Tarsus (TARS) Q4 2025 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Feb. 23, 2026, 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Bobak R. Azamian
• Chief Commercial Officer — Aziz Mottiwala
• Chief Scientific Officer — Seshadri Neervannan
• Chief Financial Officer — Cory Jubinville

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Annual Net Sales -- $451,400,000 full year net product sales, reflecting growth and underlying adoption of XDEMVY.
• Quarterly Net Sales -- $151,700,000 net product sales for the fourth quarter, with a 44% gross-to-net discount.
• Gross-to-Net Discount -- Full-year gross-to-net at approximately 45%, exiting fourth quarter at 44%; anticipated to be 43%-45% long-term, with Q1 typically higher due to deductible resets.
• Sales Guidance -- 2026 net product sales guidance issued for the first time at $670,000,000 to $700,000,000, implying annual growth exceeding $230,000,000 and 50% at the midpoint.
• Seasonality Impact -- Management projects flat to slightly down revenues in first quarter compared to the previous quarter, driven by expected first-quarter seasonality including higher out-of-pocket costs and reduced patient visits.
• Operating Expenses -- Total operating expenses were $522,300,000, with continued investment in XDEMVY commercialization and R&D.
• Salesforce Expansion -- Planned addition of 15 to 20 key account leaders in 2026 as a targeted investment to deepen prescriber engagement, with expected growth contribution in the second half of the year.
• DTC Campaign Efficiency -- Direct-to-consumer campaign yielded unaided awareness growth from 2% to 25% over the campaign period, with 2026 spend planned at $80,000,000, similar to 2025 levels.
• Retreatment Trends -- Weekly refill rates for XDEMVY are in the low- to mid-teens percentage range, trending toward an anticipated steady-state of approximately 20%.
• SG&A and R&D Guidance -- 2026 SG&A expenses are guided to $545,000,000-$565,000,000 and R&D expenses to $115,000,000-$135,000,000, including major spending on Phase 2 programs.
• Pipeline Progress -- TP-04 (ocular rosacea) Phase 2 trial initiated in December 2025 with top-line data expected in 2027; TP-05 (Lyme prevention) Phase 2 trial to enroll ~700 participants in 2026, with top-line data also targeted for 2027.
• Cash Position -- Year-end cash, cash equivalents, and marketable securities reported at approximately $418,000,000.
• Global Expansion -- TP-03 on track for potential European approval in 2027, Chinese partner Brandforma expects approval in 2026, and Japanese regulatory engagement ongoing.
• U.S. XDEMVY Prescriber Mix -- Current prescribing base approximately two-thirds optometrists and one-third ophthalmologists, with both segments increasing weekly usage.
• Peak Sales Outlook -- Company raises XDEMVY's U.S. peak sales target to over $2,000,000,000, supported by large addressable market and deepening utilization.

SUMMARY

Tarsus Pharmaceuticals (NASDAQ:TARS) delivered record net sales and provided its first annual guidance, projecting continued strong revenue growth anchored by expanding XDEMVY adoption and awareness. Management emphasized the strategic focus on category creation in eye care, disciplined cost structure, and the scaling of its salesforce and direct-to-consumer initiatives to reinforce leadership in Demodex blepharitis treatment. Tarsus Pharmaceuticals highlighted clinical progress on TP-04 for ocular rosacea and TP-05 for Lyme disease prevention, with both programs advancing into Phase 2 and significant market opportunities outlined. Global expansion remains a key element, as regulatory milestones in Europe, China, and Japan approach for TP-03, with international dynamics described as highly similar to the U.S. experience.

