Tarsus Pharmaceuticals, Inc.

1. DESCRIPTION OF BUSINESS AND PRESENTATION OF FINANCIAL STATEMENTS

Description of Business

Tarsus Pharmaceuticals, Inc. (“Tarsus” or the “Company”) is a commercial stage biopharmaceutical company focused on the development and commercialization of therapeutics, starting with eye care. The Company launched XDEMVY®(lotilaner ophthalmic solution) 0.25%, formerly known as TP-03, for the treatment of Demodex blepharitis, in August 2023, after receiving United States (“U.S.”) Food and Drug Administration (“FDA”) approval in July 2023.

Follow-On Public Offerings

In August 2023, the Company completed a follow-on public offering under its shelf registration statement on Form S-3 (the “2021 Shelf Registration Statement”) of 5,714,285 shares of common stock at a public offering price of $17.50 per share. In September 2023, the underwriters partially exercised the underwriters’ option to purchase additional shares resulting in the Company’s issuance of an additional 355,164 shares of common stock at the public offering price of $17.50 per share. The aggregate net proceeds received by the Company were $99.3 million, after deducting underwriting discounts, commissions, and other offering-related expenses.

In November 2023, the Company filed a shelf registration statement on Form S-3 that was declared effective by the Securities and Exchange Commission (“SEC”) on November 21, 2023, (the “2023 Shelf Registration Statement”), which replaced the 2021 Shelf Registration Statement and permits the Company to offer up to $300.0 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination, including in units from time to time.

In February 2024, the Company filed an automatic shelf registration on Form S-3 ASR (the “2024 Shelf Registration Statement”). In March 2024, the Company completed an underwritten follow-on public offering under the 2024 Shelf Registration Statement of 2,812,500 shares of the Company’s common stock, par value $0.0001 per share, and, in lieu of common stock to a certain investor, pre-funded warrants to purchase 312,500 shares of its common stock (the “March 2024 Public Offering”). The price to the public was $32.00 per share and $31.9999 per pre-funded warrant, which was the price to the public of each share of common stock sold in the March 2024 Public Offering, minus the $0.0001 exercise price per pre-funded warrant. The pre-funded warrants are exercisable, subject to certain beneficial ownership restrictions, at any time after their original issuance and will not expire; as of December 31, 2025,312,500 of pre-funded warrants are exercisable. The Company also granted the underwriters a 30-day option to purchase up to 468,750 additional shares of its common stock at the public offering price of $32.00 per share, which the underwriters exercised in full and was completed in March 2024. The aggregate net proceeds received by the Company were $107.7 million, after deducting underwriting discounts, commissions, and other estimated offering-related expenses.

In March 2025, the Company completed an underwritten follow-on public offering under the 2024 Shelf Registration Statement, pursuant to which the Company sold 2,808,988 shares of its common stock at a public offering price of $44.50 per share (the “March 2025 Public Offering”). The Company also granted the underwriters a 30-day option to purchase up to 421,348 additional shares of its common stock at the public offering price of $44.50 per share, which the underwriters exercised in full in March 2025. The aggregate net proceeds received by the Company were $134.8 million, after deducting underwriting discounts, commissions, and other estimated offering-related expenses.

Open Market Sales Agreement

As part of the 2023 Shelf Registration Statement, the Company concurrently filed a sales agreement prospectus covering the sale of up to $100.0 million of common stock pursuant to an Open Market Sale Agreement (the “2023 ATM Prospectus”) with Jefferies LLC (“Jefferies”), which replaced the November 1, 2021 Open Market Sale Agreement TM. Under the terms of the 2023 ATM Prospectus, Jefferies will act as the Company’s sales agent and is entitled to compensation for its services equal to 3% of the gross proceeds of any shares of common stock sold.

During the years ended December 31, 2025 and 2024, there wereno sales of the Company’s common stock pursuant to the 2023 ATM Prospectus. During the year ended December 31, 2023, the Company sold 1,000,000 shares of common stock under the 2023 ATM Prospectus for net proceeds of $19.2 million, after deducting broker commissions and offering-related expenses.

Liquidity

The Company has a limited operating history, has accumulated losses and negative cash flows from operations since inception, and, while it has successfully generated revenues from XDEMVY since its launch in August 2023, the revenue and income potential from the Company’s business and market are unproven. The Company has funded its inception-to-date operations through the Initial Public Offering (“IPO”), subsequent follow-on public offerings, and the 2023 ATM Prospectus, as well as from proceeds from product sales, the development and license agreement (the “China Out-License”), and draws on the current loan and security agreement (the “2024 Credit Facility”) with Pharmakon Advisors, LP (“Pharmakon”) and the previous loan and security agreement with Hercules Capital, Inc. (“Hercules”) and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (“SVB”) (collectively, the “Credit Facilities”). The Company estimates that its existing capital resources will be sufficient to meet projected operating expense requirements and other liquidity needs for at least 12 months from the issuance date of the accompanying Financial Statements that have been prepared on a going-concern basis.

The Company plans to fund its operations, capital funding and other liquidity needs using existing cash and investments and, to the extent available, cash generated from commercial operations. Management believes the Company could continue to incur operating losses in the future and may be required to raise additional capital to fund its ongoing operations. However, no assurance can be given as to whether financing will be available on terms acceptable to the Company, or at all. If the Company is unable to raise additional funds as required, it may need to delay, reduce, or terminate some or all of its development programs and clinical trials. The Company may also be required to sell or license its rights to product candidates in certain territories or indications that it would otherwise prefer to develop and commercialize on its own and/or enter into collaborations and other arrangements to address its liquidity needs, which could materially and adversely affect its business and financial prospects, or even its ability to remain a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES

Basis of Presentation and Use of Estimates

The accompanying Financial Statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. and with the rules and regulations of the SEC. Certain prior year amounts have been reclassified to conform to the current year presentation on the Balance Sheets to separately present accounts payable and other accrued liabilities. Certain other immaterial prior year amounts have been aggregated to conform with the current year presentation in the Statements of Operations and Comprehensive Loss. The preparation of financial statements in conformity with GAAP and with the rules and regulations of the SEC requires management to make informed estimates and assumptions that affect the amounts reported in these accompanying Financial Statements and Notes. These estimates and assumptions are based upon historical experience, knowledge of current events and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources and involve judgments with respect to numerous factors that are difficult to predict and may materially differ from the amounts ultimately realized and reported due to the inherent uncertainty of any estimate or assumption. On an ongoing basis, management evaluates its estimates including those related to the recognition of revenue, clinical trial accruals, contract manufacturing accruals, expected demand for inventory, fair value of assets and liabilities, income taxes, and stock-based compensation. Management bases its estimates on historical experience and various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ materially from those estimates and assumptions used in the preparation of the accompanying Financial Statements under different assumptions and conditions.

The Company’s Financial Statements as of and for the year ended December 31, 2025 reflect the Company’s estimates of the impact of the macroeconomic and geopolitical environment, including the impact of inflation, interest rates, and foreign exchange rate fluctuations. The duration and the scope of these conditions cannot be predicted; therefore, the extent to which these conditions will directly or indirectly impact the Company’s business, results of operations and financial condition, is uncertain. The Company is not aware of any specific event or circumstance that would require an update to its estimates, judgments and assumptions or a revision of the carrying value of the Company’s assets or liabilities as of the issuance date of the accompanying Financial Statements.

The accounting policies and estimates that most significantly impact the presented amounts within these accompanying Financial Statements are further described below:

Cash and Cash Equivalents

Cash and cash equivalents consist of bank deposits and highly liquid investments, including money market fund accounts, that are readily convertible into cash without penalty, with original maturities of three months or less from the purchase date. The carrying amounts reported in the accompanying Balance Sheets for cash and cash equivalents are valued at cost, which approximate their fair value.

Restricted Cash

As of December 31, 2025 and 2024, the Company held $2.6 million of restricted cash as collateral for a letter of credit related to the Company’s new office space lease that was executed in December 2024 (see Note 9). Restricted cash that will be held for less than one year is reported in current assets and amounts that will be held for longer than one year are reported in non-current assets on the accompanying Balance Sheets.

