Tarsus Pharmaceuticals - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered strong execution: XDEMVY net product sales were $78.3M, up 217% YoY and 18% QoQ; bottles dispensed reached ~72,000, up 23% QoQ, with coverage now >90% of lives and gross-to-net at ~47%.
• Revenue and EPS beat Wall Street: Revenue came in above consensus by ~$5.9M; EPS was better than expected by ~$0.10 (S&P Global consensus).*
• Gross margin held ~93%; CFO sees minimal impact from potential tariffs given low COGS, diversified API/finish capacity, and second US contract manufacturer in process.
• Liquidity strengthened: $134.8M equity raise; cash, cash equivalents and marketable securities at $407.9M to fund DTC expansion and pipeline (TP‑04 Phase 2 H2’25; TP‑05 Phase 2 in 2026).
• Near-term catalyst: Q2 bottles guidance of 85k–90k and gross-to-net 45%–47%; management expects typical summer moderation in Q3 and stronger growth in Q4, with DTC spend stepped up to $70–$80M in FY25.

What Went Well and What Went Wrong

What Went Well

• Category-creation momentum: “The XDEMVY launch is continuing to exceed our expectations” with ECPs moving from monthly to weekly to daily prescribing; bottles dispensed up ~23% QoQ and weekly prescribers up ~110% vs Q3’24.
• Coverage/DTC leverage: >90% coverage across commercial/Medicare/Medicaid and a 140% jump in weekly website visits by March vs December; strong leading indicators supporting demand.
• Financial/operational resilience: Gross margin ~93%, inventory in channel ~2.5 weeks, and cash of $407.9M after $134.8M equity raise.

Quotes

• CEO: “XDEMVY…is on track to potentially become one of the best-selling anterior segment medicines.”
• CFO: “Gross margins remained relatively flat and were approximately 93%.”

What Went Wrong

• Elevated SG&A: Q1 SG&A rose to $85.0M (from $51.6M YoY) driven by DTC and marketing; management plans to increase Q2 marketing $5–$10M vs Q1 and full-year DTC to $70–$80M.
• Still loss-making: Net loss was $(25.1)M; diluted loss per share $(0.64), albeit improved YoY from $(1.01).
• Guidance conservatism: Management refrained from long-range revenue guidance given DTC impact uncertainty and macro factors; expects Q3 seasonality headwinds before stronger Q4.

Transcript

Bobak Azamian (CEO)

Okay, ladies and gentlemen, and thank you for standing by. Welcome to the Tarsus Q1 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. If you would like to ask a question at that time, please press star one one on your telephone keypad. As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Mr. David Nakasone. Sir, please begin.

David Nakasone (Head of Investor Relations)

Thank you. Before we begin, I encourage everyone to go to 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; Jeff Farrow, our Chief Financial Officer and Chief Strategy Officer; and joining us for the question-and-answer session, Seshadri Neervannan, our Chief Operating 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.

Bobak Azamian (CEO)

Thank you, Dave. Good afternoon, everyone, and thank you for joining us. 2025 is off to a tremendous start in terms of both patient impact and the exceptional sales growth of XDEMVY. I'm pleased to share that in the Q1, we generated more than $78 million in XDEMVY sales, a year-over-year increase of 217%, driven by approximately 72,000 bottles that were dispensed to patients. The results we have delivered to date demonstrate the impressive execution ability of our team to establish an entirely new market and foster its growth.

They also highlight the difference and positive impact we can have on the millions of patients we aim to serve on our way to becoming an eye care leader. Aziz will provide more specifics on our commercial achievements this quarter, future plans for our innovative DTC campaign, and the team's ongoing efforts to build even more momentum.

