TARS

Good afternoon, welcome to Tarsus First Quarter 2026 Financial Results conference call. As a reminder, this call is being recorded and all participants on a listen-only mode. After the CEO's presentation, there will be a question and answer session. At this time, I would like to turn the call over to David Nakasone, Head of Investor Relations, to lead off the call. David, you may begin.

Thank you. Before we begin, I encourage everyone to visit the Investor section of the Tarsus website to view the earnings release and related materials we will be discussing today. Joining me on the call this afternoon are Bobby Azamian, our Chief Executive Officer and Chairman, Aziz Mottiwala, our Chief Commercial Officer, and Jeff Farrow, our Chief Financial Officer and Chief Strategy Officer. I'd like to draw your attention to slide three, which contains our forward-looking statement. 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. Our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional details. With that, I'll turn the call over to Bobby.

Good afternoon. Thank you for joining us. We are off to a strong start in 2026, with a quarter that reflects the continued momentum of XDEMVY's launch and the strength of our key growth drivers. We've always believed XDEMVY would be revolutionary, and our strong first quarter results reflect that. Every key metric we track, including the number of writers, depth of prescribing, awareness, and evidence generation, continue to grow substantially quarter-over-quarter. These are the same drivers we have committed to delivering on, and we are on track to achieve our full-year guidance, reach blockbuster status in the next couple of years, and realize $2 billion in peak sales potential.

In the first quarter of 2026, XDEMVY delivered more than $145 million in net product sales, an increase of more than 85% year-over-year, reflecting consistent patient outcomes and expanding eye care physician or ECP utilization across their practices. Having spent time in the field and at several medical conferences over the past few months, I can tell you what we're hearing directly from ECPs. They describe XDEMVY as one of the most impactful medicines they've ever used with consistent outcomes, clear utility across their practices, and broad access that is nearly universal. Said differently, it works, it's easy to use, and access is outstanding. When those elements come together, behavior changes. ECPs are no longer looking only for the most symptomatic cases.

They are beginning to screen every patient for collarettes. That is what ultimately drives a larger addressable market over time, more patients identified and more patients treated. What we're building at Tarsus, however, is not a one-product story. We have developed a disciplined, repeatable playbook for identifying diseases with clear root causes and significant unmet needs and transforming how they're treated. That playbook is driving the future of our pipeline. In the first quarter of 2026, we initiated Calliope, an approximately 700 participant phase II trial of TP-05 for the potential prevention of Lyme disease. Enrollment is progressing well with the first wave of participants already dosed, we expect topline data during the first half of 2027, which would support readiness for a phase III trial.

Lyme disease represents one of the largest and fastest growing unmet needs in infectious disease prevention, affecting millions of Americans each year. There are no FDA-approved prophylactic options available today. It seems like I can't go a week without reading something in the news about the impact of the disease and the increasing burden on the U.S. healthcare system. TP-05 is a first of its kind investigational, oral on-demand prophylactic designed to target and kill ticks before they transmit disease. We believe it has the potential to fundamentally shift the current paradigm from management to disease prevention. We've seen tremendous interest in this program from patients, potential partners, federal agencies, and the broader medical community, reflecting both the scale of the opportunity and the need for a new approach.

Another program I hear increasing excitement about is TP-04, particularly with the initiation of our phase II core study in ocular rosacea. Ocular rosacea is another significant and underdiagnosed disease affecting an estimated 15 million-18 million Americans, with no FDA-approved treatments today. Similar to Demodex blepharitis or DB, it is a mite-driven disease that impacts the area around the eye, including the eyelids and surrounding skin that can meaningfully affect how patients look, feel, and see. We hear it all the time from ECPs. A treatment like TP-04 could be game-changing, and they can't wait to offer their patients an option like this. TP-04 is a novel, sterile investigational ophthalmic gel designed to treat Demodex mites, the root cause of disease.

We believe it has the potential to become another first and only FDA-approved medicine for an underdiagnosed and underappreciated eye disease. The core study is progressing as planned, and we continue to expect topline data in the first half of 2027. Turning back to XDEMVY, the drivers are clear. Broader physician adoption, a DTC campaign bringing more patients through the door, and an expanding evidence base, all pointing to a larger treatable population over time. XDEMVY is only one piece of a larger story. We are deliberately building Tarsus to create and lead new categories in eye care and beyond with the pipeline and playbook to do it repeatedly. With that, I'll pass it to Aziz.

Thanks, Bobby. As Jeff highlighted, in Q1, we delivered more than $145 million in XDEMVY net product sales, an increase of more than 85% year-over-year, and we meaningfully outperformed the market. Additionally, every key metric we track has grown. As we've moved into the second quarter, prescriptions continue to grow with some of the highest weekly numbers since launch. Our outstanding performance continues to be driven by three key factors: increasing depth of prescribing, expansion of the patient funnel, and ongoing evidence generation. In terms of depth of prescribing, we continue to see growth, not just in the number of ECPs prescribing XDEMVY, but in how often they prescribe. In the first quarter, nearly half of our 15,000 target ECPs prescribed XDEMVY at least once a week, up approximately 10% from Q4 2025.

