Tarsus shares fall after short seller report

Investing.com -- Tarsus Pharmaceuticals saw its stock drop roughly 8% midday on Wednesday after short seller Culper Research disclosed a short position in the company.

Culper Research released a report stating it holds a short position in thecompany, whose only commercial product is XDEMVY, an eyedrop treatment for demodex blepharitis.

The short seller claims XDEMVY's growth has relied on a company-funded charitable foundation Medicare copay arrangement that raises Anti-Kickback Statute concerns. Culper argues XDEMVY's addressable market is approximately 20% of what Tarsus claims.

Culper alleges Tarsus has driven XDEMVY uptake by reducing Medicare patient copays through donations to a blepharitis fund operated by the Healthwell Foundation. The report notes manufacturer copay support is standard for commercially insured patients but illegal for Medicare patients under the Anti-Kickback Statute.

The firm points to several factors it views as problematic. Healthwell launched its blepharitis fund in September 2023, one month after Tarsus launched XDEMVY in August 2023. Culper's analysis of Tarsus financial statements suggests the company made charitable donations of $5.7 million in 2023, $31.2 million in 2024, and $78.5 million in 2025. These figures align closely with the blepharitis fund's disclosed donations of $5.1 million in 2023 and $30.0 million in 2024, according to IRS filings.

A representative from Carepoint, one of Tarsus's top two specialty pharmacies, estimated that 50% of XDEMVY Medicare patients obtain Healthwell grants. This implies 91% of the fund's grants go to XDEMVY patients, according to Culper's calculations.

The report also highlights that in Tarsus's 2024 Form 10-K, the company explicitly named "patient assistance donations" as a component of SG&A expenses. In its 2025 Form 10-K, Tarsus changed this language to "patient support functions."

Culper consulted a healthcare attorney with nearly 30 years of experience who said Tarsus "harbors many of the attributes of the arrangements that have been prosecuted." The Department of Justice has previously prosecuted similar arrangements, including Actelion, which settled for $360 million in December 2018, Jazz and others for $123 million in April 2019, and Teva for $425 million in October 2024.

The short seller also questions Tarsus's claimed addressable market of 25 million U.S. demodex blepharitis patients. This figure derives from the company's Titan study, which found 58% of eye care patients presented with collarettes. Culper argues this equates the presence of collarettes with the disease itself, which it calls a logical error.

Culper conducted a survey of 30 current XDEMVY prescribers who reported just 18% of their patients have demodex blepharitis, compared to the 58% figure Tarsus uses for its market size estimate.

Tarsus acknowledges only 1.5 million patients in the U.S. have ever been diagnosed with demodex blepharitis. As of June 2026, Tarsus has treated over 600,000 patients, representing 40% of the diagnosed U.S. population.

The report estimates XDEMVY revenues will peak below $800 million in 2028, well short of the company's stated path to over $2 billion in sales. Culper notes that in May 2025, Elanco sold its XDEMVY royalty rights to Blackstone for $295 million, which Culper calculates implies Blackstone underwrote peak revenues of $712 million to $1.3 billion.

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