Good afternoon and welcome to the Tarsus Pharmaceuticals Third Quarter 2023 Financial Results Conference Call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to David Nakasone, Head of Investor Relations to lead off the call. Please begin.

Thank you. Before we begin, I encourage everyone to go to the Investors Section of the Tarsus website to view the earnings release and related financial tables 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 language 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. Bobby?

Thank you, Dave, and thank you all for joining us for our first ever earnings call, and our first opportunity to speak with you since the highly anticipated launch of XDEMVY, the only FDA approved treatment for Blepharitis. We are off to a great start and I'm pleased to share our progress with you today. Blepharitis is a pervasive and damaging eyelid disease that affects approximately 25 million Americans. Of these more than 7 million are seeking treatment for a complimentary eye condition. Double clicking on that number, more than 1.5 million people have already been diagnosed with arthritis and are highly motivated to find an effective treatment. As anticipated, this is the patient segment driving strong initial demand, and as the XDEMVY launch progresses, we expect to expand further into that group of 7 million patients. XDEMVY was approved a month ahead of its scheduled PDUFA date, and as planned, we made sure it was available to patients within a month of approval. Today, I'm proud to report that we are delivering on the expectations we set for ourselves and for the launch of XDEMVY. Specifically, in the third quarter, we generated $1.7 million in net sales net, and we delivered XDEMVY to more than 1,700 patients, eagerly awaiting a new solution for Blepharitis. These results speak to the two key advantages that make XDEMVY launch unique. One, XDEMVY is the first and only FDA approved medicine to treat Demodex blepharitis, which has enabled us to build an entirely new market focused on eyelid health. Two, XDEMVY offers a defined course of treatment that delivers strong and durable outcomes and provides value to payers, eye care providers and patients. You'll hear more about our progress on both fronts later in this call. For those of you who are not…

Thanks, Bobby. As the initial launch metrics demonstrate, the enthusiasm for XDEMVY is truly remarkable. I've worked in the eye care industry for more than 20 years, and I've never this kind of early response, which I believe speaks to our unique and differentiated approach. In July, we shared our strategic and deliberate launch plan. And we are executing successfully on this plan. We have a driven, best-in-class team comprised of eye care experts and product launch veterans that are exceeding expectations on a daily basis. So far, our near-term accomplishments are delivering a solid foundation for the long-term expectations we have set for ourselves and for XDEMVY. That said, launching a first-in-class therapeutic is a marathon and not a sprint. And we are primed for a steady launch trajectory as we continue to build demand and secure high value payer contracts. Category creation requires both substantial disease education and behavioral change. Diagnosing the Demodex blepharitis is a simple task as it just requires patients to look down during every eye exam and looking for collarettes, the sure sign of disease. And as it's simple as it sounds, not every eye doctor is doing it, at least not yet. We recognize that a shift in behavior like this will take time, which is why we initiated the D state education campaigns for every eye care provider as well as for patients well in advance of approval. We've now transitioned our efforts to might over month, a complementary branded campaign that highlights the benefits of XDEMVY. As a result, recent market research indicates that nearly 70% of ECPs say they recognize the importance of screening for collarettes in every eye exam, and more than 90% of ECPs indicate intent to prescribed XDEMVY. That is truly a remarkable number. And what it…