Marketable Securities and Long-Term Investments

Marketable securities consist primarily of short-term fixed income investments carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities (see Note 3). Management determines the appropriate classification of its investments in fixed income securities at the time of purchase. Available-for-sale securities with original maturities beyond three months at the date of purchase, including those that have maturity dates beyond one year from the balance sheet date, are classified as current assets on the accompanying Balance Sheets due to their highly liquid nature and availability for use in current operations.

Marketable securities are recorded at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) within the accompanying Statements of Stockholders’ Equity until realized. The Company periodically evaluates whether declines in fair values of its available-for-sale securities below their book value are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as the Company’s ability and intent to hold the available-for-sale security until a forecasted recovery occurs. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion, as well as interest and dividends, are included in interest income. Realized gains and losses as well as credit losses, if any, on marketable securities identified on a specific identification basis are included in other income (expense) in the accompanying Statements of Operations and Comprehensive Loss. The Company evaluates the underlying credit quality and credit ratings of the issuers during the period. To date, the Company has not identified any other-than-temporary declines in fair value of its investments and no credit losses associated with credit risk have occurred or have been recorded. Interest earned on marketable securities is included in interest income within the accompanying Statements of Operations and Comprehensive Loss.

The Company holds a preferred stock investment in a privately-held eye care company that does not meet the criteria for in-substance common stock. Accordingly, the investment is classified within long-term investments in the accompanying Balance Sheets based on the Company’s intent to hold the securities for more than one year. The preferred stock investment is measured under the Accounting Standards Codification 321, Investments— Equity Securities, measurement alternative and is carried at cost, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar equity financings. The Company evaluates this investment for such observable price changes at each reporting period.

In December 2025, the Company purchased additional preferred stock of the same investee in a subsequent fundraising round that was executed at the same price and pursuant to the same terms as the Company’s initial investment under the Amended Preferred Stock Purchase Agreement. This transaction represented an orderly transaction for similar securities.

Based on this subsequent financing, the Company concluded that there was no change in the observable price of the preferred stock investment as of December 31, 2025 and 2024.

Additionally, at each reporting period, the Company will assess the investment for possible impairment indicators. If the fair value of the preferred stock investment is determined to be less than its carrying value, the Company will recognize an impairment loss through other income (expense) in the Statements of Operations and Comprehensive Loss. During the years ended December 31, 2025 and 2024, there were no identified impairment indicators that resulted in a change to the fair value of the preferred stock investment.

Accounts Receivable, Net

Accounts receivable generally consists of amounts due from the Company’s customers, which includes pharmaceutical wholesalers and specialty pharmacy providers related to product sales of XDEMVY in the U.S. Payment terms are typically 30-60 days following delivery to customers. Accounts receivable are recorded net of discounts, chargebacks, allowances and other adjustments. The Company monitors the financial performance and creditworthiness of its customers so it can properly assess and respond to changes in their credit profile. The Company estimates the allowance for credit losses based on existing contractual payment terms, actual payment patterns of customers and individual customer circumstances. Amounts determined to be uncollectible are written off against the reserve when it is probable that the receivable will not be collected. The Company did not record a reserve for estimated credit losses during the years ended December 31, 2025 and 2024.

Inventory

Inventories include the costs of material, third-party manufacturing costs, packaging services, and freight-in. Cost is determined on a first-in, first-out basis. Inventory is measured at the lower-of-cost and net realizable value, based on a number of factors including, but not limited to, damage, expiration, or changes in price level.

The Company capitalizes inventory costs associated with products following regulatory approval when future commercialization is considered probable and the future economic benefit is expected to be realized. Product that may be used in clinical development programs are excluded from inventory and the costs are charged to research and development expense in the Statements of Operations and Comprehensive Loss as incurred, as long as they do not have an alternative use. The Company evaluates inventory levels that would be sold within one year. The portion of inventory that is not expected to be sold or used within one year is classified as inventory, non-current in the accompanying Balance Sheets.

Intangible Assets, Net

Intangible assets are measured at fair value as of the acquisition date or, in the case of commercial milestone payments, the date they become due. The evaluation of intangible assets includes assessing the amortization period for which the asset is expected to contribute to the future cash flows of the Company. Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis when the Company is unable to reliably estimate the pattern of cash flow.

Long-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset might not be fully recoverable. To do so, the Company compares the carrying value of the intangible asset to the undiscounted net cash flows over its remaining useful life, and if not recoverable, will estimate the fair value of the asset. If the fair value is less than the carrying amount, an impairment loss is recognized in the Statements of Operations and Comprehensive Loss.

Fair Value Measurements

Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

•Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are publicly accessible at the measurement date.

•Level 2: Observable prices that are based on inputs not quoted on active markets, but that are corroborated by market data. These inputs may include quoted prices for similar assets or liabilities or quoted market prices in markets that are not active to the general public.

•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts for financial instruments consisting of cash, cash equivalents, accounts receivable, net, accounts payable and accrued liabilities approximate fair value due to the short maturities for each. As the long-term debt is subject to variable interest rates that are based on market rates which regularly reset, the Company believes that the carrying value of the long-term debt approximates its fair value.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain assets or liabilities within the fair value hierarchy. The Company did not have any transfers of assets and liabilities between the levels of the fair value hierarchy during the years presented.

Property and Equipment, Net

Property and equipment, net are stated at historical cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets that range from three tofive years. Leasehold improvements are amortized on a straight-line basis over the shorter of the remaining lease term or the estimated useful lives of related improvements. Construction-in-progress represents capitalized costs of assets being constructed and is not depreciated until the asset is ready for its intended use, at which point it is reclassified to the appropriate asset category and depreciation commences. The Company evaluates the recoverability of its property and equipment, net whenever events or changes in circumstances of the business indicate that the asset’s carrying amount may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the sum of the future undiscounted cash flows the assets are expected to generate over the remaining useful lives of the assets. If a long-lived asset fails a recoverability test, the Company measures the amount by which the carrying value of the asset exceeds its fair value.

Leases

The Company determines if an arrangement is or contains a lease at inception and evaluates each lease agreement to determine whether the lease is an operating or finance lease. Right-of-use assets (“ROU assets”) represent the Company’s right to control an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the initial non-cancelable lease term, unless there is a renewal option that is reasonably certain to be exercised. The Company uses its incremental borrowing rate at the lease commencement date in determining the discount rate utilized to present value the future minimum lease payments since an implicit interest rate in each at-market lease agreement was not determinable. Lease expense for the Company’s operating leases are recognized on a straight-line basis over the lease term.

The Company’s variable lease costs, consisting primarily of real estate taxes, insurance costs, and common area maintenance, are expensed as incurred and excluded from the reported ROU assets and lease liabilities amounts presented in the accompanying Balance Sheets. The current and non-current portion of the operating lease liability are included in other accrued liabilities and other long-term liabilities, respectively, in the accompanying Balance Sheets. Rent expense is allocated to research and development and general and administrative expenses in the accompanying Statements of Operations and Comprehensive Loss.

Concentration Risk

Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable. The Company maintains cash held on deposit at financial institutions in the U.S. These deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) in an amount up to $250,000 for any depositor. To the extent the Company holds cash deposits in amounts that exceed the FDIC insurance limitation, it may incur a loss in the event of a failure of any of the financial institutions where it maintains deposits. The Company invests its excess cash in highly liquid investments, including money market fund accounts, that are readily convertible into cash without penalty.

Management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions, but will continue to monitor regularly and adjust, if needed, to mitigate risk, including any ongoing or new events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions. The Company has established guidelines regarding diversification of its investments and their maturities, which are designed to maintain principal and maximize liquidity. To date, the Company has not experienced any losses associated with this credit risk and continues to assess that this exposure is not significant.

Major Customers

The Company periodically enters into agreements with certain limited specialty pharmacies and specialty distributors for the sale of XDEMVY in the U.S. Major customers are defined as customers that individually accounted for greater than 10% of the Company’s revenue. The following table presents each major customer that accounted for more than 10% of the Company’s gross product sales:

• Represents less than 10% of respective activity.

