Tarsus Pharmaceuticals Q3 2026 Earnings Call Transcript

Tarsus Pharmaceuticals (NASDAQ:TARS) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Tarsus Pharmaceuticals reported record net sales of $194.6 million for Q3 2026, driven by strong prescription volumes of XDEMVY, achieving a gross margin of approximately 93%.

The company raised its full-year 2026 sales outlook for XDEMVY to between $715 million and $730 million, citing increased patient demand and deeper utilization among eye care professionals.

Tarsus is advancing its pipeline with five potential new medicines, including ongoing programs for ocular rosacea and Lyme disease prevention, alongside international expansion plans.

Management highlighted strategic DTC investments, notably a John Cena campaign, which contributed to a 75% growth in high-value patient engagements.

The company completed two acquisitions, Irenix and Alkias, and is integrating these into its operations to enhance its clinical and commercial capabilities.

Full Transcript

OPERATOR (Moderator)

Hello and welcome to Tarsus Pharmaceuticals third quarter 2026 financial results conference call. As a reminder, this call is being recorded and all participants are in a listen-only mode. After the speaker’s presentation, there will be a question and answer session. 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.

David Nakasone (Head of Investor Relations)

Thank you. Before we begin, I encourage everyone to visit the investors section of the Tarsus website to view the press release issued today and related materials we will be discussing today. Joining me on the call today are Bobby Azamian, Chief Executive Officer and Chairman, Nira Klaes, our Chief Commercial Officer, Jeff Farrow, our Chief Financial Officer and Chief Strategy Officer. And joining us for Q&A is Dr. Liz Yu, our Chief Medical Officer, and Sesha Neervannan, our Chief Operating 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 will turn the call over to Bobby.

Bobby Azamian (Chief Executive Officer and Chairman)

Good afternoon and thank you for joining us. 1 million bottles of XDEMVY dispensed, more than $1 billion in cumulative net product sales, and a pipeline with the potential to bring five new medicines to patients in the next five years as we celebrate our 10th anniversary. Those numbers say a lot about how far Tarsus has come. But what excites me the most is what they tell us about where we can go. We started with a conviction that there were important diseases in eye care hiding in plain sight and that following the signs to their root cause could lead to entirely new categories of medicine. XDEMVY showed what that conviction could accomplish. This quarter we delivered record sales and are again raising our full-year outlook. Nira and Jeff will take you through the details and why we believe XDEMVY is just getting started.

I want to talk about our broader ambition: building the next leader in eye care. Not one defined by a single drug, but by a repeatable ability to spot a disease the field has overlooked. Bring forward a medicine that could change how it’s treated. Bring it to patients. That’s the standard we’re applying across our pipeline. We want to be first or best, and we’re choosing opportunities where we believe we can make a meaningful difference. With Stargardt disease, that means the potential to help children and young adults preserve vision they would otherwise lose.

With IRX101, it means improving antiseptic preparation for patients receiving repeated retinal injections. And with our existing investigational programs for ocular rosacea and Lyme disease prevention, we have opportunities to address other diseases where patients still need better answers. Together, they give us what we believe is one of the most differentiated pipelines in eye care. Three years ago, we were launching a single product for a disease most people had never heard of. Today, we’re a team that built the category from scratch, closed two acquisitions in two months, and is running several clinical programs. There was no playbook for any of it, so we wrote one. And the people who wrote it have grown with every chapter.

Nira is a wonderful example. She joined us early in the Tarsus journey and started where it matters most: prioritizing patients can access and afford XDEMVY. That became the foundation for everything that followed. Since then, she has helped build the XDEMVY launch into one of the best in eye care, and I’m very proud to have her as our Chief Commercial Officer. One million bottles shows what this team can do. One billion dollars shows the model works.

Five in five is what we plan to do next. Nira, over to you.

Nira Klaes (Chief Commercial Officer)

Thank you, Bobby. I’m honored to lead our commercial organization at such an important time for Tarsus. I know this business and this team well, and I’ve never been more confident in the opportunity ahead for XDEMVY. XDEMVY delivered another record quarter in Q3, approximately $195 million in net product sales, up nearly 64% year over year. And we did it in a seasonally softer quarter when vacations and medical meetings mean fewer days in the office. Even so, weekly prescriptions of XDEMVY reached an all-time high. And that momentum has continued into the fourth quarter.

There are three reinforcing pillars driving growth. One, increasing demand as more patients recognize their symptoms and ask about XDEMVY. Two, broader and deeper prescribing among our target eye care professionals, or ECPs. And three, a growing contribution from retreatments due to positive experiences from patients and their ECPs. The ongoing progress we are seeing on all three fronts reinforces our belief that we’re still in the early phases of XDEMVY’s growth trajectory.

