Tarsus Pharmaceuticals experienced a near 8% decline in its share price around midday Wednesday following publication of a short seller report by Culper Research that disclosed a short position in the company. Culper’s report focuses on Tarsus’s sole commercially marketed therapy, XDEMVY, an eyedrop indicated for demodex blepharitis, and raises questions about the product’s growth drivers and addressable market.
Central to Culper’s argument is an allegation that XDEMVY adoption has been materially supported by lowered Medicare patient copays made possible through donations to a blepharitis-specific fund managed by the Healthwell Foundation. Culper contends that while manufacturer copay assistance to commercially insured patients is common, providing funds that reduce Medicare beneficiaries’ out-of-pocket costs may violate the Anti-Kickback Statute.
The short seller points to timing and transaction patterns it views as suspicious. Healthwell initiated its blepharitis fund in September 2023, one month after Tarsus launched XDEMVY in August 2023. Culper’s review of Tarsus’s reported charitable contributions shows donations of $5.7 million in 2023, $31.2 million in 2024, and $78.5 million in 2025. Culper notes these donation amounts align closely with Healthwell’s disclosed grant totals of $5.1 million in 2023 and $30.0 million in 2024 as reflected in IRS filings, a correlation the short seller highlights in its analysis.
In support of its contention that the Healthwell grants largely flow to XDEMVY patients, Culper cites a Carepoint representative — Carepoint is identified as one of Tarsus’s top two specialty pharmacies — who estimated that roughly 50% of XDEMVY Medicare patients receive Healthwell grants. Using that estimate, Culper calculates that approximately 91% of the blepharitis fund’s grants are directed to XDEMVY patients.
Financial reporting changes at Tarsus also attract attention in Culper’s report. The firm notes that Tarsus’s 2024 Form 10-K explicitly listed "patient assistance donations" as part of SG&A expenses, whereas the 2025 Form 10-K relabeled that category as "patient support functions." Culper interprets the rewording as noteworthy in the context of its broader concerns.
To assess legal risk, Culper engaged a health-care attorney with nearly three decades of experience. That advisor told Culper that Tarsus "harbors many of the attributes of the arrangements that have been prosecuted." Culper underscores the Department of Justice’s history of pursuing comparable arrangements, citing prior resolutions involving Actelion ($360 million settlement in December 2018), Jazz and others ($123 million in April 2019), and Teva ($425 million in October 2024).
Culper also disputes Tarsus’s estimate of the U.S. addressable population for demodex blepharitis. Tarsus has used a 25 million-patient figure derived from its Titan study, which reported collarettes in 58% of eye care patients. Culper characterizes the company’s extrapolation as equating collarette presence with active disease and calls that a logical error. To challenge the Titan-based estimate, Culper surveyed 30 current XDEMVY prescribers; those clinicians reported that 18% of their patient panels have demodex blepharitis, a far smaller share than the 58% used by Tarsus.
Tarsus itself recognizes a much smaller diagnosed population, stating that only 1.5 million patients in the U.S. have ever been diagnosed with demodex blepharitis. The company also reports treating more than 600,000 patients with XDEMVY as of June 2026, a figure Culper notes equals 40% of the diagnosed U.S. population.
On projected revenue, Culper’s model suggests XDEMVY sales would peak below $800 million in 2028, well under the over $2 billion peak sales trajectory outlined by Tarsus. Culper points to a separate transaction as an implicit market signal: in May 2025, Elanco sold its XDEMVY royalty rights to Blackstone for $295 million. Culper interprets that sale price to imply Blackstone underwrote peak revenues in a range it calculates to be $712 million to $1.3 billion, which contrasts with Tarsus’s higher guidance.
The combination of alleged Medicare copay support via a third-party foundation, apparent alignment between Tarsus donations and Healthwell grants, a prescriber survey that produces a substantially lower disease prevalence than Tarsus’s Titan-based estimate, and a royalty transaction consistent with more modest peak sales underpins Culper’s short position and its conclusion that XDEMVY’s upside may be materially constrained.
Summary
Culper Research disclosed a short position in Tarsus and published a report accusing the company of relying on a Healthwell Foundation-funded copay program that could raise Anti-Kickback Statute concerns and materially overstate XDEMVY’s addressable market. The allegations, supported by donation timelines, IRS grant figures, a prescriber survey and a royalty sale valuation, corresponded with an approximately 8% intraday drop in Tarsus’s share price.
Key points
- Culper argues that donations linked to a Healthwell Foundation blepharitis fund have facilitated reduced Medicare copays for XDEMVY, a practice Culper says may implicate the Anti-Kickback Statute; this impacts pharmaceutical compliance and Medicare payer sectors.
- Discrepancies between Tarsus’s market-size estimate (25 million) and Culper’s prescriber survey (18% report prevalence) raise questions about demand assumptions that influence revenue forecasts and investor valuation models in the biotech and specialty pharma markets.
- Market signals from a May 2025 royalty sale (Elanco to Blackstone for $295 million) are cited by Culper as implying peak revenue expectations far below Tarsus’s stated path, affecting private-market valuation benchmarks and royalty-asset investors.
Risks and uncertainties
- Potential legal and regulatory scrutiny related to Medicare copay assistance arrangements - this risk directly affects pharmaceutical compliance teams and could influence payer-provider relationships.
- Questions about the true addressable market for demodex blepharitis create uncertainty around revenue projections and cash-flow assumptions, affecting investors and analysts modeling the company’s future performance.
- Reliance on third-party foundations and reported donation patterns introduces reputational and operational risks that could alter prescribing dynamics through specialty pharmacies and affect relationships with distribution partners.
Tags
pharma, biotech, Medicare, compliance, TARS