Tarsus (TARS) Q1 2025: Xdemvi Sales Surge 217% as DTC and Medicare Access Unlock Prescriber Shift
Xdemvi, Tarsus’s flagship eye care therapy, posted a 217% sales leap as expanded Medicare coverage and direct-to-consumer (DTC) campaigns drove prescriber frequency from monthly to daily. Management’s aggressive investment in patient and physician education, plus a broadening commercial footprint, positions Tarsus to deepen category leadership and accelerate global expansion, though elevated spend and evolving payer dynamics remain key watchpoints.
Summary
- Prescriber Frequency Shift: Core eye care providers rapidly moved from monthly to daily Xdemvi prescribing, driven by sales force expansion and broad payer access.
- DTC Campaign Impact: Direct-to-consumer advertising dramatically increased patient engagement, with website visits up 140% and growing brand recognition among patients.
- Pipeline and Global Expansion: Progress in ocular rosacea development and regulatory advances in Europe and Japan set the stage for future category creation and geographic growth.
Performance Analysis
Tarsus delivered a breakout quarter as Xdemvi, its first-in-class treatment for Demodex blepharitis, generated over $78 million in net sales—up 217% year-over-year—on 72,000 bottles dispensed. The company’s gross margin held steady at 93%, reflecting both high product pricing power and minimal cost-of-goods pressure, even as operating expenses increased by $14 million quarter-over-quarter, primarily due to stepped-up DTC and commercial investments.
Sales force expansion and payer access were the primary levers behind the surge in prescribing frequency among eye care professionals (ECPs), with the number of ECPs writing more than one prescription per week doubling from late 2024. Notably, the prescription volume split evenly between Medicare and commercial channels after Medicare access ramped up, removing a major adoption barrier and catalyzing growth among older patient cohorts. Channel inventory remained stable at roughly two and a half weeks, consistent with prior quarters, signaling healthy demand without excess channel stuffing.
- OPEX Elevation: Operating expenses rose to $104.6 million, mainly from increased DTC spend and commercial activity, as Tarsus leaned into its surround-sound market creation strategy.
- Gross-to-Net Discount Dynamics: The gross-to-net discount settled at 47%, with a Medicare accrual adjustment slightly reducing the figure; management expects a similar range going forward.
- Cash Position Strengthened: The company ended Q1 with $407.9 million in cash, bolstered by a $134.8 million equity raise, giving Tarsus ample runway for commercial and pipeline investments.
While marketing spend will accelerate further in 2025, management reaffirmed that robust gross margins and disciplined inventory management should support a sustainable growth trajectory, even as R&D ramps with the ocular rosacea program.
Executive Commentary
"The results we have delivered to date demonstrate the impressive executional ability of our team to establish an entirely new market and foster its growth. They also highlight the difference in positive impact we can have on the millions of patients we aim to serve on our way to becoming an eye care leader."
Bobby Azamian, Chief Executive Officer and Chairman
"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. These results were principally driven by our recently expanded Salesforce, which is just beginning to demonstrate their ability to reach our target universe of prescribers more frequently and more effectively."
Aziz Motawala, Chief Commercial Officer
Strategic Positioning
1. Category Creation Blueprint
Tarsus’s core strategy revolves around category creation, using a “surround sound” approach—education, access, and execution—to drive physician adoption and patient demand. The company’s ability to shift ECPs from infrequent to routine prescribers of Xdemvi demonstrates the power of this model, especially as broad payer coverage eliminates historical friction points.
2. Direct-to-Consumer (DTC) Acceleration
DTC campaigns have become a central growth lever, with expansion from streaming to network TV driving a 140% increase in website visits and growing patient-initiated demand. This investment is expected to rise to $70–80 million in 2025, with further upside if early signals of patient engagement and prescriber conversion persist.
3. Pipeline and Global Expansion
Beyond Xdemvi, Tarsus is advancing TP04 for ocular rosacea, a large, underserved market with no approved therapies. The company expects to initiate a Phase II trial in the second half of 2025. Internationally, regulatory momentum is building: European approval could arrive as early as 2027 (with no Phase III required), and Japanese market entry discussions are underway based on compelling prevalence data.
