Executive Summary / Key Takeaways

• Transformative Growth Trajectory: Harrow, Inc. is executing a strategic pivot from its compounding roots to a leading branded ophthalmic pharmaceutical company, aiming for a $250 million revenue quarter by the end of 2027, driven by a scalable commercial infrastructure and a rapidly expanding portfolio of FDA-approved products.
• VEVYE's Explosive Potential: The dry eye asset VEVYE, bolstered by the "Access for All" program, is demonstrating exceptional prescription growth (66% sequential volume increase in Q2 2025) and industry-leading refill rates, positioning it as Harrow's most valuable asset and a significant long-term cash flow driver. Management projects over $100 million in VEVYE revenue for 2025.
• Strategic Retina Market Dominance: Harrow is aggressively penetrating the retina market with IHEEZO and the relaunched TRIESENCE, leveraging strong GPO relationships and clear reimbursement pathways. The recent agreement with Samsung Bioepis for anti-VEGF biosimilars (BYOOVIZ, OPUVIZ) further solidifies its position, creating a powerful, synergistic portfolio.
• Operational Leverage and Margin Expansion: Despite significant investments in its commercial infrastructure and strategic acquisitions, Harrow is demonstrating strong operating leverage, with Q2 2025 total revenue up 30% year-over-year to $63.7 million and GAAP net income of $5.0 million. Branded gross margins remain robust, signaling future profitability.
• Debt Refinancing as a Near-Term Catalyst: Upcoming maturities of the Oaktree Loan and 2026 Notes in early 2026 present a critical financing event. Management is actively pursuing refinancing, which, if successful, could remove a key overhang and unlock further shareholder value.

Harrow's Ophthalmic Ascent and Strategic Evolution

Harrow, Inc. is rapidly emerging as a prominent North American eyecare pharmaceutical company, dedicated to providing comprehensive ophthalmic disease management solutions. The company's mission centers on delivering safe, effective, accessible, and affordable medications that enhance patient compliance and improve clinical outcomes across a spectrum of conditions affecting both the front and back of the eye. This commitment is deeply rooted in its history, which began in 1998 with the establishment of its ImprimisRx compounding business in Nashville, Tennessee.

The ImprimisRx segment, while facing historical regulatory scrutiny, served as a foundational asset, cultivating commercial relationships with over 10,000 eye care professionals. This network provided the crucial credibility and infrastructure that enabled Harrow's strategic pivot towards FDA-approved branded products, a transformation that gained significant momentum around 2021. This evolution is evident in the company's expanding portfolio, now totaling over 59 prescription products, and its sophisticated, scalable commercial infrastructure designed to serve eye care professional offices, ambulatory surgical centers (ASCs), hospitals, and direct-to-patient channels. The broader ophthalmic market offers substantial opportunities, with over 7 million ophthalmic surgeries performed annually in the U.S., a massive and growing intravitreal injection market exceeding 10 million annual procedures, and an enormous chronic dry eye disease market affecting over 9 million patients with moderate to severe conditions.

Technological Edge: Differentiated Solutions for Eye Care

Harrow's investment thesis is fundamentally underpinned by its portfolio of differentiated ophthalmic products, each offering distinct technological advantages that address critical unmet needs and improve patient care. These innovations form the core of its competitive moat and drive its financial performance.

VEVYE (cyclosporine 0.1%) stands out in the crowded dry eye disease market due to its rapid onset, efficacy, and a twice-daily dosing regimen that significantly enhances patient compliance. Its most compelling differentiator is its superior tolerability profile; patients consistently report VEVYE "doesn't burn. It didn't sting. I didn't get this weird taste in my mouth," a stark contrast to many older cyclosporine formulations. This patient-centric benefit translates directly into "industry-leading refill rates," with covered patients averaging 9 refills annually through its pharmacy partner, far outpacing typical dry eye therapies. This high adherence fuels sustained revenue growth and strengthens its market position.

For ophthalmic anesthesia, IHEEZO (chloroprocaine hydrochloride ophthalmic gel) offers a significant procedural workflow enhancement. As a single-dose anesthetic, it streamlines the process for intravitreal injections, a procedure with over 10 million annual use cases in the U.S. This efficiency not only benefits the patient but also enhances clinic productivity, making it an "excellent clinical choice" for eye care professionals.

TRIESENCE (triamcinolone acetonide injectable suspension), a proprietary ophthalmic steroid, has returned to the market after years of absence, addressing a substantial backlog of demand. Its key advantage for patients is its affordability, boasting a "$37 co-payment," making it the "lowest out-of-pocket cost at the consumer level of any product in the category." This competitive pricing, combined with its trusted clinical profile, positions it for rapid adoption, particularly as Harrow expands its use into the large ocular inflammation market.

The recent acquisition of BYQLOVI (clobetasol propionate ophthalmic suspension 0.05%) introduces a "highly potent next-generation therapy" and the "first new ophthalmic steroid in its class in over 15 years." BYQLOVI's formulation with clobetasol offers robust clinical efficacy with a remarkably low incidence of increased intraocular pressure (IOP) at just 1.4% in pivotal studies, "substantially lower" than less potent corticosteroids. Its twice-daily dosing, compared to typical four-times-daily regimens, significantly improves patient compliance. Cross-label comparisons also suggest BYQLOVI "performed better than all other approved products for the same indication in the U.S." in terms of pain relief and inflammation clearance, providing a strong clinical and compliance advantage in the over 7 million annual ophthalmic surgeries market.

Furthermore, Harrow's agreement with Samsung Bioepis for the anti-VEGF biosimilars BYOOVIZ (ranibizumab-nuna) and OPUVIZ (aflibercept-yszy) is strategically significant. Both products possess "interchangeability status," a critical technological and regulatory designation that facilitates seamless adoption and competitive pricing in the high-value retinal disease market. This allows Harrow to leverage its deep retina expertise and existing infrastructure to compete aggressively.

These technological differentiators collectively contribute to Harrow's competitive moat by offering superior clinical outcomes, enhanced patient compliance, and improved economic value for both patients and providers. This translates into higher potential ASPs, reduced marketing costs due to strong organic demand and refills, and a robust market positioning that supports long-term growth.

Competitive Landscape: Carving a Niche Amidst Giants

Harrow operates in a competitive ophthalmic market, strategically positioning itself as a specialized, agile player rather than directly confronting the broad portfolios of industry giants. Its competitive standing is defined by its unique blend of compounding expertise, targeted branded products, and strategic partnerships.

Compared to diversified pharmaceutical companies like Bausch Health Companies Inc. (BHC), which boasts a broad Bausch + Lomb division, Harrow differentiates through its agility in niche, customized solutions. While BHC's financial performance shows steady revenue growth, its profitability can be variable due to significant debt. Harrow, with its efficient cash flow generation from core operations, aims for more targeted, profitable growth, leveraging its compounding roots for customer loyalty in specialized segments.

Against Alcon Inc. (ALC), a leader in surgical devices and vision care, Harrow's strength lies in its therapeutic offerings like IHEEZO, which provide notably easier implementation in certain clinical settings. ALC's technological leadership in devices offers greater procedural efficiency, but Harrow's focus on accessible therapeutics can capture different market segments. ALC's scale supports strong margins and growth rates, while Harrow's focused model allows for lower operating costs and agility in niche markets.

When juxtaposed with Johnson & Johnson (JNJ), a diversified healthcare conglomerate with a strong Vision Care division, Harrow's approach is more targeted in ophthalmic pharmaceuticals. Harrow's equity interests and royalty model can lead to materially lower upfront investment for certain therapies compared to JNJ's resource-intensive R&D. While JNJ benefits from superior brand recognition and global scale, Harrow's strategic adaptability for niche innovations allows it to compete effectively in specific, high-value segments.

Harrow's competitive advantages include its proprietary compounding expertise, which offers customized solutions and fosters customer loyalty, potentially leading to superior margins and faster innovation cycles. This helps Harrow exploit weaknesses in larger competitors' agility and improve its pricing power in specialized markets. Its established distribution channels and regulatory licenses further reinforce its position by limiting new entrants. However, Harrow's smaller scale can lead to higher customer acquisition costs and potential supply chain dependencies, which could impact financial performance.