Let’s begin with the new patient demand. The synergy between our branded advertising John Cena campaign and unbranded disease education efforts are helping more people recognize their symptoms and take action. What matters most isn’t how many people see the campaign, it’s what they do next. Patients are using our chat, taking the You Might Be Right quiz, and searching for a doctor — all signals that they intend to seek care. Those high-value actions grew 75% this quarter and we’re converting prescriptions at a higher rate than last year.

That’s why we’re adding $5 million to our DTC spend, bringing our full-year investment to approximately $95 million. And we’ll focus those dollars on the channels producing the strongest results. The second driver is ECP utilization, where prescribing is both deepening and broadening. In the third quarter, the number of ECPs writing at least five prescriptions per week, who we call daily prescribers, grew approximately 20% over the second quarter. That matters because it shows that screening and treatment for Demodex blepharitis, or DB, have become a routine part of their practices. Additionally, our growing body of real-world evidence is giving those ECPs more reasons to screen.

At the recent American Academy of Optometry, or AAOPT, meeting, we presented a chart review that identifies DB in 91% of patients with recurrent chalazia or hordeola. Findings like these show ECPs where DB may be hiding in their practices and underscore their belief in the number of patients that could benefit from XDEMVY. The third driver is retreatment. This quarter, approximately 20% of prescriptions were for patients returning for another course of therapy, and we believe it will settle in the low-20% range over time. On a growing base of treated patients, that can become an increasingly meaningful and durable source of demand.

Put together, new patient demand, broader and deeper ECP adoption, and retreatment show how durable the XDEMVY opportunity is. Approximately 25 million Americans are affected by DB. Even with more than 1 million bottles dispensed to date, we’ve reached only a fraction of the potential market. We’re still building the category, expanding disease recognition, and helping ECPs make DB screening a routine part of eye care. That progress reinforces our confidence in XDEMVY’s potential to exceed $2 billion plus in peak annual sales and supports the increased full-year outlook.

Jeff, to our commercial team: thank you for your discipline, urgency, and patient focus behind these results. You’ve built tremendous momentum and we’re energized for the opportunity ahead in 2027. Jeff, over to you for the financial results, updated guidance, and pipeline progress.

Jeff Farrow (Chief Financial Officer and Chief Strategy Officer)

Thanks, Nira. XDEMVY’s continued growth is giving us greater opportunities to invest in Tarsus’ future. Our job is to put that capital to work where it can create the greatest value, expanding XDEMVY’s reach and advancing our pipeline through its next clinical milestones. We are making those decisions with discipline, directing commercial investments toward the opportunities generating the strongest returns and planning development spending around advancing each of our programs.

Starting with our third quarter results, we delivered XDEMVY net product sales of $194.6 million driven by strong prescription volumes, gross margin of approximately 93%, and we ended the quarter with cash and cash equivalents of approximately $310 million. Turning to expenses, SG&A expense was $168 million excluding costs of the Alkeus acquisition. The year-over-year increase was primarily due to DTC and other promotional investments, our new key account leader team, and higher variable costs as XDEMVY volumes grew.

R&D expense was $44 million for the quarter excluding costs of the Alkeus acquisition. The year-over-year increase was primarily due to TPO4, TPO5, IRX101, and other ongoing programs. Acquired in-process research and development, or IPR&D, charges totaled $632 million, comprising $81 million for Irenix and $551 million for Alkeus. Additional details on the accounting for both transactions are available in our Form 10-Q issued earlier today. Now turning to our updated full-year 2026 guidance, we expect our full-year 2026 XDEMVY sales outlook to be between $715 million to $730 million. The updated range reflects increased trends we are seeing in patient demand, deeper ECP utilization across multiple patient segments, and stronger returns from our DTC investment. It also accounted for the usual medical meetings and holidays that occur in the fourth quarter. Gross margin to remain steady at approximately 93%.

SG&A expense of $605 million to $620 million, which includes stock compensation of $45 million to $50 million. This anticipated increase is due to higher variable fees driven by growing XDEMVY volumes, increased DTC investments bringing our full-year spend to approximately $95 million, and integration costs related to Alkeus. And R&D expense of $140 million to $155 million, which includes stock compensation of $20 million to $25 million, reflecting progress across our clinical programs and the integration of the Alkeus and Irenix programs.

