10-Q: Harrow Reports Strong Revenue Growth, Strategic Acquisitions

Harrow, Inc. announced significant revenue increases and key strategic acquisitions in its Q3 2025 filing, alongside a major debt refinancing and new credit facility.

Summary

• Total revenues for the three months ended September 30, 2025, increased to $71,638,000 from $49,257,000 in the prior year, a 45.4% increase.
• Net income for Q3 2025 was $1,020,000, a significant improvement from a net loss of $(4,220,000) in Q3 2024.
• For the nine months ended September 30, 2025, total revenues grew to $183,211,000 from $132,783,000 in the prior year, a 38.0% increase.
• Net loss for the nine months ended September 30, 2025, was $(11,765,000), a reduction from $(24,258,000) in the same period of 2024.
• Operating activities generated $35,453,000 in cash for the nine months ended September 30, 2025, a substantial improvement from a cash usage of $(4,423,000) in the prior year.
• The company secured a new $40,000,000 senior secured revolving credit facility with Fifth Third Bank, National Association, which remains undrawn.
• Harrow completed a private offering of $250,000,000 in 8.625% senior notes due 2030, using the net proceeds of $242,794,000 to prepay all prior outstanding senior debt, including the Oaktree Loan, 2026 Notes, and 2027 Notes.
• An agreement was made to acquire the remaining equity interests in Melt Pharmaceuticals, Inc. for an initial cash payment of approximately $4,300,000 and contingent consideration tied to FDA approval, coding/reimbursement, and sales milestones.
• Harrow entered into a commercialization agreement with Samsung Bioepis Co., Ltd. for BYOOVIZ and OPUVIZ in the U.S. market, involving an upfront payment and sales-based milestones.
• Exclusive U.S. commercial rights to BYQLOVI (clobetasol propionate ophthalmic suspension) 0.05% were acquired from Formosa Pharmaceuticals, with commercial launch expected in Q4 2025.
• The company launched 'Harrow Access For All' (HAFA) to expand its patient access model across its ophthalmic portfolio and 'VEVYE Access for All' to increase patient access to VEVYE at reduced out-of-pocket costs.
• ImprimisRx discontinued compounding Klarity-C on June 30, 2025, transitioning approximately 25,000 patients to VEVYE as part of 'Project Beagle' to shift customers to FDA-approved products.

Sentiment

Score: 7

Explanation: The company demonstrated strong revenue growth and a significant positive shift in operating cash flow, indicating improved operational efficiency. Strategic acquisitions and debt refinancing are positive for future growth and financial stability. However, the company still reported a net loss for the nine-month period, and faces ongoing regulatory and economic risks, which temper the overall positive sentiment.

Positives

• Total revenues increased by $22,381,000 (45.4%) for the three months and $50,428,000 (38.0%) for the nine months ended September 30, 2025, driven by strong sales of IHEEZO and VEVYE.
• Net income for Q3 2025 was $1,020,000, a positive swing from a net loss of $(4,220,000) in Q3 2024.
• Net cash provided by operating activities significantly improved to $35,453,000 for the nine months ended September 30, 2025, compared to cash used of $(4,423,000) in the prior year.
• Cash and cash equivalents increased to $74,290,000 as of September 30, 2025, from $47,247,000 at December 31, 2024.
• The company successfully refinanced its existing senior debt with a new $250,000,000 senior unsecured notes offering, extending maturities to 2030 and reducing interest rates on the refinanced debt.
• A new $40,000,000 senior secured revolving credit facility was established with Fifth Third Bank, National Association, providing additional liquidity, with an uncommitted incremental facility of up to $20,000,000.
• Strategic acquisitions and commercialization agreements for BYOOVIZ, OPUVIZ, and BYQLOVI are expected to expand the branded product portfolio and future revenue streams.
• The launch of 'Harrow Access For All' and 'VEVYE Access for All' programs aims to improve patient access and affordability, potentially boosting product adoption.
• A jury verdict awarded ImprimisRx, LLC $11,249,000 (plus post-judgment interest) in a legal proceeding against Ocular Science, Inc. and OSRX, Inc. for trademark infringement and unfair competition.