Having just come back from visiting doctors in Cincinnati, I wanted to share my personal perspective on how different it is to be in the field today versus a year ago or even a quarter ago. MDs and ODs are looking for more DB patients and beginning to prescribe XDEMVY across all DB patient segments of MGD, dry eye, cataracts, and contact lenses. They are now fully empowered by the high-quality access we've secured across all payer channels and our high-touch patient services that ensure patients can receive XDEMVY at a reasonable cost. Patients are beginning to ask about DB after seeing our unique and action-oriented DTC campaign. I also heard from several of the ECPs I visited that XDEMVY is one of the best advances they've seen in decades and has become their new standard of care.

It is clear our growth drivers are having a significant impact as our target physicians are rapidly moving from monthly to weekly to daily prescribing. We strongly believe we are just beginning to scratch the surface on the maximum prescribing potential for all of our writers. While our immediate focus remains on the U.S. launch of XDEMVY, we are also continuing to explore the global potential of XDEMVY and pursuing our next category-creating opportunity, ocular rosacea. We recently presented meaningful new data at the American Society of Cataract and Refractive Surgery, or ASCRS, which showed that the high prevalence and significant impact of Demodex blepharitis in Japan is on par with the U.S. That is, there are millions of people in Japan suffering from Demodex blepharitis and in need of XDEMVY.

We are confident about the potential opportunity here and look forward to meeting with regulatory authorities in the second half of this year to determine our best path forward in this region. We are also making great progress in Europe. As a reminder, due to the stellar clinical data and product profile of XDEMVY, the European Medicines Agency has stated we do not need to conduct a Phase 3 study, and we remain on track for potential European regulatory approval in 2027. Turning to ocular rosacea, the more we learn about this pervasive and damaging eye disease, the more excited we are about its potential to be the next transformative category in eye care.

We are consistently hearing from ECPs that they are seeing as much ocular rosacea in their practices as DB, and that it may be even more impactful to their patients in terms of how they look, feel, and see. Like DB, ocular rosacea is a large and underserved market that affects approximately 15-18 million Americans, with the majority of cases caused by an infestation of Demodex mites. It can also be quickly and simply diagnosed in any standard eye exam by looking for inflammation and redness. These are just a couple of the many parallels to Demodex blepharitis that give us great confidence in our ability to deliver another impactful therapeutic that targets the root cause of disease. The potential medicine we are advancing is TP-04, a convenient, sterile, ophthalmic gel formulation of our best-in-class molecule, lotilaner.

It is specifically designed to be used around the eye, and the ECPs we have spoken with are excited about this approach. We are accelerating this program as quickly as possible and remain on track to initiate a Phase 2 trial later this year. Finally, I'd like to highlight our recent equity financing, which secured approximately $135 million, no small feat in the current market environment. The significant support that our existing and new shareholders demonstrated through their participation in this upsized equity offering speaks to the confidence they have in the potential value of XDEMVY and our pipeline.

These funds further strengthen our financial position and will enable us to continue to drive the growth of XDEMVY, potentially create another new category in ocular rosacea, and continue to advance our pipeline. There is clearly a lot to be excited about. We have a proven category-creating blueprint for success.

We are advancing a pipeline of category-creating medicines that could potentially be the standard of care, and we believe that we are well positioned to achieve substantial and sustained revenue growth for years to come. With that, I will turn the call over to Aziz.

Aziz Mottiwala (Chief Commercial Officer)

Thanks, Bobby. From the beginning, we have said category creation provides great opportunity. It also requires a tailored, custom-built strategy that delivers consistent and increasing growth through a surround-sound approach of education, ease of access, and flawless execution, all of which we are delivering. Our strong Q1 results exceeded our expectations even in the face of the typical headwinds like the annual resetting of deductibles and the impact of holidays and medical meetings. In the Q1, approximately 72,000 bottles of XDEMVY were dispensed to patients, and we generated more than $78 million in net sales, a quarter-over-quarter growth of 18%. These results were principally driven by our recently expanded sales force, which is just beginning to demonstrate their ability to reach our target universe of prescribers more frequently and more effectively.

