Belite's talked about a pricing in the $350,000 to $500,000 territory. So trying to get a sense of what proportion of these patients are actually under the care of like a retinal specialist and is an addressable sort of market?

Secondly, just a question around how to think about like sort of the use of natural history. So like on BCVA changes over, say, a 2-year period versus lesion growth, I think the competitor had flagged you typically would lose like 1 letter every 2 years or so. So just wondering how you think about like the need for longer-term follow-up and sort of the durable BCVA benefit.

Yes. Thank you for your question. In terms of pricing, that price range that you articulated is the price range that we would consider also for this asset around that $350,000 price point. And it's really about value creation, understanding the differentiated profile here. And as we think about this particular asset, there is a safety and tolerability value proposition that really resonates here and differentiates from the competition. So we're excited to launch this. And as you mentioned, the natural history is a good way to create that value over time and to position this for optimal dosing and durability. With that, I'll turn it over to Sesha to provide additional comments.

Yes. Thank you, Neera. So with respect to your question on long-term follow-up on the vision benefit, what we saw in the trial is that the worsening of low-light visual acuity, which is actually even more of a sensitive measure than a BCVA was statistically significant. We saw benefit within 2 years in those trials. And that is a great measure to follow up because low-light visual acuity is a precursor of BCVA loss, BCVA tends to worsen slower than LLVA. And so that's a great measure for the physicians to monitor and look at the product of vision loss. So the tools are there, and they are very mature.

Our next question comes from Lachlan Hanbury-Brown of William Blair.

Yes. I was just wondering if the team is there. I think I cut out on that last question.

We're here. No, we're here.

Good. All right. Great. Congrats on the deal. I guess maybe a couple of quick ones. Just first, you've been talking a lot about the Stargardt program with gildeuretinol, but I know that Alkeus was at least until recently, I'm not sure if it's still going, but looking at geographic atrophy. So wondering if you're thinking there's an opportunity there, if you describe any value to that or if this is really just about Stargardt? And then maybe a second question. You said you're thinking about a potential second Phase III for approval. I just wanted to clarify, are you expecting a second Phase III would be needed? Or is that more of a -- you're thinking about that maybe for commercial purposes to add a different data set or a different layer of data, a different population, that kind of thing?

Yes. Thank you, Lachlan. I'll take the first part of that and Sesha will take the second part. So we really look at this in terms of the acquisition as on Stargardt. We see that there's been 400 patients treated, including [ GA ] and that provides a really strong foundation. So while we're acquiring the entire company, our focus is really on Stargardt in terms of the value ascribed here. And Sesha, go on.

Thank you, Bobby. Yes. As I mentioned, our current Phase III trial, NORTHSTAR is a very robustly designed trial and patients in a large set of patients. In fact, it's potentially the largest progressive prospective trial that's being conducted in Stargardt disease. And it's put very conservatively and very robustly for meeting both the primary and secondary endpoints.

And so we are very confident about this trial, providing a very robust clinical package along with the very strong Phase II data as well. So that is our primary approach, and we are very confident that it will be a very compelling evidence for registration and approval. The way we think about the second trial is really proactively thinking about any risk mitigation if we need it. And also any potential upside where we could enhance the data, enhance the exercise to stay with the fast progressors or other ways to enhance it. So it's really more of a risk mitigation and potential upside strategy. And we still need to talk to the FDA about how that study may look like. So stay tuned for how that progresses.

And our next question comes from Mazi Alimohamed of Oppenheimer.

So I think one from us is that I think when we're looking -- so it sounds like Alkeus has previously mentioned that the cleanest signal in Stargardt came from the presymptomatic and early-stage patients. But we noticed that NORTHSTAR is enrolling advanced disease. So how do we square the pivotal population with the mechanism? Is the expectation just a slower atrophy to the front at the lesion margin? And I guess the second follow-up to that is if that's the case, what reduction there do you consider clinically meaningful?

Yes. Thank you, Mazi, for the question. So the NORTHSTAR trial is designed for advanced patients, but also include younger and progressive patients. As I mentioned, it includes patients from age of 8 to 45. And we're really capturing those patients in the disease state. The [Technical Difficulty] lesion, in a group of atrophic lesion, which is very well-known and unprecedent endpoint by the FDA for approval. And that's how it is designed.

And these data showed that there's a very robust reduction of that atrophic lesions in the trial. We saw about 29% reduction compared to placebo. So I think the study is designed to hit on the primary endpoints and secondary endpoint of like visual acuity that is presented with the FDA. And really, it's positioned to win on those endpoints.

And I'll just add, when we looked at the data package here, we saw really good signals through our multiple Phase II studies in both moderate disease, advanced disease and some early patients. So we got confident across the spectrum of disease that Sesha is describing here in NORTHSTAR.

Got it. And then I guess with that, so if tinlarebant is approved, how could that affect trial enrollment going forward?

We don't think so. We -- the trial -- the NORTHSTAR trial is being conducted globally at many sites. And the trial is already enrolling. We started the trial 2 months ago, Alkeus started trial 2 months ago, and it's enrolling as expected. And we anticipate that by the time other products could be approved and launched, we'll be well underway in terms of our enrollment. And also, as I mentioned, we have the non-U.S. sites that we can also leverage evened on that.

And our next question comes from Francois Brisebois of LifeSci Capital.

This is [ Dan ] on for Frank. Congrats on all the progress. I guess, firstly, on the XDEMVY retreatment rates reaching high teens. Could you give us some color on what you're seeing in terms of XDEMVY's durability of treatment response and physician retreatment behavior as you think about -- I believe you have previously mentioned that rate kind of stabilizing around 20% and your confidence there?

And secondly, in terms of the DTC efforts, could you give us some color on how that kind of -- in terms of website engagement, what that conversion rate is into sort of treated patients?

Sure. In terms of retreatment, it's maturing just as we've described in the past. It continues to advance into the high teens, and we see it stabilizing at about a 20% steady state. The why really matters here when we think about retreatment, DB is a recurring condition and only ECPs can make that decision to retreat.

And so we're seeing exactly what we want, patients who actually have good experience with XDEMVY to begin with, come back when their symptoms recur. And this is still very much a new prescription story as it relates to retreatment. The second part of your story was around -- or your question was around the DTC piece. And our consumer engine is really performing ahead of our own expectations. What we've seen is increasing awareness through branded, unbranded and our celebrity campaign with Cena. The unaided awareness is now up to 30%.

And if you think about it, where we started, we were at 2%. Now 1 in every 3 patients can recognize XDEMVY by name. So that's really quite exceptional velocity for a disease that most people really never heard of. And our website engagement is also up by 30% and patients are, as we mentioned, asking for XDEMVY by name. On spend, you could think about it as it's being very efficient and very disciplined, and the returns continue to support the continued investment.

And our next question comes from Matthew Caufield of H.C. Wainwright.

Really great to see the range of updates this morning. So 2 questions from us. With the evolving pipeline now with data catalysts across the coming years, is there any shift to the prioritization of programs other than the partnership potential for Lyme disease? And then separately, regarding the Alkeus acquisition, what milestones would define success over the next 12 to 24 months, considering the Phase III NORTHSTAR top line are expected later into second half ' 29, just in terms of judging whether the acquisition is tracking kind of above or below your near-term expectations?

Matt, this is Jeff. Happy to answer those questions. So no pipeline shift. We're -- we have a robust balance sheet that will continue to allow us to focus on the existing pipeline. We're really excited about the ocular rosacea program. You highlighted the Lyme, which our baseline assumption is to partner with a Phase II-ready package. But also the iRenix product is something that we're really excited about getting into the market here in the next couple, 3 years.

So we're fully committed to the pipeline, including the Alkeus Phase III study. And then on sort of the data flow on the Alkeus, the ALK-001, in essence, what we'll obviously be tracking is patient enrollment. And so that will be something key. There is a design within the study that would allow for an interim analysis. That is something that we are going to discussing internally and it makes sense to do, but that is a potential option for us to do. And then, of course, there'll be the data -- top line data, which we expect to be sometime in the second half of 2029.

And our next question comes from Anthea Li of Jefferies.

This is Anthea on for Dennis. Just 2 questions from us. On the XDEMVY guidance, the implied script trajectory looks fairly conservative, even accounting for holidays and seasonality. Is there anything we're missing in terms of script acceleration in the second half outside of seasonality?

And then secondly, how are you thinking about profitability now that you need to probably ramp up R&D spend for these 2 new assets and then also expand the sales force? I think consensus has Tarsus becoming EBIT positive in '27. Do you still think that's fair?

Sure. Happy to take that question. No, we believe the guidance that we gave is appropriate guidance based on what we've historically seen in terms of seasonality and the expectations for various meetings and holidays. So we stand by that guidance. Of course, we always have an opportunity to update that in subsequent quarters. But right now, we're pleased how we've moved that up. I think it shows robust growth.

On the profitability, we haven't commented on profitability yet. That said, if you take a look at the guidance that we have provided, take the top end of the revenue and the bottom end of the OpEx, you could see us going profitable sometime in '27. Even with the incremental spend on iRenix and the Alkeus in the time frame of when those data will turn over, shift our ability to go profitable maybe perhaps by a quarter or 2.

And then the last part of that question was the sales force piece, and I'll take that. In terms of -- as we think about sales force with the new assets, you can think about a different sales force of between 50 to 75 complete team.

This concludes our question-and-answer session and today's conference call. Thank you for participating, and you may now disconnect.

Good afternoon, and welcome to Tarsus investor call announcing the acquisition of iRenix Medical, Inc. As a reminder, this call is being recorded. [Operator Instructions] At this time, I would like to turn the call over to David Nakasone, Head of Investor Relations, to lead off the call. David, you may begin.

Thank you. Before we begin, I encourage everyone to visit the Investors section of the Tarsus website to view the press release and related materials we will be discussing today. Joining me on the call this afternoon are Bobby Azamian, our Chief Executive Officer and Chairman; Liz Yeu, our Chief Medical Officer; Aziz Mottiwala, our Chief Commercial Officer; Jeff Farrow, our Chief Financial Officer and Chief Strategy Officer; and joining us for the question-and-answer session, Neera Clase, Senior Vice President, Market Access and Reimbursement.

I'd like to draw your attention to Slide 3, which contains our forward-looking statements. During this call, we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional details.

With that, I'll turn the call over to Bobby.

Thank you, Dave, and thank you to everyone joining us today. Today's announcement marks an important milestone in the evolution of Tarsus as we continue building a leading eye care company. With XDEMVY, we demonstrated that some of the greatest opportunities in eye care come from solving significant problems that have been overlooked for decades despite their impact on patients. Today's acquisition extends that approach to another important unmet need in eye care. IRX-101 is a late-stage investigational ocular surface antiseptic with the potential to improve the standard of care for millions of patients who require repeated retinal procedures to preserve their vision.

Additionally, it represents the next step in expanding our pipeline, broadening our impact across eye care and establishing our first strategic position in retina, one of the largest and most important specialties in eye care. In many ways, our first step into the back of the eye begins by addressing an impactful problem at the front of the eye, the ocular surface, where we have deep expertise. It also reflects how we think about innovation, start with what matters most to patients and physicians, understand and address the root cause of the burden and bring forward solutions that have the potential to fundamentally transform patient outcomes. One of the many reasons we're excited about this acquisition is the scale of the need. More than 11 million intravitreal or IVT injections are performed each year in the United States. Many patients return every 4 to 8 weeks, often for years to preserve their vision. Yet one of the most fundamental parts of the procedure, antiseptic preparation before the injection has not seen any meaningful innovation in more than 40 years.

With IRX-101, we believe we have the opportunity to substantially improve the patient treatment experience and outcomes, making it easier for patients to continue sight-preserving treatment while also reducing the burden for physicians.

Before I hand the call over to Dr. Liz Yeu, our Chief Medical Officer, I want to acknowledge Dr. Stephen Smith, Co-Founder and CEO of iRenix, a vitreoretinal surgeon and Clinical Assistant Professor of Ophthalmology at Stanford. Stephen understands this problem firsthand from treating retinal patients, and he and the entire iRenix team built IRX-101 with a clear focus on improving the IVT injection experience. We are grateful for the innovation, passion and patient focus they brought to this program, and we are honored that they have entrusted Tarsus to carry this forward.

With that, I will turn the call over to Liz.

Thank you, Bobby, and good afternoon, everyone. As many know, I've spent my career as a practicing ophthalmologist helping patients restore and preserve their vision often through ongoing treatment. Echoing Bobby's comments, I'm thrilled with the acquisition of IRX-101 because it has the potential to address the significant shortcomings of a critical part of every intravitreal injection, the application of povidone-iodine before the injection. When I talk with my retinal specialist colleagues, they tell me one of the biggest complaints they hear from the patients is the burning, irritation and pain that can follow antiseptic preparation. And our own survey results confirmed exactly that. More than 3/4 of retinal specialists we surveyed attributed patient complaints to povidone-iodine, not the needle, povidone-iodine. For patients with retinal disease, treatment doesn't end with a single injection. They often return every 4 to 8 weeks for years to preserve their vision. When a povidone-iodine application is followed by ocular surface damage, causing corneal epithelial cell death, it can lead to days of pain and irritation and that burden can accumulate over time. As a clinician, I've seen firsthand how it can make patients more reluctant to return for ongoing care. That's why improving the patient experience is so important, and that's what makes IRX-101 so compelling.

Turning now to the data. In the iRenix RELEIF Phase IIb/III trial, IRX-101 was compared directly against povidone-iodine in patients undergoing intravitreal injections. In this study, IRX-101 demonstrated statistically significant improvements in both endpoints, post-procedural pain and corneal fluorescein staining, a test showing damage to the ocular surface. Furthermore, approximately half of patients treated with IRX-101 reported a pain score of 0, 1 hour after their procedure, not lower pain, but no pain.

Looking ahead, the pivotal Phase III study has a defined path forward aligned with input from the FDA, and we anticipate initiating this study in the first half of 2027. We plan to enroll approximately 270 patients and compare directly against povidone-iodine with top line data expected in 2028. The path is clear and the need is significant. We look forward to advancing this program and the potential to deliver a new patient-centric option that can benefit physicians and patients alike.

I'll now turn the call over to Aziz.

Thank you, Liz. Hearing that perspective from someone who treats these patients every day reinforces exactly why this asset has the potential to be so impactful. The success of XDEMVY has given us much more than a product on a path towards more than $2 billion in peak U.S. sales. It has given us a proven commercial engine, one built on strong clinical evidence, physician education, broad patient access and exceptional execution. We've demonstrated that we can change physician behavior, build lasting relationships across eye care and successfully bring an innovative therapy to patients. We believe IRX-101 is another opportunity where those capabilities matter.

Commercially, this is an attractive opportunity because it's a highly focused market that already exists. More than 11 million IVT injections are performed every year in the United States, and every one of those procedures requires an ocular antiseptic preparation. Additionally, the vast majority of those procedures are performed by approximately 3,500 retinal specialists, which means we have the opportunity to build a dedicated focused commercial effort, including a sales force that is expected to be less than half the size of our current XDEMVY sales force. We don't need to create demand. We need to facilitate adoption through education that demonstrates meaningful value to retinal specialists and the patients they care for. We believe our commercial capabilities, combined with a differentiated product, position us to do exactly that.

With that, I'll now turn it over to Jeff to highlight the details of the transaction.

Thank you, Aziz, and good afternoon, everyone. When we evaluated this opportunity, we focused on 3 things: a large and durable market with significant unmet need; second, a differentiated late-stage asset with a clear regulatory path; and a transaction structure that reflects efficient capital allocation.

The iRenix acquisition ticks all of the right boxes. It advances our long-term strategy to build a leading eye care company while preserving the financial strength to continue investing in XDEMVY and our broader pipeline. It also represents a thoughtful use of capital that has the potential to create meaningful long-term value for shareholders.

Let me now walk you through the transaction structure. Under the terms of the acquisition agreement, Tarsus will pay upfront consideration of approximately $75 million, consisting of $37.5 million in cash and $37.5 million worth of Tarsus common stock and potential approval and commercial milestones of up to $490 million and low to mid-single-digit tiered royalties upon achievement of certain milestones.

I'm pleased to announce that the acquisition has closed, and we have financed the purchase with our balance sheet.

From a financial perspective, what makes this opportunity particularly compelling is the combination of a well-defined development program, a focused commercial model and a transaction structure that aligns significant portions of the economics with future value creation. This asset is also supported by an attractive intellectual property position with patent protection expected into at least 2039.

As Liz outlined, the pivotal study is expected to initiate in the first half of 2027 with top line data expected in 2028. We anticipate the cost to approval to be in the range of approximately $20 million to $30 million. Stepping back, this transaction is about much more than adding a promising late-stage asset. It allows us to leverage the capabilities we've built with XDEMVY from clinical development and commercial execution to market access as we thoughtfully expand into one of the largest specialties in eye care.

At the same time, we're doing so from a position of financial strength while preserving our ability to continue investing in XDEMVY and the rest of our pipeline. We believe that combination, strategic expansion, focused execution and financial flexibility positions Tarsus to create meaningful long-term value for patients, physicians and shareholders. I'll now hand the call back to Bobby for closing remarks.

Thanks, Jeff. We've always said our ambition is to build a leading eye care company, and now we've taken another important step forward. With XDEMVY, we proved that meaningful innovation can transform areas of eye care that have been overlooked for far too long. IRX-101 provides us the opportunity to do it again, bring meaningful innovation to millions of patients while establishing the foundation for our next chapter of growth.

Operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Jason Gerberry with Bank of America.