4. Commercial Execution and Prescriber Deepening
The commercial focus remains on deepening prescribing within the core 15,000 ECPs, who account for over 85% of prescriptions. The sales force is still ramping, and management sees substantial headroom as more ECPs transition to weekly and daily prescribing, with retreatment rates emerging as a long-term tailwind.
5. Financial Flexibility and Capital Allocation
With a fortified balance sheet post-equity raise, Tarsus has the resources to fund both aggressive commercial expansion and pipeline development. Management is not prioritizing near-term cash flow positivity, instead emphasizing continued investment to maximize category leadership and long-term value creation.
Key Considerations
This quarter marks a pivotal inflection for Tarsus, as commercial and marketing investments begin to unlock the full prescribing potential of its core ECP base. The company’s playbook, built on payer access, DTC engagement, and prescriber education, is now being validated in real time, though operational and market risks remain.
Key Considerations:
- Prescriber Frequency Inflection: Rapid shift from monthly to daily prescribing signals the beginning of deeper market penetration, not just initial adoption.
- Medicare Coverage as Growth Catalyst: Broad Medicare access has removed a major barrier, unlocking new patient segments and fueling volume growth among older demographics.
- DTC Spend Escalation: Marketing investment is set to rise materially, with management willing to further increase spend if engagement metrics continue to outperform.
- Pipeline Leverage: Ocular rosacea and other pipeline assets could replicate the Xdemvi playbook, but require continued R&D outlays and regulatory execution.
- Global Expansion Readiness: Regulatory tailwinds in Europe and Japan offer multi-year growth optionality, but timelines and reimbursement remain to be de-risked.
Risks
Rising operating expenses, particularly in DTC and R&D, could delay the path to profitability if top-line growth slows or patient demand underperforms expectations. Macro events, evolving payer policies, and the need to sustain prescriber engagement represent ongoing uncertainties. While management sees minimal tariff risk due to diversified supply and low cost of goods, external shocks could still impact margin or inventory dynamics.
Forward Outlook
For Q2 2025, Tarsus guided to:
- 85,000 to 90,000 Xdemvi bottles dispensed, up from 72,000 in Q1
- Gross-to-net discount in the 45–47% range
For full-year 2025, management maintained guidance:
- DTC marketing spend of $70–80 million, with potential upside if campaign performance persists
- Incremental R&D spend in the second half as TP04 (ocular rosacea) enters Phase II
Management flagged typical Q3 seasonality as a moderator of sequential growth, with a return to stronger momentum expected in Q4. Factors influencing future outlook include DTC campaign impact, payer dynamics, sales force productivity, and macroeconomic environment.
- Ongoing DTC expansion and data generation to drive further prescriber and patient adoption
- Pipeline trial initiation and regulatory interactions in new geographies
Takeaways
Tarsus’s Q1 results confirm the power of its market creation strategy, with prescriber frequency, patient engagement, and payer access all converging to drive category-defining growth.
- Prescriber Deepening: The shift to weekly and daily prescribing among core ECPs is the clearest signal of durable, repeatable demand, with retreatment rates providing a long-term volume tailwind.
- Commercial and DTC Investment: Management is leaning into marketing and physician education, betting on continued conversion and brand-building to maximize first-mover advantage.
- Global and Pipeline Upside: Progress in ocular rosacea and international markets could extend Tarsus’s leadership, but will require sustained execution and capital deployment.
Conclusion
Tarsus’s Q1 2025 results showcase a company moving beyond initial launch into sustained category leadership, powered by prescriber deepening, DTC engagement, and broad payer access. With a strong balance sheet and a clear blueprint for category creation, the company is positioned to capture both near-term growth and long-term market expansion, though spending discipline and execution on global and pipeline initiatives remain critical watchpoints.
Industry Read-Through
Tarsus’s results highlight the increasing importance of DTC campaigns and payer access as accelerators of specialty pharmaceutical adoption, particularly in new or underdiagnosed therapeutic categories. The rapid transition from monthly to daily prescribing among ECPs demonstrates how targeted education, broad insurance coverage, and patient-driven demand can combine to create outsized growth in specialty pharma. For peers in ophthalmology and other specialty segments, the Xdemvi launch underscores the power of a surround-sound commercial approach and the need for robust data generation to expand prescriber comfort and patient reach. The experience also signals that, in markets with high unmet need, early investment in brand and access infrastructure can yield compounding returns as prescribing habits shift and retreatment rates emerge as durable growth levers.