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

Thank you. Before we begin, I encourage everyone to visit the Investor 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; Seshadri Neervannan, our Chief Operating 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'll turn the call over to Bobby.

Good afternoon, and thank you for joining us. 2025 was a breakout year for Tarsus and for XDEMVY. The first and only FDA-approved therapeutic for Demodex blepharitis, an impactful disease that affects more than 25 million Americans. Among the key highlights for the year, we delivered more than $450 million in full year net sales. We have helped more than 0.5 million patients living with Demodex blepharitis since launch, underscoring the meaningful real-world impact of XDEMVY and by creating and leading an entirely new category in eye care, we have established Tarsus as a differentiated company fully capable of translating scientific insight into commercial leadership. We believed from the beginning that XDEMVY could be a breakthrough medicine. Today, the data and real-world experience validate our conviction. In just 2 years since launch, XDEMVY has fundamentally changed the eye care experience. We see that transformation reflected in 3 clear proof points. First, XDEMVY is delivering consistent meaningful outcomes for patients. Second, eye care professionals have fundamentally changed the way they practice. And third, we've redefined the rules of launch and have succeeded in rewriting the biotech playbook. We're now ready to share what we've always believed that XDEMVY can reach blockbuster status within the next couple of years with sales potential exceeding $2 billion. At the same time, we are intentionally building Tarsus for its next phase of growth. Our primary strategy is disciplined and built for repetition identify diseases with clear root causes, significant demand for better solutions and the potential to establish a new standard of care and then apply the development and commercial playbook, we have proven with XDEMVY. We are already executing against that framework with TP-04 and Ocular Rosacea and TP-05 and Lyme disease prevention, 2 clinical stage programs where the biology is clear, the unmet…

Thanks, Bobby. We entered 2026 from a position of strength and momentum. XDEMVY is one of the best-selling prescription eye drops and from a product line perspective, is now profitable and growing. This gives us the leverage and flexibility to continue investing in our proven growth drivers that we believe will best support this opportunity. We are still early in reaching the estimated 25 million Americans living with Demodex blepharitis, or DB. And as Bobby mentioned, we have fundamentally changed medicine. We've transformed the eye care experience and now see U.S. sales potential exceeding $2 billion. Beyond the large untapped addressable market, this outlook is reinforced by 3 fundamentals: One, a highly effective medicine that delivers consistently positive outcomes for an easy to diagnose disease. Two, our top prescribers have a significant opportunity to increase utilization and almost every doctor we talk to is looking for more patients to treat. And three, the tremendous growth in patient interest with many coming in and asking for XDEMVY by name. We've seen a meaningful shift in eye care professional or ECP practice behavior and patterns. ECPs are continuing to deepen utilization across all of the patient types we've been talking about, including DB patients with congruent MGD, dry eye and cataracts where visual outcomes are so important. Furthermore, I constantly hear from ECPs that they're beginning to look beyond these initial 9 million patients we originally focused on. And are now screening for DB patients being treated for glaucoma, receiving eye injections or presenting with styes, the lumps and bumps you typically get on your eyelids. At the same time, patients are becoming more proactive and are increasingly self-identified. Together with strong access where we have more than 90% of coverage across commercial, Medicare and Medicaid, these dynamics are expanding the funnel…

Thanks, Aziz, and good afternoon, everyone. We are leading the way in category creation and have proven that our model works. XDEMVY is the first proof point, and we are now applying that same scientific and strategic framework for the next set of opportunities in our pipeline. Today, I'll share updates on 2 programs that reflect the attributes that drove XDEMVY success. Clear biology, significant unmet need and the opportunity to pioneer new standards of care. I'll start with TP-04 for Ocular Rosacea. Ocular Rosacea is a natural extension of our Demodex expertise. Like DB, it is driven by Demodex mites and can significantly impact how patients look, feel and see. It is also easily identified during a routine eye exam by the hallmark signs of inflammation and redness. Ocular Rosacea affects an estimated 15 million to 18 million Americans, and there are currently no FDA-approved treatments. Importantly, this opportunity is highly complementary to our existing infrastructure. It involves the same physicians and the same diagnostic process, enabling us to build on what we've already established, lotilaner's positive clinical data across several related conditions. In particular, in Papulopustular Rosacea, a related inflammatory facial skin condition with similar pathophysiology, lotilaner demonstrated statistically significant improvements in inflammation and redness in a Phase II trial. The insights from that trial have further informed our understanding of and confidence in TP-04's potential in Ocular Rosacea. TP-04 is a novel lotilaner based sterile investigational ophthalmic gel designed specifically for application to the area around the eye. In December 2025, we initiated the first-ever Phase II trial for the potential treatment of Ocular Rosacea which we believe is the next blockbuster category in eye care. The goal of this trial is to evaluate safety and improvements in erythema and telangiectasias around the eye, 2 of the…