• XDEMVY's unaided patient awareness rose to 25% as a direct outcome of targeted marketing.
• Weekly refill rates are not yet at steady-state but are increasing as practices formalize protocols.
• Tarsus Pharmaceuticals intends to add one to two new programs annually to its R&D pipeline, balancing focus and long-term growth.
• Pipeline clinical trial spending for 2026 was detailed: $7,000,000-$10,000,000 for ocular rosacea (Phase 2), and $25,000,000-$30,000,000 for Lyme disease prevention (Phase 2), with expenses primarily incurred in 2026.
• International opportunity is currently modeled as 90% U.S, 10% rest of world, with Japan potentially contributing a higher share relative to Europe.
• The addition of David Pyott to the Board of Directors reinforces industry expertise as Tarsus Pharmaceuticals scales globally.

INDUSTRY GLOSSARY

• Gross-to-net discount: The difference between a drug's list price (gross sales) and the net revenue received after deducting rebates, discounts, and patient support programs.
• DTC (Direct-to-consumer): Marketing initiatives targeting patients directly, aiming to increase brand awareness and drive patient requests/adoption of a therapy.
• NRx: New prescriptions; refers to prescriptions written for patients who have not previously received the therapy.
• ECP (Eye Care Professional): Clinicians, primarily optometrists and ophthalmologists, who diagnose and treat ophthalmic conditions.
• SG&A: Selling, general, and administrative expenses that include costs related to marketing, commercial support, and overhead.
• MGD: Meibomian Gland Disease, a common cause of dry eye characterized by abnormal function of the meibomian glands in the eyelids.
• TP-03, TP-04, TP-05, XDEMVY: Pipeline code names for proprietary therapeutic candidates and approved products targeting various ophthalmic or systemic diseases.

Full Conference Call Transcript

Bobak R. Azamian: Among the key highlights for the year, we delivered more than $450,000,000 in full year net sales. We have helped more than half a 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 Pharmaceuticals, Inc. 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 two years since launch, XDEMVY has fundamentally changed the eye care experience. We see that transformation reflected in three 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 have redefined the rules of launch and have succeeded in rewriting the biotech playbook. We are now ready to share what we have always believed, that XDEMVY can reach blockbuster status within the next couple of years with sales potential exceeding $2,000,000,000. At the same time, we are intentionally building Tarsus Pharmaceuticals, Inc. 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 in ocular rosacea, and TP-05 in Lyme disease prevention, two clinical-stage programs where the biology is clear, the unmet need is substantial, and our approach has the potential to deliver a new standard of care. Importantly, we also intend to expand our pipeline in a measured way, targeting one to two new programs per year.

This pace allows us to remain focused, leverage our existing infrastructure, and allocate capital responsibly while extending our long-term growth trajectory and patient impact. What excites me the most is that we have the right team in place to accelerate our goal of becoming the next leader in eye care. You may have seen last week that we welcomed David Pyott, distinguished leader in the global biopharmaceutical industry and former Chairman and CEO of Allergan, to our Board of Directors. His experience building enduring global eye care franchises and driving disciplined growth at scale will be invaluable as we continue to expand Tarsus Pharmaceuticals, Inc.'s reach. We have proven we can build and scale.

We have a product that continues to grow, and a pipeline with tangible proof points that position us to do even more. Looking ahead, our ambition is clear: to build a company capable of repeatedly creating and leading new categories in eye care and beyond. Before I hand it over to Aziz, I want to thank the entire Tarsus team. Our performance in 2025 reflects extraordinary execution and our award-winning culture, laying the foundation as we become a leader in eye care. Aziz, thanks.

Aziz Mottiwala: 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 have transformed the eye care experience and now see U.S. sales potential exceeding $2,000,000,000. Beyond the large untapped addressable market, this outlook is reinforced by three 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 have 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 have been talking about, including DB patients with concurrent MGD, dry eye, and cataracts, where visual outcomes are so important.

Furthermore, I constantly hear from ECPs that they are beginning to look beyond these initial nine 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-identifying. Together with strong access, where we have more than 90% of coverage across commercial, Medicare, and Medicaid, these dynamics are expanding the funnel of diagnosed and treated patients. To further accelerate the depth of utilization among ECPs, we are making a targeted investment in one of the most impactful parts of our business, our salesforce.

