Harrow : Q1-2025 Letter to Stockholders

Published: 2025-05-08 20:08:42 ET HROW

Published on 05/08/2025 at 20:08

May 8, 2025

Dear Harrow Stockholders:

Today, we reported first-quarter 2025 revenues of $47.8 million, a 38% increase over the prior-year's first-quarter revenues of $34.6 million and, as expected, a sequential decrease from fourth-quarter 2024 revenues. In addition to record-high cash flow from operations of $19.7 million for the quarter, a very bright spot was VEVYE, as revenues rose 35% quarter-over-quarter, increasing from $16.0 million in the fourth quarter of 2024 to $21.5 million in the first quarter. While overall sales momentum is building in the second quarter, the astounding recent success in growing VEVYE NRx demand is poised to drive tremendous value for our stockholders - this year and for many years to come.

In addition to touching on a few subjects Harrow stockholders may be interested in (e.g., our capital structure and the potential impact of tariffs) in the balance of this Letter to Stockholders, I will provide color on our first-quarter performance, focusing on why I am confident we are on track to meet our 2025 directional revenue guidance of more than $280 million.

As discussed during our last earnings conference call, with a growing percentage of our revenue coming from higher-margin branded products, Harrow's business follows a predictable seasonal pattern. The first quarter is typically our weakest financial quarter, due in part to factors such as prior-quarter stocking to avoid any pending price increases and to max out rebating programs, surgical scheduling patterns, and the resetting of annual insurance deductibles. This year followed that well-established pattern. The second quarter usually outperforms the first quarter, and the second half of the year typically outperforms the first half, with the fourth quarter being our strongest quarter, driven by increased year-end patient activity and distributor purchasing patterns ahead of the new year. Our particularly robust fourth quarter in 2024 set a high bar, exacerbating the seasonal contrast between the fourth quarter of last year and the first quarter of 2025.

In addition to traditional seasonality, certain operational factors slowed our ability to earn as much revenue from the period as anticipated. More specifically, some of our demand-generation initiatives took longer to gain traction than expected, and the impact of recently launched initiatives, like VEVYE® Access for All (VAFA), launched in late March, only began to make a significant impact at the end of the quarter.

I remain confident in our 2025 revenue expectations and guidance of over $280 million. Revenues are expected to accelerate quarter-over-quarter, and we see this happening already in the current quarter. We also expect stronger performance in the second half of the year versus the first half of the year. Our strategic plan for 2025 remains unchanged. We intend to prioritize the key drivers outlined in last quarter's Letter to Stockholders (with the list below reordered according to anticipated revenue impact):

We expect revenue for VEVYE to grow year-over-year and become our largest revenue-generating product this year. We are rapidly expanding patient access to VEVYE and accelerating our market share in the U.S. dry eye disease (DED) segment. I believe VEVYE will be our first 9-figure annual revenue product (hopefully this year). And, if current trends continue, VEVYE qualifies as a product that could significantly outperform our 2025 internal revenue forecasts.

IHEEZO® revenues will grow year-over-year. We are seeing increasing demand for IHEEZO, driven by new account growth, positive physician feedback, customer retention, and increased procedure volumes within existing accounts.

TRIESENCE® should become one of our top three revenue-generating products in 2025. With recent market access wins, including pass-through status effective April 1, 2025, as well as recent account wins with several of the largest private equity-owned ophthalmic groups in the country, we expect to re-establish TRIESENCE as the injectable steroid of choice for U.S. ophthalmologists.

Stockholders should count on us to leverage our commercial platform and all-star commercial team and opportunistically add new impactful ophthalmic products to our portfolio.

In the past, I've hedged when asked which of our products I believe is the most valuable. But today, after launching more than 40 ophthalmic prescription products over the past 12 years, including VEVYE, I can say with confidence: (1) given the consistent weekly growth in new prescriptions, new prescribers, and the stability we see with refills, VEVYE is poised to be our largest revenue product, (2) the VAFA program is the most successful market access strategy I've been a part of, and (3) without question, VEVYE is presently Harrow's most valuable asset.

Launched in mid-March, VEVYE® Access for All reflects our core mission: making our products accessible and affordable for everyone. VAFA ensures eligible patients and health plans have guaranteed access to VEVYE, removing financial and administrative barriers that typically delay access to treatment. This innovative program reimagines traditional insurance formulary models and delivers what I believe is the most aggressive, patient-centric market access program in prescription eyecare today.

