Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Tarsus Second Quarter 2025 Earnings 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. 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.

Thank you, Dave. Good afternoon, everyone, and thank you for joining us. We are approaching the 2-year anniversary of the launch of XDEMVY, the first and only FDA-approved treatment for Demodex blepharitis. In that time, we've established a new category in eye care and executed one of the most successful launches ever in the prescription eye drop market. This success is more than a milestone. It's powerful validation of our scientific innovation, strategy and leadership and a clear signal that our vision of becoming the next leader in eye care isn't just aspirational. It's already taking shape with measurable impact. In Q2, we delivered record-breaking results of more than $100 million in net sales and approximately 91,000 bottles dispensed to patients in need. This quarter-over-quarter growth is even more impressive when you consider we are primarily a new prescription or NRx business and do not yet benefit from meaningful refills at this stage of the launch. These impressive Q2 results reflect continued momentum in physician education and adoption, strong high-quality access and increasing patient demand, underscoring the meaningful value XDEMVY is delivering to those living with Demodex blepharitis. They also reflect the early impact of our direct-to-consumer campaign, which is driving prescription volumes. With an estimated 25 million people in the U.S. living with Demodex blepharitis or DB, this campaign is proving to be a powerful catalyst in opening new conversations, changing physician behavior and encouraging patients to take action, all of which is making XDEMVY a household name. That momentum is echoed in real-time feedback from the field, reinforcing my bullishness on this investment and its potential to provide even greater access to the DB market. Coupled with this early DTC success, our continued focus on education, broad payer access and the outstanding execution by our sales force strengthens…

Thanks, Bobby. Q2 was a standout quarter. We delivered more than $100 million in net sales and dispensed approximately 91,000 bottles to patients, demonstrating the strength and scalability of our launch strategy. We achieved over 30% sequential quarterly revenue growth, significantly outpacing the anterior segment prescription eye drop market, including the other recent launches. Our performance this quarter is even more impressive when you consider that XDEMVY remains predominantly an NRx product at this stage. As Bobby highlighted, one of the major drivers this quarter has been our DTC campaign, which is already fueling meaningful increases in prescription volume. Unlike typical DTC efforts that can take multiple quarters to show traction, we're seeing early measurable impact that we expect will continue to grow. Our DTC success amplified by the continuous engagement of our sales force is evidenced by 3 key metrics: one, elevated consumer awareness. Our national media presence across network television and digital platforms like USA TODAY and the New York Post is putting XDEMVY in the spotlight. As a result, unaided awareness of XDEMVY has more than tripled since the campaign began. Patients are increasingly motivated to seek treatment and ask for XDEMVY by name. Two, exceptional engagement with our website. Interactions on our XDEMVY.com website are up nearly 400% since the beginning of the year, with more people taking high-value actions such as completing the symptom quiz, watching educational videos and using the Find a Doctor tool. This level of engagement and interest demonstrates increasing consumer intent and is translating directly into office visits and prescriptions. Three, a growing prescriber base. As more patients proactively seek treatment for DB, more physicians are writing. In fact, we now have over 20,000 ECPs prescribing XDEMVY. Looking at these key shifts in the market, it is clear our DTC campaign…

Thanks, Aziz, and good afternoon, everyone. Echoing Bobby's and Aziz's comments, we had a remarkable quarter. In the second quarter, XDEMVY generated $102.7 million in net product sales, marking our strongest quarter to date. The response to XDEMVY has reinforced our conviction in its blockbuster plus potential, and we see substantial long-term opportunity to expand its role in eye care and reach more patients around the world. In the second quarter, we shipped approximately 94,000 bottles to distributors and dispensed approximately 91,000 bottles to patients, slightly above the top end of our Q2 guidance of 90,000 bottles dispensed. Inventory levels at the distributors were consistent with the prior quarter at approximately 2.5 weeks. As a reminder, we recognize revenue when XDEMVY is shipped from our warehouse to the distributors, not on bottles dispensed to patients. Gross-to-net discount for the second quarter was in line with our guidance at approximately 45%, and the sequential improvement in the discount was primarily driven by a reduction in patient copays as many patients work through their annual deductibles. Gross margins were flat at 93%. Continuing through the P&L, increases in SG&A expenses of approximately $44 million in the second quarter of 2025 as compared to the prior year were primarily driven by sales and marketing costs to support the XDEMVY launch. Specifically, direct-to-consumer advertising costs, increases in employee-related costs due to the larger sales force as well as variable costs associated with growing prescription numbers and sales. These variable costs include pharmacy fees, prior authorization, support at ECP offices and patient support programs. R&D expenses increased by $3.3 million in Q2 2025 from the prior year, primarily due to expenses related to the TP-04 program and other research and development programs as well as higher employee-related expenses. Cash and cash equivalents at quarter end…