In 2026, we plan to add approximately 15 to 20 key account leaders. This is a relatively modest investment that is strategically focused on increasing depth within high-opportunity practices, and we expect it to contribute meaningfully to growth in the second half of the year. Another critical growth lever is evidence generation. We plan to share additional clinical and real-world data to reinforce the consistency of outcomes, strengthen physician confidence, and further expand screening and treatment patterns. This will also feed another powerful amplifier of ECP utilization: peer-to-peer influence. Having been in the eye care space for a long time, I know that when ECPs hear directly from colleagues about XDEMVY’s consistent outcomes, adoption accelerates.

We see this dynamic repeatedly at conferences and across professional forums. And complementing all the great work we are doing with our ECPs, our powerful direct-to-consumer campaign and surround-sound approach to patient education also continues to deliver a positive and growing return on investment. In 2026, we plan to execute with even greater precision, focusing on the channels and formats that we know drive the greatest return while maintaining a similar level of spend as in 2025. And you can feel the momentum of our campaign in the field.

I was recently with a group of optometrists at a large eye care conference, and they were blown away by how often patients are now coming in asking to be screened for DB, in many cases making appointments specifically to ask about XDEMVY. It is also amazing to see the change in objective measures of unaided awareness of DB and XDEMVY, which has gone from just 2% at the start of our campaign to now 25%, or one in four patients surveyed. Finally, retreatment dynamics are continuing to progress. Weekly refills are trending in the low- to mid-teens range as practices formalize protocols, moving towards our expected steady-state rate of approximately 20%.

Taken together, these trends—a sustained shift in physician behavior, expanded screening, growing consumer awareness, and emerging retreatment practices—are making diagnosing and treating new patients more efficient than ever. Before I pass the call over to Sesha, I just want to say how proud and thankful I am for our commercial team. At conferences and meetings, we constantly hear from ECPs about all the great work our team is doing and the impact they are having on patient lives. As you can clearly see, we have a lot more in store for 2026 and look forward to sharing our progress with you. Over to you, Sesha.

Seshadri Neervannan: 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 to the next set of opportunities in our pipeline. Today, I will share updates on two programs that reflect the attributes that drove XDEMVY’s success: clear biology, significant unmet need, and the opportunity to pioneer new standards of care. I will 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 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 have already established. Lotilaner has 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 2 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 2 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 telangiectasia around the eye, two of the most impactful signs of the disease, using novel and proprietary grading scales informed by feedback from the FDA.

As with XDEMVY, this Phase 2 trial is designed to inform decisions on dose and endpoints for later-stage development. Importantly, the FDA has indicated that we are not required to show a cure but rather improvements at the endpoint. We expect top-line data in 2027. Turning to TP-05 for Lyme disease prevention, a significant and growing public health concern, I am excited to announce that we plan to initiate a Phase 2 clinical trial in 2026. We plan to enroll approximately 700 participants at risk of Lyme disease in one tick season with the goal of generating data that gives us confidence in TP-05’s potential to prevent Lyme disease. Top-line data is expected in 2027.

As a reminder, TP-05 is an investigational on-demand oral tablet that is designed to potentially kill Lyme-infected ticks before disease transmission occurs, directly targeting the root cause. Approximately 27 million Americans are at moderate to high risk of contracting Lyme disease, with no FDA-approved preventative therapies and an annual health care burden of over $1,000,000,000. Our approach is already established in animal health and further supported by the results of our previous tick-kill trial, where TP-05 demonstrated greater than 95% tick-killing activity within 24 hours compared to placebo.

Furthermore, our market research showed that patients and physicians alike are excited about the potential of a new oral preventative therapy, with 90% of patients willing to try it and a majority of physicians willing to prescribe to up to 95% of their high-risk patients. We believe advancing this program ourselves is the right strategic decision at this stage, given the foundation we have in place, which includes deep experience with the lotilaner molecule, patent protection projected through 2040, alignment with the FDA on a regulatory path forward, and engagement with and support from many of our top Lyme disease experts in the country.

