HARROW INC
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
HROW$26.89+3.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001493152-24-030575
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001493152-24-045295
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 68 previous paragraphs and 73 current paragraphs.
45 unchanged; 14 reworded; 13 added; 8 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 6 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
Cybersecurity Incident
Current report
In November 2024, we became aware of a cybersecurity incident that involved unauthorized access of an employee’s email account. Through this unauthorized access the threat actor was able to fraudulently divert Company funds to its bank account. We detected the incident in a time that management believes minimized any financial, operational or reputational risk to the Company, we believe this early detection will result in an immaterial impact to the Company’s financial results and at no point was our ability to generate revenues disrupted. We, along with our external cybersecurity experts, are continuing to work diligently to fully investigate and assess the impact of the incident and we have notified, and are cooperating with, federal law enforcement. As the investigation of the incident is ongoing, the full scope, nature and impact of the incident are not yet fully known.
Current report
TRIESENCE Re-Launch, Oaktree Second Amendment and Draw
Current report
In October 2024, we announced the re-launch of TRIESENCE following the successful manufacturing of three process performance qualification batches of the product. In connection with the re-launch, during October 2024 we made a one-time payment of $37,000,000 to Novartis Technology, LLC and Novartis Innovative Therapies AG (together, “Novartis”) pursuant to terms of an asset purchase agreement between Novartis and the Company. Also, during October 2024, we entered into the Second Amendment (the “Second Amendment”) to the Credit Agreement and Guaranty originally entered into on March 27, 2023, as amended by that certain First Amendment to Credit Agreement and Guaranty and Consent, dated as of July 18, 2023 (as amended, the “Oaktree Loan”), with the lenders from time to time party thereto and Oaktree Fund Administration, LLC, as administrative agent for the lenders (“Oaktree”). Upon satisfaction of certain conditions to funding, the Company drew down the principal amount of $30,000,000 (the “$30,000,000 Draw”) under a pre-existing commitment under the Oaktree Loan to partially fund the one-time payment to Novartis.
Current report
In the Second Amendment, the Company and Oaktree agreed to certain changes to the Oaktree Loan in connection with the Company’s draw under the Oaktree Loan. Pursuant to the amendment, Oaktree agreed to waive any make-whole costs associated with the $30,000,000 Draw in the event of early repayment of the debt under the Oaktree Loan if paid before March 31, 2025. In addition, Oaktree agreed to exclude the $30,000,000 Draw from the calculation of the Total Leverage Ratio as defined in the Oaktree Loan. No other material changes to the Oaktree Loan were provided in the Second Amendment.
Current report
Following entry into the Second Amendment and the funding of the Novartis milestone payment, the Company has drawn down a total principal loan amount of $107,500,000 under the Oaktree Loan and no additional principal loan amount remains available to the Company under the Oaktree Loan.
Current report
Branded
Current report
The following presents our Branded cost of sales:
Current report
ImprimisRx
Current report
The following presents our ImprimisRx cost of sales:
Current report
Branded
Current report
ImprimisRx
Current report
In October 2024, we made a one-time payment of $37,000,000 upon the achievement of a milestone associated with one of our asset purchase agreements which was funded, in part, from our availability under the delayed draw commitments of our Oaktree debt facility.
Removed paragraphs (8)
Previous report
TRIESENCE PPQ Batches and Manufacturing
Previous report
In June 2024, we announced the successful manufacture of a process performance qualification (“PPQ”) batch of TRIESENCE. In order to re-launch TRIESENCE for commercial use, we believe two additional, consecutive and successful PPQ batches (an aggregate of three PPQ batches) of TRIESENCE will need to be made. A second PPQ batch was produced in July 2024, and we are currently waiting for analytical results associated with this batch. If the second PPQ batch was produced successfully, the Company (along with its manufacturing partners) expects to produce a third PPQ batch before the end of the third quarter 2024. If these three PPQ batches are manufactured successfully, we believe TRIESENCE could be re-launched in the U.S. prior to the end of 2024. In accordance with the terms of the Asset Purchase Agreement we entered into with Novartis Technology, LLC and Novartis Innovative Therapies AG (collectively, “Novartis”), a $37,000,000 milestone payment will be due to Novartis upon re-launch in the U.S.
Previous report
The following presents our revenues:
Previous report
The increase in revenues between periods was related to an increase in sales volumes of our branded ophthalmology products. During the three and six months ended June 30, 2023, the Company recorded $3,928,000 and $9,578,000, respectively, in revenues associated with the transfer of sales and profits of recently acquired products where the product new drug applications (“NDAs”) had not yet transferred to Harrow. During the three months and six months ended June 30, 2024, revenues from branded products totalled $27,292,000 and $41,229,000, respectively, compared to $13,095,000 and $19,367,000 (which included revenues from the transfer of profits) during the same periods in the prior year, respectively. Net sales of IHEEZO were $11,294,000 and $13,616,000 during the three months and six months ended June 30, 2024, respectively.
