Tarsus Pharmaceuticals, Inc. (TARS)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, future revenue, business strategy, product and product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

The words “anticipate,” “believe,” contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “on track,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would,” or the negative of these terms or other similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ from expected results, include, among others:

•our ability to continue to successfully commercialize XDEMVY®, formerly known as TP-03, for the treatment of Demodex blepharitis;

•the prevalence of Demodex blepharitis and the size of the market opportunity for XDEMVY;

•our plans related to the continued commercialization of XDEMVY and our product candidates, if approved, including commercialization timelines and sales strategy;

•any statements regarding our ability to achieve distribution and patient access for XDEMVY and timing and breadth of payer coverage; our expectations of the potential market size, pricing, gross-to-net yields, eye care professional and patient acceptance of our product and product candidates, opportunity and patient populations for our product and product candidates, including XDEMVY;

•the rate and degree of market acceptance and clinical utility of XDEMVY and our product candidates;

•the likelihood of our clinical trials demonstrating safety and efficacy of our product candidates, and other positive results;

•the timing and progress of our current clinical trials and timing of enrollment and initiation of our future clinical trials, and the reporting of data from our current and future trials, and our ability to hire and retain personnel to oversee and execute on our current and future trials;

•the timing or likelihood of regulatory filings and approval for our product candidates and our ability to meet existing or future regulatory standards or comply with post-approval requirements;

•our plans relating to the clinical development of our current and future product candidates, including the size, number and disease areas to be evaluated;

•the anticipated timing, terms and benefits of the acquisition of Alkeus Pharmaceuticals, Inc. (“Alkeus”) and, assuming closing of the transaction, our ability to integrate Alkeus and realize the anticipated benefits of the pending acquisition;

•our ability to integrate iRenix Medical, Inc. (“iRenix”) and realize the anticipated benefits of the acquisition;

•the impact of health epidemics on our business and operations;

•the impact of unfavorable global and geopolitical economic conditions on our business and operations;

•the success of competing therapies that are or may become available;

•our estimates of the number of patients in the United States (“U.S.”) or globally, as applicable, who suffer from Demodex blepharitis, ocular rosacea, Lyme disease and malaria and the number of patients that will enroll in our clinical trials;

•the beneficial characteristics, safety, efficacy, therapeutic effects and potential advantages of our product candidates;

•our ability to obtain and maintain regulatory approval of our product and our product candidates to meet existing or future regulatory standards;

•our plans relating to the further development and manufacturing of our product and product candidates, including additional indications for which we may pursue;

•our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

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•the expected potential benefits of strategic collaborations with third parties (including, for example, the receipt of payments, achievement and timing of milestones under license agreements, and the ability of our third party collaborators to commercialize our product candidates in the territories under license) and our ability to attract collaborators with development, regulatory and commercialization expertise;

•existing regulations and regulatory developments in the U.S. and other jurisdictions;

•our plans and ability to obtain, maintain, or protect intellectual property rights, including extensions of existing patent terms where available;

•our continued reliance on third parties to conduct additional clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials;

•the need to hire additional personnel and our ability to attract and retain such personnel;

•the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•our financial performance;

•the sufficiency of our existing capital resources to fund our future operating expenses and capital expenditure requirements;

•our competitive position; and

•our anticipated use of our existing resources and the proceeds from our initial public offering (“IPO”), our subsequent follow-on public offerings in May 2022 (the “May 2022 Public Offering”), August 2023 (the “August 2023 Public Offering”), March 2024 (the “March 2024 Public Offering”), and March 2025 (the “March 2025 Public Offering”), collectively the “Follow-On Public Offerings”, as well as proceeds from our sales agreement prospectus (the “2023 ATM Prospectus”), drawdowns from our loan and security agreement (the “2024 Credit Facility”) with funds associated with Pharmakon Advisors, LP (“Pharmakon”), and a private placement of 2,098,519 shares of our common stock at a purchase price of $56.00 per share and pre-funded warrants to purchase 133,625 shares of our common stock at a purchase price per pre-funded warrant of $55.9999 (the purchase price per share less $0.0001, the exercise price of the pre-funded warrants), which is expected to result in gross proceeds of $125.0 million, before deducting placement agent fees and offering expenses (the “PIPE Transaction”). The PIPE Transaction is expected to close on August 7, 2026, subject to the satisfaction of customary closing conditions.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and growth prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” elsewhere in this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, advancements, discoveries, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this report and the documents that we reference in this report and have filed with the Securities and Exchange Commission (“SEC”) as exhibits to this report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

References in this Quarterly Report on Form 10-Q to the terms, “Tarsus,” the “Company,” “we,” “our,” and “us” refer to Tarsus Pharmaceuticals, Inc., unless the context otherwise indicates.