As Bobby noted, ECPs continue to see incredible outcomes with XDEMVY and are looking for more patients they can serve across their practices. At the American Society of Cataract and Refractive Surgery, or ASCRS conference, we met with countless physicians and heard in several podium discussions that they are broadly incorporating DB screening and treatment as part of their routine preoperative procedures, where every cataract patient is assessed prior to surgery. To further accelerate the growth we're seeing within our existing base of ECPs, we are preparing to deploy our key account leaders or KALs. This is a highly targeted investment focused on our largest and highest potential practices, where ECPs are actively prescribing and there remains significant opportunity to expand utilization.

This role attracted exceptional talent from across the industry, and we expect this team to be a meaningful driver of incremental growth starting in the second half of 2026. Additionally, retreatment rates are increasing to the mid-teens range as ECPs formalize long-term DB management protocols. As a reminder, we expect steady state retreatment rates of approximately 20%. Turning to direct-to-consumer or DTC. Our DTC campaign is delivering strong and improving return on investment or ROI that is exceeding our expectations and is at the higher end of benchmarks. This is also reinforced by what we consistently hear from ECPs. More and more patients are coming into the office proactively asking about DB and XDEMVY.

Further, we continue to see millions of visitors to the xdemvy.com website and high-value engagement, including quiz completion and use of the Find a Doctor tool is up nearly 40% quarter-over-quarter, continuing to exceed even our own lofty expectations. With over a year of experience, we now have a much clearer understanding of what specifically maximizes DTC performance. We're applying those learnings to continuously improve how and where we deploy our investment, focusing on the channels and messages that generate the highest value engagement. In short, we're amplifying what's already working. Additionally, we have several exciting new things planned in the coming weeks, including a creative refresh and expanded disease state messaging designed to help even more patients recognize their symptoms, normalize DB, and ultimately drive more patients into the office.

We're also continuing to make investments in evidence generation that reinforce the broad utility of XDEMVY and expand how ECPs think about DB. One key example is the data we presented at ASCRS on the association between DB with chalazion and hordeolum, conditions that are estimated to impact several million patients in the U.S. These conditions can cause patients significant discomfort, impact their vision, and lead to invasive procedures in ECP offices. This data showed that a large portion of patients assessed also had underlying DB, more than 70% overall and even higher in recurrent cases. We're hearing directly from doctors that they're excited about this data and are proactively screening and treating these patients.

The takeaway is simple. Our ongoing evidence generation is doing exactly what we intended, expanding our market opportunity by giving ECPs more compelling reasons to look for and treat DB across a broader and larger set of patients. As we look ahead, there's great momentum across the key drivers of the business, and we expect to build on that momentum with the deployment of our KAL team, the scaling ROI of our DTC campaign, new patient-focused initiatives, and additional evidence that further supports the broad utility of XDEMVY. As Jeff will discuss, these drivers give us confidence in achieving full year guidance while continuing to expand the long-term opportunity for XDEMVY. Over to you, Jeff.

Thanks, Aziz. Building on what Bobby and Aziz outlined, we delivered net product sales of $145.4 million, reflecting strong year-over-year growth from growing demand for XDEMVY and exceptional execution by our team. As expected and highlighted on our year-end earnings call, the first quarter included typical seasonal dynamics such as deductible resets and higher out-of-pocket costs, as well as some impact from severe winter weather, particularly in the Northeast part of the country.

Despite these factors, our underlying demand remains significantly stronger than our peers. According to third-party data, peers experienced double-digit prescription declines versus our low single digits. As we entered the second quarter, XDEMVY prescription trends rebounded to all-time highs. Turning to other revenue items, license fees and collaboration revenues were $16.7 million in the quarter. This includes a one-time $15 million regulatory milestone payable by our partner, Grand Pharma, following the approval of TP-03 for DB in Greater China, as well as approximately $1.7 million related to the required China withholding tax. This approval represents an important step toward helping the more than 40 million people in the region affected by DB and underscores our commitment to serving patients. Over time, we do expect to generate additional royalties from this partnership.

Although they are not expected to be meaningful in 2026 or 2027 as Grand Pharma seeks to secure payer coverage. We look forward to supporting Grand Pharma as they prepare for commercial launch later this year. For additional details on our Q1 financial performance, please refer to the earnings release issued earlier today. Looking ahead, we reiterate our full year 2026 guidance of net product sales of $670 million-$700 million, SG&A expenses of $545 million-$565 million, including approximately $40 million in stock-based compensation, R&D expenses of $115 million-$135 million, including stock-based compensation of approximately $20 million, and gross margins of approximately 93%.

