Researchers say they submitted eye photos showing no sign of demodex blepharitis, sat through a telehealth appointment lasting under ten minutes, and walked away with an XDEMVY prescription carrying a year's worth of refills.
That episode anchors a broader case: that Tarsus Pharmaceuticals's growth engine, a manufacturer-funded Medicare copay charity paired with aggressive specialty-pharmacy practices, may be propping up demand for a drug whose real market is far smaller than the company claims. Culper Research, which holds a short position in Tarsus, argues the company's promoted $2 billion-plus sales target would require selling more bottles annually than the total number of Americans ever diagnosed with the disease.
Ticker: TARS (Tarsus Pharmaceuticals, Inc.)
Research Firm: Culper Research
Report URL: https://culperresearch.com/wp-content/uploads/2026/07/Culper_TARS_7-1-2026.pdf?ref=shortreport.fyi
Report date: 2026-07-01
Position Disclosure: Short position in Tarsus Pharmaceuticals, Inc. (TARS)
Thesis
Culper Research argues that Tarsus's XDEMVY growth depends on an allegedly improper manufacturer-funded Medicare copay arrangement and aggressive pharmacy practices, and that the drug's real market is far smaller than the company claims.
- Charity Timing Match: Healthwell launched its blepharitis copay fund in September 2023, one month after XDEMVY's August 2023 launch. Its implied donations rose from $5.1 million in 2023 to $30.0 million in 2024, tracking Tarsus's estimated charitable contributions of $5.7 million and $31.2 million over the same years, calculated from Tarsus's deferred-tax-asset disclosures.
- Single-Drug Fund: Healthwell's blepharitis fund paid $21.5 million to 31,668 recipients in 2024, averaging $680 each, a sum the report says is inconsistent with the low-cost generic treatments the fund nominally covers. Applying a Carepoint representative's estimate that half of XDEMVY Medicare patients use Healthwell implies 91% of the fund's recipients were XDEMVY patients.
- Buried Patient-Support Costs: Tarsus's 2024 10-K itemized "patient assistance donations" within SG&A. Its 2025 10-K dropped that language and folded the spending into IT, legal, and professional costs, while Q1 2026 SG&A rose to 94% of product revenue as XDEMVY sales fell sequentially for the first time, from $152 million to $145 million.
- Pharmacy Steering: The report alleges Tarsus directs prescriptions to BlinkRx, whose share of revenue allegedly grew from 13% to at least 63%. Four prescribers said Tarsus representatives described BlinkRx as preferred, and a BlinkRx employee's public role description cites "Tarsus Financial Assistance Outreach & PAP through the Healthwell Foundation" for Medicare patients.
- Unneeded Refills: A physician told the report that 30% to 40% of patients receive extra XDEMVY prescriptions from Carepoint to keep "in the medicine cabinet," despite XDEMVY being a one-time six-week course. The report's own telehealth test produced a prescription with a one-year refill after submitting photos the author says showed no disease.
- Market-Size Logic Error: Tarsus's claimed 25 million-patient market applies the 58% collarette prevalence found in its own Titan study to 45 million annual eye visits, but the report notes collarettes commonly occur in healthy eyes and that Tarsus's pivotal trials required at least 10 collarettes per lid. The company separately states only 1.5 million Americans have ever been diagnosed with the disease.
- Revenue Ceiling: A model assuming Tarsus eventually treats 3 million cumulative patients, twice the diagnosed U.S. population, projects XDEMVY revenue peaking below $800 million in 2028, well short of Tarsus's promoted $2 billion-plus target.
- Blackstone's Smaller Bet: Elanco sold its XDEMVY royalty stream to Blackstone affiliates for $295 million in May 2025. The report calculates that price implies Blackstone underwrote peak XDEMVY sales of roughly $712 million to $1.284 billion.
Catalysts
- Potential DOJ or HHS-OIG scrutiny of Healthwell funding and pharmacy arrangements: Pending regulatory action under the Anti-Kickback Statute or False Claims Act could validate or dispel the report's central allegation.
- Next quarterly results: Future reporting could show whether SG&A, already at 94% of Q1 2026 product revenue, continues rising as analysts model it falling toward 70%.