Thank you, Jeff, and thank you all again for joining us today. This milestone quarter where we surpassed $100 million in XDEMVY net sales marks a true inflection point for the brand and reinforces our confidence in its immediate growth and long-term potential. Tarsus was built to deliver transformative solutions. And with the launch of XDEMVY, we've proven our ability to create entirely new treatment paradigms in eye care. As we look ahead, our commitment to scientific rigor, innovation and flawless execution positions us not only to lead in additional high-impact underserved diseases, but to build the next great eye care leader and improve the lives of millions of patients globally. Operator, please open the line for questions.

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

Congrats on the nice quarter, everyone. A couple from me. Can you talk a little bit about this increase in new prescribers? Were those targeted new 5,000 over the 15,000 that you had originally targeted? Or did those just come on board sort of de novo? Are you seeing any erosion in that earlier prescriber base? And then I was just hoping you could give us some color on whether you continue to -- sort of continue the DTC campaign for another year and sort of when we should expect that spend to stop?

Eddie, thanks for that question. It's Aziz. Yes, we're really pleased with the progress we're seeing on the DTC campaign. It's one of the real highlights of the quarter that we're seeing some really meaningful contributions. And I think that's reflected in the fact that as patients come in, it's really opened up a broader prescribing funnel with the 20,000 prescribers. Those are all doctors we call on. They're all people that we target. The reality is that we focus most of our efforts on the core 15,000. That's where the majority of prescriptions are going to come from. So our sales force does a great job. It's one of the highest quality sales forces in the space. We've recruited great talent there, and they have great productivity and capacity. So they're reaching all these 20,000 doctors. These are folks, I would say, are extra value on top of the core audience that we're driving. And that's really defining the fact that we've got a bigger market potential than we even imagined earlier. So we think about DTC as just opening up this market sooner than anticipated to a broader audience. And the great news is when we did our sales force expansion, we accounted for this possibility and our sales force is well equipped to handle and reach these doctors. And I will tell you, we haven't seen any erosion in the current base. If anything, we're seeing a deepening of prescribing in the core audience as well. I think that was reflected in the prepared comments where 2 things. One, we're seeing really meaningful utilization across all the key segments, which I think speaks to the high utility of XDEMVY in the practice and the long-term potential for this to become sort of the standard of care across multiple patient types. And then secondly, doctors are incorporating this into their routine. You're seeing about 5,000 doctors, almost 1/3 of our core audience there prescribing on a weekly basis. So this is becoming a habit. It's really taking hold. And I think if you look at that level of prescriber penetration and adoption in just 2 years, it's really remarkable what our team and this product has been able to deliver so far. On the DTC front, we're seeing great results there. I think we expect to continue that for the foreseeable future, I think, through the end of this year and into next. And then I think we'll evaluate do we need to continue to do this or can we pause it seasonally? That's work we're doing right now. But I do think as we're still in the relative early stage of building out this market, educating and empowering the consumer will continue to be an important lever. With that said, as Jeff mentioned, we're kind of at that steady-state expense. We don't expect to scale that anymore. We expect to stay in the current range of spend there.

Appreciate it. And then if I can get one more on the gross-to-net, you're going to end the year sort of in the low 40s, you said. Can you talk about if there are plans or are there ways to sort of get even better than that in 2026 and beyond? Or should we sort of expect low 40s for the foreseeable future?

Eddie, it's Jeff. I think from a modeling perspective, at this stage, I would continue to think about the low 40s as being sort of our steady state absent the typical Q1 dynamics there. Of course, we're always going to look at ways to improve that, but that can be challenging in the current payer environment. So I think from a modeling perspective, think about it in the low 40s.

Our next question comes from Andrea Newkirk with Goldman Sachs.

Just curious here as we near the 2-year mark since XDEMVY was approved, just wondering if you might be willing to speak more on how you see the cadence of the launch progressing from here? And then I'd also be curious, you mentioned a couple of times here that the peak could actually be even greater than what you had believed before, which I think was $1 billion-plus. How are you thinking about that refined peak potential now? And what is that being driven by specifically?

