We can get started. Welcome, everyone. I see some people still filing into the room. We'll get started, and welcome to everyone on the webcast also. I'm Steve Seedhouse on the biotech team at Cantor. It's a privilege to welcome Harrow, our next presenting company, and I'm of course, joined by the one and only Mark Baum, Founder and CEO. Looking forward to the conversation, Mark. Thanks for being here. I think this year has been an interesting year for Harrow. We're fairly new to our coverage on the company, but obviously have retraced this historical progress and building of the company that you've had. This year you articulated a change in guidance strategy at least, and almost directly said, we want to move to a situation where we're under-promising and over-delivering. Maybe a different philosophy, maybe a maturation of the company.
Not to put words in your mouth, but just reflecting on that, how has it helped you focus the company, you think, and maybe take a long-term view of what you're building and where you're going?
Well, thank you, first of all, and thank you to the team at Cantor. We really appreciate the audience. Some people look at week-to-week prescription volumes for VEVYE. The way Andrew and I have built the company over the last, this December will be 15 years, is really based on a five-year strategic cycle. Over these five-year cycles, we've been able to produce a tremendous amount of revenue, profit growth, and stockholder value. You really have to take a little bit longer view than week to week, month to month, quarter to quarter, and even year to year. That said, our stockholders, because we're a publicly traded company, want us to provide some level of financial guidance that we feel comfortable with. We've done that, but I will say that from our perspective, we continue to really manage the business on this five-year cycle.
That said, we've reiterated guidance for the year. The back half of this year is going to be much, I think, stronger than the first half of this year, the fourth quarter stronger than the third quarter. We'll continue to provide financial guidance, but at the same time, manage the business for the longer term.
With some of these maturing products that you have, you mentioned VEVYE, obviously there are some others, and a lot of them have been in transition. I am thinking of IHEEZO particularly, and then, of course, you are constantly onboarding new products. You are building this plane in flight, so to speak, with profitability, but adding new products constantly. Are you comfortable with the level of visibility that you have and predictability that you have into these businesses now? Are some of them at different points than others and some of them still a little hard to predict? Or just in terms of your internal visibility on the prospects of your different businesses, where are you at?
So visibility and transparency are critical for Andrew and I and the rest of the senior leadership team, and really for even our field reps. We owe it to them to provide visibility. In terms of product by product, it really depends by the product. ASP is always really difficult quarter to quarter. There are seasons within the year for certain products, and it is really hard to be precise on ASP. We have a little bit more predictability, I would say, with our Part B, as in Bravo products, the buy-and-bill products. But in the aggregate, when we think about financial guidance, I think we do have sufficient visibility and transparency into the business to provide the kind of numbers that we have provided historically and will continue to provide.
One piece of visibility that you provided to the Street, and this has been a long-standing goal that you have set as a company, is this $250 million revenue quarter, at some point next year, calendar 2027. When you spoke about that goal at your Analyst Day last year, I believe, you even broke that down by segment, in terms of this is the contribution we expect I think from ImprimisRx, and this is from the Retina business, and this is from VEVYE, or from maybe dry eye more broadly. Any plans to update that sort of segment contribution, and has anything shifted or is anything going to shift?
I am just curious if that is something that you put out then and maybe will not revisit, or are you really refining that and going to continue to sort of guide us towards what to expect and what to model as we get closer to 2027?
Well, first of all, the $250 million, as you said, is a goal. It is not guidance. I would also say it is not a question of if we are going to hit those numbers, but when. If you look back at prognostications that we made about revenue goals and targets many years ago, I remember we talked about a $100- million revenue run rate, and people thought I was bananas. But we hit that certainly in due course. We actually ran into COVID, and we were about, I think, a quarter late than we had anticipated, but we did it in the face of COVID. So we are going to hit those numbers. In terms of updating the market, we do have an Investor Day coming in the spring of next year. I do not know that we have addressed the specific details of that agenda.