Our guidance reflects continued strength in the underlying fundamentals of the business, including increased depth of prescribing, expansion of the patient funnel, continued execution by our exceptional sales force, including the deployment of our new key account leaders, and ongoing evidence generation, expanding the addressable patient population. From a quarterly perspective, growth in 2026 is expected to follow patterns consistent with our prior experience and broader sector dynamics. That is strong growth in the second quarter, more modest growth in the third quarter, and robust growth in the fourth quarter. Finally, turning to the pipeline. As Bobby mentioned, we initiated our phase II Calliope trial evaluating TP-05 for the potential prevention of Lyme disease during the first quarter.

Lyme disease is the most common vector-borne disease in the U.S., with more than 35 million people considered to be at high or moderate risk of contracting the disease and hundreds of thousands of new cases diagnosed annually. Yet there are still no FDA-approved prophylactic options. What makes TP-05 compelling is not just the size of the market, but the strength of the science and the differentiated nature of our approach. This oral on-demand investigational therapeutic is designed to directly target the root cause of Lyme disease by potentially killing ticks before disease transmission occurs. An approach that is simple, fast, and practical for patients. In fact, it is already approved for Lyme disease prevention in dogs and cats and may have benefited from prophylactic Lyme therapies just like TP-05.

From a financial and operational standpoint, we are advancing this program with a clear development path and defined milestones, including expected topline data in the first half of 2027. Similarly, our ocular rosacea program continues to progress as planned, with topline data also anticipated in the first half of next year. Outside of the U.S., we continue to advance our global expansion efforts for TP-03 and are on track to complete the key technical work required to support potential future filings. At the same time, we are taking a thoughtful approach to timing and evaluating next steps in the context of the broader geopolitical, regulatory, and macro access environment.

Before I hand the call off to Bobby, I want to restate that we firmly believe that we are well-positioned for the remainder of 2026 with strong and growing underlying demand for XDEMVY, and a robust and advancing pipeline with topline results in the first half of 2027. I'll turn it back to Bobby for closing remarks.

Thanks, Jeff. Tarsus continues to execute on one of the most successful launches in eye care,. We've delivered so much so that the addressable market continues to expand beyond our initial estimates. More patients are being identified, more patients are being treated, more physicians are continuing to embed XDEMVY into routine care. This is a direct result of how we've deepened utilization in ECP practices, meaningfully grown awareness about DB, generated compelling clinical evidence showing just how important it is to treat the condition. We are now applying that same category-creating model across our pipeline, including in Lyme disease prevention and ocular rosacea, as we work to replicate the success of XDEMVY and establish Tarsus as a leader in creating new standards of care. Operator, please open the line for questions.

Thank you. Ladies and gentlement, to ask a question at this time, you will need to press star one one on your touch-phone telephone and wait for your name to be announced. To withdraw your questions, simply press star one one again. Now first question coming from the line of Dennis Ding with Jefferies.

Hi. Thanks for taking our questions. We have two. On the second quarter, you know, I was surprised that you guys didn't give bottle guidance, but when I look at consensus, which is $168 million, it should imply around 145,000 or 150,000 dispensed bottles. That's about 13% or 14% quarter-over-quarter growth and similar to the Q2 bounce that we saw in 2025. How do you feel about those numbers, and does our math make sense? Number two, Glaukos has a phase II readout later this year for DB. They're delivering physostigmine, which is approved for glaucoma. You've mentioned before that you've looked at all these different assets. I'm curious what you think about the potential tolerability issues there since the drugs actually constrict pupils. In your own due diligence, are vision changes or blurry vision a liability with that asset? Thanks so much.

Hi, Dennis, this is Jeff. I'll take the first part of the question and then turn it over to Bobby for the second part. As we've moved into full-year guidance, we stepped away from the quarterly updates in terms of bottles dispensed, gross to net, absent some material change, right, where we don't believe we're going to be able to meet that guidance. Our expectation is really just to continue to provide updates on the guidance that we provided earlier. We're still believing the full year guidance both on the revenue side and the SG&A side.

To your question on growth between Q1 and Q2, just a reminder that 2025 was the second full year of launch, and we were starting from a bigger or a smaller base at that point in terms of total bottles. You shouldn't expect a 30% growth similar to what we saw between Q1 and Q2. You know, take into account the fact that we are starting on a bigger base now and, you know, make your adjustments accordingly.

Thank you, Dennis. This is Bobby. With respect to how we see the landscape, we're really focused on XDEMVY. You know, we've been creating a really important marketing category for patients, and we see that growing. I think the evidence we're generating around XDEMVY is robust with more to come. We believe that XDEMVY's profile is going to be the standard of care for the foreseeable future. We certainly track everything we see in terms of pipeline, and we're not surprised that, you know, people are also looking at this market. In terms of XDEMVY's effectiveness, its safety, the product profile, it's just such a great standard of care.

I hear time and again, like I did in the field this quarter, just how this is the best medicine a lot of doctors have seen. We're really focused on building on that success and creating a lasting standard of care.

Okay. Thank you.

Thank you. Our next question coming from the line of Graig Suvannavejh with Mizuho Group. Your line is now open.