Andrea, it's Aziz. I'll start here. When we think about the cadence of launch going forward, I think it's really a great opportunity to reflect on our strategy and how well it's worked and the fact that everything we put into place is really coming to fruition. So you think about our core base of educating the prescriber base where we've got great penetration with an increasing depth of prescribing happening. And I'll tell you that none of our doctors are telling us they're reaching their full potential. In fact, they're actively looking for more use cases in the practice. So that education of the prescriber with great penetration where we've got even more than our originally intended audience on board is really remarkable. That's a great foundation for continued growth. Secondly, we're seeing DTC and the patient education aspect of this really driving and to see that contributing as quickly as it has and to see the results we're seeing in terms of increasing awareness, the website metrics, the fact that we're seeing an expanded prescriber base, I think, really speaks to the value of the DTC campaign. And then I always say that this is all predicated on our great coverage, right? This is the ease of access, 90% of lives covered. We've got a clear path for doctors to liberally prescribe this product to patients that need it. And what I really think about this when we talk as a team here is we've had a great couple of years, but we've only treated about 350,000 patients at most. And we've got 9 million and up to 25 million patients to treat. So with all the great results to date, we've really only scratched the surface. So what do we expect going forward? We expect the strategy to continue to deliver. We expect continued steady growth. And I've said this before, there's no hockey sticks on this launch, but there is a steady progressive build of one of the most remarkable and exciting markets in the eye care space.

And I would just add to that, Andrea, as well that we're very pleased how Q3 is turning out these early days, and that reflects our stronger guidance. I think stepping back, if we -- if you'd asked us, earlier this year, we would have expected flatter growth. But I think some of the initiatives we're seeing in the DTC and some of the sales force initiatives are really paying off early. So we're quite pleased with that. And that really kind of goes to your question on the peak potential here. We ultimately don't know the ultimate peak potential here, but what we are seeing signs and signals that it's going to be higher than what we thought, say, a year ago. Typically, in a new category, you really can't tell what that peak potential is. But I can tell you, just looking at analogs that, that 25 million patients that we have estimated that have Demodex blepharitis, that's likely going to drop down into the 9 million bucket at a greater degree, right? When you build it, they typically come, and we've seen that over and over again in these new categories. So a long-winded way of saying stay tuned for more peak guidance there. But at this point, it's much higher than what we anticipated.

And this is Bobby. I'll just add one point that bridges both of these. Aziz mentioned before, the 80% prescribing across the segments. So that gives us a lot of confidence with increasing weekly prescribers that we're going to continue to grow this launch. And imagine only 350,000 of 9 million with all those segments getting some real traction across ECP offices, but only early days really in prescribing across the segments.

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

Maybe just thinking about your setup into fourth quarter this year, from a bottle volume growth standpoint, given that 3Q is seasonally light, do you think the same sort of magnitude of order step change that we saw from 3Q to 4Q prior year? Is this kind of a good compass to be thinking about sequential volume growth into year-end there? And then these added prescribers, are these mainly on the optometry side or the ophthalmology side? Just wondering if you can give a little bit of added color there. And then third point, just for clarification. So I think a year ago, when you thought about peak sales potential, I think the commentary was that this could be as big or bigger than Restasis, which we knew, I think, peaked out at around [ $1.4 billion ]. So are you saying that there's some magnitude of order step improvement relative to that?

Yes, Jason, this is Jeff. Good to hear your voice. As you think about looking at Q3 to Q4 step-up this year, I think taking a look at last year would be a little aggressive just because it was early days in the launch, and we were starting out at a relatively small baseline. So I think that might be a little aggressive to be thinking about modeling that. Like Aziz said, we didn't -- we don't expect a hockey stick in the fourth quarter here. So more measured steady growth off a higher baseline coming off a really strong Q3.

Yes. And then Jason, on the prescriber base, that incremental prescriber base, that's a great mix of both ophthalmology and optometry. We're seeing this, and particularly when you align that vis-a-vis the use across the segments, I think what you're seeing is that doctors are seeing these use cases. So for the cataract patients, for instance, that's bringing in more ophthalmologists that are now thinking about this as a way to screen patients before surgery. Your optometrists continue to build their excitement around this. This is a great way for them to expand their scope of practice and really think about serving more patients. So we're seeing great feedback from both segments, and we're seeing continued depth of prescribing across both segments. And then the incremental prescribers are also relatively similar in terms of mix, where we've said before, it's about 60% optometry, 40% ophthalmology. That's about representative of what we're seeing with the growing prescriber base as well.

