All right, good morning. Day two of the 36th Annual Piper Sandler Healthcare Conference. We're going to start things off with Harrow and all things ophthalmology. Delighted to have Mark Baum, CEO, joining us today. And if it's okay, I just want to go right into questions.
Let's do it. Thank you for inviting us, by the way, David. We appreciate the audience.
And we're thrilled that you're here. So let's start off with just a big picture question. So you've got your prescription eye care business. You also have your compounding business. That's sort of two different businesses. So I guess with that in mind, and given the evolution of the company, how do you envision the role of the compounding business going forward, given that you're clearly leaning into your prescription business?
First of all, we started the business, we began revenues in April of 2014. We're a startup. We started with no products, no customers, and very little capital. The first business we started was our compounding business. Many years ago, it was the only reason why you would want to own Harrow stock. It was the most important reason to own Harrow stock. Now, a little over 10 years later, we've built one of the largest portfolios of prescription ophthalmic medications in the United States market. It's certainly probably the least important reason to own Harrow stock. It is a great, stable business. It produces a lot of cash. It was sort of the mothership from which we were able to launch all of the other businesses and acquire all the assets that we now have.
But as I said, it's probably the least important part of our business. But it's a great business, throws off a lot of cash, and has created a lot of relationships.
So looking ahead, though, just to be clear, the investment in the overall organization will continue to lean into the prescription business?
100%. We are innovating in the compounding business. I think they launched two products this year. So the business was built on innovation. But overwhelmingly, our capital, our time that we spend is focused on our prescription business. But the compounding business has been great. Without the compounding business, we wouldn't have been able to create Melt Pharmaceuticals, which we just had some amazing data readout on. So compounding has been very, very good to us. But going forward, it's a prescription story.
Later in the discussion, we'll come back to the data on MELT-300. I wanted to dig into some specific products on the prescription side. First, digging a little into the 2024 guidance, you relaunched TRIESENCE in October, I believe. So I guess my question here is, regarding your guidance, does that contemplate any impact from that relaunch?
No. We did not assume when we gave guidance of greater than 180 for the full year, up from 130-ish in 2023, that we would have TRIESENCE back. We also assumed that there was going to be some time for us to complete the market access activities for TRIESENCE. So just getting inventory for TRIESENCE is one thing. And we will probably see some revenue in the fourth quarter from TRIESENCE. But once we complete our market access work, we'll have that really fire up. Most of that's going to come in the first quarter of next year.
Just taking a step back on the product, how should we think about the underlying opportunity for TRIESENCE? And then, secondly, I mean, and this ties into the first part of the question, what does reimbursement or what will it look like?
So the product has a J-code that is specific to TRIESENCE. We recently received confirmation from all of the regional MACs that they are reimbursing for TRIESENCE, which is great. And once again, this is sort of the second phase, the market access phase of the relaunch. The product has a WAC price of $944. And there is some impact under the Inflation Reduction Act. We have to see what ends up happening with that next year. But overall, we expect our ASP to be very robust for TRIESENCE once we're able to get units out more aggressively. In terms of the addressable market, there's 400,000 or so annual vitrectomies a year in the United States market. TRIESENCE is also impactful for other inflammatory conditions in the back of the eye.
And so when you add it all up, on label, off label, we're not promoting off label, but if you add it all up, it's more than 600,000 annual use cases. It is the lowest priced preservative-free steroid in the U.S. market. It's the most affordable. And it is also one that is highly trusted by U.S. retina professionals and ophthalmologists in general.
I did notice that the Orange Book patent on TRIESENCE expires in 2029. But it was on shortage for a number of years. So I guess with that in mind, how do you think about the exclusivity runway and also the potential for generic competition down the road?
It did take us a long time to get the product back into inventory. I don't want to say that the equipment is like a Rube Goldberg type machine. It is very antiquated. It's very difficult to make. It takes, believe it or not, by the time you complete analytical work on a batch, it can take north of 30 days to produce a single batch. There are many dozens of processes involved. It is without question. We make a lot of compounded medications. We make a lot of other medications. It is the most challenging product that I've seen any manufacturing team produce. Our manufacturing partner is Alcon. They're not new at this. It's hard. Of course, someone could come along and meet the spec and more power to them. I would say it's going to be very, very tough.
