Tarsus (TARS) Q3 2025: 147% Growth Underscores Xdemvi’s Blockbuster Trajectory
Tarsus delivered a transformative quarter, with Xdemvi’s adoption and physician engagement driving 147% year-over-year growth and outpacing broader eye care industry trends. Physician prescribing depth, patient awareness, and direct-to-consumer (DTC) investments are compounding, supporting blockbuster-plus potential and a pipeline set for further category creation. Management’s outlook signals continued momentum, but investors should monitor gross-to-net dynamics and execution on new indications as growth drivers evolve into 2026.
Summary
- Prescribing Depth Expands: Weekly and multi-weekly Xdemvi prescribers rose 20% and 30%, fueling broader adoption.
- DTC Investment Delivers: Direct-to-consumer campaigns are driving unaided awareness and positive ROI, reinforcing patient-led demand.
- Pipeline Readiness: Ocular rosacea and Lyme prevention programs are progressing, with global expansion strategies in motion.
Performance Analysis
Xdemvi, prescription eye drop for demodex blepharitis (DB), was the engine of Tarsus’s exceptional Q3, with net sales of $119 million and over 103,000 bottles dispensed. This translated to 147% year-over-year growth, a figure that stands out even more given the typically soft seasonality in eye care during Q3, when peer products saw sequential declines. Notably, weekly prescribers grew 20% and those prescribing more than once a week climbed 30%, highlighting deepening integration into clinical practice.
The gross-to-net discount, or the gap between list and realized sales due to rebates and coverage, held steady at 44.7%, reflecting both Medicare program adjustments and a rising Medicare mix. Importantly, this did not erode margin structure, and inventory levels remained stable at roughly two and a half weeks. DTC spend approached the high end of guidance, with a 90% increase in website visits and 42% growth in unaided awareness, directly correlating to more office visits and prescriptions. Retreatment rates (refills) are trending upward, with over 10% of weekly prescriptions now refills and mid-teens in early cohorts, supporting durable, recurring revenue streams.
- Prescription Depth Drives Growth: The shift from trial to frequent prescribing, especially among top prescribers, is accelerating adoption.
- Medicare Mix and Coverage: Broad coverage and higher Medicare patient share are expanding the addressable base, albeit with some gross-to-net pressure.
- DTC ROI Scaling: Marketing efficiency and patient pull-through are compounding, with ROI described as positive and growing each quarter.
Tarsus’s performance is not only outpacing the market but also building a foundation for sustainable, high-quality growth as recurring use and expanded indications come online.
Executive Commentary
"Xtemvi is now one of the best-selling prescription eye drops in the market, setting a new benchmark for launch performance across the pharmaceutical industry... We are just scratching the surface on the full potential of this launch."
Bobby Azamian, Chief Executive Officer and Chairman
"Q3 was another tremendous quarter with Xtemvi generating $118.7 million in net product sales... Our growth drivers are working in harmony, resulting in steady weekly prescription gains driven largely by new patient starts."
Jeff Farrow, Chief Financial Officer and Chief Strategy Officer
Strategic Positioning
1. Category Creation and Physician Behavior Shift
Tarsus’s core strategy is category creation—building awareness, diagnosis, and treatment patterns for demodex blepharitis. The company’s educational efforts and compelling clinical data are changing physician behavior, with more than 20,000 doctors now prescribing Xdemvi. The recent meibomian gland disease (MGD) data is broadening use cases, with physicians proactively screening for DB in patients presenting for dry eye, cataracts, and other comorbidities, thus expanding the total addressable market.
2. Direct-to-Consumer Engine
DTC marketing, or direct-to-consumer advertising, is a central lever, delivering a positive and growing return on investment. The campaign is driving patient awareness, with many patients now asking for Xdemvi by name and proactively seeking diagnosis. This patient pull is reinforcing physician confidence and accelerating adoption, creating a virtuous cycle of awareness, diagnosis, and treatment.
3. Pipeline and Global Expansion
Pipeline development is advancing, with a Phase II trial for TPO4 (ocular rosacea) set to initiate by year-end and a Phase 2b study for TPO5 (Lyme disease prevention) planned for 2026. International expansion is also progressing, with regulatory discussions in Japan and a preservative-free formulation for Europe on track for submission in 2026. Tarsus is considering both direct sales and partner-driven models to maximize global reach.