The Company believes that the concentration of credit risk in its accounts receivable is mitigated by its credit evaluation process, relatively short collection terms, and the level of credit worthiness of its customers. The following table presents each major customer that accounted for more than 10% of its accounts receivable, net:

• Represents less than 10% of respective balance.

Major Suppliers

The Company does not currently own manufacturing facilities and depends on outsourced manufacturing for the production of XDEMVY for commercial use and for the production of its other product candidates for clinical trials. The Company enters into agreements with third-party manufacturers that are approved for the commercial production of XDEMVY and third-party suppliers that are approved for XDEMVY’s active pharmaceutical ingredient. Although there are potential sources of supply other than the Company’s existing manufacturers and suppliers, any new supplier would be required to qualify under applicable regulatory requirements. The loss of certain manufacturers and third-party suppliers could result in a temporary disruption of the Company’s commercialization efforts.

Revenue Recognition

(i) Product Sales, Net

The Company recognizes product sales, net when a customer obtains control of the promised goods or services, which occurs at a point in time, typically upon delivery of the Company’s product to the customer. The Company records the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are capable of being distinct; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue as each performance obligation is satisfied.

The Company sells XDEMVY to customers in the U.S., which became available for commercial sale during the third quarter of 2023. These customers include a limited number of specialty pharmacies and distributors who in turn sell it directly to clinics, hospitals, pharmacies and federal healthcare programs. Revenue from product sales is primarily recognized upon physical delivery of the product (when the customer obtains control of the product), in return for agreed-upon consideration. Shipping and handling activities are considered to be fulfillment activities rather than a separate performance obligation and are recorded within selling, general and administrative expenses in the accompanying Statements of Operations and Comprehensive Loss.

Revenues from product sales are recorded at the net sales price, or the transaction price, which may include fixed or variable consideration for (i) invoice discounts for prompt payment and distribution service fees, (ii) commercial and government rebates, chargebacks, discounts and fees, (iii) product returns and (iv) costs of co-pay assistance programs for patients, as well as other incentives. Estimates of variable consideration are calculated based on the actual product sales each reporting period and the nature of the variable consideration related to those sales. Where appropriate, the Company utilizes the expected value method to determine the appropriate amount for estimates of variable consideration based on factors such as the current contractual and statutory discount rates, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The amount of variable consideration that is included in the transaction price may be constrained and is included in product sales, net only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. These estimates reflect the Company’s best estimate of the amount of consideration to which the Company expects to be entitled based on the terms of the contract. Actual amounts of consideration ultimately received may differ materially from estimates. If actual results in the future vary from estimates, the Company will adjust these estimates, which would affect product sales, net and earnings in the period such variances are adjusted. During the years ended December 31, 2025, 2024, and 2023, the Company did not recognize any revenue related to material changes in product sales, net related to amounts included in accrued liabilities at the beginning of the period.

The Company categorizes product sales deduction estimates as follows:

Distribution Service Fees: The Company engages with wholesalers and specialty pharmacies to distribute its products to end customers. The Company pays the wholesalers and certain specialty pharmacies a fee for services such as: chargeback administration and service level commitments. The Company estimates the amount of distribution services fees to be paid to the customers and adjusts the transaction price with the amount of such estimate at the time of sale to the customer. An accrued liability is recorded for unpaid distribution service fees.

Prompt Pay Discounts: The Company provides its customers with a percentage discount on their invoice if the customers pay within the agreed upon timeframe. The Company expects that its customers will earn prompt pay discounts. The Company estimates the probability of customers paying promptly based on the percentage of discount outlined in the purchase agreement between the two parties, and deducts the full amount of these discounts from gross product sales and accounts receivable at the time revenue is recognized.

Product Returns: The Company’s customers are contractually permitted to return product within the contractual allowable time, both before and after the applicable expiration date. In the initial sales period, the Company estimates its provision for returns based on the Company’s historical experience and adjusts the transaction price at the time of the product sale to the customer. Once sufficient history has been collected for product returns, the Company will utilize that history to inform its returns estimate. Once the product is returned, it is destroyed since it cannot be resold.

Chargebacks: A chargeback is the difference between the Company’s invoice price to the wholesaler and the wholesaler’s customer’s contract price. The wholesaler tracks these sales and charges back the Company for the difference between the negotiated prices paid between the wholesaler’s customers and the wholesaler’s acquisition cost. The Company estimates the percentage of goods sold that are eligible for chargeback and adjusts the transaction price and accounts receivable at the time of sale of the product to the customer.

Co-payment Assistance: Patients who meet certain eligibility requirements may receive co-payment assistance funded by the Company. The Company records contra-revenue for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators. An accrued liability is recorded on unredeemed co-payment assistance related to products for which control has been transferred to the customer.

Rebates: The Company accrues 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’s estimates for expected utilization of commercial payer rebates are based on data received from its customers. The estimates for rebates under government programs are based on statutory discount rates and expected utilization as well as historical data the Company has accumulated since product launch. 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 product sales, net. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current period’s activity, plus an accrual balance for known prior periods’ unpaid rebates. If actual rebates vary from estimates, the Company may need to adjust accruals, which would affect product sales, net in the period of adjustment. An accrued liability is recorded for unpaid rebates related to product for which control has transferred to the customer.

(ii) License Fees and Collaboration Revenue

China Out-License

License fees and collaboration revenue in the accompanying Statements of Operations and Comprehensive Loss have historically been related to the China Out-License that allows the third-party licensee to market the Company’s TP-03 product candidate (representing functional intellectual property) in the People’s Republic of China, Hong Kong, Macau, and Taiwan (the “China Territory”)— see Note 10. The accounting and reporting of revenue for out-license arrangements requires significant judgment for: (a) identification of the number of performance obligations within the contract; (b) the contract’s transaction price for allocation (including variable consideration); (c) the stand-alone selling price for each identified performance obligation; and (d) the timing and amount of revenue recognition in each period.

The China Out-License was analyzed under GAAP to determine whether the promised goods or services are distinct or must be accounted for as part of a combined performance obligation. In making these assessments, the Company considers factors such as the stage of development of the underlying intellectual property and the capabilities of the customer to develop the intellectual property on their own, and/or whether the required expertise is readily available. If the license is not distinct, the license is combined with other promised goods or services as a combined performance obligation for revenue recognition.

The China Out-License included the following forms of consideration: (i) non-refundable upfront license payment; (ii) equity-based consideration; (iii) sales-based royalties; (iv) sales-based threshold milestones; (v) one-time payment for executing a drug supply agreement; (vi) development milestone payments; (vii) regulatory milestone payments and the issuance of a related patent; and (viii) a one-time termination payment to transition the rights to develop and commercialize TP-03 in China for the treatment of Demodex blepharitis and Meibomian Gland Disease (“MGD”) to Xi An Grand Chang An Pharmaceutical Co., Ltd. (“GrandPharma”). Revenue is recognized in proportion to the allocated transaction price when (or as) the respective performance obligation is satisfied. The Company evaluates the progress related to each milestone at each reporting period and, if necessary, adjusts the probability of achievement and related revenue recognition. The measure of progress, and thereby periods over which revenue is recognized, is subject to estimates by management and may change over the course of the agreement.

Contractual Terms for Receipt of Payments

A performance obligation is a promise in a contract to transfer a distinct good or service and is the unit of accounting. A contract’s transaction price is allocated among each distinct performance obligation based on relative standalone selling price and recognized when, or as, the applicable performance obligation is satisfied.

The contractual terms that establish the Company’s right to collect specified amounts from its customers and that require contemporaneous evaluation and documentation under GAAP for the corresponding timing and amount of revenue recognition, are as follows:

Upfront License Fees: The Company determines whether non-refundable license fee consideration is recognized at the time of contract execution (i.e., when the license is transferred to the customer and the customer is able to use and benefit from the license) or over the actual (or implied) contractual period of the China Out-License. The Company also evaluates whether it has any other requirements to provide substantive services that are inseparable from the performance obligation of the license transfer to determine whether any combined performance obligation is satisfied over time or at a point in time. Upfront payments may require deferral of revenue recognition to a future period until the Company performs obligations under these arrangements.