Overview

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Our Business

We are a commercial stage biopharmaceutical company focused on the development and commercialization of therapeutics, starting with eye care. We launched XDEMVY® (lotilaner ophthalmic solution) 0.25%, formerly known as TP-03, for the treatment of Demodex blepharitis, in August 2023 after receiving U.S. Food and Drug Administration (“FDA”) approval in July 2023. Demodex blepharitis is caused by the infestation of Demodex mites. Demodex blepharitis (“blephar” is a reference to eyelid and “itis” is a reference to inflammation) is an ophthalmic lid margin disease characterized by inflammation of the eyelid margin, redness and ocular irritation, including a specific type of eyelash dandruff called collarettes, which are pathognomonic for Demodex blepharitis. Poorly controlled and progressive Demodex blepharitis can lead to corneal damage over time and, in extreme cases, blindness. There may be as many as approximately 25 million people in the U.S. who suffer from Demodex blepharitis. XDEMVY is the first and only therapeutic approved by the FDA and we believe is the definitive standard of care for the treatment of Demodex blepharitis.

XDEMVY targets and eradicates the root cause of Demodex blepharitis - Demodex mite infestation. The active pharmaceutical ingredient (“API”) of XDEMVY, lotilaner, paralyzes and eradicates mites and other parasites through the inhibition of parasite-specific gamma-aminobutyric acid-gated chloride (“GABA-Cl”) channels with no GABA-Cl inhibition in humans.

To date, we have completed seven clinical trials that include a Phase 3 Saturn-2 trial, a Phase 2b/3 Saturn-1 trial, four Phase 2 trials, and a Phase 1 trial for XDEMVY in Demodex blepharitis, all of which met their primary, secondary and/or certain exploratory endpoints, with the drug well tolerated throughout each trial. We have also completed clinical trials in Demodex blepharitis patients with Meibomian Gland Disease (“MGD”), including the Phase 2a clinical trial (the “Ersa Trial”), and a pilot clinical trial (the “Rhea Trial”) involving an XDEMVY vehicle.

We intend to further advance our pipeline with, e.g., lotilaner API to address several diseases in human medicine, including eye care, and infectious disease prevention. We are investigating the development of our lotilaner-based product candidates

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our “Selected Financial Data” and our financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those discussed under the section titled “Risk Factors” and elsewhere in this Annual Report on 10-K. See the section titled “Note Regarding Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K.

Overview

Our Business

We are a commercial stage biopharmaceutical company focused on the development and commercialization of therapeutics, starting with eye care. We launched XDEMVY® (lotilaner ophthalmic solution) 0.25%, formerly known as TP-03, for the treatment of Demodex blepharitis, in August 2023 after receiving U.S. Food and Drug Administration (“FDA”) approval in July 2023. Demodex blepharitis is caused by the infestation of Demodex mites. Demodex blepharitis (“blephar” is a reference to eyelid and “itis” is a reference to inflammation) is an ophthalmic lid margin disease characterized by inflammation of the eyelid margin, redness and ocular irritation, including a specific type of eyelash dandruff called collarettes, which are pathognomonic for Demodex blepharitis. Poorly controlled and progressive Demodex blepharitis can lead to corneal damage over time and, in extreme cases, blindness. There may be as many as approximately 25 million people in the U.S. who suffer from Demodex blepharitis. XDEMVY is the first and only therapeutic approved by the FDA and we believe is the definitive standard of care for the treatment of Demodex blepharitis.

XDEMVY targets and eradicates the root cause of Demodex blepharitis - Demodex mite infestation. The active pharmaceutical ingredient (“API”) of XDEMVY, lotilaner, paralyzes and eradicates mites and other parasites through the inhibition of parasite-specific gamma-aminobutyric acid-gated chloride (“GABA-Cl”) channels with no GABA-Cl inhibition in humans.

To date, we have completed seven clinical trials that include a Phase 3 Saturn-2 trial, a Phase 2b/3 Saturn-1 trial, four Phase 2 trials, and a Phase 1 trial for XDEMVY in Demodex blepharitis, all of which met their primary, secondary, and/or certain exploratory endpoints, with the drug well tolerated throughout each trial. We have also completed clinical trials in Demodex blepharitis patients with Meibomian Gland Disease (“MGD”), including the Phase 2a clinical trial (the “Ersa Trial”), and a pilot clinical trial (the “Rhea Trial”) involving an XDEMVY vehicle.

We intend to further advance our pipeline with, e.g., lotilaner API to address several diseases in human medicine, including eye care, and infectious disease prevention. We are investigating the development of our product candidates to address targeted diseases with high unmet medical needs, which currently include TP-04, an investigational sterile aqueous gel formulation of lotilaner for the potential treatment of ocular rosacea, and TP-05, an investigational oral tablet formulation of lotilaner, for potential Lyme disease prophylaxis and community malaria reduction.

Recent Business and Corporate Highlights

XDEMVY

•XDEMVY is one of the best-selling prescription eye drops.

◦Net product sales were $151.7 million and $451.4 million for the fourth quarter and full year 2025, respectively.

◦Delivered approximately 130,000 and 400,000 bottles to patients during the fourth quarter and full year 2025, respectively.

◦Maintained over 90% of commercial, Medicare, and Medicaid covered lives and recognized a gross-to-net discount of approximately 44% and 45% in the fourth quarter and full year 2025, respectively.

•Direct-to-consumer (“DTC”) campaign on streaming platforms and network television generated a positive return on investment in 2025 that continues to grow.

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◦Unaided awareness of Demodex blepharitis is now approximately 25% versus 2% of patients surveyed at the beginning of the campaign.

•We continued to execute on our category-creating strategy, advancing a robust pipeline.

•Strengthened our leadership with the appointment of David E.I. Pyott, a renowned Biopharmaceutical leader and former Chief Executive Officer and Chairman of Allergan Inc., to the Board of Directors.

◦Mr. Pyott joined our Board of Directors in February 2026 and brings decades of global leadership experience spanning innovative R&D, product development, and commercial execution. He was instrumental in transforming Allergan from a focused eye care business with approximately $1 billion in revenue into a global specialty pharmaceutical and medical device leader generating more than $7 billion in revenue.

TP-03 Demodex blepharitis in patients with MGD, Ersa and Rhea Trials:

In December 2023, we announced positive topline results of the Ersa Trial evaluating XDEMVY administered twice daily (“BID”) or three times a day (“TID”) for 6 weeks and 12 weeks for the treatment of MGD in patients with Demodex mites. XDEMVY demonstrated statistically significant and clinically meaningful improvements compared to baseline in two objective measures of the disease: the presence and quality of liquid secretion as measured by the Meibomian Gland Secretion Score; and the number of glands secreting normal or clear liquid. In November 2024, additional positive data was presented from the Ersa Trial as well as data from the Rhea Trial, a pilot study evaluating XDEMVY vehicle for the treatment of MGD in patients with Demodex mites, at the American Academy of Optometry (“AAOpt”) Annual Meeting 2024, and in April 2025 at the American Society of Cataract and Refractive Surgery (“ASCRS”) Annual Meeting 2025. The Rhea Trial enrolled a similar patient population as the Ersa Trial, and evaluated the same outcomes, with the same dosing regimens, except the Rhea Trial participants received XDEMVY vehicle. Both the Ersa and Rhea Trials also assessed patient reported outcomes for some of the most commonly reported patient symptoms in Demodex blepharitis and MGD, namely fluctuating vision, itching, redness, and burning.

The presentations, which combined the Ersa and Rhea Trials data in a pooled analysis, demonstrated that XDEMVY provided statistically significant and clinically meaningful improvements of the meibomian glands from baseline and when compared to vehicle, including at least three times more glands secreting normal or clear liquid in patients treated with XDEMVY compared to vehicle at day 43. These improvements were shown across three objective measures of MGD: i) the presence and quality of liquid secretion as measured by the Meibomian Gland Secretion Score; ii) the number of glands secreting normal or clear liquid; and iii) the number of glands yielding any liquid. Improvements were also demonstrated across certain patient reported outcomes, including fluctuating vision, itching and redness. Further, XDEMVY demonstrated statistically significant rates of collarette cure and lid margin erythema cure that are consistent with previous XDEMVY studies. No statistically significant differences were observed between the BID and TID treatment arms in both the Ersa and Rhea Trials, respectively, and XDEMVY and the XDEMVY vehicle were well tolerated. Given the positive results of these trials, plus the FDA’s feedback that these patients are already covered under XDEMVY’s label for the treatment of Demodex blepharitis, our medical affairs team is continuing to move forward with sharing this data with ECPs.

TP-04 Rosacea, Galatea Trial:

In February 2024, we announced positive topline results from the Galatea trial, a Phase 2a trial evaluating TP-04, an investigational sterile aqueous gel formulation of lotilaner, for the potential treatment of papulopustular rosacea. The positive topline results demonstrated statistically significant improvements (p0.05) in inflammatory lesions and Investigator’s Global Assessment score (change in baseline and success rate) were observed compared to vehicle at week 12. TP-04 was generally well tolerated.

After review of the Galatea trial data with the FDA and key opinion leaders (“KOLs”), we decided to pursue development of TP-04 for the potential treatment for ocular rosacea, a highly prevalent and underserved eye disease with no FDA-approved therapy. In December 2025, we initiated a Phase 2 trial for the potential treatment of ocular rosacea with topline results expected in the first half of 2027.

TP-05 Lyme Disease, Carpo Trial:

We believe TP-05 is currently the only on-demand, oral tablet in development that targets ticks, and potentially prevents Lyme disease transmission. It is designed to rapidly and durably provide systemic blood levels of lotilaner potentially sufficient to kill infected ticks attached to the human body before they can transmit the Borrelia bacteria that causes Lyme disease.

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In February 2024, we announced positive topline results from the Carpo trial, which demonstrated a statistically significant increase in tick mortality compared to vehicle (p0.001), regardless of treatment arm, and was well tolerated (the “Carpo Trial”). The Carpo Trial was designed to evaluate TP-05, an investigational oral systemic, non-vaccine pharmacological prophylactic for the potential prevention of Lyme disease in humans. The Carpo Trial evaluated the efficacy of TP-05 in killing lab grown, non-disease carrying ticks after they have attached to the skin of healthy volunteers, as well as confirm the safety, tolerability, and blood concentration of TP-05.

Given ongoing discussions with the FDA about our Lyme disease program, they agreed to our proposed approach for a Phase 2 clinical trial of TP-05 (an investigational oral tablet), which would include several hundred subjects with planned trial initiation expected in the second quarter of 2026. Additionally, the FDA confirmed that a Phase 3 trial would require a disease prevention field study that would likely require the enrollment of thousands of patients. We believe that partnering this program, following completion of the Phase 2 clinical trial, could be the best approach to potentially deliver this prophylactic therapy candidate to patients.

Additional Potential Growth Drivers in 2026 and Beyond:

•In Europe, we are on track for the potential approval of a preservative-free formulation of TP-03 for the potential treatment of Demodex blepharitis expected in 2027.

•Ongoing discussions continue with regulatory authorities in Japan on a potential path to approval of TP-03 for Demodex blepharitis. The Elara prevalence trial showed high prevalence and significant impact of Demodex blepharitis in Japan, consistent with U.S. findings.

•Our partner in Greater China, GrandPharma, expects potential approval of TP-03 for Demodex blepharitis in 2026.

Corporate and Financial Overview

We were incorporated as a Delaware corporation in November 2016, and our headquarters are located in Irvine, California. Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, acquiring intellectual property, clinical development of our product candidates, commercializing XDEMVY, building our research and development capabilities, raising capital, and enhancing our corporate infrastructure.

To date, we have financed our operations through private placements of preferred stock, convertible promissory notes, net proceeds from issuance of common stock in our init

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