Hi. This is Sam on for Graig. Thanks for taking our questions. Congrats on the quarter. Maybe two from us. First, how much of the current growth is you're seeing coming from the expansion use cases under called the Demodex blepharitis umbrella? Specifically, we're interested in the cataract surgery patient population. Second, given the reaffirmed guidance of $670 million-$700 million, can you walk us through some of the assumptions and drivers required to achieve that guidance, the prescription growth, gross-to-net normalization, and overall run rate through the balance of the year? Thank you.

Yeah. When we think about the market and how the product is performing, one of the great things that we highlighted in the prepared comments and what we're hearing very clearly from physicians here is the continued expansion of use throughout the patient population. We started early on with some of the most obvious cases, dry eye, cataract surgery, contact lens intolerance. We're definitely seeing a lot of utilization across all of those segments, and we've really shifted our strategy now to not only go after those segments to even go more broadly, right? There's 25 million Americans out there, and they're coming into the funnel. We think about not just cataract, dry eye. We think about, as we mentioned, patients that have hordeolum or chalazia, for example, and even other cases.

I think the way to think about this is physicians are using this across every segment that we've highlighted, and they continue to expand to new segments, and that's where our evidence generation strategy will fuel. In terms of some key drivers, I'll let Jeff speak to the mechanics. But I would highlight that coming off of this quarter, we saw progression in every metric we track commercially, depth of prescribing all of our consumer metrics, which sets us up nicely for the rest of the year, where we have our key account leaders deploying. They'll start to make an impact in the third quarter and in the back half of the year. We've got some exciting things on our direct-to-consumer initiatives as well.

A lot more drivers to come, and I'll let Jeff speak to the mechanics in terms of the guidance.

Yeah. There's one other thing I would add. This is Bobby. You know, based on what I hear, these drivers are really playing out. As we've mentioned, I'm hearing doctors that are really treating regardless of symptoms, treating with any comorbidity in the setting of cataract surgery. I'm so excited about the evidence that we generated and evidence to come. You know, I think chalazion is one of those examples where there's just lots of reasons to treat and that's really leading to the expansion of the patient population that's the addressable market here. Jeff, I'll pass to you.

Thanks, Sam, for your question. Yeah. In addition to sort of the broad strokes that Aziz mentioned in terms of growing depth of prescribing, etc. impact, evidence generation that Bobby just highlighted, and the impact of the KAL team, that'll sort of impact the growth over the quarter, particularly in the back half of the year. We continue to see the seasonality that we saw last year and the year prior to that. Much like we saw last year, Q1 was, you know, tempered. We saw some nice robust growth in the second quarter as the deductible sort of got blown through by the individual patients. Then we also see growth in the summertime, but much more tempered growth than say, between Q1 and Q2.

Q4 tends to be one of our highest growth quarters as patients come into the end of the year. They've run through their deductibles, and they're trying to use up their FSA. We anticipate that type of impact on a seasonal basis as well.

Thanks for the color. Thanks so much for the question.

Thank you. Our next question coming from the line of François Brisebois with LifeSci Capital. Your line is now open.

All right. Thanks for taking the question. Congrats on the quarter. Just a couple questions. I'm getting, some questions on ocular rosacea. I was just wondering, when you mentioned it's a, you know, root cause of the disease. I think with blepharitis, you guys in the trials and whatnot, were plucking eyelashes, and you can legitimately see the mites, and then it's pathognomonic sign when you see the collarettes now. how comfortable do we feel that ocular rosacea is, you know, the Demodex mites are causing the ocular rosacea?

Yeah. Thank you, Frank. I appreciate that question. I know you've tracked our story for a long time. You've seen the playbook that we've really applied in the development of XDEMVY, and we're applying that same playbook in OR. You know, to your point, it starts with a disease that has a clear root cause, and clearly identifiable patients. We see that in OR. To your question, we see that the majority of patients with OR have Demodex. It is harder to measure. You don't have the benefit of a collarettes that you can pull from around the eye, you do have clear signs. Those are signs of inflammation, signs of redness, erythema, and telangiectasias, they're called.

We know that when patients have those signs, they're very likely to have Demodex as an underlying root cause. That's really the basis of our approach here. I will also add, we're hearing a lot of great interest in OR as well. When I'm out in clinics or talking to doctors about XDEMVY, they raise OR. They say, "I'm looking at these patients that have something great for the added margin, but I don't have anything for the inflammation around their eyes." They're seeing how important this disease is, and now that they're taking the collarettes around the eyes. We see basically an opportunity to create a category with a very similar playbook to your question.

Great. Just on the endpoint side, just to kind of compare it to what you guys have done in the past, the collarettes cure rate was very interesting for blepharitis. In this case, You talked about the signs. Can you just remind us maybe what the endpoints are and the comfort on the regulatory side of those endpoints?

Absolutely. We are enrolling patients by OR, and we're looking at OR endpoints. Those are those same telangiectasias and erythema. We've aligned with the FDA that we need to look at those endpoints, and we need to see an improvement in one of them. That's really how we're structuring the trial, and that's the bar we expect for success in the phase II trial that we're conducting.

Great. If I could sneak in a last one, too, I promise. Just in terms of the second quarter... Jeff, thanks for kind of breaking out second quarter, you know, first quarter seasonality, second, third, and fourth. In the second quarter, can you give any granularity as to what is to be expected maybe in the months of the second quarter?

In terms of revenue, Frank?

Yeah. Scripts. You know, sometimes there are, you know, some weeks or whatnot that are definitely harder or there's the summer months with-

Oh.

... holidays and conference time and stuff. I'm just wondering any granularity on what goes on in that second quarter that maybe we should-

Got it.

... pay close attention to?

Got it. Yeah. No, part of that was the impact of the spring break timeframe, which we've already passed through by and large part in the early part of April. That's kind of behind us. You know, there are some conferences that, you know, could pull some of the doctors out of the office. We don't anticipate that to be, you know, much greater than what we've seen historically. You can sort of think about this as on a growth trajectory upwards for the rest of the quarter here.

Okay, great. Do you guys break out how your patients are broken down between, like for age groups? Is it the older crowd or you actually, you know, just 'cause it seems like this does get worse with time, right? I think after 70 years old, everyone has this. Is it mostly the older or the younger crowd that you guys are treating?

Frank, it's Aziz. We see utilization across a wide array of patients. You can think about your cataract patients. That's typically an aging patient. We see a lot of utilization there. You think about patients in contact lenses or dry eye, and that spans the entire patient population. You know, while there is a higher propensity in elderly patients, you're right about that. We see more and more younger patients. Professionals that are working, looking at the screen all day, noticing their eyes are bothering them. They see the ad. They're motivated to go talk to their doctor. We're seeing utilization across the front. I think that, you know, cataract is obviously an elderly population, but everywhere else you're seeing a pretty diverse population of patients getting treated.

Okay, great. Sorry, I think I promised one last question, but I guess I lied. That's all good for me.

Thank you, Frank.

Thank you. Our next question coming from the line of Jenna Davidner with Barclays. Your line is now open.

Hi. Thank you for taking my question. I had one on Lyme disease. As Bobby mentioned, there's a lot of elevated concern right now around ticks. I was just curious if you could remind us what your strategic priorities for this program are and whether or not this might make sense to partner out? Just given the elevated concern that there's no FDA-approved prophylactic treatment, do you think there's any pathway towards an accelerated approval timeline? Thank you.

Thank you so much, Jenna. Thanks for highlighting the Lyme program. We hear a lot of interest in this program. There's not really a week goes by that I don't see something in the press or the media about Lyme disease and tick season, which has now started. We're very excited about the program. We've advanced it into this phase II trial that is groundbreaking in many ways. 700 patients across, you know, a broad array of participants across geographies. We're looking at using a very novel investigational medicine here, TP-05, which is an oral on-demand. Really, patients can take it, you know, where they fit and on demand. That's, I think, a very unique potential medicine.

You know, in this trial, we're gonna get some good data. We hope, on safety, on dosing, and really be prepared for a phase III. Be phase III-ready, as I mentioned. I think that will allow us to really assess where this fits. Our base case is this is better in someone else's hands as it goes to phase III. I think delivering a package with a great, robust phase II data set with FDA clarity on the path forward will be important. In terms of the FDA's guidance here, they've been very collaborative. You know, we have other vaccines that have been developed in this space, so we're largely following that guidance.

I think the phase III is TBD based on our phase II, but, you know, our base case is that we'd have to conduct a large vaccine-like phase III. That's something we'd have clarity around as we got ready for that and talk to potential partners.

Thank you. Our next question coming from the line of Jason Gerberry with Bank of America, your line is now open.

Hi. This is Melanie on for Jason, thanks for taking our question. You've mentioned that with the addition of the key account leaders, most of that impact is likely to be seen in the back half of the year. How should we be thinking about kind of that incremental impact on top of the typical, like, seasonality that you guys flagged with like a stronger second half? Thank you.

Yeah, Melanie, I think adding these key account leaders is gonna be a great catalyst for us in a lot of ways. We've shown when we've added people, we can get a response right away. We did this when we expanded our sales force prior. We're using a very similar approach. The key account leader is a very unique position in that it's really targeted toward just increasing depth of prescribing we're seeing. The two things I'll tell you there, one is no one in our called-on audience, no physicians that we're talking to have capped out yet. Even our top doctors have room to grow, and we're seeing a broader opportunity with doctors being able to prescribe more in general. These key account leaders are some of the most experienced and sophisticated sales individuals.

Again, this is against a very high bar because we have a great sales team. These folks are going to be targeted against the highest opportunity practices that are having good success but could be doing more. We are able to deploy them and train them. They are in the process of finalizing that training, and then they will be out there in the third quarter. I think you are going to start to see that. Now, again, it is about 17 to 20 people. This is not like a massive expansion of the sales force, but what I think you are going to see is that this is going to catalyze even more depth of prescribing. It is a key element of this being a driver to get to the targets we have this year. I would expect you to see that right away.