Development Milestones: The Company utilizes the most likely amount method to estimate the amount of consideration to which it will be entitled for achievement of development milestones as these represent variable consideration. For those payments based on development milestones (e.g., patient dosing in a clinical study or the achievement of statistically significant clinical results), the Company assesses the probability that the milestone will be achieved, including its ability to control the timing or likelihood of achievement, and any associated revenue constraint. Given the high degree of uncertainty around the occurrence of these events, the Company determines the milestone and other contingent amounts to be constrained until the uncertainty associated with these payments is resolved. At each reporting period, the Company re-evaluates this associated revenue recognition constraint. Any resulting adjustments are recorded to revenue on a cumulative catch-up basis, and reflected in the financial statements in the period of adjustment.

Regulatory Milestones: The Company utilizes the most likely amount method to estimate the consideration to which it will be entitled and recognizes revenue in the period regulatory approval occurs (the performance obligation is satisfied) as these represent variable consideration. Amounts constrained as variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company evaluates whether the milestones are considered probable of being reached and not otherwise constrained. Accordingly, due to the inherent uncertainty of achieving regulatory approval, associated milestones are deemed constrained for revenue recognition until achievement.

Royalties: Under the sales-or-usage-based royalty exception the Company recognizes revenue based on the contractual percentage of the licensee’s sale of products to its customers at the later of (i) the occurrence of the related product sales or (ii) the date upon which the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, the Company has not recognized any royalty revenue from the China Out-License.

Sales Threshold Milestones: Similar to royalties, applying the sales-or-usage-based royalty exception, the Company recognizes revenue from sales threshold milestones at the later of (i) the period the licensee achieves the one-time annual product sales levels in their territories for which the Company is contractually entitled to a specified lump-sum receipt, or (ii) the date upon which the performance obligation to which some or all of the milestone has been allocated has been satisfied or partially satisfied. To date, the Company has not recognized any sales threshold milestone revenue from the China Out-License.

The Company re-evaluates the measure of progress to each performance obligation in each reporting period as uncertain events are resolved and other changes in circumstances occur.

Cost of Sales

Cost of sales consists of direct and indirect costs related to the manufacturing and distribution of XDEMVY, including raw materials, third-party manufacturing costs, packaging services, freight-in, third-party royalties payable on the Company’s product sales, net and amortization of capitalized intangible assets associated with XDEMVY. Cost of sales also includes period costs related to certain inventory warehouse and distribution operations and inventory adjustment charges. The Company began capitalizing inventory costs upon FDA approval of XDEMVY in July 2023. Prior to FDA approval of XDEMVY, manufacturing and other inventory costs were recorded to research and development expenses in the Statements of Operations and Comprehensive Loss.

Selling, General and Administrative

Selling, general and administrative costs consist of salaries, benefits, stock-based compensation and other personnel-related costs for the Company’s executive, finance, sales and marketing, and other administrative functions. Selling, general and administrative expenses also include sales and marketing costs, including direct-to-consumer (“DTC”) advertising costs, to support the Company’s commercial launch that started in August 2023, consulting fees, legal services, rent and other facilities costs, patient support functions, the U.S. healthcare reform federal excise fee on Branded Prescription Pharmaceutical Manufacturers and Importers, and other general operating expenses not otherwise classified as research and development expenses. Advertising costs are expensed as incurred and were $121.2 million, $29.8 million, and $9.4 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Research and Development Costs

Research and development costs are expensed as incurred or as certain upfront or milestone payments become contractually due to licensors upon the achievement of clinical or regulatory events. Research and development expenses include internal costs directly attributable to in-development programs, including the costs of salaries, payroll taxes, employee benefit and other personnel-related costs (including stock-based compensation expense), license fees, materials, clinical trial site insurance, supplies and the cost of services provided by outside contractors to conduct nonclinical studies, clinical trials and contract manufacturing activities. All costs associated with research and development are expensed as incurred. The Company accrues these costs based on factors such as estimates of the work completed and in accordance with agreements established with third-party service providers under the service agreements. As it relates to clinical trials, the financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. Such payments are evaluated for current or long-term classification based on when they will be realized. The Company’s objective is to reflect the appropriate expense in its financial statements by matching those expenses with the period in which the services and efforts are expended. The Company accounts for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial taking into consideration discussions with applicable personnel and outside service providers. The clinical trial accrual is dependent in part upon the timely and accurate reporting of progress and efforts incurred from contract research organizations (“CROs”), contract manufacturers and other third-party vendors. Although estimates are expected to be materially consistent with actual amounts incurred, the Company’s understanding of the status and timing of services performed relative to the actual status and timing of services performed can vary and may result in changes in estimates in any particular period. The Company makes significant judgments and estimates in determining the accrued liabilities balance at each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. To date, there have been no material differences between estimates of such expenses and the amounts actually incurred.

The Company has entered into, and may continue to enter into, license agreements to access and utilize certain technology. In each case, the Company evaluates if the license agreement results in the acquisition of an asset or a business. To date, none of the Company’s license agreements have been considered an acquisition of a business. For asset acquisitions, the upfront payments to acquire such licenses, as well as any future milestone payments made before product approval that do not meet the definition of a derivative, are immediately recognized as research and development expense in the Statements of Operations and Comprehensive Loss when paid or become payable, provided there is no alternative future use of rights in other research and development projects.

Stock-Based Compensation

The Company recognizes stock-based compensation expense for equity awards granted to employees, consultants, and members of its Board of Directors. Stock option awards are at an exercise price of not less than 100% of the fair market value of common stock on the respective date of grant. The grant date is the date the terms of the award are formally approved by the Company’s Board of Directors or its designee. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards as of the date of grant. The fair value of restricted stock units is representative of the closing market price of the Company’s common stock on the date preceding the award grant-date.

Stock awards granted typically haveone tofour-year service conditions and a contractual term of 10 years. Any performance conditions for vesting are explicitly stated in each award agreement and are associated with clinical, business development, or operational milestones. For stock-based awards that vest subject to the satisfaction of a service requirement, the related expense is recognized on a straight-line basis over each award’s actual or implied vesting period. For stock-based awards that vest subject to a performance condition, the Company will recognize compensation expense when performance conditions are achieved or when the Company determines it is probable the performance conditions will be achieved by the end of the requisite service period. Compensation expense will be recognized on a cumulative catch-up basis in the period of achievement, and on a straight-line basis thereafter until the end of the requisite service period. The expense recognized for awards is based on the grant date fair value of a unit multiplied by the number of units expected to be earned with respect to the related performance conditions. Depending on the outcome of these performance goals, a recipient may ultimately earn a number of units greater or less than the number of units expected to be earned. Shares of the Company’s common stock are issued on a one-for-one basis for each performance unit earned. In general, performance unit awards vest at the end of the performance period. At each reporting period, the Company reassesses the probability of the achievement of the performance vesting conditions. As applicable, the Company reverses previously recognized expense for unvested awards in the same period of forfeiture.

The measurement of the fair value of stock option awards and recognition of stock-based compensation expense requires assumptions to be estimated by management that involve inherent uncertainties and the application of management’s judgment, including (i) the expected term of the stock option until its exercise by the recipient, (ii) stock price volatility over the expected term, (iii) the prevailing risk-free interest rate over the expected term, and (iv) expected dividend payments over the expected term.

All stock-based compensation expense is reported in the accompanying Statements of Operations and Comprehensive Loss within cost of sales, research and development expense or selling, general and administrative expense, based upon the assigned department of the award recipient. The measurement of the fair value of stock option awards and recognition of stock-based compensation expense requires assumptions to be estimated by management that involve inherent uncertainties and the application of management’s judgment, including:

Fair Value of Common Stock — The fair value of the Company’s common stock is based on the closing quoted market price of its common stock as reported by the Nasdaq Global Select Market on the date of the option grant.