We have chosen that date, obviously, because we think we are going to have some really interesting things to talk about at that time, and that we do have sufficient visibility and transparency at that level. But we will very likely probably break things down by segment. When I say that, I mean by ocular surgery, retina, and then ocular surface. That is really, I think, how we might break the business down, should we do so in the springtime.
That would be helpful. I have loved hearing you speak one-on-one and in public forums like this about the sort of five-year strategic plan frameworks that you and Andrew have been implementing as you have been building Harrow. I guess, what does the next one look like? Even if you do not want to get specific now, if that is for the Analyst Day, j ust at a high level, how do you think about what the long-term vision is here from Harrow, from where you have come five years ago to where you want to go?
We are going to talk about the business in terms of those three core segments. Ocular surgery. I mean perioperative. So, in the case of a cataract surgery, for example, ocular surface optimization, sedation, mydriasis, infection, inflammation. When we talk about our retina business, we mean periprocedural. We mean sedation, eye pressure control, anesthesia, the therapeutic, and to the extent that there is inflammation, even an anti-inflammatory. On the ocular surface side of things, we have just a very powerful ocular surface franchise. I do not think anyone has anything quite like what we offer, not only in dry eye disease, but in inflammation, infection, antifungals. We have the only FDA-approved antifungal. So there is a lot of breadth within that portfolio. So that is how we will frame the business on a go-forward basis. Those are the areas that we are interested in and that we will continue to do M&A around.
Last strategic sort of high level question, then we will go through some of the key products, in detail. You have spoken pretty assertively about G-MELT being sort of a big part of the long-term growth vision for the company. Why are you so confident in this product as maybe your biggest one yet? Because that is how you have spoken about it. Is it really just you have hands-on experience with MKO Melt, so you know what it can be out there in the marketplace? Is it an instinct? Is it a combination of all that? Because you have been pretty bullish on the prospects of MELT.
So look, the reason why we were bullish on VEVYE, as an example, is because we had many, many years of experience selling a compounded version of a 0.1% cyclosporine formulation. Not only did we have experience with physicians, but we had hundreds and hundreds of thousands of data points at the consumer level. So we really intimately understood the dry eye disease, consumer dynamics, out-of-pocket dynamics, all sorts of features of that condition. The same feature set is true with the G-MELT drug candidate. We sell a compounded version of that product now. We have for nearly a decade. It has been used in over 1 million cataract surgeries, the compounded version. Doctors are paying for it out of their capitated fee. If you look at capitated fees, they are not going up, they are going down.
For an ASC, a surgery center or physicians practice to take money from that diminishing fee and to spend it on this sedation medicament is extraordinary. We started off also with one account. We have now 800 institutional accounts with the compounded version. We have a SPA with the FDA as it relates to the drug candidate. We think we have met those commitments. We are going to be speaking to the agency here very soon. We said that we will speak to them in the fourth quarter, the early part of the fourth quarter. What I can say is I think about things from a commercial perspective. Andrew and I both do.
In terms of a commercial launch, to be able to transition 800+ institutional accounts from a non-FDA approved, compounded cash pay product to an FDA approved on-label, potentially reimbursable product, is extraordinary, in terms of it being a commercial no-brainer. I am excited about that. The other thing I would tell you is it is really hard to sell non-FDA approved compounded medications. When we have an FDA-approved version of this product, it will broaden the number of practices that are using it. We are really excited about it because we know the data shows that so many patients are exposed to not only IVs, but opioids during these cataract surgeries and other ocular procedures. We are going to reduce or obviate that need once this is approved. I am incredibly excited about it and remain so. We know a lot about how to execute this commercially.
Very good. Look forward to following the progress on that. Maybe some of the more immediate products in focus, starting with IHEEZO, and we will go through a few questions here, product by product. The volume growth in particular, and really the outlook, I think, for IHEEZO, has been a positive surprise for at least me in the analyst community, maybe not you internally. Is there a possibility that IHEEZO actually outperforms VEVYE in, let us say, second half of this year or even next year? Or is VEVYE still going to be the larger product?