One of the things our stockholders should count on is what I would say is the third phase of our relaunch. So the first phase is just making inventory, getting initial batches made. The second phase is the market access phase. I would say the third phase is stable ability to produce inventory. We don't want the product to go back on shortage. It continues to be a demand story as opposed to a supply story. So we want to be able to meet the demand that we anticipate next year. And at the same time, you can count on us to execute a lifecycle management strategy for the product. When we acquired it, or we're looking at it a couple of years ago, that was part of the strategy. And you should count on us to execute on that, hopefully, in the coming year.
Helpful. So moving on to another product, there's IHEEZO. You've cited pretty strong growth in unit demand. So maybe talk about what's driving that here? Or just more broadly, how would you talk to differentiation versus other ocular anesthetic products?
It's the first novel FDA-approved ocular anesthetic in about 14 years, when it was approved in September of 2023, and it works fast. It has predictable duration, and so you can imagine if you're the cataract surgery patient or you're having an intravitreal injection, and for you, the anesthetic of choice for that doctor may last five minutes. For someone else, it may last seven minutes. For the other person, it might last 17 minutes, and you don't want to be the patient that has five minutes of duration of anesthesia when it's a 12-minute procedure. You can imagine that wouldn't be great. With IHEEZO, you get predictable duration. You get north of 20 minutes, so there are clinical features that add value to the practice, and also, it also has a product-specific J-code. It's the only reimbursable anesthetic in the U.S. market.
There are a number of other key features. The uptake has been terrific. Particularly in the fourth quarter, we're seeing this retina pivot that we executed really take hold. We're jazzed about what we're seeing.
How should we think about the underlying opportunity for IHEEZO?
What I have said is that with the portfolio that we have access to, I believe reasonably, by the end of 2027, in a quarterly period, we should be able to produce a revenue run rate of $1 billion. That implies a $250 million revenue quarter. You might say, well, Mark, how the heck are you going to do that? And what are you penciling in for each product? For IHEEZO, we are penciling in about $75 million. The way that we get there, and that would obviously be a $300 million annual run rate, is very simple. We are focused on the retina market and the in-office market. There are more than 12 million annual procedures in that market. If you impute a $400 or so ASP to that market, we only need about 6%-7% market share to attain that revenue target.
And I'm not saying 6%-7%. I've never had a product get to 6% or 7%. Currently, we make drug for about 20% of the cataract surgeries in the U.S. market. So we know how to gain market share in large markets. And so 6%-7% in the next three years is absolutely doable. And if we achieve that, our stockholders will be happy. And we'll get to our revenue targets that we've laid out.
So another product that's important to the business is VEVYE and dry eye. And also solid volume growth. So I wanted to drill down on where you're pulling in patients here. This is a competitive space. There's other options available. I mean, there's limitations, of course, for these options. But are you pulling in patients who have perhaps been on Restasis? Have you pulled in patients who have perhaps been on Xiidra, treatment-naive patients? Just help us understand where the growth is coming from.
Yeah. Our thesis when we got into the dry eye business, and by the way, we've been in the dry eye market with a 0.1% compounded cyclosporine for more than six years. So we have served thousands and thousands of doctors in the U.S. market with that compounded product. So we really study the dry eye market in a very deep way. We actually interviewed 800 consumers. So not only at the physician level, but at the consumer level, which is really critical. What we believed is that even though there are a lot of options in the market before VEVYE, there were not many good options. In fact, I don't think there were any really good options, frankly. And as a result of that, only about one out of every 10 patients remained on therapy one year out. So you have a lot of churn.
Our belief was that in addition to being able to offer a great product, one that was efficacious, one that had durability of effect, we have data going out 56 weeks with sustained improvement in signs and symptoms, that we would get those NRXs, the new prescriptions. But importantly, we were going to get our crack at that churn. And when those patients tried our product, we could retain them. And the power of retention in the dry eye market is mission critical. And our product has shown with this refill rate that we can retain patients.
Can you talk to reimbursement on VEVYE? And this is a big Medicare Part D market. So maybe talk to any wins on the Part D front.
We are now getting Med D wins, and we're getting access. As you mentioned, it's a very competitive market. We typically don't like to sell things and lose money, but at the same time, we're committed to patient access, so we are participating in that market. And we feel like we have a great product to offer. But one thing that I promised our stockholders earlier in the launch is that we would have Med D coverage in the first quarter. We're going to deliver on that promise. We'll have additional wins in Med D, and we're trying to do so in a way that allows us to serve that patient population in a profitable way for our stockholders.