Previous report
The following presents our cost of sales:
Previous report
The following presents our research and development expenses:
Previous report
Tax (Expense)/Benefit
Previous report
During the three and six months ended June 30, 2024, we recorded income tax expense of $(655,000) and tax benefit of $15,000 and $303,000, during the same periods in 2023, respectively. The income tax expense in 2024 is primarily related to the timing differences related to the tax deductibility for stock-based compensation, interest expense and loss on our investment in Eton. We expect the timing differences will result in taxable income for the year ending December 31, 2024.
Reworded paragraphs (14)
Previous wording
In February 2024, we entered into a license and supply agreement with Apotex Inc. (“Apotex”). Under the terms of the agreement, Apotex licensed exclusive rights and marketing authorizations of the following products in the Canadian market from Harrow: VERKAZIA (cyclosporine ophthalmic emulsion) 0.1% and Cationorm PLUS. Apotex was also granted a license for products Apotex will pursue approval for in Canada: VEVYE (cyclosporine ophthalmic solution) 0.1%, IHEEZO (chloroprocaine hydrochloride ophthalmic gel) 3%, and ZERVIATE (cetirizine ophthalmic solution) 0.24% (with VERKAZIA and Cationorm Plus, collectively, the “Apotex Products”). In exchange for these licenses, Apotex will make payments to Harrow for milestones related to manufacturing arrangements, regulatory and commercial achievements, in addition to royalties on net sales of the Apotex Products.
Current wording
In February 2024, we entered into a license and supply agreement with Apotex Inc. (“Apotex”). Under the terms of the agreement, Apotex licensed exclusive rights and marketing authorizations of the following products in the Canadian market from Harrow: VERKAZIA (cyclosporine ophthalmic emulsion) 0.1% and Cationorm PLUS. Apotex was also granted a license for products Apotex will pursue approval for in Canada: VEVYE (cyclosporine ophthalmic solution) 0.1%, IHEEZO (chloroprocaine hydrochloride ophthalmic gel) 3%, and ZERVIATE (cetirizine ophthalmic solution) 0.24% (with VERKAZIA and Cationorm Plus, collectively, the “Apotex Products”). In exchange for these licenses, Harrow will earn amounts related to manufacturing, regulatory and commercial achievement milestones, in addition to royalties on net sales of the Apotex Products.
Previous wording
The following period-to-period comparisons of our financial results for the three and six months ended June 30, 2024 and 2023 are not necessarily indicative of results for any future period.
Current wording
The following period-to-period comparisons of our financial results for the three and nine months ended September 30, 2024 and 2023 are not necessarily indicative of results for any future period.
Previous wording
Our revenues include amounts recorded from sales of proprietary compounded formulations, sales of branded products to wholesalers through a third-party logistics facility, commissions from third parties and revenues received from royalty payments owed to us pursuant to out-license arrangements.
Current wording
Our revenues include amounts recorded from sales of proprietary compounded formulations, sales of branded products to wholesalers through a third-party logistics facility, commissions from third parties and revenues received from royalty payments owed to us pursuant to out-license arrangements. The following presents our revenues:
Previous wording
The increase in our cost of sales was largely attributable to expenses associated with unit volumes sold and increased direct and indirect costs associated with production of our products.
Current wording
The increase in our ImprimisRx cost of sales was largely attributable to expenses associated with unit volumes sold and increased direct and indirect costs associated with production of our products.
Previous wording
The increase in gross margin between the three and six months ended June 30, 2024 and 2023 was primarily attributable to an increase in sales associated with our branded ophthalmology products, which generally have a higher gross margin profile than our compounded products.
Current wording
The increase in Branded gross margin between the three and nine months ended September 30, 2024 and 2023 was primarily attributable to an increase in sales reducing the impact of our fixed expenses, such as license amortization.
Previous wording
The increase in selling, general and administrative expenses between periods was primarily attributable to an increase in expenses including regulatory enhancements, costs to support the transition of recent product acquisitions, and an increase in expenses related to the addition of new employees in sales, marketing and other departments to support current and expected growth, including the commercial launch of VEVYE in December 2023. Stock-based compensation expense increased by $1,266,000 during the six months ended June 30, 2024 compared to the prior year period.
Current wording
The increase in selling, general and administrative expenses between periods was primarily attributable to an increase in expenses including regulatory enhancements, costs to support the transition of recent product acquisitions, and an increase in expenses related to the addition of new employees in sales, marketing and other departments to support current and expected growth, including the commercial launch of VEVYE in December 2023. Stock-based compensation expense increased by $1,227,000 during the nine months ended September 30, 2024 compared to the prior year period.
Previous wording
Interest expense, net was $5,471,000 and $10,886,000 for the three and six months ended June 30, 2024, respectively, compared to $5,704,000 and $10,451,000 for the same periods in 2023, respectively. The decrease during the three months ended June 30, 2024 compared to the same period in 2023 was primarily the result of increased interest income earned. The increase during the six months ended June 30, 2024 compared to the same period in 2023 was primarily the result of the increase in the outstanding principal amount of our debt obligations.