Thanks, Sesha. 2025 was a year of strong financial performance and disciplined execution. For the fourth quarter of 2025, we delivered $151.7 million in net product sales at a gross to net discount of 44%. For the full year, we delivered $451.4 million at a gross to net discount of approximately 45%. Total operating expenses were $522.3 million driven in large part by commercial investments supporting the XDEMVY launch. We ended the year with approximately [ $418 ] million in cash, cash equivalents and marketable securities providing meaningful financial flexibility as we scale the business and expand our pipeline. Turning to 2026. With more than 2 years of revenue history, a clear understanding of seasonality, broad and stable payer coverage and proven DTC effectiveness, we are providing full year guidance for the first time. For 2026, we expect strong net product sales in the range of $670 million to $700 million or annual growth of more than $230 million and 50% at the midpoint of our guidance. It is important to note that projected annual revenue growth is not anticipated to be linear throughout the year. Consistent with what we have seen across eye care and other therapeutic areas, we expect typical first quarter seasonality to impact growth, including deductible resets that increased out-of-pocket costs and temporarily reduce new patient visits. We also expect this dynamic to increase the gross to net discount for the first quarter. Additionally, given that XDEMVY remains primarily driven by new patients, holidays, medical meetings and this year's severe weather disruptions are influencing near-term trends. As a result, we expect first quarter 2026 revenues to be flat to slightly below our Q4 2025 revenue. Further, sequential growth through 2026 is expected to be similar to what we observed in 2025 and consistent with broader sector…

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

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

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

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

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

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

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

Eddie, it's Aziz. Yes, thanks for that clarifying question. I think as you move further in the launch, you are going to be more susceptible to the typical seasonality. That's pretty typical for most brands. We see this across the eye care space and actually areas outside of eye care as well. So we're seeing that now in the first quarter. I think the dynamics you're referring to are what give us the confidence in the continued growth of the brand and to eventually achieve the peak that we provided today. And I think the fundamentals there are really strong, as you alluded to, right? We've got a strong and growing base of prescribers that are actively deepening their utilization. They're looking for other use cases. We're meeting that with a strong consumer effort. We're now 1 in 4 patients aware. So if you think about our DTC even at a similar spend level, we're likely going to be able to convert patients more quickly and more effectively as we progress on that effort. And then, of course, the refills will continue to help drive that. But I do think from time to time, conferences, weather, et cetera, is certainly going to affect it, considering that even at our steady-state 20% refill rate, we're still primarily NRx driven, right? So you'll see that across every brand. We're probably just as susceptible to it given the NRx dynamic. But certainly, the long-range view here looks really great given the drivers I've outlined.

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

This is Bhavin Patel on for Jason Gerberry. First on the gross to net side, you landed at about 44% for 4Q. And I know that 1Q typically has the reset pressure. But I guess as we look at full year 2026, where do you see that steady-state gross to net settling out? And are there any favorable dynamics potentially offsetting the 1Q pressures? And then the second question is, obviously, raising the peak sales target to over $2 billion is a big update. And I'm just wondering if you can unpack what's driving that increased conviction? Is it more about the breadth of the prescriber base continuing to expand? Or is it about really getting deeper with those top-tier weekly writers and maybe it has something to do with adding those new key account leaders that you mentioned?