Their efforts to drive awareness and change practice patterns have led to a profound shift in monthly to weekly prescribing. At the end of the Q1, we saw an increase of approximately 110% in the number of ECPs, which is now in the thousands, writing more than one prescription per week compared to the end of Q3 of 2024. We saw very similar increases in daily prescribing as well.

This increase in routine prescribing clearly underscores the value of this first-in-class therapeutic and the importance of an optimized sales force. What is even more encouraging is knowing that while we are making remarkable progress again this quarter, we still have millions more to serve. Our top prescribers say they have not even come close to reaching their limits, and there are thousands more of our target ECPs who have the capacity to prescribe XDEMVY every week and every day.

Our success this quarter was also driven by broad commercial and Medicare coverage and the growing impact of our direct-to-consumer advertising campaign. We began the year with more than 90% of commercial and Medicare lives covered. This remarkable access has all but eliminated the most significant hurdle to physician adoption, and we are now seeing both an increase in ECP prescribing and patient access, particularly among Medicare patients.

We are also well on our way to making XDEMVY a household name thanks to the impact of our innovative DTC campaigns, coupled with our surround-sound approach to physician and patient education. In the Q1, we expanded our effort from streaming platforms into network television, which increased the average weekly website visits by 140% in March 2025 compared to December 2024. We're also seeing thousands of patients taking the DB quiz every week.

Given these strong results, we have a lot of optimism and confidence as we look to expand this effort even further through the end of the year. As Bobby mentioned, we just came back from ASCRS and heard from several doctors that patients are starting to ask for XDEMVY by name. This is really exciting.

Keep in mind that every patient journey is different. For the vast majority of patients, they typically need to see the ad multiple times, eventually make an appointment, and then, of course, fill the prescription. As we look at the Q2 and step into the next phase of the launch, we are confident we'll begin to see even more benefits from the growth drivers we implemented last year, namely, first, the sales force. With essentially two quarters under their belts, they are just beginning to hit their stride.

Second, the benefits of broad access. With more than 90% of all lives covered, we have eliminated a major roadblock to access and expect to see an ongoing increase in patient volumes. Third, our action-oriented DTC campaign. Frequent airings on streaming and network TV, supported by our digital and social efforts, are meaningfully increasing website traffic and patient engagement. Finally, our ongoing evidence generation, as illustrated by the new data highlighting the global prevalence and real-world patient burden of DB, and the recently presented MGD data in DB patients, which is expected to further drive utilization across all patient segments. With these in place, we have the confidence that we will continue delivering consistent and increasing growth in one of the fastest-growing categories and firmly establish our position as the next leader in eye care.

I'll now turn it over to Jeff Farrow, our Chief Financial Officer and Chief Strategy Officer, to discuss our financial results. Jeff.

Jeffrey Farrow (CFO and Chief Strategy Officer)

Thanks, Aziz, and good afternoon, everybody. Tarsus's Q1 performance reflected both our executional strength and our team's unwavering dedication and commitment to patients. XDEMVY net product sales were $78.3 million, driven by approximately 72,000 bottles dispensed to patients and a gross-to-net discount of approximately 47%. As a reminder, we recognize revenue when XDEMVY is shipped from our warehouse to the distributors, not on bottles dispensed to patients. Additionally, we ended the quarter with approximately two and a half weeks of inventory in the channel, which is in line with previous quarters.

The gross-to-net discount of approximately 47% reflects the excellent coverage we started the year with, as well as an adjustment to our estimate for the Medicare accrual for the Q4 of 2024. This adjustment, made in the Q1, resulted in a reduction of the discount of approximately 1% or approximately $1.5 million.

Absent this adjustment, our gross-to-net discount for the Q1 would have been about 48%, which is in line with what we guided to on our previous earnings call. From a U.S. GAAP perspective, gross-to-net accruals in any given quarter are based upon estimates that are trued up upon subsequent invoices and data received. Continuing through the P&L, total operating expenses were approximately $104.6 million.

