Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to ____ . Commission File Number: 001-39614 TARSUS PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) Delaware 81-4 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to ____ . Commission File Number: 001-39614 TARSUS PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) Delaware 81-4717861 ( ...

Tarsus Corporate Presentation May 2022 © Tarsus Pharmaceuticals 2022 Legal Disclaimer This presentation contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current expectations about future events that we believe may affect our financial condition, results of operations, business strategy, and financial needs. All statements other than statements of historical fa ...

[Part I - Financial Information](index=3&type=section&id=Part%20I%20-%20Financial%20Information) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed financial statements for the three months ended March 31, 2022, detailing financial position, operations, and cash flows, including a net loss of $20.2 million [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) Total assets slightly increased to $181.5 million, while total liabilities significantly rose to $32.3 million due to a new term loan, decreasing stockholders' equity to $149.2 million Condensed Balance Sheet Summary (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $175,010 | $171,332 | | Total current assets | $178,755 | $175,952 | | **Total assets** | **$181,483** | **$178,907** | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $12,610 | $11,478 | | Term loan, net | $19,180 | $— | | **Total liabilities** | **$32,286** | **$12,177** | | **Total stockholders' equity** | **$149,197** | **$166,730** | | **Total liabilities and stockholders' equity** | **$181,483** | **$178,907** | [Condensed Statements of Operations and Comprehensive (Loss) Income](index=5&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20(Loss)%20Income) The company reported a net loss of $20.2 million for Q1 2022, a significant decline from $10.4 million net income in Q1 2021, primarily due to decreased revenues and lower R&D expenses Condensed Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total revenues | $539 | $33,432 | | Research and development | $12,081 | $16,261 | | General and administrative | $7,946 | $5,160 | | Total operating expenses | $20,060 | $22,718 | | **Net (loss) income** | **$(20,238)** | **$10,376** | | **Net (loss) income per share, diluted** | **$(0.98)** | **$0.47** | [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $15.3 million, offset by $19.1 million from financing activities, resulting in a net cash increase of $3.7 million for the quarter Summary of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,286) | $(11,794) | | Net cash used in investing activities | $(161) | $(175) | | Net cash provided by financing activities | $19,125 | $19 | | **Net increase (decrease) in cash** | **$3,678** | **$(11,950)** | [Notes to Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) Detailed notes disclose the company's accumulated deficit of $66.9 million, a new $175 million credit facility, the LianBio out-license agreement, and a May 2022 follow-on public offering - The company has no product sales and an accumulated deficit of **$66.9 million** as of March 31, 2022. It expects to continue incurring operating losses[21](index=21&type=chunk) - On February 2, 2022, the company executed a **$175 million** credit facility and made an initial draw of **$20 million**[22](index=22&type=chunk)[134](index=134&type=chunk) - The company has an out-license agreement with LianBio for TP-03 in Greater China, with eligibility for up to **$45.0 million** in development/regulatory milestones, **$100 million** in sales-based milestones, and tiered royalties[128](index=128&type=chunk)[130](index=130&type=chunk) - In May 2022, the company completed a follow-on public offering, raising gross proceeds of **$75.6 million** from the sale of **5.6 million** shares at **$13.50** per share[142](index=142&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's business, clinical progress for TP-03, and financial results, including a Q1 2022 net loss of $20.2 million, with sufficient capital to fund operations into 2026 [Overview of Business and Recent Highlights](index=28&type=section&id=Overview%20of%20Business%20and%20Recent%20Highlights) Tarsus, a biopharmaceutical company, announced positive Phase 3 results for TP-03 for Demodex blepharitis, supporting a planned NDA submission, and is advancing TP-05 for Lyme disease prevention - The lead product candidate, TP-03, is in Phase 3 for Demodex blepharitis, a condition affecting an estimated **25 million** people in the U.S[150](index=150&type=chunk) - The Phase 3 Saturn-2 trial for TP-03 met its primary endpoint, with **56%** of patients achieving a complete collarette cure compared to **13%** on vehicle (p<0.0001). The company plans to submit an NDA in the second half of 2022[152](index=152&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - The company is advancing TP-05, a novel oral therapeutic for the prevention of Lyme disease, with Phase 1 data expected in the second half of 2022[157](index=157&type=chunk) - A follow-on public offering was completed on May 5, 2022, raising gross proceeds of **$75.6 million**[163](index=163&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Total revenues significantly decreased to $0.5 million in Q1 2022 due to the absence of a one-time license fee, while R&D expenses fell and G&A expenses rose Comparison of Operations (in thousands) | Account | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Total revenues | $539 | $33,432 | $(32,893) | | Research and development | $12,081 | $16,261 | $(4,180) | | General and administrative | $7,946 | $5,160 | $2,786 | | **Net (loss) income** | **$(20,238)** | **$10,376** | **$(30,614)** | - The decrease in R&D expenses was mainly due to non-recurring costs in Q1 2021, including a **$5.5 million** stock payment and a **$2.0 million** cash payment for in-license agreements[181](index=181&type=chunk) - The increase in G&A expenses was primarily due to a **$2.1 million** increase in payroll and personnel-related costs from adding **14** employees, and a **$0.6 million** increase in commercial and market research costs[182](index=182&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2022, the company held **$175.3 million** in cash and equivalents, with sufficient capital from recent offerings and expected milestones to fund operations into 2026 - As of March 31, 2022, the company had cash, cash equivalents, and marketable securities of **$175.3 million**[172](index=172&type=chunk)[185](index=185&type=chunk) - The company expects to receive an additional **$30 million** in cash milestones from the China Out-License during 2022[187](index=187&type=chunk)[191](index=191&type=chunk) - The company believes its capital resources, including the May 2022 equity raise and expected milestone payments, are sufficient to fund operations at least into 2026[191](index=191&type=chunk) - A shelf registration statement on Form S-3 is effective, permitting the company to offer up to **$300.0 million** in securities[193](index=193&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations affecting its cash equivalents and **$19.2 million** in variable-rate debt - The company's main market risk is interest rate risk, affecting its cash equivalents and variable-rate debt[212](index=212&type=chunk) - The outstanding debt of **$19.2 million** bears a variable interest rate tied to the Wall Street Journal prime rate, which was **8.45%** at execution and increased to **8.70%** on March 17, 2022[138](index=138&type=chunk)[212](index=212&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[214](index=214&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[215](index=215&type=chunk) [Part II - Other Information](index=38&type=section&id=Part%20II%20-%20Other%20Information) [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[218](index=218&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the 2021 Annual Report, except for an updated emphasis on the lengthy, expensive, and uncertain nature of clinical drug development - Clinical drug development is a lengthy, expensive, and risky process with uncertain outcomes, and early trial results may not predict future success[220](index=220&type=chunk) - The company's product candidates, including TP-03, face a high risk of failure and may not prove safe or effective in later-stage trials despite promising early results[222](index=222&type=chunk)[223](index=223&type=chunk) - Numerous unforeseen events can delay or prevent marketing approval, including issues with CROs, patient enrollment, inconclusive results, safety concerns, and regulatory hurdles[225](index=225&type=chunk)[226](index=226&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There has been no material change in the planned use of proceeds from the Initial Public Offering - The planned use of proceeds from the October 2020 IPO has not materially changed[230](index=230&type=chunk) [Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[231](index=231&type=chunk) [Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[233](index=233&type=chunk) [Other Information](index=40&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this item - None[234](index=234&type=chunk) [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Loan and Security Agreement and required certifications - A key exhibit filed is the Loan and Security Agreement from February 2, 2022[235](index=235&type=chunk)

Tarsus Corporate Presentation April 2022 © Tarsus Pharmaceuticals 2022 Legal Disclaimer This presentation contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current expectations about future events that we believe may affect our financial condition, results of operations, business strategy, and financial needs. All statements other than statements of historical ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number 001-396147 TARSUS PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) Delaware 81-4717861 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to ____ . Commission File Number: 001-39614 TARSUS PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) Delaware 81-4717 ...

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q For the quarterly period ended June 30, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to ____ . Commission File Number: 001-39614 TARSUS PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) Delaware 81-4717861 ( ...