Expected Term— The Company’s expected term represents the period that the Company’s stock option awards are expected to be outstanding. Management estimates the expected term of awarded stock options utilizing the simplified method to determine the expected term since the Company does not have sufficient exercise history. The simplified method results in an expected term of 6.25 years based on the mid-point between the vesting date and the end of the contractual term.

Expected Volatility — Prior to 2023, the Company did not have sufficient trading history for its common stock to use its own historical volatility. Management estimated the expected volatility based on a designated peer-group of publicly-traded companies for a look-back period (from the date of grant) that corresponded with the expected term of the awarded stock option. Beginning in January 2023, the Company began using its own historical stock price for expected volatility.

Risk-Free Interest Rate — The Company estimates the risk-free interest rate based upon the U.S. Department of Treasury yield curve in effect at award grant date for the time period that corresponds with the expected term of the awarded stock option.

Dividend Yield — The Company’s expected dividend yield iszero because it has never paid cash dividends and does not expect to for the foreseeable future.

Income Taxes

Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recorded based on the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the financial statements, as well as operating losses and tax credit carry forwards using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of enactment. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain due to the Company’s historical operating performance and recorded cumulative net losses in prior fiscal periods. A valuation allowance is recorded to reduce deferred tax assets, because based upon a weighting of positive and negative factors, it is more likely than not that these deferred tax assets will not be realized. If or when the Company were to determine that deferred tax assets are realizable, an adjustment to the corresponding valuation allowance would increase the net income in the period that such determination was made.

The Company’s income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities. In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential revisions and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known.

Interest and penalties related to unrecognized tax benefits, if any, are recorded as a component of income tax expense.

Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for potential dilutive shares of common stock. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common stock equivalents outstanding for the period determined using the treasury-stock method and if-converted method as applicable.

Due to net losses in all periods presented, all otherwise potentially dilutive securities are antidilutive, and accordingly, the reported basic net loss per share equals diluted net loss per share.

Comprehensive Loss

Comprehensive loss represents (i) net loss for the periods presented, and (ii) unrealized gains or losses on debt securities included in the Company’s reported marketable securities and cash equivalents.

Recently Issued or Effective Accounting Standards

Recently issued or effective accounting pronouncements that impact, or may have an impact, on the Company’s financial statements are discussed below. Outside of the pronouncements below, other recent accounting pronouncements not disclosed in these Financial Statements have been determined by the Company’s management to have no impact, or an immaterial impact, on its current financial position, results of operations, or cash flows.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires annual disclosures of specific categories in the rate reconciliation, additional information for reconciling items that meet a quantitative threshold and a disaggregation of income taxes paid, net of refunds. The standard also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The Company adopted ASU 2023-09 retrospectively during the year ended December 31, 2025. Refer to Note 12 for the related income tax disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting-Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses(“ASU 2024-03”). ASU 2024-03 improves the disclosures about a public business entity’s expenses by requiring more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) included within income statement expense captions. The standard is effective for the Company beginning with its Annual Report on Form 10-K for the year ending 2027. Early adoption is permitted. ASU 2024-03 should be applied prospectively. Retrospective adoption is permitted. The Company is currently assessing the impact this standard will have on its financial statements.

3. FAIR VALUE MEASUREMENTS

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type are presented in the following table:

Money Market Funds and U.S. Treasury Securities

Money market funds and U.S. Treasury securities are highly liquid investments and are actively traded with readily-available market prices that are publicly observable and independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

Commercial Paper, Corporate Debt Securities, and Government-Related Debt Securities

Commercial paper, corporate debt securities and government-related debt securities were valued using Level 2 inputs that utilized industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. The Company reviews trading activity and pricing for these investments as of each measurement date.

The fair value and amortized cost of cash equivalents, and available-for-sale investments by major security type are presented in the following table:

As of December 31, 2025 and 2024, a majority of the Company’s debt securities had a maturity of 12 months or less. As of December 31, 2025, twenty debt securities had a contractual maturity betweenone andtwo years, with an estimated fair market value of $46.9 million and amortized cost of $46.8 million. As of December 31, 2024, eight debt securities had a contractual maturity betweenone andtwo years, with estimated fair market value of $19.0 million and amortized cost of $19.0 million.

As of December 31, 2025 and 2024, the Company hadseven andten debt securities, respectively, in a continuous gross unrealized loss position for less than one year. As of December 31, 2025 and 2024, unrealized credit losses on these securities were not material. Further, the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis. Accordingly, the Company did not recognize any other-than-temporary impairment losses.

4. BALANCE SHEET ACCOUNT DETAIL

The composition of selected captions within the accompanying Balance Sheets are summarized below:

Inventory

Inventory consists of the following:

Property and Equipment, Net

Property and equipment, net consists of the following:

(1)This balance represents construction in progress for which no depreciation expense has been recognized.

Depreciation expense for the years ended December 31, 2025, 2024, and 2023 was $0.9 million, $0.7 million, and $0.7 million, respectively. There were no impairments recognized during the years ended December 31, 2025, 2024, and 2023.

Intangible Assets

Intangible assets, net consists of the following:

Intangible assets are amortized to cost of sales over the remaining useful life of 7.7 years as of December 31, 2025, with an initial useful life of 10 years from the date of first commercial sale (see Note 9). Amortization expense for the years ended December 31, 2025, 2024, and 2023 were $1.0 million, $0.5 million and $0.1 million, respectively. There have beenno impairments of intangible assets for the years ended December 31, 2025, 2024, and 2023.

As of December 31, 2025, the expected future amortization expense for the Company’s intangible assets is as follows:

Other Accrued Liabilities

Other accrued liabilities consists of the following:

5. STOCKHOLDERS’ EQUITY

2020 and 2016 Equity Incentive Plans

The Company’s Board of Directors and stockholders adopted and approved the Company’s 2020 Equity Incentive Plan (the “2020 Plan”) in October 2020. The 2020 Plan replaced the Company’s 2016 Equity Incentive Plan that was earlier adopted in December 2016 (the “2016 Plan”, collectively the “2020 and 2016 Plans”). However, awards outstanding under the 2016 Plan will continue to be governed by its original terms. The number of shares of the Company’s common stock that were initially available for issuance under the 2020 Plan equaled the initial sum of 9,000,000 shares plus 2,432,980 shares that were then available for issuance under the 2016 Plan. The 2020 Plan provides for the following types of awards: incentive and non-statutory stock options, stock appreciation rights, restricted shares, and restricted stock units.

The number of shares of common stock reserved for issuance under the 2020 Plan are increased automatically on the first business day of each fiscal year, commencing in 2021 and ending in 2030, by a number equal to the lesser of: (i)4% of the shares of common stock outstanding on the last business day of the prior fiscal year; or (ii) the number of shares determined by the Company’s Board of Directors. In general, to the extent that any awards under the 2020 Plan are forfeited, terminate, expire or lapse without the issuance of shares, or if the Company reacquires the shares subject to awards granted under the 2020 Plan, those shares will again become available for issuance under the 2020 Plan, as will shares applied to pay the exercise or purchase price of an award or to satisfy tax withholding obligations related to any award.

Employee Stock Purchase Plan

Under the terms of the Company’s 2020 Employee Stock Purchase Plan (“ESPP”), eligible employees can purchase common stock through scheduled payroll deductions. The purchase price is equal to the closing price of the Company’s common stock on the first or last day of the offering period (whichever is less), minus a 15% discount. To determine the value of ESPP expense to be recognized during each offering period, the Black-Scholes option-pricing model is used, in combination with the discounted employee price. A participant may purchase a maximum of 3,000 shares of common stock during asix-month offering period, not to exceed $25,000 at full market value on the offering date during each ESPP year.

Pursuant to the terms of the ESPP, the number of shares of common stock reserved for issuance under the ESPP are increased automatically on the first business day of each fiscal year, commencing in 2021 and ending in 2040, by an amount equal to the lesser of (i)one percent of the total number of shares of common stock outstanding on the last day of the year, (ii)2.5 million shares, or (iii) a number determined by the Board of Directors.