Turning to our pipeline and international plans, in China, our partner launched TPO3. Similar to other companies, we have made the decision to defer regulatory filings for TPO3 in Europe and Japan. In light of the current implications of Most Favored Nation regulations, for TPO4 in ocular rosacea and TPO5 in Lyme disease prevention, both investigational programs remain on track with top-line results expected in the first half of 2027. For IRX101, our investigational ocular antiseptic, we anticipate initiating the Phase 3 COMFORT study in the first half of 2027 with top-line results expected in 2028.

We currently estimate the cost to approval to be in the range of $20 to $30 million. For our investigational medicine, Gildoretinol in Stargardt disease, enrollment continues to progress in the Phase 3 North Star study with top-line results expected in the second half of 2029. We currently estimate the cost to approval at $150 million to $200 million. To sum up, XDEMVY delivered another record quarter and we’re raising our full-year outlook. That growth, along with our strong balance sheet, gives us the flexibility to keep expanding XDEMVY’s reach while advancing each of our programs towards its next milestone. As Tarsus looks to 2027, we’ve never been in a stronger position to deliver for patients. I will now turn the call back to Bobby for final remarks.

Bobby Azamian (Chief Executive Officer and Chairman)

Ten years ago, Tarsus Pharmaceuticals was an idea built on a conviction: patients with overlooked diseases deserve better. Today we’ve brought an FDA-approved medicine to market and built an entirely new category of treatment. In just three years since launch, we’ve dispensed more than a million bottles of XDEMVY and generated over a billion dollars in cumulative sales. And in the last few months we’ve completed two acquisitions expanding into the back of the eye.

We’ve built a lot in a short time, and with every step we’ve strengthened our ability to do it again. That’s what gives me confidence in our ambition to build the next leader in eye care and deliver more game-changing medicines to patients. Operator, let’s open the line for questions.

OPERATOR (Moderator)

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions while we organize the queue.

Bobby Azamian (Chief Executive Officer and Chairman)

While you’re organizing the queue, this is Bobby Azamian. I just want to take a moment to recognize and thank the entire Tarsus team. What they’ve been able to accomplish in just three years since launch is truly extraordinary. Their commitment and consistency make me so proud and really give us greater capacity to do even more with XDEMVY and the rest of our pipeline. So thank you to the entire Tarsus team.

OPERATOR (Moderator)

Thank you. And our first question comes from Jason Gerberry with Bank of America. You may proceed.

Jason Gerberry (Analyst at Bank of America)

Hey guys, thanks for taking my questions. Maybe one for Jeff. I think past commentary suggested 43% to 45% gross-to-net be a good kind of operating assumption longer term. So thinking about next year, is that still appropriate? And then a pipeline question as we think about Stargardt. I know the angle to differentiate here potentially would be around preservation of visual cycle. What do you think HCPs are looking at from a product labeling perspective around that consideration?

Just thinking about potential differentiation angles here. Thanks.

Jeff Farrow (Chief Financial Officer and Chief Strategy Officer)

Sure, Jason. Related to your gross-to-net question, we continue to believe 43% to 45% gross-to-net discount is what we’ll see next quarter as well as into next year. You might recall that Q1 tends to be a little bit higher, but as the year progresses we typically see that improve quarter over quarter. But we still believe that 43% to 45% gross-to-net is the appropriate discount for 2027 as well.

Elizabeth Yeu (Chief Medical Officer)

Hi, this is Liz Yeu, and with regards to your gildeuretinol question, as you know it’s a once-daily oral therapy and that mechanism is designed to support the normal visual cycle. And what our retina KOLs are telling us is that this is a really unique and interesting mechanism that they are keenly looking forward to, because as you know, withholding vitamin A from the retina can lead to unwanted potential side effects such as night vision and dark adaptation issues.

The early programs for gildeuretinol do demonstrate a very promising safety profile without any of the night blindness or dark adaptation AEs. And we’ll further test this with the Phase 3 North Star program, where our engagement opportunities have definitely demonstrated that the retina community is excited to have an oral therapy that would provide this.

OPERATOR (Moderator)

Great. Thank you. Our next question comes from Andrea Newkirk with Goldman Sachs. You may proceed.

Andrea Newkirk (Analyst at Goldman Sachs)

Good afternoon. Thanks for taking the question and congrats on the quarter. Nira or Jeff, a question for you here on new patient volumes. Just curious if that’s being driven more by patient requests from the DTC campaigns or via organic slit-lamp screening. And Jeff, I guess specifically how should we expect DTC spend to trend in 2027? Do you expect that DTC will continue to remain elevated to support the long-term volume expansion, or should we see some decrease going forward?

Thanks so much.