I do not want to predict which one is going to be larger than the other. Our view is that they are both going to be nine-figure and hopefully multi nine-figure revenue products. From a gross margin profile perspective with IHEEZO, it is obviously a very attractive product, and it is an important product for the patients who are benefiting from it. IHEEZO is a significant growth driver. You saw in the second quarter, we had tremendous growth in the number of new accounts. What is critical, though, with IHEEZO is not only that we sign up a new account, but that we get greater breadth and depth within that account. If an account orders 50 units, oftentimes these retina surgeons, these medical retina practices, one doctor will do 50+ injections in a day, where are the rest of the units for that week for that particular practice?
We need greater depth within the physician's practice for these injections. Keep in mind, even though we did have record account growth, we had record demand. I think you will see that continue certainly for the balance of the year and into next year. 98% of the unit opportunities are not being met by IHEEZO. With the QUELL data coming and with some of the other things that we are seeing in the market, we want to definitely narrow that 98% and increase our market share within what is a very, very large market opportunity for us with IHEEZO.
Can I follow up on QUELL? This is, of course, the ongoing randomized control study, which I think we are expecting data for in fourth quarter this year. You have had some other clinical data updates that have looked very positive for IHEEZO, including against some active control, some of the legacy CANs. Maybe if you want, you can recap some of that data, but also would love for you to walk us through the trial design and the type of data you expect to generate from QUELL and what would be a good result from that.
Retina practices, in particular for these intravitreal injections, retina docs want to see data. They want to see data specific to their procedures. We committed to a study called the Dang Study. We had an initial readout in the July timeframe, as we had promised, and the results were very positive directionally. We were able to show that patients who were on IHEEZO versus the control had less pain, greater patient preference for IHEEZO, and I think that directionally was really important. What we have done with QUELL is we have committed to a phase IV study under an IND, and so it potentially, depending on the results, could cause an amendment to our label, and it is really the Dang Study on steroids, if you will. It is 236 patients. It is significantly enrolled at this point, actually. It is enrolled very, very well.
It's a multicenter study, it really compares IHEEZO versus the traditional standard of care, what these physicians have been doing for many years. Our goal, once again, is to show lower pain, greater patient preference for IHEEZO relative to the comparator arm in the study. That'll come out in the fourth quarter, I think that's going to really, depending on how the data comes out, should expand the opportunity even more for IHEEZO. It will get to the point where, as I've said in the past, the legacy mode of doing anesthesia for these intravitreal injections will become like the BlackBerry relative to the iPhone 17. I used to think my BlackBerry was fantastic. I loved it. Now, I wouldn't go anywhere near it because I have the iPhone 17. We think that IHEEZO, as it relates to ocular anesthesia, is certainly the iPhone 17.
You've talked about, I think you mentioned it again here, the inverse statistic, but you have about 2% market penetration for IHEEZO. What do you think the peak opportunity is for a product like IHEEZO once you have the data in hand, once you've sort of fully gotten to the depth of these retina practices? What are we talking about?
Well, if you ask me what the peak number is, I say 100%. I think we should get them all. Now, the reality is, in practice, there are a number of reasons why that just simply will not happen. But in baseball, there's this thing called the Mendoza Line, i f you're batting like 200. If we were batting 200, if we were getting two out of 10, that would be fantastic. If we were getting one out of 10, I think our stockholders would be incredibly happy. I think the bottom line is, though, we have a lot of headroom from where we are now, which is 2% and growing.
By the way, Steve, if it was you or your mother or your uncle, someone that you loved, and they were going to be getting these injections monthly or bimonthly, you would want them to have the premium anesthesia experience. It's no fun to have a needle put into your eye, and a premium anesthetic experience is actually very important to the patients, and we have significant data to prove that. Hopefully this QUELL will put an exclamation point on that.
Indeed. L ooking forward to that and those data. You have, obviously, the biosimilars, BYOOVIZ and OPUVIZ now. I'm just curious, have you already sort of seen how they might complement the marketing of IHEEZO? Is it more complicated than I'm making it sound, or is there going to be some synergy here as you launch both products in tandem into those markets?