The increase of $14 million compared to Q4 2024 was driven primarily by XDEMVY direct-to-consumer advertising and other related commercial and marketing costs. Gross margins remained relatively flat and were approximately 93%. While uncertain and evolving, we also believe that even if tariffs were to be implemented, as currently rumored, they would have an insignificant impact on our gross margins or other expenses. For background, we have approximately two years of API in the United States and several more years in Europe.

Additionally, XDEMVY is currently being filled and finished by a well-known contract manufacturer in Europe, and we are well into the process of bringing on a second contract manufacturer located in the United States. Importantly, as I noted earlier, we have strong gross margins, and like any other small molecule therapeutic or eye drop, XDEMVY manufacturing costs represent a very small part of our total cost of sales.

Therefore, even if tariffs were imposed, we would not expect a material impact to the P&L given our low cost of goods. Moving to the balance sheet, we ended the Q1 with $407.9 million in cash and cash equivalents, which includes the $134.8 million from our recent equity raise. Echoing Bobby's comments, this oversubscribed and upsized financing demonstrates continued shareholder appreciation for XDEMVY's strong potential and, importantly, their support for Tarsus.

Turning to our performance aspirations, we continue to anticipate strong annual growth of XDEMVY as our fully deployed sales force builds further momentum with ECPs, our DTC campaign encourages more and more patients to visit an ECP, and doctors moving from monthly to weekly to daily prescribing.

Looking specifically at the Q2 and factoring in the historical Q2 headwinds of ECP conferences, holidays, and spring break, we remain confident XDEMVY will continue on its strong trajectory and expect the following. Bottles dispensed to meaningfully increase compared to the Q1 and in the range of $85,000-$90,000, and the gross-to-net discount is expected in the range of 45%-47%. We also reiterate our expectation that we will likely see more modest revenue growth in the Q3 due to typical sector summer dynamics, with stronger growth returning in the Q4.

Moving to operating expenses, given the early positive signals of our DTC advertising and surround-sound campaigns, we have made the strategic decision to broaden our advertising efforts and increase our network spend even more. As a result, we now anticipate an increase in SG&A XDEMVY-related marketing costs of approximately $5-$10 million compared to the Q1 of 2025. As we amp up our DTC activities and spend with the goal of boosting this launch even further, we expect full-year 2025 DTC costs to be in the range of $70-$80 million, with the potential to add even more in the second half of the year if we continue to see strong signals that campaign is resonating with ECPs and patients.

Additionally, as we noted on last quarter's call, in the second half of this year, we expect R&D expenses to increase with the planned initiation of the Phase 2 study of TP-04 in ocular rosacea. We continue to expect this study to cost between $7 million and $10 million, and the costs should be split between 2025 and 2026. In closing, we enter the Q2 of 2025 with a tremendous amount of momentum and strength, both operationally and fiscally, and we look forward to sharing more updates with you in the coming quarters. I will now turn the call back to Bobby for final remarks.

Bobak Azamian (CEO)

Thank you, Jeff, and thank you all for making the time to join us today. As I said at the beginning, we have a lot to be excited about. We have a proven blueprint for success. XDEMVY is setting a new standard for product launches, and we have a strong financial position that enables us to continue driving the growth of XDEMVY and continue advancing a robust pipeline of other potential category-creating medicines. Operator, please open the line for questions.

Operator (participant)

Yes, sir. Ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 11 again. Again, if you have a question or comment at this time, please press star 11 on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Lachlan Hanbury-Brown from William Blair. Your line is open.

Lachlan Hanbury-Brown (William Blair)

Hey, guys. Thanks for the questions and congrats on the strong quarter. A couple of questions. I guess first, you were talking about, we have spoken in the past about meeting with the FDA to align on study design for both pipeline products. I just wanted to check, have you seen any disruptions? Have you been able to have those meetings or schedule them as you expected? Second, on XDEMVY in this past quarter, with Medicare coming online, can you give a sense of how much of the volume or the prescribing is going to commercial versus Medicare patients at the moment?