Nira Klaes (Chief Commercial Officer)

Thanks, Andrea. In terms of your first part of your question, the three main drivers for volume growth are really DTC, where we actually are seeing one in three patients know about DB now through our DTC efforts, and patients are actually asking for XDEMVY by name. The second part of that is execution, the salesforce execution, which we’ve added approximately 20 KALs, or key account leaders. And these folks are meaningfully contributing to expanding the conversation with doctors to really get them to think about the different patient types.

And then finally, the evidence that we talked about. We’re seeing addressable TAM increases both at the top of the funnel and at the bottom of the funnel. The evidence is really giving doctors confidence to look at more opportunities to potentially diagnose and treat. And XDEMVY comes to mind. I’ll turn the other part of the conversation back to Jeff.

Jeff Farrow (Chief Financial Officer and Chief Strategy Officer)

Thanks, Nira. And Andrea, to your question, that is something that we’re looking at right now. Our assumptions for next year are still being looked at, but I think it’s fair to say we’re going to still spend a fair amount on DTC, probably in the same range that we spent this year, in, say, the $80 to $95 million range. The one thing that we’ve gotten better at is really seeing where we’re seeing a better ROI and making investments in specific spots, specific times.

And in fact, our DTC investment in Q3 overall was less than what we did in Q2. We bulked up in Q2 in anticipation of a little bit of a slowdown in the Q3 scripts dispensed, and it definitely appeared to pay off. We had the John Cena campaign that we invested in Q2, and then you might recall, we also did two disease education ads with Don’t Blame the Cat and then The Fan. And we think that was one of the reasons we saw a nice uptick in the latter part of August as well.

So I think big picture, probably in the same range, but we might pulse similar to what we did this year as well between Q2 and Q3.

Andrea Newkirk (Analyst at Goldman Sachs)

Great. Thanks so much, guys.

OPERATOR (Moderator)

Thank you. Our next question comes from Dennis Ding with Jefferies. He may proceed.

Dennis Ding (Analyst at Jefferies)

Hey guys, thanks for taking my question. So first, when I think about all the positive signs you guys are seeing and compare that with consensus, which is 900 next year, but then 1.1 in ’28 and then 1.25 in ’29, eventually 2 billion all the way out in 2035, growth really needs to slow down significantly, which means to me there’s either incremental net price erosion or perhaps XDEMVY is hitting its ceiling in terms of reaching new patients. So, number one, can you help us understand your assumptions on IRA and when you expect that to kick in?

And then, number two, what sort of proactive strategies do you have to reach out to the patients who haven’t been treated yet, especially as you start bumping up into your addressable TAM? Thanks so much.

Jeff Farrow (Chief Financial Officer and Chief Strategy Officer)

Yeah, great question, Dennis. You know, this is a new category, and unfortunately there’s not really a good analog for XDEMVY. It’s something we struggled with to really help investors and analysts think about what this might look like. But we do anticipate, every day, it’s going to be one of those things where we’re not a, quote-unquote, chronic disease. So we basically start each quarter at zero and have to drive new scripts. So that is part of the process in which we are categorizing and anticipating that growth to occur over time.

Consensus might have us at 2035 for the $2 billion peak, but we have not given specific guidance yet, so I would take that with a grain of salt as well.

Nira Klaes (Chief Commercial Officer)

I would add to that, Dennis, that what we’re seeing is the physician experience has been remarkable. We’re hearing overwhelmingly that they’re getting more and more comfortable with thinking about expanding the patient types and really looking at ways that they’re going to increase their utilization. Almost every doctor that we speak to, whether it’s at conferences or during our field ride-alongs, is really looking for more patients to treat. And basically, we also did a survey where we found that 80% of ECPs surveyed actually indicated that they would increase their overall prescribing in the coming year as they think about an expansion of the patient type for DB. And then finally, what I would say is, 98% of all of the eye care professionals that we’re currently calling on really express a satisfaction with XDEMVY. And that satisfaction actually has a spillover impact where they continue to find other additional patients and patient types.

Bobby Azamian (Chief Executive Officer and Chairman)

The only thing I would add—that’s great, Nira. I think this strategy you’ve mapped out with ECP engagement, more and more patient engagement, and importantly, evidence is really how we’re going to be proactive. And, you know, we talk about those 25 million Americans with DB, and I’ll pass to Liz to talk about some of her future strategies, because I think evidence has been such a strong foundation for this great medicine.

Elizabeth Yeu (Chief Medical Officer)

Thank you. Bobby, you make such a great point where there’s two parts to this. There are at least 25 million Americans infected with Demodex blepharitis, and in the eye care physician primary care practice, routinely, 58% or one in two patients are affected. As we enter year four, there are three key opportunities. First, to better understand recurrence of the disease, retreatment, and long-term outcomes. Second, further defining the clinical burden and the broader footprint of DB across different patient populations, as Nira mentioned.