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%20I.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed financial statements for Tarsus Pharmaceuticals, Inc. for the three months ended March 31, 2021, and December 31, 2020, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, and specific account details [Condensed Balance Sheets](index=5&type=section&id=Condensed%20Balance%20Sheets) This section presents the company's financial position, including assets, liabilities, and equity, at specific reporting dates Condensed Balance Sheets | ASSETS (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $156,179 | $168,129 | | Total current assets | $191,451 | $170,655 | | Total assets | $193,954 | $171,972 | | LIABILITIES (in thousands) | | | | Total current liabilities | $10,118 | $5,387 | | Total liabilities | $10,722 | $5,992 | | STOCKHOLDERS' EQUITY (in thousands) | | | | Total stockholders' equity | $183,232 | $165,980 | - Total assets increased from **$171.972 million** at December 31, 2020, to **$193.954 million** at March 31, 2021. Total liabilities increased from **$5.992 million** to **$10.722 million**, and total stockholders' equity increased from **$165.980 million** to **$183.232 million**[12](index=12&type=chunk) [Condensed Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This section details the company's financial performance, including revenues, expenses, and net income or loss, over specific periods Condensed Statements of Operations and Comprehensive Income (Loss) | (in thousands, except per share) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenues | $33,432 | $— | | Total operating expenses | $22,718 | $2,118 | | Income (loss) from operations | $10,714 | $(2,118) | | Net income (loss) | $10,376 | $(1,957) | | Basic Net income (loss) per share | $0.51 | $(0.74) | | Diluted Net income (loss) per share | $0.47 | $(0.74) | - The company reported a **net income of $10.376 million** for the three months ended March 31, 2021, a significant improvement from a **net loss of $1.957 million** in the prior-year period, driven by **$33.432 million** in total revenues from license fees and collaboration[16](index=16&type=chunk) [Condensed Statements of Preferred Stock and Stockholders' Equity (Deficit)](index=7&type=section&id=Condensed%20Statements%20of%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) This section outlines changes in the company's equity, including preferred stock, common stock, and accumulated deficit, over the reporting period Condensed Statements of Preferred Stock and Stockholders' Equity (Deficit) | (in thousands, except share data) | Balance as of Dec 31, 2020 | Net Income | Stock-based Comp. | Exercise of Options | Shares Issued for In-license | Balance as of Mar 31, 2021 | | :-------------------------------- | :------------------------- | :--------- | :---------------- | :------------------ | :--------------------------- | :------------------------- | | Common Stock Shares | 20,323,201 | — | — | 13,773 | 187,500 | 20,524,474 | | Common Stock Amount | $4 | — | — | — | — | $4 | | Additional Paid-In Capital | $198,821 | — | $1,363 | $19 | $5,494 | $205,697 | | Accumulated Deficit | $(32,845) | $10,376 | — | — | — | $(22,469) | | Total Stockholders' Equity | $165,980 | $10,376 | $1,363 | $19 | $5,494 | $183,232 | - Stockholders' equity increased from **$165.980 million** at December 31, 2020, to **$183.232 million** at March 31, 2021, primarily due to **net income of $10.376 million** and the issuance of shares for in-license rights valued at **$5.494 million**[20](index=20&type=chunk) [Condensed Statements of Cash Flows](index=8&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Statements of Cash Flows | (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(11,794) | $(1,996) | | Net cash used in investing activities | $(175) | $(36) | | Net cash provided by (used in) financing activities | $19 | $(27) | | Net decrease in cash, cash equivalents and restricted cash | $(11,950) | $(2,059) | | Cash, cash equivalents, and restricted cash — end of period | $156,199 | $55,913 | - Net cash used in operating activities increased to **$11.794 million** for the three months ended March 31, 2021, from **$1.996 million** in the prior-year period, despite reporting net income, due to changes in operating assets and liabilities, including a **$25 million** increase in accounts receivable and a **$7.199 million** contract asset[23](index=23&type=chunk) [Notes to Condensed Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed financial statements, including accounting policies and specific account breakdowns [1. Description of Business and Presentation of Financial Statements](index=9&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS%20AND%20PRESENTATION%20OF%20FINANCIAL%20STATEMENTS) This note describes the company's core business, its financial statement presentation, and its capital structure and funding outlook - Tarsus Pharmaceuticals, Inc. is a late clinical-stage biopharmaceutical company focused on developing therapeutic candidates for ophthalmic conditions, with an accumulated deficit of **$22.5 million** as of March 31, 2021, and **$32.8 million** as of December 31, 