So what does a win look like in terms of access? In other words, can you talk through utilization management, step-throughs, et cetera, for VEVYE?
Yeah. The step-throughs and prior authorizations are a part of the market. And one of the other parts of our thesis when we got into the market is that for a prior authorization and for a step, there were so many. There were literally, we estimated more than 10 million U.S. patients that had tried and failed another cyclosporine therapy. And so when they were prescribed VEVYE, the step would be easy because they've already stepped. They've already tried a cyclosporine and failed. And we're seeing that play out. That's actually working. But it is a very competitive market. And we'll see how things play out this year. But I think one of the things you should look out for in the next couple of quarters is an improved ASP. We've been very aggressive with our access strategy.
We are making some amendments to the business rules that we operate under. Beginning in the first quarter of next year, and certainly in the second and third quarters, you'll start to see, I think, significant percentage improvement. When I say significant, I mean very significant percentage improvement in our ASP. We're making those changes now. We don't think that there'll be much falloff in NRXs. Any falloff from NRXs will be overwhelmed by increased coverage that we're attaining through Med D and so on.
So you actually covered my next question, which is on ASPs and gross to net. But can you, I don't know if you could quantify what you think the gross to net will look like. I've seen with Restasis particularly before loss of exclusivity, I mean, some really, I don't want to say obscene gross to nets, but pretty steep, same as Xiidra. So what kind of ballpark are we looking at for VEVYE?
I think Bausch + Lomb has put out sort of a target of a $200 or so ASP for their product. And so that would not be unreasonable as a target for us in due course. We're not there, obviously, right now. But we think with some of these business rule changes, that's an attainable level.
I wanted to take a step back and talk about the commercial infrastructure that you have in place supporting VEVYE and also how the sales organization is prioritizing the various prescription products. So help us understand that and also any plans, if you have any, for headcount expansion?
So the top of the heap for us is VEVYE. We have a sales force there that is, we have about 60 or so territories that we want to cover out of 100 total. Unfortunately, we only have in the neighborhood of 50 or so of those territories actually staffed. Now, it's very challenging to get what I would say a triple-plus level sales staff. We're looking for those folks aggressively. That's a distinct sales organization. Maria Lloyd leads that. She's fantastic. IHEEZO has its own sales organization that is discrete. It's a much smaller sales organization. Now that we're focused on retina, it's compact. Even our strategic sales group does a lot more damage, positive damage, than even sort of the feet on the street folks.
We also have an inside sales organization that covers white space that we don't cover with all of our products, but they're really focused on the anterior segment products, and then we have a discrete compounding group.
Specifically regarding dry eye, that historically has been pretty promotion sensitive. There's been historically a lot of DTC. Is that something you're going to layer into your commercial strategy for VEVYE, whether it's light digital-based DTC? I mean, I'm not expecting any big broadcast media DTC. But you never know. But how are you guys thinking about it?
To be clear, I would love to have Jennifer Aniston speak for us. I would love to have these celebrities. I'd love to see our product in Las Vegas at the Sphere. That would be wonderful. If you're a Harrow stockholder, rest assured, we're not going to be investing in DTC. But we are very, very happy that others are. They are creating market awareness. They're creating disease awareness. And as I said, because there continues to be not a lot of great options outside of VEVYE, that's our perspective, we're going to get a crack at those patients. So they're drumming up business for us and for themselves, obviously. But we're happy about their efforts in DTC. But we're not going there ourselves.
Got it. I wanted to switch gears just a bit, talk about your portfolio of anterior segment products. And wanted to get your thoughts on the trajectory of those products. And are there any specific products? I mean, these are kind of legacy assets. Any specific ones that stand out as major opportunities?
I mean, first of all, they're great products. They're high utility products for our customers. Our physician customers are happy we have them. We paid $8.5 million cash upfront for the Santen portfolio, for example. We are buying things right. We are in the black already there. Every quarter, we're making money. What our goal was to merely stabilize those assets, the revenues from those products, and then work to begin to increase share. I'm really happy to say, from second quarter to third quarter, we saw an increase in revenue there. In the third quarter, we actually saw gross revenues increase for that portfolio. Net was not where we wanted it to be. But we're very happy with that purchase. It gives us a lot of visibility in the community. But once again, that's probably not the reason why you want to own Harrow stock.