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

And Bhavin, this is Bobby. Thanks for the question about $2 billion. We have gotten a lot of people interested in what's the potential of XDEMVY, and we're really excited to be able to talk about that today. What's really changed there is that we have a great view of how XDEMVY is performing now 2 years in. We know that this is a breakthrough. We've served only 0.5 million patients with this medicine. There are 25 million Americans with DB. So that represents less than 10% penetration, that $2 billion-plus figure. We also have transformed the practice of eye care in general, and that's allowed doctors to look beyond those segments to all their patients. They're starting to look at all their patients and recognizing the importance of DB. And then to your point, there's just continued flawless execution across the board with our commercial effort, education, access, evidence. You mentioned a couple of things there that we're going to continue to execute flawlessly on. So that's allowed us to rewrite the playbook and confidently say this is a $2 billion-plus medicine.

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

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

Yes. Thanks, Lachlan. Yes, you're absolutely right. The DTC campaign so far is performing exceptionally well, ahead of our expectations in terms of timing to reach that positive ROI, which confirmed our rationale to continue to advance that in 2026. When you think about what's driving the improvement in ROI in '26 and why we're excited about that, there's a couple of factors. One, now you've got 1 in 4 patients aware. And two, you've got doctors actively looking. These 2 things, along with our ability to execute, right, we've learned a lot in the last year, is going to allow us to really scale that ROI impactfully. It's a compounding effect, if you will. We should be able to convert those patients more quickly, more effectively. $80 million feels right. And ultimately, look, where we're making a slight incremental investment is actually with the sales force because ultimately, the physician writing the prescription. And we think that getting the patients into the practice is important, but continuing to support that deepening of prescribing and that deepening of utilization is another factor. So we're sort of hitting on both sides of the funnel, if you will. We're driving patients at the top and really investing and converting as many of those patients as possible. And as we sit today, we feel really good about the outlook on converting patients from DTC, but also improving the physician dynamics and building on that momentum as well. So TBD, I think long term, we feel really good about the investment level, and we've got the right things in place to capitalize on it.

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

Yes. Lachlan, this is Sesha. Thanks for the question. So Lyme disease is a Phase IIb trial, as we said, about 700 participants. We plan to enroll them in 1 peak season. Beyond safety, which is an important part of a prophylactic program, we are looking to measure other measures. One of the key ones is the blood level of lotilaner, which we want to see that could really translate into our confidence of overall effectiveness of TP-05. So the purpose of the study is to generate data that gives us a strong Phase III ready package, gives us additional confidence on the program and in a large enough population that can give us directional input to a Phase III study.

Our next question comes from Jenna Davidner with Barclays.

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

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

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

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

Yes. Thank you for that question. I think when we look at ex-U.S., what's really interesting is the overall dynamics are very similar to the U.S. The prevalence of the disease is pretty consistent regardless of the geography. And in most of the markets, the treatment paradigm is very similar to what we saw in the U.S. prior to launch of XDEMVY, where doctors are aware, they're typically using palliative approaches and are really eager to have a definitive cure or treatment for the disease. Furthermore, the positive U.S. experience is getting out there. As we mentioned, doctors like to hear from each other. And I've been to a few of these European conferences, and the European doctors are really excited with what they're seeing their U.S. colleagues do with XDEMVY. So there's a lot of interest and excitement around the market opportunity. The market dynamics are very similar, albeit there's always differences in pricing and reimbursement, but the patient and physician dynamics are very similar. And ultimately, the pricing and reimbursement dynamics will sort of dictate our go-to-market approach, which we're currently evaluating in each of those markets.

Our next question comes from Dennis Ding with Jefferies.

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

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

Yes. Thanks, Bobby. Can you please repeat that question so I can clarify that?

Yes, for sure. In terms of ocular rosacea, what do you see as a meaningful trend on erythema and then if there's a scenario to hit stat sig on that endpoint?

Yes. Thank you. So thank you for the question. So one of the things I would start by saying that this is the first-ever trial in ocular rosacea, and we are not new to this paradigm. We have done this once well before, developing new clinical measures. So that's an important part of what we do here. So in addition to erythema, we are also looking at telangiectasia, which are prominent blood vessels. These are the hallmark signs of the disease. And when we talk to the ECPs, given the fact that there is no approved treatment, what they're looking for is any improvement in these conditions. It's very meaningful for them, and that's exactly what we are focused on. We have alignment with the FDA on these 2 measures. And what we are striving to show is an objective improvement on these measures. And that's -- and then we'll continue to evaluate the data and move it forward with continued conversations with the FDA.