Common Stock Outstanding and Reserves for Future Issuance

As of December 31, 2025, the Company had 42.6 million shares of common stock issued and outstanding, which excludes 312,500 of pre-funded warrants that remained exercisable at period end and are reserved for future issuance. As of December 31, 2024 the Company had 38.3 million shares of common stock issued and outstanding. Common stockholders haveone vote for each share of common stock held and are entitled to receive dividends declared by the Company’s Board of Directors when legally available for distribution, then-subject to the dividend rights of the holders of preferred stock. For the years ended December 31, 2025, 2024, and 2023, nodividends were declared.

The Company’s total shares reserved for future issuance under its 2020 and 2016 Equity Incentive Plans and 2020 ESPP are summarized below:

6. STOCK-BASED COMPENSATION

Stock-Based Compensation Expense

Stock-based compensation expense was recognized in the accompanying Statements of Operations and Comprehensive Loss as follows:

Stock-based compensation expense was recognized by equity type as follows:

As of December 31, 2025, total unrecognized stock-based compensation expense and average remaining vesting period by equity type is as follows:

The fair value of granted stock options was estimated as of the date of grant using the Black-Scholes option-pricing model, based on the following inputs:

Stock Option Activity

Stock option activity during the year was as follows:

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of December 31, 2025.

The total grant-date fair value of options that vested during the years ended December 31, 2025, 2024, and 2023, was $14.2 million, $13.5 million, and $13.4 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2025, 2024, and 2023 was $10.1 million, $7.0 million, and $1.6 million, respectively.

Restricted Stock Unit Activity

Restricted stock unit activity during the year was as follows:

The total grant-date fair value of restricted stock units that vested during the years ended December 31, 2025, 2024, and 2023, was $14.1 million, $7.3 million, and $3.7 million, respectively.

Performance Stock Unit Activity

During the year ended December 31, 2025, the Company granted certain employees performance stock units. During the third quarter of 2025, the Company began recognizing stock-based compensation expense related to a performance condition that was determined to be probable of achievement.

Performance stock unit activity during the year was as follows:

7. NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share:

The following outstanding and potentially dilutive securities were excluded from the calculation of diluted net loss per share because their impact under the treasury stock method and if-converted method would have been anti-dilutive for each period presented:

8. SEGMENT REPORTING

The Company manages business activities on an aggregated basis and operates inone reportable segment: therapeutics. The therapeutics segment derives revenue primarily through sales of XDEMVY to specialty pharmacies and distributors in the U.S, who in turn sell it directly to clinics, hospitals, pharmacies and federal healthcare programs. The segment also generates license fees and collaboration revenue related to the China Out-License (see Note 10). The accounting policies of the therapeutics segment are the same as those described in the summary of significant accounting policies (see Note 2).

The Company’s chief operating decision-maker (“CODM”) is its Chief Executive Officer (“CEO”). The CODM uses net loss, as reported in the accompanying Statements of Operations and Comprehensive Loss, to assess performance of the therapeutics segment and in deciding whether to allocate resources into the therapeutics segment or outside the segment, such as for acquisitions or new in-license agreements. The CODM uses net loss to regularly monitor budget versus actual results which are used in assessing performance of the segment and in establishing management’s compensation. The CODM does not review assets in evaluating the results of the therapeutics segment, and therefore, such information is not presented.

The following table provides the operating financial results of the therapeutics segment:

9. COMMITMENTS & CONTINGENCIES

Lease Agreements

In the ordinary course of business, the Company enters into lease agreements with unaffiliated third parties for its facilities and office equipment. As of December 31, 2025, the Company hadtwo active leases with a combined square footage of 98,807 for office and laboratory suites in Irvine, California.

In December 2024, the Company entered into an agreement to terminate its former facility lease agreements (the “Former Lease”) and concurrently entered into a new lease agreement (the “Current Lease”), both with the same landlord, to relocate its corporate headquarters to another location in Irvine, California under a 10-year lease term. In September 2025, the Company obtained access to the new facility, and commenced the Current Lease; however, the Company’s headquarters have not yet been relocated. Construction remains in progress on the new facility and the Company plans to relocate its headquarters during 2026. Lease payments under the Current Lease began in November 2025. Base rent under the Current Lease is $2.5 million for the first year and is subject to annual increases of 3% thereafter. Upon commencement of the Current Lease, the Company became entitled to base rent abatement for the first five full calendar months for an aggregate amount of $0.7 million. The Current Lease also provides a tenant improvement allowance, not to exceed approximately $5.8 million, and to be applied toward construction costs of the premises. The tenant improvement allowance must be used within one year of the Current Lease commencement date, after which any unused portion will be forfeited with no further obligation by the landlord. As of December 31, 2025, the landlord had not paid any of the tenant improvement allowance.

Upon execution of the Current Lease, the Company provided the landlord a letter of credit for $2.6 million to serve as a security deposit. Provided that no defaults occur and the Company meets certain financial milestones for certain time periods, the security deposit can subsequently be reduced.

The components of total lease expense for the Company’s lease agreements are as follows:

Other information related to the Company’s lease agreements are as follows:

The below table summarizes as of December 31, 2025 the (i) minimum lease payments over the next five years and thereafter, (ii) lease arrangement imputed interest, and (iii) present value of future lease payments, as follows:

In-License Agreements

Elanco In-License Agreement for Skin and Eye Disease or Conditions in Humans

In January 2019, the Company executed a license agreement with Elanco Tiergesundheit AG (“Elanco”) for exclusive worldwide rights to certain intellectual property for the development and commercialization of lotilaner in the treatment or cure of any eye or skin disease or condition in humans, as amended in June 2022 (the “Eye and Derm Elanco Agreement”). The Company has sole financial responsibility for related development, regulatory, and commercialization activities.

The Company made cash payments to Elanco under the Eye and Derm Elanco Agreement comprised of $1.0 million upfront upon contract execution in January 2019 and a total of $4.0 million for three specified clinical milestone achievements in September 2020, April 2021, and March 2023, which were all recorded in research and development expense in the Statements of Operations and Comprehensive Loss.

In August 2023, a milestone of $4.0 million was achieved and paid to Elanco upon the first commercial sale of XDEMVY in the U.S. and in September 2024, a $5.0 million sales-based milestone obligation to Elanco was triggered for the achievement of reaching $100.0 million in net product sales of XDEMVY. These respective milestone payments were recorded to intangible assets, net in the accompanying Balance Sheets as of December 31, 2025 and 2024.

The Company is obligated to make potential future cash payments to Elanco of $2.0 million under the Eye and Derm Elanco Agreement upon achievement of the last clinical milestone in the treatment of human skin diseases using lotilaner and a maximum of $70.0 million for various commercial and sales threshold milestones for the treatment of human skin diseases and the treatment of blepharitis in humans using lotilaner.

In May 2025, Elanco sold and assigned its rights to receive certain future tiered royalties and commercial milestones under the Eye and Derm Elanco Agreement to an affiliate of Blackstone Private Credit Fund (“Blackstone”). Certain future payments under the Eye and Derm Elanco Agreement will be directed to Blackstone, with no modification to the Company’s obligations or the terms of the underlying agreement. The Company and Elanco amended the Eye and Derm Elanco Agreement to make certain conforming changes.

In addition, the Company is obligated to pay tiered contractual royalties in the mid to high single digits of its product sales, net. If the Company receives certain types of payments from its sublicensees, it will be obligated to pay a variable percentage in the low to mid double-digits of such proceeds, until achievement of the first applicable regulatory approval of a product covered under the license, which occurred in July 2023 with the FDA approval of XDEMVY. The Company’s accrued royalties payable are recorded to cost of sales in the accompanying Statements of Operations and Comprehensive Loss for the years ended December 31, 2025, 2024, and 2023 and other accrued liabilities in the accompanying Balance Sheets as of December 31, 2025 and 2024. Royalty expense during the years ended December 31, 2025, 2024, and 2023 was $24.6 million, $9.0 million, and $0.7 million, respectively.

