Harrow Inc (HROW) 2024 Q2 法說會逐字稿

Good morning, and welcome to Harrow second-quarter 2024 earnings conference call. My name is Josh, and I will be your operator for today's call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the call over to Jamie Webb, Director of Communications and Investor Relations for Harrow.

Thank you, operator. Good morning, and welcome to Harold's second-quarter 2024 earnings conference call. Before we begin today, let me remind you that the company's remarks may include forward-looking statements within the meaning of federal securities laws. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond Harrow's control, including risk and uncertainties described from time to time in its SEC filings such as the risks and uncertainties related to the company's ability to make commercially available its FDA-approved products and compounded formulations and technologies and FDA approval of certain drug candidates in a timely manner or at all.

For a list and description of those risks and uncertainties, please see the risk factors section of the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Harrow's results may differ materially from those projected. Harrow disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.

This conference call contains time-sensitive information and is accurate only as of today. Additionally, Harrow will refer to non-GAAP financial metrics, specifically adjusted EBITDA and/or adjusted earnings as well as core results such as core gross margin, core net income, and core diluted net income per share. A reconciliation of any non-GAAP measures with the most directly comparable GAAP measures is included in the company's earnings release and letter to stockholders, both of which are available on the website.

By now, you should have received a copy of the earnings press release. If you have not received a copy, please go to the Investor Relations page of the company's website, www.harrow.com. Joining me on today's call are Harrow's Chief Executive Officer, Mark L. Baum; and Harrow's Chief Financial Officer, Andrew Boll.

With that, I'd like to turn the call over to Mark to go over some prepared remarks prior to the question-and-answer session.

Thanks, Jamie, and good morning and welcome to our second-quarter 2024 conference call. Hopefully, you have reviewed our earnings release, corporate presentation, and letter to stockholders, all of which are available on the Investor Relations section of our website.

As you now know, Harrow achieved record quarterly revenue of $48.9 million. That's a 46% increase over the prior year quarter and a 42% increase over the previous quarter. Every part of our business contributed to these record results. I believe the data, some of which I will share shortly, demonstrate that IHEEZO is just ripen and we knocked it out of the park with VEVYE.

Our anterior segment business is performing beautifully, with revenue increasing by over 40% versus the first quarter of this year. And our ImprimisRx compounding subsidiary achieved its highest quarterly revenue in its history. I'm happy to report that branded revenue is now firmly ahead of compounded revenue. This is now showing up in our margins as they float higher, as promised.

We expected branded revenue will continue to dominate overall revenues going forward, and in fact, that this should accelerate. Based on our overall operational momentum, we expect revenue in the back half of 2024 to outpace revenue in the first half of this year, and that's especially true with TRIESENCE's relaunched later this year. I remain confident that 2024 revenue will be greater than $180 million, excluding any TRIESENCE's contribution. And at this point, I believe the question is just how much greater than $180 million we will print.

I'll now provide some commentary on the quarter and why we are upbeat about the balance of this year, starting with our retina market products, which consist of IHEEZO and TRIESENCE. IHEEZO quarterly unit volumes nearly doubled, up about 98% from last quarter. We've now signed 24 supply agreements with strategic retina practice accounts this year, including 10 in the second quarter and another 7 since June 30.

Probably -- no, definitely the most exciting statement in my letter to stockholders was the announcement of a recent agreement with the largest and highest volume retina practice group in the United States. This agreement could have a big impact for us. And while it will be phased in over the coming quarters, it should fuel and accelerate IHEEZO growth and it's a major proof point for the value that IHEEZO can provide to the most respected practice groups in the country.

On TRIESENCE, I have a good interim update to share, We are making progress towards the eventual relaunch of TRIESENCE with all initial analytical testing of the second PPQ batch being in specification. In fact, the third PPQ batch is now scheduled for production in a matter of days -- actually to be precise, next week. More details on TRIESENCE's relaunch work can be found in my letter to stockholders, including my view of our commercial prospects, which followed meetings with numerous key figures in the retina community at the recent ASRS meeting in Stockholm, Sweden.