And third, generating evidence that would support earlier diagnosis in order to give ECPs that greater confidence in when and whom to treat. And these efforts can help ECPs identify and more confidently make informed treatment decisions throughout the course of the disease.

Dennis Ding (Analyst at Jefferies)

Perfect. And if I can squeeze one more in just on ALK001. So thanks for the $150 to $200 million guidance on the cost to approval, but can you clarify what exactly was FDA’s feedback on the Phase 3? Because it seems like there’s a little bit of ambiguity in terms of whether one or two Phase 3 studies will be needed and also what’s on the table in terms of conducting an interim in 2028.

Seshadri Neervannan (Chief Operating Officer)

Thank you for the question. This is Sesha Neervannan. So for ALK001, as you know, North Star is our Phase 3 study. It is the largest prospective Phase 3 study in Stargardt’s disease, powered very strongly for both primary and key secondary endpoints. And the FDA had fully endorsed the study design and the endpoints and how we have positioned it. So there’s strong agreement with the FDA on the study itself, and we are positioning that as a primary pivotal trial.

And of course we have very strong data from the TEASE trials—three, four TEASE trials—where we had looked at patient populations, both early-stage patients and late-stage patients, both structural and functional visual LLVA responses, and not to mention over 400 patients with over seven years of tolerability. So, very strong data package to begin with. And as we continue the conversation with the FDA moving forward, we keep the optionality of another Phase 3 trial open.

We are still continuing to have those discussions and we’ll update as soon as we have more information to share on that.

OPERATOR (Moderator)

Perfect. Thanks, guys. Thank you. Our next question comes from Matthew Caulfield with H.C. Wainwright. You may proceed.

Matthew Caulfield (Analyst at H.C. Wainwright)

Hi. Thank you, guys. With the really impressive growth for XDEMVY, are there important considerations for future prospective competition in the DB space, particularly considering an external topical eyelid cream currently in Phase 2? And then just separately, can you remind us of the patent and IP runway for XDEMVY and DB in terms of insulating the growth trajectory that we’re seeing? Thank you very much.

Jeff Farrow (Chief Financial Officer and Chief Strategy Officer)

Thank you for the question. Matthew, this is Jeff. Fundamentally we believe it’s going to be a high bar to beat the success of XDEMVY. The efficacy and the safety profile and the thousands of patients that we’ve treated thus far has demonstrated a very safe and efficacious drug. The impact that we have seen of some potential competition, it’s interesting they have taken an approach of using a cream-based sort of elution. What we have chosen, based on our market research, was to use an eye drop that seemed to be preferential to the patient population, and it’s something that they’re used to versus twice-a-day application of a gel or a cream.

And secondly, I think it’s going to be one of those things that potentially more awareness could raise all boats here, too. So having patients have different choices can be beneficial for everybody in a situation like that. But again, I think it’s going to be a high bar to actually beat the efficacy and profile of XDEMVY, fundamentally. Yeah. And Matt, on your question on IP, we have runway through 2038, plus any Hatch-Waxman extensions.

Matthew Caulfield (Analyst at H.C. Wainwright)

Excellent. Thank you guys and congrats on the really impressive quarter.

Jeff Farrow (Chief Financial Officer and Chief Strategy Officer)

Thank you.

OPERATOR (Moderator)

Thank you. Our next question comes from Jenna Daviner with Barclays. You may proceed.

Jenna Daviner (Analyst at Barclays)

Hi. Thanks for taking my question. With respect to the guidance raise and the implied 4Q coupled with the increased DTC investments, can you just talk about the degree to which that guidance raise is driven by the DTC increase? And then on ocular rosacea, can you just remind us of the key endpoints and how we should think about the bar for success there, given this is a new treatment category, as well as the path forward to Phase 3? Thank you.

Bobby Azamian (Chief Executive Officer and Chairman)

Jenna, this is Bobby. I just want to clarify your first question. I think you broke up a little bit. Can you just repeat it?

Jenna Daviner (Analyst at Barclays)

Yes. With respect to the guidance raise and the implied 4Q coupled with your increase in DTC investment, can you just help us understand the degree to which the DTC increase is driving the guidance range?

Nira Klaes (Chief Commercial Officer)

Thank you, Jenna. The DTC, as you know, is one of the best campaigns probably out there, and we’re really pleased with what we’re seeing. While we’re not providing specific numbers, what we can say is that it’s very positive and growing at the higher end of the benchmarks that we see, and we’re really, really pleased. We now have over a year of experience, and we’re getting a much clearer understanding of what drives the DTC performance. And certainly those learnings are continuously going into how we think about things like guidance and how we deploy our investments.