Seshadri Neervannan (COO)

Thank you, Lachlan, for the question. I'll take the first part of the first question with the pipeline. As you know, we are creating a new paradigm with our programs, especially with ocular rosacea, with our blueprint of developing the new disease, new endpoints, and we are well on track to starting the trial in the second half of the year. We are proceeding with every sense of urgency, as well as looking at the patient population and learning a lot from the physicians in the field of both the disease and the patients as well.

Bobak Azamian (CEO)

I'll just reiterate, Lachlan, to your question, we have not had any delays in our meeting schedule, so we have not seen the impact on our pipeline for your question.

Aziz Mottiwala (Chief Commercial Officer)

Great. For the second part of that question, when you think about our script volume in the Q1, it is a relatively equal split between Medicare and commercial prescriptions. I think the one thing to keep in mind is the Medicare coverage, the bulk of that came in, activated in the Q1. When you look at it versus, say, the Q4, we definitely saw an increase in Medicare prescriptions. As we look at the total volume of scripts, it is about equally split.

That is what we expected to see. The only other thing I would add there is getting that coverage is a huge catalyst for us. I think it has been a tremendous growth driver. If you look back, that is probably the one piece of feedback we received from physicians that that was one of the key barriers. Now that that's out of the way, I think we'd anticipate to see continued volume growth based on that great coverage. Thanks for the questions.

Operator (participant)

Thank you. Our next question or comment comes from the line of Andrea Newkirk from Goldman Sachs. Ms. Newkirk, your line is open.

Andrea Newkirk (Analyst)

Thank you. Good afternoon. Thanks for taking the questions. Aziz, I was just wondering if you could discuss the pushes and pulls that you're seeing to repeat prescribing, more specifically around your comments around the prescribers who are writing daily versus weekly versus monthly scripts.

Aziz Mottiwala (Chief Commercial Officer)

Absolutely. That has been one of the great things to see as we have continued to accelerate this launch at the beginning of the year, that progression of doctors writing the product more frequently. When I look at what the key drivers are there, I think there are a couple that are in the near term that have really impacted, particularly in the Q1. First would be the expanded sales force. Everyone recalls that we expanded the sales force late last year. They got off to a great start.

They have done a phenomenal job. With that said, I think having those repeat visits in front of those new customers for that expanded team is really starting to have that impact. I think those repeat visits are resulting in further education, encouraging doctors to look across the different patient segments and expand their utilization. That is going very well.

The second one, as I mentioned earlier, is the coverage. That was probably the biggest barrier we heard to deepening adoption when the doctor could not differentiate who had coverage and who did not. Now, with over 90% of lives covered, doctors can be a little bit more open in terms of who they are thinking about treating. If you think about a particular segment, say your cataract patient, that is a heavy-party patient. We are able to address that segment more effectively now.

That is a real tangible example where we are hearing qualitatively doctors are starting to utilize XDEMVY more and more. I think the two near-term drivers have been the sales force and, sorry, the coverage. I think when we look at what is going to continue that going forward, there is still a lot more room for the sales force to continue to make amplification.

I think that the coverage is going to be a key driver. Also, we're seeing early indicators that DTC is having a positive effect. Also, as we mentioned earlier, we just came back from a major conference, and doctors are also responding very nicely to the MGD data and other evidence that's out there. A real short way to think about this is near-term, it's been the sales force and coverage. That's going to continue to ramp. On the back of that, we've got DTC and new data as well.

Bobak Azamian (CEO)

Yeah. Andrea, just to give you some color from my interactions with doctors, I mean, they can't stress how amazed they are by the effect and overall profile of the medicine. I think that really drives them to look more and more because they see how well it works. Really, every patient they prescribe it to is what they tell us. That motivates them to look more. As Aziz mentioned, the evidence that we're going to generate will help them look even more. We see only opportunity ahead in terms of that progression that Aziz described.