We're in the market with BYOOVIZ. I'm pretty happy with the number of accounts that have adopted. Like IHEEZO, it's really about getting depth within the account. The OPUVIZ opportunity is much larger. It's a very competitive market, though, clearly. The good news for us, and part of the reason why we got into that market in particular, is that we already have the cost structure in place. We already have the retina team. We're calling on the accounts. We're providing them with IHEEZO. Our accounts and retina are growing faster than they ever have. Our philosophy is commercially to hug the customer. It is to not be a one-product company. It's to really take a more consultative approach, and that means offering them not only the anesthetic but also the therapeutic. Our goal is to only get a handful of percentage points of market share.
Our goal is quite modest. The other thing I would say is we didn't spend $100 million to get into this opportunity. We spent a nearly de minimis amount of money to capture this opportunity, and so our cost structure is very low, and that gives us flexibility to cut deals on the contracting side, to do a lot of things that others may not be able to do.
That was a Harrow deal. Right, Mark?
It is a Harrow deal. Some people say we are cheapskates. I say we love our stockholders.
That is right. VEVYE, let us talk about this obviously important product. You have expanded the sales force this year, and then you recently, via the acquisition of TYRVAYA, sort of indicated that it is further expanding, right? Because you can onboard some of that field force.
That is right.
And it's complementary in the dry eye space. I guess the question is, are you seeing the impact? Secondly, you have the problem now of the trailing comps, where you've grown volume substantially in recent quarters and recent years. Do you think there's more room to grow from a volume standpoint? Do you think the sales force can capitalize on the momentum you still have?
First of all, there's a lot of growth left. I mean, the market for dry eye medications has, on a prescription, on a TRx basis, grown better than 20% year-over-year for the past two years. So the market is expanding. More people are realizing they have this condition, they don't want to live with it any longer, and they want a preferred option as a prescription medication. So the market can certainly expand. In terms of our goals with our dry eye franchise, with VEVYE specifically, we want to be the number one cyclosporine. Then we're trying to be the number one anti-inflammatory, and eventually, we want to be the number one prescription medication choice in that category. What's really interesting from my perspective, I have a Grok Bot that looks at our prescriptions from PhilRx. Every hour it gives me a report.
It's kind of cool. It's one of the ways that I'm using AI internally. We have other reports that tell us what our market share is on a territory-by-territory level. What's interesting is there's a growing number of territories within these 100 or so territories that we currently have, where we are already the number one cyclosporine. There's a growing number of territories where we are the number one anti-inflammatory. Here's the kicker. There are a meaningful number of territories where we're the number one prescription product already within territories that we cover.
What has been the key to that? Is it relationships with the prescribers? Is it maybe sales coverage on the Harrow side?
It's a little bit of everything. We have some amazing reps in particular markets where we're doing very well. They have strong relationships. It is also coverage. There are a number of factors. When I see those data in those markets, and I'm not going to name the specific markets, and there are several, it gives me confidence that we can replicate those results in other markets where we may have a lower percentage of market share. It all boils down to VEVYE versus RESTASIS, versus CEQUA, versus Xiidra, versus some of these other products. I think if anyone who has dry eye gets all of those four anti-inflammatories and puts them in their eye, I would bet a dollar to a donut that they would prefer VEVYE without question, in terms of the feel of the product, its tolerability, and so on.
In terms of coverage, which you mentioned, can you tell us more about the formulary win that Harrow had in August with respect to VEVYE, and just maybe compare and contrast it with the CVS formulary win from earlier this year? I think that was implemented in January.
We did have the CVS coverage win. That was a preferred win. This is a win going from not covered, and blocked actually, to covered. It did open up millions of new lives to the product, and I think it is consistent with what we have said all year, which is that we are going to expand coverage for VEVYE. You mentioned TYRVAYA earlier, a few minutes ago, and TYRVAYA has actually pretty good coverage. Our goal is to expand coverage with VEVYE, and I think over the next 12 to 24 months, you will see additional contracts, additional coverage, and continued growth in market share as that coverage comes in.
