Harrow Third Quarter 2026 Earnings Conference Call - HARROW INC

Financial Performance:

• Third-quarter 2026 revenue reached a record $99.3 million, representing a 41% sequential increase and 39% year-over-year growth.
• Branded revenue totaled $83.5 million (84% of total), up 62% year-over-year; specific contributions were Viivi ($39.7M), IHSO ($25.3M), TriEssence ($10.7M), and compounders ($15.8M).
• GAAP gross margin improved to 75% from 71% in Q2, though remained below expectations due to lower margins in compounded formulations and product mix.
• SG&A expenses were $53.1 million, reflecting an expanded commercial team but remaining flat sequentially; R&D was $10.3 million, higher than expected due to accelerated clinical programs and NDA preparation.
• GAAP net income was $9.8 million, driven by a one-time $5 million non-GAAP gain from the settlement of litigation with OSRX.
• Adjusted EBITDA turned positive at $21.2 million (compared to a $1.2 million loss in Q2), bringing year-to-date adjusted EBITDA to $7.3 million.
• Cash and cash equivalents stood at $75.3 million as of September 30, 2026.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance is reaffirmed at $350 million to $365 million, implying Q4 revenue of $136 million to $151 million (37–52% sequential growth).
• Full-year adjusted EBITDA outlook was lowered to a floor of >$40 million (vs. previous $80–100M range), with Q4 expected to generate >$33 million.
• Q4 outlook reduction reflects higher costs for G-Melt NDA filing fees, accelerated clinical spending (QWEL, Tri-Essence, YoCHO), and Tervaia acquisition transition costs.
• Management projects Q4 2026 as the company's strongest quarter historically, with momentum expected to continue into 2027.
• G-Melt NDA submission is targeted for late 2026 or early 2027, with a PDUFA date expected in 2027.

Business Segments and Product Lines:

• Viivi: Revenue grew 35% sequentially, outpacing prescription growth; new commercial strategies improved net realized ASP and coverage (expanding to a major national plan covering 10M lives effective Jan 2027).
• IHSO: Unit demand reached 62,210 (up 21% YoY); Q4 expected to set a new quarterly record driven by the strongest seasonal period and new data on Quell (patient comfort).
• TriEssence: Achieved its strongest quarter under HARO ownership with 20,022 units (up 37% sequentially, 110% YoY), driven by adoption in ocular inflammation protocols.
• BioViz: Initial launch saw "wide but shallow" adoption; follow-through purchasing has strengthened through September, with expectations for significant growth in Q4.
• Tervaia: Contributed revenue for the first time in Q1; integration of 40 reps from BioViz is progressing with growing prescription demand.
• HARRO-RX: Launched as a single digital destination for the entire portfolio (20+ products), integrating with provider workflows and EMRs; MDA filing accepted with PDUFA target in 2027.
• New Products: Launch of OpViz (bimatoprost biosimilar) planned for 2027.

Market and Competitive Landscape:

• Commercial organization realigned into four focus teams (Ocular Surface Disease, Retina, Surgical, Access Plus) to maximize portfolio synergy, particularly in the dry eye market where HARO now owns two differentiated products.
• Viivi faces a competitive market; management declined to disclose specific pricing algorithms but confirmed improved economics via shifts toward covered prescriptions.
• IHSO faces competition in intravitreal injections but differentiates via patient comfort and ocular surface health data from the QWEL study.
• HARO emphasizes its unique "buy-and-bill" portfolio strength, claiming the largest number of such products in ophthalmology compared to competitors.

Risks and Challenges:

• Clinical trial outcomes: The QWEL study for Quell (IHSO) did not meet its primary non-inferiority endpoint for immediate post-procedure pain relief.
• Gross margin pressure: Current margins are below targets due to the mix of compounded products and temporary product mix headwinds.
• Regulatory uncertainty: Dependence on FDA approval timelines for G-Melt and future product candidates; potential for delays.
• Contractual disputes: Ongoing active discussions with partner NovoLeak regarding the licensing of Tervaia and potential implications for Viivi.
• Market access: Challenges in converting initial orders to consistent "buy-and-bill" revenue cycles, particularly for new biosimilars like BioViz.

Management Commentary and Tone:

• Tone was confident and optimistic, emphasizing the transition from platform building to commercial execution excellence.
• CEO Mark Baum described the second half as "playing out as expected" and expressed belief that Q4 would be the strongest in company history.
• Management expressed high confidence in Viivi's momentum and the value of the new commercial organization structure.
• Despite the Quell trial not meeting the primary endpoint, management remained positive, framing the data as valuable for medical messaging regarding post-procedure comfort and safety.

Analyst Questions and Answers:

• Viivi Economics: Management confirmed significant improvement in net realized ASP and prior authorization approval rates, with a shift from cash-pay to covered prescriptions.
• QWEL/IHSO Data: Clarified that while the primary endpoint was not met, secondary endpoints showed equal immediate pain scores but superior post-procedure pain, reduced adverse events (27% vs 47%), and better ocular surface staining. No second study is planned for this indication.
• BioViz Uptake: Explained the "wide but shallow" initial launch was typical for biosimilars; follow-through purchasing is accelerating, and learnings will benefit the 2027 OpViz launch.
• Tervaia/NovoLeak: Confirmed active discussions regarding Tervaia licensing; management believes the acquisition benefits NovoLeak and expects a stronger relationship post-resolution.
• G-Melt Filing: Confirmed on-track for late 2026/early 2027 submission with FDA alignment; PDUFA date expected in 2027.
• R&D Spending: Anticipates R&D as a percentage of revenue to remain stable, though Q4 will see accelerated spending due to NDA filings and clinical studies.

Other Key Points:

• The company has 20+ branded products and a comprehensive "buy-and-bill" portfolio.
• New clinical data for TriEssence (triamcinolone) is expected in early 2027 to further drive adoption.
• The "HARRO-RX" digital platform aims to consolidate the ordering of multiple specialty products into one EMR-integrated workflow.
• Management highlighted the productivity gains from the expanded sales force, noting that the number of Viivi account managers has more than tripled.
• An investor day is scheduled for March 2027 in New York City.