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Harrow Health, Inc. (NASDAQ:HROW) is an ophthalmology-focused healthcare company. It went up hugely in September after ImprimisRx, a subsidiary, launched Fortisite, a topical antibiotic used for the surface of the eye. Fortisite consists of Tobramycin and Vancomycin.
Harrow Health is led by CEO Mark L Baum, whose activism in American drug pricing policy – he made a $0.99 compounded alternative pill when Martin Shkreli raised the price of Daraprim 5000% – has earned him consumer gratitude and goodwill. Mr. Baum has been able to transform this goodwill into a price-conscious, consumer-focused, profitable business venture. The company’s initial years have been the subject of at least four Harvard case studies.
Harrow Health was covered in an article on Seeking Alpha by Michigan Value Investor. It is an authority article which discussed the company’s excellent growth potential.
The company made further gains after another approval for the ophthalmic gel IHEEZO (AMP-100), developed by the company in partnership with Swiss pharmaceutical firm Sintetica for ocular surface anesthesia. The drug has a total addressable market (“TAM”) of 12.5 million annual U.S. procedures, of which 4.5 million are cataract surgeries and 8 million are intravitreal injections.
The company’s other product is MAQ-100, an injectable steroid drug candidate used for the visualization of vitreous during vitrectomy. Exclusive marketing rights were acquired for MAQ-100 in the U.S. and Canada from Wakamoto Pharmaceutical Co., Ltd. The product is not yet approved in the U.S., but it is approved in Japan. The company plans to use Japanese trial data for its marketing application in the U.S. The company had a Type B meeting with the FDA in August. There are roughly 400,000 annualized procedure run rate for the asset.
About the meeting, here’s what the company said in their last earnings call:
Well, the meeting itself, I’d say, was very positive. Our intention with the program was to leverage the work that had been done in Japan for the approval of the product in that market. And I think the upshot from the meeting is that we continue to believe that we will have access to a, I would say a very efficient process and an efficient way of getting that product into the U.S. market.
We still need to see the minutes from the meeting and we still need to have conversations with our partners in Japan, which did take place in the next 30 days to 45 days or so, but it was a very positive meeting. I think the FDA is interested in having a product in the market for that indication that is FDA approved.
Other assets include Iopidine and Moxitrol recently acquired from Novartis, and Dexycu from Eyepoint, which Harrow promotes in the U.S. against certain fees.
Harrow Health looks like a nice little gem; well-managed, deep pipeline of revenue generating products, niche focused, although a little low on cash – the question now is, is there further upside for latecomers and current holders? Or is the 2x spike it saw in the last couple of months all there is?
The company has – or used to have – two revenue generating streams – branded FDA-approved products (BPPs) and cGMP compounded products (CPPS) – serving the U.S. surgical, acute, and chronic care markets. Together, these markets produce around 10,000+ customers (doctors, hospitals, and ASCs). Recently, just last month, the company sold its non-ophthalmic compounding business to Innovation Compounding Pharmacy, an affiliate of Revelation Pharma, for an undisclosed amount.
Harrow Health is a well-regarded name in the ophthalmic medicine sector, with its ImprimisRx brand. It is a vertically integrated pharmaceutical and pharmacy platform. The company has “an efficient, scalable, and tech-enabled national distribution platform for prescription products, including a 50-state mail order pharmacy.” Other salient details about the company’s business:
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~40 SKUs serve large and growing surgical, acute, and chronic eyecare markets:
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5.5 million annual ocular surgeries;
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8+ million intravitreal injections;
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16+ million U.S. dry eye disease patients; and
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3+ million U.S. glaucoma patients.
The company’s products are supported by 60+ patents and a large peer-reviewed literature. The company services 4000+ monthly accounts of over 10,000 prescribers and institutions.
Besides these, the company also owns rights/stocks, etc., in three other subsidiaries – Surface Ophthalmics, Melt Pharmaceuticals, and Eton Pharmaceuticals (ETON). These started out as Harrow Health subsidiaries but are now independent companies. Harrow owns 2 million shares of Eton and 20% and 46% equity in Surface and Melt, respectively. It also owns $13.5M senior secured note and ROFR (right of first refusal) on 3rd party commercialization rights of Melt’s products and royalty rights on Surface’s SURF-100, 200, 201 and Melt’s MELT-300 drug candidates. These are all phase 2 completed assets.
Financials
HROW has a market cap of just $325mn. The company will make nearly $100mn in revenue this year, which, they say, is set to double with the approval of AMP-100. Harrow has seen a 35% year-over-year revenue growth rate (1H 2022 vs. 1H 2021) and 7-year revenue CAGR of 72%. Their gross margin is above 70%, and the company has been profitable for quite some time. Harrow tries to remain self-sufficient; the last dilutive share offering was in 2017, more than 5 years ago. This attitude is no doubt helped by management’s alignment “with shareholders with market-based vesting stock grant.”
Harrow Health has since made an offering, $300mn, in May this year. This is a mixed shelf offering, and Harrow has shown no indication of actually making the offering a reality.
Bottom Line
Harrow Health, Inc. looks like a nice and attractive investment. The stock spiked recently on an approval, and is currently trading at all-time highs. I am not comfortable buying a stock at such peaks, however, I plan to buy Harrow Health when the price goes below $8.
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