A couple for me. Just what do you need to show to command a price premium versus Betadine, which I understand to be more of a genericized price point per bottle. And is this a category where you think you can get a price premium with good access if you deliver on the remaining outstanding Phase III trial requirements? And as it pertains to the upcoming Phase III, the press release suggests this is like a safety tolerability trial. So can you just remind us what are the endpoints, treatment duration? What are you looking to show in this type of trial? Is this really about showing a comparable antiseptic benefit to Betadine?

Jason, it's Aziz, and thank you for jumping on. Really great questions here. I'll start with just talking about why we're excited about the market opportunity, right? Just to reiterate, 11 million IVTs every year in the U.S. These are patients that are undergoing therapy to save their vision, and that process really matters and all of them get antiseptic. So this is a critical step in that process. In terms of your question, we see this as being a very differentiated asset. And when it pertains to pricing reimbursement, this is an area that we actually are really keen on. And to that end, we've had Neera Clase, who's our Head of Access, join us here today, and she's the architect of all the marketing -- market access and reimbursement work we've done in XDEMVY, which, as everyone knows, has been a core pillar of the success of that launch. So I'll allow Neera to give you a little bit more color on what do we think it will take to get that differentiated reimbursement. And then maybe we can turn it over to Liz to give you a little bit more color on the clinical plan there. So Neera, I'll turn it to you.

Great. Jason, in terms of the pricing, it's early days, as you know now. So we don't have pricing yet established. But we do and will pursue the J-code pathway. Typically, how it works for a product like this is that this is a buy-and-bill product because it's physician administered. So what that means is that there's typically a miscellaneous code that's assigned. And with that, it will go through a process where at some point, we'll pursue the J-code. We feel really confident about the J-code strategy. And once we determine the strategy and the approach, we'll also get more firm on the pricing as well. And that will all be driven by the clinical insights, and we do feel like there's a strong clinical differentiation here given the TAM that you heard Aziz talk about as well as the opportunity to really differentiate from a current product that causes a lot of pain, a lot of discomfort and actual corneal toxicity. So with that, I'll turn it over to Liz to talk a little bit more about the clinical value.

Jason, thanks for your question regarding the pivotal study. So you're absolutely right as it comes to the Phase III study, it is a pivotal safety study. The name is COMFORT. With that, we will also explore various endpoints to potentially enhance the label for use over the current standard of care. That will also reinforce the earlier findings of the potential pain improvement as well as the staining over povidone-iodine. The FDA separately will require an efficacy study in order to obtain the antisepsis label. So we will run those 2 studies in parallel.

And just to clarify, the efficacy study is an in vitro antimicrobial study. So that's also something that's pretty standard and lower risk as it pertains to a late-stage study.

Our next question comes from the line of Dennis Ding with Jefferies.

Can you please clarify what's really the deciding factor here for adoption? Is it reduced pain or reduced infection rates and the subsequent corneal damage? Because it's not a product that a patient is going to request. So it's going to be up to the doctor to reach for this over a generic product. And maybe the answer here is the ASP plus 6. So curious what you guys are thinking around how you're going to pitch this to doctors? And are patients really going to come back more frequently due to less pain?

Thank you so much for that question. I believe the opportunity is the improved patient experience. IRX-101 is really a novel ocular antiseptic. It is a chlorine dioxide solution that specifically targets the bacterial cell walls. So it improves the potential for just cell damage to the microbial killing itself. So it's unlike Beta povidone-iodine, which is nonspecific and really broadly toxic, whereas IRX-101 is targeted cell killing. So it induces less cell damage. 44% of patients after their third intravitreal injections will actually stop going and stop receiving their injections. So they actually have decreased compliance because of the anxiety and the pain that is produced by these retinal injections. So the opportunity here is that with improving the actual experience themselves, we can redefine the standard of care here.

And I would just add a great point on the science here and also reiterating the point you made earlier that 3/4 of the doctors we talk to tell us the biggest issue the patients have is actually the antiseptic preparation with Betadine, not even the needle, right? So these are patients receiving injections in the eye, and they're actually complaining about the procedure preparation. So you're right, this is not going to be something that patients are going to ask for by name like XDEMVY, but this is something the doctors are going to reach for because they want to optimize that experience for the patient, right? They want to make sure the patients are happy. And most importantly, as Liz just highlighted, they want to make sure that, that process is conducive to the patients staying on therapy. This is therapy to preserve their vision. So it's very important that, that process is conducive to the patients staying in the practice, staying adherent and being comfortable in what would otherwise be a very difficult management process. So there's a lot of meat on the bone there. And as you can imagine, we've got a really strong strategy in terms of how to educate the physicians, the implications that they're going to be there. Neera talked earlier about the access model that we can have. These are all things that we've done really well with XDEMVY, and we believe we can replicate with IRX-101 quite effectively.

Our next question comes from the line of Matthew Caufield with H.C. Wainwright.

Just to follow up on what's already been answered. Is the IRX-101 goal to offer an alternative for those patients that have already experienced discomfort from previous procedures or potentially replace the traditional povidone-iodine kind of more broadly? And then just separately, just to confirm, with the 101 Phase III initiation targeted for first half of '27, that does not impact any of the prioritization for TP-04 in ocular rosacea or the TP-05 development in Lyme disease next steps, correct?

No, this is Bobby. I'll take the second one, and then I'll pass to Aziz and Liz for the first one. Certainly, this does not impact our R&D capacity and our time lines on other pipeline programs. And if anything, as has been mentioned, this really doubles down our category creating formula. I'm personally excited about this one because it's a great way to help patients preserve vision as Aziz and Liz have mentioned. So different programs, different indication, and we have the capacity and the wherewithal to do it. And I'll pass to Liz and Aziz to talk about IRX-101 and the alternative it might offer to Betadine.

So I'll start, just talk about the market opportunity. I think it's a great question. Obviously, with such a differentiated profile and the market we're looking at, we do see this as an opportunity to change the standard of care. And while today, we're not going to be talking about peak sales potential, I think you can illustrate what some obvious use cases are to start, right? So about 1/3 of patients coming in have real high degrees of Betadine sensitivity, meaning they can't even tolerate it at all. That's going to be the obvious first use case. So while we are going to look for changing the standard of care, we're going to be really thoughtful about starting. And if you look at just those 1/3 of patients that can't tolerate Betadine at all, that would be where the doctors will reach for this first. And a conservative starting point if you're thinking about how to model this is that alone would be a $200 million to $300 million market potential opportunity. So more to come there as we continue to do the market development, but we see clear starting points and clear opportunities to change the standard of care. And maybe, Liz, you can highlight from a physician's perspective, why the science and rationale clinically would support that.

Absolutely. So as Aziz mentioned, povidone-iodine remains a longstanding standard of care for antiseptic preparation. There's no other commercially available ocular antiseptic. The alternative like aqueous chlorhexidine exists, but it's really only used when povidone-iodine is not tolerated or there's a documented hypersensitivity. But even with povidone-iodine, it is a nonstandard way that it is utilized. And what makes IRX-101 so compelling is that rather than adapting an existing antiseptic for this setting, we're developing with IRX-101, a specific ophthalmic use for intravitreal injections with prospective clinical data that will be generated directly against Betadine in order for retinal specialists with a purpose-built product that will be head-to-head with that -- with more comfort as well as less staining and ultimately a better experience for the patient.

Our next question comes from the line of Graig Suvannavejh with Mizuho.

Congrats on the deal. Obviously, this is a product and profile of a product that we've not really seen before. So I appreciate the color that you've given on an initial view of the market opportunity. With that said, as I think about on the forward with your current pipeline and now adding this product, can you talk about what the BD strategy is from here? I know you guys have been looking at a lot of different things. Does this kind of make you feel that you're in a good spot? Or is there the potential that we should be looking for additional deals, whether it be this year or next year? Or should we be expecting a certain cadence?

Graig, it's Jeff. Happy to answer that question. So yes, we're really excited about this deal, but we do continue to strive to be an eye care leader and having more pipeline value be created through our existing programs, but also through BD. And so we're continuing to explore additional opportunities in the anterior segment. And as highlighted by Bobby, this is kind of our first foray into the back of the eye. So we're expanding our lens to look at other products in the back of the eye. These are not typical sort of wet AMD type of products, but rather unique category-creating aspects that we think we can create value and provide some incremental benefit to the patient community as well.

Jeff, and maybe a follow-up for you. Just on the deal terms, I know that there are $490 million in approval and commercial milestones -- any additional color you could give just on how as we think about our model kind of where the economics on those milestones are more back-end loaded or are they more front-end loaded related more to approval?

Yes. Happy to provide some context there. So the milestones are all based -- start happening on approval and are commercial-based milestones. So from an accounting perspective, the upfront payment of $75 million will be expensed in the third quarter. And as the milestones are achieved, they'll be capitalized and amortized over the life of the patent. So that will be sort of how to think about it from an accounting perspective.

Our next question comes from the line of François Brisebois with LifeSci Capital.

This is Dan on for Franç. If you could just touch on, are there any sort of differences in workflow in terms of preparation, administration compared to Betadine for IRX-101? And how do you see sort of physicians viewing it positively for adoption?

This is Liz here. Yes, with IRX-101, as you saw in the photos, it's an easy 2-part system that's activated by a buffer, and it takes less than a minute to put together. So what I envision as an eye care professional is that this will be a potentially real easy standardized approach that could be streamlined right into the workflow for the intravitreal injection process as compared to what povidone-iodine currently is doing, where it's nonstandardized, some people use swabs, other use gauzes, and there are different concentrations that are currently being utilized.

Our next question comes from the line of Truman Dunkley with William Blair.

This is Truman on for Lachlan Hanbury-Brown. I was wondering, are there additional investments that will be needed to support any commercial infrastructure needs?

Yes, I can start there. When you look at the commercial infrastructure needs, certainly, we build out specific commercial efforts for this product to maximize the opportunity here. But what's exciting is in addition to a very large TAM, established need in the marketplace, it's a pretty focused effort, right? When you think about the retina space, about 3,500 doctors make up the vast majority of injections that are done. So as we said, we'd have a focused commercial effort. Sales team here would be probably about half the size of the XDEMVY sales force dedicated specifically to the retinal specialist. So that's a little bit of an incremental buildout, but it's a very focused build. And then we'll be able to take full advantage of all of our other efforts, marketing, back office, conference support. So there's some synergies here when you think about us being a commercial player in eye care, certainly. And then obviously, with a very unique and differentiated product, we are going to be making strategic investments to maximize that differentiated offering and really cultivate deep relationships with the physicians that will adopt this product.

Ladies and gentlemen, I'm showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.

Going here with our next company presenter at the BofA Annual Healthcare Conference in Nevada. We've got Tarsus Pharmaceuticals, Jeff Farrow, CFO; and Aziz Mottiwala, Chief Commercial Officer. I'm Jason Gerberry, I cover biotech and pharma at BofA.

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 XDEMVY for Demodex blepharitis. And by all signs, there's a lot of growth runway still in front of you and the 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 1Q, XDEMVY takeaways, where you saw performance? Any surprises as you think about that in the context of the full year outlook?

Sure. Happy to answer that. So -- and Jason, thanks for having us. It's great to be here. Maybe just 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 XDEMVY for the treatment of Demodex blepharitis. It's a disease of the eye. We've got an exciting pipeline, 2 assets in Phase II, one for ocular rosacea. It's a type of rosacea that's around the ocular area. And then also, we have a Phase II program for the prophylactic treatment of Lyme disease, and we can talk a little bit more about that later.

But in terms of the Tarsus expectations for the year, we're really excited and pleased with how the tempo of growth has been. 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 -- in that quarter continue to grow, including depth of prescribing, employee engagement, and then we also had some really interesting Phase IV 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 called out a few things in 1Q. So I think ahead to the next 3 quarters, similar quarterly cadence and catch-up that comes with maybe some of the headwinds that you experienced in 1Q?

Yes. Yes. 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 bottle -- or one of the biggest quarters from a pure bottle perspective. So -- and we saw that in the fourth quarter.

So that's kind of how we see things play out. We might get a little bit of tailwinds, as you highlighted, because of some of the snow and some of the weather impact 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 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 consumer and physician response to the evidence we're generating. And those are really 3 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. They're 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 physicians 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, is 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 hordeola and chalazia, 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 to grow as we go through the rest of the year to achieve the guidance that Jeff alluded to.

Okay. You upped the peak sales guide to greater than $2 billion. Maybe can you talk about -- are you seeing -- is your expectation around the TAM through -- is that an underlying factor there? And you were involved with Restasis and creating dry eye category. Maybe a similar point in time, how do you see the evolution of Demodex blepharitis as a condition where doctors are focusing on it and sort of the metrics there, how do they stack up?

So we were really excited when we talked about the potential of this product. And to be clear, the $2 billion peak is U.S. sales for XDEMVY only. So it's actually very, very impactful to think about that. And I look at, historically, right, Restasis is a 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, 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, and they can make a definitive diagnosis. So these are things that we believe allow XDEMVY to be an even bigger impact in the eye care market, i.e., the $2 billion peak versus, say, dry eye products, I think it's $1 billion, $1.5 billion.

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 hordeola and chalazia. There's several other use cases. So beyond just the obvious, right? We talked about dry eye, cataract surgery, Meibomian 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 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 this audience of 20,000 doctors is actually continuing to progress, how they're activating patients in their practice. So expanding TAM and expanding depth of prescribing are the 2 levers that we believe are going to untap the full potential.

Okay. And this is somewhat of a promotion-sensitive category. 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 have you kind of reached 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 and OpEx still has to scale with the growth of the brand? I mean, in support of that sales and marketing dollars to support the brand as opposed to other things that could drive alternative sources of growth?

Yes. So 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 eye care 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, copay 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.

Yes. No. I think, right now, the XDEMVY 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 #1 in capital allocation is continued growth of XDEMVY, but we're also really excited about our pipeline and investing in the ocular rosacea on the Lyme 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 to the back of the eye as well.

Yes. Okay. And then maybe just thinking about sources of the business and uptake, be it either -- is there a patient profile or patients with comorbidities more likely to get treatment? And from a prescriber perspective, I'm just curious why ophthalmologists maybe lag ODs at this point. I think, at the time when you guys IPO-ed, 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 of your thoughts around maybe why ODs have gravitated to the product more so than MDs?

Yes. And I think to clarify, the products have performed really well across both segments. Ophthalmology is mentioned like it's actually not -- 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 pretreating these patients that are seeing a high preponderance of them in Demodex blepharitis. So we see real value there.

Optometry being, say, 2/3 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, going back to what the 50-50 was, well, a lot of the prescribing that's happening in ophthalmology clinics is done by the OD, the optometrists. The surgeon is saying, I'm going to do the surgery, and the optometrist is going to manage that. So you have co-management, that's a factor there.

And then third, for your stand-alone optometrists, 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 drug -- or sorry, 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 is 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 just on the initial script and use of the slit lamp? Or is it also a confirmatory follow-up visit to make sure that the therapy has accomplished the goal of clinical care?

It's both, right? So a lot of times, they'll initiate the therapy in 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 to 6-week course of therapy. So they'll bring them back in 2 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.

Yes. Okay. And then we were getting more questions from investors about competitor Phase II Glaukos data. And 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 lotilaner?

Yes. 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. 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, we did explore a method of application when we thought about lotilaner, and based on our work, the preferred method was via eyedrops. I think patients are more familiar with eyedrops for those type of things. And so that's the route we chose.

And I do think it's going to get -- from a competitive perspective, it's going to be a high bar to really exceed what XDEMVY has been able to accomplish, right, in terms of very good efficacy. I think in real world, you're probably hearing 9 out of 10 patients are extremely satisfied. It's extraordinarily safe. And there's a great deal of patient satisfaction and being able to see those collarettes 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 chloride channel of the mites and there's no off-target human implications of that. So it's very specific to the parasite and it kills the parasite directly.

Okay. So as XDEMVY grows and expands, usually, there is a target on any drug's back with payers as you get above a $1 billion threshold. And so 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 to 2?

Yes. 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 a high rate of effectiveness, as Jeff outlined, super safe.

This is not something that people have to take every single month. They take 1, maybe 2 treatments a year. We talked about a 20% retreatment rate, which is a great value. We sit across from payers 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, 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 payer. 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 XDEMVY grows, it is actually an offset. So the more we can model that through pharmacoeconomic modeling, that will 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.

Okay. So let's shift to pipeline in the last 10 minutes. We've got Phase II ocular rosacea data, first half '27. This is the same API in XDEMVY, just given in a different dosage format. Maybe just how much confidence can you derive from what you've seen in Demodex blepharitis to that study result?

Sure. So a little background on ocular rosacea. It impacts about 15 million to 18 million patients, and there is no other approved FDA therapeutic out there for it. And of those 15 million to 18 million patients, the vast majority of ocular rosacea is caused by Demodex blepharitis. And so we knew with XDEMVY, 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 II 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 2 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 1-level improvement in either the redness reduction or in the reduction in vessels. And what gives us confidence, as you might recall, Jason, that we had a Phase II study in papulopustular 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? I'm just trying to get a sense of how that might compare to the supportive Phase II study that you cited there in rosacea?

Yes. 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 1-point reduction as Dr. B at a different site and continuing to sort of read that scale of improvement.

Yes. And in 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 Phase III.

And how much overlap is there with them in Demodex blepharitis? And when 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?

Yes. 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 XDEMVY. There's going to be patients that have ocular rosacea that will get TP-04. 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 XDEMVY. And almost a contrast was very notable that the eyelid margin was clear, but there was still a lot of periocular redness, vascular telangiectasia. And they said, wow, if you had something that would fix this, and we said, okay, we might have something up our sleeve which should kind of help prompted us to accelerate and move this program into Phase II.