We’re really focusing on those channels and messages that generate the highest-value engagement. And so, I know that you heard in the prepared remarks that our full-year spend is going up by $5 million, which brings our total spend up to $95 million. Again, another strong, big driver for our growth in Q3 and as we move forward.

Elizabeth Yeu (Chief Medical Officer)

Yeah. And regarding your question on ocular rosacea, as you know, we’re really excited about this opportunity. And nobody has ever done an ocular rosacea study, so this is the first-ever study in ocular rosacea with endpoints that have never been studied before. So we are pursuing with the study, and the key endpoints there, as we had discussed with the FDA, are the hallmark of the disease, which are really inflammation-driven, and that includes erythema, or redness around the eye, as well as telangiectasia, which is prominence of blood vessels.

So we are exploring these two endpoints plus additional exploratory endpoints, and we look forward to the data, which is anticipated next year.

OPERATOR (Moderator)

Thank you. Our next question comes from Francois Briswa with Lifestyle Capital. You may proceed.

Francois Briswa (Analyst at Lifestyle Capital)

Thanks for taking the question. Congrats on the quarter. I was just wondering, clearly you mentioned the impact John Cena campaign and other DTC efforts here maybe in August. And I was just wondering, is that kind of a bullish impact you expect or is it still growing or did it hit in one shot? I’m just wondering, in terms of your guidance here for the fourth quarter, just remind us maybe the cadence of that impact of those efforts and, you know, touching on the seasonality that you usually get in the fourth quarter.

Thank you.

Nira Klaes (Chief Commercial Officer)

Yes, the DTC ROI is positive and growing and probably at the higher end of the benchmarks that we see. You know, the way we think about it and the sequence of this, you can think about it in terms of branded: you have the John Cena social media campaign, you have the unbranded television advertising. You’ve heard us talk about Bury the Cat and the fan ads that have been really instrumental in driving a lot of awareness and education. All of these things are working in concert.

And what we’ve actually seen is a 75% increase in these high-value website actions, and that actually signals to us more patients are probably likely to go see an ECP and then actually take advantage of some of the tools that we offer on the website. We are also seeing higher prescription conversion versus last year.

Jeff Farrow (Chief Financial Officer and Chief Strategy Officer)

And Frank—go ahead. Jeff. This is Jeff. I’d just add to Nira’s comment. So we are seeing sort of an accumulation of the impact of the DTC campaign, so the ROI is improving, as she highlighted earlier. And the other impact I would highlight, too, is the KOLs are also driving increased depth and prescribing. And, you know, so the $5 million incremental is certainly adding to that aggregate amount. But we’re noting that actually the increase we’re doing is almost $28 million from the prior midpoint guidance, and so obviously you’re seeing some compounding effect of multiple factors here as well.

Francois Briswa (Analyst at Lifestyle Capital)

Okay, no, that’s very helpful, thank you. And then just the last one, I get a lot of questions around—and you mentioned—the retreatment. Is it that the collarettes are coming back? Like, do we have a better feel now how long it takes? Or is it certain patients are prone for them to come back? Or, you know, I guess where I’m trying to get to is I get a lot of people asking if people would just take it and maybe don’t finish their bottle, and then there’s a little bit left and they use it again, and so they don’t get a retreat—like a refill.

I’m just wondering if that’s something that happens, despite maybe the bottle being expired or whatnot, or anecdotally if you hear of any of that. Thank you.

Elizabeth Yeu (Chief Medical Officer)

Thanks for the question. With regards to retreatment, we did perform a study that demonstrates that across physicians with extensive experience, it appears that about 20% to 25% of patients require retreatment. Now, that is based on clinician-reported experience of the patients that they are seeing and not that it’s a set schedule for treatment itself. With that being said, there are some comorbid conditions that may produce higher risk factors and tendencies, such as MGD or ocular rosacea.

And what’s driving the retreatment is either, one, initiation of symptoms that the patients recognize or, two, clinicians recognizing the sign of the collarette.

Bobby Azamian (Chief Executive Officer and Chairman)

And this is Bobby. I’ll just add, I love all the questions about continued growth. I mean, just to reiterate it, we see this being multifactorial. We have lots of patients coming in from awareness. We have a very broad prescribing base and great activation with this new force, the KLS calling on the top prescribers. And then we have the tailwind of retreatment. So, you know, we just see continued very strong growth for XDEMVY across the board because of multiple factors.

Francois Briswa (Analyst at Lifestyle Capital)

Excellent. All right, thank you.