4. Operational Scale and Margin Management
Operational discipline is evident in inventory management and expense control. Gross-to-net discounts are expected to stabilize, and operating expenses, particularly DTC spend, will remain elevated but are tied to revenue growth. The company is targeting efficiency gains as the commercial engine matures and as retreatment rates climb toward a projected 20% annualized level.
5. Multi-Specialty Penetration
Optometrist and ophthalmologist engagement is balanced, with optometry accounting for roughly 65% of volume. Both segments remain strategic, with optometrists benefiting from in-clinic patient retention and ophthalmologists focusing on pre-surgical management. This dual-channel approach diversifies risk and broadens market penetration.
Key Considerations
This quarter’s results highlight a business in the midst of a rare category-creating launch, with multiple growth levers compounding and a robust pipeline to extend the runway.
Key Considerations:
- Prescribing Depth and Retreatment: The move from trial to frequent prescribing and rising retreatment rates support not just initial uptake but recurring revenue streams.
- Gross-to-Net Stability: Medicare mix and discount rates warrant monitoring, as further mix shifts could pressure realized revenue even as volumes grow.
- DTC Spend Efficiency: Positive ROI on DTC spend is a differentiator, but sustainability and efficiency as spend scales will be critical to long-term margin.
- Pipeline Execution: Timely initiation and successful readouts from ocular rosacea and Lyme programs are essential for maintaining multi-year growth expectations.
- Global Expansion Risk/Reward: Execution in Europe and Japan, including regulatory timelines and commercial model selection, will influence international upside realization.
Risks
Gross-to-net pressure from increased Medicare mix or policy changes could impact realized revenue even as volumes climb. Pipeline execution carries inherent clinical and regulatory risk, and competitive response from incumbents or new entrants could challenge category leadership. DTC efficiency may plateau, and operational scaling internationally introduces additional complexity. Investors should also monitor potential seasonality and market saturation as the installed base grows.
Forward Outlook
For Q4 2025, Tarsus guided to:
- Xdemvi net product sales of $140 million to $145 million
- Inventory levels consistent at two and a half weeks
For full-year 2025, management raised guidance to:
- Annual revenue of $440 million to $445 million
Management expects gross-to-net discounts to remain in the 43% to 45% range and operating expenses, including DTC spend, to reach the high end of the $70 to $80 million range. Pipeline milestones include initiation of the ocular rosacea Phase II trial by year-end and continued progress on global submissions.
Takeaways
Tarsus’s Q3 performance demonstrates that category creation, deep physician engagement, and DTC-driven demand can deliver sustained, outsized growth in a challenging sector.
- Prescription Depth and DTC Synergy: Physician prescribing depth and patient-led demand are compounding, supporting blockbuster-plus potential and recurring revenue streams.
- Pipeline and Global Leverage: A robust pipeline and global expansion provide multiple shots on goal, but require disciplined execution to realize full value.
- Margin and Reinvestment Balance: Gross-to-net management and DTC efficiency will be critical as the business scales, with recurring use and new indications needed to offset potential margin pressure.
Conclusion
Tarsus delivered a paradigm-defining quarter, with Xdemvi’s momentum and pipeline optionality positioning the company as a next-generation eye care leader. Sustaining growth will require continued execution on DTC, physician education, and global expansion, as well as clinical success in new indications. Investors should watch for gross-to-net trends and the pace of recurring use as key forward indicators.
Industry Read-Through
Tarsus’s success with Xdemvi underscores the power of category creation, physician education, and direct-to-consumer investment in specialty pharmaceuticals. The company’s ability to drive both initial adoption and recurring use in a chronic condition sets a new benchmark for specialty launches. Competitors in eye care and other specialty pharma segments will likely revisit their DTC strategies and physician engagement models, as patient-led demand and retreatment become increasingly central to durable growth. The focus on Medicare access and gross-to-net management also highlights the importance of payer mix and coverage dynamics for all high-volume specialty launches.