And with the data from our Phase 2 trial, we expect to generate a robust Phase 3–ready package that will potentially maximize the program’s long-term value. Before I turn the call over to Jeff, we also continue to make progress in the potential of TP-03 globally. In Europe, TP-03 remains on track for potential regulatory approval in 2027. In Japan, we are engaged with regulators to define the development pathway, and in China, our partner, Brandforma, expects approval later this year. These milestones represent potential long-term growth drivers as we work to establish TP-03 as a global standard of care. We have an exciting year ahead and look forward to sharing continued progress across our pipeline.

With that, I will turn it over to Jeff. Thanks, Sesha.

Aziz Mottiwala: 2025 was a year of strong financial performance and disciplined execution. For 4Q 2025, we delivered $151,700,000 in net product sales at a gross-to-net discount of 44%. For the full year, we delivered $451,400,000 at a gross-to-net discount of approximately 45%. Total operating expenses were $522,300,000, driven in large part by commercial investments supporting the XDEMVY launch. We ended the year with approximately $418,000,000 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 two years of revenue history, a clearer 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 $670,000,000 to $700,000,000, or annual growth of more than $230,000,000 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 increase 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 4Q 2025 revenue. Further, sequential growth through 2026 is expected to be similar to what we observed in 2025 and consistent with broader sector dynamics. We expect strong growth in the second quarter, more tempered growth in the third quarter, and robust growth in the fourth quarter. Turning to expenses, for 2026, we expect gross margins to remain strong at approximately 93%.

SG&A expenses to be in the range of $545,000,000 to $565,000,000, which includes stock-based compensation of approximately $40,000,000, continued investment in our DTC campaign, XDEMVY-related marketing and commercial support at levels consistent with 2025, or approximately $80,000,000, the incremental planned 15 to 20 new key account leaders, anticipated utilization of patient support services, and variable costs that scale with higher sales, including pharmacy administration fees and the branded prescription drug fee.

We also expect R&D expenses to be in the range of $115,000,000 to $135,000,000 and includes stock-based compensation of approximately $20,000,000, a Phase 2 trial of TP-04 for the potential treatment of ocular rosacea expected to cost between $7,000,000 to $10,000,000 with the majority planned to be recognized in 2026, and the Phase 2 trial of TP-05 for the potential prevention of Lyme disease. As Sesha noted, this is a relatively large trial and expected to cost approximately $25,000,000 to $30,000,000 in total. Given our expertise with TP-05 and lotilaner, we believe we are best positioned to run the trial and generate the most value for this program by developing a Phase 3–ready package for our potential partner.

Importantly, and as Aziz mentioned, our 2026 plan reflects a balanced approach, extending XDEMVY’s leadership while advancing pipeline programs that expand our long-term growth potential and value creation. In summary, we believe we are entering 2026 with strong revenue visibility, a scalable cost structure, and a disciplined investment plan. We look forward to sharing more updates with you in the coming quarters. I will now turn the call back to Bobby for closing remarks.

Bobak R. Azamian: Thanks, Jeff. In just two 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 $2,000,000,000. And as you heard today, Tarsus Pharmaceuticals, Inc. 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 is proven. We have rewritten the biotech playbook and are on our way to becoming a leading pharma company. Operator, please open the line for questions.

Operator: Press 11 on your telephone. Wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from Francis Edward Hickman with Guggenheim. Your line is now open.

Francis Edward Hickman: Yeah. Hey, guys. Congrats on the progress, and thanks for taking my question. You give us a little bit more detail into what is going into your expectations beyond 1Q? For that $370,000,000 to $400,000,000 guidance. In terms of a little bit more about, like, the bottles and the refill and sort of what your expectations around the cadence of that. Appreciate it. Thank you. So, yeah, it—

Aziz Mottiwala: You talking about Q1, Eddie, in particular?

Eddie Hickman: Be 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 retreatment to work throughout the year?