You'll see that, you know, bear through the seasonality, but it doesn't alleviate the impact of seasonality, right. That's a patient-flow issue, it's not so much of an execution issue. I think about this as depth of prescribing, change of behavior over time, and allowing us to continue a great growth short, growth trajectory. Again, you are gonna see seasonality in the quarters, as Jeff mentioned.

Thank you.

Thank you. Our next question coming from the line of Mazahir Alimohamed with Oppenheimer, your line is now open.

Hi. Thanks, all, for taking our questions. Just a couple from us. I guess the first one is, can you give us any additional color on what percentage of prescriptions dispensed in the quarter represent retreatment patients versus new starts? The second part is, I guess as you think about the peak sales, the $2 billion peak sales number, how much of that is predicated on retreatment becoming recurring annual behavior, I guess, versus like a purely new patient identification?

Yeah, Mazi. The retreatment's something that we get a lot of questions on and something that we're tracking really closely. It's also something that we've seen progress very nicely over the last several quarters. As a reminder, what we said is that we'd expect retreatments to be a steady state around 20%, meaning at any given week of prescriptions, about 20% of the composition would be retreatments. What we're seeing so far is retreatments averaging in the mid to high teens. Again, that's up quarter-over-quarter, one of those key metrics. We're seeing that steadily progress. We'd expect that to even out at around 20%. To answer your question, when we think about the long-term potential, you can assume that about a steady state, 20%. In a future revenue, 20% of that would be due to retreatments, because that implies that steady state, 20%.

Yeah. Yeah, that makes a lot of sense. Well, thanks. That's all from us. Thank you for answering the question.

Thank you. Our next question coming from the line of Lachlan Hanbury-Brown with William Blair. Your line is now open.

Hey, guys. Thanks for the question. Maybe just first for Jeff. You know, you have a stronger than expected gross to net in the first quarter. Can you maybe elaborate on what drove that? Is that, you know, the mix shift? Is it driven by the changes in Medicare or some one-off items? How should we think about that sort of flowing through? You know, we typically have a cadence of gross to net stepping down throughout the year. Should we still expect that, or is it gonna be relatively flat from here?

Yeah, Lachlan, good to hear you. We are still not going to be providing gross to nets on a quarterly basis now that we've moved over to full year revenue guidance. You know, I would just say that we, you know, did see the typical seasonality that we usually see in the first quarter in terms of, you know, co-pays resetting and driving some additional support there. That said, you know, I think we are still very comfortable that we will be exiting, you know, Q4 in that 43%-45% range. I would just guide you to the fact that we would expect to be somewhere within that range for the year.

Okay, great. Thanks. Maybe one for Aziz. You know, the continued sort of strong growth in website visits, especially the high value sort of activities on the website, seems pretty encouraging. Has the conversion rate to the extent you can sort of track it, the conversion rate from, you know, website visits and e-scripts sort of maintained constant, so sort of tracking in line with the increase in visits?

Sure. When we look at DTC, this is an area that's really compelling, an area that we're really excited about the trajectory here. You highlighted the increased HVAs. You know, we're really pleased because the ROI overall is continuing to improve. It's already ahead of what the benchmarks are. Ahead of our expectations. We don't get into specific conversion metrics, but I'd say the ROI is improving, which implies more patients are getting on therapy, right? What you're seeing is Q1 is a patient flow thing, right, where we lost days of weather. I wouldn't think about the Q1 versus those metrics as the comparator. I think about patients are ready to go, and I think we're seeing the impact of that even early in Q2 with our prescriptions being near our all-time high levels.

I think you're gonna continue to see that stack over time. The great thing about DTC is once you get to a great ROI, and I've seen this on multiple campaigns in my career, you can start to see a stacking effect, where these patients are primed and ready to go. This also validates the strategy of continuing to drive depth of prescribing. The more doctors that are looking for more patients, the better our conversion is gonna be. This is sort of the one-two punch that we're working on, and I think you're seeing positive trajectory on both of those fronts.

Great. Thanks.

Thank you. Our next question coming from the line of Eddie Hickman with Guggenheim. Your line is now open.

Hey, guys. Thanks for taking the question. Congrats on the progress. Just another one on the GTN. As this retreatment cohort expands towards that 20% that you've guided for, does the gross-to-net profile change between a refill prescription and a new start? Like, do you get a better sort of net price realization if a patient sort of is coming back and doesn't need to go through the whole co-pay assistance program? Just sort of curious how that dynamic may shift beyond the sort of typical seasonal gross to net changes you've already talked about.

Yeah, great question, Eddie. It's not likely to change on a refill patient. They still have to go through, you know, the prior auth proposal as well as potentially provide some co-pay [assistance] for that product as well. It's not likely to change much.