Moving on to dry eye disease, our dry eye disease franchise, which is anchored by VEVYEZ knocked it out of the park and here's what I mean. Our latest corporate presentation, which provides select data from just PhilRx, that's our VEVYE pharmacy partner, shows total prescriptions in the second quarter of 2024 increasing 212% from the first quarter of this year.

New prescriptions continue to roll in and critically refills remain a major contributor to VEVYE growth with our eighth cycle of monthly refills underway. Keep in mind this data doesn't include retail pharmacies and other access points for VEVYE, which would increase these numbers markedly. VEVYE prescribers are now about 3,000 strong and this number grows literally every day.

Another key factor driving VEVYE's success is our market access strategy. You see, even the most clinically impressive drugs can fall short of their potential if it's not accessible to patients. VEVYE is currently exceeding our internal market access goals with covered lives now beyond 166 million and commercial coverage is at approximately 58%. And Medicaid coverage is currently at 80% and expected to reach 100% by the time we report third-quarter results.

We're particularly pleased with positive feedback from physicians about their patient successes with VEVYE. Their feedback confirms that VEVYE works quickly, has a longer durability of action is extraordinarily tolerable, resulting in wonderfully positive treatment outcomes.

And here's a shameless plug. Given the number of people on this call, mathematically, there's a good chance that a fair number of you actually suffer from dry eye disease. I want to encourage you to speak to your eye care professionals to see if VEVYE can help you. The proof is in the pudding, especially if you're a HARROW's stockholder.

Patients who have put other cycles points in their eyes, including me, my family, and our friends cannot believe how VEVYE feels. It just feels different and it works different, in a good way. If you become a VEVYE user, I want to encourage you to please reach out to us, reach out to me, and let me know what you think about VEVYE. Because of the VEVYE team's launch success and because we intend to compete for every single opportunity to help a dry eye patient, we are investing by expanding our VEVYE salesforce and opening new territories.

We carved the national geography into 59 territories or markets. And currently, we cover only 36 of these markets with feet on the street. I don't worry. Our inside salesforce fills the gaps where we don't have people in these markets and they do a fantastic job. But a shift is underway. Given our success and assuming we can continue at this current pace with strong demand and geography-specific market access wins, we intend to open up new territories throughout the year.

I love what we've done so far, and I really love VEVYE as a product as you can tell. But we have barely scratched the surface with what we can do and what we intend to do with VEVYE. I believe and certainly the VEVYE commercial team believes that VEVYE has best-in-class potential in a dry eye disease category.

The VEVYE, you ain't seen nothing yet. It's a long-term play for us to help millions of people suffering from dry eye disease and we intend to sell more VEVYE in 2035 than we do in 2025 as stockholders expect VEVYE to be a major driver of cash flow and stockholder value for many years to come.

I'll conclude by adding that while the Harrow team delivered great results for the second quarter executing beautifully, we are laser focused on the back half of the year, meeting our revenue targets and exceeding them, in fact, and seizing the opportunity we see to become North America's leading ophthalmic pharmaceutical company. I believe Harrow's contribution to our customers and their patients is growing. And at Harrow, which we started from scratch, not too long ago, is on the cusp of becoming a very special and valuable ophthalmic pharmaceutical company. While we made a lot of progress, we truly are just getting started.

We're happy now to answer your questions. I'll pause to have our operator poll for questions. Operator?

(Operator Instructions) Jeffrey Cohen, Ladenburg Thalmann & Company.

Hey, good morning, Mark, how are you?

Good morning, Jeff.

I got some great quotes, much appreciated. So a few questions come to mind. So specific on VEVYE, could you talk about Medicare? I heard you call out to 166 million covered by 58% and Medicaid at 80%. Could you call out Medicare or is there any commentary there?

Yeah, so we are -- we are going through the process of obtaining Medicare coverage now. I think when we launched the product, we said that this was going to be an 18-month to 24-month process to get all of the requisite coverage. And we are absolutely pursuing Medicare coverage. We didn't call Medicare coverage out specifically because that's not a part of our coverage universe now, but we are certainly in the process and in an active negotiation process with those plans.

