Tarsus Pharmaceuticals Bets Big on XDEMVY Growth

Tarsus Pharmaceuticals, Inc. ((TARS)) has held its Q4 earnings call. Read on for the main highlights of the call.

Tarsus Pharmaceuticals’ latest earnings call struck an optimistic tone around XDEMVY’s commercial ramp and long‑term potential, while acknowledging heavy near‑term spending and margin headwinds. Management leaned into robust 2025 performance, aggressive 2026 growth targets and a well‑funded pipeline, but investors will be watching for proof of operating leverage and durable refill behavior.

Rapid Revenue Growth in 2025

Tarsus posted full‑year 2025 net product sales of $451.4 million, with Q4 2025 contributing $151.7 million and underscoring strong exit momentum. The numbers highlight how quickly XDEMVY has scaled since launch, setting a high base from which the company now plans its next phase of growth.

Bold 2026 Guidance Signals Confidence

For 2026, management issued its first full‑year outlook, guiding to $670 million to $700 million in net product sales. At the midpoint, that implies roughly 50% year‑over‑year growth versus 2025, signaling confidence in continued uptake despite expected seasonality.

Vast Market Opportunity Remains

XDEMVY has already treated more than half a million patients, yet management estimates about 25 million Americans have Demodex blepharitis. With penetration described as well under 10%, the company sees considerable headroom for expansion in diagnosis and treatment.

Commercial Momentum and Awareness Gains

Unaided awareness of Demodex and XDEMVY has climbed from roughly 2% to about 25%, while payer coverage now exceeds 90% across commercial plans, Medicare and Medicaid. Weekly refills currently in the low‑to‑mid teens are trending toward a targeted steady‑state refill rate of about 20%, which would add meaningful revenue stability.

High Margins at the Product Line Level

Management emphasized that XDEMVY is already profitable on a product‑line basis, supported by a guided gross margin of roughly 93% in 2026. However, they expect the long‑term gross‑to‑net discount to settle in the 43% to 45% range, meaning a significant portion of list‑price revenue will not flow through.

Solid Cash Position Supports Growth

The company ended 2025 with approximately $418 million in cash, cash equivalents and marketable securities. This balance is intended to fund commercial scaling for XDEMVY and ongoing development of pipeline assets without immediate reliance on external financing.

Pipeline Progress with Defined Timelines

Tarsus is advancing TP‑04 for ocular rosacea, with a Phase II trial that began in December 2025 and topline data expected in the first half of 2027. TP‑05 for Lyme disease prevention is slated to enter Phase II in the second quarter of 2026 with about 700 participants and topline data also targeted for the first half of 2027, building on prior tick‑killing data.

Aiming for Blockbuster Status

Management increased its conviction that XDEMVY can exceed $2 billion in peak U.S. sales based on current prescribing trends and the large unmet need. They cited low current penetration, broader screening, emerging use cases and continued commercial execution as drivers of this upgraded ambition.

Targeted Commercial Spend to Deepen Adoption

To sustain growth, Tarsus plans to add about 15 to 20 key account leaders and maintain significant direct‑to‑consumer and patient education efforts. Around $80 million of marketing spend is earmarked for XDEMVY in 2026, with the goal of strengthening prescribing habits and improving conversion from diagnosis to treatment.

Operating Expenses Weigh on Profitability

Despite strong top‑line growth, total operating expenses in 2025 reached $522.3 million, outpacing net sales and delaying company‑level profitability. Management acknowledged the need for operating leverage as revenue scales if they are to translate product success into sustainable earnings.

Impact of Large Gross‑to‑Net Discounts

The company reported a gross‑to‑net discount of about 44% in Q4 2025 and roughly 45% for the full year, and expects a long‑term range of 43% to 45%. While this level of discounting supports access, it materially reduces realized revenue per prescription and magnifies the importance of volume and cost discipline.

Seasonality and Q1 Headwinds

Management warned that Q1 2026 revenue will likely be flat to slightly below Q4 2025 as patients face deductible resets and higher out‑of‑pocket costs. Holidays, medical meetings and weather disruptions are also expected to temporarily pressure volumes and lift gross‑to‑net in the first quarter.

Reliance on New Prescriptions

XDEMVY growth is currently driven mainly by new prescriptions, making quarterly trends vulnerable to external events and seasonal slowdowns. The company aims to offset this sensitivity as refill rates move toward a roughly 20% steady‑state level, which would smooth revenue patterns.

Elevated Investment Requirements

For 2026, Tarsus forecast SG&A expenses between $545 million and $565 million and R&D between $115 million and $135 million, including substantial stock‑based compensation. Additional spend is earmarked for TP‑04 and TP‑05 Phase II trials, reinforcing that cash burn will remain significant in the near term.

Ex‑U.S. Expansion Still a Wild Card

Management highlighted opportunities for XDEMVY in markets such as Europe, Japan and China but noted that pricing, reimbursement and regulatory paths could differ meaningfully from the U.S. They did not provide firm timelines for international contributions, leaving ex‑U.S. upside as a longer‑dated option rather than a near‑term driver.

Guidance and Outlook

The 2026 outlook calls for $670 million to $700 million in net product sales, with a non‑linear quarterly cadence featuring a softer Q1, strong Q2, more moderate Q3 and robust Q4. Management expects gross margins near 93%, long‑run gross‑to‑net in the mid‑40% range, heavy but focused SG&A and R&D, and improving operating leverage as refill rates build and the franchise matures.

Tarsus’ earnings call painted a picture of a company with powerful top‑line momentum and a clear strategy to build XDEMVY into a blockbuster brand. Investors now must weigh the sizable market opportunity and pipeline catalysts against sustained high spending, discounting and seasonality as the company works toward durable profitability.