Aziz Mottiwala: Yeah. No. I think just the big-picture guidance that we provided in the prepared remarks is, you know, we do expect flat to slightly down in Q1 just given the typical dynamics that you see with the deductibles resetting. And then, historically, we have seen a nice bump up in Q2. And then as you think about the eye care space in general, you typically see some tempered growth in the Q3 summertime frame. And then fourth quarter, with FSAs expiring and deductibles basically expiring as well, you see more robust growth there. So all of that, you know, the gross-to-nets and the bottles too, are baked into, you know, our guidance.

We are not going to, you know, really provide that typical bio model guidance or gross-to-net guidance that we have historically done now that we have given the full-year guidance here. But, you know, absent a material change, we are probably not going to comment on those types of things. But if there is something that changes dynamically, we will be sure to make sure the Street does.

Eddie Hickman: Got it. And then one clarification: as the launch continues and docs and patients get more familiar with how this is administered and, you know, maybe some getting refills, do we expect the impact of those seasonal disruptions for conferences and weather and holidays to continue to be as impactful from a magnitude perspective going forward? Hey, Eddie. It is Aziz. Yeah. Thanks for that clarifying question.

Aziz Mottiwala: I think as you move further in the launch, you are going to be more susceptible to the typical seasonality. That is pretty typical for most brands. We see this across the eye care space and actually therapeutic areas outside of eye care as well. So we are seeing that now in the first quarter. I think the dynamics you are referring to are what give us the confidence in the continued growth of the brand and eventually achieve the peak that we provided today. And I think the fundamentals there are really strong, as you alluded to. Right? We have got a strong and growing base of prescribers that are actively deepening their utilization.

They are looking for other use cases. We are meeting that with a strong consumer effort. We are now one in four patients aware. You think about our DTC, even at a similar spend level, we are 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, it is certainly going to affect it, considering that even at our steady-state 20% refill rate, we are still primarily NRx-driven. Right? So you will see that across every brand.

We are probably just as susceptible to it given the NRx dynamic. But, certainly, the long-range view here looks really great given the drivers I have outlined.

Eddie Hickman: Appreciate it. Thanks for all the color, guys, and congrats again.

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

Pavan Patel: Hey, guys. This is Pavan Patel on for Jason Matthew 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 $2,000,000,000 is a big update. And I am just wondering if you can unpack what is 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. Thank you. Hey, Pavan, it is 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 had 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 will probably get to that range in the middle of this year. We will see a stepwise decrease in Q2 and then fundamentally get to that sort of lower end of the 43% to 44% to 45% range.

Bobak R. Azamian: And, Pavan, this is Bobby. Thanks for the question about $2,000,000,000. We have gotten a lot of people interested in what is the potential of XDEMVY, and we are really excited to be able to talk about that today. What has really changed there is that we have a great view of how XDEMVY is performing now two years in. We know that this is a breakthrough. We have served only half a million patients with this medicine. There are 25 million Americans with DB, so that represents less than 10% penetration.

That $2,000,000,000 plus figure, we also have transformed the practice of eye care in general, and that has allowed doctors to look beyond those segments to all of their patients. They are starting to look at all their patients and recognizing the importance of DB. And then to your point, there is just continued flawless execution across the board with our commercial effort, education, access, evidence. You mentioned a couple things there that we are going to continue to execute flawlessly on. So that has allowed us to rewrite the playbook and confidently say this is a $2,000,000,000 plus medicine. Thank you.

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

Lachlan Hanbury-Brown: Guys, thanks for taking the question. I guess the first maybe on the DTC campaign. You said that it has, you have seen a great response, it has got a positive ROI, and it has probably achieved that earlier than you would have expected. So curious on the thoughts of, you know, is it worth putting more behind that? You know, investing more money in a DTC campaign—how you thought about that and sort of landed on $80,000,000 being the right level of spend?

Seshadri Neervannan: Yeah. Thanks, Lachlan. Yeah. You are 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 is driving, you know, the improvement in ROI in 2026 and why we are excited about that, there are a couple of factors. One, now you have got one in four patients aware. And two, you have got doctors actively looking. These two things, along with our ability to execute—right, we have learned a lot in the last year—is going to allow us to really scale that ROI impactfully.

