Yahoo Finance Harrow Inc (HROW) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic Advances
Revenue Growth: Increased by 33% in Q1 2024 compared to Q1 2023.
VEVYE Launch Success: Strong initial sales and positive market reception; over 150 million lives covered.
IHEEZO Market Penetration: Expanded adoption following CMS reimbursement confirmation; supply agreements with large multi-practice accounts.
Cash and Cash Equivalents: $76 million as of the end of Q1 2024.
Divestiture: Sold 2 million shares in Eaton, adding $5.5 million to cash reserves.
Patent Update: New patent claims granted for IHEEZO, extending until 2039.
Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Harrow Inc reported a 33% increase in revenues for the first quarter of 2024 compared to the same period in 2023.
The launch of VEVYE for dry eye disease has been successful, with significant growth in new prescriptions and refills, indicating strong market acceptance.
Harrow Inc has expanded market access for VEVYE, increasing covered lives from 40 million to over 150 million, enhancing the product's accessibility.
The company has secured several strategic supply agreements for IHEEZO, positioning it for increased market penetration, especially among retina specialists.
Harrow Inc's balance sheet remains strong with $76 million in cash and cash equivalents, bolstered by strategic divestments adding $5.5 million to their cash position.
Negative Points
Harrow Inc faces risks and uncertainties related to FDA approvals and commercial availability of their products, which could impact future performance.
The company experienced a material impact on sales due to the Change Healthcare cyber-attack, with a significant financial hit in the millions of dollars.
There is ongoing uncertainty with Medicare Part D coverage for VEVYE, with full coverage not expected until Q1 of 2025.
The company's gross margins are currently in the mid-70s percentage range, with a target to reach the low 80s by year-end, indicating potential challenges in achieving higher profitability.
Harrow Inc's reliance on the successful pull-through of strategic accounts and new product launches like VEVYE and IHEEZO to drive future revenue growth, posing execution risks.
Q & A Highlights
Q: Could you talk about VEVYE, it looks like you made some strong progress on covered lives. How does your outlook for the balance of the year on the covered lives and remind us how things look with Medicare and CMS? A: Mark Baum, CEO of Harrow Inc, explained that the number of covered lives for VEVYE increased from about 40 million to over 150 million in less than two months. He anticipates this number will continue to rise through the next year. Coverage for Medicare Part D is expected to take about 18 months from launch, aiming for Q1 2025. Baum expects to report further improvements quarterly.
Q: Any comment on margins or margins at all as far as gross margins for '24 and how you expect them to fold out or any cadence or any guidance on the margin side for the year? A: Andrew Boll, CFO of Harrow Inc, noted that core gross margins are expected to be in the mid-70s, potentially rising to the low 80s by year-end. This increase is anticipated as revenue growth is expected to be driven by branded products, which have higher gross margins compared to compounded products.
Q: Was there an impact on revenues for Q2 from the Change Healthcare cyber-attack, and if so, is that impact going to be seeping back in for Q3, or from Q1 to Q2? A: Mark Baum acknowledged a significant impact on Q1 sales due to the cyber-attack, estimating losses in the millions of dollars. However, he noted improvements in March and April, indicating that the effects are diminishing and the company is recovering well into Q2.
Q: Could you talk about the top line and its cadence for 2024. Anything to guide us on as far as quarterly readout? A: Baum stated that while Harrow Inc does not provide quarterly guidance, they expect revenues to exceed $180 million for 2024. He expressed confidence in achieving this target, especially with the promising performance in Q2 and various upcoming activities.
Q: Can you provide some insights into the supply agreements with the seven large multi-practice organizations? A: Baum explained that these agreements vary, with some being essentially licenses to hunt, requiring authorization for physicians to order and purchase. Others include volume discounts and incentives. He emphasized the importance of these agreements for market access and the company's efforts to ensure effective order pull-through.
Q: Could you provide a little color on your pricing realization, in particular for the two E branded drugs and what you're seeing and how that impacts in your performance so far with those products? A: Baum discussed the average selling price (ASP) for IHEEZO and VEVYE, indicating satisfaction with the current figures, which are ahead of internal expectations. He noted that more data would provide greater visibility into ASPs publicly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