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 on the profile, who the prescriber is, and are eye care professionals thinking about treating a dermatologic manifestation? And what role will derms ultimately play? And 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 see this as really as an eye care-focused play though. And this is the same call point. So this is optometrists and ophthalmologists that are essentially anterior-segment focused. They focus on front of the eye diseases, like dry eye, like Demodex 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 ocular rosacea. There's nothing today. Some of these folks are trying to use IPLs. So there's a precedent that people are trying to solve this problem, this conundrum. And that gives us even more confidence in the potential of this -- 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 go to Lyme disease. This is also lotilaner, but in an oral dosage format.

That's right.

And so maybe just the initial learnings from the -- I'm trying to -- I forget, it is like a tick-kill study, right? But the differences in the Phase II that you're running and how that could provide additional learnings and derisk the program more fulsome.

Sure. Yes. No, we've gotten a lot of interest in that since we announced 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...

Lucky them.

Pardon me?

Lucky them.

Well, they were paid. They were paid money. But what we did is we exposed them to the ticks 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 8 hours, and it's durable.

And so based on that data, we've decided to move forward in this Phase IIb 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 will 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 PK levels, drug levels. Knowing what we saw in the Phase IIa study in the tick-kill 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 there -- in all reality, we're not going to likely see a stat sig signal there. We'll be measuring because it's going to be a very small n.

What will be the N roughly?

What will be the end? About 700 patients.

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

Yes. That's right. But we are doing it in high endemic areas because we did learn from, I think, 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 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 result, right, on the pre and then the second specified analysis. But if it is approved, ultimately, it's a 4-dose vaccination. So I guess there's, a, question of how does it competitively stack up against that? And then b, what would be a regulatory development pathway for an oral agent like this that's taken presumably less onerous schedule in a 4-injection vaccine schedule?

Yes. Great questions. I think it's hard to say on the Pfizer regulatory pathway. I do note that it's -- there's a huge unmet need, and this administration has highlighted this as being an important criteria for them to be focused on. So they could see approval. I think we have had discussions with the agency about a Phase III study. They have sort of reverted to the clinical study that the Pfizer team did in Lyme disease prevention study. So it would be a similar magnitude in terms of size. However, given the LYMERix 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. So I'd like to cut it off there. But thank you guys so much for joining us.

Thank you, Jason. Appreciate it.

Good afternoon, and welcome to Tarsus' First Quarter 2026 Financial Results Conference Call. As a reminder, this call is being recorded. [Operator Instructions]

At this time, I would like to turn the call over to David Nakasone, Head of Investor Relations, to lead off the call. David, you may begin.

Thank you.

Before we begin, I encourage everyone to visit the Investors section of the Tarsus website to view the earnings release and related materials we will be discussing today.

Joining me on the call this afternoon are Bobby Azamian, our Chief Executive Officer and Chairman; Aziz Mottiwala, our Chief Commercial Officer; and Jeff Farrow, our Chief Financial Officer and Chief Strategy Officer.

I'd like to draw your attention to Slide 3, which contains our forward-looking statements. During this call, we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional details.

With that, I'll turn the call over to Bobby.

Good afternoon, and thank you for joining us.

We are off to a strong start in 2026, with a quarter that reflects the continued momentum of XDEMVY's launch and the strength of our key growth drivers. We've always believed XDEMVY would be revolutionary and our strong first quarter results reflect that. Every key metric we track, including the number of writers, depth of prescribing, awareness and evidence generation continue to grow substantially quarter-over-quarter. These are the same drivers we have committed to delivering on, and we are on track to achieve our full-year guidance, reach blockbuster status in the next couple of years and realize $2 billion in peak sales potential.

In the first quarter of 2026, XDEMVY delivered more than $145 million in net product sales, an increase of more than 85% year-over-year, reflecting consistent patient outcomes and expanding eye care physician or ECP utilization across their practices. Having spent time in the field and at several medical conferences over the past few months, I can tell you what we're hearing directly from ECPs. They describe XDEMVY as one of the most impactful medicines they've ever used with consistent outcomes, clear utility across their practices and broad access that is nearly universal. Said differently, it works, it's easy to use and access is outstanding.

When those elements come together, behavior changes. ECPs are no longer looking only for the most symptomatic cases, they are beginning to screen every patient for collarettes. And that is what ultimately drives a larger addressable market over time, more patients identified and more patients treated. What we're building at Tarsus, however, is not a one-product story. We have developed a disciplined, repeatable playbook for identifying diseases with clear root causes and significant unmet need and transforming how they're treated. That playbook is driving the future of our pipeline.

In the first quarter of 2026, we initiated Calliope, an approximately 700 participant Phase II trial of TP-05 for the potential prevention of Lyme disease. Enrollment is progressing well, with the first wave of participants already dosed, and we expect top line data during the first half of 2027, which would support readiness for a Phase III trial.

Lyme disease represents one of the largest and fastest-growing unmet needs in infectious disease prevention, affecting millions of Americans each year. Yet there are no FDA-approved prophylactic options available today. It seems like I can't go a week without reading something in the news about the impact of the disease and the increasing burden on the U.S. health care system.

TP-05 is a first-of-its-kind investigational oral on-demand prophylactic designed to target and kill ticks before they transmit disease, and we believe it has the potential to fundamentally shift the current paradigm from management to disease prevention. We've seen tremendous interest in this program from patients, potential partners, federal agencies and the broader medical community, reflecting both the scale of the opportunity and the need for a new approach.

Another program I hear increasing excitement about is TP-04, particularly with the initiation of our Phase II KORE study in ocular rosacea. Ocular rosacea is another significant and underdiagnosed disease, affecting an estimated 15 million to 18 million Americans with no FDA-approved treatment today. Similar to Demodex blepharitis, or DB, it is a mite-driven disease that impacts the area around the eye, including the eyelids and surrounding skin that can meaningfully affect how patients look, feel and see.

We hear it all the time from ECPs, a treatment like TP-04 could be game-changing and they can't wait to offer their patients an option like this. TP-04 is a novel, sterile investigational ophthalmic gel designed to treat Demodex mites, the root cause of disease, and we believe it has the potential to become another first and only FDA-approved medicine for an underdiagnosed and underappreciated eye disease. The KORE study is progressing as planned, and we continue to expect top line data in the first half of 2027.

Turning back to XDEMVY. The drivers are clear: broader physician adoption, a DTC campaign, bringing more patients through the door and an expanding evidence base, all pointing to a larger treatable population over time. But XDEMVY is only one piece of a larger story. We are deliberately building Tarsus to create and lead new categories in eye care and beyond with the pipeline and playbook to do it repeatedly.

And with that, I'll pass it to Aziz.

Thanks, Bobby.

As just highlighted, in Q1, we delivered more than $145 million in XDEMVY net product sales, an increase of more than 85% year-over-year, and we meaningfully outperformed the market. Additionally, every key metric we track has grown. And as we've moved into the second quarter, prescriptions continue to grow with some of the highest weekly numbers since launch.

Our outstanding performance continues to be driven by 3 key factors: increasing depth of prescribing, expansion of the patient funnel and ongoing evidence generation. In terms of depth of prescribing, we continue to see growth, not just in the number of ECPs prescribing XDEMVY, but in how often they prescribe.

In the first quarter, nearly half of our 15,000 target ECPs prescribed XDEMVY at least once a week, up approximately 10% from Q4 2025. As Bobby noted, ECPs continue to see incredible outcomes with XDEMVY and are looking for more patients they can serve across their practices. At the American Society of Cataract and Refractive Surgery, or ASCRS Conference, we met with countless physicians and heard in several podium discussions that they are broadly incorporating DB screening and treatment as part of their routine pre-operative procedures, where every cataract patient is assessed prior to surgery.

To further accelerate the growth we're seeing within our existing base of ECPs, we are preparing to deploy our key account leaders or KALs. This is a highly targeted investment focused on our largest and highest potential practices, where ECPs are actively prescribing and there remains significant opportunity to expand utilization. This role attracted exceptional talent from across the industry, and we expect this team to be a meaningful driver of incremental growth starting in the second half of 2026. Additionally, retreatment rates are increasing to the mid-teens range as ECPs formalize long-term DB management protocols. As a reminder, we expect steady-state retreatment rates of approximately 20%.

Turning to direct-to-consumer or DTC. Our DTC campaign is delivering strong and improving return on investment or ROI that is exceeding our expectations and is at the higher end of benchmarks. This is also reinforced by what we consistently hear from ECPs. More and more patients are coming into the office proactively asking about DB and XDEMVY.

Further, we continue to see millions of visitors to the XDEMVY.com website and high-value engagement, including quiz completion and use of the Find a Doctor tool is up nearly 40% quarter-over-quarter, continuing to exceed even our own lofty expectations. With over a year of experience, we now have a much clearer understanding of what specifically maximizes DTC performance, and we're applying those learnings to continuously improve how and where we deploy our investment, focusing on the channels and messages that generate the highest value engagement. In short, we're amplifying what's already working.

Additionally, we have several exciting new things planned in the coming weeks, including a creative refresh and expanded disease state messaging designed to help even more patients recognize their symptoms, normalize DB and ultimately drive more patients into the office. We're also continuing to make investments in evidence generation that reinforce the broad utility of XDEMVY and expand how ECPs think about DB.

One key example is the data we presented at ASCRS on the association between DB with chalazion and hordeolum, conditions that are estimated to impact several million patients in the U.S. These conditions can cause patients significant discomfort, impact their vision and lead to invasive procedures in ECP offices. This data showed that a large portion of patients assessed also had underlying DB, more than 70% overall and even higher in recurrent cases. And we're hearing directly from doctors that they're excited about this data and are proactively screening and treating these patients.

The takeaway is simple. Our ongoing evidence generation is doing exactly what we intended, expanding our market opportunity by giving ECPs more compelling reasons to look for and treat DB across a broader and larger set of patients. As we look ahead, there is great momentum across the key drivers of the business, and we expect to build on that momentum with the deployment of our KAL team, the scaling ROI of our DTC campaign, new patient-focused initiatives and additional evidence that further supports the broad utility of XDEMVY. And as Jeff will discuss, these drivers give us confidence in achieving full-year guidance while continuing to expand the long-term opportunity for XDEMVY.

Over to you, Jeff.

Thanks, Aziz.

Building on what Bobby and Aziz outlined, we delivered net product sales of $145.4 million, reflecting strong year-over-year growth from growing demand for XDEMVY and exceptional execution by our team. As expected and highlighted on our year-end earnings call, the first quarter included typical seasonal dynamics, such as deductible resets and higher out-of-pocket costs as well as some impact from severe winter weather, particularly in the Northeast part of the country.

Despite these factors, our underlying demand remains significantly stronger than our peers. According to third-party data, peers experienced double-digit prescription declines versus our low single digits. And as we entered the second quarter, XDEMVY prescription trends rebounded to all-time highs.

Turning to other revenue items. License fees and collaboration revenues were $16.7 million in the quarter. This includes a one-time $15 million regulatory milestone payable by our partner, Grand Pharma, following the approval of TP-03 for DB in Greater China, as well as approximately $1.7 million related to the required China withholding tax. This approval represents an important step toward helping the more than 40 million people in the region affected by DB and underscores our commitment to serving patients.

Over time, we do expect to generate additional royalties from this partnership, although they are not expected to be meaningful in 2026 or 2027 as Grand Pharma seeks to secure payer coverage. We look forward to supporting Grand Pharma as they prepare for commercial launch later this year. For additional details on our Q1 financial performance, please refer to the earnings release issued earlier today.

Looking ahead, we reiterate our full-year 2026 guidance of net product sales of $670 million to $700 million, SG&A expenses of $545 million to $565 million, including approximately $40 million in stock-based compensation, R&D expenses of $115 million to $135 million, including stock-based compensation of approximately $20 million and gross margins of approximately 93%.

Our guidance reflects continued strength in the underlying fundamentals of the business, including increased depth of prescribing, expansion of the patient funnel, continued execution by our exceptional sales force, including the deployment of our new key account leaders and ongoing evidence generation expanding the addressable patient population. From a quarterly perspective, growth in 2026 is expected to follow patterns consistent with our prior experience and broader sector dynamics. That is strong growth in the second quarter, more modest growth in the third quarter and robust growth in the fourth quarter.

Finally, turning to the pipeline. As Bobby mentioned, we initiated our Phase II Calliope trial, evaluating TP-05 for the potential prevention of Lyme disease during the first quarter. Lyme disease is the most common vector-borne disease in the United States with more than 35 million people considered to be at high or moderate risk of contracting the disease and hundreds of thousands of new cases diagnosed annually. Yet there are still no FDA-approved prophylactic options.

What makes TP-05 compelling is not just the size of the market, but the strength of the science and the differentiated nature of our approach. This oral on-demand investigational therapeutic is designed to directly target the root cause of Lyme disease by potentially killing ticks before disease transmission occurs, an approach that is simple, fast and practical for patients. In fact, it is already approved for Lyme disease prevention in dogs and cats and may have benefited from prophylactic Lyme therapies just like TP-05. From a financial and operational standpoint, we are advancing this program with a clear development path and defined milestones, including expected top line data in the first half of 2027.

Similarly, our ocular rosacea program continues to progress as planned, with top line data also anticipated in the first half of next year. Outside of the U.S., we continue to advance our global expansion efforts for TP-03 and are on track to complete the key technical work required to support potential future filings. At the same time, we are taking a thoughtful approach to timing and evaluating next steps in the context of the broader geopolitical, regulatory and macro access environment.

Before I hand the call off to Bobby, I want to restate that we firmly believe that we are well positioned for the remainder of 2026 with strong and growing underlying demand for XDEMVY and a robust and advancing pipeline with top line results in the first half of 2027.

With that, I'll turn it back to Bobby for closing remarks.

Thanks, Jeff.

Tarsus continues to execute on one of the most successful launches in eye care, and we've delivered so much so that the addressable market continues to expand beyond our initial estimates. More patients are being identified, more patients are being treated and more physicians are continuing to embed XDEMVY into routine care. This is a direct result of how we deepened utilization in ECP practices, meaningfully grown awareness about DB and generated compelling clinical evidence showing just how important it is to treat the condition.

We are now applying that same category-creating model across our pipeline, including in Lyme disease prevention and ocular rosacea as we work to replicate the success of XDEMVY and establish Tarsus as a leader in creating new standards of care.

Operator, please open the line for questions.

[Operator Instructions] And our first question coming from the line of Dennis Ding with Jefferies.

We have 2. So on the second quarter, I was surprised that you guys didn't give bottle guidance. But when I look at consensus, which is $168 million, it should imply around 145,000 to 150,000 dispensed bottles. That's about 13% or 14% quarter-over-quarter growth and similar to the Q2 bounce that we saw in 2025. How do you feel about those numbers? And does our math make sense?

And then number two. Glaukos has a Phase II readout later this year for DB. They're delivering physostigmine, which is approved for glaucoma. So, you've mentioned before that you've looked at all these different assets. So, I'm curious when you think about the potential tolerability issues there since the drug actually constrict pupil. So in your own due diligence, are vision changes or blurry vision a liability with that asset?

Dennis, this is Jeff. And I'll take the first part of the question and then turn it over to Bobby for the second part. As we've moved into full-year guidance, we stepped away from the quarterly updates in terms of bottles dispensed gross to net, absent some material change, right, where we don't believe we're going to be able to meet that guidance. And so our expectation is really just to continue to provide updates on the guidance that we provided earlier. So, we still believe in the full-year guidance, both on the revenue side and the SG&A side.

To your question on growth between Q1 and Q2, just a reminder that 2025 was the second full year of launch, and we were starting from a bigger or a smaller base at that point in terms of total bottles. So, we shouldn't expect a 30% growth similar to what we saw between Q1 and Q2. So, take into account the fact that we are starting on a bigger base now and make your adjustments accordingly.

Yes. Thank you, Dennis. This is Bobby. And with respect to how we see the landscape, we're really focused on XDEMVY. We've been creating a really important marketing category for patients, and we see that growing. I think the evidence we're generating around XDEMVY is robust with more to come. So, we believe that XDEMVY's profile is going to be the standard of care for the foreseeable future.

We certainly track everything we see in terms of pipeline, and we're not surprised that people are also looking at this market. But in terms of XDEMVY's effectiveness, its safety, the product profile. It's just such a great standard of care. I hear time and again, like I did in the field this quarter, just how this is the best medicine a lot of doctors have seen. So, we're really focused on building on that success and creating a lasting standard of care.

And our next question coming from the line of Graig Suvannavejh with Mizuho Group.

This is Sam on for Graig. And congrats on the quarter. Maybe 2 from us. First, how much of the current growth you're seeing coming from the expansion use cases under, call the Demodex blepharitis umbrella? Specifically, we're interested in the cataract surgery patient population.

And then second. Given the reaffirmed guidance of $670 million to $700 million, can you walk us through some of the assumptions and drivers required to achieve that guidance across prescription growth, gross to net normalization and overall run rate through the balance of the year?

Yes. So when we think about the market and how the product is performing, one of the great things that we highlighted in the prepared comments and what we're hearing very clearly from physicians here is the continued expansion of use throughout the patient population. So, we started early on with some of the most obvious cases, dry eye, cataract surgery, contact lens intolerance. We're definitely seeing a lot of utilization across all of those segments. And we've really shifted our strategy now to not only go after those segments to even go more broadly, right?

There's 25 million Americans out there, and they're coming into the funnel. And we think about not just cataract, dry eye, we think about, as we mentioned, patients that have hordeolum or chalazion, for example, and even other cases. So, I think the way to think about this is physicians are using this across every segment that we've highlighted, and they continue to expand to new segments. And that's where our evidence generation strategy will fuel.

