Harrow, Inc.

Good day, everyone, and welcome to the HARO, Inc. First Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Jamie Webb, Director of Communications and Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to Harold's first 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 risk and uncertainties, many of which are beyond HARO's 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 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. Harold'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 referred 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. The reconciliation of any non-GAAP measures with the most directly comparable GAAP measures is included in the company's earnings relief 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 Elbaum, and Harrow's Chief Financial Officer, Andrew Bowles. 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 welcome to everyone joining us on today's call. I will start as I always do with a reminder to review our earnings release, corporate presentation, and letter to stockholders, all of which are posted to the investor relations section of our website. Our business demonstrated remarkable resilience in the first quarter of 2024. especially given the effects of the change healthcare cyber attack, with revenues for the first quarter of 2024 increasing 33% over the same period in 2023. Here are a few key recent accomplishments of note. We strengthened our management team, adding Greg DePasquale, who started this week in the newly created role of Senior Vice President and Head of Commercials. Greg is responsible for all sales, marketing, and sales operations activities for Harrow's portfolio of branded ophthalmic products. Greg comes to us from a sales leadership role at Regeneron, where he experienced great success driving revenue growth for the retina product ILEA and ILEA HD. Prior to Regeneron, Greg held leadership roles at Essilor, Novartis' retina division, ZEISS, and Bausch & Lomb. We are excited about what Greg brings to Harrow, especially at this time in our development. John Saharik will continue to oversee Harrow's commercial business as Chief Commercial Officer. However, he also serves as the CEO of Impromiss Rx, and he will focus on the day-to-day management of our market-leading Impromiss Rx compounded division. Let's talk about V-VI, the first and only water-free cyclosporine designed to treat the signs and symptoms of dry eye disease. Vevi is the cornerstone product in our dry eye disease franchise. We launched Vevi in January of 2024, and with four months under our belt since the launch, the early success we are seeing in the numbers coupled with feedback from very experienced ophthalmic leaders is gratifying. For our stockholders, given the opportunity we see in the U.S. chronic dry eye disease market, the reception for Vevi thus far should give you confidence and what we are doing at Harrow. Not only have new prescriptions continued to ramp up month to month, but we are now seeing the beginning of our fifth refill cycle. This is very good news as the true value to Harrow stockholders is not in the initial VBI prescription, but in the stream of monthly refills. We're also pleased with our success with market access for VBI. As of our last earnings call in mid-March, only a couple of months ago, Our market access team had secured coverage for just over 40 million lives. I am thrilled to report that this number has since climbed to north of 150 million covered lives for Vivi. New payer contracts are also being added daily. I've always believed that being the best product in a market, while important, isn't enough for long-term success. It must also be accessible and affordable to patients. And I'm delighted to say that our market access strategy is ahead of schedule and is helping to ensure patient access to this amazing new dry eye product. Levi's success is also the result of our dedicated and experienced small but mighty Levi's sales team. Size can matter less when your team has deep experience in the ophthalmic business and specifically with dry eye. And many of our sales leaders have participated in launching products some of the best selling dry disease products. That said, as we ramp up sales, gain coverage, and hit our internal average sales price or ASP targets, we intend to add more Vivi sales professionals. The most rewarding aspect of our Vivi launch so far has been the positive responses from both prescribers and patients. Prescribers are anecdotally reporting that patients who previously found no relief with other treatments are experiencing significant improvements with Vivi, often in as little as two weeks and with little or no adverse side effects. Vivi refills are also a great story. Our data demonstrates and plain common sense supports the notion that patients don't refill a chronic disease prescription unless they're getting relief. The consistent increase in Vivi prescription refills, as I said, now into this fifth cycle, underscores the value Vivi provides to patients nationwide. Let's also spend some time on IHESO, the only J-coded or reimbursable ophthalmic anesthetic in the U.S. market. IHESO is now a full year into its launch. We are pleased with the increase in adoption that we are seeing from eye care professionals in all settings of care, particularly following the recent confirmation from the Centers for Medicare and Medicaid Services, or CMS, that IHESO is separately reimbursable in the physician's office setting of care and for both unilateral and bilateral in-office procedures. As a result, IHESO is well-positioned to gain market penetration, especially among retina specialists, and in particular, with large group purchasers. Since CMS confirms separate payments, we have executed supply agreements with seven large multi-practice strategic accounts that, in the aggregate, are responsible for over 450,000 annual cataract surgeries and over 1.1 million intravitreal injections each year. These supply agreements are critical to our commercial strategy, as is order pull-through at the practice level, which will be a primary focus for Greg over the next few months. One last item of note on IHESO is that the U.S. Patent and Trademark Office recently granted IHESO a new set of patent claims with an expiration date of 2039. We also continue to progress in our strategy to reintroduce triessence to the market. Analytical testing of the commercial scale process performance qualification or PPQ batch of triessence That was manufactured during the week of April 15 is nearing completion and I am pleased to report that the batch has passed all preliminary release parameters. We anticipate having final results by the end of May and we intend to communicate our plan for the balance of our tri essence relaunch program during the current calendar quarter. I want to add that we are making solid progress with our interior segment products as well. And we expect this line of products to continue to be valuable for eye care physician customers who count on these products on a daily basis to maintain the eye health of their patients. These products have great market access stories as well. For example, you can see from slide six in our corporate presentation, Madison has 88% coverage or approximately 276 million covered lives. while Elevero has 75% coverage or 236 million covered lives. It's up to us to get out there and tell the stories of these great products, and we are. Lastly, I want to confirm that the progress we reported last quarter in our Imprimis RX compounding business is continuing. We are firmly back on track with our historical growth trajectory over the last several years of low double-digit growth in this business. Our balance sheet continues to be solid with $76 million in cash and cash equivalents, including our investment in Eaton Pharmaceuticals as of the end of the first quarter. Since the close of the first quarter, however, we divested our non-strategic holdings of about 2 million shares in Eaton, adding $5.5 million to our cash position, which can now be deployed into more strategic investments and activities. In closing, Harold has made critical strides executing our five-year strategic plan. And this progress and what we're working on currently are the sources for the tremendous enthusiasm for what lies ahead during the balance of 2024. We're now happy to answer your questions. I will pause to have our operator pull for questions. Operator?