- Full-year 2026 results versus guidance: Performance against guidance of $670 million to $700 million in net product sales and $545 million to $565 million in SG&A could reinforce or weaken the profitability case embedded in Street estimates.
- Further sequential revenue declines: Additional declines after Q1 2026's drop from $152 million to $145 million would support the claim that the diagnosed patient pool is being exhausted.
- Potential payer pushback on pricing: A former employee cited by the report said payer resistance could cause revenue to peak as early as late 2026.
Company Response
The report does not state that the authors sought comment from Tarsus, Healthwell, BlinkRx, Carepoint, UpScript, or Blackstone, and it reports no response from any of these parties.
Notable Details
- Tarsus's promoted $2 billion-plus sales target would require selling more than 1.7 million XDEMVY bottles a year, more than the entire 1.5 million U.S. patients the company says have ever been diagnosed with the disease, per the report's calculation.
- Insiders sold $17 million of Tarsus stock over the past year, according to the report.
- The report says it ran the eye photos submitted through Tarsus's telehealth pathway past Claude, an AI model, which found no sign of demodex blepharitis in the images.
- checkmylids.com, the eyelid-health telehealth site linked from Tarsus's XDEMVY webpage, was registered in August 2025, according to the report's review of ICANN domain records.
"The Company's entire TAM rests on a freshman level logic error."
The author uses this line to argue that Tarsus improperly equates the presence of any eyelid collarettes with demodex blepharitis to derive its claimed 25 million-patient market.
FAQs
What is TARS stock and what does the company sell?
TARS is the ticker for Tarsus Pharmaceuticals, a biopharmaceutical company whose sole commercial product is XDEMVY, an eye drop for demodex blepharitis. XDEMVY launched in August 2023 following FDA approval in July 2023 and is dosed twice daily for six weeks.
What is Tarsus Pharmaceuticals, Inc. and what is XDEMVY used for?
Tarsus Pharmaceuticals, Inc. developed and markets XDEMVY, a prescription eye drop treating demodex blepharitis, a condition linked to eyelid mites. The company licensed the underlying drug, lotilaner, from Elanco in 2019 and reported treating more than 600,000 patients as of June 2026.
What does Culper Research allege about Tarsus's Healthwell funding?
Culper Research, which holds a short position in Tarsus, alleges the company funds Healthwell Foundation's blepharitis copay fund to cover Medicare patients' XDEMVY costs, creating Anti-Kickback Statute risk under HHS-OIG guidance on disease-specific charity funds. The report quotes a healthcare attorney who said Tarsus "harbors many of the attributes of the arrangements that have been prosecuted."
What is the Healthwell blepharitis fund?
It is a Healthwell Foundation program covering copays for blepharitis treatments, launched in September 2023, one month after XDEMVY's commercial launch. By 2024 it had grown to Healthwell's third-largest fund by patient count among 59 disease-specific funds, disbursing $21.5 million to 31,668 recipients.
How much of XDEMVY's distribution runs through BlinkRx?
The report says BlinkRx's share of Tarsus revenue rose from 13% to at least 63%, and that BlinkRx and Carepoint together account for 79% of revenue. Prescribers told the report that Tarsus representatives encouraged them to route prescriptions to BlinkRx specifically.
What is Tarsus's financial guidance for 2026?
Tarsus has guided to $670 million to $700 million in net XDEMVY product sales and $545 million to $565 million in SG&A for 2026. The report argues that holding SG&A at the 94% of revenue seen in Q1 2026, rather than the roughly 70% implied by Street models, would produce approximately negative $130 million in 2026 EBIT.
Did Tarsus respond to the allegations in the Culper Research report?
The report does not indicate that Tarsus, Healthwell, or the pharmacies involved were asked for comment, and no company response is included in the document.
How big does Culper Research think XDEMVY's market actually is?
The report disputes Tarsus's claimed 25 million-patient demodex blepharitis market, noting it was derived by applying a 58% collarette prevalence rate from Tarsus's own Titan study to 45 million annual eye visits. It contrasts this with Tarsus's own disclosure that only 1.5 million U.S. patients have ever been diagnosed with the condition, and models XDEMVY revenue peaking below $800 million in 2028.
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