In terms of some key drivers, I'll let Jeff speak to the mechanics, but I would highlight that coming off of this quarter, we saw progression in every metric we track commercially, depth of prescribing, all of our consumer metrics, which sets us up nicely for the rest of the year where we have our key account leaders deploying. They'll start to make an impact in the third quarter and in the back half of the year. And we've got some exciting things on our direct-to-consumer initiatives as well. So, a lot more drivers to come.

And I'll let Jeff speak to the mechanics in terms of the guidance.

Yes. Aziz, one other thing I would add -- this is Bobby. Based on what I hear, these drivers are really playing out. As we've mentioned, I'm hearing doctors that are really treating regardless of symptoms, treating with any comorbidity in the setting of cataract surgery. I'm so excited about the evidence that we generated and evidence to come. I think chalazion is one of those examples where there's just lots of reasons to treat, and that's really leading to the expansion of the patient population that's the addressable market here.

And so Jeff, I'll pass to you.

Thanks, Sam, for your question. Yes, in addition to sort of the broad strokes that Aziz mentioned in terms of growing depth of prescribing, DTC impact, evidence generation that Bobby just highlighted and the impact of the KAL team, that will sort of impact the growth over the quarter, particularly in the back half of the year. But we continue to see the seasonality that we saw last year and the year prior to that. So, much like we saw last year, Q1 was tempered, but we saw some nice robust growth in the second quarter as the deductibles sort of got blown through by the individual patients.

And then we also see growth in the summertime, but much more tempered growth than, say, between Q1 and Q2. And then Q4 tends to be one of our highest growth quarters as patients come into the end of the year. They've run through their deductibles, and they're trying to use up their FSA. So, we anticipate that type of impact on a seasonal basis as well.

And our next question coming from the line of François Brisebois with LifeSci Capital.

Congrats on the quarter. Just a couple of questions. I'm getting some questions on ocular rosacea. And I was just wondering, when you mentioned it's a root cause of the disease, I think with blepharitis, you guys in the trials and whatnot were plugging eyelashes and you can legitimately see the mites and then its pathognomonic sign when you see the collarettes now. But is there -- how comfortable do we feel that ocular rosacea is -- Demodex mites are causing the ocular rosacea?

Yes. Thank you, Frank, and I appreciate that question. I know you've tracked our story for a long time, and you've seen the playbook that we've really applied in the development of XDEMVY, and we're applying that same playbook in OR. And to your point, it starts with a disease that has a clear root cause and clearly identifiable patients. And we see that in OR. To your question, we see that the majority of patients with OR have Demodex. And it is harder to measure. You don't have the benefit of a collarette that you can pull from around the eye, but you do have clear signs. And those are signs of inflammation, signs of redness, erythema and telangiectasia, they're called.

And we know that when patients have those signs, they're very likely to have Demodex as an underlying root cause. So, that's really the basis of our approach here. I will also add, we're hearing a lot of great interest in OR as well. When I'm out in clinics or talking to doctors about XDEMVY, they raise OR. They say, I'm looking at these patients. I have something great for the added margin, but I don't have anything for the inflammation around their eyes. And they're seeing how important this disease is now that they're taking a post look around the eyes. So, we see basically an opportunity to create a category with a very similar playbook to your question.

Great. And then just on the endpoint side, just to kind of compare it to what you guys have done in the past, the collarette cure rate was very interesting for blepharitis. But in this case, can you just -- you talked about the size. Can you just remind us maybe what the endpoints are and the comfort on the regulatory side of those endpoints?

Absolutely. So, we are enrolling patients by OR, and we're looking at OR endpoints. And so those are those same telangiectasias and erythema. We've aligned with the FDA that we need to look at those endpoints, and we need to see an improvement in one of them. And that's really how we're structuring the trial, and that's the bar we expect for success in the Phase II trial that we're conducting.

Great. If I could sneak in a last one, too, I promise. In terms of the second quarter, Jeff, thanks for kind of breaking out second quarter -- first quarter seasonality, second, third and fourth. But in the second quarter, can you give any granularity as to what is to be expected maybe in the months of the second quarter?

In terms of revenue, Frank?

Yes. Or sometimes there are some weeks or whatnot that are definitely harder or there's the summer months with holidays and conference time and stuff. I'm just wondering any granularity on what goes on in that second quarter that maybe we should pay close attention to.

Got it. Yes. No, part of that was the impact of the spring break time frame, which we've already passed through, by and large part in the early part of April. So, that's kind of behind us. And so there are some conferences that could pull some of the doctors out of the office, but we don't anticipate that to be much greater than what we've seen historically. So, you can sort of think about this as on a growth trajectory upwards for the rest of the quarter here.

Okay. Great. And do you guys break out how your patients are broken down between like for age groups? Is it the older crowd or you actually -- just because it seems like this does get worse with time, right? I think after 7 years old, everyone has this. So is it mostly the older or the younger crowd that you guys are treating?

Sure. Frank, the disease. We see utilization across quite a wide array of patients. You can think about your cataract patients that's typically an aging patient. So, we see a lot of utilization there. But you think about patients in contact lenses or dry eye, and that spans the entire patient population. So while there is a higher propensity in elderly patients, you're right about that. We see more and more younger patients, professionals that are working, looking at the screen all day, noticing their eyes are bothering them. They see the ad. They're motivated to go talk to their doctor. So, we're seeing utilization across the front. And I think that cataract is obviously an elderly population, but everywhere else, you're seeing a pretty diverse population of patients getting treated.

Okay. Great. Sorry, I think I promised one last question, but I guess I lied. That's all good for me,

Our next question coming from the line of Jenna Davidner with Barclays.

I had one on Lyme disease. And as Bobby mentioned, there's a lot of elevated concern right now around ticks. So, I was just curious if you could remind us what your strategic priorities for this program are and whether or not this might make sense to partner out? And just given the elevated concern that there's no FDA-approved prophylactic treatment, do you think there's any pathway towards an accelerated approval time line?

Thank you so much, Jenna. Yes, thanks for highlighting the Lyme program. We hear a lot of interest in this program. There's not really a week goes by that I don't see something in the press or the media about Lyme disease and tick season, which has now started. So, we're very excited about the program. We've advanced it into this Phase II trial that is groundbreaking in many ways, 700 patients across a broad array of participants across geographies.

We're looking at using a very novel investigational medicine here, TP-05, which is an oral on-demand. Really, patients can take it where they sit and on demand. And that's, I think, a very unique potential medicine. So in this trial, we're going to get some good data, we hope, on safety, on dosing and really be prepared for a Phase III, be Phase III ready, as I mentioned. And I think that will allow us to really assess where this fits.

Our base case is this is better in someone else's hands as it goes to Phase III. But I think delivering a package with a great robust Phase II data set with FDA clarity on the path forward will be important. In terms of the FDA's guidance here, they've been very collaborative. We have other vaccines that have been developed in this space. So, we're largely following that guidance. And I think the Phase III is TBD based on our Phase II, but our base case is that we'd have to conduct a large vaccine like Phase III, and that's something we'd have clarity around as we got ready for that and talk to potential partners.

And our next question coming from the line of Jason Gerberry with Bank of America.

This is Melanie on for Jason. So, you've mentioned that with the addition of the key account leaders, most of that impact is likely to be seen in the back half of the year. So, how should we be thinking about kind of that incremental impact on top of the typical seasonality that you guys flagged with like a stronger second half?

Yes. Melanie, I think adding these key account leaders is going to be a great catalyst for us in a lot of ways. We've shown when we've added people, we can get a response right away. We did this when we expanded our sales force prior. We're using a very similar approach. The key account leader is a very unique position in that it's really targeted toward this increasing depth of prescribing we're seeing. And the 2 things I'll tell you there. One is, no one in our called-on audience, no physicians that we're talking to, have capped out yet. So, even our top doctors have room to grow. And we're seeing a broader opportunity with doctors being able to prescribe more in general.

So, these key account leaders are some of the most experienced and sophisticated sales individuals. And again, this is against a very high bar because we have a great sales team. These folks are going to be targeted against the highest opportunity practices that are having good success but could be doing more. So, we're able to deploy them and train them. They're in the process of finalizing that training, and then they'll be out there in the third quarter. And I think you're going to start to see that.

Now again, it's about 17 to 20 people. So, this is not like a massive expansion of the sales force. But what I think you're going to see is that this is going to catalyze even more depth of prescribing. And it's a key element of this being a driver to get to the targets we have this year. And I'd expect to see that right away, and you'll see that bear through the seasonality, but it doesn't alleviate the impact of seasonality, right? That's a patient flow issue. It's not so much of an execution issue. So, I think about this as depth of prescribing change in behavior over time, and allowing us to continue a great growth trajectory. But again, you are going to see seasonality in the quarters, as Jeff mentioned.

And our next question coming from the line of Mazahir Alimohamed with Oppenheimer.

Just a couple from us. I guess the first one is, can you give us any additional color on what percentage of prescriptions dispensed in the quarter represent retreatment patients versus new starts?

And the second part is, I guess, as you think about the peak sales, the $2 billion peak sales number, how much of that is predicated on retreatment becoming recurring annual behavior, I guess, versus a purely new patient identification?

Yes, Mazi. So the retreatment is something that we get a lot of questions on and something that we're tracking really closely. It's also something that we've seen progress very nicely over the last several quarters. So as a reminder, what we've said is that we'd expect retreatments to be at steady state around 20%, meaning at any given week of prescriptions, about 20% of the composition would be retreatments.

What we're seeing so far is retreatments averaging in the mid- to high teens. And again, that's up quarter-over-quarter, one of those key metrics. So, we're seeing that steadily progress. We'd expect that to even out at around 20%. And then to answer your question, when we think about the long-term potential, you can assume that about a steady state 20%. So in a peak year revenue, 20% of that would be due to retreatments because that implies that steady state 20%.

And our next question coming from the line of Lachlan Hanbury-Brown with William Blair.

Maybe just first for Jeff. You had the stronger-than-expected gross to net in the first quarter. Can you maybe elaborate on what drove that? Is that the mix shift? Is it driven by the changes in Medicare or some one-off items? And then how should we think about that sort of flowing through? We typically have a cadence of gross to net stepping down throughout the year. Should we still expect that? Or is it going to be relatively flat from here?

Yes, Lachlan. Good to hear you. We are still not going to be providing gross to net on a quarterly basis now that we've moved over to full-year revenue guidance. And I would just say that we did see the typical seasonality that we usually see in the first quarter in terms of co-pays resetting and driving some additional support there. That said, I think we are still very comfortable that we will be exiting Q4 in that 43% to 45% range. So, I would just guide you to the fact that we would expect to be somewhere within that range for the year.

Okay. Great. And maybe one for Aziz. The continued sort of strong growth in website visits and especially the high-value sort of activities on the website seems pretty encouraging. But has the conversion rate to the extent you can sort of track it, the conversion rate from website visits and these scripts sort of maintained constant, so sort of tracking in line with the increase in visits?

Sure. So, when we look at DTC, this is an area that's really compelling, an area that we're really excited about the trajectory here. So, you highlighted the increased HVAs. We're really pleased because the ROI overall is continuing to improve, and it's already ahead of what the benchmarks are ahead of our expectations. So, we don't get into specific conversion metrics, but I'd say the ROI is improving, which implies more patients are getting on therapy, right? And what you're seeing is Q1 is a patient flow thing, right, where we lost days of weather.

So, I wouldn't think about the Q1 versus those metrics as the comparator. I think about patients are ready to go. And I think we're seeing the impact of that even early in Q2 with our prescriptions being near our all-time high levels. And I think you're going to continue to see that stack over time. The great thing about DTC is once you get to a great ROI, and I've seen this on multiple campaigns in my career, you can start to see a stacking effect where these patients are primed and ready to go. And this also validates the strategy of continuing to drive depth of prescribing. The more doctors that are looking for more patients, the better our conversion is going to be. So, this is sort of the one-two punch that we're working on, and I think you're seeing positive trajectory on both of those fronts.

And our next question coming from the line of Eddie Hickman with Guggenheim.

Congrats on the progress. Just another one on the GTN. As this retreatment cohort expands towards that 20% that you've guided for, does the gross to net profile change between a refill prescription and a new start? Like do you get a better sort of net price realization if a patient sort of is coming back and doesn't need to go through the whole co-pay assistance program? Just sort of curious how that dynamic may shift beyond the sort of typical seasonal gross to net changes you've already talked about?

Yes. Great question, Eddie. It's not likely to change on a refill patient. They still have to go through the prior auth proposal as well as potentially provide some co-pay for that product as well. So it's not likely to change much.

Got it. And maybe somebody already asked this, but did you sort of talk specifically about which federal agencies have tremendous interest in TP-05 and sort of what that means for the acceleration of that program?

Yes. Sure, Eddie. This is Jeff again. We have a great government affairs team that's been engaged on that side of the house there as you highlighted and Jenna highlighted as well that there's a lot of interest here. And so there's a LymeX group that is looking at opportunities to speed up approvals, particularly in the Phase III realm and sort of stepping away from the disease prevention approach that vaccines typically do.

And so they're invested in looking at diagnostics and some other areas that can speed up the development pathway there. And then RFK, who is part of the HHS program has made this a high priority as has Makary. So the FDA has really taken an aggressive approach here and is looking to speed therapeutics to market as quickly as we can.

And there are no further questions in the queue at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.

All right. I think we're ready to get started. Good afternoon, everyone. Welcome to the Barclays Miami Healthcare Conference. I'm Jenna Davidner. I'm one of the analysts here on the specialty pharmaceuticals team and very pleased to have Tarsus Pharmaceuticals on the stage with me this afternoon. From the company, we have Jeff Farrow, the CFO; and Dave Nakasone, who is the Head of Investor Relations. Thank you both for taking the time.

Well, thank you, Jenna. It's great to be here.

So just to level set the conversation, the company is a couple of years into the launch of XDEMVY. So maybe for people that are newer to the story, can you give us an overview of Tarsus and maybe talk about the time line of when XDEMVY was approved and launched, and I'm going to get into a couple of questions about the product itself and the condition and things like that.

Sure, happy to. So Tarsus Pharmaceuticals is a biopharmaceutical company that is headquartered in Southern California in Irvine, California. And we are a commercial company, as I mentioned, that has a product on the market called XDEMVY for the treatment of demodex blepharitis. It's a disease of the eye that is caused by over-proliferation of these demodex mites, and we kill the demodex mites very efficaciously with XDEMVY. We got approval in August of '23. So this is really our -- start of our third year of launch. Last year, we recorded revenues of about $450 million and treated about 500,000 patients out of the 9 million sort of available market to us. That -- these are patients that are actively going in and seeking eye care professional assistance.

Overlaying that, there's actually 25 million patients that are impacted by demodex blepharitis. So it's a highly prevalent disease. This year, we provided guidance -- the annual guidance for the first time, and we guided to top line revenue of between $690 million and $700 million. And from long-term perspective, we think the peak guidance is around $2 billion in ultimate profitability or off of top line revenue. And then we also have a couple of products in the pipeline as well. We've initiated 2 Phase II studies, the first one using the same active ingredient that's in XDEMVY, except in the sterile topical gel for the treatment of ocular rosacea. And then in an oral tablet, the same active ingredient for the prophylactic prevention of Lyme disease. It's another exciting program that we're going to be kicking off here shortly as well.

Awesome. Thank you for that great overview. So what's interesting is you mentioned how broad the DB market opportunity is. And I remember from around the time of the launch, some of the pushback. People weren't really familiar because there is no -- there was no FDA-approved product to treat this. And if you just think about that in combination with how strong your launch has been in this revenue trajectory in the first 2 full years. Maybe can you talk about things like the diagnostic process and maybe from the 25 million, how do you think about what your more near long-term addressable patient population is within that. And just anything, the launch has gone -- has exceeded expectations on everything from volume growth to also gross-to-net. So maybe just in the context of the first 2 years. putting together all of those before we get into the 2026 outlook and the peak sales and longer-term trajectory?

Sure. Yes. We like to think of ourselves as being a category-creating organization, and we've really created a new category here that nobody had ever heard of demodex blepharitis before and even the doctors weren't very familiar with it. And so the treatment paradigm before was patients would come in complaining about itchy, red, burning eyes. And the only therapies that were available at the time were sort of these homeopathic therapies, including tea tree oil, which causes stinging and burning or these lid scrubs kind of basically wipe off the scruff, neither voice got to the root cause of the disease, which is the demodex mites. And so the founder and CEO, Bobby Azamian was the one that identified this as a potential therapeutic area and took it through clinical development. And as part of that clinical development pathway, it was really getting out there and educating the eye care physicians on this is really a disease that is caused by these demodex mites.

And if you kill the mites then you can cure the disease. And so through that clinical process, the education paradigm was going forward. The team did a really nice job on the payer side, the market access group of going out there, educating the payers on this huge unmet need and the fact that there's a lot of off-label usage of products like dry eye that they're paying for that aren't benefiting the patients. So if you had a product that could be a 6-month or 6-week treatment period and cured the disease for a period of time, that made sense for them to cover that. And so we were able to get really broad payer coverage ultimately, now we're at 90% prior payer coverage.