It is a compounding effect, if you will. We should be able to convert those patients more quickly, more effectively. $80,000,000 feels right. And, ultimately, look, what we are making is slight incremental investments actually with the salesforce because, ultimately, the physician is writing the prescription. And we think that getting the patients in the practice is important, but continuing to support that deepening of prescribing and that deepening of utilization is another factor. So sort of hitting on both sides of the funnel, if you will. We are 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. We have got the right things in place to capitalize on it.

Lachlan Hanbury-Brown: Hey. Great. Thanks. And maybe a second on the Lyme disease program. Can you give any more details on what that study looks like and what the endpoints might be, how long it would be, what sort of, you know, duration of treatment is.

Seshadri Neervannan: Yeah. Hi, Lachlan. Thanks for the question. So Lyme disease, you know, is a Phase 2b trial, as you said, about 700 participants. You know, we plan to enroll them in one 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 a confidence of overall effectiveness of TP-05.

So the purpose of the study is to generate data that gives us a strong, Phase 3–ready package, gives us additional confidence on the program, and in a large enough population that can give us directional input to a Phase 3 study. Got it. Thanks. Our next question comes from Jenna DeBinder with Barclays.

Operator: Hi, thanks for taking my question. 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 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? Thank you.

Aziz Mottiwala: Thanks, Jenna. This is Jeff. Great question. We do not 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 copay program, also patient support programs that will increase with increased revenue. So that would be the main item there. The other thing, you know, that we could explore in potential out years is maybe a reduction in DTC spend.

You know, we will have to see how that experiment plays out, but there could be a potential to, you know, pare back on it or pulse it or something like that. But that is more of a 2027 and beyond type of question there. So, but big picture, no material step-ups in the out years absent a material change in the business.

Operator: Awesome. Thank you so much.

Bobak R. Azamian: Our next question comes from Matthew Coleman Caufield with H.C. Wainwright. Hey, guys. Great to see the continued progress—I appreciate the question. So there was obviously 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?

Seshadri Neervannan: Thanks. Yeah, thank you for that question. I think when we look ex-U.S., what is 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 are 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 have been to a few of these European conferences, and the European doctors are really excited with what they are seeing their U.S. colleagues do with XDEMVY. So there is a lot of interest and excitement around the market opportunity. The market dynamics are very similar, albeit, you know, there are always differences in pricing and reimbursement, but the patient and physician dynamics are very similar. Ultimately, the pricing and reimbursement dynamics will sort of dictate our go-to-market approach. We are currently evaluating in each of those markets.

Bobak R. Azamian: Okay. Great. Thank you very much.

Operator: Our next question comes from Yuchen Ding with Jefferies. Hi, this is Andrea Tan on for Yuchen. Thanks for taking our questions, and congrats on the quarter. In terms of the peak sales guidance, can you talk about when you expect to achieve that $2,000,000,000 in sales? If that would be before 2032 and when your composition-of-matter patent expires, or 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 is a scenario to hit statistical significance there. Thank you.

Bobak R. Azamian: Thank you very much. This is Bobby, and I appreciate the question. It is a little early to say exactly when that peak is going to be hit. What we see is we are two plus years into the launch, and we have seen continued incredible growth, and we continue to see no slowing of that growth. We are about a couple years from a billion plus. And then, you know, we see no signs of slowing down. And all these metrics that we have talked about on the commercial side continue to be very, very strong. So that is what I can say about the peak, and I will pass to Sesha to talk about ocular rosacea.

Seshadri Neervannan: Yeah. Thanks, Bobby. Can you please repeat that question so I can clarify that?

Andrea Tan: Yeah. For sure. In terms of ocular rosacea, what do you see as a meaningful trend on erythema? And then if there is a scenario to hit stat sig on that endpoint.