2020[26](index=26&type=chunk)[30](index=30&type=chunk) - The company completed its IPO on **October 20, 2020**, raising **$91.7 million** in net proceeds, and all outstanding convertible preferred stock converted into common stock[27](index=27&type=chunk)[28](index=28&type=chunk) - Management believes existing capital resources will be sufficient for at least **12 months**, but the company will require additional capital for future operations, facing risks of dilution or restrictive debt covenants[31](index=31&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [2. Summary of Significant Accounting Policies and Use of Estimates](index=11&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES%20AND%20USE%20OF%20ESTIMATES) This note outlines the key accounting principles and significant management judgments used in preparing the financial statements, including revenue recognition and R&D costs - The financial statements are prepared in conformity with GAAP for interim information, with management making estimates for equity-based awards, income tax assets/liabilities, and R&D expense accruals[42](index=42&type=chunk)[45](index=45&type=chunk) - The company's operations have not been significantly impacted by COVID-19 to date, but it continues to monitor potential future impacts on clinical trials[49](index=49&type=chunk)[51](index=51&type=chunk) - Revenue recognition for out-license arrangements involves significant judgment in identifying performance obligations, allocating transaction price (including variable consideration like milestones and royalties), and determining recognition periods[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - Research and development costs, including upfront and milestone payments for in-licensed intellectual property, are expensed as incurred because the acquired assets have not yet received regulatory approval and have no alternative future uses[65](index=65&type=chunk)[67](index=67&type=chunk) - Stock-based compensation expense is recognized at fair value using the Black-Scholes model, with assumptions for expected term, volatility, risk-free interest rate, and dividend yield[68](index=68&type=chunk)[69](index=69&type=chunk) [3. Balance Sheet Account Detail](index=16&type=section&id=3.%20BALANCE%20SHEET%20ACCOUNT%20DETAIL) This note provides a detailed breakdown of specific balance sheet accounts, including property and equipment, other assets, and accrued liabilities Property and Equipment, net of Accumulated Depreciation (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :------- | :------------- | :---------------- | | Furniture and fixtures | $349 | $294 | | Office equipment | $52 | $74 | | Lab equipment | $167 | $173 | | Leasehold improvements | $163 | $141 | | Total, at cost | $731 | $682 | | Accumulated depreciation and amortization | $142 | $134 | | Net | $589 | $548 | Other Assets (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :------- | :------------- | :---------------- | | Deposits | $27 | $33 | | Equity warrant rights | $1,233 | $— | | Other long term assets | $70 | $48 | | Total | $1,330 | $81 | Accounts Payable and Other Accrued Liabilities (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :------- | :------------- | :---------------- | | Trade accounts payable and other | $4,997 | $2,237 | | Operating lease liability, current portion | $221 | $282 | | Accrued clinical studies | $3,567 | $1,524 | | Income taxes payable | $313 | $— | | Employee stock option early exercise liability, current portion | $335 | $304 | | Total | $9,433 | $4,347 | [4. Stockholders' Equity](index=17&type=section&id=4.%20STOCKHOLDERS'%20EQUITY) This note details the company's authorized and outstanding common and preferred stock, along with shares reserved for future issuance under equity plans - The company is authorized to issue **200 million shares** of common stock and **10 million shares** of preferred stock. No dividends were declared for the three months ended March 31, 2021, or the year ended December 31, 2020[95](index=95&type=chunk)[96](index=96&type=chunk) Common Stock Reserved for Future Issuance | Category | March 31, 2021 | December 31, 2020 | | :------- | :------------- | :---------------- | | Stock options issued and outstanding | 2,448,675 | 1,836,739 | | Stock options reserved for future grant | 9,790,635 | 9,414,091 | | Total shares of common stock reserved | 12,239,310 | 11,250,830 | [5. Stock-Based Compensation](index=18&type=section&id=5.%20STOCK-BASED%20COMPENSATION) This note describes the company's equity incentive plans and the stock-based compensation expense recognized for employee and non-employee awards - The 2020 Equity Incentive Plan, adopted October 8, 2020, replaced the 2016 Plan and automatically increases shares reserved for issuance annually by the lesser of **4%** of outstanding common stock or a board-determined number[98](index=98&type=chunk)[99](index=99&type=chunk) Stock-Based Compensation Expense (in thousands) | Category | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :------- | :-------------------------------- | :-------------------------------- | | Research and development | $344 | $1 | | General and administrative | $1,019 | $3 | | Total | $1,363 | $4 | - Stock-based compensation expense significantly increased to **$1.363 million** for the three months ended March 31, 2021, from **$4 thousand** in the prior-year period[104](index=104&type=chunk) [6. Net Income (Loss) Per Share](index=20&type=section&id=6.