Our next question comes from Andreas Argyrides with Oppenheimer.

Congrats on all the success and progress in '25. Most of our questions were asked, but I'm going to ask a couple here. Can you give us -- you mentioned something around the seasonal dynamics while you provided the robust sales guidance. Can you give us any additional insight into those seasonal trends? And then assuming you advance both ocular rosacea and Lyme disease programs, how much do you think those pivotal studies would cost?

Yes. And I'll take the first part here. So the seasonal dynamics are what you typically see across the industry. And again, as we move further down the launch curve here, we'd expect XDEMVY to be part of that typical seasonality, right? And there's a few dynamics here, right? There's resetting co-pays. There's deductible resets for both patient visits. So you're thinking about patients -- fewer patients going into the office, and then those that are going in the office are paying more out of pocket. So it affects both the demand as well as the gross to net, which Jeff alluded to earlier. What we do see is that, that is already starting to work its way through. If you look at the most recent weeks in the IQVIA data, which most people track, we are seeing a positive trajectory in the last few weeks, and we expect that to continue outside of anything unexpected. But I think once you're past the bulk of the season and of course, the weather, you start to see people come back into the eye care offices, you start to see conversion of those scripts. And fundamentally, all the signs we're seeing are really great. When we go to the conferences, the doctors are telling us -- there's no end in sight. You've seen a lot of utility and success with the product, and we see that in the numbers, too, that we analyze, right? The doctors are looking for more and more cases. We think rolling out our key account leaders will help facilitate that. They'll be kind of out there in the back half of the year. We expect that to pay for itself. So these are some key drivers, and we talked a little bit about DTC earlier as well. So we'd expect all the things we're doing to continue to amplify the growth. And certainly, the Q1 dynamics are going to play through. But absent of that, we expect a really strong year in line with the guidance that Jeff provided.

And Jeff, do you want to talk about the pivotal potential cost for OR in line?

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

[Operator Instructions] Our next question comes from the line of Graig Suvannavejh with Mizuho.

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

Yes. Great, it's Aziz. I can provide a little bit of color on both of those. So in terms of the prescribing dynamics, what we're excited about is the continued depth of prescribing. And we're seeing this across both ophthalmology and optometry. And I'll remind folks that our split is roughly 2/3 optometry and about 1/3 ophthalmology with both segments growing really strongly. In fact, when we think about depth of prescribing, we've seen some really good movement there. In the most recent quarter, we hit a stat of about 40% of our core target now prescribing weekly, meaning they're prescribing at least 5 a week -- sorry, once a week. And then we saw a 20% growth in those that are writing at least 5 a week or what we call a daily writer. So they're writing at least once a day. That grew 20%. So you've got about 40% of your total audience writing this with good regularity, and then the fundamental heavy users are growing even more at 20%. So there's some good signals there, and that's, again, across both those segments. So we really feel good about the prescribing dynamics. We think about the utility of expanding that effort further with the key account leaders. And then, of course, thinking about the effort that DTC has there, right? Every time a patient comes in from DTC, that's actually pulling from our 25 TAM into that 9 million TAM. So you're expanding the funnel, as we mentioned earlier. So that's going to help continue to facilitate that depth of prescribing. And then to clarify, the $2 billion peak, that's specific to the U.S., right? So that's where we're in market right now, and that's where we're focusing the guidance, and that peak is $2 billion in the U.S.

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

Graig, it's Jeff. Yes, it is a little bit challenging, particularly given some of the dynamics that we're facing now with MFN. And I think what we're doing is we're making thoughtful investments along the way to do ECP education, get engaged with patient groups and do everything we can before crossing the Rubicon and really launching over there. So we're monitoring that. But big picture, I think a good sort of proxy is typically 90% U.S., 10% rest of world. So I think that would be something you could think about. I would say Japan is probably a little bit higher on the opportunity scale than maybe Europe is. But I think that for modeling purposes, that would probably be a good model.

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