Because VAFA launched late in the first quarter, it had little impact on our first-quarter results. Still, VEVYE revenues rose 35% quarter-over-quarter, increasing from $16.0 million in the fourth quarter of 2024 to

$21.5 million in the first quarter, and according to IQVIA, VEVYE is now #1 in per-prescriber volumes for dry eye prescription products, exceeding all branded dry eye products. Last year, according to PhilRx, our specialty pharmacy partner, the average covered patient received nine bottles of VEVYE. Also, seven weeks post-VAFA, NRx volumes at PhilRx for VEVYE have increased by >4X, and the number of weekly VEVYE prescribers has increased by 4X. These are powerful data.

Also of interest is a retrospective analysis of our 2024 net sales price per unit. We modeled the VAFA program inputs vs. the inputs of our pre-VAFA program. The analysis showed that (1) VAFA saved patients money and (2) Harrow would have generated more revenue per VEVYE prescription. Specifically, if VAFA had been in place throughout 2024, we estimate our net sales price per unit would have been approximately 23% higher. More access, patient savings, less paperwork for prescribers and their staff, and more value transfer to Harrow. That's a win every day of the week and twice on Sunday!

More access leads to more prescriptions and prescribers. When you have an incredible chronic care product like VEVYE that delivers excellent clinical outcomes and is consistently refilled, you create what we believe we are now experiencing: a virtuous cycle of consistent compounding financial growth, satisfied prescribers, and healthier, happier patients. If things continue anywhere near the pace we are seeing, in terms of growth, a year or two from now, I expect VEVYE to be right at or near the top of the leading U.S. prescription dry eye medications. In summary, these are still early days, but less than two months into implementation, VAFA's early momentum has surpassed our expectations, reinforcing my conviction that this groundbreaking initiative is one of the most impactful and potentially financially transformative in Harrow's history.

As we alluded to on our last call, for competitive purposes, we have requested that some Harrow pharmacy partners (including PhilRx) discontinue reporting VEVYE prescription data to third-party aggregators, like IQVIA, beginning in the second quarter of 2025. As a result, publicly available pay-for-data sources may no longer reflect VEVYE's actual market performance.

Two final items on VEVYE:

A new VEVYE patent, expiring in 2042, was recently added to the FDA's Orange Book.

We are standing up a second VEVYE production site, expected to go live in the first half of next year, and scaling batches to meet demand and ensure against stockouts and access disruptions.

In the first quarter, our branded commercial team made excellent progress positioning Harrow's buy and bill portfolio, including IHEEZO and TRIESENCE, by improving market access, enhancing product visibility, and streamlining the ordering process through the following commercial infrastructure initiatives:

IHEEZO

During the first quarter, our sales team made substantial progress expanding IHEEZO's reach, engaging with several new and potential large accounts that are now moving through various early stages, such as sample evaluations, formulary discussions, and initial orders.

We are encouraged by the momentum in our commercial pipeline. While not every conversation will lead to a new customer, our impressive existing account reorder rate and anticipated conversion rate of new potential accounts should significantly accelerate unit demand through 2025. We're consistently adding approximately 30 new accounts each quarter, with many already identifying patients for utilization. Notably, the top ten accounts in our customer pipeline represent an estimated 80,000 incremental annual units, illustrating the substantial growth opportunity ahead, even if only partially realized. With a clear strategy and focused execution, we are confident in our ability to scale and support our expanding commercial footprint and deliver meaningful year-over-year unit demand growth.

Another important trend to highlight - consistent with the seasonality discussed earlier in this Letter to Stockholders - is the notable shift in distributor purchasing patterns. While first-quarter IHEEZO sales were impacted by the elevated stocking activity at year-end, we now see clear signs that this dynamic is normalizing. Specifically, in April, the number of units sold more than doubled compared to the monthly average in the first quarter. This rebound indicates a return to typical ordering behavior and reflects strengthening demand as downstream inventory levels rebalance and new accounts begin to ramp up utilization.

TRIESENCE

At the end of the first quarter, Harrow was notified by the Centers for Medicare & Medicaid Services (CMS) of several significant milestones, including the publication of TRIESENCE's Average Sales Price (ASP +6%) in the quarterly CMS drug pricing file, the approval of transitional pass-through status approval (J-3300) in both the ASC and Hospital Outpatient Department (HOPD) settings, and reimbursement authorization for bilateral use cases.

These milestones went into effect on April 1, 2025, and are already accelerating TRIESENCE's market momentum. TRIESENCE is emerging, as we expected, as a preferred intraocular steroid option among U.S. ophthalmologists, including its recent adoption by five of the largest private equity-owned retina groups.

Since these market access initiatives took effect in the second quarter, effectively unlocking approximately 40% of the market for TRIESENCE, sales momentum has accelerated. The number of accounts ordering TRIESENCE has more than doubled since the beginning of the year, a strong signal of growing market confidence and adoption. Ophthalmologists performing procedures in the ASC and HOPD settings of care now have the assurance that TRIESENCE will be reimbursed outside the bundled fee, a reimbursement feature that we saw directly impact the adoption of IHEEZO.