Financial Performance: A Growth Story Unfolding

Harrow's financial performance in the second quarter of 2025 underscores its successful strategic pivot and operational effectiveness. Total revenues reached $63.7 million, marking a robust 30% increase over the prior-year period and a 33% sequential increase from Q1 2025. This growth translated into GAAP net income of $5.0 million and Adjusted EBITDA of $17.0 million, demonstrating the increasing operating leverage within the business.

The Branded segment was the primary engine of this growth, generating $42.27 million in revenue in Q2 2025, a 54.5% year-over-year increase. Its gross margin remained strong at 79.3%. For the first half of 2025, branded revenue surged to $70.05 million, a 70.0% increase over the same period in 2024, with a gross margin of 75.9%. This segment's cost of sales increased due to higher unit volumes and fixed expenses, including acquired product NDA amortizations related to the TRIESENCE launch and a capitalized contingent milestone payment in Q4 2024.

VEVYE revenue in Q2 2025 was $18.64 million. While this represented a 13% sequential decrease from Q1 2025 due to a normalization in average selling price (ASP) after an anomalous Q1, it was a significant increase from Q2 2024's $4.32 million. IHEEZO revenue saw a remarkable 251% sequential increase to $18.34 million in Q2 2025, reflecting strong demand and the benefits of its retina pivot. The "Other branded products" category, which includes TRIESENCE, also saw a substantial 447% sequential increase in Q2 2025, reaching $5.21 million.

The ImprimisRx segment contributed $21.47 million in revenue in Q2 2025, a slight decrease of 0.5% year-over-year, with a gross margin of 65.1%. For the first half of 2025, ImprimisRx revenue was $41.52 million, a 1.8% decrease from the prior year, with a gross margin of 64.3%. The decrease in gross margin was attributed to a product mix shift towards lower gross margin products and sales discounts. Despite these shifts, ImprimisRx remains a stable, cash-generating business.

Overall, Harrow's TTM Gross Profit Margin stands at 74.56%, and its EBITDA Margin is 14.10%. Selling, general, and administrative (SGA) expenses increased in Q2 2025 due to strategic investments in sales and marketing personnel to support growth, partially offset by lower stock-based compensation. Research and development (R&D) expenses also rose in the first half of 2025, reflecting increased activity related to the expanded branded product portfolio and new launches.

From a liquidity perspective, Harrow reported $52.96 million in cash and cash equivalents as of June 30, 2025. Net cash provided by operating activities significantly increased to $18.86 million in the first half of 2025, primarily driven by a $37.21 million decrease in accounts receivable from collections.

However, the company faces significant debt maturities in early 2026, with the Oaktree Loan ($107.50 million principal) and 2026 Notes ($75.00 million principal) becoming due. Management is in active discussions to refinance these obligations, acknowledging that failure to do so could raise substantial doubt about its ability to continue as a going concern.

Strategic Initiatives and Future Outlook: Fueling the Growth Engine

Harrow's future growth is anchored by a series of strategic initiatives and a clear outlook, with management maintaining its 2025 directional revenue guidance of more than $280 million. This requires approximately $169 million in revenue in the second half of the year, a target management believes is achievable. The long-term ambition is to achieve a $250 million revenue quarter by the end of 2027.

VEVYE is central to this vision. The "VEVYE Access for All" (VAFA) program, launched in late Q1 2025, has been a game-changer, quadrupling new prescriptions and weekly prescribers at PhilRx. Q2 2025 saw prescription volumes surge 66% sequentially, with new prescriptions up 62%. The program's success ensures "nearly every prescription of VEVYE that is dispensed is now profitable." While ASP normalized in Q2, it is expected to stabilize with a "modest improvement" bias by year-end, bolstered by the new strategic alliance with Apollo Care, which expands distribution and insurance coverage. VEVYE is projected to generate over $60 million in revenue for H2 2025 and exceed $100 million in annual revenue for 2025. Harrow is also securing additional manufacturing capacity and plans a second VEVYE manufacturing site next year to meet anticipated demand.

Project Beagle, initiated in Q1 2025, strategically transitions ImprimisRx's Klarity-C patients to VEVYE. The discontinuation of Klarity-C compounding on June 30, 2025, aims to migrate approximately 25,000 patients to VEVYE, which is expected to more than double profit per prescription even at VEVYE's $59 cash pay price.