That evolved over time, when we got out of the gate, it was initially commercial coverage that came online over time. And the gross to nets were somewhat higher than they are now as a result of that because we're covering a lot more of the patients with free goods or co-pay assistance. And then in 2025, the start of 2025, we had Medicare come online. And so that was really a helpful tailwind for 2025 as well. So that helped us really evolve the gross to net, kind of where we're at steady state, we exited Q4 at a gross to net discount of about 44%. And we expect the long-term gross to net sort of in the 43% to 45% range. Absent the Q1 dynamics where the deductibles typically reset. There's usually more payers assist or co-pay assistance in other programs that we might implement. So it's going to be slightly higher in Q1, but it will evolve over time.

Awesome, and it's just kind of fascinating to think of even doctors being less familiar with DB at the start of your launch and approval. And in year 2, you're nearing $500 million. Year 3, you're approaching $700 million. It just really speaks to how prevalent this condition is and how well the drug worked. Then on top of that, you have a very strong commercial team within Tarsus that's done a great job. So I wanted to focus on that because it's played a huge role in the launch. So maybe from the beginning, can you talk about the sales infrastructure you started with? And along the way, what has -- where have you added? And maybe where do we stand currently?

Yes. Thanks, Jenna. So we started with about 100-person sales force, and it was really targeted. And about a year into the launch, we added about 50% more. And we knew the size of the market or roughly 15,000 prescribing eye care professionals, half of them being optometrists and half of being ophthalmologists. And to your earlier point, we really saw the sales starting to take off. Most recently and earlier this year, we announced that we're adding about 15 to 20 key account leaders. And the expectation here is they're going to be input into the highest producing territories. These are the best of the best that we have and really going to expand and drive depth amongst our current prescribers.

And since you brought up the prescriber base, it's interesting how it's very targeted. There's -- maybe you can talk about the group that you're targeting and why? How many of them are currently prescribing and maybe how you think about the frequency of these prescribers and maybe increasing that utilization over time?

So we have about, I'd say a little over 20,000 who are prescribing today, prescribing XDEMVY today, but about 15,000 represent about 85% of all prescriptions in the eye. And like I said earlier, half are optometrists and half are ophthalmologists. And so when you look at that landscape, we have about 40% who are writing weekly. And then our daily prescribers are those that write 5 or more per week has grown 20% since the last quarter. So our focus is on that core audience of prescribers and really driving depth of utilization in the practice. So providing them with evidence, providing them with further education. It's a segue into the direct-to-consumer advertising as well to help drive even more patients. But ideally, we want to get as many of those 15,000 to write weekly and eventually daily.

Yes, interesting because we've talked to some eye care professionals that are writing daily and they tell us we see these patients all the time. So it just -- with the 40% you mentioned and the very well-known target population. It's just there's still such a way to keep increasing the utilization within the group you already have your touch points with and you also mentioned DTC. So I wanted to go there next. And I don't know in the audience who else has seen the commercial, but it's a great commercial and it's very motivating, next time you go to the eye doctor to have them check and look down in slit lamp. So can you talk about the DTC campaign, when you kick that off and maybe what impact if or what impact it might be having now or could in the future, just given maybe more of a delayed response as you target the consumers and they kind of fall through the funnel?

Yes. No, I'll start and Dave, feel free to chime in. But it is a very impactful commercial. And one of the byproducts of it is actually sort of destigmatized the fact that people -- one of the challenges that doctors had at one point was like how do you bring it up to patients that they've got mites in their eyes without freaking them out. And so this helps sort of destigmatize it a little bit, but it's been very impactful, and we started the program last year. And we've -- it's a combination of the streaming TV, where you can get very targeted, very good data. Actually, when a commercial airs to when the patient picks it up. It's scary how much information you could actually garner from those smart TVs. And then the network TV, we initiated shortly thereafter and there's more eyeballs on the ad there, but it's a little bit less targeted there, but it helps us have a broad reach between sort of the commercial consumer as well as the older Medicare patients as well by sort of having those different targets.

And so we learned a lot last year. We're going to spend the same amount this year in 2026. But we -- because of the learnings we had, we know which programs seem to resonate and drive the most utilization and what time slots. And so we're able to target it more -- even more efficiently. So those dollars have even a greater ROI. And this is sort of an aggregate type of thing. The more you have it out there with a good commercial, the more impact it has. And so we've already surpassed our cost to do this commercial and it's continuing to grow, and we're looking at a multiple on return at this point.

Awesome. And maybe can we also just differentiate between the 25 million TAM, the 9 million? Because then when we tie the DTC, I think it's -- the 25 million patients is a massive opportunity. So having more of them fall into that more realistic or addressable near-term population? Just can you break those and give the difference for investors?

Yes. So Jenna, the 9 million are essentially those that are immediately addressable. They're either diagnosed already with demodex blepharitis or they're coming in for a complementary condition. Dry eye, Meibomian gland disease, contact lens intolerance, or they're coming in for cataract procedures. And so essentially about 60% of everybody walking through the eye doctor probably has demodex blepharitis. So that's how you get to that 9 million and DTC is really helping to drive those above the 9 or essentially not 25 million and helping to grow the addressable market. Because patients are coming in, asking for XDEMVY by name or asking the doctor to check for collarettes and we see this also in our unaided awareness.

So before we started the campaign, I'm sure like many of you, you probably never heard of demodex blepharitis. Now we have essentially 1 in 4 patients coming into the doctor's office and asking for it by name.

Awesome. And so we talked about the launch trajectory today. We talked a lot about the commercial. So now let's focus a little bit on guidance, which Jeff, you mentioned in the beginning. So very strong 50% plus growth expected this year. You're investing. Still potential for positive EBITDA. So can you just help us understand what gives you the most confidence in that outlook for this year and maybe refresh us on the spending outlook and maybe what some of the drivers are on that side?

Sure. Yes. So we -- our philosophy on guidance has always been, we're not going to give guidance until we can give good guidance. And as you highlighted, there really wasn't a good analog out there before Tarsus came along. And so there was nothing we could sort of say, well, let's take a look at this launch trajectory. So we wanted to get some history. And now we have about 2 years of historical data that we can draw upon. And that includes kind of where we exited in the fourth quarter on scripts. We -- now we have a stable payer base now. So we know what the gross to nets are within patient mixes. We have a good sense of the seasonality.

So there's no seasonality of the disease, but we do know since we're primarily an NRx product or a new script product as opposed to a chronic disease that gets refills. Whenever there's a doctor not in the office, we see a drop in scripts. Usually recovers subsequent to the doctor coming back. But whenever there's a vacation or a big conference or bad weather, we'll see a drop in the scripts as a result of that. So based on that, we made some assumptions on either sort of out of offices, gross to net assumptions and continued growth as it relates to our DTC campaign that got us to the $670 million to $700 million in range there. So we feel really good about where we're going to land, and that's basically how we came up with the assumptions there.

Perfect. And then just to double click on the cadence question. Can you just remind us, obviously, you were pretty explicit about 1Q. But then can you remind us of which quarters kind of maybe step up or down through the rest of the year?

Sure. Yes. So over the last 2 years, we've seen a familiar pattern. And we've looked at this and other companies in the eye care space, too. So it's not really isolated just to Tarsus. But if you look at the NRx pattern on some of these other eye care, you'll see the same thing. So in Q1, you'll typically see patients deferring doctor visits because they have their deductibles reset. And so they'll usually come back at a later stage once they've kind of gotten through those deductibles. We'll also see some erosion on the gross to net discount, which we talked about. It usually will come down a couple of points as a result of deductibles resetting us providing more co-pay assistance.

So we'll see a drop in scripts as well as maybe an impact of the top line revenue because of the gross to net impact. And then in Q2, we'll see a nice ramp up again in growth. So in the summertime in the third quarter, we'll see a little bit of a tempering of growth. We'll continue to see growth, but it will be not at the same pace as between Q1 and Q2. And -- and then over the last couple of years, we've seen a nice rocket ship in the fourth quarter where patients have gotten through their deductible. They want to use up their FSAs. And so that tends to be our best quarter, quite frankly.

Awesome. Okay. So let's shift gears a little bit into your peak sales and total opportunity here. I think in the beginning, as we've touched on multiple times. This opportunity was maybe a little bit underappreciated or misunderstood. And then you've done so well with this launch trajectory approaching $700 million in just year 3. So sometimes what we hear a little bit of pushback on is the overall runway in this product, just given how big it already is, and we're still very early. And I think you also mentioned this in the beginning, but just remind us really how early we are in terms of the patients that you've treated to date and it helps people also frame, you're generating over $1,000 per script. And so I think sometimes that gets a little bit lost in translation as well. And then after, we'll get into the numbers on the peak sales.

Yes. So I think one of the most profound stats is launch to date, we've treated about 500,000 patients, and it's a really great start. And -- but that's what it is. There's still 25 million out there that we're looking to serve. So when you think about how much runway there really is, there's a long way to go. And when we talk to ECPs, nobody said they've reached their limits. They're not even close. And you see it on the podiums. You see it in medical meetings. You see it in field rides. And so for us, it's really about driving on that message. You really -- you need to have every patient look down in the slit lamp because there's a really good chance they have demodex blepharitis.

So now focusing on the numbers. At the time of launch, the peak sales was $1 billion plus. You recently just doubled that to $2 billion plus. I mean, what gives -- what gave you the confidence to increase that peak sales estimate. And I would just love to hear your thoughts on that.

Yes. We've been -- we knew it's been tracking higher, and the launch has even exceeded our high expectations nice to see. But it's been sort of multifactorial. But one of the things that we have seen is doctors even better than what we saw in the clinical study are saying, this is helping all my patients, right? And there's a lot of doctor talk within this community, the eye care community in terms of have you heard about XDEMVY? Oh, yes, it's been great. So that's been super helpful. And as Dave highlighted, these doctors are -- most written prescribers say they have still tons of more patients that they could write for. So big unmet opportunity there.

And then the DTC, the activation of the consumers has been really impactful. We see that this has been something that really resonates in the consumer side. And so that's been driving in patients that we weren't really initially modeling for. So it's -- and the trajectory of the launch is a little bit steeper than what we anticipated. So all of those things and the fact that we're just sort of scratching the surface on the opportunity here make us think that the $2 billion is an achievable number.

Awesome. And then even beyond that, as we think about the pipeline, you have 2 programs in development. So maybe as we're starting to run out of time here, can you touch on these programs, what the opportunity is and maybe what the next catalysts are for those?

Yes. So we're really excited about these programs. It's all sort of cliched, but it's a pipeline in a product, all the same active ingredient. So ocular rosacea is probably the nearest term one. So this is a type of rosacea that's around the orbital eye area, that KOLs tell us they see this all the time. It's much more awareness out there than, say, demodex blepharitis at the same time. And what we are doing is we've built a sterile gel formulation of the same active ingredient that's in XDEMVY and we know XDEMVY is very good at killing the mites. And so the theory here is this ocular rosacea is about 15 million to 18 million patients. It's caused by demodex mites by the most part.

So if we can kill the mites, we should see a reduction in the rosacea or the redness. But there's also another hallmark of the disease, which is this pronounced vessels on the eyelids. And so what we're doing is designed to study that could show a reduction in the redness or a reduction in the vessels based on the FDA discussion. Either of those would be valid endpoints for a pivotal study. And so we've kicked that study off here in December, and we'll have top line readout in the first half of next year. And then Lyme disease, you want to touch on Lyme disease?

Yes. So we're excited to get the Phase II study for Lyme disease prevention. It's an oral tablet. It is probably going to be about 700 patients. We plan to enroll it in 1 tick season. And it's a pretty -- as many of you folks know, Lyme disease is a pretty prevalent disease. It costs the U.S. health care system well over $1 billion. And we should have data similar to ocular rosacea in the first half of next year.

Awesome. And just to wrap things up. And I also wanted to make a comment on your balance sheet, which I think is underappreciated. This is a newer launch company. You have a very strong balance sheet with over $400 million in cash and equivalents, very little debt, and you're on the cusp of profitability. And as I mentioned, these scripts generate over $1,000 per script, it just feels like you have such high financial flexibility here and just a very strong operating model and future outlook.

So with those things in mind, and with the way the launch trajectory has gone with the new peak sales, the 2026 guidance and your new peak sales, which is double what you had before. Help us in your mind, what do you think is the most dislocated in terms of maybe how the stock has responded and we've talked about this throughout the year. People follow the weekly script trends and you have been very clear about 1Q seasonality, just all of that mumbo jumbo that I just said. Like maybe put into context for people what you think is the most underappreciated right now.

I think you highlighted it in terms of the opportunity here in XDEMVY itself, right? I think there's been always a skepticism, nobody heard about this disease. We've demonstrated a strong launch, but people focus on the weekly scripts, despite us telling them that there's going to be weakness. We told people that Q1 is going to be flat to down, right? But nevertheless, people are sort of reacting to some of the decrease in IQVIA scripts there. So I -- we view this as a buying opportunity, knowing that we've given very strong guidance from $650 million to $700 million. So I think that's one of the big misses here is just listen to the guidance, take a look at the big opportunity that we're just scratching the surface here. And that this is a big multibillion dollar opportunity.

Awesome. And hopefully, with having the full year guidance out, it helps provide an anchor for people to maybe not need to focus as much on those weekly scripts. But thank you guys so much for attending the conference and congratulations on a great launch so far.

Thank you, Jenna. It's great to be here.

Thank you, Jenna.

Good afternoon, and welcome to Tarsus Fourth Quarter and Full Year 2025 Financial Results Conference Call. As a reminder, this call is being recorded. [Operator Instructions]. At this time, I would like to turn the call over to David Nakasone, Head of Investor Relations, to lead off the call. David, you may begin.

Thank you the forward-looking statements. During this call, we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional detail. With that, I'll turn the call over to Bobby.

Good afternoon, and thank you for joining us. 2025 was a breakout year for Tarsus and for XDEMVY. The first and only FDA-approved therapeutic for Demodex blepharitis, an impactful disease that affects more than 25 million Americans. Among the key highlights for the year, we delivered more than $450 million in full year net sales. We have helped more than 0.5 million patients living with Demodex blepharitis since launch, underscoring the meaningful real-world impact of XDEMVY and by creating and leading an entirely new category in eye care, we have established Tarsus as a differentiated company fully capable of translating scientific insight into commercial leadership.

We believed from the beginning that XDEMVY could be a breakthrough medicine. Today, the data and real-world experience validate our conviction. In just 2 years since launch, XDEMVY has fundamentally changed the eye care experience. We see that transformation reflected in 3 clear proof points First, XDEMVY is delivering consistent meaningful outcomes for patients. Second, eye care professionals have fundamentally changed the way they practice. And third, we've redefined the rules of launch and have succeeded in rewriting the biotech playbook. We're now ready to share what we've always believed that XDEMVY can reach blockbuster status within the next couple of years with sales potential exceeding $2 billion. At the same time, we are intentionally building Tarsus for its next phase of growth. Our primary strategy is disciplined and built for repetition identify diseases with clear root causes, significant demand for better solutions and the potential to establish a new standard of care and then apply the development and commercial playbook, we have proven with XDEMVY.

We are already executing against that framework with TPO 4 and ocularosacea and TPV and Lyme disease prevention, 2 clinical stage programs where the biology is clear, the unmet need is substantial, and our approach has the potential to deliver a new standard of care. Importantly, we also intend to expand our pipeline in a measured way, targeting 1 to 2 new programs per year. This pace allows us to remain focused, leverage our existing infrastructure and allocate capital responsibly while extending our long-term growth trajectory and patient impact.

What excites me the most is that we have the right team in place to accelerate our goal of becoming the next leader in eye care. You may have seen last week that we welcomed David Pyott, a distinguished leader in the global biopharmaceutical industry and former Chairman and CEO of Allergan to our Board of Directors. His experience building enduring global eye care franchises and driving disciplined growth at scale will be invaluable as we continue to expand Tarsus' reach. We have proven we can build and scale. We have a product that continues to grow. In a pipeline with tangible proof points that position us to do even more.

Looking ahead, our ambition is clear: to build a company capable of repeatedly creating and leading new categories in eye care and beyond. Before I hand it over to Aziz, I want to thank the entire Tarsus team. Our performance in 2025 reflects extraordinary execution in our award-winning culture, laying the foundation as we become a leader in eye care. Aziz?

Thanks, Bobby. We entered 2026 from a position of strength and momentum. XDEMVY is one of the best-selling prescription eye drops and from a product line perspective, is now profitable and growing. This gives us the leverage and flexibility to continue investing in our proven growth drivers that we believe will best support this opportunity. We are still early in reaching the estimated 25 million Americans living with Demodex blepharitis, or DB. And as Bobby mentioned, we have fundamentally changed medicine. We've transformed the eye care experience and now see U.S. sales potential exceeding $2 billion.

Beyond the large untapped addressable market, this outlook is reinforced by 3 fundamentals: One, a highly effective medicine that delivers consistently positive outcomes for an easy to diagnose disease. Two, our top prescribers have a significant opportunity to increase utilization and almost every doctor we talk to is looking for more patients to treat. And three, the tremendous growth in patient interest with many coming in and asking for Xtampibyname. We've seen a meaningful shift in eye care professional or ECP practice behavior and patterns are continuing to deepen utilization across all of the patient types we've been talking about, including DB patients with concurrent MGD, dry eye and cataracts where visual accumes are so important.

Furthermore, I constantly hear from ECPs that they're beginning to look beyond these initial 9 million patients we originally focused on. And are now screening for DB patients being treated for glaucoma, receiving eye injections or presenting with ties, the lumps and bumps you typically get on your eyelids. At the same time, patients are becoming more proactive and are increasingly self-identified. Together with strong access where we have more than 90% of coverage across commercial, Medicare and Medicaid, these dynamics are expanding the funnel of diagnosed and treated patients.