Thanks, Aziz. I've been lucky enough to have been part of several companies who have brought innovative new solutions to patients in need. And based on that experience, I believe Tarsus is on the cusp of delivering blockbuster potential in an entirely new category of eye care. As Bobby noted, we had an exciting third quarter marked by $1.7 million in net product sales. We also completed an equity raise of nearly $100 million that will be used to support the ongoing launch of XDEMVY and other strategic priorities. As a reminder, we recognize revenue when we ship XDEMVY from our warehouse to the distributors, not just on bottles received by the patients. Looking forward, we are very encouraged by the meaningful numbers of bottles dispensed so far in the fourth quarter. But as we are still in the early days of an uncharted new launch, I wanted to highlight the potential fluctuations in both demand and gross to net discounts we might see in the future due to prescribers being out of the office for the American Academy of Ophthalmology and Optometry Conferences, multiple holidays in the fourth quarter, potential short-term and more challenging prior authorization changes that payers may implement while we work to finalize contracts. Turning now to our pipeline, I'm pleased to provide an update on the multiple near-term Phase 2 data readouts we anticipate in the coming months. Beyond XDEMVY, we are continuing to advance three novel therapeutics that target the root cause of the disease. All three are based on [Lotilaner], the same active ingredient in XDEMVY, providing us with a pipeline in a product. We remain on track to report top line data from our Meibomian Gland Disease study by year end, and top line data from our Rosacea study in the first quarter of 2024. Due to additional time required to fully enroll our Lyme disease prevention study, we now expect to report top line results in the first quarter of 2024. Again, great progress here and the potential to continue building long-term value for the company and our shareholders. Finally, as you may have noted, earlier today, we filed a shelf registration statement in the amount of $300 million. This is merely a good housekeeping measure for Tarsus and we have no immediate plans for financing. I also want to take this opportunity to note that the potential $2.5 million milestone we have with the -- bio is now likely to be recognized in the first half of 2024. I will close by saying, we remain well-capitalized with approximately $247 million in cash at the end of Q3. Based on our current plan, this provides sufficient capital to support the ongoing launch of XDEMVY and the advancement of our clinical pipeline programs. And with that, I will turn the call back to Bobby.

Thank you, Jeff. As you heard today, this is an incredibly important and exciting time for our company. With the launch of XDEMVY Tarsus is well in its way to becoming an eye care leader with the potential to deliver multiple therapies from our category creating pipeline. Operator, please open the line for questions.

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

Couple for me, just your comments in the PR about 1,700 bottles that pretty closely lines up with the IQVIA data. So, I'm just curious your thoughts on data reliability with IQVIA relative to Symphony and if IQVIA is ultimately perhaps like the better data source for tracking here. And then, just your latest thoughts on the role between optometrists and ophthalmologists. It looks like, I think you guys kind of had communicated this would be like kind of a 50-50 split, but it looks like ODs are about 62% of scripts so far. So curious if based on early observations, maybe how you're thinking about the optometrists playing maybe a bigger role here?

I'll be happy to answer those for you. So when we think about the syndicated data like IQVIA or Symphony, I think a couple things to keep in mind here. One is we have a very unique distribution network with four focus pharmacies, and secondly, it's very early in the launch. Those two things really yield that these audits are a little bit more directional at best in early days. I'd say in more recent weeks, where they're looking better is just the trend in trajectory. But on a week-to-week basis, we see a lot of fluctuations in what they're reporting versus what we see here internally. We've been giving them a lot of the data feeds. So we anticipate as the weeks go on that those data feeds will be getting more and more accurate. But I think for now, I would tell you that really focusing on the trajectory and the trend versus the week-to-week numbers because you're going to see some fluctuations in their projections. Our goal is to just focus on driving volumes and as the volumes increase, those will sort of align better over time. To your second question around the split across specialties, we're seeing great feedback from both ophthalmology and optometry. We reported over 2,000 doctors to date use on therapy, and that is coming from a mix of both, as you mentioned. I think near-term, we are seeing a slight slant towards optometry, but I think over the long haul, it'll start to even out. You'll see an equal contribution from both ophthalmologists and optometry. Maybe at most, it goes to 55 optometry, but we do anticipate that balancing out a little bit more over time.

And our next question comes from Tim Lugo of William Blair.

Hey guys, this is [Lachlan] on for Tim, thanks for taking the question. We heard a lot of discussion, not necessarily from doctors, but other companies in the field around your pricing. So I was just wondering if you can discuss the initial feedback you've had, you've been hearing there, particularly from payers? And then second, can you maybe just talk about how the education has been going around Demodex mite to blepharitis and how that's been received with like professionals? And do you have any sense of kind of how many have incorporated looking forward into the existing practice?