Andrea Newkirk (Analyst)

Got it. Bobby, maybe I can ask a follow-up there then, just given the efficacy that the physicians are recognizing and observing here. To what extent are you then seeing retreatments happening? Has that started coming in in a more meaningful way than in previous quarters?

Bobak Azamian (CEO)

Yeah. We're definitely hearing about it more and more. When I was in the field, I heard it from a lot of the offices that they're asking about when and how should I think about retreatment. Our sales force is able to talk them through the data that shows that by a year, about 40% of patients recur in the Phase 3 follow-up we had. They're starting to see that themselves. I'll pass to Aziz to talk a little bit about how we see that going forward. I do think that it's exactly as we suspected so far. We do expect that to be a meaningful long-term growth driver for us.

Aziz Mottiwala (Chief Commercial Officer)

Yeah. I can add a little bit more color. I think the first thing I always remind folks of is with any product, even chronic medications, adherence is pretty low. To be successful, it's all about driving new patients. We've got 25 million patients out there that we want to continue to drive diagnosis and treatment for those patients. That's really the core emphasis.

To Bobby's point, we do contemplate retreatments as a tailwind for us. When you look at the IQVIA data today, you're seeing a high single-digit refill rate. If you start to do a little bit of math and you impute patients that were treated, say, a year ago relative to the volumes today, you can assume that the actual retreatment rate is probably leading that or even higher than what you're seeing in the refill rate in IQVIA.

A very positive trend. I think that trend is what gives us confidence in reaffirming our estimate of about 20% annualized retreatment rates that we talked about before. Again, it looks really good, and it's trending in the right direction.

Andrea Newkirk (Analyst)

Okay. Thank you, guys.

Operator (participant)

Thank you. Our next question or comment comes from the line of Pavan Patel from Bank of America. Your line is open.

Hey, guys. This is Salahan for Jason Gerberry. First question is, how is the feedback from the Orion Registry and the combined Ersa and Rhea, MGD data being received by eye care professionals? Are you seeing evidence that this new data is influencing prescribers' behavior or expanding use into specific patient segments, such as dry eye? The second question is regarding the upcoming Phase 2 trial for TP-04 in ocular rosacea. Can you share any details on the study design, primary endpoints, and patient population? Thank you.

Aziz Mottiwala (Chief Commercial Officer)

Yeah. Thanks for the question. I'll speak a little bit to the receptivity on the new data. Seshadri can speak to the pipeline developments here. I'd say that coming fresh off a conference, it's really exciting to see how doctors respond to the increasing base of evidence around the disease state and the product. I think when you look at the Orion Registry, the real key takeaway there is that the vast majority, over 90% of patients, are symptomatic.

That's really prompting doctors to want to look more, look at the lids more, and help identify more patients. I think when you look at the Ersa and Rhea data, what we're hearing very clearly is that there's evidence now that shows that XDEMVY has impact on a constellation of symptoms as well as improving the oil secretions that are really important for eye health.

These two things combined really do two things. They help the doctor want to diagnose more, but then they start thinking about the types of patients. They're not just thinking about the traditional DB patient. They're thinking about a dry eye patient. They're thinking about the impact of fluctuating vision, say, on a cataract patient or a contact lens intolerant patient. They're also thinking about how they can incorporate this in their daily routine. The data is being received very well. It's still early. Data dissemination takes time. They have to see it and hear it multiple times. The initial response is really positive.

In particular, with the doctors that have really increased their frequency of prescribing, they do look back and say, "Hey, I'm having multiple repeat visits with the rep, and I'm hearing more and more about this great data." That's really prompting me to look more. Seshad, want to talk about the pipeline?