Got it. Maybe somebody already asked this, but did you sort of talk specifically about which federal agencies have tremendous interest in TP-05, and sort of what that means for the acceleration of that program?

Yeah, sure, Eddie. This is Jeff again. We have a great government affairs team that's been engaged on that side of the house there, as you highlighted, and Jenna highlighted as well that there's a lot of interest here. There's a LymeX group that is looking at opportunities to speed up approvals, particularly in the phase III realm, and sort of stepping away from the disease prevention approach that vaccines typically do. They're invested in looking at diagnostics and some other areas that can speed up the development pathway there. RFK, who is part of the HHS program, has made this a high priority, as has Makary. The FDA has really taken an aggressive approach here and is looking to speed therapeutics to market as quickly as we can.

Got it. Appreciate that.

Thank you. There are no further questions in the queue at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.

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

Thank you. Before we begin, I encourage everyone to visit the Investor section of the Tarsus website to view the earnings release and related materials we will be discussing today. Joining me on the call this afternoon are Bobby Azamian, our Chief Executive Officer and Chairman; Aziz Mottiwala, our Chief Commercial Officer; Seshadri Neervannan, our Chief Operating Officer; and Jeff Farrow, our Chief Financial Officer and Chief Strategy Officer. I'd like to draw your attention to Slide 3, which contains our forward-looking statements. During this call, we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional detail. With that, I'll turn the call over to Bobby.

Good afternoon, and thank you for joining us. 2025 was a breakout year for Tarsus and for XDEMVY. The first and only FDA-approved therapeutic for Demodex blepharitis, an impactful disease that affects more than 25 million Americans. Among the key highlights for the year, we delivered more than $450 million in full year net sales. We have helped more than 0.5 million patients living with Demodex blepharitis since launch, underscoring the meaningful real-world impact of XDEMVY and by creating and leading an entirely new category in eye care, we have established Tarsus as a differentiated company fully capable of translating scientific insight into commercial leadership. We believed from the beginning that XDEMVY could be a breakthrough medicine. Today, the data and real-world experience validate our conviction. In just 2 years since launch, XDEMVY has fundamentally changed the eye care experience. We see that transformation reflected in 3 clear proof points. First, XDEMVY is delivering consistent meaningful outcomes for patients. Second, eye care professionals have fundamentally changed the way they practice. And third, we've redefined the rules of launch and have succeeded in rewriting the biotech playbook. We're now ready to share what we've always believed that XDEMVY can reach blockbuster status within the next couple of years with sales potential exceeding $2 billion. At the same time, we are intentionally building Tarsus for its next phase of growth. Our primary strategy is disciplined and built for repetition identify diseases with clear root causes, significant demand for better solutions and the potential to establish a new standard of care and then apply the development and commercial playbook, we have proven with XDEMVY. We are already executing against that framework with TP-04 and Ocular Rosacea and TP-05 and Lyme disease prevention, 2 clinical stage programs where the biology is clear, the unmet 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 1 to 2 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, a 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' reach. We have proven we can build and scale. We have a product that continues to grow. In 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 in our award-winning culture, laying the foundation as we become a leader in eye care. Aziz?

Thanks, Bobby. We entered 2026 from a position of strength and momentum. XDEMVY is one of the best-selling prescription eye drops and from a product line perspective, is now profitable and growing. This gives us the leverage and flexibility to continue investing in our proven growth drivers that we believe will best support this opportunity. We are still early in reaching the estimated 25 million Americans living with Demodex blepharitis, or DB. And as Bobby mentioned, we have fundamentally changed medicine. We've transformed the eye care experience and now see U.S. sales potential exceeding $2 billion. Beyond the large untapped addressable market, this outlook is reinforced by 3 fundamentals: One, a highly effective medicine that delivers consistently positive outcomes for an easy to diagnose disease. Two, our top prescribers have a significant opportunity to increase utilization and almost every doctor we talk to is looking for more patients to treat. And three, the tremendous growth in patient interest with many coming in and asking for XDEMVY by name. We've seen a meaningful shift in eye care professional or ECP practice behavior and patterns. ECPs are continuing to deepen utilization across all of the patient types we've been talking about, including DB patients with congruent MGD, dry eye and cataracts where visual outcomes are so important. Furthermore, I constantly hear from ECPs that they're beginning to look beyond these initial 9 million patients we originally focused on. And are now screening for DB patients being treated for glaucoma, receiving eye injections or presenting with styes, the lumps and bumps you typically get on your eyelids. At the same time, patients are becoming more proactive and are increasingly self-identified. Together with strong access where we have more than 90% of coverage across commercial, Medicare and Medicaid, these dynamics are expanding the funnel of diagnosed and treated patients. To further accelerate the depth of utilization among ECPs, we're making a targeted investment in one of the most impactful parts of our business, our sales force. 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 accelerate. We see this dynamic repeatedly at conferences and across professional forums. In complementing all the great work we're 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's 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 1 in 4 patient surveyed. Finally, retreatment dynamics are continuing to progress. Weekly refills are trending in the low to mid-teens range as practices formalized protocols, moving towards our expected steady-state rate of approximately 20%. Taken together, these trends of sustained shift in vision behavior, expanded screening, growing consumer awareness and emerging retreatment practices, 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're 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.