Yes. Hey, thanks for the question. It's Aziz again. So on the first one around price, I think we were very thoughtful and purposeful when we thought about the pricing for XDEMVY, really reflecting the value proposition the product brings. It's one course of therapy for 6 weeks, gets great outcomes across multiple full measures of disease, and it's the first and only approved product for the disease. All those things combined lead to a great value prop for physicians, patients and payers. So the feedback we've gotten has been very reasonable on that. I think that's reflected in some of the non-contracted coverage we're seeing here in early days, and that's reflected in the better than expected gross to net discount. So payers are covering this. We're having ongoing discussions with all the payers, and we're not seeing a lot of pushback there. Of course, those are all negotiations and they're active negotiations. But I think the payers derecognize the value proposition XDEMVY brings. They do acknowledge the unique aspect of the drug and the fact that it's a first and only. So we feel really good about that and stay committed to the idea of building commercial coverage through '24 and having Part D come in on 2025. And then when it comes to education, this has been a focus of ours even prior to the launch. We had multiple campaigns. Educating the physicians and patients on the disease. Our disease campaign was essentially as having physicians screened for the disease by having patients look down. We're seeing that momentum continue to build now that the product is approved. As we stated in our prepared comments, 70% of doctors we survey say that it's important to look for collarettes. And furthermore, we know that if they're looking for collarettes, they understand that collarettes are pathognomonic for Demodex blepharitis. So they are making the link. I think in early days, it's still important to build that habit and make it a routine in every exam. And that's our focus going forward. Right? You can see the sales force and our Medicare team are continuing to educate on disease. The sales force is out there linking the disease to the benefits of the product, and that's going to be a continued focus for us, right? We're building a new category. It will take some time, but we are seeing great momentum there.

And I just want to add to that, Aziz. This is Bobak Azamian. I've been in the field, as our executive team, roughly monthly. And I've seen that education take place. I was once in a very urban environment, and next in a more suburban environment. And just as Aziz said, you see some doctors that are immediately prescribing been doing multiples, and then you see some doctors that need a couple of visits, and start to understand the value proposition, start to look for patients and then come online and start prescribing. So we're seeing that really, really week in, week out in terms of that education taking.

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

Just 2 from me. Can you give any additional color on what went into that 73% gross to net discount and how you think that will track over the next few quarters given it's already better than where we thought it would start? How many of those 1,700 bottles were reimbursed? And how does the limiting sampling work for this project product? And then if you can give us sort of any data benchmark on the upcoming MGD study and sort of what you're hoping to move forward in that program?

It's Jeff. I'll start with the gross to net question. So we did do better than we anticipated. We ended up with an overall gross to net discount of about 73%. I think we were anticipating closer to 80%. The vast majority of that discounting was related to our bridging program. But what the delta between our expectations and what we ultimately saw was a little more coverage than what we were expecting from the commercial side in particular. We do think over time that as we start to get payer coverage in 2024 with commercial, we'll see that gross to net improve. And then ultimately, in 2025, once Medicare comes on, we'll get to a steady state of about 50% gross to net discount. I think the thing we're cautioning folks on, as I mentioned earlier, is in the fourth quarter, now that some of these payers are seeing more scripts come through, they're trying to manage their budgets if we are not currently contracted with them. So we're anticipating somewhat of a flat gross to net discount from the third quarter, because of that. We're starting to see more owners' prior offs. Again, that will be short term, and we do expect to see that improve over time starting in Q1 of 2024.

And then the second question was about the upcoming MGD study. Jeff, do you want to take that one?

Sure. On the MGD study, we anticipate releasing the data here in the next month and a half prior to year-end. It includes data from 2 dose types, one is BID, one is TID. And so we'll be able to release that top-line data sometime later this year.

And our next question comes from Oren Livnat of H.C. Wainwright.