Seshadri Neervannan: Yeah. So thank you. Thank you for the question. You know, so one of the things I would start by saying is that this is a first-ever trial in ocular rosacea, and, you know, we are not new to this paradigm. We have done this once well before, developing new clinical measures. So that is 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, you know, given the fact that there is no approved treatment, what they are looking for is any improvement in these conditions.

You know, it is very meaningful for them. And that is exactly what we are focused on. We have alignment with FDA on these two measures. And what we are striving to show is an improvement on these measures. And then we will continue to evaluate the data and move it forward with continued conversations with the FDA.

Andrea Tan: Great. Thank you.

Operator: Our next question comes from Andreas Argyrides with Oppenheimer. Hey. Thanks, guys. Congrats on all the success and progress in 2025. Most of our questions were asked, but I am going to ask a couple here. Can you give us—you mentioned something around the seasonal dynamics—you provided that 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? Thanks.

Seshadri Neervannan: Yeah. And just I will 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 would expect XDEMVY to be part of that typical seasonality. Right? And there are a few dynamics here. Right? There are resetting copays. There are deductible resets for both patient visits. So you are thinking about 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 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 we are 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. Fundamentally, all the signs we are seeing are really great. We go to the conferences, the doctors are telling us there is no end in sight.

They are seeing 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 will 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 would expect all the things we are doing to continue to amplify the growth.

And, certainly, the Q1 dynamics are going to play through, but absent that, we expect a really strong year in line with the guidance that Jeff provided.

Aziz Mottiwala: And, Jeff, do you want to talk about the pivotal potential cost for OR and Lyme?

Aziz Mottiwala: Yeah. So, Andreas, the OR study is expected to cost somewhere between $7,000,000 to $10,000,000 with the majority of those costs incurred in 2026. And then for the Phase 3 or Phase 2 Lyme study, somewhere in the range of $25,000,000 to $30,000,000, with most of those costs coming in during 2026 and a few trailing over 2027.

Francis Edward Hickman: Alright. Appreciate it, guys. And congrats again on all the progress. Thank you.

Operator: Press 11 on your touch-tone phone. That is 11 to ask a question. Our next question comes from the line of Greg Subinovich with Mizuho. Great. Thanks so much for taking my question and 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 two 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. Thanks.

Aziz Mottiwala: Great. It is Aziz. I can provide a little bit of color on both of those. So in terms of the prescribing dynamics, what we are excited about is the continued depth of prescribing, and we are seeing this across both ophthalmology and optometry. And I will remind folks that our split is roughly two-thirds optometry and about a third ophthalmology, with both segments growing really strongly. In fact, when we think about depth of prescribing, we have 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 are prescribing at least once a week.

We saw a 20% growth in those that are writing at least five a week, or what we call a daily writer. So, you know, you have 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 are some good signals there, and that is 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 is actually pulling from our 25 million TAM into that 9 million TAM. So you are expanding the funnel, as we mentioned earlier. So that is going to help continue to facilitate back up the prescribing. And then to clarify, the $2,000,000,000 peak, that is specific to the U.S. Right? So that is where we are in market right now, and that is where we are focusing. The guidance, and that peak, is $2,000,000,000 in the U.S.

Oren Livnat: Got it. And maybe as a follow-up then, I know it is early days, but any way to help us think about what then the ex-U.S. component might look like? No. Again, it is hard at this point, but any color there?

Cory Jubinville: Hey, Greg. It is Jeff. Yeah. It is a little bit challenging, particularly given some of the dynamics that we are facing now with MF, and I think what we are doing is we are making thoughtful investments along the way to, you know, do ECP education, get engaged with patient groups, and do everything we can before crossing the Rubicon and really launch over there. So we are monitoring that. But big picture, you know, I think a good sort of proxy is typically, you know, 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.

Seshadri Neervannan: Very much appreciated. Thanks so much, and congrats again.

Oren Livnat: Thank you.

Operator: That will conclude today’s question and answer session. This concludes today’s conference call. Thank you for participating. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.