Tarsus Q3 2025 Earnings Call: Contradictions Emerge in DTC Campaign, Refill Rates, and Prescription Dynamics

Date of Call: November 4, 2025

Financials Results

• Revenue: $118.7M net product sales in Q3, up 147% YOY; shipments >107k bottles and >103k bottles dispensed; up double-digits sequentially vs Q2

Guidance:

• Q4 net product sales expected $140M–$145M, implying FY revenue of $440M–$445M.
• Distributor inventory expected ~2.5 weeks; gross-to-net expected 43%–45% and to stabilize in a similar range beyond 2025.
• Q4 operating expenses expected higher than Q3 (variable costs and increased DTC); full-year DTC spend expected at top end of $70M–$80M.
• Initiate Phase II TP-04 (ocular rosacea) by year-end with topline data anticipated in 2026.
• Begin Phase 2b for TP-05 (Lyme prophylactic) in 2026; evaluating partnerships.
• Europe preservative-free submission planned in 2026 with potential approval in 2027; Japan regulatory discussions ongoing.

Business Commentary:

• XDEMVY Launch Success and Market Growth:
• Tarsus Pharmaceuticals delivered more than 103,000 bottles of XDEMVY to patients, resulting in approximately $119 million in net revenue for Q3 2025.

• The growth was driven by increased physician engagement, the strength of the category-creating blueprint, and the profound impact XDEMVY is having on patients.

• Increased Prescribing Depth and Frequency:

• The number of weekly XDEMVY writers increased by approximately 20%, and the number of ECPs prescribing more than once a week increased by 30%.

• This trend is attributed to enhanced physician understanding of the disease and its comorbidities, including meibomian gland disease data.

• Direct-to-Consumer Impact and Awareness:

• Tarsus' DTC campaign led to a 90% increase in xdemvy.com website visits and a 42% increase in unaided awareness since the previous quarter.

• The campaign's positive ROI is correlated with more patient office visits, increased diagnoses, and ultimately, more prescriptions for XDEMVY.

• Pipeline and Future Growth Opportunities:

• Tarsus plans to initiate a Phase II study for TP-04 to treat ocular rosacea by year-end, with top-line data expected in 2026.
• The company's focus on expanding globally and advancing the Lyme disease prevention program reflects its strategy to create new markets and deliver long-term value.

Sentiment Analysis:

Overall Tone: Positive

• Management described Q3 as "exceptional results" and XDEMVY as "one of the best-selling prescription eye drops," reported $118.7M net product sales, guided Q4 sales to $140M–$145M and reiterated "blockbuster plus" potential and continued pipeline advancement.

Q&A:

• Question from Andreas Argyrides (Oppenheimer & Co. Inc.): You said doctors are changing practice patterns and broadening use of XDEMVY partly due to MGD data — can you elaborate on the changes and how broader use translates to prescription lift?
  Response: Prescribing depth is increasing (weekly prescribers +20%; multi-weekly +30%); MGD data prompts broader screening (dry eye, cataract, contact lens patients), converting trials into recurring weekly prescriptions and driving lift.

• Question from Eddie Hickman (Guggenheim Securities): Do you have a sense of time between initial fill and first refill, are refill rates within expectations, and are you updating your internal peak sales estimate?
  Response: Retreatment ~10% on a weekly basis and mid-teens in earlier cohorts, trending toward an expected ~20% annualized retreatment; actions include physician education and streamlined pharmacy workflows; management still views XDEMVY as "blockbuster plus" but has not updated a quantified peak estimate.

• Question from Jason Gerberry (BofA Securities) for Bhavin: Do you need an FDA meeting before starting TP-04 and what should we expect for 2026 OpEx?
  Response: No additional FDA meeting required; TP-04 Phase II on track to start late 2025; 2026 OpEx expected roughly in line with 2025 SG&A, includes $70M–$80M DTC, $7M–$10M for ocular rosacea (2025–26), and potential incremental spend if Lyme Phase 2b proceeds.

• Question from Andrea Tan (Goldman Sachs): Update on developing assays/scales for TP-04 and do those need regulatory validation before starting Phase II?
  Response: Scales/assays are being developed with ECP partners; FDA provided earlier input and does not require formal validation per se, so preparations are proceeding as planned.

• Question from Lachlan Hanbury-Brown (William Blair): Why shift guidance to revenue from bottles, and where are you in the DTC ROI curve — is peak effect near?
  Response: Provided revenue guidance because key data points (notably DTC impact) have matured to support it; DTC is delivering positive ROI ahead of schedule, will continue investing into 2026 with room to scale and may pulse spend later as awareness matures.