Elanco In-License Agreement for All Other Diseases or Conditions in Humans

In September 2020, the Company executed a license agreement with Elanco granting it a worldwide license to certain intellectual property for the development and commercialization of lotilaner for the treatment, palliation, prevention, or cure of all other diseases and conditions in humans (i.e., beyond that of the eye or skin), as amended in June 2022 (the “All Human Uses Elanco Agreement”).

The Company made cash payments under the All Human Uses Elanco Agreement of $0.5 million related to a clinical milestone that was triggered in December 2022 upon enrollment of the first patient in the Phase 2a Carpo trial, for the potential treatment of Lyme disease. The Company is required to make potential future cash payments under this agreement upon the achievement of various clinical milestones up to an aggregate maximum of$4.0 million and various commercial and sales threshold milestones for an aggregate maximum of $77.0 million. In addition, the Company will be obligated to pay contractual royalties in the single digits of its product sales, net. If the Company receives certain types of payments from its sublicensees, it will also be obligated to pay a variable percentage in the low to mid double-digits of such proceeds, until achievement of the first applicable regulatory approval of a product covered under the license.

Other In-License Agreement for All Ophthalmic Uses in Humans

In October 2024, the Company executed a new in-license agreement from a third party for the exclusive worldwide rights to develop, manufacture, and commercialize a compound for all ophthalmic uses (the “In-License Agreement”), and concurrently made an upfront payment of $2.5 million, which was recorded to research and development expense in the accompanying Statements of Operations and Comprehensive Loss for the year ended December 31, 2024. As of December 31, 2025, the Company is obligated to make potential future cash payments under the In-License Agreement of $3.0 million upon the achievement of an event-based development milestone and up to $102.0 million for various commercial and sales threshold milestones. Future annual worldwide net sales of products developed from the compound, developed, manufactured, and commercialized via the In-License Agreement, will also be subject to incremental royalty rates in the range of mid to high single digits.

Employment Agreements

The Company has entered into employment agreements, including severance and change in control agreements, with seven of its executive officers. These agreements provide for the payment of certain benefits upon separation of employment under specified circumstances, such as termination without cause, or termination in connection with a change in control event.

Litigation Contingencies

From time to time, the Company may be subject to various litigation and related matters arising in the ordinary course of business. The Company is currently not aware of any such matters where there is at least a reasonable probability that a material loss, if any, has been or will be incurred for financial statement recognition.

Indemnities and Guarantees

The Company has certain indemnity commitments, under which it may be required to make payments to its officers and directors in relation to certain transactions to the maximum extent permitted under applicable laws. The duration of these indemnities varies, and in certain cases, are indefinite and do not provide for any limitation of maximum payments. The Company has not been obligated to make any such payments to date and no liabilities have been recorded for this contingency in the accompanying Balance Sheets.

10. OUT-LICENSE AGREEMENTS

Out-License of TP-03 Commercial Rights in the China Territory

In March 2021, the Company entered into the China Out-License agreement with LianBio for its exclusive development and commercialization rights of TP-03 (lotilaner ophthalmic solution) 0.25% in the China Territory for the treatment of Demodex blepharitis and MGD. Prior to the March 2024 Novation Agreement to GrandPharma discussed in detail below, LianBio was contractually responsible for all clinical development and commercialization activities and costs within the China Territory.

The Company assessed this arrangement and identified the following material promises under the arrangement: (i) the exclusive license to research, develop, manufacture, commercialize, make, offer for sale, sell, and import TP-03 in the China Territory; and (ii) the research and development services in the form of clinical study materials for the respective Phase 2b/3 trial (Saturn-1) and Phase 3 (Saturn-2) TP-03 trials. The promises to provide research and development services for Saturn-1 and Saturn-2 clinical trials were evaluated and determined to be distinct promises in the contract and each of the two clinical trials are separate performance obligations apart from the promise to provide the license.

The assessment of the initial transaction price for the China Out-License included an analysis of amounts the Company expected to receive, which at contract inception consisted of: (i) a $15.0 million upfront cash payment; (ii) a $10.0 million second cash payment; (iii) a $10.0 million milestone that was determined to be within the control of the Company; and (iv) $1.2 million representing the initial fair value of equity warrants.

The Company accounted for each performance obligation as follows:

Out-License

The Company determined that this license was distinct based on an evaluation of the delivery of the functional license that was in the later stages of development, and it met the criteria for being distinct from the research and development services required under the China Out-License. The Company determined the standalone selling price of this license using a discounted projected sales model and recognized as license fees and collaboration revenue the total allocated transaction price at contract inception, upon delivery of the license.

Research and Development Services

The standalone selling price of these performance obligations was determined using the adjusted market assessment approach. The Company analyzed costs expected to be incurred for each of the clinical trials through completion to estimate the price that a customer would be willing to pay for these services in order to benefit from the clinical trials. The Company determined that LianBio simultaneously benefited from the research and development services that are satisfied over time, as they were able to request and access the clinical trial data at any point through the trial completion. Therefore, the Company recognized the amounts allocated to the respective research and development performance obligations for the Saturn-1 and Saturn-2 clinical trials within license fees and collaboration revenue as the research and development services were provided using an input method, based on the costs incurred for each clinical trial and the total costs expected to be incurred to satisfy each performance obligation. The Company believes this method most faithfully depicted its performance in transferring the promised services during the expected period of time that each clinical trial was ongoing. The Company monitored the expected completion dates for each clinical trial and updated its estimated time to completion at each reporting period, as necessary.

In February 2023, a specified milestone event was triggered based upon the signing of an agreement for which the Company has no ongoing obligations, resulting in $2.5 million recognized as license fees and collaboration revenue in the accompanying Statements of Operations and Comprehensive Loss for the year ended December 31, 2023.

In February 2024, LianBio announced its plan to wind down its operations and in March 2024 made a special cash dividend payment to the Company of $0.7 million (equivalent to $4.80 per share). In March 2024, the Company executed an agreement with GrandPharma and LianBio (the “Novation Agreement”) to transition the rights to develop and commercialize TP-03 in China for Demodex blepharitis and MGD from LianBio to GrandPharma. Upon execution of the Novation Agreement, the China Out-License with LianBio was assigned to GrandPharma with a one-time payment of $2.5 million (the “Termination Payment”) made to the Company from LianBio in April 2024. This Termination Payment was recorded as license fees and collaboration revenue in the accompanying Statement of Operations and Comprehensive Loss for the year ended December 31, 2024. The Novation Agreement amended the $15.0 million future development milestone payable on China regulatory approval of the China Out-License with a combined condition of patent issuance related to TP-03 in China.

Simultaneous with the execution of the Novation Agreement, the Company entered into a warrant termination agreement (the “Warrant Termination Agreement”) pursuant to which the Company received a cancellation payment of $0.4 million (the “Warrant Cancellation Payment”). This Warrant Cancellation Payment was recorded as license fees and collaboration revenue in the accompanying Statement of Operations and Comprehensive Loss for the year ended December 31, 2024.

Through December 31, 2025, the Company received aggregate payments from LianBio totaling $86.1 million, comprised of (i) $15.0 million of initial consideration, (ii) $67.5 million for the achievement of specified milestones, (iii) $2.5 million upon execution of the Novation Agreement, (iv) $0.4 million upon execution of the Warrant Termination Agreement, and (v) $0.7 million related to a special cash dividend.

As of December 31, 2025, the Company is eligible to receive further consideration from GrandPharma upon the achievement of additional TP-03 events, including: (i) additional regulatory approval and/or patent issuance milestones of up to an aggregate of $20.0 million; (ii) China-based TP-03 sales threshold milestone payments of up to an aggregate of $100.0 million; and (iii) tiered low-to-high-teen royalties for China Territory TP-03 product sales. The variable consideration related to the remaining milestone payments was fully constrained as of December 31, 2025.