Negatives

• The company reported a net loss of $(11,765,000) for the nine months ended September 30, 2025, despite improved Q3 profitability.
• ImprimisRx segment gross margin decreased to 59.0% in Q3 2025 from 66.9% in Q3 2024, and to 62.5% for 9M 2025 from 67.1% for 9M 2024, primarily due to product mix, sales discounts, and one-time costs.
• Selling, general and administrative expenses increased by $2,211,000 for the three months and $15,329,000 for the nine months ended September 30, 2025, due to new employee additions and seasonal/special project costs.
• Interest expense, net, increased to $(6,038,000) for Q3 2025 and $(18,994,000) for 9M 2025, primarily due to an increase in the outstanding principal amount of debt obligations.
• A loss on extinguishment of debt of $7,750,000 was recorded in Q3 2025 due to the prepayment of prior debt facilities.
• Total stockholders' equity decreased to $46,661,000 as of September 30, 2025, from $69,297,000 at December 31, 2024.

Risks

• Disruptions at the FDA, CMS, the SEC, and other government agencies due to U.S. government shutdowns or staffing reductions could adversely affect operations, regulatory interactions, and access to capital.
• The company's results of operations may be negatively impacted if its pharmaceutical compounding facilities do not comply with regulatory requirements or lose their licenses.
• ImprimisRx is subject to an administrative accusation by the California State Board of Pharmacy, which could lead to the denial of its 503B out-of-state outsourcing facility renewal application, restricting sales in California.
• The federal government could pursue enforcement actions against the company for non-compliance with cGMPs and other required regulations, which could be costly and result in adverse business consequences.
• Sales depend on coverage and reimbursement from government and commercial third-party payers, and pricing and reimbursement pressures (including provisions in the Inflation Reduction Act) could affect profitability.
• Global economic conditions, including inflation, high interest rates, and an uncertain trade environment, may negatively affect the company and magnify certain business risks.
• Changes in U.S. trade policy, such as the imposition of significant tariffs on pharmaceuticals and raw materials, could materially increase costs, disrupt the supply chain, and impair the company's competitive position.
• The company has incurred a loss on extinguishment of debt and increased interest expense due to debt refinancing, indicating higher leverage.
• The collection of the $11,249,000 judgment from OSRX is uncertain, and the company has not recognized any gains associated with it.

Future Outlook

The company expects its current cash position and funds generated from operations, along with any future financing, to be sufficient to sustain planned operations and capital expenditures for at least the next 12 months. It anticipates continued growth in branded pharmaceutical products and will pursue development and commercialization opportunities. The company is evaluating the impacts of the One Big Beautiful Bill Act (OBBBA) on deferred-tax balances and expects it to reduce U.S. cash income-tax payments. The acquisition of Melt Pharmaceuticals is expected to close in Q4 2025, and BYQLOVI is expected to be available in Q4 2025.

Management Comments

• We believe we have built a tangible and intangible infrastructure that will allow us to scale revenues efficiently in the near and long-term.
• The company expects BYQLOVI to be available in the fourth quarter of 2025.
• We expect to close the acquisition of Melt Pharmaceuticals before December 31, 2025.
• We believe that, based on our current concentration of sales and geographic diversification, the loss of the California nonresident outsourcing facility pharmacy license would not be material to our consolidated statement of operations.

Industry Context

Harrow operates in the North American ophthalmic disease management sector, a market characterized by ongoing demand for specialized treatments. The company's strategy of acquiring and commercializing FDA-approved branded products, alongside its compounding business, positions it to address diverse patient needs. The focus on patient access programs like HAFA and VEVYE Access for All aligns with broader industry trends to improve affordability and reduce treatment barriers. The acquisition of commercial rights for BYOOVIZ and OPUVIZ, biosimilars for major ophthalmic drugs, reflects a move towards high-value, complex biologics, a growing segment in ophthalmology. The Melt Pharmaceuticals acquisition, if successful, would further expand its product pipeline with a new product candidate (MELT-300). However, the industry faces increasing regulatory scrutiny, particularly for compounding pharmacies, and pricing pressures from government and commercial payers, as highlighted by the Inflation Reduction Act.