To further accelerate the depth of utilization among ECPs, we're making a targeted investment in one of the most impactful parts of our business, our sales force. In 2026, we plan to add approximately 15 to 20 key account leaders. This is a relatively modest investment that is strategically focused on increasing depth within high opportunity practices, and we expect it to contribute meaningfully to growth in the second half of the year. Another critical growth lever is evidence generation.

We plan to share additional clinical and real-world data to reinforce the consistency of outcomes, strengthen physician confidence and further expand screening and treatment patterns. This will also feed another powerful amplifier of ECP utilization, peer-to-peer influence. Having been in the eye care space for a long time, I know that when ECPs hear directly from colleagues about XDEMVY's consistent outcomes, adoption accelerate. We see this dynamic repeatedly at conferences and across professional forums. In complementing all the great work we're doing with our ECPs, our powerful direct-to-consumer campaign and surround sound approach to patient education also continues to deliver a positive and growing return on investment.

In 2026, we plan to execute with even greater precision, focusing on the channels and formats that we know drive the greatest return while maintaining a similar level of spend as in 2025. And you can feel the momentum of our campaign in the field. I was recently with a group of optometrists at a large [ Eyefair ] conference, and they were blown away by how often patients are now coming in asking to be screened for DB. In many cases, making appointments specifically to ask about XDEMVY. It's also amazing to see the change in objective measures of unaided awareness of DB and XVI, which has gone from just 2% at the start of our campaign to now 25% or 1 in 4 patient surveyed.

Finally, retreatment dynamics are continuing to progress. Weekly refills are trending in the low to mid-teens range as practices formalized protocols, moving towards our expected steady-state rate of approximately 20%. Taken together, these trends of sustained shift in vision behavior, expanded screening, growing consumer awareness and emerging retreatment practices, making diagnosing and treating new patients more efficient than ever.

Before I pass the call over to Sesha, I just want to say how proud and thankful I am for our commercial team. At conferences and meetings, we constantly hear from ECPs about all the great work our team is doing and the impact they're having on patient lives. As you can clearly see, we have a lot more in store for 2026 and look forward to sharing our progress with you. Over to you, Sasha.

Thanks, uses, and good afternoon, everyone. We are leading the way in category creation and have proven that our model works. XDEMVY is the first proof point, and we are now applying that same scientific and strategic framework for the next set of opportunities in our pipeline. Today, I'll share updates on 2 programs that reflect the attributes that drove XMB success, clear biology, significant unmet need and the opportunity to pioneer new standards of care. I'll start with TPO 4 for Ocular Rosacea. Ocular Rosacea is a natural extension of our Demodex expertise. Like DB, it is driven by deminimize and can significantly impact how patients look, feel and see.

It is also easily identified during a routine eye exam by the hallmark signs of inflammation and redness. Ocular Rosacea affects an estimated 15 million to 18 million Americans, and there are currently no FDA-approved treatments. Importantly, this opportunity is highly complementary to our existing infrastructure. It involves the same physicians and the same diagnostic process, enabling us to build on what we've already established lotilaner's positive clinical data across several related conditions. In particular, in Papulopustular rosacea, a related inflammatory facial skin condition with similar pathophysiology, lotilaner demonstrated statistically significant improvements in inflammation and witness in a Phase II trial.

The insights from that trial have further informed our understanding of and confidence in PPO 4's potential in Ocular Rosacea. PPAI is a novel lotilaner based sterile investigational ophthalmic gel designed specifically for application to the area on the eye. In December 2025, we initiated the first-ever Phase II trial for the potential treatment of Ocular Rosacea which we believe is the next blockbuster category in eye care.

The goal of this trial is to evaluate safety and improvements in Erica and telingectases around the eye, 2 of the most impactful signs of the disease using novel and proprietary grading scales informed by feedback from the FDA. As with Xb, this Phase II trial is designed to inform decisions on dose and endpoints for later-stage development. Importantly, the FDA has indicated that we are not required to show a cure, but rather improvements in the endpoint. We expect top line data in the first half of 2027.

Turning to TP-05 for Linden prevention, a significant and growing public health concern. I'm excited to announce that we plan to initiate a Phase II clinical trial in the second quarter of 2026, we plan to enroll approximately 700 participants at risk of line disease in 1 peak season with the goal of generating data that gives us confidence in TP-05's potential to prevent Lyme disease. Top line data is expected in the first half of 2027. As a reminder, TP-05 is an investigational on-demand oral tablet that is designed to potentially kill lime infected tics before disease transmission occurs directly targeting the root cause.

Approximately 27 million Americans are at moderate to high risk of contracting line disease with no FDA-approved preventative therapies and an annual health care burden of over $1 billion. Our approach is already established in Animal Health and further supported by the results of our previous TIL trial, where TPV demonstrated greater than 95% tickling activity within 24 hours compared to placebo. Furthermore, our market research showed that patients and physicians alike are excited about the potential of a new oral preventative therapy. With 90% of patients willing to try it, and a majority of physicians willing to prescribe to up to 95% of their high-risk patients. We believe advancing this program ourselves is the right strategic decision at this stage given the foundation we have in place, which includes deep experience with the local later molecule, patent protection projected through 2040, alignment with the FDA on a regulatory path forward and engagement with and support from many of our top line disease experts in the country.

And with the data from our Phase II trial, we expect to generate a robust Phase III ready package that will potentially maximize the program's long-term value. Before I turn the call over to Jeff -- we also continue to make progress in the potential of TP-03 globally. In Europe, TP-03 remains on track for potential regulatory approval in 2027. In Japan, we are engaged with regulators to define the development pathway. And in China, our partner, Grand Pharma expects approval later this year. These milestones represent potential long-term growth drivers as we work to establish TP-03 as a global standard of care. We have an exciting year ahead and look forward to sharing continued progress across our pipeline. With that, I'll turn it over to Jeff.

Thanks, Sesha. 2025 was a year of strong financial performance and disciplined execution. For the fourth quarter of 2025, we delivered $151.7 million in net product sales at a gross to net discount of 44%. For the full year, we delivered $451.4 million at a gross to net discount of approximately 45%. Total operating expenses were $522.3 million driven in large part by commercial investments supporting the XDEMVY launch. We ended the year with approximately $419 million in cash, cash equivalents and marketable securities providing meaningful financial flexibility as we scale the business and expand our pipeline.

Turning to 2026. With more than 2 years of revenue history, a clear understanding of seasonality, broad and stable payer coverage and proven DTC effectiveness, we are providing full year guidance for the first time. For 2026, we expect strong net product sales in the range of $670 million to $700 million or annual growth of more than $230 million and 50% at the midpoint of our guidance. It is important to note that projected annual revenue growth is not anticipated to be linear throughout the year. Consistent with what we have seen across eye care and other therapeutic areas, we expect typical first quarter seasonality to impact growth, including deductible resets that increased out-of-pocket costs and temporarily reduce new patient visits.

We also expect this dynamic to increase the gross to net discount for the first quarter. Additionally, given that XDEMVY remains primarily driven by new patients, holidays, medical meetings and this year's severe weather disruptions are influencing near-term trends. As a result, we expect first quarter 2026 revenues to be flat to slightly below our Q4 2025 revenue. Further, sequential growth through 2026 is expected to be similar to what we observed in 2025 and consistent with broader sector dynamics. We expect strong growth in the second quarter, more tempered growth in the third quarter and robust growth in the fourth quarter.

Turning to expenses. For 2026, we expect gross margins to remain strong at approximately 93%, SG&A expenses to be in the range of $545 million to $565 million, which includes stock-based compensation of approximately $40 million, continued investment in our DTC campaign, XDEMVY-related marketing and commercial support at levels consistent with 2025 or approximately $80 million, the incremental planned 15 to 20 new key account leaders, anticipated utilization of patient support services and variable costs that scale with higher sales, including pharmacy administration fees and the branded prescription drug fee.

We also expect R&D expenses to be in the range of $115 million to $135 million and includes stock-based compensation of approximately $20 million. The Phase II trial of TP-04 for the potential treatment of ocular rosacea expected to cost between $7 million to $10 million, with the majority planned to be recognized in 2026 and the Phase II trial of TP-05 for the potential prevention of Lyme disease.

As Sesha noted, this is a relatively large trial, and expected to cost approximately $25 million to $30 million in total. Given our expertise with TP-05 and lotilaner we believe we are best positioned to run the trial and generate the most value for this program by developing a Phase III-ready package for our potential partner. Importantly, and as Aziz mentioned, XDEMVY is profitable and growing from a product line perspective today. As revenue continues to scale, we expect increasing operating leverage and maintain a clear line of sight towards potential company level profitability while maintaining the flexibility to invest in other high-return opportunities.

Overall, our 2026 plan reflects a balanced approach. Extending XDEMVY's leadership while advancing pipeline programs that expand our long-term growth potential and value creation. In summary, we believe we are entering 2026 strong revenue visibility, a scalable cost structure and a disciplined investment plan. We look forward to sharing more updates with you in the coming quarters. I'll now turn the call back to Bobby for closing remarks.

Thanks, Jeff. In just 2 years since the launch of XDEMVY, we have driven a fundamental shift in eye care and expect a clear path to peak sales potential of more than $2 billion. And as you heard today, Tarsus is not a single product story. XDEMVY is proof of a repeatable model, one that integrates science, commercial execution and disciplined investment to create and lead new categories in underserved disease states. The foundation is built, the model has proven. We've rewritten the biotech playbook and are on our way to becoming a leading pharma company. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from Eddie Hickman with Guggenheim.

Can you give us a little bit more detail into what is going into your expectations beyond 1Q for that $370 million to $400 million guidance in terms of a little bit more about like the bottles and the refill and sort of what your expectations are around the cadence of that?

So yes, are you talking about Q1 any in particular?

Sort of beyond Q1, anything you can give us to get you to that full year guidance that you gave us in terms of the number of bottles and sort of how you expect retreatments to work throughout the year?

Yes. No, I think just the big picture guidance that we provided in the prepared remarks is we do expect flat to slightly down in Q1, just given the typical dynamics that you see with the ductless -- and then historically, we've seen a nice bump up in Q2. And then as you think about eye care space, in general, you typically see some tempered growth in the Q3 summer time frame. And then fourth quarter with FSAs expiring and deductibles are basically expiring as well, you see more robust growth there. So all of that, the gross to nets and the bottles dispensed are baked into our guidance. We're not going to really provide that typical model guidance or gross to net guidance that we've historically done now that we've given the full year guidance here. But absent a material change, we're probably not going to comment on those type of things. But if there is something that changes dynamically, we'll be sure to make sure -- the street knows.

Got it. And then one clarification is, as the launch continues and docs and patients get more familiar with how this is administered and maybe some getting refilled. -- do we expect sort of the impact of those seasonal disruptions for conferences and weather and holidays to continue to be as impactful from a magnitude perspective going forward?

Eddie, it's Aziz. Yes.Thanks for that clarifying question. I think as you move further in the launch, you are going to be more susceptible to the typical seasonality. That's pretty typical for those brands. We see this across the eye care space and actually areas outside of eye care as well. So we're seeing that now in the first quarter. I think the dynamics you're referring to are what gives us the confidence in the continued growth of the brand and to eventually achieve the peak that we provided today. And I think the fundamentals there are really strong, as you alluded to, right? We've got a strong and growing base of prescribers that are actively deepening their utilization. They're looking for other use cases. We're meeting that with a strong consumer effort. We're now 1 in 4 patients is aware. So if you think about our DTC, even at a similar spend level we're likely going to be able to convert patients more quickly and more effectively as we progress in that effort.

And then, of course, the refills will continue to help drive that. But I do think from time to time, conferences, whether et cetera, is certainly going to affect it, considering that even even at our steady-state 20% refill rate, we're still primarily NRx driven, right? So you'll see that across every brand, we're probably just as susceptible to it given the NRx dynamic. But certainly, the long-range view here looks really great given the drivers I've outlined.

Our next question comes from Jason Gerberry with Bank of America.

This is Bob Patel on for Jason Gerberry. First on the Gist side, you landed at about 44% for 4Q. And I know that 1Q typically has the reset pressure. But I guess as we look at full year 2026, where do you see that steady state risen settling out? And are there any favorable dynamics in potentially offsetting the 1Q pressures?

And then the second question is obviously raising the peak sales target to over $2 billion is a big update. And I'm just wondering if you can unpack what's driving that increased conviction. Is it more about the breadth of the prescriber base continuing to expand? Or is it about really getting deeper with those top-tier weekly writers and maybe it has something to do with adding those new key account leaders that you mentioned.

Bob, it's Jeff. Just to answer your question on the gross to net side of the house, you are right, we do expect some pressure on the gross to net discount in Q1 as most manufacturers will face this quarter. But we do expect it to go to fundamentally where we have guided for long-term gross to net discount, which is in the 43% to 45%. As you highlighted in the fourth quarter, we exited at 44%. We'll probably get to that range in the middle of this year. So we'll see a stepwise decrease in Q2 and then fundamentally get to that sort of lower end of the 43% to 44% to 45% range.

And [ Pavan, ] this is Bobby. Thanks for the question about $2 billion. We have gotten a lot of people interested in what the potential of Xtembi,and we're really excited to be able to talk about that today. What's really changed there is that we have a great view of how XDEMVY is performing now 2 years in. We know that this is a breakthrough. We've served only 0.5 million patients with this medicine. There are 25 million Americans with DB. So that represents less than 10% penetration, that $2 billion plus figure. We also have transformed the practice of eye care in general, and that's allowed doctors to look beyond those segments to all of their patients.

They're starting to look at all their patients and recognizing the importance of -- and then to your point, there's just continued flawless execution across the board with our commercial effort, education, access evidence. You mentioned a couple of things there. that we're going to continue to execute flawlessly on. So that's allowed us to rewrite the playbook and constantly say this is a $2 billion-plus medicine.

Our next question comes from Lachlan Hanbury-Brown with William Blair.

I guess the first maybe on the DTC campaign, you said that it's -- you've seen a great response. It's sort of got a positive ROI and probably achieve that earlier than you would have expected. So just curious on the thought of is it worth putting more behind that, you're investing more money in a DTC campaign, how you thought about that and sort of landed on $80 million being the right level of spend for that.

Yes. Thanks, Lachlan. Yes, you're absolutely right. The DTC campaign so far is performing exceptionally well ahead of our expectations in terms of timing to reach that positive ROI, which confirmed our rationale to continue to -- when you think about what's driving the improvement in ROI in '26 and why we're excited about that, there's a couple of factors. One, now you've got 1 in 4 patients aware. And two, you've got doctors actively looking. These 2 things, along with our ability to execute, right, we've learned a lot in the last year is going to allow us to really scale that ROI impactfully. It's a compounding effect, if you will. We should be able to convert those patients more quickly, more effectively. $80 million feels right.

And ultimately, look, what we're making is slight incremental investments actually with the sales force because ultimately, the physicians writing the prescription and we think that getting the patients in the practice is important, but continuing to support that deepening prescribing and that deepening of utilization is another factor. So we're sort of hitting on both sides of the funnel, if you will. We're driving patients at the top and really investing and converting as many of those patients as possible.

And as we sit today, we feel really good about the outlook on converting patients from DTC, but also improving the physician dynamics and building on that momentum as well. So TBD, I think, long term, we feel really good about the investment level, and we've got the right things in place to capitalize on it.

Okay. Great. And maybe a second on the Lyme disease program. Can you give any more details on what that study looks like and what the end points might be, how long it would be, what sort of duration of treatment is?

Yes. Lachlan, this is Sesha. Thanks for the question. So Lyme disease is a Phase IIb trial, as we said, about 700 participants. We plan to enroll them in on peak season. Beyond safety, which is an important part of a prophylactic program, we are looking to measure other measures. One of the key ones is the blood level of lotilaner which we want to see that could really translate into a conference of overall effectiveness of TP-05. So the purpose of the study is to generate data that gives us a strong Phase III ready package gives us additional confidence on the program. And in a large enough population that can give us directional input to a study.

Our next question comes from Jenna Davidner with Barclays.

Just on the operating expenses, which I think came in a little bit ahead of what people were modeling, and it makes sense given the R&D and the investments in sales and marketing. I was just curious maybe looking beyond 2026, would you expect this a similar level of step-up going forward? Or is there a point in time where maybe the increase in OpEx spend would kind of moderate a little bit?

Thanks, Jenna. This is Jeff. Great question. We don't expect a big step-up absent a major change in the business. The only thing I would continue to think about is certain variable costs that will continue to increase with revenues increasing. There are certain things that we pay in terms of pharmacy fees, fees to run the co-pay program, also patient support programs that will increase with increasing revenue. So that would be the the main item there. The other thing that we could explore in potential out years is maybe a reduction in DTC spend. We'll have to see how that experiment plays out, but there could be a potential to us to pare back on it or pulse it or something like that, but that's more of a '27 and beyond type of question there. So -- but big picture, no material step-ups in the out years absent a material change in the business.

Our next question comes from Matthew Caufield with H.C. Wainwright.

Great to see the continued progress. I appreciate the question. So there was obviously a mention of the European preservative-free formulation in 2027, the discussions in Japan and the potential partnered approval in 2026 in China. Can you tell us a little bit more about these opportunities and how these markets compare in terms of anticipated prescriber receptivity overall.

Yes. Thank you for that question. I think when we look at ex U.S., what's really interesting is the overall dynamics are very similar to the U.S. The prevalence of the disease is pretty consistent regardless of the geography. And in most of the markets, the treatment paradigm is very similar to what we saw in the U.S. prior to launch of XDEMVY, where doctors are aware, they're typically using elite approaches and are really eager to have a definitive cure treatment for the disease.