I have a couple of questions. Just to revisit this issue of the evolving payer pushback, I guess, in the immediate term. First, can you just help us understand what kind of early experiences you're hearing about physicians, having in terms of getting their patient access early on. Do they need to fill out a letter of medical necessity now or is it just going through specialty pharmacy that's handling all that adjudication for them on the back end so that they don't experience any of that friction per se. And going forward, I guess obviously gross nets are going to potentially be volatile, but what about volumes? Do you suspect that if there's an incremental pushback and reaction to your very strong volume out of the gates here, that it could actually get harder in the near term for someone to get a patient on? And what do you have to do to make sure that that doesn't then potentially sour any doctors on the experience going forward?

So I think when you think about that access right now as Jeff mentioned earlier, through the end of the year, we can expect that these folks, as they start to see volume, the payers will put some restrictions in place. We've seen this in pockets. I think that this is something that the doctors can navigate through. The doctors typically initiate the pa but through our focus pharmacy network, they do get some assistance in that process. But clearly, the doctor has to initiate that they have the patient records. It varies by plan what the expectations are. So in some cases, a very simple PA. In other cases, we are seeing a little bit more onerous PAs, mind you that all this coverage is not contracted right now. So as contracts come online, we would push for a more straightforward PA to label that's aligned with a first and only type of product. So we see that evolving over time. In terms of impact to volumes, I think what Jeff is saying is we're continuing to see steady uptake from the physicians. We're seeing that the doctors are getting access to the drug, they're having great success with the drug. So we continue to see that build. I think that you have to just keep in mind that that's more of a headwind. We don't see it as something that would keep the prescription flat, but it does sort of give us a little bit of a headwind as we are building that acceptance with physicians. And I think the doctors are sensitive to that. They know and understand that new products take time to build coverage. And I think it speaks to the value proposition of XDEMVY that people are committed, they're seeing these patients, they don't have another option. So the doctors are putting the effort in and of course our programs are there to help that process along. So we think we'll continue to build volume steadily. But certainly, changes in policy or short-term PA adjustments can be a slight headwind as we're ending the year here.

And just so I'm clear we're not covered or where pushback is insurmountable is that bridging program still getting drug into patient's hands in any and all cases essentially such that we'll continue to see the demand reflected in the prescriptions going forward? It's just a question of the economics that you realize in gross net.

That's exactly right.

And our next question comes from Balaji Prasad of Barclays.

This is McKayla on for Balaji. Thanks for taking our questions. Just thinking about your pipeline, at what point might you look to expand this further and are there any areas in particular that would be of interest?

We do look actively at the entire eye care landscape, as you can imagine with a great early launch trajectory with a commercial platform. Eventually we want to add more products to our pipeline and to our commercial force. Right now, we can only be so modest. But with continue success, we would look to add further products and so stay tuned. Nothing to report today, but stay tuned.

And we have time for one more question. One moment. Our next question comes from Patrick Dolezal of LifeSci Capital. Q –UnidentifiedAnalyst: Hi, this is Corey on for Patrick. Thanks for taking our questions. In the call, you mentioned that more than 2,000 ECPs have prescribed XDEMVY so far. So it sounds like prescriber adoption has been quite broad as opposed to a really narrow focused group of prescribers leading most of the volume. We'd love to hear more about your strategy and how you've been prioritizing ECP targeting? And I guess also on that note, how are you thinking about marketing in both the near- and long-term? It seems like marketing has primarily been directed towards prescribers. Can you speak to the relevance of consumer directed marketing in Demodex blepharitis? And what might your strategy be in that regard?

