Tarsus Pharmaceuticals, Inc. (TARS)·Q1 2025 Earnings Summary

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 .

Financial Results

Core P&L and Volume (prior two quarters vs current)

Notes: CFO indicated Q3 GTN ~40% after accrual adjustment; absent adjustment ~43% . Q4/FY GTN ~45% . Q1 GTN ~47% with ~1% favorable accrual true-up; absent adjustment ~48% .

Actual vs Wall Street Consensus (S&P Global)

Disclaimer: *Values retrieved from S&P Global.

KPIs and Commercial Drivers

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO (B. Azamian): “XDEMVY…on track to potentially become one of the best-selling anterior segment medicines…we are well positioned to accelerate the growth of XDEMVY, create another new category in Ocular Rosacea and continue to advance our pipeline.”
• CFO (J. Farrow): “Gross to net discount ~47%…adjustment reduced discount by 1% ($1.5M)…gross margins ~93%…inventory ~2.5 weeks.”
• CCO (A. Mottiwala): “We saw an increase of ~110% in the number of ECPs writing >1 Rx/week vs Q3’24…patients starting to ask for XDEMVY by name.”
• COO (S. Neervannan): “Endpoints and measures for TP‑04 are contemplated in alignment with FDA; Phase 2 initiation later this year.”

Q&A Highlights

• Payer mix: Q1 script volume was roughly equally split between Medicare and commercial; Medicare coverage activation in Q1 was a major adoption catalyst .
• Retreatment: Field feedback growing; refill rate in syndicated data high single-digit; management reaffirms ~20% annualized retreatment expectation over time, supported by ~40% recurrence at 12 months in follow-up data .
• Guidance stance: No long-range revenue guidance yet given DTC/network impact uncertainty and macro events; quarterly assessment continues .
• Channel inventory: Stable ~2–2.5 weeks; no expectation of change despite growth .
• Q2 near-term guide: Bottles 85k–90k; GTN 45%–47%; Q3 moderation (conferences/holidays), stronger Q4 .

Estimates Context

• Q1 2025 beat: Revenue $78.335M vs $72.47M*; EPS $(0.64) vs $(0.74); 6 estimates for each metric.
• Implications: Consensus for subsequent quarters likely to shift higher given demonstrated QoQ growth, improving coverage, and stepped-up DTC, though operating expenses will also rise (marketing).*
  Disclaimer: *Values retrieved from S&P Global.

Financial Details (YoY and Mix)

• Net product sales rose to $78.3M (vs $24.7M in Q1’24, +217% YoY), driven by ~72,000 bottles vs ~26,000 YoY .
• SG&A increased to $85.0M (from $51.6M YoY) with higher DTC and commercial costs; R&D modestly higher at $14.4M .
• Net loss improved to $(25.1)M from $(35.7)M YoY; diluted EPS $(0.64) vs $(1.01) .
• Cash, cash equivalents and marketable securities $407.9M at quarter-end .

Key Takeaways for Investors

• XDEMVY growth drivers are intact and strengthening: coverage >90%, deeper ECP engagement, and scaled DTC should sustain revenue growth, with expected seasonal Q3 moderation before stronger Q4 .
• The quarter was a clean beat vs consensus on both revenue and EPS despite elevated marketing costs; margin profile (~93%) is resilient and tariff risk appears minimal .
• Near-term setup: Q2 bottles guidance (85k–90k) and lower GTN range (45%–47%) point to continued momentum; watch for confirmation of DTC ROI and Medicare utilization .
• Pipeline creates optionality without near-term heavy spend: TP‑04 Phase 2 in H2’25 ($7–$10M split across ’25/’26) and TP‑05 Phase 2 in 2026, with TP‑05 likely partnered longer-term .
• Balance sheet supports execution: $407.9M liquidity post raise; SG&A will step up but runway ample to scale DTC and commercial footprint .
• Monitoring points: retreatment rates trend, ECP daily prescribing penetration, GTN progression to low-40s steady state, and EU/Japan regulatory path updates .