You want to own it because VEVYE is ripping. IHEEZO is doing very, very well. TRIESENCE is coming back. And with this MELT data, it's just an exciting opportunity there.
Yeah. Let's talk about the MELT-300 data. So you had the recent phase III for procedural sedation and cataract surgery. And just first part of the question is talk about the opportunity here, particularly since you have MKO Melt in your compounding business. So how do you think about the opportunity? And secondly, how much bigger of an opportunity could MELT-300 be versus the compounded product?
Selling a compounded non-FDA approved product is very difficult. We'll sell more than 150,000 MKO Melts, the compounded version this year, to more than 700 physician groups in the United States. Once the MELT-300 product is approved, assuming it is, the compounded product will stop. We'll hopefully convert those practices over to the FDA approved product, which we believe will be a reimbursable product. To be clear, though, what the FDA asked MELT Pharmaceuticals to do was to demonstrate superiority over midazolam, which is a very good drug. It's a ubiquitous sedation medicament in the United States. If you've had surgery, you've probably been exposed to midazolam. The data was overwhelmingly positive. It was demonstrating superiority over a very good drug. We're excited about MELT-300's prospects, not only in cataract surgery, but also outside of cataract surgery.
The markets for the product candidate are much larger outside of ophthalmology than they are in ophthalmology. So when you think about GI procedures, colonoscopies, vasectomies, women's health procedures, a kid comes into an ER with a broken leg, there are a lot of use cases, more than 100 million in the U.S. market alone.
Yeah. Wanted to.
By the way, it's the biggest thing that we have. I would say it ranks meaningfully higher in terms of the market opportunity than even VEVYE, for sure.
Okay. That's helpful color, so in the minute or so we have left, wanted to ask you a question about 2025 and specifically the cost structure and overall direction of spend, particularly commercial-related spend, just given you've got a handful of products that are pretty young in their commercial lives.
Yeah. We're going to continue to invest in commercial resources where we have coverage. And I would say IHEEZO were pretty much built out, anterior segment built out, compounding built out. But VEVYE does warrant additional headcount. We're not going to make those investments until we have coverage. So where we have coverage, we'll add headcount, assuming we can get great people. But with that expense, you should see corresponding revenue, profitable revenue. And that's how we've built the business. We don't do these extravaganza launches with 300 reps and doctors writing prescriptions in areas where they don't have coverage. It's highly data dependent, highly data driven.
Yeah. Everyone, one last question, just quickly on capital deployment. How are you thinking about the addition of other eye care focused assets? You have commercial infrastructure you can leverage. I mean, how big of a priority is that?
There's not a lot of good stuff out. There's a lot of bad stuff out there. We like MELT, and there's a few other things that we like, but we also like shopping at the discount rack with a stack of red labels on the tag for the 25% discount at the register, so if we can find something really attractive like that, we'll go for it.
All right. I'll leave it at that. Thanks, Mark. Thanks everyone in the audience.
Thanks, Dave.
Okay. I see the clock is ticking. So that means we got to get started. Good morning again, day two at the 36th Annual Piper Sandler Healthcare Conference. This is David Amsellem from the biopharma team. And we're delighted to have the team from Harmony with us. We have Dr. Jeffrey Dayno, CEO. We have Kumar Budur, Chief Medical Officer. We have Sandeep Kapadia, CFO. We've got the team here. So delighted to have you. And let's start, and there's a lot to talk about. I wanted to talk about WAKIX first and drill down on latest commercial dynamics. So you've added, I think it was about 250 average new Rx on average in the last quarter. So help us better understand how you're thinking about the cadence of new Rx.
And not going to try to pin you down on a 2025 question, but maybe just generally, it's been a pretty steady cadence. How should we think about that going forward as the patient footprint continues to grow?
Yeah. Sure, David. First of all, thanks for the invitation on behalf of the Harmony team. It's great to be here. I think WAKIX, as you know, in terms of we continue to be a growth story in terms of the commercial business and obviously the build out of the pipeline, so we're going into year six, and WAKIX continues to grow, as you mentioned, as of the end of Q3, 6,800 average patients, and I think we see, as we said, we've guided to this year about 7,000 patients by the end.