• Question from Cory Jubinville (LifeSci Capital): Can you translate site traffic and awareness gains into customer acquisition cost or payback, and how should we model DTC spend in 2026 and beyond?
  Response: No CAC/payback point disclosed; ROI is scaling and evolving week-to-week; expect similar DTC spend in 2026 to 2025 (top-end $70M–$80M) and will evaluate dialing back or pulsing once patient awareness and physician protocols reach steady state.

• Question from Yuchen Ding (Jefferies): For ocular rosacea, what would be clinically meaningful improvements (erythema, telangiectasia) and does prior papulopustular data de-risk the program?
  Response: Phase II will target reductions in eyelid telangiectasia and lid/preocular redness; prior papulopustular study showed robust lesion and investigator-grade improvements and erythema reduction, giving confidence TP-04 can produce meaningful redness/telangiectasia improvements.

• Question from Matthew Caufield (H.C. Wainwright): Any granularity on traction between optometrists vs ophthalmologists and which is the larger untapped market?
  Response: About ~65% of volume comes from optometry and ~35% from ophthalmology; both are priorities—optometrists drive volume and in-clinic treatment dynamics, ophthalmologists are key for cataract/pre-op patients.

Contradiction Point 1

DTC Campaign Effectiveness and Impact

It involves differing perspectives on the impact and necessity of the DTC campaign, which is critical for driving patient awareness and office visits, potentially affecting the market penetration and revenue growth of XDEMVY.

Can you convert DTC ROI to CAC or payback period, and what are DTC spending plans for 2026 and beyond? - [Cory Jubinville](LifeSci Capital)

2025Q3: DTC ROI metrics are evolving weekly, showing positive scaling. The plan is to continue investing at a similar level in 2026, focusing on efficiencies. The decision to adjust DTC spend in future years will consider patient awareness and doctor protocols. - [Aziz Mottiwala](CMO)

Can you clarify the increase in new prescribers? Did these represent the 5,000 of your original 15,000 target or were they newly acquired? Are you seeing any attrition in existing prescribers? What are your plans for continuing the DTC campaign? - [Francis Edward Hickman](Guggenheim Securities)

2025Q2: The DTC campaign is expected to continue through year-end, with ongoing evaluation of its necessity. - [Aziz Mottiwala](CMO)

Contradiction Point 2

Refill and Retreatment Rates

It involves differing expectations and current status of refill and retreatment rates, which are crucial for maintaining long-term revenue growth and patient adherence to XDEMVY.

What is the average time between initial fill and first refill, and what are you doing to retain early adopters? Are you updating your internal peak sales estimate for XDEMVY? - [Eddie Hickman](Guggenheim Securities, LLC)

2025Q3: Refill rates are positive and progress well, with over 10% refills on a weekly basis and mid-teens retreatment rates for early cohorts. - [Aziz Mottiwala](CMO)

What is your view on steady-state retreatment rates? What retreatment rates are you targeting? How accurate are third-party estimates? How critical is retreatment to XDEMVY's success? - [Cory Jubinville](LifeSci Capital)

2025Q2: The target is a 20% steady-state annualized retreatment rate, with current rates showing positive trends. - [Aziz Mottiwala](CMO)

Contradiction Point 3

XDEMVY Prescription Frequency and Patient Dynamics

It involves changes in the prescription frequency and patient dynamics for XDEMVY, which are crucial for understanding the product's market adoption and revenue trajectory.

How are doctors changing their practices to broaden XDEMVY's use in more patients, particularly regarding meibomian gland disease data? - [Andreas Argyrides](Oppenheimer & Co. Inc.)

2025Q3: Doctors are changing their prescribing patterns, with an increase in weekly and multiple-times-weekly prescribing. - [Aziz Mottiwala](CMO)

What factors are influencing the frequency of prescribing (e.g., daily vs. weekly vs. monthly)? - [Andrea Newkirk](Goldman Sachs)

2025Q1: The expanded sales force and broad coverage have been key drivers in increasing prescription frequency. - [Aziz Mottiwala](CMO)

Contradiction Point 4

DTC Spending and Impact Duration

It involves the duration and impact of the DTC campaign, which is crucial for patient awareness and driving office visits, ultimately impacting revenue.

Why did you switch to revenue guidance from bottles, and how long will the DTC impact last? - [Lachlan Hanbury-Brown](William Blair)

2025Q3: DTC ROI is growing, and the campaign continues to drive patient awareness and office visits, supporting a positive return on investment. The impact is expected to scale into 2026, with potential seasonal adjustments later. - [Jeffrey S. Farrow](CFO & CSO)

When will full-year guidance be provided? How accurate are DTC metrics in predicting new patient starts? - [Eddie Hickman](Guggenheim Securities)

2024Q4: DTC impact already included in Q4, with $15M Q1 spend incremental. - [Jeffrey S. Farrow](CFO)