OPERATOR (Moderator)

Thank you. Our next question comes from Lachlan Hanbury Brown with William Blair. You may proceed.

Lachlan Hanbury Brown (Analyst at William Blair)

Yeah, guys, thanks for the questions. I think the strong growth in what’s normally a seasonally slower quarter was pretty notable. So I was wondering if there were any trends in sort of what was different. Like, is that being driven by certain practices, geographies, channels, patient subtypes—anything that sort of explains how you were able to offset the seasonality there? And then maybe secondly, now that you have both Irenix and Alkias in-house, is there anything else that you’ve learned—like any new learnings about those programs that you maybe, now that you’ve had more time with them, that you maybe hadn’t picked up on during diligence?

Bobby Azamian (Chief Executive Officer and Chairman)

Can you just clarify the second question there, Lachlan? Any new programs? I missed the rest of that.

Lachlan Hanbury Brown (Analyst at William Blair)

Just wondering if, now that you have Irenix and Alkias in-house and have had some more time with those programs, are there any sort of new learnings that you’ve had that you hadn’t discovered during your initial diligence but have picked up on now that you’ve had them in your hands for a bit?

Nira Klaes (Chief Commercial Officer)

Thank you. In terms of the growth, what we have seen this quarter has been pretty substantial, and we’re really pleased with what we’re hearing. First and foremost, we’re hearing more patients get activated and want to go in to see their doctors. That’s really driven a lot by the DTC efforts that we have deployed. Second, what we’re also hearing is that doctors are really thinking about XDEMVY more frontline. They’re actually starting to include XDEMVY in terms of their treatment and retreatment protocols.

And then thirdly, what we’re hearing is also the evidence component. We released 11 abstracts at the most recent medical conference, and they were very well received. And this is our opportunity to continue to educate and make awareness and drive that. When you couple all of these efforts and initiatives together, along with the execution of the sales team, the KLS that we’ve talked about, you really see this opportunity and growth that’s really accelerating here in the back half of the year.

We’re really pleased with what we’re seeing.

Bobby Azamian (Chief Executive Officer and Chairman)

And Lachlan, on your acquisition question, it’s a great question. I think on the Irenix transaction, we’re finding even more excitement about this as a potential new antiseptic. I think people see this as potentially a new standard of care. So the more we dig into that from a market research perspective, the more excited we get about it. And then, of course, on Alkias, it’s a much bigger transaction. This is the first big integration that we’ve done, and we put a lot of effort and time into making sure that they feel part of Tarsus and that we continue to execute on that.

So we set up a really strong cross-functional team of next-level leadership that is really taking the lead on making sure that the clinical studies move forward timely, that there’s good communications between both entities, and that we maintain the exciting culture that we’ve got here at Tarsus and Alkias. And so I think those are some of the new things that really have developed over time there.

OPERATOR (Moderator)

Thanks. Thank you. Our next question comes from Mazaher Ali Mohammed with Oppenheimer. You may proceed.

Mazaher Ali Mohammed (Analyst at Oppenheimer)

Thank you, everyone, and congratulations on the quarter, and thank you for taking our questions. So I think for us, firstly, kind of thinking about IRX101 and following back on what Jeff just said, I think kind of top of mind for us was thinking through the reimbursement strategy and how exactly you’re thinking about going forward with that. Is that something where you anticipate a separate payment or a J-code, or do you anticipate it will be bundled into the procedure?

And kind of secondly on that, given the lean cost to approval, is the plan a single Phase 3 on a 505 pathway? Thank you.

Nira Klaes (Chief Commercial Officer)

Thank you. In terms of IRX-101, it is going to be a separate payment. We’re looking for a J-code. There will likely also be what we call a C-code at point of launch. As you know, with this particular product, this is a buy-and-bill product done in offices. So the provider economics really matter, and we’re really looking forward to leveraging our market access expertise as we potentially bring this drug to market.

Elizabeth Yeu (Chief Medical Officer)

And regarding your question on the regulatory pathway, this is a new chemical entity, and the label we’re pursuing is an ocular antiseptic label. For that label, the efficacy studies come from in vitro microbiological studies across multiple different organisms as defined by the FDA, coupled with a clinical safety trial that will constitute the full package for NDA filing.

OPERATOR (Moderator)

Thank you. Our next question comes from Eddie Hickman with Guggenheim Securities. You may proceed.

Eddie Hickman (Analyst at Guggenheim Securities)

Hey, good afternoon, and congrats on the great quarter. Sorry to repeat if this has been asked before, but assuming positive data for TP-04, how quickly could you move into a Phase 3? And since you gave cost to approval for IRX-101 and gildaretinol, how should we think about the overall development cost and commercial footprint for the ocular rosacea, especially given the overlap with the XDEMVY call point? Appreciate it.

