Tarsus Pharmaceuticals, Inc. (TARS) Earnings

Management highlights

- Core Commercial Performance of Xtambi * Over 700,000 patients have been treated with Xtambi since launch, and the product is on track to reach $2 billion in potential annual peak sales. Adoption has advanced from initial uptake to standard-of-care status: the number of eye care professionals (ECPs) prescribing Xtambi daily has doubled year-over-year, retreatment rates have advanced to the high teens, and more than 80% of surveyed ECPs plan to increase prescribing over the next year. New clinical data confirms DB is common in patients with tralasia, reinforcing Xtambi's superiority over tea tree oil and driving increased routine screening. * Direct-to-consumer (DTC) marketing has driven strong patient engagement: unaided awareness of DB has reached 30%, high-value actions on Xtambi.com increased 19%, and many patients now request Xtambi by name. - Alkias Pharmaceuticals / ALK001 Acquisition * Tarsus announced a pending acquisition of Alkias Pharmaceuticals to add ALK001 (Gilder Retinol), a late-stage investigational treatment for Stargardt disease, to its pipeline. Stargardt is a devastating inherited retinal disease with no FDA-approved treatments that causes blindness in half of patients diagnosed before age 20 within seven years, affecting an estimated 86,000 patients in the U.S. * ALK001 is a modified vitamin A analog that slows formation of toxic bisretinoids that damage retinal cells, without disrupting the normal visual cycle. It has demonstrated encouraging potential to preserve visual function, with a favorable long-term tolerability profile across more than 400 patients with up to seven years of treatment exposure. ALK001's ongoing Phase 3 NorthStar trial is expected to deliver top-line results in the second half of 2029. - Strategic Pipeline Expansion * The acquisition builds on Tarsus' earlier purchase of IRX101 to expand its presence in the large retina specialty, establishing a portfolio of pipeline assets targeting serious retinal diseases. Management's long-term goal is to build a leading diversified eye care company focused on overlooked diseases, with multiple potential blockbuster products.

Guidance

- Full-year 2026 Xtambi net product sales guidance was increased to $685 million, reflecting stronger than expected year-to-date performance and anticipated robust fourth quarter growth from typical year-end patient dynamics. - Gross margins are expected to remain approximately 93% for full-year 2026. - SG&A expense guidance is maintained at $545 million to $565 million for full-year 2026. - Full-year 2026 R&D expense guidance was increased to $190 million to $210 million, up from the prior range of $115 million to $135 million, to account for the upfront consideration from the recent Irenix Medical acquisition. The pending Alkias acquisition is not included in this guidance. - Management reaffirmed that profitability is expected in 2027, with the incremental R&D and commercial spend for new pipeline assets potentially shifting profitability by only one to two quarters.

Segment performance

Tarsus Pharmaceuticals operates with one core commercial product segment: Xtambi (its lead treatment for demodex blepharitis (DB)). In Q2 2026, Xtambi generated net product sales of $173.9 million, representing 69% year-over-year growth and 20% quarter-over-quarter growth. To date, Xtambi has generated nearly $1 billion in cumulative net product sales, and accounts for 100% of Tarsus' current commercial revenue. Gross margins for the segment (and company overall) held steady at approximately 93% in the quarter. The company ended Q2 2026 with $449.7 million in cash, cash equivalents, and marketable securities.

Risks & headwinds

- Forward-looking statements regarding pipeline progress, clinical trial outcomes, revenue growth, and profitability are subject to inherent risks and uncertainties, and actual results may differ materially from current expectations, as detailed in the company's SEC filings. - ALK001's Phase 3 trial may not meet its primary or secondary endpoints, and the FDA may require an additional Phase 3 trial for approval, which would delay potential launch and increase development costs. - ALK001 is entering a competitive landscape with a competitor's Phase 3 Stargardt product already having a head start, which could impact market share, trial enrollment, and commercial adoption if the competitor launches first. - Pipeline expansion requires increased R&D and commercial spending, which could delay the company's path to profitability.

Analyst Q&A

• Q: How does ALK001 differentiate from competitor Tinlarabant, which has a head start in Phase 3 development for Stargardt disease, and what is your expected market opportunity?

  A: Management noted ALK001 demonstrates efficacy on both disease progression (measured by retinal atrophy and low-light visual acuity) that is unique in the field, and has a strong safety profile with 7 years of data from over 400 treated patients. ALK001's unique mechanism reduces toxic dimers without disrupting the normal visual cycle, a key advantage for a blinding disease. Survey data of 100 retina physicians supports the expectation that ALK001 can be a billion-dollar-plus annual opportunity. ---

• Q: How will you build out commercial capabilities for your new retina pipeline, and how does this strategy differ from Xtambi's commercial playbook?

  A: Management noted the retina physician base is far more concentrated than the DB market, with only ~3,500 relevant ECPs, and ~2,000 physicians expected to write over 80% of Stargardt therapies. There is significant overlap with the sales force already being built for the company's other phase 3 retina asset IRX101, creating meaningful synergy. While the go-to-market focus is different from Xtambi's broad primary eye care approach, the core strategy of delivering differentiated clinical evidence and securing fast broad payer access aligns with the company's proven playbook. For this rare disease, management expects a similar fast access path with a differentiated value story. ---

• Q: What price do you expect for ALK001, and how do you address clinical endpoints including use of natural history data and durability of benefit?

  A: Management confirmed the expected pricing aligns with competitor commentary, in the $350,000 to $500,000 range, reflecting the product's differentiated clinical value. Low-light visual acuity (LLVA), the secondary endpoint in ALK001's Phase 3 trial, is a more sensitive measure of vision loss than standard best-corrected visual acuity (BCVA), and statistically significant benefit in LLVA was already observed within two years in earlier trials. LLVA loss precedes BCVA loss, making it a valuable endpoint for physicians to monitor disease progression. ---

• Q: Is a second Phase 3 trial required for ALK001 approval, and will you develop ALK001 for geographic atrophy in addition to Stargardt?

  A: Management explained the acquisition includes all of Alkias' assets, including prior work in geographic atrophy, but the value ascribed to the transaction is almost entirely focused on the Stargardt opportunity. The ongoing NorthStar Phase 3 trial is robustly designed and powered to support registration on its own, and management is confident in its ability to deliver a compelling approval package. The potential second trial is a proactive risk mitigation and upside strategy, to potentially expand data to younger faster-progressing patient populations, and will be finalized following discussions with the FDA.