Current wording
Interest expense, net was $5,525,000 and $16,411,000 for the three and nine months ended September 30, 2024, respectively, compared to $5,749,000 and $16,200,000 for the same periods in 2023, respectively. The decrease during the three months ended September 30, 2024 compared to the same period in 2023 was primarily the result of increased interest income earned. The increase during the nine months ended September 30, 2024 compared to the same period in 2023 was primarily the result from the increase in the outstanding principal amount of our debt obligations.
Previous wording
During the three and six months ended June 30, 2024, we recorded a loss of $(1,923,000) and $(3,171,000), respectively, related to the change in fair market value of Eton’s common stock at the time of its sale, including trading expenses and commissions of approximately $436,000, compared to a loss of $(714,000) and gain of $1,328,000, respectively, during the same periods in 2023.
Current wording
During the nine months ended September 30, 2024, we recorded a loss of $3,171,000 related to the change in fair market value of Eton’s common stock at the time of its sale, including trading expenses and commissions of approximately $436,000, compared to a gain of $1,348,000 and gain of $2,676,000 during the three and nine months ended September 30, 2023, respectively.
Previous wording
During the six months ended June 30, 2023, we recorded a loss on extinguishment of debt of $5,465,000, related to the early payoff of a loan.
Current wording
During the nine months ended September 30, 2023, we recorded a loss on extinguishment of debt of $5,465,000, related to the early payoff of a loan.
Previous wording
During the three and six months ended June 30, 2024, we recorded other income of $46,000 and $72,000, respectively, related to a sublease of lab and office space in Nashville. During the three and six months ended June 30, 2023, we recorded other expense, net of $178,000 and $149,000, respectively, related primarily to transition services and write-off of inventories associated with the divestment of our non-ophthalmology business.
Current wording
During the three and nine months ended September 30, 2024, we recorded other income of $4,000 and $76,000, respectively, related to a sublease of lab and office space in Nashville. During the three and nine months ended September 30, 2023, we recorded other expense, net of $195,000 and $344,000, respectively, related primarily to transition services and write-off of inventories associated with the divestment of our non-ophthalmology business.
Previous wording
Our cash on hand at June 30, 2024 was $70,968,000, compared to $74,085,000 at December 31, 2023.
Current wording
Our cash on hand at September 30, 2024 was $72,601,000, compared to $74,085,000 at December 31, 2023.
Previous wording
Net cash used in operating activities during the six months ended June 30, 2024 was $(7,374,000) compared to $(3,648,000) during the same period in the prior year. The increase in net cash used in operating activities between the periods was mainly attributed to increase in operating expenses associated with the commercial launch of VEVYE in January 2024, including increased headcount associated with the sales force, recent product acquisition integrations and increased costs of goods sold.
Current wording
Net cash used in operating activities during the nine months ended September 30, 2024 was $(4,423,000) compared to $(4,856,000) during the same period in the prior year. The decrease in net cash used in operating activities between the periods was mainly attributed to changes in our working capital balances including accounts receivable, accounts payable, prepaid expenses and inventories.
Previous wording
Net cash provided by (used in) investing activities during the six months ended June 30, 2024 was $4,993,000 compared to $(132,219,000) during the same period in the prior year. Cash used in investing activities in 2023 was primarily related to the acquisition of five branded products completed in January 2023. Cash provided by investing activities in 2024 was primarily related to the sale of our investment position in Eton.
Current wording
Net cash provided by (used in) investing activities during the nine months ended September 30, 2024 was $4,396,000 compared to $(152,350,000) during the same period in the prior year. Cash used in investing activities in 2023 was primarily related to the acquisition of branded products completed in 2023. Cash provided by investing activities in 2024 was primarily related to the sale of our investment in Eton.
Previous wording
Net cash (used in) provided by financing activities during the six months ended June 30, 2024 and 2023 was $(736,000) and $62,351,000, respectively. Cash used in financing activities during the six months ended June 30, 2024 was primarily related to payment of payroll taxes upon vesting of RSUs in exchange for shares withheld from employees. Cash provided by financing activities during the six months ended June 30, 2023 was primarily related to proceeds received from the sale of notes in our 2023 capital markets transactions and entering into loan arrangements, offset by repayment of the B. Riley senior secured note and payment of payroll taxes upon vesting and exercise of equity instruments in exchange for shares withheld from employees.
Current wording
Net cash (used in) provided by financing activities during the nine months ended September 30, 2024 and 2023 was $(1,457,000) and $126,546,000, respectively. Cash used in financing activities during the nine months ended September 30, 2024 was primarily related to payment of payroll taxes upon vesting of RSUs in exchange for shares withheld from employees. Cash provided by financing activities during the nine months ended September 30, 2023 was primarily related to proceeds received from the sale of notes and common stock in our 2023 capital markets transactions and entering into loan arrangements, offset by repayment of the B. Riley senior secured note and payment of payroll taxes upon vesting and exercise of equity instruments in exchange for shares withheld from employees.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The increase in our Branded cost of sales was largely attributable to expenses associated with unit volumes sold.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The following presents our selling, general and administrative expenses: