Tarsus Pharmaceuticals Chief Executive Bobak Azamian found his inspiration in a veterinarian's office — of all places.
Today, the company sells one drug that could, potentially, treat 25 million people in the U.S. with Demodex blepharitis, a condition that occurs when mites build up in the eyelashes. This causes itchiness, crustiness, dryness and other problems in the skin around the eyes.
But its drug, Xdemvy, didn't emerge from the human health side of pharmaceuticals. Instead, Azamian and his cofounder drew inspiration from animal health. Lotilaner, the active ingredient behind Xdemvy, is an antiparasitic used to treat tick and flea infestations in animals.
"Fleas, ticks, mites, these are really common parasites that cause disease in our pets," he said in an interview. "A lot of animal-health companies have been innovators. So, we found the best antiparasitic molecule and brought it to human medicine."
Shares of Tarsus Pharmaceuticals have been on a run over the past four months, helped by strong third-quarter sales growth. The biotech stock has rocketed about 150% since early August.
Tarsus Pharmaceuticals' Strong Growth
Xdemvy brought in $48.1 million in sales during the three months ended Sept. 30, easily beating expectations for $43.2 million, according to FactSet. That ramped markedly from the $1.9 million in sales Tarsus reported in the year-earlier period, Xdemvy's first on the market.
The biotech stock surged nearly 14% on Nov. 14, the day after Tarsus Pharmaceuticals reported its third-quarter sales. Shares later pulled back, however, and closed with a fractional gain. Since then, the stock has continued gaining momentum.
In an October report to clients, William Blair analyst Lachlan Hanbury-Brown noted Tarsus had finished hiring and training its salesforce, which hit the field after Labor Day.
"Management is already seeing a lift from the new reps and noted it expects the expansion to pay for itself this year, and to see multiples of return on investment in 2025," he said.
Biotech Stock: Blockbuster Status Looms
Azamian, Tarsus Pharmaceuticals' CEO, notes Xdemvy is the first prescription medicine meant specifically for Demodex blepharitis. Now that there's a drug on the market, doctors are "looking for it more than they ever have."
Historically, patients with Demodex blepharitis simply had to "deal with it," he said.
"There hasn't been any medicine, so people have been doing over-the-counter remedies, warm compresses to try to reduce the inflammation, scrubs to try to scrub off the debris that results from the mites, and then trying things like tea tree oil that has some natural product activity against mites, but don't really get to the root cause like our drug, Xdemvy, does," he said.
He estimates Tarsus has treated 100,000 patients with the condition and has reached 13,000 of the approximately 15,000 doctors who treat them. But there are millions of potential patients. He notes the incidence of Demodex blepharitis climbs as patients get older.
Analysts following the biotech stock expect Xdemvy to approach blockbuster status in 2029 with an estimated $965.4 million in sales, a significant increase from the $174.1 million forecast for this year and $310.8 million for next.
Next Efforts In Rosacea And Lyme Disease
Tarsus Pharmaceuticals is also on a treatment for rosacea around the eyes and a drug that could prevent Lyme disease. Rosacea is a skin condition that causes redness or flushing, oftentimes on the face. Both are different formulations of the same active ingredient behind Xdemvy.
Papulopustular rosacea, the formal name for the condition Tarsus is targeting, occurs in about 18% to 26% of patients with rosacea. It's developing TP-04 as a topical treatment for the disease.
Meanwhile, Tarsus' TP-05 could prevent Lyme disease from tick bites or malaria transmitted by mosquito bites. Tarsus estimates there are 300,000 to 400,000 cases of Lyme disease each year in the U.S. Malaria occurs in 247 million people annually across the globe.
"This is a pipeline in a product," Azamian said. "One molecule across three formulations."
Top 3% Biotech Stock
But the success with Xdemvy, thus far, is truly what's driving Tarsus stock, he said.
Shares have a strong IBD Digital Relative Strength Rating of 97 out of a best-possible 99. This means the biotech stock ranks in the top 3% of all stocks when it comes to 12-month performance.
Tarsus Pharmaceuticals shares have traded above their key moving averages since September, MarketSurge shows.
But, it's important to note, the company is still not profitable. It's expected to report losses until 2026, according to FactSet.
Still, Azamian remains upbeat.
"It's category ownership with Xdemvy and then category creation with rosacea," he said. "We have a great team, a great financial position. Our mission at Tarsus is really to not just have one great medicine with Xdemvy but, ultimately, to have other category-creating medicines that we can bring to patients.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