%20NET%20INCOME%20(LOSS)%20PER%20SHARE) This note presents the basic and diluted net income or loss per share calculations, including the weighted-average shares outstanding for each period Net Income (Loss) Per Share Attributable to Common Stockholders | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----- | :-------------------------------- | :-------------------------------- | | Basic Net Income (Loss) | $0.51 | $(0.74) | | Diluted Net Income (Loss) | $0.47 | $(0.74) | | Basic Weighted Average Shares Outstanding | 20,336,022 | 2,650,363 | | Diluted Weighted Average Shares Outstanding | 21,824,574 | 2,650,363 | - For the three months ended March 31, 2021, basic net income per share was **$0.51** and diluted net income per share was **$0.47**, a positive shift from a basic and diluted net loss per share of **$(0.74)** in the prior-year period[110](index=110&type=chunk) - The 'two-class method' was used for diluted EPS calculation in 2021 as it was more dilutive, while in 2020, all potentially dilutive securities were anti-dilutive due to net loss[109](index=109&type=chunk) [7. Fair Value Measurements](index=21&type=section&id=7.%20FAIR%20VALUE%20MEASUREMENTS) This note provides information on assets and liabilities measured at fair value, categorized by the input levels used in the valuation techniques Fair Value Measurements (in thousands) | Category | March 31, 2021 (Level 1) | March 31, 2021 (Level 3) | March 31, 2021 (Total) | | :------- | :----------------------- | :----------------------- | :--------------------- | | Money market funds | $156,179 | $— | $156,179 | | Equity warrant rights | $— | $1,233 | $1,233 | | Total assets measured at fair value | $156,179 | $1,233 | $157,412 | | Category | December 31, 2020 (Level 1) | December 31, 2020 (Level 3) | December 31, 2020 (Total) | | :------- | :-------------------------- | :-------------------------- | :------------------------ | | Money market funds | $168,129 | $— | $168,129 | | Total assets measured at fair value | $168,129 | $— | $168,129 | - Equity warrant rights, classified as **Level 3** fair value measurements, were recognized at **$1.233 million** as of March 31, 2021, stemming from the China Out-License transaction with LianBio[112](index=112&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk) [8. Commitments & Contingencies](index=21&type=section&id=8.%20COMMITMENTS%20%26%20CONTINGENCIES) This note details the company's contractual obligations, including lease agreements, in-license payments, and potential future milestone and royalty payments - The company has two capitalized facility leases expiring **January 31, 2024**, with a weighted-average remaining lease term of **2 years, 10 months**, and a weighted-average estimated incremental borrowing rate of **10%**[120](index=120&type=chunk)[123](index=123&type=chunk) Total Lease Cost (in thousands) | Category | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :------- | :-------------------------------- | :-------------------------------- | | Operating lease cost | $60 | $16 | | Variable lease cost | $60 | $1 | | Short-term lease cost | $32 | $— | | Total lease cost | $152 | $17 | - Under in-license agreements for lotilaner, the company made a **$2.0 million** clinical milestone payment in Q1 2021 (paid April 2021) and issued **187,500 common shares** valued at **$5.5 million** to Elanco for continued license exclusivity[128](index=128&type=chunk)[131](index=131&type=chunk) - Future potential payments to Elanco include up to **$3.0 million** for skin disease clinical milestones, **$79.0 million** for commercial/sales milestones (January 2019 Agreement), and **$4.5 million** for other clinical milestones, **$77.0 million** for commercial/sales milestones (September 2020 Agreement), plus **single-digit royalties** on net sales[129](index=129&type=chunk)[133](index=133&type=chunk) [9. Out-License Agreement](index=26&type=section&id=9.%20OUT-LICENSE%20AGREEMENT) This note details the exclusive out-license agreement with LianBio for TP-03 in Greater China, including recognized revenue and future potential payments - On **March 26, 2021**, Tarsus entered into an out-license agreement with LianBio for exclusive development and commercialization rights of TP-03 in Greater China for Demodex blepharitis and Meibomian Gland Disease[139](index=139&type=chunk) - The company recognized **$33.3 million** in license fees and **$0.1 million** in collaboration revenue for the three months ended March 31, 2021, related to the transfer of TP-03 license rights and partial completion of clinical activities[141](index=141&type=chunk) - Future contractual receipts from LianBio include **$15.0 million** (received April 2021), **$10.0 million** (received May 2021), up to **$75.0 million** in development/regulatory milestones, **$100.0 million** in sales-based milestones, and **tiered mid-to-high-teen royalties**[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2021, compared to 2020. It