Seshadri Neervannan (COO)

Yes. Thanks, Aziz. Great question, Pavan. In terms of the ocular rosacea, as Bobby alluded to earlier, ocular rosacea is a highly prevalent disease. More than 50% of those patients of the disease is actually caused by Demodex mite. This is a great opportunity for us and create another category. We have the potential to pioneer a standard of care for ocular rosacea. The key features of ocular rosacea are prominent blood vessels on the eye, on the lid, and areas surrounding the eye, and then erythema surrounding the eye. Those are the two features of ocular rosacea which the physicians use to diagnose the disease. Those are some of the objective measures that we are planning to look at in our trial.

The size of the trial and how we're going to be looking at it and all the details will come later this year as we get closer to starting the trial. The endpoints and the measures that we are contemplating are also something that the FDA are in alignment with. We are on a good track here.

Bobak Azamian (CEO)

Yeah. I just highlight two points on ocular rosacea from some of the interactions we had in recent weeks with doctors. One is this is new. There's never been a medicine developed or trialed for ocular rosacea. Under Seshadri's leadership, our team is diligently translating some of those important clinical findings into a robust clinical plan. The other thing that I am just so encouraged about, the doctors, the ECPs, both MDs and ODs, are so enthusiastic about ocular rosacea. They are seeing it more and more. Now, they're looking at eyelids.

My assessment is that they're even more familiarized with ocular rosacea than they were with DB when we were at a similar stage. I think this is an opportunity that really is a compelling one. It's hard to really state how big that is until we get out there and get data. As Seshad said, this looks and feels a lot like Demodex blepharitis. It is another example, we think, of how Tarsus can pioneer a new category of medicine.

Operator (participant)

Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone keypad. Our next question or comment comes from the line of Eddie Hickman from Guggenheim. Your line is open.

Edward Hickman (Analyst)

Thanks for the questions. Congrats on the quarter. When you think about providing guidance going forward, what are the potential factors, I guess, beyond the summer bumpiness where you have less visibility right now that might prevent you from accurately extrapolating volumes and price going forward? Maybe I missed this, but you noted previously that you had already reached the target 15,000 docs, and they are increasing their frequency of prescribing. Do you know how many more ECPs beyond that target have been reached? Thanks.

Aziz Mottiwala (Chief Commercial Officer)

Hey, Eddie, it's Jeff. I'll take the first part of that question and then pass it over to Aziz. We look at the potential to provide guidance on a quarter-by-quarter basis. I think the two factors that are really causing us pause and preventing us from providing long-range guidance is, one, some of the impact of the DTC campaign, particularly the expanded network campaign. We want to make sure we get our arms around that and see what the impact of that is in the back half of this year. Secondly, there's a lot of macro events going on as we speak, we're keeping an eye on that. We want to be thoughtful as we think about moving forward on that front as well. We do make an assessment on a quarterly basis whether we are going to move forward on the revenue guidance. Yeah.

When it comes to the target prescribing base, certainly, it's grown beyond 15,000 in terms of the number of doctors that have utilized the product. With that said, we know that the vast majority of prescriptions, over 85%, are likely going to come from that core 15,000. We focus the efforts there and really focus our efforts on deepening the prescribing. Obviously, if it continues to grow, we have other mechanisms in which we can address that broader base. When it comes to the sales force and the vast majority of our strategic efforts, it's on that core 15,000 audience and really moving the needle from that monthly to weekly, weekly to daily prescribing.

Edward Hickman (Analyst)

Great. As that increases, do you expect the level of stocking that you have in the channel to change at all?

Aziz Mottiwala (Chief Commercial Officer)

We do not anticipate that, Eddie. It has been hovering around two to two and a half weeks consistently over the last five quarters. I think the pharmacies and distributors do not like to hold a large amount of inventory just given the pricing dynamics and managing their balance sheet. We do not anticipate from a sort of weekly basis that really evolving much beyond that two and a half weeks.

Edward Hickman (Analyst)

Great. Thanks, guys.