The IHEEZO retina pivot strategy is yielding significant results. Q2 2025 unit volume grew 25% sequentially, with 19 new retina accounts added and a 33% volume increase within the largest retina GPO. The "IHEEZO for All" strategy, coupled with broad coverage (81% commercial/government payers) and a permanent J-code, positions IHEEZO to surpass $50 million in revenue for 2025 and become a "nine-figure revenue product in short order."

The TRIESENCE relaunch in October 2024 is capitalizing on years of market absence. Q1 2025 market access initiatives, including pass-through status and bilateral use reimbursement, "effectively unlocked about 40% of the overall market." TRIESENCE boasts 84% coverage and the lowest out-of-pocket cost ($37 co-pay) in its category. Harrow plans to expand its use into the ocular inflammation market, including cataract surgery, with new leadership driving this initiative, expecting unit demand growth in Q4 2025 and into 2026.

Recent strategic acquisitions further bolster the outlook. BYQLOVI, acquired in June 2025, is expected to launch in Q1 2026, with modest stocking orders in Q4 2025. The Samsung Bioepis ophthalmology biosimilars portfolio (BYOOVIZ, OPUVIZ), secured in July 2025, is hoped to launch BYOOVIZ in 2026 with an "immediate uptick in product demand," leveraging Harrow's retina expertise.

Risks and Challenges: A Clear-Eyed View

Despite the compelling growth narrative, Harrow faces several material risks that warrant investor attention. The most immediate is the upcoming debt refinancing for the Oaktree Loan ($107.50 million) and 2026 Notes ($75.00 million), both maturing in early 2026. While management believes refinancing is probable, there is no assurance of acceptable terms or successful completion, which could raise "substantial doubt" about the company's ability to continue as a going concern.

Regulatory compliance remains an ongoing challenge. Harrow has a history of FDA warning letters and inspections related to its compounding operations, requiring voluntary product recalls and remediation efforts. While recent discussions with the federal government regarding its New Jersey outsourcing facility (NJOF) are closed, ongoing scrutiny could lead to costly enforcement actions or restrictions on product sales.

Payer and reimbursement pressures are inherent to the pharmaceutical industry. Government and commercial payers continue to implement cost-containment initiatives, potentially leading to lower reimbursement rates, narrower patient populations, and increased rebates. Legislative actions, such as the Inflation Reduction Act, further exacerbate these pressures, impacting profitability.

Supply chain risks are evident, particularly with VEVYE, where demand has outpaced initial production capacity, leading to temporary inventory shortages. While mitigation efforts are underway, ensuring robust supply for accelerated growth remains critical. Additionally, U.S. trade policy and potential tariffs on pharmaceuticals and raw materials could increase costs, though management estimates a "fairly negligible" impact of about 50 basis points on gross margins from existing tariffs.

Finally, intense competitive dynamics in the ophthalmic market, particularly with the entry of new biosimilars and established players, could challenge Harrow's market share and pricing power. The company's smaller scale compared to industry giants also presents vulnerabilities in customer acquisition costs and resource depth.

Conclusion

Harrow, Inc. stands at a pivotal juncture, having successfully transformed from its compounding origins into a dynamic branded ophthalmic pharmaceutical company. The Q2 2025 results, marked by robust revenue growth and a return to GAAP net income, underscore the effectiveness of its strategic pivot and the inherent operating leverage within its scalable commercial infrastructure. Products like VEVYE, with its exceptional clinical profile and market access program, are not merely driving current growth but are foundational to Harrow's long-term vision of achieving a $250 million revenue quarter by the end of 2027.

The company's strategic focus on the retina market, bolstered by IHEEZO's strong performance, the TRIESENCE relaunch, and the recent Samsung Bioepis biosimilars agreement, positions it for sustained expansion in high-value segments. While the upcoming debt refinancing represents a critical near-term event, management's proactive engagement and confidence in securing favorable terms could unlock significant shareholder value. Harrow's commitment to technological differentiation, patient accessibility, and disciplined execution, even amidst competitive and regulatory challenges, paints a compelling picture of a company poised for continued ascent in the specialized eyecare landscape.