Yes. And Jason, this is Bobby. To your last question, it's [ tantalizing ] to think about. As we said earlier, we're not giving a new peak, but we see ourselves ahead on a lot of metrics. You think about the adoption by ECPs, you think about the value of our medicine and the coverage. On the other hand, it's an NRx medicine. So I think it's just too early, but we do expect this to be one of the largest peak eye drops ever, and we're really excited about that.

Our next question comes from Cory Jubinville with LifeSci Capital.

Congrats on this really exciting update. You mentioned at the beginning of the prepared remarks that the launch to date has primarily been driven by new-to-brand scripts. Have you refined at all how you're thinking about steady-state retreatment rates? If we look at recently available third-party script estimates, retreatment rates are hovering around 2% to 2.5% of total volume. I guess, one, from your data that you have on hand, how accurate are those third-party aggregators on retreatment specifically? And what are your target goals for those retreatment rates? Two, have you been able to track kind of the individual patient cohorts, maybe the overall percent of retreatment hasn't yet reached a steady state, but that's mostly because you're looking at patients who've been treated a year out, who first received XDEMVY early in that launch curve. So the volume was relatively lower compared to the volume that we're seeing today. And three, given the potential TAM as it fits into the denominator of the present market penetration, how much weight are you even placing into the -- placing retreatment into the continued success of XDEMVY? I guess do you feel that you even need high retreatment rates if the TAM is sufficiently large?

Yes, Cory, thanks for that. Really good question set here. So when it comes to the refill dynamic, I'll start with where we've kind of guided in the past, which is we expect to see about a 20% steady-state annualized retreatment rate. Now you hit on some really important points here. When you look at the weekly IQVIA data, it really does understate it because keep in mind, a lot of these patients are getting their second treatment several months, if not longer, post their initial success on XDEMVY. So oftentimes, those retreatments are shown in the weekly data as an NRx. Now when you look at longitudinal data sets or the data sets we have available to us, if you remember the last couple of quarters, we said it's been hovering in the mid- to high single digits. When we look at the most recent data sets, we're actually seeing that tick up, and it's just above -- just a hair above over 10%. So as we said, it's trending positively, and we feel really good about eventually getting to that steady state. So that's on track. And you hit a very important point there, too, right? If that's what we're seeing in the weeklies, that implies if you're looking at this on a cohort basis, that's obviously a little bit higher than that. We're not quite at the steady state yet, but everything is leading us to believe that this will continue to progress and be a great tailwind for us. How much do we think this is critical? I mean, of course, this is important, right? We want patients to get that success again and again. So if the patients had a great outcome, we want them to have that when the disease recurs. So this is an important part of the strategy, but I would refer back to the point you made, which is we have a huge TAM. And 2 years in, we've only scratched the surface. So our key focus is continuing to evolve that TAM to get as many of those 25 million patients into that base of 9 million, as Jeff mentioned, and to get as many of those 9 million patients on treatment because they can all benefit. So refill is important, trending the right way, but the focus is opening up the door to this very massive TAM. And as Bobby said, we see that as the opportunity to have one of the best-sized product launches in the eye care space.

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

I guess, you've previously talked about we should expect DTC to take a few quarters to take effect, but you're saying today, it's kind of showing through a little earlier than anticipated. Can you elaborate on why you think that is? Why is it different in this market than maybe what you would expect having looked at other markets? And second, you talked about the unaided awareness of XDEMVY tripling. Can you give us a sense of sort of where that is now and how much headroom is left to grow in the unaided awareness?

Yes, that's a great question. So I think about the campaign, I've worked on a lot of these. And this is a real fun part of the commercialization strategy where you can really engage consumers directly and get people excited about a solution for something they've been suffering for -- from a long time. And I think our campaign is exciting. It's memorable. It's very creative and different. And that's the fun part of it. But I think what's really driven the success here is the fact that we layered this DTC campaign as part of a very thoughtful strategy in all, where we focused a lot of time upfront educating the prescriber base, building a huge prescriber base and penetrating that very quickly. So our quick adoption has enabled this. Secondly, we ensured we had great coverage, 90% of lives covered. That's very remarkable in the eye care space when you look at other recently launched products. I think a lot of people are saying that being in the 70s and 80s is full coverage. So 90% is really remarkable in terms of the doctor's ease and the patient's access to the drug. I think these set up a great platform for us to execute an impactful DTC campaign. I think the fact that there's nothing available for these patients, this disease is something that's visual as well as something patients feel is very motivating. And of course, as we've always said, right, if you tell somebody, hey, the source of your problem is a bug in your eye, you're pretty likely to go see a doctor. So I think when you look at all those things together, we're seeing a DTC campaign that is really doing remarkably well, and it's one of the best campaigns I've ever been a part of. And when you look even contemporarily at recently launched products in our space, you're not seeing that level of growth. You're seeing great product launches, but not the level of growth we're seeing 2 years in. And I think that's, again, driven by a really great strategy and a very effective campaign. But again, it's all about layering the strategy, great sales force, great access and a great campaign. In terms of unaided awareness, we're not getting to the specific percentages there. How much headroom do we have? I'm not going to stop until everybody that I know can rip XDEMVY off the tip of their tongue. So I want this to be a household name. We want this to be one of the biggest brands ever in eye care, and we want this to be something that the second somebody rubs or itches their eyes, they run into their doctor and say, can I get XDEMVY. So how much headroom? Lots more headroom to come.