11. CREDIT FACILITY AGREEMENTS

In April 2024, the Company executed the 2024 Credit Facility with Pharmakon with maturity in April 2029. The 2024 Credit Facility is collateralized by substantially all of the Company’s presently existing and subsequently acquired assets. Upon execution, the Company made a $75.0 million draw from the initial tranche of the 2024 Credit Facility, a portion of which was utilized to repay all outstanding indebtedness on the Credit Facility with Hercules and SVB (the “2022 Credit Facility”), resulting in total net proceeds of $39.6 million. The 2024 Credit Facility provided forthree potential additional term loan tranches in principal amounts up to $25.0 million, $50.0 million, and $50.0 million, respectively, subject to customary conditions to funding and, in the case of the lasttwo tranches, achieving minimum net product sales milestones, which were met. The Company did not draw on any of thethree additional tranches of $25.0 million, $50.0 million and $50.0 million, respectively, each of which expired on December 31, 2024, June 30, 2025 and December 31, 2025.

Under the 2024 Credit Facility, the outstanding principal draws accrue interest at a floating rate based upon the secured overnight financing rate (“SOFR”), plus a margin of 6.75% per annum. The SOFR is subject to a 3.75% floor. At the extinguishment date of the 2022 Credit Facility, the outstanding principal was accruing interest at the aggregate cap of 11.45%.

The Company was required to pay a specified fee upon the earlier of (i) February 2, 2027 or (ii) the date the Company prepays, in full or in part, the outstanding principal balance of the 2022 Credit Facility (“End of Term Charge”). Upon the signing of the 2024 Credit Facility, the End of Term Charge of $1.4 million was paid in full in April 2024, which was derived by multiplying 4.75% by the $30.0 million outstanding principal balance. Prior to being paid, the End of Term Charge was accreted to interest expense over the expected maturity date. The Company recognized a loss on debt extinguishment of $1.9 million in the Statement of Operations and Comprehensive Loss for the year ended December 31, 2024.

As of December 31, 2025, 2024 and 2023, the effective interest rates for the full term of the Credit Facilities was 11.99%,12.61%, and 11.96%, respectively. The Company recognized interest expense in the accompanying Statements of Operations and Comprehensive Loss in connection with the Credit Facilities as follows:

The carrying value of the 2024 Credit Facility consists of principal outstanding less legal and administrative issuance costs that were recorded as a debt discount to the long-term debt, net and will continue to be accreted to interest expense using the effective interest method during its term. The principal balance of the 2024 Credit Facility and related accretion and amortization are reported on a combined basis as long-term debt, net in the accompanying Balance Sheets as follows:

12. INCOME TAXES

The components of loss from operations before income tax provision were as follows:

The U.S. federal, state, and local income tax provision is summarized as follows:

A reconciliation of income taxes was computed by applying the U.S. federal statutory income tax rate in each period to the pretax loss for the years ended December 31, 2025, 2024 and 2023, and adjusted for certain classes of transactions, as summarized below:

(1)Before the valuation allowance, various states made up the majority (greater than 50 percentage) of the tax effect in this category, including Pennsylvania for 2025; Pennsylvania, California and Massachusetts for 2024; and Tennessee and Pennsylvania for 2023. The cash paid for income taxes (net of refunds) during the year was $0.1 million for federal tax and $0.2 million for state and local taxes.

The tax effects of significant items comprising the Company’s deferred tax assets and liabilities were as follows:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company maintains a valuation allowance against its net deferred tax assets due to the uncertainty that such assets will be realized and evaluates the recoverability of its deferred tax assets on at least an annual basis. The Company has determined that its deferred tax assets, with the exception of amounts supported by the reversal of taxable temporary differences, are not realizable. Consequently, the Company has recorded a valuation allowance on deferred tax assets of $107.9 million and $88.0 million at December 31, 2025 and 2024, respectively.

At December 31, 2025, the Company has U.S. federal, state, and local net operating loss (“NOL”) carryforwards of approximately $176.1 million and $105.9 million, respectively. As a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), for U.S. income tax purposes, NOLs generated prior to December 31, 2017 can be carried forward for up to 20 years, while NOLs generated after December 31, 2017 can be carried forward indefinitely, but are limited to 80% utilization against taxable income. The Company’s total U.S. federal NOL of $176.1 million will not expire but will only be able to offset 80% of future taxable income within each year. The other state and local NOLs will begin to expire in 2033. At December 31, 2025, the Company had U.S. federal and other state research and development tax credits of $6.9 million and $2.2 million, respectively. The Company’s U.S. federal research and development tax credits begin to expire in 2040 unless previously utilized, and the other state and local credit carryforwards do not expire.

The Internal Revenue Code (“IRC”) Sections 382 and 383 limit annual use of NOL and research and development credit carryforwards in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has completed an ownership change analysis, which resulted in some ownership changes. Of the total U.S. federal, state, and local NOLs of $176.1 million and $105.9 million respectively, $174.6 million and $105.0 million are available as of December 31, 2025 to offset future taxable income. The remaining $1.5 million and $0.9 million will become available in future years. If a requisite ownership change occurs in the future, the amount of remaining tax attribute carryforwards available to offset taxable income and income tax expense in future years may be restricted or eliminated. If eliminated, the related asset would be removed from deferred tax assets with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.

Uncertain tax positions are evaluated based upon the facts and circumstances that exist at each reporting period. Subsequent changes in judgment based upon new information may lead to changes in recognition, derecognition, and measurement. Adjustment may result, for example, upon resolution of an issue with the taxing authorities or expiration of a statute of limitations barring an assessment for an issue. The Company recognizes a tax benefit from an uncertain tax position when it is more-likely-than-not that it will be sustained upon examination by tax authorities. As of December 31, 2025, the Company had gross unrecognized tax benefits of $4.3 million, none of which would affect the effective tax rate if recognized. The Company’s policy is to recognize the interest expense and/or penalties related to income tax matters as a component of income tax expense. The Company had no accrual for interest or penalties in the accompanying Balance Sheets at December 31, 2025 and has not recognized interest and/or penalties in the accompanying Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 or 2024.

The following table summarizes the changes to the gross unrecognized tax benefits:

The Company is subject to taxation in the U.S. Federal jurisdiction and various states. All tax years from inception are subject to examination by federal and state tax authorities. Further, the Company is not currently under examination by any federal, state, or local tax authority.

13. RELATED PARTY TRANSACTIONS

Equity Investment in Privately-Held Eye Care Company

In April 2024, the Company participated in an equity financing round of an early clinical-stage private eye care company. Pursuant to the terms of a Preferred Stock Purchase Agreement, the Company purchased $3.0 million of preferred stock. In December 2025, pursuant to the terms of an Amended Preferred Stock Purchase Agreement, the Company purchased an additional $0.9 million of preferred stock, resulting in a total investment of $3.9 million and representing a small minority equity interest in this private company. Dr. Azamian, the Company’s CEO and Chair of the Board, and Dr. Link, a member of the Company’s Board of Directors, serve on the board of this private company.

14. EMPLOYEE BENEFIT PLAN

The Company has a 401(k) tax-deferred savings plan which permits participants to make contributions by salary deduction pursuant to Section 401(k) of the IRC. The Company has elected to make discretionary matching contributions of 5% of employee contributions up to a maximum annual compensation limit of $350,000. For the years ended December 31, 2025, 2024, and 2023, the Company’s matching contributions were $3.7 million, $2.2 million, and $1.1 million, respectively, as reported in the accompanying Statements of Operations and Comprehensive Loss.

15. SUBSEQUENT EVENT

Other In-License Agreements for All Diagnostic, Prophylactic, and Therapeutic Uses in Humans

On February 2, 2026, the Company executed two new in-license agreements from a third party for the exclusive worldwide rights to develop, manufacture, and commercialize several compounds for all diagnostic, prophylactic, and therapeutic uses, except for a specific field carve-out for a small minority of the compounds to be retained by the licensor (collectively, the “February 2026 In-License Agreements”). In aggregate, the Company made an upfront payment of $2.0 million upon execution of the license agreements in February 2026, and is obligated to make potential future cash payments of

$2.5 million upon the achievement of event-based development milestones, and up to $92.0 million for various commercial and sales threshold milestones. Future annual worldwide net sales of products developed, manufactured, and commercialized in conjunction with the February 2026 In-License Agreements will also be subject to incremental tiered royalty rates in the mid single digits.