Tarsus Pharmaceuticals, Inc.TARS
Tarsus Pharmaceuticals, Inc. Commitments Disclosure
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 had two 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:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Operating lease expense | $ | 1,490 | $ | 835 | $ | 705 | |||||||||||
| Variable lease expense | 645 | 472 | 391 | ||||||||||||||
| Total lease expense | $ | 2,135 | $ | 1,307 | $ | 1,096 | |||||||||||
Other information related to the Company’s lease agreements are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Cash paid for operating leases | $ | 858 | $ | 799 | $ | 884 | |||||||||||
| Remaining lease term (years) | 9.9 | 0.8 | 3.1 | ||||||||||||||
| Discount rate | 11.4 | % | 11.0 | % | 10.0 | % | |||||||||||
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:
| Amounts | ||||||||
| 2026 | $ | 2,021 | ||||||
| 2027 | 2,625 | |||||||
| 2028 | 2,704 | |||||||
| 2029 | 2,783 | |||||||
| 2030 | 2,869 | |||||||
| Thereafter | 15,396 | |||||||
| Total future lease payments, undiscounted | 28,398 | |||||||
| (Less): Imputed interest | (11,956) | |||||||
| (Less): Tenant improvement allowance | (5,843) | |||||||
| Present value of operating lease payments | $ | 10,599 | ||||||
| Operating lease liability, current | — | |||||||
| 10,599 | ||||||||
| Total operating lease liability | $ | 10,599 | ||||||
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.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Mar 17, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 31, 2021 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.