highlights the company's transition to net income due to out-licensing revenue, ongoing R&D investments, and liquidity position, while also discussing future funding requirements and the impact of COVID-19 [Overview of our Business](index=28&type=section&id=Overview%20of%20our%20Business) This section provides an overview of Tarsus Pharmaceuticals, Inc.'s focus as a late clinical-stage biopharmaceutical company and its lead product candidate, TP-03 - Tarsus Pharmaceuticals is a late clinical-stage biopharmaceutical company focused on ophthalmic conditions, with its lead product candidate, TP-03, in Phase 2b/3 for Demodex blepharitis[150](index=150&type=chunk) - TP-03 is designed to paralyze and eradicate mites by inhibiting parasite-specific GABA-Cl channels, with an estimated **9 million cases** of Demodex blepharitis in the U.S. and potential for TP-03 to be the first FDA-approved therapeutic[151](index=151&type=chunk)[152](index=152&type=chunk) - The company is advancing its pipeline with lotilaner API for other diseases, including TP-03 for Meibomian Gland Disease (MGD), TP-04 for rosacea, and TP-05 for Lyme prophylaxis and community malaria reduction[154](index=154&type=chunk) [Recent Business and Clinical Highlights](index=29&type=section&id=Recent%20Business%20and%20Clinical%20Highlights) This section highlights recent achievements, including clinical trial progress for TP-03, the LianBio out-license agreement, and the FDA's acceptance of the IND for TP-05 - The Saturn-1 trial for TP-03 in Demodex blepharitis was fully enrolled by **Q1 2021**, with topline data expected in **July 2021**, and the Saturn-2 pivotal trial commenced in **Q2 2021**[155](index=155&type=chunk) - An out-license agreement for TP-03 in Greater China with LianBio was executed on **March 26, 2021**, with initial time-based proceeds of **$15 million** received in **April 2021** and **$10 million** in **May 2021**[156](index=156&type=chunk) - The FDA accepted the Investigational New Drug (IND) application for TP-05 for Lyme disease prevention, with a Phase 1 study anticipated to initiate in **Q3 2021**[159](index=159&type=chunk) [Corporate and Financial Overview](index=29&type=section&id=Corporate%20and%20Financial%20Overview) This section summarizes the company's financing activities, including IPO proceeds, and its financial performance, highlighting the first quarter of revenue generation - The company has financed operations through private placements of preferred stock (**$101.0 million** net proceeds) and an IPO (**$91.7 million** net proceeds) in **October 2020**[162](index=162&type=chunk)[163](index=163&type=chunk) Net Income (Loss) (in millions) | Period | Net Income (Loss) | | :----- | :---------------- | | Q1 2021 | $10.4 | | Q1 2020 | $(2.0) | - The company recognized **$33.4 million** in license fee and collaboration revenue in **Q1 2021** from the China Out-License, marking its first revenue generation[166](index=166&type=chunk) [Impact of the COVID-19 Pandemic on our Operations](index=31&type=section&id=Impact%20of%20the%20COVID-19%20Pandemic%20on%20our%20Operations) This section discusses the company's efforts to continue business and clinical programs amidst the COVID-19 pandemic, including safety measures and trial protocols - The company has continued key business activities and clinical programs despite the COVID-19 pandemic, implementing workplace safety measures and work-from-home policies[170](index=170&type=chunk)[171](index=171&type=chunk) - Protocols for Saturn-1 and Saturn-2 trials include increased health screening, enhanced communication, and over-enrollment of participants to mitigate potential COVID-19 impacts[171](index=171&type=chunk) [Result of Operations](index=31&type=section&id=Result%20of%20Operations) This section analyzes the company's financial performance, detailing changes in revenues, operating expenses, and net income or loss for the reported periods Summary of Results of Operations (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | | :----- | :-------------------------------- | :-------------------------------- | :----- | | Total revenues | $33,432 | $— | $33,432 | | Total operating expenses | $22,718 | $2,118 | $20,600 | | Income (loss) from operations | $10,714 | $(2,118) | $12,832 | | Net income (loss) | $10,376 | $(1,957) | $12,333 | - License fees and collaboration revenue totaled **$33.4 million** for **Q1 2021**, attributable to the China Out-License, with additional revenue expected as performance obligations are satisfied[175](index=175&type=chunk)[176](index=176&type=chunk) - Research and development expenses increased by **$14.7 million**, primarily due to a **$5.5 million** payment for lotilaner rights, a **$2.0 million** clinical milestone, and increased clinical/preclinical study costs[178](index=178&type=chunk) - General and administrative expenses increased by **$4.6 million**, driven by higher payroll, insurance, professional fees, and commercial/market research costs[179](index=179&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, expected future cash inflows, and its ability to fund operations and capital expenditures - As of **March 31, 2021**, cash and cash equivalents were **$156.2 