Thanks, Aziz, and good afternoon, everyone. We are leading the way in category creation and have proven that our model works. XDEMVY is the first proof point, and we are now applying that same scientific and strategic framework for the next set of opportunities in our pipeline. Today, I'll share updates on 2 programs that reflect the attributes that drove XDEMVY success. Clear biology, significant unmet need and the opportunity to pioneer new standards of care. I'll start with TP-04 for Ocular Rosacea. Ocular Rosacea is a natural extension of our Demodex expertise. Like DB, it is driven by Demodex mites and can significantly impact how patients look, feel and see. It is also easily identified during a routine eye exam by the hallmark signs of inflammation and redness. Ocular Rosacea affects an estimated 15 million to 18 million Americans, and there are currently no FDA-approved treatments. Importantly, this opportunity is highly complementary to our existing infrastructure. It involves the same physicians and the same diagnostic process, enabling us to build on what we've already established, lotilaner's positive clinical data across several related conditions. In particular, in Papulopustular Rosacea, a related inflammatory facial skin condition with similar pathophysiology, lotilaner demonstrated statistically significant improvements in inflammation and redness in a Phase II trial. The insights from that trial have further informed our understanding of and confidence in TP-04's potential in Ocular Rosacea. TP-04 is a novel lotilaner based sterile investigational ophthalmic gel designed specifically for application to the area around the eye. In December 2025, we initiated the first-ever Phase II trial for the potential treatment of Ocular Rosacea which we believe is the next blockbuster category in eye care. The goal of this trial is to evaluate safety and improvements in erythema and telangiectasias around the eye, 2 of the most impactful signs of the disease using novel and proprietary grading scales informed by feedback from the FDA. As with XDEMVY, this Phase II 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 in the endpoint. We expect top line data in the first half of 2027. Turning to TP-05 for Lyme disease prevention, a significant and growing public health concern. I'm excited to announce that we plan to initiate a Phase II clinical trial in the second quarter of 2026, we plan to enroll approximately 700 participants at risk of Lyme disease in 1 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 the first half of 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 billion. 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 II trial, we expect to generate a robust Phase III 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, Grand Pharma 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'll turn it over to Jeff.

Thanks, Sesha. 2025 was a year of strong financial performance and disciplined execution. For the fourth quarter of 2025, we delivered $151.7 million in net product sales at a gross to net discount of 44%. For the full year, we delivered $451.4 million at a gross to net discount of approximately 45%. Total operating expenses were $522.3 million driven in large part by commercial investments supporting the XDEMVY launch. We ended the year with approximately [ $418 ] million in cash, cash equivalents and marketable securities providing meaningful financial flexibility as we scale the business and expand our pipeline. Turning to 2026. With more than 2 years of revenue history, a clear understanding of seasonality, broad and stable payer coverage and proven DTC effectiveness, we are providing full year guidance for the first time. For 2026, we expect strong net product sales in the range of $670 million to $700 million or annual growth of more than $230 million and 50% at the midpoint of our guidance. It is important to note that projected annual revenue growth is not anticipated to be linear throughout the year. Consistent with what we have seen across eye care and other therapeutic areas, we expect typical first quarter seasonality to impact growth, including deductible resets that increased out-of-pocket costs and temporarily reduce new patient visits. We also expect this dynamic to increase the gross to net discount for the first quarter. Additionally, given that XDEMVY remains primarily driven by new patients, holidays, medical meetings and this year's severe weather disruptions are influencing near-term trends. As a result, we expect first quarter 2026 revenues to be flat to slightly below our Q4 2025 revenue. Further, sequential growth through 2026 is expected to be similar to what we observed in 2025 and consistent with broader sector 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 million to $565 million, which includes stock-based compensation of approximately $40 million, continued investment in our DTC campaign, XDEMVY-related marketing and commercial support at levels consistent with 2025 or approximately $80 million, 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 million to $135 million and includes stock-based compensation of approximately $20 million. The Phase II trial of TP-04 for the potential treatment of ocular rosacea expected to cost between $7 million to $10 million, with the majority planned to be recognized in 2026 and the Phase II 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 million to $30 million 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 III-ready package for our potential partner. Importantly, and as Aziz mentioned, XDEMVY is profitable and growing from a product line perspective today. As revenue continues to scale, we expect increasing operating leverage and maintain a clear line of sight towards potential company level profitability while maintaining the flexibility to invest in other high-return opportunities. Overall, 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 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'll now turn the call back to Bobby for closing remarks.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our next question comes from Jenna Davidner with Barclays.

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

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

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

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

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

Our next question comes from Dennis Ding with Jefferies.

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

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

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

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

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

Our next question comes from Andreas Argyrides with Oppenheimer.

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

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

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

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

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

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

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

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

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

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