Tarsus Pharmaceuticals Inc
For the period ended Dec 31, 2024. Filed Feb 25, 2025.
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FY2024 · Filed Feb 25, 2025
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Item 8. Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Tarsus Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Tarsus Pharmaceuticals, Inc. (the Company) as of December 31, 2024 and 2023, the related statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| Accrued Commercial and Government Rebates Impacted by Estimated Payer Mix | |
| Description of the Matter | As described in Note 2 to the financial statements, where appropriate, the Company utilizes the expected value method to estimate variable consideration based on factors such as current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The Company accrues variable consideration for rebates for contractually agreed-upon discounts with commercial payers and mandated discounts under government programs such as the Medicaid Drug Rebate Program, Medicare Part D Prescription Drug Program, and other government health care programs in the U.S. The Company calculates the accruals for commercial and government rebates based on various assumptions, including payer mix, with actual rebates potentially requiring accrual adjustments affecting net product sales. Auditing the Company’s estimated payer mix used in the calculation of the accrued commercial and government rebates was especially challenging because it involved subjective management assumptions based on variability of rebates with commercial payers and government programs. Changes in the payer mix assumptions could have a material impact on the accrued commercial and government rebates. |
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| How We Addressed the Matter in Our Audit | To test management’s payer mix assumptions, our audit procedures included, among others, comparing management’s estimate to our independently developed expectation based on historical results and inquiring of sales and marketing personnel. We performed a sensitivity analysis to evaluate the impact of changes in management’s estimated payer mix on the accrued commercial and government rebates. Additionally, we compared the accrued rebates, based on the estimated payer mix, to actual rebate invoices received in the subsequent period. |
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/s/Ernst & Young LLP
We have served as the Company’s auditor since 2020.
Irvine, California
February 25, 2025
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