Comparison to Industry Standards

• The company's ImprimisRx subsidiary reported an adverse event (ADE) rate of approximately 2 per million units, which is stated to be meaningfully better than known ADE rates for FDA-approved products, indicating strong safety performance in its compounding operations.
• The new $250,000,000 8.625% Senior Notes due 2030, along with the $40,000,000 revolving credit facility, provide a capital structure that is common for growth-oriented pharmaceutical companies, allowing for strategic investments and debt management.
• The acquisition of commercial rights for BYOOVIZ (ranibizumab-nuna) and OPUVIZ (aflibercept-yszy) positions Harrow in the biosimilar market, competing with established brands like Lucentis and Eylea, which are significant players in the wet AMD and other retinal disease markets. This move is consistent with a broader industry trend of increasing biosimilar adoption for cost-effectiveness.
• The acquisition of BYQLOVI, the first new ophthalmic steroid in its class in over 15 years, suggests a focus on innovative products, potentially offering a competitive edge in the post-operative inflammation and pain market against older steroid formulations.

Management Changes

Corporate Governance

Legal Proceedings

• ImprimisRx, LLC was awarded an amended final judgment of $11,249,000 (plus post-judgment interest) against Ocular Science, Inc. and OSRX, Inc. for willful trademark infringement and unfair competition. The company is pursuing collection, but has not recognized any gains due to collection uncertainty.
• ImprimisRx is actively engaged in discussions with the California State Board of Pharmacy regarding an administrative accusation and the potential denial of its 503B out-of-state outsourcing facility renewal application.

Related Party Transactions

• The company entered into an Agreement and Plan of Merger to acquire the remaining equity interests of Melt Pharmaceuticals, Inc. This is considered a related party transaction as certain officers and directors of Harrow, including the CEO, own equity interests in Melt and the CEO serves on Melt's board of directors.

Stakeholder Impact

• Shareholders: Potential for increased value from strategic acquisitions and improved financial performance, but diluted equity from stock-based compensation and potential for further dilution from contingent share issuances for Melt acquisition. Debt refinancing provides stability but increases overall debt load.
• Employees: New Chief Accounting Officer appointment and continued equity awards (stock options, PSUs, RSUs) for management and employees, indicating ongoing incentives and retention efforts.
• Customers: Expansion of patient access programs (HAFA, VEVYE Access for All) aims to improve affordability and access to ophthalmic products, potentially increasing customer base and satisfaction.
• Suppliers: Changes in U.S. trade policy and potential tariffs could increase input costs and disrupt supply chains, impacting supplier relationships and costs.
• Creditors: New senior unsecured notes and revolving credit facility provide a restructured debt profile. The fixed charge coverage ratio covenant ensures financial discipline for creditors.

Next Steps

• Close the acquisition of remaining interests in Melt Pharmaceuticals, Inc. during the fourth quarter of 2025.
• Launch BYQLOVI commercially in the fourth quarter of 2025.
• Continue implementing 'Harrow Access For All' (HAFA) and 'VEVYE Access for All' programs, expanding into 2027.
• Continue to review opportunities to reduce the size of the compounded formulary and transition ImprimisRx customers to Harrow's FDA-approved products.
• Address the administrative accusation by the California State Board of Pharmacy regarding ImprimisRx's 503B out-of-state outsourcing facility renewal application.
• Pursue efforts to enforce and collect the $11,249,000 judgment (plus post-judgment interest) from OSRX, Inc.

Key Dates

Recommendation

Harrow, Inc. demonstrates strong top-line growth and a significant positive shift in operating cash flow, driven by key branded products and strategic acquisitions. The successful debt refinancing improves the company's capital structure and liquidity. However, the company still reports a net loss for the nine-month period, indicating that profitability is not yet consistently achieved. Significant regulatory risks, particularly concerning its compounding facilities and potential trade policy impacts, remain a concern. The Melt Pharmaceuticals acquisition, while strategic, involves substantial contingent payments. Given the mix of strong operational improvements and strategic growth initiatives against persistent profitability challenges and regulatory headwinds, a 'hold' recommendation is appropriate. Investors should monitor the successful integration of acquisitions, sustained profitability, and resolution of regulatory matters.

Keywords

Ophthalmology, Pharmaceuticals, SEC Filing, Harrow Inc, HROW, Financial Results, Debt Refinancing, Revolving Credit Facility, Melt Pharmaceuticals, BYQLOVI, BYOOVIZ, OPUVIZ, ImprimisRx, FDA Approval, Patient Access Programs, Q3 2025, Earnings, Revenue Growth, Corporate Debt, Regulatory Compliance, Drug Development