As a result of these favorable developments, TRIESENCE is expected to contribute more meaningfully to our revenue, with even greater growth expected in the second half of the year as utilization continues to scale across both new and existing accounts. Supporting this trajectory, our Harrow Cares initiative, which enrolled 280 new accounts in the first quarter, saw a 20% increase in TRIESENCE-related enrollments in April alone. This early acceleration reinforces the strong market response to improved reimbursement dynamics and underscores the growing role TRIESENCE is playing in our buy-and-bill portfolio.

Our Specialty Branded Product (SBP) portfolio - one of the broadest in the North American market -consists of ILEVRO®, NEVANAC®, VIGAMOX®, MAXITROL®, MAXIDEX®, IOPIDINE®, NATACYN™, FLAREX®, TOBRADEX® ST, VERKAZIA®, FRESHKOTE®, and ZERVIATE®.

While net revenues associated with this portfolio fluctuated in the first quarter, we saw volume improvement in the second quarter. As the year progresses, expect revenues from these products to steadily contribute more to Harrow's overall revenue.

The true value of this group of products extends far beyond revenues. These products are well-known, essential, everyday therapies thousands of eyecare professionals rely on to deliver routine and critical ophthalmic care to their patients. In many cases, Harrow is one of the few - and sometimes the only - reliable source from which eyecare customers can access these essential medications. Importantly, we are seeing opportunities to continue to drive value from these products, such as our partnered authorized generic launch of MAXITROL and our expectation to have ZERVIATE back in stock before the end of this quarter.

This unique position strengthens our customer relationships, reinforces our reputation for reliability, and aligns directly with Harrow's goal of putting the patient first by supplying high-quality ophthalmic medications that are critical for daily patient care at an affordable price. Over time, we believe the intrinsic value of our SBP platform will remain a key driver of Harrow's market leadership and long-term success.

ImprimisRx's record fourth-quarter performance provided a strong foundation for continued progress in the first quarter of 2025, consistent with the typical seasonal dynamics we outlined earlier for first-quarter results in the ophthalmic pharmaceutical industry. Once again, consistent with revenue patterns in our branded business, we're seeing a meaningful improvement in the ImprimisRx business in the second quarter, with April appearing to be a record month.

We recently announced the launch of Project Beagle, an initiative under which our management team is doing a 360-degree review of opportunities to offer ImprimisRx customers a Harrow-owned, FDA-approved alternative to a compounded formulation. Project Beagle is now well underway. An excellent example of this initiative is the expansion at the beginning of the second quarter of Harrow's VAFA program to include the more than 25,000 patients who have historically been prescribed Klarity-C Drops®, a compounded cyclosporine 0.1% product manufactured and distributed by ImprimisRx.

The transition from Klarity-C to VEVYE Access for All is progressing smoothly. Most of our top Klarity-C prescribers have converted their patients through a prescription authorization platform available via PhilRx. Our ImprimisRx customer care and sales teams are also proactively reaching out to our broader customer base to raise awareness of this program's value.

We are grateful that many thousands of U.S. eyecare professionals faithfully rely on ImprimisRx compounded products to treat sight-threatening and sight-preserving conditions. We are equally committed to supporting eyecare professionals who give the gift of sight to patients worldwide through medical missions. This commitment has been a cornerstone of our company since its first day of operations and will continue to be a core part of Harrow's mission.

Lastly, as an update on the previously announced $34.9 million jury verdict award in the case of ImprimisRx, LLC v. OSRX, Inc. (OSRX), the case is in the final stages of litigation, we expect a final legal ruling shortly, and will provide stockholders with an update as material details become available.

In last quarter's Letter to Stockholders, I provided an overview of our capital position. I noted that we had initiated discussions with our existing lenders and several prospective partners regarding opportunities to refinance or repay a portion of our $222.75 million in outstanding debt.

While these conversations are ongoing, I can share that we are in active dialogue with multiple well-regarded institutions, and we're encouraged by the interest and engagement we've received. As fellow stockholders, Andrew and I remain deeply committed to pursuing a path that strengthens the Company's long-term financial foundation.

In terms of timing, we expect to finalize these efforts by late summer or early fall of this year. We're confident that we should be able to deliver a lower cost of capital, increased financial flexibility, and greater assurance that we're positioned to pursue opportunities to grow our business for the future. Thank you for your continued trust and patience while we work through this process. We look forward to sharing more details as soon as we are able.

Disclaimer

Harrow Inc. published this content on May 08, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 08, 2025 at 22:35 UTC.