And I'll just add on that second point. It's amazing to me a few years ago, nobody really knew what this disease was. And now we've heard that from ECPs. We've heard that from just people that we know outside of work. So starting with a completely new disease, we have a lot of room to grow. So I'm really excited about that.

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

Congrats on the quarter, obviously. So regarding the new prescribers, is there a sense of the proportion coming progressively from prescribers treating related indications like dry eye, contact lens wearers? I know you had mentioned cataracts. I guess, overall, how impactful has the patient overlap been in terms of driving new prescription growth, at least at this stage?

Yes. I think that's what you're seeing is as you've got a core base of prescribers that are using this on a very routine basis, they're getting lots of experience across the patient base. And they're at conferences, they're are at programs talking about the utility of the drug across a broad range of patients. And that, as you get patients coming in the door, is really motivating for those new prescribers to say, okay, well, I can use this in lots of different places. So let me get my hands on this product. The access is really straightforward. The patient is asking for it. Maybe they failed to dry medication before, maybe I'm sending them off for surgery, let's get this thing cleared up. So I think that the fact that we've contextualized the very specific patient types makes it easier for these really late adopters, if you really think about it, right? They're coming in 2 years later, but they're very motivated now because they're seeing the success other doctors are having, and they're seeing great access and clear use cases established, and they're hearing that from both our sales force and their colleagues. So I think that's giving them a good place to start and then expand as they get familiarity with the drug.

That's really helpful. I mean would you say the core of the new prescriptions then are patients coming in with DB like primarily?

Well, fundamentally, DB is underpinning any of the patient segments, right? So I think what the doctors are doing is they're hearing about this and they're saying, well, let me take a look at the eyelids as part of the exam. And if they see the crusting and redness, regardless of where the patient's other issues are, they're thinking about XDEMVY, right? And that patient may have been a [ dry ] patient, might be a surgical patient. But I think what you're seeing is a couple of years in, we're really trying to change that behavior of every doctor to say, looking at the eyelids is a critical part of the eye exam. And then you say, "Oh, this is a patient that may have these symptoms, let me think about using it or hey, this is a patient. We want really good satisfaction for this patient all around if they're getting a surgery. So let me think about using this." So I think that underlying is the doctor being able to easily and quickly diagnose this and then hearing again, well, all these patient types can benefit if you're seeing that level of crusting and redness on the lids.

And I'll just piggyback on that. We've talked about evidence being an important growth driver in the medium term here. And I'm really proud of how we've educated doctors around MGD in the setting of Demodex blepharitis. Our Chief Medical Officer, Elizabeth Yeu, is the top doctor and surgeon in the field and really worked across all these disease segments, dry eye, cataract, contact lens, MGD, even other areas of comorbidities with DB. We have an exciting set of studies that we want to roll out over the next 12, 18 months and continue to build on that strong evidence to drive education for doctors and ultimately give them all the data they need to serve all the patients in their clinic that have DB.

Our next question comes from Andreas Argyrides with Oppenheimer.

Congrats on the quarter. Just a quick one on the ocular rosacea program. When can we get some updates in the near term?

Yes. Thank you, Andreas. As we mentioned, we're really on track and very excited and optimistic about this program. We're on track to start a Phase II study by the end of 2025 this year. As we also mentioned, this is a brand-new indication. This is another example of category creation. And in fact, there's never been a study done in ocular rosacea before. So our team is really focused on preparing for success in the Phase II. We -- as we've talked about before, we have buy-in from the FDA on the protocol and the endpoints. We have the CMC on track. We have sites that are interested, high-quality sites that see a lot of patients. So we're really focused on preparing for success in that Phase II, given that it's the first ever. And this is what our team knows how to do. We've done very similar things in the early days with Demodex blepharitis. So stay tuned.

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