Furthermore, the positive U.S. experience is getting out there. As we mentioned, doctors like to hear from each other. And I would then do a few of these European conferences and the European doctors are really excited with what they're seeing their U.S. colleagues do with XDEMVY. So there's a lot of interest and excitement around the market opportunity, the market dynamics are very similar, albeit there's always differences in pricing and reimbursement, but the patient and physician dynamics are very similar. Ultimately, the pricing reimbursement dynamics will sort of dictate our go-to-market approach, which we're currently evaluating in each of those markets.

Our next question comes from Dennis Ding with Jefferies

This is Anthea on for Dennis. Congrats on the quarter. In terms of the peak sales guidance, can you talk about when you expect to achieve that $2 billion in sales and if that would be before 2032 and when your competition of matter patent expires? Or is there some more room beyond that based on your secondary patents out to 2038. And then secondly, on Ocular Rosacea can you talk a little bit more about what a meaningful trend on Arsema would be? And is there a scenario to hit static there.

Thank you very much. This is Bobby and I appreciate the question. It's little early to say exactly when that peak is going to be hit. What we see is we're 2-plus years into the launch, and we've seen continued incredible growth, and we continue to see no slowing of that growth. So we're about a couple of years from $1 billion plus and then we see no signs of slowing down. And all these metrics that we've talked about on the commercial side continue to be very, very strong. So that's what I can say about the peak, and I'll pass to Sesha to talk about authorization.

Can you please repeat that question so I can clarify that?

Yes, for sure. In terms of ocular rosacea, what do you see is a meaningful trend on erythema. And then is there a scenario to hit stat sig on that end point?

Yes. So thank you for the question. So one of the things I would start by saying that -- this is the first-ever trial in Oclarosacia, and we are not new to this paradigm. We have done this once well before developing new clinical measures. So that's an important part of what we do here. So in addition to erythema, we're also looking at Pillingetacia, which are prominent bloodless -- these are the hallmark signs of the disease. And when we talk to the ECPs, given the fact that there is no approved treatment, what they're looking for is any improvement in these conditions. It's a very meaningful for them.

And that's exactly what we are focused on. We have alignment with the FDA on these 2 measures. And what we are striving to show is an objective improvement on these measures. And that's -- and then we'll continue to evaluate the data and move it forward with continued conversations with the FDA.

Our next question comes from Andreas Argyrides with Oppenheimer.

Congrats on the success and progress in most of our questions were asked, but I'm going to ask a couple here. Can you give us -- you mentioned something around the seasonal dynamics while you provided the robust sales guidance. Can you give us any additional infection to those seasonal trends?

And then assuming you advance both ocularization and line disease programs, how much do you think those pivotal studies would cost?

Yes, Andreas, I'll take the first part here. So the seasonal dynamics are what you typically see across the industry. And again, as we move further down the launch curve here, we'd expect Xena to be part of that typical seasonality, right? And there's a few dynamics here, right? There's resetting co-base, there's deductible resets for both patient visits. So you're thinking about patients, fewer patients going into the office and then those that are going in the office are paying more out of pocket. So it affects both the demand as well as the gross to net, which Jeff alluded to earlier. What we do see is that, that is already starting to work its way through. If you look at the most recent weeks in the IQVIA data, which most people track, we are seeing a positive trajectory in the last few weeks, and we expect that to continue outside of anything unexpected.

I think once you're past the bulk of the season and, of course, the weather, you start to see people come back into the eye care offices, you start to see conversion of those scripts. And fundamentally, all the signs we're seeing are really great. When we go to the conferences, the doctors are telling us there's no end in sight. The -- you've seen a lot of utility and success with the product, and we see that in the numbers, too, that we analyze, right? The doctors are looking for more and more cases -- we think rolling out our key account leaders will help facilitate that. They'll be kind of out there in the back half of the year. We expect that to pay for itself. So these are some key drivers, and we talked a little bit about DTC earlier as well. So we'd expect all the things we're doing to continue to amplify the growth. And certainly, the Q1 dynamics are going to play through. But Absent of that, we expect a really strong year in line with the guidance that Jeff provided.

And Jeff, do you want to talk about the pivotal potential costs for our online.

Yes. So Andreas, the OR study is expected to cost somewhere between $7 million to $10 million, with the majority of those costs incurred in 2026. And then for the Phase III or Phase II LIME study, somewhere in the range of $25 million to $30 million with most of those costs coming in during 2026 and a few trailing over to 2027.

Our next question comes from the line of Graig Suvannavejh with Mizuho.

Two questions, if I could. Just one, could you just go into XDEMVY current prescribing trends and differences happening between the 2 segments, ophthalmologists and optometrists -- and then secondly, just a follow-up on the peak sales guidance. Any way you can provide color on the U.S. versus ex U.S. kind of split there.

Yes, Greg, it is Aziz. I can provide a little bit of color on both of those. So in terms of the prescribing dynamics, what we're excited about is the continued depth of prescribing. And we're seeing this across both ophthalmology and optometry. And I'll remind folks that our split is roughly 2/3 optometry and about 1/3 ophthalmology with both segments growing really strongly. In fact, we think about depth of prescribing, we've seen some really good movement there in the most recent quarter. We hit a stat of about 40% of our core target now prescribing weekly meaning they're prescribing at least 5 a week -- sorry, once a week.

And then we saw a 20% growth in those that are writing at least 5 week what we call deli-rider. So they're writing at least once a day that grew 20%. So you've got about 40% of your total audience writing this with good regularity and then the fundamental heavy users are growing even more at 20%. So there's some good signals there, and that's again across both those segments. So we really feel good about the prescribing dynamics. We think about the utility of expanding that effort further with the key account leaders.

And then, of course, thinking about the effort that DTC has there, right? Every time a patient comes in, from DTC. That's actually pulling from our 25 TAM into that 9 million TAM. So you're expanding the funnel as we mentioned earlier. So that's going to help continue to facilitate that depth of prescribing. And then to clarify, the $2 billion peak that's specific to the U.S., right? So that's where we're in market right now, and that's what we're focusing the guidance, and that peak is $2 billion in the U.S.

Got it. And maybe as a follow-up then, any -- I know it's early days, but any way to help us think about what the ex U.S. component might look like? I know, again, it's hard at this point, but any color there?

Greg, it's Jeff. Yes, it is a little bit challenging, particularly given some of the dynamics that we're facing now with --. And I think what we're doing is we're making thoughtful investments along the way to do ECP education, get engaged with patient groups and do everything we can before crossing the Rubicon and really launching over there. So we're monitoring that.

But big picture, I think a good sort of proxy is typically 90% U.S., 10% rest of world. So I think that would be something you could think about. I would say Japan is probably a little bit higher on the opportunity scale than maybe Europe is. But I think that for modeling purposes, that would probably be a good model.

That will conclude today's question-and-answer session. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good afternoon, and welcome to Tarsus' Third Quarter 2025 Financial Results Conference Call. As a reminder this call is being recorded. [Operator Instructions]

At this time, I would like to turn the call over to David Nakasone, Head of Investor Relations, to lead off the call. David, you may begin.

Thank you. Before we begin, I encourage everyone to visit the Investors section of the Tarsus' website to view the earnings release and related materials we will be discussing today.

Joining me on the call this afternoon are, Bobby Azamian, our Chief Executive Officer and Chairman; Aziz Mottiwala, our Chief Commercial Officer; and Jeff Farrow, our Chief Financial Officer and Chief Strategy Officer.

I'd like to draw your attention to Slide 3, which contains our forward-looking statements. During this call, we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional detail.

With that, I will turn the call over to Bobby.

Good afternoon. And thank you for joining us.

This quarter, Tarsus delivered exceptional results that continue to raise the bar for what a successful product launch looks like. XDEMVY is now one of the best-selling prescription eye drops in the market, setting a new benchmark for launch performance across the pharmaceutical industry. We delivered more than 103,000 bottles of XDEMVY to patients and recognized approximately $119 million in net revenue. These results reflect the strength of our category-creating blueprint, the increasing physician engagement and the profound impact we are having on patients.

What's more, we strongly believe we are just scratching the surface on the full potential of this launch. More than 20,000 doctors have already prescribed XDEMVY. And once they see successful patient outcomes, they start proactively looking for more patients that can help, broadening utilization across multiple patient segments and bringing us closer to our goal of serving millions of patients. Not only are we seeing this in the numbers, we hear it directly from eye care professionals or ECPs.

Recently, I was at 2 of the most impactful medical meetings in eye care: the American Academy of Optometry; and the American Academy of Ophthalmology.

Three key themes stood up: first, ECPs consistently described XDEMVY as one of the most meaningful therapeutic advances in eye care in decades; second, even our top prescribers say they haven't come close to reaching their full potential; and third, doctors are changing their practice patterns and broadening their use of XDEMVY across a wider range of patients, particularly in light of our recent meibomian gland disease data in Demodex blepharitis patients.

That data has been a catalyst for them to look more proactively for Demodex blepharitis, or DB, across patients coming in for complementary conditions like dry eye, cataracts and contact lens intolerance. "That third point hits very close to home as both of my parents were prescribed XDEMVY after recent visits for 2 different conditions. My dad came in for a cataract surgery and my mom with a stye." During their visits, they were both diagnosed with DB. This expanding clinical recognition is being further amplified by our direct-to-consumer or DTC efforts, which are bringing new patients into offices, many of whom are asking for XDEMVY by name.

With patients proactively asking to be screened for DB, broad access and a best-in-class platform and sales force, these strong tailwinds are propelling the next frontier of growth, and we are just getting started. Aziz and Jeff will share more proof points later in the call, but suffice it to say, we are very pleased with the ongoing depth of adoption across multiple DB patient segments.

Turning to our pipeline, the progress we've built with XDEMVY gives us tremendous confidence in the trajectory of our next potential category-creating opportunity, ocular rosacea. This is yet another area of uncharted territory that ECPs emphatically told us was a significant area of unmet need. Listening and working closely with ECPs to fully understand the needs of the patients has been foundational to our success at Tarsus, and that partnership is guiding the design of our Phase II trial, which we plan to initiate by year's end.

Additionally, we see ample opportunity to expand globally, including in Europe and Japan and to advance our Lyme disease prevention program, which represents yet another opportunity for category creation. We have built remarkable momentum and as you will hear from Jeff, we continue to outperform the eye care market, and we believe Tarsus is positioned to become the next leader in eye care.

I am so proud of our team for setting a new standard in treating Demodex blepharitis, and we're applying that same innovation mindset to conditions that have been underserved for far too long. We know what it takes to create a market, shift behavior and deliver long-term value, and this is just the beginning. As we look ahead into 2026 and beyond, we expect this powerful momentum to carry forward as we continue to expand our pipeline and increase our impact, setting us up for years of potential tremendous growth.

With that, I'll now turn the call over to Aziz.

Thanks, Bobby. Echoing Bobby's comments, it's incredible to see our evolution and truly inspiring to know we've helped nearly 400,000 patients with XDEMVY, and we're just getting started. With an estimated 25 million Americans living with Demodex blepharitis, we believe we've only just begun to unlock the full potential of XDEMVY. As more physicians move from monthly to weekly and from weekly to daily prescribing, we're seeing a true waterfall of utilization that demonstrates increasing confidence and expanding reach across patients. I'll share more specific metrics in a moment, but the traction we're seeing gives us great confidence in the durability and scale of this launch and the blockbuster plus potential of XDEMVY.

In the third quarter, we recognized approximately $119 million in net sales and delivered more than 103,000 bottles to patients, both up double digits from the second quarter. That kind of growth really stands out in a quarter when most eye care products experienced softer volumes as evidenced by the sequential declines in new prescriptions seen across several other branded interior segment medicines. Our results this quarter reflect not only strong execution, but continued validation from the field, a sign that XDEMVY is becoming a trusted part of daily eye care practice.

So let's get into the details. Last quarter, we shared that more than 20,000 eye care professionals have now prescribed XDEMVY and that approximately 5,000 were prescribing weekly. This quarter, I'm thrilled to say that the number of weekly writers has increased by approximately 20% and the number of ECPs prescribing more than once a week has increased by approximately 30%. This significant prescribing depth highlights how effectively XDEMVY is being integrated into changing practice patterns.

Underpinning this increased utilization is an easy-to-diagnose disease, a best-in-class therapy, exceptional patient access and affordability, and educational efforts, that are empowering patients to ask for XDEMVY and ECPs to screen every patient. ECPs continue to tell us the same thing. XDEMVY is one of the biggest eye care breakthroughs in the past 2 decades. That comes down to 2 key factors: first, XDEMVY delivers outstanding clinical results; and second, our high-quality access is making it easier for them to prescribe and streamlining access for patients with many paying less than $30.

We're equally as excited about our DTC campaign. It's delivering a positive return on investment that continues to grow. Furthermore, we've seen a 90% increase xdemvy.com website visits and a 42% relative growth in unaided awareness since last quarter. This engagement and awareness are correlating to more office visits, more physician diagnosis and more patients receiving XDEMVY.

We're also seeing a positive trend in retreatment behavior, which is steadily building. More than 10% of weekly prescriptions are now refills, and that number climbs into the mid- to high-teens amongst our earliest patient cohorts. While ECPs report the consistent efficacy they see with XDEMVY, we know that might can return over time and as many ECPs are now beginning to set clear expectations that XDEMVY is part of long-term patient management, we continue to expect retreatments will stabilize around 20% over time, providing another important contributor to our sustainable and strong growth.

This kind of momentum gives us real conviction that we're building one of the best launches in history. When you zoom out, our progress is striking. Demodex blepharitis is now recognized as a mainstream condition. Physicians are screening for DB more broadly and treating more confidently across the various patient segments. Retreatment is growing as XDEMVY becomes part of ongoing care and Tarsus has established a new standard in eye health.

Our commercial engine is firing on all cylinders with awareness driving diagnosis, diagnosis driving treatment and positive treatment outcomes reinforcing confidence. It's a virtuous cycle fueling XDEMVY's path to our expectation of blockbuster plus success.

In closing, I want to thank our incredible sales team. Their focus and execution is constantly setting a new bar and has been a key driver of our success. It's one of the largest and most experienced teams in eye care. And as Bobby mentioned earlier, it's just the beginning.

With that, I'll turn it over to Jeff to walk through our financials and pipeline updates. Jeff?

Thanks, Aziz. Q3 was another tremendous quarter with XDEMVY generating $118.7 million in net product sales. To put a finer point on our results, we delivered double-digit growth in both prescription volumes and revenues in what, as Aziz mentioned, is typically a softer quarter across eye care due to holidays, vacations and fewer office visits.

In the third quarter, we shipped more than 107,000 bottles to distributors and dispensed more than 103,000 bottles of XDEMVY to patients, above the top end of our guidance. Distributor inventory levels remained steady at around 2.5 weeks. As a reminder, we recognize revenue when XDEMVY is shipped from our warehouse to the distributors, not when bottles are dispensed to patients.

Our gross-to-net discount was 44.7%, in line with the top end of our guidance and essentially flat to Q2, driven by 2 main factors: one, an adjustment to our accrual estimate for the Medicare Manufacturers Discount Program, or MDP, which was implemented earlier this year and added approximately 0.7% to the discount; and two, we saw an increase in Medicare patients entering the catastrophic category of coverage, where manufacturers bear a greater share of costs, a dynamic we expect to continue through year-end.

Importantly, this gross-to-net performance reflects broad coverage and rising demand across a broader set of patients, especially Medicare patients, a key indicator of healthy, sustainable growth. It's clear our growth drivers are working in harmony, resulting in steady, weekly prescription gains, driven largely by new patient starts.

For the fourth quarter, we expect XDEMVY net product sales to be in the range of $140 million to $145 million. While we continue to expect increases in weekly dispenses as compared to Q3, it is important to remember that fourth quarter demand is affected by several major conferences and holidays.

Our Q4 guidance represents annual revenue of $440 million to $445 million, an amazing accomplishment at this stage in the launch. We also expect inventory levels to be consistent with Q3 at about 2.5 weeks; gross-to-net discounts to be in the range of 43% to 45%, driven by ongoing Medicare mix dynamics. Looking beyond 2025, we expect the gross-to-net discount to stabilize in a similar range.

We are also expecting Q4 operating expenses to be higher than Q3, reflecting variable costs, tied to increased volumes and demand and an increase in our quarterly DTC investment, bringing our full year DTC investment to the top end of our provided range of $70 million to $80 million.

Now, turning to our pipeline. Progress continues across all programs. We remain on track to initiate the Phase II study for TP-04 for ocular rosacea this year, with top-line data anticipated in 2026. We are excited about the potential to bring another category-creating medicine to millions of underserved patients.

We anticipate beginning a Phase 2b study for TP-05, our oral, on-demand prophylactic for the potential prevention of Lyme disease in 2026. And we're continuing to evaluate strategic options, including partnerships that will enable us to advance the program efficiently and maximize long-term value.

Likewise, we remain on track with international progress. Discussions with regulators in Japan are ongoing, and our preservative-free formulation in Europe remains on track for expected submission in 2026 with potential approval in 2027. Both represent sizable markets with significant unmet need and we're considering flexible commercial strategies from direct sales by Tarsus to partner models, leveraging third-party distribution.

In summary, Q3 was another momentum-building quarter with strong execution, deeper adoption and meaningful impact across both commercial and clinical fronts. We anticipate this to continue into 2026 and beyond with a clear line of sight to blockbuster plus potential. Tarsus remains well-positioned to advance commercial growth, deliver key clinical milestones and pursue strategic opportunities that reinforce our leadership in eye care. We're proud of what we're building and even more excited about what's ahead.

I will now turn the call back to Bobby for final remarks.