Did TYRVAYA give you leverage in that regard to make headway with VEVYE?
TYRVAYA is an interesting thing. TYRVAYA is almost like a love affair that we have had. We started off kind of lukewarm a little bit.
Can I actually ask you, because you have described this as your I think you said it was the best deal you have ever done, the best deal that Harrow has ever done. Like better than VEVYE?
For a product that is in the market creating revenue. Keep in mind when we acquired VEVYE—By the way, Andrew did it. I want to give Andrew Boll a lot of credit. He did a tremendous amount of the work with TYRVAYA. VEVYE didn't have any revenue. IHEEZO didn't do any revenue. Did we get good deals on those? Absolutely. But in terms of a product that was in the market generating revenue, we've never been able to buy something at sub- 1x trailing revenue. That's incredible. Assets like TYRVAYA, where there is a global IP portfolio, a global opportunity, a significant customer base coverage, and so on. Those types of assets can trade for 7x, 8x, upwards of 10x revenue, and these are high margin products. To get something at sub- 1x was incredible.
What's also interesting about the way the deal was structured is that there are sales milestones. There are payments that we will have to make, depending on the ultimate commercial success of the product. This is a case, Steve, where we are tickled and only too excited to make those payments because our ROI on the deal gets much better as we make those payments and have growth in revenues. This is a deal where I think Andrew and I both believe we have a very good chance of having to make those payments. We are happy to do so.
Very good. Just back to VEVYE, a couple more questions real quick. Obviously, the net price per vial has been ebbing and flowing, as you've changed the VEVYE Access for All, and now you've had these formulary wins. As you continue to get coverage wins and to penetrate the market, is it going to still be a little bit unpredictable or ebbing and flowing, or are you getting to the point where you are comfortable with where net price is going to settle out?
I think we are comfortable internally within a range. It is really hard to have a handle on ASP on an annualized basis because so much happens during the course of a year. But within the range that we have set, I think we are very comfortable given the business rules algorithm that is in place. By the way, that gets modified from time to time.
What products have been the biggest market share donors to VEVYE as you have undergone all this growth? Do you have visibility into that ?
We do, and I do not want to mention any other specific products. We wish them all the best, but we wish ourselves even more-
Fair enough.
... of the best.
I think you mentioned you're excited about the number of accounts that are onboarding with respect to the BYOOVIZ launch. Anything else to say, or what can we expect, I guess, from that product this year? Because that's a new launch.
BYOOVIZ?
BYOOVIZ, yeah. It's a new type of product as well for Harrow.
It's incremental, is what I would say. It's very high- margin revenue. It's a sales commission, effectively. A very meaningful and attractive sales commission, but it's very high- margin revenue, and it makes us more important to the practices that we serve, and that's why we want to have BYOOVIZ, we want to have OPUVIZ, we want to have even IOPIDINE within those practices. Believe it or not, there's another product within the MELT family of products called YOCHIL, which is a sedation medicament, fast acting, fast up, fast down. We think that there's a lot of patients that are getting these intravitreal injections that might want some basis of sedation before they get these injections. So there's an opportunity there. All in all, BYOOVIZ, IOPIDINE, it's all part of us hugging the customer and being important to that practice and partnering with that surgeon.
I love the fact, too, that as we close here in the last minute, you brought it full circle back to MELT and dropped another plug for MELT in there, which is great. I know how excited you are about that.
When we look at the value of the company, MELT is also unique for Harrow because I got the call from John Berdahl many years ago. He asked us to compound a product to replace opioids and IVs. We compounded it for him. More of his colleagues started taking it on. We made a significant investment of capital and time, a lot of risk, and it's really the first product at Harrow that we took from idea, literally a phone call from a surgeon, then hopefully here fairly soon to the filing of an NDA.
Indeed.
That is an incredible sign of maturity for our company as we continue to grow and serve the ophthalmology and optometry community in the U.S.
Very good. Well, we're looking forward to following the continued progress for the rest of this year. Always a lot going on with Harrow, and look forward as well to Analyst Day.
Thank you, Steve.
Thank you very much.