Hey, Cory, it's Aziz. And yes, no, I think we've been really pleased with the Physician acceptance and receptivity. We just came back from both the Academy of Ophthalmology and Academy of Optometry, got a lot of firsthand feedback. So we're real delighted with the uptake we're seeing among the physician community. We're seeing broad updates to your point. And that's been our strategy, right. We didn't want to niche the product, we wanted to go to a broad audience of prescribers. That's why we built the sales force the way we did. We're targeting over 15,000 doctors in our efforts. So we're making great progress in penetrating that marketplace. How we prioritize that, and I think we've shared before, we take a very data driven and informed approach. We think about where patient volumes are, we look at claims data, and we look at who has historically been early adopters of other products, and that really helps focus our efforts. We also mentioned earlier that we've already talked to 80% of our top decile doctors. So we've been real thoughtful about where we're deploying the sales force time. And I think that the physician receptivity and the number of doctors that have written and repeat written, which is really important, I think reflects that very thoughtful approach. I think in terms of the marketing efforts that you asked about, we've been real intentional here. I think early days, we really have focused on the physician education, building that understanding, that scientific platform, if you will. That will continue to be the focus along with building coverage. And the way you can think about it is once we have great physician penetration, which we're already on a good start on, and as more payer coverage comes in, that's probably going to signal a great time to think about activating the consumer more purposefully. We do have some consumer education ongoing right now, we've done some smaller campaigns. But in terms of broad-based DTC, which I think you're referring to, I think that comes online, when we've got even more adoption among the physician community and even enhanced coverage with our contracts coming online in '24 and early '25.

One moment for our last question. This question is from Frank Brisebois of Oppenheimer.

I was just wondering, we talked a little bit in previous questions about optometrists versus ophthalmologist. And I was wondering, can you just help us understand how the pitches are going and the reception is going between the two different types of docs and if there's any sticky points or is it a very different pitch between both of them? So any color on that would be helpful. And then you talked about entering the guidelines here, I was wondering how important that is, for physicians to then prescribe.

I think the pitch is very similar overall, our sales messaging is very consistent. You can think about it in really 3 tranches. We focus on the disease state, building awareness, continuing to promote diagnosis by looking at lids. Secondly, we focus on the value proposition that XDEMVY brings, the unique effects that XDEMVY brings across tolerance, mites and redness. And third, we focus on our pull through with our pharmacy network, getting the prescription in and the process to get the prescription, which is, of course, really important in early days when we don't have contracts in place. So that's pretty consistent. I think sometimes you do have nuances, obviously, optometry versus, say, a very busy surgical practice, you do take a slightly different approach. But I think, again, we're seeing great receptivity on both. Again, primary optometry sees a lot of medical visits that they're incorporating this in. We are hearing from ophthalmologists that they are certainly going to look for a clean, healthy lid before they do a cataract or LASIK surgery. So those things are starting to take hold. And when you think about things like the guidelines, I think that validates the approach, which gives physicians a lot of confidence. And I think more so being in those guidelines also helps our discussions with the payers. It really positions the product at a standard of care, if you will, in eye care. And I think that helps us in those care negotiations that are ongoing as well. I think in terms of the day-to-day feedback, I've been out in the field. I'm hearing that personally. I know, Bobby, you mentioned you've been out in the field, maybe you have a couple other insight software as well here.

Yes. I would just add, I mean, we came back from both major academies, optometry and ophthalmology, in the last several weeks. And the value proposition is very strong, whether it was at our booth or advisory boards for commercial or medical affairs. There's tremendous interest. And I think as you're seeing in the data, there is a little more demand from optometry out of the gate. They've been already looking at the list probably a little bit more than the ophthalmologist. But we know how collaborative these doctors work together. So when we talk about that hybrid approach, it's really because in a given clinic, you'll see optometrists and ophthalmologists working together. That was very striking to me, being out in the field. And then there was 1 question about guidelines I think you had, Frank. Did you want to cover that, Aziz?

Yes. I think what we said on the guidelines was that I think that's important validation for the physician, but again, I think really does validate for the payers. So we're delighted, I think we anticipate incorporating in other guidelines as well. But the AAO practice patterns, I think, are really important. I mean, I think just for reference to add to that is, those aren't updated very often, right? Those are updated every handful of years. So to be included this year right after launch is a real testament to the medical efforts that we had, the scientific platform we've had out there, and I think it is reflected in that.

This concludes the Q&A session. I would like to now turn it back to Bobby Azamian for closing remarks.

Thank you all, again, for your time and interest. We really look forward to keeping you updated on our progress as we work diligently to deliver on the promise of XDEMVY. Hope everyone has a great day.

This concludes today's conference call. Thank you for participating, and you may now disconnect.