million**. The company expects to receive an additional **$70 million** from the China Out-License by **March 31, 2022**[183](index=183&type=chunk) - Existing capital resources and anticipated proceeds are expected to fund operating expenses and capital expenditure requirements into the **first half of 2023**[186](index=186&type=chunk) Summary Statement of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------- | :-------------------------------- | :-------------------------------- | | Operating activities | $(11,794) | $(1,996) | | Investing activities | $(175) | $(36) | | Financing activities | $19 | $(27) | | Net increase in cash, cash equivalents and restricted cash | $(11,950) | $(2,059) | - Net cash used in operating activities was **$11.8 million** for **Q1 2021**, primarily due to cash payments to vendors (**$9.2 million**) and payroll (**$2.7 million**), despite recognized revenue[194](index=194&type=chunk) [Critical Accounting Policies, Significant Judgments and Use of Estimates](index=35&type=section&id=Critical%20Accounting%20Policies,%20Significant%20Judgments%20and%20Use%20of%20Estimates) This section outlines the company's critical accounting policies, particularly regarding revenue recognition for out-licenses and collaborative agreements, and the significant judgments involved - No material changes to critical accounting policies were reported, except for revenue recognition for out-licenses and collaborative agreements, which involves deferring upfront fees and constraining variable consideration (milestones) until uncertainty is resolved[199](index=199&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section assesses the company's exposure to market risks, primarily interest rate risk, and concludes that such risks did not materially impact operations for the reported periods - The company's primary market risk is interest rate risk, but due to the short-term maturities and low-risk profile of its **$156.2 million** cash and cash equivalents (money market accounts), a **100 basis point** change in interest rates would not have a material effect[207](index=207&type=chunk) - Inflation, interest rate changes, or foreign currency exchange rate fluctuations did not have a significant impact on results of operations for the periods presented[208](index=208&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of the company's disclosure controls and procedures, concluding their effectiveness as of March 31, 2021, and noting no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of **March 31, 2021**, providing reasonable assurance for timely and accurate financial reporting[209](index=209&type=chunk) - There were no material changes in internal control over financial reporting during the period covered by the report[210](index=210&type=chunk) - Management acknowledges the inherent limitations of control systems, which can only provide reasonable, not absolute, assurance against errors and fraud[212](index=212&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings, though it acknowledges that litigation, if it arises, could adversely impact the business - The company is not currently a party to any material legal proceedings[215](index=215&type=chunk) - Litigation, regardless of outcome, can negatively impact the company due to defense costs, diversion of management resources, and reputational harm[215](index=215&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors included in the Annual Report on Form 10-K for the year ended December 31, 2020, have occurred as of the filing date[216](index=216&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms that there has been no material change in the planned use of proceeds from the company's Initial Public Offering (IPO) - There has been no material change in the planned use of proceeds from the company's IPO[217](index=217&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - No defaults upon senior securities were reported[218](index=218&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures to report - No mine safety disclosures were reported[219](index=219&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) The company has no other information to disclose under this item - No other information was reported[220](index=220&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate documents, certifications, and the Development and License Agreement with LianBio Ophthalmology - Key exhibits filed include the Amended and Restated Certificate of Incorporation and Bylaws, certifications from executive officers (31.1, 31.2, 32.1, 32.2), and the Development and License Agreement with LianBio Ophthalmology dated **March 26, 2021**[222](index=222&type=chunk) [Signatures](index=40&type=section&id=Signatures) This section contains the signatures of the company's authorized officers, certifying the filing of the Form 10-Q - The report is signed by Bobak Azamian, M.D., Ph.D., President and Chief Executive Officer, and Leo M. Greenstein, Chief Financial Officer, on **May 11, 2021**[227](index=227&type=chunk)[228](index=228&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number 012-34567 TARSUS PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) Securities registere ...