Got it. Okay, perfect. On the commercial side, could you talk about the size or scope of the VEVYE sales force and then maybe give us a general flavor of the overall commercial size now, perhaps FTEs, and perhaps what kind of '24 growth and '25 growth on that organization we should anticipate?

Yeah. So VEVYE sales force, as I mentioned on the call, we hack up the national geography into specific markets. And we only cover a little over half of those markets with feet on the street. The rest of the markets that we don't have discrete individuals covering is covered by our inside salesforce, and as I mentioned on the call, they do a fantastic job.

However, because of the market access wins that we've had, because of the word spreading, I think, within the ophthalmic community amongst ophthalmologists and optometrists and the growing interest in VEVYE, we are going to invest in expanding our sales organization. So the goal is to certainly have all of those markets covered with feet on the street. And I think you should expect that to happen over the coming quarters. It's not going to happen instantaneously.

Remember that when we launch products, we launch products to not only serve our customers and their patients but to also ensure that we don't get over our schemes financially. And so we've been able to launch products over the years in a profitable way in a very disciplined way, and we're going to continue to do that over the coming quarters as we fill out our VEVYE sales organization, which has been remarkably productive. The degree to which this team and their leadership have executed is remarkable, and we're really proud of them and grateful for what they've done.

But there's a lot left to be done. We've really just scratched the surface, as I said on the call, and we'll continue to grow the organization in '24 and '25. Andrew, do you want to add to that?

I'll just echo what you said, Mark, about letting the access and revenue drive the salesforce and making sure we're not going to get over our schemes. That said, I think I said this on the last call, I love VEVYE. We see so much potential from a revenue standpoint, from a long-term value perspective. The refill rate just continues to perform amazingly well for that product. And as Mark said, the leadership on the sales team is just doing a fantastic job.

And so as we make investments, I love making investments in that salesforce. We're looking for ways to do that every day. And so it's going to be an exciting product for us for a long time. And certainly, I know the patients are benefiting and we're excited to increase access and increase the sufficient availability of the product.

I think the number one patient that you know about is dear old daddy, Andrew. I mean, your dad is a VEVYE patient who just loves VEVYE.

That's right.

Got it. I got one more quick one on IHEEZO, if you don't mind. You talked about these in 2024 supply agreements. Can you give us a little taste of what a supply agreement looks like, how many users associated with the typical supply agreement, and any geographical commentary? Thanks.

Sure. So the supply agreements, to be clear, are licenses to hunt, if you will. These organizations, mainly which are backed by private equity groups, require that you -- if you want to sell to the entire organization that you contract with the head of the organization. So that's what these agreements allow us to do. They allow us to, in a very friction-free way, get into the individual sites that are parts of these organizations or satellites, if you will, and sell into those organizations.

The truth is, though, that you can't get these deals done unless you have folks within these organizations that want the products. And so the reason why we've been able to get these supply agreements over the line is because of the voices -- the physician voices within these organizations that want the products. And they have been sort of carrying the torch for certainly IHEEZO within their organizations. And now that we have these deals done, we will phase those programs.

And as I mentioned on the call, we just signed the largest retina practice group in the US and it's a very big win for us and a very big opportunity, but it will take several quarters to implement and get these agreements sold or get the products sold throughout these organizations. But that's part of the reason why we're so bullish on being able to grow revenue over the coming quarters as these agreements get fully implemented and phased-in.

Chase Knickerbocker, Craig-Hallum.

Good morning, Mark and Andrew. Obviously, the quarter speaks for itself, but I want to share my congratulations as well on the execution here. Maybe just first a couple of specific market access questions for me. Can you just share what you would expect the average co-pay to be for Medicaid patients?

And then the same question on commercial co-pays. Are we still doing kind of $0 on the first prescription, speaking on VEVYE, of course? And then maybe speak some of the barriers that might be up on some of those commercial contracts kind of speak to what steps are there in place? Thanks.