Seshadri Neervannan (Chief Operating Officer)

So, regarding your question on ocular rosacea, as I mentioned earlier, this is the first ever study, so we are looking at multiple different aspects of the study and we’ll have to look at the data next year and proceed. Assuming the data is positive, we will move into a Phase 3 study either later next year or the following year. That’s generally our plan. But first things first, we have to complete our ongoing study and read out the data.

Nira Klaes (Chief Commercial Officer)

Regarding the commercial footprint, we’re pretty excited about the ocular rosacea indication, should it be approved. With XDEMVY, we created a category, and this is very similar in that it is something new and something that doctors tell us all the time that they see a lot of in their practice. So we’re excited about the opportunity ahead and can leverage a lot of synergies and call points from what we currently see with Demodex blepharitis treatment.

Go ahead. Sorry.

Jeff Farrow (Chief Financial Officer and Chief Strategy Officer)

Sorry. It’s Jeff. Just following up on that. As Nira highlighted, there’s a lot of synergies with our footprint there, so we wouldn’t expect to be expanding in a large fashion as it relates to the commercial footprint. And then sort of pivoting off of what Sesha said on the Phase 3 study, it’s probably a little early to give an estimate on the cost for that yet until we have a good sense of what the design is, following feedback from the agency.

Eddie Hickman (Analyst at Guggenheim Securities)

Got it. And on that XDEMVY retreatment rate that you noticed, correct me if I’m wrong, but that’s sort of approaching or at where the steady state that you guided for. Are you changing that guidance at all for what you expect that long-term retreatment or refill rate to be?

Jeff Farrow (Chief Financial Officer and Chief Strategy Officer)

Yeah, you know, we basically are saying it’s in the low 20s and, you know, it’s evolved over time as, you know, we sort of estimated it to land there. From the time of launch, we’ve seen it go from low single digits to high teens, and now we’re in the low 20s. We’ll have to monitor that over time to see if it needs to be adjusted again. But I would say we’ve adjusted it to be low 20s from, say, 20%.

OPERATOR (Moderator)

Thank you. Our next question comes from Greg Savanovich with Mizuho. You may proceed.

Greg Savanovich (Analyst at Mizuho)

Good evening. Thanks for taking my questions. Congrats on the quarter. And let me add my congrats to Nira on becoming officially Chief Commercial Officer. Nira, maybe a question for you just from a high level. Obviously you’ve been in the organization for a while, but now as you’re officially CCO, any comments you can make on tweaks that perhaps you are thinking about implementing or have implemented? Obviously it’s a well-oiled machine as is, but just any thoughts as you are now leading the organization?

And then second question, if I could just revisit the Alkias product that you are now developing. Could you just remind us of the IP position of the product? Is this a composition of matter patent, is there a method of use patent, or any other formulation patents? Any dates, whether that includes or doesn’t include PTA or PTE, would be helpful there. Thank you very much.

Nira Klaes (Chief Commercial Officer)

Greg, thank you so much for the congratulations. It certainly means a lot and I’m really grateful and honored for this opportunity. I can tell you that the first thing I think about when I think about the opportunity is XDEMVY and how great the drug is in and of itself. And then secondly, the team that we have behind it and the expertise that we’ve created over time, including the competitive differentials within the team—everything from market access to marketing to our salesforce execution.

I think the playbook is working and so we want to continue to work on that playbook and execute it flawlessly as we move forward. There’s always going to be things that we look at in terms of how can we improve and how can we continue to accelerate the trajectory. We have some big goals to achieve, obviously guidance for this year and then as we move forward, eventually getting to peak sales of $2 billion plus. So we’re excited about what’s ahead, and really I can tell you that you can expect to see a lot of what we’re doing today with little potential tweaks as we move forward.

Bobby Azamian (Chief Executive Officer and Chairman)

And Greg, with regard to your question on IP on the Alkias product, we’re guiding right now to orphan exclusivity. Composition of matter has expired. So think about seven, seven and a half years from approval. That said, our general counsel is a patent attorney by training, and he set us up for success with the XDEMVY patents here. And so he’s looking at other opportunities—potentially method of use coming out of the data that we are going to be collecting in the Phase 3 study as well.

So we’re looking to potentially get some upside potential there.

Greg Savanovich (Analyst at Mizuho)

Thank you.

OPERATOR (Moderator)

Thank you. And this concludes the conference. Thank you for your participation. You may now disconnect.

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