Operator (participant)

Thank you. Our next question or comment comes from the line of Cory Jubinville from LifeSci Capital. Your line is open.

Cory Jubinville (Managing Director)

Thanks for taking our questions and congrats on these numbers. Quick from us, based off the Q1 numbers that we're seeing today, we're now looking at a run rate over $300 million and growing for XDEMVY, which is greater than 2024 OpEx. Obviously, spend is going to increase in 2025 as you increase that marketing spend, advance some of these additional clinical programs. Curious if you could add some commentary on total projected 2025 spend beyond that DTC campaign and maybe add some color about the potential to bridge to cash flow positivity following the recent equity raise. From your projections, can you achieve profitability with the current balance sheet?

Jeffrey Farrow (CFO and Chief Strategy Officer)

Yeah, Cory. This is Jeff. We are anticipating OpEx to continue to grow as we talked about in terms of the DTC investment. Of course, there are certain variable costs as revenues go up. So do some of those costs, including cost of goods sold, obviously. We have not provided long-range guidance in terms of when we might go cash flow positive. I'll highlight we're not opposed to going cash flow positive, but we are thinking about investments in the pipeline, including investments in ocular rosacea and such there. I think until we are in a position to provide top-line revenue guidance, we're probably not going to provide any type of cash flow positive guidance either.

Cory Jubinville (Managing Director)

Got it. Maybe one for Aziz. In the targeted streaming service DTC campaign that you had last year, you mentioned that there was potential to get some really powerful analytics regarding the conversion rates on certain profiles of patients. It still seemed a bit too early at the time to start seeing those impacts. Today, you mentioned that the DTC campaign is driving that 140% increase to site traffic. I guess at this point, do you have a good sense of who the most responsive patients are to DTC campaigns? If so, what does that patient profile look like?

Aziz Mottiwala (Chief Commercial Officer)

Yeah. It's a great question, Cory. I think when we did the streaming, we did get a lot of great insights. An example or two of that is we got a good understanding of what our demographic likes to watch, what sort of programs they respond well to, when's the ideal time to run an ad, for instance. We also learned which of the activities really lead to eventual prescription. We highlighted earlier on our prepared comments increase in the number of website visits and quizzes. Those correlate nicely to prescription volume. It gave us a lot of insights on where to place our bets. When you think about the typical patient, as you can imagine, it's going to mirror sort of how we saw the coverage evolve. There's your sort of mid-40s patient that's got commercial coverage, that's active.

Their eyesight is integral to their day-to-day activities. They're going to want to make an appointment because they want perfect vision. They're going in there. They want to have the ability to wear their contact lenses, be able to be at work, and be able to have clear vision during the day. Things like blepharitis obviously get in the way.

The other demo that's really opened up with Medicare coverage is that 60-plus person who's potentially going in for cataract surgery and really wants to enjoy high-quality vision and a great quality lifestyle. Of course, we know that Demodex blepharitis increases as you age in terms of the prevalence. Those are the two patient types we think, or the two consumer types we think about. With the learnings we've had, we've really been able to tailor our programming choices specifically to those demographics. I think that's performing well, and that's really informed our approach to deploying the money we are into DTC.

Bobak Azamian (CEO)

Yeah. Cory, this is Bobby. Just one other bit of feedback that's beyond the analytics. I know our team is going to be very data-driven and looking for great return on investment here as we're seeing. When we got in front of doctors, I heard something, I think, powerful that when doctors started now talking to patients about XDEMVY and DB, they said, "I've heard of this." That's a change. That's a real educational change that we've seen and heard over the last few months with this ad now playing. We're creating a new category, and patient education is a key growth driver, as we've mentioned.

Cory Jubinville (Managing Director)

Excellent. That's helpful. Thanks. Congrats again.

Operator (participant)

Thank you. I'm sure no additional questions in the queue at this time. Ladies and gentlemen, this concludes the program. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.