Yeah, I'll just comment and I think it's referenced in the letter to stockholders that we've had some big wins on Medicaid, specifically in some very large markets in Texas and certainly in California. As I said in my letter to stockholders now, Medicaid patients have access to VEVYE with zero co-pay, so zero out of the pocket, which is fantastic for a market of that size.

Andrew, do you want to comment on some additional market access information, specifically, any barriers and step edit.

And just coming more -- a little bit more on the Medicaid side, you know this is state-specific typically on the plans. But as Mark said, the co-pays are generally really low, in some cases as low as $0, in many cases single digits. So it's a great win for the access team.

On the step edit side, we are seeing some plans requiring that prior authorization. Typically, it's a failed patient on a different dry eye product. The good news for us is the market is full of patients that have failed other products. We talked about this in the launch of VEVYE that the existing dry eye market kind of lacked a really good product. And so there are a lot of patients that have tried products and failed. And so all that step edit is there. There is a large population of patients that has failed other dry eye products. And so our ability to get to the step and get the product paid for us is a huge barrier, and we're seeing increased wins with even prior authorization approvals.

Got it. That's helpful. And then kind of building off that, how should investors be thinking about Medicare coverage here? Obviously, it's early days, but do you guys have goals for kind of progress there by the end of the year by midway next? I mean how are you guys thinking about Medicare coverage? And then maybe speak to what you would expect there as far as how your market access team is trying to make that as affordable as possible for Medicare beneficiaries for VEVYE?

Yes. Just to be clear, as I said in my prepared remarks, we intend to compete for every single dry eye prescription and to be able to help every single dry eye disease patient in need, and that includes Medicare beneficiaries. So we are in active discussions and have been for quite some time to be able to serve that patient population.

The goal, I think, from the time that we launched the product, we were realistic that it was going to take 18 to 24 months or so to get all of the coverage in place that we would need for the following many, many years as we grew this product. And so I don't think that there's anything that's changed today from where we had been planning when we launched the product. But we are going after Medicare coverage, We intend to have coverage hopefully in the first quarter or so of next year to have that in place.

But I can't really comment specifically on, you know, how those negotiations are going because it is a -- these are very competitive markets for that patient population. And as I said, our goal is to be able to serve that patient population and we intend to aggressively compete for every one of those patients.

Makes sense. And then just maybe on the supply agreements for IHEEZO now for 2024, that's great to see. Could you help us quantify kind of what the overall opportunity is in those -- within those supply agreements, you said the licenses to hunt. Just kind of how big is that ground. Whether you kind of quantify it by maybe like a market share metric or overall revenue opportunity? Just help us kind of think about what that overall size of those supply agreements are. Thanks.

Yeah, sure. So the agreements that we have in place now and what we haven't done is posted sort of what percentage of the TAM these agreements reflect. And I don't think that we're going to do that. I can give you some additional color and just give you a sense of the scale of some of these agreements. And I'll just give you one data point from the most recent agreement that we signed that I was so excited about to serve the largest retina practice group in the US.

That group alone has about 2.1 million patient visits per year, 2.1 million. So this is a very large market opportunity. And I would think that many of those patient visits are connected with the administration of intravitreal injection. So it's a very exciting account. But as I said, we have more than two dozen of these agreements in place now, and we intend to serve those groups over time. They have to -- these agreements have to be phased in and they will be.

And that's, as I said, part of the reason why we're so excited about the coming quarters and the coming years because we really have not yet seen the effects financially from the agreements that we've been able to get in place. But that will happen.

Got it. And then just last for me, I'll hop back in queue. Sorry for so many here. But assuming everything goes right, Mark, when would you expect to relaunch TRIESENCE this year, assuming kind of everything goes smoothly with this one in-process batch in the next -- the third one here. And then the 100,000 units is kind of what I have was kind of previously here in the TRIESENCE market before all the supply constraints. How are you thinking about penetrating that kind of original opportunity in the first couple of quarters after launch?

Yes. So the timing on TRIESENCE, as I said, we're going to be making the third batch next week. It's scheduled for next week, which is amazing. And boy, do I want to thank the team that has been working so diligently for about a year to get us to this point. So they've done an incredible job.

And the reason why we've scheduled the third batch is because all of the indications so far is that we've been successful with the second batch. We don't have all of the data, but we have a lot of the data, and we're pretty positive on the balance of the data that we expect to get here in the coming days.

In terms of when we might be able to relaunch that product, assuming that we're successful with the third batch, it does take somewhere between 30 -- and it has taken as long as 60 days to get validated analytical test results from a batch. And so it's very easy to look at the calendar and say, hey, if they're doing this in the middle of August and even if it takes two months and I've said in the letter that it takes about 30 days to do all the paperwork. You can see that sometime in the fourth quarter, if all goes well, we'll be able to relaunch this product.

What I'm most excited about beyond having inventory finally of this product is the feedback that I received from retina specialists at ASRS about TRIESENCE. We had meetings with these folks about programs that we were considering working on, you know, and many of these programs got a big thumbs down. These retina specialists don't consider that or here's why I wouldn't work on that.

But when we talk to them about TRIESENCE, there was -- and I have to -- normally, you don't want to say all, the word -- use the word all. But I would say that all retina specialists that we spoke to, and I spoke to probably 15 high-level folks, everyone was really excited to have TRIESENCE back in the market.

And so I'm very confident that we're going to be able to sell all that we can produce for quite a long time. Right now, we're very busy not only preparing for the preparation of this third batch, but also working with our contract manufacturer to schedule additional batches this year and into the first half of next year based on our internal forecast for the product.

So TRIESENCE is a winner. The market wants TRIESENCE, and we've got some really exciting plans for TRIESENCE. It's not only hopefully for this year, but for several years to come to develop the TRIESENCE brand.

Mayank Mamtani, B. Riley Securities.

Good morning, team. Congrats on a strong quarter and thanks for taking the question. So before we go into the three growth products, could you just maybe help us understand that 40% growth quarter over quarter in the anterior product business?

Well, there's not much to say other than that portfolio of products, which we acquired from Santen and Novartis, so those two transactions that we did make up that portfolio. And as you recall, we actually got a pretty good deal when we acquired those products and our goal was to stabilize them. They had been falling in terms of their revenues for many years before we got involved. And I think not only we were trying to stabilize since but get them back into a growth position.

And the thesis was that if we could do that, given the price that we paid and given the long-term need for these products, that we would have a financial winner and that we would be able to serve our customers with a very broad portfolio of an amazing tool kit for ophthalmologists and optometrists for many years to come and make a lot of friends in the ophthalmic community with these products to make sure they had access to them.

And so that's what we've done. I think we've met our promise there. These products have certainly stabilized. And in fact, from the first quarter to the second quarter, as we said, we had 40% -- over 40% growth. And to be candid with you, as Andrew told me the other day, the third quarter's looking really good too. So this is turning out to be a very positive transaction, and I think, is in keeping with the other transactions that we were able to complete. Five transactions over the course of a couple of years. I think all of them have worked out really well for our stockholders.

Yes. No, that's great to hear. And then on IHEEZO, if you're able to segment how unilateral versus bilateral procedure proportions could look like? As you know, there are certain forms of treatments that are having side effects in the other eye where you may need a VEGF, and I'm talking about these complement drugs. So I was just curious what's your expectation unilateral versus bilateral? And then also some of these procedures could be retroactively built to January 1. Is that a reasonably interesting number? Or is that relatively small? And then I have a follow-up on VEVYE.

Yeah, in terms of the retroactivity, I wouldn't make a big deal of that. That's mainly a benefit for our customers to be able to ensure that any issues with Billy that that were in the past are kind of cleaned up. And that's a good thing from a credibility perspective from us -- for us rather. And in terms of bilateral versus unilateral, this is a really big point to make because it's simple math that if you are selling an account 2,000 units a year and they're only using IHEEZO in one eye and half of the patients are being administered bilateral injections, then you're going to increase your unit volumes with that one account by 50%. And if it's being used on 100% of the patients bilaterally, then your revenues or your unit volume demand is going to double. So it's really easy math. It's good math.

But I think the important thing is that the product is really performing well in the clinic and not only in surgical cases but in laser interventions, in glaucoma surgeries. Certainly, in intravitreal injections, we're getting very positive feedback and I think that's where the greatest opportunity for unit demand will be, well north of 10 million units per year and growing, especially with these GA products now they are in the market.

So we're excited about that market. That's one of the reasons why Greg DiPasquale joined our company. He's already making a big impact. The reason why we have so many of these strategic agreements done -- and not only done, but now we're seeing pull through purchases through these agreements is because of the great work that Greg and the entire team that's working on IHEEZO is doing. I mean, we have a phenomenal team commercially on IHEEZO and they're really producing results. But they're just getting started. If you look at the overall market share, Mayank, what we're doing versus what we maybe can do, we have, as I said in the letter, just scratched the surface.

Yeah. No, absolutely looking forward to the penetration trends, including through the course of this year. And I know you're not going to comment on the proportion of contribution to guidance for IHEEZO. But sort of my other related question is also around VEVYE, net price assumption longer term that we could model here? And also like based on the refill rate, what duration of treatment on average you anticipate patients being on drug? What would also be helpful, just given we are seeing one of your peers materially increased guidance, so just kind of trying to understand what IHEEZO and VEVYE, on an annual rate basis, contribution would be? And what are some of those -- at least for VEVYE, where we still have to learn more about net price and number of units per patient over the course of the year, if you're able to give some color, that would be helpful.

Sure. So to be clear, whether it's VEVYE or IHEEZO, we really -- we'll not discuss ASP at all. There is no competitive rationale for us publicly discussing ASP. So we won't do that. And I think, over time, as we report more on a product-specific basis, people like you who have your training will be able to get a much better idea of where net pricing is or ASP pricing is for these products.

In any case, in terms of refill rates or durations of treatment, if you are diagnosed with chronic dry eye disease and you start VEVEYE and you refill the prescription, what we're seeing is that the refill rates -- and we have a history by the way of understanding refill rates for chronic dry eye disease patients through our compounding business. So we understand what good looks like because our refill rates for our compounded formulations were very strong, and certainly, much higher than even refill rates for FDA-approved products historically.

But what we're seeing with VEVYE far exceeds what we've seen with our compounded products. And I don't have any specific information specific data to give to you but other than to tell you that we're now in our eighth refill cycle. And if you look at NRx, you know, as a component of TRx, over time, the NRx component of the TRx is going to become smaller because more and more patients are refilling. And so the refills become a larger percentage of the TRx. But given the way our TRx is growing, it's not a bad thing. It's a good thing.

And as we add more salespeople in these territories, the NRx will continue to grow. And then you get the sort of amazingly beautiful compounding of prescriptions.

Andrew, do you want to add to that?

Yeah, I can add a little color. Earlier in the call Mark mentioned my father takes VEVYE and I was there when he first took and to see him who's suffered most of eye diseases, including terrible dry eye and he has tried all of the products. I remember still him putting that drop inside -- the first drop and he looked at me and he said, wow, and it's really helped him as a patient and it's really, I think, changes life -- quality of life. And that's one of the reasons we're seeing these refills.

There isn't -- there has not been a dry eye product on the market that generates this type of benefit. And so I think you'll continue to see refill rate climb. As Mark said, we'll see more and more refills be a part of the TRx number, but we will continue to see NRxs and we'll continue to drive NRxs in the new prescriptions.

In regard to pricing too, one of the great things about the market access program is we're focused on making money. And so as we get these market access wins, we should ASP improves. We've got a really generous program right now to make sure we're getting patients on therapy. But overall, the market access program is executing. We're getting wins. And so we should start seeing ASP get a little better on that product as well.

And importantly, the refill rates as those increase will continue to see ASP go up as well as a lot of those worked a lot of those people have gone through the prior authorization process and now they're getting a lot of their claims paid for -- a lot of the claims for VEVYE paid for.

So all good things for VEVYE, and that's probably the product I'm most excited about, and that tells you how great a product is because IHEEZO is also an amazing product. As Mark mentioned, we're having tons of wins there, and that's going to be a really big and important product for us for a long time as well.

Great. And my final question about your ASRS Meeting at Stockholm. You identified, I believe, some additional strategic opportunities that you're getting to be on the table for now that you have a bigger brand in eye care. Could you just talk to how you plan to prosecute these, and obviously, balance against the laser-focus that you have with the current product portfolio? And congrats again. Thanks for taking my questions.

Thank you, Mayank. Yeah, as I said in the letter, we continue to be on the hunt for wonderful products with great economics that will allow us to serve our customers. We want to be an important company, not only to the pharma community at large, but really to these doctors and their offices. We want to be a contributor to the staff in these offices by giving them products that make their job easier, that they get paid for, that don't create prior authorization nightmares for them.

So we're looking for products that will allow us to build the persona in ophthalmology as an ophthalmic pharmaceutical company that we can be proud of, that their stockholders can be proud of, that the people who work at Harrow can be proud of. And so there are great products out there and there are also a lot of duds. And Andrew and I have our fingerprints on all of these deals. We work on them together very actively, and we're always on the hunt for things that can help us reach our goals. But as you know, we're not going to overpay. We're not going to get overly excited about something and put ourselves in a financially perilous position.

So we have a history of doing deals, I think, that is very positive. I think if you look at the five deals that we've done in the last couple of years, we've been able to generate a tremendous amount of value for our stockholders. And so we are convinced that there are deals out there to be done and we're actively looking at many of them.

And we have a lot to offer to partners. I want to close with that. Because if you look at our history, whether it's an anterior segment product or whether it's a product being sold into the posterior segment, our commercial organization is a winner. I mean, these people know how to get the ball over the line. They know how to score points. They know how to get things done.

And so too a potential partner, we have a lot of credibility, certainly more credibility than we've ever had, which allows us to speak to potential partners and sort of with credibility and to, I think, get better terms or more reasonable terms that involve more backend and less front end. But we're actively looking and we'll see what we're able to get done.

The main focus so to be clear at Harrow is executing on what we have. We have an amazing portfolio. 17 branded products. Now the number one compounded franchise in the US. So we've got a lot going for us now. We've got a lot to do day in and day out. But if there's a chance to buy something that we believe is worth a dollar and we can pay a dime for it upfront, we're going to certainly take a hard look at that.

Brooks O'Neil, Lake Street Capital Markets

Good morning, all. Thanks for taking my questions. I'm going to focus on two things. One, I noticed in the shareholder letter, I think I did -- I read it late last night, but I think you said around $11 million of revenue in the quarter from IHEEZO. I know it's still very early in the development and commercialization of that product. But can you speak at all to reorder activity so far? Are you seeing any doctors or practices coming back to the plate to reorder IHEEZO?

Yeah. Thank you for that, Brooks. Yeah, in the corporate deck, we actually lay out what the reorder rate is. Specifically for IHEEZO, I think, this quarter it was 87%. So that's a -- that's pretty good. As you know, because you've known me for a while now, I'm a glass half empty kind of guy. And so I say to our people, what about the other 13%. But 87% is not bad. It really isn't bad.

But overall, we still have a very, very small percentage of the market. I think we're just about -- I think, on a run rate of about 1% of that addressable opportunity. It's a very, very small percentage of the market. But doctors who use it, they like it and they're ordering more. And I think we can improve that refill rate above 87%. But that's where we are now.

Like you say 87% is a very impressive number at this stage of the rollout. And with 1% of the market, I can't even do the math to figure out what the opportunity is and it looks quite large.

So my second and last question is just curious about this. Obviously, many times, we see Medicare come through, commercial payers come through before Medicaid. It's my experience that our friends in state government are not always the most proactive players. Is there any reason you have been so successful in establishing VEVYE in the Medicaid market? I mean, is there anything you need to Medicaid patients in terms of their proclivity or incidence of dry eye disease? Or what do you think is driving that on the Medicaid side? And I'm guessing that over time, there's a big opportunity in Medicare and commercial as well.

Yeah. So in terms of what's driving Medicaid, I have to say that our market access team deserves a lot of credit from the leadership on down. And so I want to give them that credit because they're the ones -- when I walk back to Rob's office, he's got a big smile on his face because he has got a big win. I mean, he just loves the stuff. He's a competitive guy and he loves getting these wins and he's getting them. And I think he's going to get a lot more.

You know, as I said, we're going to have 100% of Medicaid by the time of our next quarterly report. That's what we expect. But as Andrew said a few moments ago, we have to be profitable. So when we contract, we have to do that in a way that allows us to earn a profit. We take our time. We don't do launch extravaganzas with hundreds and hundreds of reps just right out of the gate. We are patient and we are deliberate and we're disciplined. And that's the way we do things here, and that's the way we built this business over the last 10 plus years. And that's the way we'll continue to do that.

Medicaid, though, we -- is a big, big success for us. We will get Medicare. I do believe certainly, this time next year, you'll see that coverage hopefully in place. But we're patient and we're going to get the right deals done. And ultimately, I think we're going to be able to serve this patient population that will benefit tremendously from VEVYE.

That's great. I lied. I have one last question, and I appreciate you taking my questions. It's my sense that in both -- in the case of both IHEEZO and VEVYE that many of these patients are essentially in their doctor's office or in need of these medications repeatedly throughout the year, perhaps even every month. Can you just comment on that so that I understand the market opportunity a little bit better and maybe investors do as well?

Well, look at our portfolio, on the compounded side, we have medications that are prescribed for patients that suffer and they're incredibly affordable, they're preservative free. The value there is tremendous. That's certainly a chronic condition, although these are compounded products, they're not FDA approved.

If you look throughout our portfolio, we own Vigamox. Vigamox is an incredible product and the entire portfolio is a tremendous tool kit for ophthalmologists and optometrists. And as I said, it creates a lot of friends when they need these products and many of them are not big products. They're small market products. And big companies, sometimes for small market products, ignore them. And in many cases, they become unavailable. They go on drug shortage. And so that's not what we're going to do.

We're going to continue to make these products available to ophthalmologists and optometrists. We're going to do our darndest to make sure that we control pricing so that they're accessible and affordable. Sometimes we have to raise price from time to time, but believe it or not, I'm probably going to talk about this on our next earnings call, in many cases, we lower prices.

And we've got some examples of that that we're going to share. Since when you hear about pharmaceutical companies actually lowering prices? We've raised a few to be sure but we're lowering others. And the goal ultimately is to have a balanced portfolio for acute care needs, chronic care needs, and to ultimately be an amazing partner, a reliable, trusted partner to the ophthalmic community. That's what we're doing with this portfolio.

In terms of a market opportunity for IHEEZO, it's gigantic. There's over 17 million annual use cases, we believe, in the US alone for IHEEZ. And the market for chronic dry eye disease is enormous with more than 9 million patients alone suffering from moderate to severe dry eye disease. I'm not using the 35 million number that -- 38 million that a lot of companies use of total dry eye patients. I'm just saying moderate to severe is more than 9 million. So it's a huge patient population. We think we have best-in-class potential with VEVYE. And as said, it's got a long runway. We're going to sell a lot more VEVEYE in 2035 than we will next year in 2025.

Thank you. I would now like to turn the call back over to Mark Baum for any closing remarks.

Terrific. So thanks again. We're, as you can tell, I think, enthusiastic about the second half of the year. The progress that we discussed is years in the making and it comes from the efforts of a dedicated team at Harrow. I want to thank all of them, our stockholders, our customers, and the entire Harrow family for their contributions and getting us to this place.

As a reminder, if you have any investor-related questions, please e-mail Jamie Webb at jwebb@harrowinc.com. Thank you, and this will conclude our call.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.