Thank you, Jeff. This quarter was a standout in every way, operationally, financially and most importantly, in the impact we had on patients. Doctors are changing how they practice. Patients are finding real relief and XDEMVY is now part of everyday care for Demodex blepharitis. As we look ahead, our priorities are clear, execute with excellence, broaden our pipeline, further our impact and continue building a company that defines what's possible in eye health.

Operator, please open the line for questions.

[Operator Instructions] While we are waiting for the Q&A roster, I will pass the call to Bobby.

Thank you. I'd just like to highlight a couple of things before we get into the Q&A. First, I am so proud of our progress to date, 8 quarters of growth, 147% year-over-year growth in Q3 is just phenomenal, and we see no end in sight to this growth. And that speaks to the power of category creation, which is what Tarsus is all about. We've talked about 2 pipeline programs already that have the potential to do that in ocular rosacea and Lyme.

Looking forward to your questions.

And our first question coming from the line of Andreas Argyrides with Oppenheimer.

Congrats on the impressive progress in the quarter. You mentioned in the prepared remarks that doctors are changing their practice patterns and broadening their use of XDEMVY across a wider range of patients and partly due to the meibomian gland disease data. Can you just elaborate on what changes you're seeing and how broader use translates to the lift you are seeing in prescriptions?

Yes. Thanks for that question. Really insightful when we talk about how the evolution of prescribing has progressed over the last several months. I think there is a few things to look into here. One is the broad base of prescribing that we highlighted last quarter that continues to grow modestly. I think the real opportunity here is the depth of prescribing we're seeing, which we highlighted in the prepared comments, where you're seeing the increase of 20% in our weekly prescribers, 30% of those who are writing multiple times a week and I think that's great evidence that they are changing their patterns.

And we do see the MGD data as one of those drivers. I think it underpins almost every single patient that comes through the door, because what the doctors think about now is who should I be screening for Demodex blepharitis. And as they start their journey, they typically think about the obvious patient. But when they get more experience, they start thinking about other patients, their dry eye patient, their cataract surgery patient, their MGD patient, their contact lens patient. And MGD is such a prevalent disease that it helps the doctor think about the value of treatment beyond just MGD, but also in patients that have DB and other comorbidities.

So for example, one of the data points there is fluctuating vision. So, if a doctor says, "Wow, DB can impact fluctuating vision, I might want to think about screening my cataract patients where post surgically, I want to avoid those visual fluctuations." So that's an example where doctors will have that progression. And then what will happen is they'll start to screen, say, their premium cataract patients, and then they'll expand to all of their cataract patients. And that's an example of how you see a doctor progressing from trial to weekly prescribing to being in that 30% growth bucket of writing multiple times a week. And as Bobby mentioned, we're at the conferences lately, and that's something you hear pretty, clearly from the doctors that that's the progression. I try it here, I see great success and then as I get that experience, I look for other opportunities as well.

Yes. And I would just add to what Aziz said, I mean, what I heard from both optometrists and ophthalmologists is just that doctors are finding that XDEMVY works great, they find more and more reasons to treat patients with DB based on the data and the different comorbidities and I'm just really astounded by the 20,000-doctor figure. We've really broadened the audience for this, and I hear new doctors saying, "Wow, this is one of the best medicines I've seen." And so it's wind in our sails, and it's reasons why we think the growth is going to continue for a long time.

Our next question coming from the line of Eddie Hickman with Guggenheim.

Congrats on the performance this quarter. Just a few questions for me. With regard to the refill rates, do you have any sense of the average time between initial filling and first refill? Is this within your expectations that these patients are coming back the next year, or are they coming back sooner? And what are you doing to keep those early adopters coming back at a minimum year after year?

And then in light of the growth trajectory that you're seeing and guiding for, are you updating your internal peak sales estimate for XDEMVY?

Yes, Eddie, thanks for that question. I'll take the first part, and I'll let Jeff handle the second.

When it comes to refills, I think, we're seeing a real positive trend here. We highlighted this last quarter and we provide a little bit more color this quarter, right? So when you look on a weekly basis, we're seeing just over 10% on a weekly basis in terms of what's a retreatment or refill versus the total volumes. And when you look on a cohort basis, meaning if you look at patients that were treated, say, a year ago, what they're getting, it's about in the mid-teens in terms of the retreatment rate. Both of those numbers are progressing positively and in line with our expectation that we could get to a 20% annualized retreatment rate. So, right where we think it should be and progressing nicely towards our expectations.

What are we doing to maintain that and to continue that trend? There is a couple of things. I'd say, first and foremost, is education with the physicians and the patients that this is a chronic disease, XDEMVY works exceptionally well at getting rid of the disease acutely, but these might they do come back, and we do share with them the data of recurrence from our pivotal trials. And that encourages the doctors to put together a protocol where they're bringing the patients back.

What that behavior looks like for each patient is a little different, some doctors are a little bit more proactive and they may say, I'm going to bring you back every 6 months. Some doctors will say, I'll wait until your annual exam. So I don't know if we can give you a precise average time, we look at different metrics, but that metric is moving as more doctors establish their protocols. I think the takeaway there is that it's moving in the right direction and in line with expectations.

The other thing that we are doing is ensuring that our pharmacy distribution network is really helping those patients stay on therapy. So there is reminders that go out that second script is typically easier for the patient because they already have a report established at the pharmacy, they've already got all their information in the database, et cetera. So we've really streamlined the process, not just for patients to get the initial treatment, but also for those follow-up retreatments that are inevitable. So physician education, streamlined patient experience is going to continue a positive and in line trend that we expect.

And I'll just add to that. I mean what I heard at the conferences was there's all sorts of different reasons people are getting refills, some patients, the doctor deems that they need a refill when they follow-up after the first treatment, of course, course of treatment. Others like my mom, they come back a year later and they have a new stye and they're seem to have DB again. So that is one thing that I think we can elucidate further through evidence among other areas, we're going to continue to study to fully describe what XDEMVY can do.

Eddie, it's Jeff. Just to address your question on the peak. Look, we are thrilled with how we performed this third quarter, particularly when we look at some of our peers who were flat to down in terms of growth. We saw very robust growth in the third quarter, and we continue to expect to see fourth quarter growth. We're constantly evaluating our peak potential here, and I think, we still believe that this is a blockbuster plus potential. We're not ready to quantify that at this point, but we're continuing to see the sort of continued growth of this opportunity, and we expect next year to be a nice robust growth as well.

Our next question coming from the line of Bhavin Patel with Bank of America. Your line is now open.

This is Jason on for Bhavin. With respect to TP-04 in the Phase II ocular rosacea, do you still need an FDA meeting before you start that trial? Just wondering where you stand with FDA alignment before starting that. And then just thinking to 2026 and just the general operational spending needs of the business, I wonder if you can give a little bit of insight there, that would be helpful.

Jason, this is Sesha. Thank you for that question. With regards to the TP-04 study, no, we don't need another FDA conversation. We had a very robust and productive conversation with the FDA on the program sometime back as we had reported. And we are progressing towards starting a trial later this year. More details to come on the study itself.

And Jason, with regards to your OpEx for 2026, we more or less think about it being in line with what we had spent here in 2025 in terms of the SG&A spend. We expect OpEx to reflect the $70 million to $80 million DTC spend. The only thing I would highlight is there is a variable component, the more we sell, there's a certain aspect that will drop to the SG&A line there.

The second aspect is the ocular rosacea program that you talked about, we previously guided to $7 million to $10 million between 2025 and 2026. We still believe that's the right amount.

And then the other area that could potentially add some OpEx spend that we're still evaluating whether we're going to move forward whether or not is the Lyme disease program Phase IIb study. So stay tuned on that one. But right now, I would think about those as the key components for OpEx for 2026.

And our next question coming from the line of Andrea Newkirk with Goldman Sachs.

Sesha, maybe another question for you, just following up on the last one regarding the TP-04 study in ocular rosacea. Can you just provide an update where things stand with developing the assays? And then do those need to be validated with the regulatory agencies before you're able to initiate the Phase II study?

So the study preparations are ongoing as we expected. We are developing the scales in collaboration with our strong partnership with the ECPs. At this point, the FDA doesn't require validation per se, but we are obviously in conversation with the FDA and FDA gave us input earlier, as we had reported in our previous conversations. And so, we are progressing as planned.

And our next question coming from the line of Lachlan Hanbury-Brown with William Blair.

First one, maybe, Jeff, just curious on the change from guiding to revenue from bottles. What was the thinking of the rationale behind that?

And then second, maybe for Aziz, you've talked about wanting to see multiples of ROI on DTC, and it sounds like over the past few quarters, you've been seeing that, you've been seeing a pretty good impact. So kind of curious to think or to hear how you think about where you are in sort of reaching the peak effect of DTC and how much more impact is left there?

Lachlan, it's Jeff. We evaluate, and I think we've mentioned this in the past on a quarter-by-quarter basis whether and what we're going to provide for guidance. And I think one of the reasons we held back on providing revenue guidance in the sort of past has been there has been some data points that we wanted to see evolve. And I think we've seen those data points evolve and in particular, the DTC impact. And so, I think we've got that behind us now. So our decision was to provide revenue guidance granted in the fourth quarter here understandably makes it a little bit easier, but we did feel it was the right time to do it.

And in regards to DTC, I think, this has been a really exciting part of the launch, it had a really profound effect. I think before getting into the mechanics here, I think, a couple of things to highlight are the impact it's having, right? You're seeing the growth in awareness, the growth in website visits. Those are directly translating into prescriptions. Patients are getting more easily identified. You're hearing from doctors at all the meetings that patients are coming in proactively asking to be screened. When doctors make the diagnosis, that discussion with the patient is more streamlined. So there's a lot of color that's happening there that's really enabling us to have such an impact.

And what we stated in the prepared comments is we're now experiencing a positive ROI. And I'll remind you, in the past, we've said that it takes a handful of quarters to get to that ROI point. So we're progressing really nicely. I go so far as to say that we're even ahead of schedule from what we expected early on.

In terms of reaching the peak potential, I think, there is still a lot of room to see increased ROI from the DTC, right? We have a very high threshold. We want to see multiples, and we're seeing a positive ROI, we're trending slightly ahead of what we'd expect in terms of that impact, and that's reflected in the results here. And I'd expect that impact to continue to scale into next year as we get more and more time with these patients getting exposed to the ad multiple times, the doctors enhancing their experience and I think when you stack that on with the physician experience being so positive, the access being great, our sales force being continuously in these offices, I think, there is a lot of room to grow our impact with DTC. And I'm really excited to see how that takes hold into next year. And I think as Jeff mentioned, we expect it to be a good growth driver for us into the next year as well.

[Operator Instructions] Our next question is coming from the line of Cory Jubinville with LifeSci Capital.

Congrats on the update. I guess just sticking with the DTC ROI math, you said it was positive and growing ROI with a plus 90% site traffic, plus 42% unaided awareness quarter-over-quarter. Can you just translate that at all to what an estimated customer acquisition cost or payback period might be?

And then sticking with that as well, you mentioned that you're likely going to approach the top end of the range for DTC spend in 2025. How should we be thinking about that in 2026 and beyond? Is there a point at which you dial back DTC spend? And if so, what goes into that decision? And how should we be modeling out that time line?

Thanks for the question, Cory. Yes, when it comes to DTC ROI, you can imagine we look at a lot of different metrics, and we're really thoughtful about what we share. I think the metrics that you're highlighting are really important ones. But as you can imagine, the ROI here is scaling and things are moving pretty quickly, right? So we're not giving a point estimate on those right now, because they'd evolve in the coming weeks, and we've seen the DTC ROI impact scale. When we say it's growing, it's scaling on a week-to-week basis as we make our investments.

I think our focus right now is to continue to sharpen those investments. So you learn, right, which programs are the best, where do you get the best placements, where do you see the best response to these patients. So we're continuing to do certain things to drive and catapult that ROI and scale it even further. And I think as we get more to a steady state, we can provide some of those detailed metrics over time. But right now, I think, the emphasis is on really making sure that that investment is driving direct diagnosis and treatment, which we're seeing, which is fantastic. And I think the plan is to continue to invest in that space.

I would expect for 2026, a similar level of spend to this year. And I think beyond that, we're going to evaluate it. I think as you get to a certain level of education where patients become aware to a certain extent, doctors are really establishing their protocols, you can think about maybe pulsing this seasonally or having a different schedule where you might be able to do this even more efficiently. But right now, I think it's still a great opportunity to invest in this to find that education and get those patients into the office, because we're still relatively early in the journey. We've only treated about 400,000 patients out of 25 million Americans that are out there. So still some good work to do, and I'm excited that the ROI is as positive as it is now, and I think we have a clear path to continue to drive that growth.

And I would just add, coming off the conferences, there were 2 themes of ROI at the clinic level that I heard. One was some patients are coming in asking for XDEMVY by name or asking, do I have mites? And the second, I think that's a real ease for the doctor as well as the conversation around mites has become more straightforward. Patients have heard of this disease. They say, okay, I saw that commercial. I know what you're talking about. So on the ground, tangible impact, and I think, the ECPs are pleased with the progress of that as well.

Our next question coming from the line of Dennis Ding with Jefferies.

I'm going to ask a bit of a longer-term question, and that's on ocular rosacea. So what's the clinical, meaningful benefit on erythema, et cetera., in Phase II? And what are the various pushes and pulls on the magnitude of benefit either through disease severity or how refractory patients are to standard of care?

And then number two, remind us what you saw in Phase II for papulopustular rosacea, if that could in some way help derisk ocular rosacea specifically, how similar are the underlying drivers of the inflammation seen in both that you feel like can be addressed with TP-04?

Ding, could I just clarify that before I pass to Sesha. The first question was what aspect of clinical meaningful benefit? Could you clarify, please?

Yes on erythema and whatever other endpoints that you guys decide to include in the Phase II?

The question is what level would be a clinically meaningful level?

That's correct.

Okay. Great. Sesha please.

Thank you, Bobby. And thank you for that question. So on the first point of the endpoints, talking to the ECPs and listening to our ECPs, the key hallmark features of the disease are prominent blood vessels that you see that we call telangiectasia in eyelids and eyelid margin. That is one of the key discerning and prominent feature of ocular rosacea as well as redness on the lids and the area around the eye, around the lids and it is called preocular region. So those are the key hallmark features of the disease, and we are really looking to establish the measures around those 2 particular aspects. And so these are features that develop over time, and we are looking to reduce the severity of these 2 measures, and that's our approach at this point.

And in terms of the papulopustular rosacea, yes, papulopustular rosacea, we did a study, as you correctly pointed out, some time back. And we had very good results in the key measures for papulopustular rosacea. In fact, the approvable endpoint -- the regulatory endpoints for that indications are lesion improvement, as well as a composite endpoint of investigator-grade assessment. And we actually had very robust, statistically significant improvement in both those measures over vehicle in that particular study, which gives us a lot of confidence, as you mentioned. And we also measured erythema in that study where we also saw a reduction in erythema.

And coupled with that, as you may recall, in our Saturn studies with XDEMVY, we also saw significant and meaningful cures, erythema cures, lid margin erythema cures for XDEMVY. So, we know the drug works in reducing redness. And so that is propelling our confidence in going into the study.

And I'll just add from conversations with the doctors, I think, from their perspective, any level of improvement in ocular rosacea is going to be meaningful. The telangiectasias can easily be seen by the doctors and the redness on the lids is what brings patients in.

So as Sesha said, these are new measures, a pioneering study, and we're hopeful to see those type of reductions that will make a difference for doctors in these patients.

Our next question coming from the line of Matthew Caufield with H.C. Wainwright.

Great to see the XDEMVY and pipeline progress. And thanks for taking our question. I was curious if there's any further granularity on the traction you're getting between optometrists compared to ophthalmologists and if the greatest untapped market and focus is among that optometrist population for potential prescriptions?

Yes, it's a great question. We see great traction with both ophthalmology and optometry. Historically, and even currently, we're seeing about 65% or so of the volume coming from optometry and the balance from ophthalmology. So a good mix, and that's been relatively consistent through the launch.

In terms of the opportunity, I think, both audiences are really important to us. I think optometrist does a lot of the in-clinic work, there are some practice dynamics that are very favorable to optometrists here that, I think, they're capitalizing on in terms of being able to have patients stay in the practice, switching to medical insurance to treat a medical condition with Demodex blepharitis. So these things are really important factors for the optometrists.

We obviously focus a lot of our sales time and educational efforts with those optometrists, but we also spend a lot of time talking to the ophthalmologists. And for ophthalmologists, cataract patients are their bread and butter. And that is a core segment for us where we see a high prevalence of Demodex blepharitis, and we know that, that inflammation and irritation of the disease can impact their surgical outcomes. So they're very motivated to screen these patients, to find these patients and to make sure that they're getting a clean, healthy eyelid around that surgical outcome.

So I think great trends on both. When you look at top prescribing, there is a good mix of both ophthalmology and optometry. And our focus going forward will continue to be educating the optometrists directly and also providing that right emphasis on ophthalmology as well. So I think they go hand in hand. And I think the great thing here is that we're seeing great results from both.

And as Bobby mentioned, we just came back from back-to-back academy meetings. And I can tell you, while the practice dynamics might be a little different, the one thing that you hear consistently from both ophthalmologists and optometrists is, one, the top users are saying they're still finding incremental opportunities to utilize XDEMVY. And 2, sort of rank-and-file users are having a great experience, and they're very encouraged with the ease of access, which is really opening their aperture to think about a broader set of patients. Both of those types of feedback are really encouraging for the future potential for the brand going forward.

And there are no further questions in the Q&A queue at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.