Tarsus Pharma Shares Under Pressure: Analyst Says Concerns Over Adverse Event Profile Overblown

The FDA approved Tarsus Pharmaceuticals Inc's TARS Xdemvy (lotilaner ophthalmic solution) 0.25% for Demodex blepharitis, a common condition caused by an infestation of Demodex mites on a patient's eyelids.

The FDA approval was based on results from two studies (Saturn-1 and Saturn-2).

Efficacy was demonstrated by a significant improvement in eyelids in each study by Day 43, with some patients seeing improvement as early as two weeks. 

Additionally, the endpoints of mite eradication showed statistically significant improvement at Day 43 across both studies. The Tarsus shares have been under pressure despite securing FDA approval.

William Blair analysts Tim Lugo, Lachlan Hanbury-Brown and John Boyle do not see anything specific in the new label. But they note that some investors might have concerns regarding the 10% instillation site stinging and burning included in the label as an adverse event. 

In Saturn-1 and Saturn-2, instillation site pain and burning were observed in 11.8% and 7.9% of Xdemvy-treated patients, compared to similar rates (albeit numerically lower) of 7.7% and 6.7% observed in vehicle patients, respectively.

The analysts say the more likely cause of the weakness is the cases of eye inflammation and occlusive retinal vasculitis for another unrelated eye care launch occurring with Apellis Pharmaceuticals Inc's APLS Syfovre, indicated for geographic atrophy.

William Blair says it is encouraging to see that the label for Xdemvy contains no restrictions or limitations on the indicated patient population, well positioning Tarsus to access the estimated seven million patients in the initial target market.

The analysts note the strong pricing of $1,850 per treatment course, above William Blair's conservative estimate of $1,500 and at the upper range of the company's prior guidance of $1,500-$2,000.

The analysts maintain an Outperform rating with a price target of $44.

Price Action: TARS shares are down 24.5% at $18.11 on the last check Tuesday.