Harrow, Inc.

Good afternoon and welcome to HARO Health's third quarter 2021 earnings conference call. My name is Ilee and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. 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 HARO Health.

Thank you, Operator. Good afternoon and welcome to Harrell Health's third quarter 2021 earnings conference call. Before we begin today, let me remind you that the company's remarks may include forward-looking statements within the meeting of federal securities law. Forward-looking statements are subject to numerous risk and uncertainties, many of which are beyond Harrell Health control, including risk and uncertainties described from time to time in its SEC filings, such as the risk and uncertainties related to the company's ability to make commercially available its 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. Errol Health's results may differ materially from those projected. Harold 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, Harold will refer to non-GAAP financial metrics, specifically adjusted EBITDA and or adjusted earnings. A reconciliation of any non-GAAP measures with the most directly comparable GAAP measures is included in the company's letter to stockholders 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.harrellinc.com. Joining me on today's call are Harrell's Chief Executive Officer, Mark Elbaum, and Harrell's Chief Financial Officer, Andrew Bowe. 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. Mark?

Good afternoon, and thanks for taking the time to join us today. As usual, I would encourage you to review our third quarter 2021 earnings release, corporate presentation, and letter to stockholders. all of which were posted on the investor relations section of our website just after the close of trading today. Before we take your questions, I'd like to provide some highlights of our results for the third quarter ended September 30th, 2021. Even though the third quarter has historically been the slowest quarter of the year and the effects of the COVID-19 pandemic were still lingering in certain regions of the country, Harrow Health delivered record top-line revenue and year-over-year earnings growth. We have now delivered our fifth consecutive quarter of record results in terms of revenue and many other key operational metrics. In the third quarter of 2021, Harrell reported record revenues of $18.7 million, and that was a 30% increase compared with $14.4 million reported for the same period in 2021. and a 3% sequential increase over our previous record revenues of $18.1 million in the second quarter of 2021. Gross margin of 74% for the third quarter of 2021 was consistent with the prior year period, but was slightly down on a sequential quarter basis, primarily due to an investment in additional personnel to accommodate a second shift at our production facilities as we prepare to increase our capacity in 2022. Adjusted EBITDA was $4.9 million for the third quarter of 2021, compared with $3 million in the prior year period, and that was a 62% year-over-year increase. Our ImpromiseRx subsidiary segment contribution for the third quarter was $6.6 million, including non-cash expenses related to depreciation, amortization, and stock based compensation of about $653,000. This compares to segment contribution of $4.7 million in the prior year period, amounting to a 39% year over year increase. In addition to our strong operating results, we continue to build momentum in the execution of our strategic vision, which includes incorporating high value FDA approved products into our family of ophthalmic pharmaceutical products and using technology to make it easier than ever to order our products and stay connected to our ophthalmic brands. That's Imprimis RX and Visionology. This momentum should lead to further customer-based expansion and increased revenue as a result of greater product purchasing depth within the practices we serve. Going forward, we expect these initiatives and others we are pursuing, all of which are focused on our core competency of ophthalmic healthcare to fuel Harrow's mission of becoming a leading US eye care company. As you may recall, during the third quarter, we announced several transactions, including the purchase of two drug candidates, AMP 100 and MAC 100. We are excited about the potential for the transformative power of these acquisitions and note that they are consistent with the types of deals we've been promising our stockholders we would complete. AMP 100 is a patented topical anesthetic intraoperative pain drug candidate with a TAM or total addressable market estimated at over 10 million annual ophthalmic procedures. That includes cataract surgeries and intravitreal injections. We expect a new drug application filing to be submitted to the FDA very soon. MAC-100 is a preservative-free steroid. It's triamcinolone acetonide, ophthalmic injectable drug candidate for visualization of the vitreous during vitrectomy. Heroin tends to communicate with the FDA in early 2022 about presenting the clinical data used for Japanese market approval of MAC-100, which is marketed in Japan as McCade for four separate indications. Our objective is to use the 11-year experience of McCade in Japan to support a U.S. and Canada market NDA submission. As we wind up 2021, we have used this past year to plow the ground and begin to make the capital investments necessary to transition HARO into a company offering not only the compounded pharmaceuticals that our business was built upon, but also FDA-approved ophthalmic pharmaceutical products. Now this is a feat which I believe we will be the first to accomplish in the ophthalmic industry. Our ability to offer both compounded and FDA-approved ophthalmic pharmaceuticals, branded products, will uniquely differentiate us, not only in the ophthalmic pharmaceutical industry, but also among publicly traded pharmaceutical companies. Once approved by FDA, AMP 100 and MAC 100 will expand our product portfolio and broaden our depth of offerings to include products for surgeries and interventions aimed at the back of the eye as well as the front of the eye. I also believe that our upcoming revenues from these new FDA-approvable products, when approved, should exceed our current level of revenues from compounded products not long after their respective approvals. And we remain on the hunt for other acquisition opportunities to add fuel to our strategic vision. This whole initiative is about leveraging our commercial platforms and strong customer relationships, and national direct distribution capabilities. That is what we're working towards, and that is why I believe we are still in the very early stages of our revenue opportunity. Now, let's take your questions. I will pause to have our operator poll for questions. Operator?