Harrow, Inc.

Good afternoon, and welcome to HARO Health's fourth quarter 2021 earnings conference call. My name is Tom, 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, and instructions will be given at that time. As a reminder, this conference is being recorded. And I would now like to turn the conference over to Janie Webb, Director of Communications and Investor Relations for HARO Health.

Thank you, Operator. Good afternoon and welcome to Herald Health's fourth quarter and year-end 2021 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 law. Forward-looking statements are subject to numerous risk and uncertainties, many of which are beyond Herald 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 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 risk 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. Harold Hill'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.haroldinc.com. Joining me on today's call are Harold's Chief Executive Officer, Mark Elbaum, and Harold'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?

Mark Elbaum Good afternoon, and thanks for joining us on today's call. I would encourage you to review our fourth quarter and year-end 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 fourth quarter and year end of December 31st, 2021, and give you a brief update on our operational progress. The fourth quarter of 2021 was yet another quarter of record performance. Our sixth consecutive quarter of records in many key financial metrics, delivering a solid conclusion to 2021 and a springboard for 2022 and beyond. In the fourth quarter of 2021, Arrow reported record revenues of $20.2 million, and that was a 38% increase compared with $14.6 million reported for the same period in 2020. and an 8% increase over the sequential third quarter of 2021. Full year 2021 revenues grew 48% to $72.5 million, and that was from $48.9 million in 2020. Fourth quarter gross profit was a record $15.1 million, a 42% increase over gross profit for the year earlier period of $10.7 million and a 10% increase over the sequential third quarter of 2021. Full year 2021 gross profit came in at $54.3 million. That was a 58% increase compared with full year 2020 gross profit of $34.4 million. Gross margin for the fourth quarter of 2021 increased to 75% compared with the prior year's 73%, and the sequential quarter's 74%. Gross margin for full year 2021 was 75%, compared with 70% for full year 2020. Adjusted EBITDA was $4.6 million for the fourth quarter of 2021, compared with $4 million in the prior year period. That was a 16% year-over-year increase. Adjusted EBITDA for full year 2021 rose to $19.5 million, and that was compared with $5.7 million in the prior year period. On the operational front, our actions in 2021 were intensely focused on positioning Hero Health to fulfill its vision of becoming a leading U.S. eye care company. For us to execute on that vision, we are one, focusing on ophthalmic, surgical, chronic and acute care prescription pharmaceuticals. Two, serving institutional customers. These are doctors and hospitals and ambulatory surgery centers. And three, continuing to add high value FDA approved products to our portfolio. We believe we made significant progress during 2021 in the execution of our strategic plan, including increasing the cash on our balance sheet to record levels, which we accomplished without diluting our shareholders, and completing several transformative transactions, all aimed at positioning us to move forward with the next steps in our strategic plan. In 2022, we are focused on building the infrastructure to support the significant growth that we anticipate over the next few years, beginning this year, not only from recent acquisitions of drug candidates like AMP 100 and MAC 100, if they're approved by the FDA, but also from internally developed formulations that we expect to launch commercially over the next 18 months or so. Also, we continue to be on the hunt for additional M&A opportunities that could further increase our growth potential. In order to support this growth, we are expanding our existing commercial infrastructure, including adding eight experienced sales executives and a head of market access. We expect our team to be further expanded during 2022 as we prepare for the approval and launch of AMP 100 and the relaunch of Iopidine, Maxitrol, and Moxesa under our company umbrella. In addition, We are focused on strengthening our internal expertise and capabilities within regulatory compliance, quality, and supply chain management. We are also in the process of establishing our own internal analytical lab, eliminating our reliance on third-party labs, and enhancing our inventory management and self-distribution systems. This year is already shaping up to be a breakout year for Harrow. We continue to see strong daily revenues. to this day. As we previously announced, October 16th of this year is our PDUFA date for AMP 100. And if approved, we intend to be ready a few months thereafter to launch AMP 100 into a market in which we have commercial credibility. That would be the U.S. ophthalmic surgical or procedure market. In addition, we expect to see value creation events from our non-controlling equity positions and companies that were originally founded as Hero Health subsidiaries before being deconsolidated. For example, in a few months, we expect surface ophthalmics to report data on a major chronic dry eye study. This was the first study of its kind to ever go head-to-head against the two category-leading FDA-approved products. A big study. Soon thereafter, we expect Melt Pharmaceuticals to report top-line data on its Melt 300 clinical study. As these events unfold, we will continue to grow our core ophthalmic pharmaceuticals business, launch new ophthalmic products we've been internally developing, and review the potential for new accretive transactions in our area of focus. That's ophthalmic pharmaceuticals. Let's take your questions. I'll pause to have our operator poll for questions. Operator?