Tarsus Pharmaceuticals Q2 Earnings Call Highlights

Key Points

• XDEMVY sales rose 69% year over year to $173.9 million in the second quarter, prompting Tarsus to raise its 2026 sales outlook to $685 million–$705 million. More than 700,000 patients have used the Demodex blepharitis treatment since launch.
• Tarsus agreed to acquire Alkeus Pharmaceuticals for $450 million upfront, adding late-stage Stargardt disease therapy ALK-001 to its pipeline. The Phase III NORTHSTAR trial is underway, with top-line results expected in the second half of 2029.
• The transaction expands Tarsus’ strategy beyond XDEMVY into retina care but will increase near-term spending. The company raised 2026 R&D guidance to $190 million–$210 million and said profitability could potentially arrive in 2027, subject to acquisition-related costs.

Tarsus Pharmaceuticals NASDAQ: TARS reported second-quarter growth in sales of its Demodex blepharitis treatment XDEMVY and announced a pending acquisition of Alkeus Pharmaceuticals, adding late-stage investigational Stargardt disease therapy gildeuretinol, also known as ALK-001, to its pipeline.

Chief Executive Officer and Chairman Bobby Azamian said the company views the transaction as an expansion of its strategy to build a larger eye-care business beyond XDEMVY. The proposed acquisition also broadens Tarsus’ presence in retina, following its recent acquisition involving IRX-101.

“XDEMVY continues to prove that thesis,” Azamian said, referring to the company’s approach of addressing overlooked eye-care diseases with new treatments. He said more than 700,000 patients have been treated with XDEMVY since launch and that the product has generated almost $1 billion in reported net product sales to date.

XDEMVY Sales Rise, Full-Year Outlook Increased

XDEMVY generated $173.9 million in second-quarter net product sales, up more than 69% from a year earlier and approximately 20% from the prior quarter. Tarsus said gross margin was approximately 93%, unchanged from the prior period, and it ended the quarter with $449.7 million in cash, cash equivalents and marketable securities.

The company raised its 2026 XDEMVY net product sales guidance to between $685 million and $705 million, from a prior range of $670 million to $700 million. Tarsus said it expects third-quarter growth to be tempered by typical summer seasonality in eye care, including physician vacations, holidays and conferences, before more robust growth in the fourth quarter.

Interim Chief Commercial Officer Neera Clase said prescribing activity has continued to broaden. The number of eye-care professionals prescribing XDEMVY at a daily cadence doubled over the past year, according to Clase, while retreatment rates have moved into the high teens. She said Tarsus expects retreatment rates to stabilize at approximately 20% over time.

Clase also highlighted consumer-awareness efforts, including campaigns featuring John Cena and an unbranded direct-to-consumer campaign featuring “Barry the Cat.” Tarsus said unaided awareness of Demodex blepharitis has reached approximately 30%, while high-value actions on the XDEMVY website increased 19%. Those actions include use of the company’s Find a Doctor tool and its AI-powered patient concierge.

The company estimates that approximately 25 million Americans are living with Demodex blepharitis. Clase said more than 80% of physicians surveyed by the company expect to increase XDEMVY prescribing over the next year and beyond.

Alkeus Deal Adds Late-Stage Stargardt Program

The pending Alkeus acquisition centers on ALK-001, an investigational modified vitamin A analog designed to reduce formation of toxic vitamin A dimers, or bisretinoids, while preserving the normal visual cycle. Tarsus said those toxic byproducts contribute to retinal cell damage in Stargardt disease, an inherited retinal disorder that can cause progressive central-vision loss and blindness.

Chief Operating Officer Sesha Neervannan said Stargardt disease affects children and young adults and currently has no FDA-approved therapies. Tarsus cited more than 36,000 diagnosed U.S. patients and an estimated total U.S. population of 86,000 patients. The company said half of patients diagnosed before age 20 are expected to become legally blind within seven years.

ALK-001 has been evaluated in more than 400 patients, with treatment exposure extending up to seven years, according to Tarsus. Neervannan said the program has shown encouraging evidence of preserved visual function and no evidence of treatment-related negative effects on night vision, dark adaptation or color vision.

The ongoing Phase III NORTHSTAR study is expected to enroll about 230 patients ages 8 to 45. Its primary endpoint is the rate of retinal lesion growth over 24 months, while a secondary endpoint assesses low-luminance visual acuity. Tarsus expects top-line results in the second half of 2029 and said it is considering a second Phase III trial, to be discussed with the FDA, that could focus on younger and faster-progressing patients.

During the question-and-answer session, Neervannan said Phase II trials showed an approximately 29% reduction in atrophic lesions compared with placebo. He said NORTHSTAR began enrolling about two months ago and is enrolling as expected.

Tarsus said its market research with 100 retinal specialists supported its view that ALK-001 could represent a billion-dollar-plus opportunity. The company said it expects approximately 2,000 physicians to account for more than 80% of Stargardt disease prescribing and sees overlap with physicians who could prescribe IRX-101. Clase said a future retina commercial team could include roughly 50 to 75 people.

Transaction Terms and Spending Plans

Tarsus agreed to pay $450 million upfront for Alkeus, consisting of $270 million in cash and $180 million in Tarsus common stock. The agreement also includes up to $350 million in potential milestones tied to U.S. regulatory approval and the first commercial sale, plus low-single-digit, tiered decreasing royalties on future net sales.

The company also secured $125 million through a private placement financing from healthcare investors, including several Alkeus shareholders. The transaction is expected to close later in 2026, subject to the expiration of the applicable Hart-Scott-Rodino waiting period and other customary conditions.

Tarsus maintained guidance for gross margin of approximately 93% and selling, general and administrative expenses of $545 million to $565 million for 2026. It increased research and development expense guidance to $190 million to $210 million from $115 million to $135 million, reflecting $75 million of upfront consideration associated with the iRenix Medical acquisition. The company said this guidance does not include the pending Alkeus acquisition.

Chief Financial Officer and Chief Strategy Officer Jeff Farrow said Tarsus has not formally provided profitability guidance. However, he said that using the high end of revenue guidance and the low end of operating expense guidance could indicate profitability sometime in 2027, though spending related to iRenix and Alkeus could shift that timing by “perhaps by a quarter or two.”

About Tarsus Pharmaceuticals (NASDAQ:TARS)

Tarsus Pharmaceuticals, Inc is a clinical‐stage biopharmaceutical company focused on developing novel therapies for diseases of the eye and ocular surface. The company's research platform centers on neuro‐effector modulation to address underlying disease mechanisms rather than solely treating symptoms. Tarsus's lead candidate, OC-01 (varenicline solution), is an intranasal formulation in Phase 3 development for the treatment of dry eye disease, a condition affecting millions worldwide and associated with significant patient discomfort and reduced quality of life.

In addition to its dry eye program, Tarsus is advancing preclinical and early‐stage programs targeting other ophthalmic indications, including allergic conjunctivitis and retinal disorders.

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