Earnings Call Transcript - HROW Q1 2026

Operator, Operator

Good morning, and welcome to Harrow's First Quarter 2026 Earnings Conference Call. My name is Michelle, and I will be your operator for today's call. As a reminder, this conference is being recorded. I would now like to turn the call over to Mike Biega, Vice President of Investor Relations and Communications for Harrow. Please go ahead.

Mike Biega, Vice President of Investor Relations and Communications

Thank you, operator. Good morning, and welcome to Harrow's first quarter 2026 earnings conference call. My name is Mike Biega, Vice President of Investor Relations and Communications, and I'm excited to be introducing today's call. The company's remarks may include forward-looking statements within the meaning of federal securities laws. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond Harrow's control, including risks and uncertainties described from time to time in its SEC filings, such as the risks 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. Harrow's results may differ materially from those projected. Harrow 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. Joining me on today's call are Mark L. Baum, Chief Executive Officer; Andrew Boll, President and Chief Financial Officer; Pat Sullivan, Chief Commercial Officer; and Amir Shojaei, Chief Scientific Officer. With that, I would like to turn the call over to Mark. Mark?

Mark L. Baum, Chief Executive Officer

Thank you, and good morning, everyone. To begin, as a growth-oriented business, the fuel for our success is and will always be demand. Without buyers seeing value in Harrow's products, ordering and reordering them, we wouldn't have a business. So demand is the key. And from that standpoint, the underlying fundamentals of Harrow have never been stronger. While the headline revenue number this quarter reflects a specific isolated dynamic, let me be clear to my fellow stockholders, our data demonstrates that demand for our key growth drivers is accelerating. Further, our market share capture is sustainable and will translate into profitable revenue growth. The $8 million revenue reduction in the first quarter was specifically tied to VEVYE. As detailed in my letter to stockholders, the surge that we saw in demand from patients with high deductibles from this new band of commercial coverage that we were so excited about, it just outpaced our initial financial modeling assumptions. Andrew will discuss this in greater detail shortly. However, we identified this issue. We corrected it. And importantly, our fix to return to our net pricing assumptions has shown negligible impact on the underlying new prescription VEVYE demand. That's the key. With the high deductible season largely behind us and new business rules in place, we expect to realize the full financial benefit of our expanded coverage moving forward, starting in the second quarter. I want to go back to demand, though, because a lack of demand in the face of a concerted commercial effort is nearly impossible to remedy. Across our portfolio and specifically with our key growth driver products, we do not have that problem. In fact, demand trends are strong, even for what is traditionally a weaker first quarter period due to standard industry seasonality. Moreover, you've probably seen on LinkedIn that we've hired more than 90 new sales professionals. So our promised commercial investments, that is doubling our sales forces in dry eye and surgical and bolstering other teams, are complete. We are now entering a period where the work we've been doing over the past several years is translating into meaningful sustained growth in demand, and this will in turn convert to revenue. Across VEVYE, IHEEZO, and TRIESENCE, our core growth drivers, we are seeing strong durable demand trends that are at or above our internal expectations. And in our business, once again, operational issues, they can be fixed. A lack of demand cannot. Let me provide some additional color on a few key products. On VEVYE, we are seeing record prescription growth, continued market share gains and increasing prescriber adoption. The product has now reached a highly meaningful position in the market, having officially surpassed XIIDRA in total prescriptions as of the end of March as we continue to close the gap with other category leaders. Crucially, this happened with half the number of reps we now have deployed. We are positioned to see this momentum accelerate, especially as we continue to successfully gain additional positive coverage changes, which we expect over the next 12 to 18 months. I'm especially pleased that more recently, we are seeing higher daily new prescription highs and higher lows. Breaking demand trend lines for a chronic care product to the upside is a very good thing. IHEEZO demand continues to build across both retina and in-office accounts. We're seeing record numbers of new accounts, and this trend has continued into the second quarter. We are still early in unlocking the full opportunity here. And as we move into the second half of the year with improved pricing, new packaging and upcoming clinical data specific to IHEEZO in retina procedures, we're positioning IHEEZO for a step change in growth. TRIESENCE is also demonstrating the kind of consistency that we expect. Even in what is typically a more challenging seasonal period for surgery, demand continued to grow sequentially with increasing adoption and strong reorder behavior. These are clear indicators that the product is gaining traction in clinical practice. Following my recent time in the field with several large new TRIESENCE accounts, it is clear to me that our expansion into the surgical inflammation market is bearing fruit and will be a part of our long-term revenue growth strategy. Our Access+ cash pay business, which includes both our branded and compounded products, having successfully worked through prior inventory constraints, is also on track. We are currently increasing safety stock and expanding the Access+ sales team, positioning this team to enter growth mode so we can deliver essential, affordable cash pay products that our customers rely on. As Pat will discuss shortly, these are the exact demand trends we look for across our portfolio: growing demand signals, expanding account adoption and improving execution, leading to greater breadth and depth within those accounts. As I look at Harrow today, I've never been more confident about where we are or where we're going. Simply put, the business is positioned beautifully for the balance of this year and has never been more valuable. A few more points on the second half setup though. One, as I mentioned, we made targeted high conviction investments to scale our commercial platform and unlock the full potential of our portfolio. We recruited top talent to Harrow. That work is now complete. We've built the commercial infrastructure, expanded our reach and attracted the exact kind of talent that wins in this industry. What that means is straightforward. We now have the engine in place to convert the demand that we're seeing into sustained revenue and profitability performance. As we move forward, several factors support strong and sustainable growth. First, our core products operate in large, underpenetrated markets with significant runways ahead. These are not short-cycle opportunities. These are durable growth platforms. Second, awareness is building. New account starts are accelerating. Breadth and depth within accounts are expanding, and these factors drive the value of our products within our customers' practices in a highly meaningful way. Third, refill rates and reorder rates that are at or above our internal estimates support bullish demand metrics for our key products. And fourth, the most challenging part of the year is behind us. Some of you have heard one of my mantras, and that is that at Harrow, we're not interested in mere activity. We celebrate economic accomplishment. We focus on economic accomplishment. And as we move through the balance of 2026, we expect to see accelerating momentum as our commercial investments fully translate into financial results or economic accomplishment. The nonrecurring VEVYE revenue modeling dynamic does not change Harrow's trajectory. If anything, it reinforces how powerful the underlying business is and what can come from VEVYE, especially as these new patients refill their prescriptions in a profitable way for our stockholders. We are executing, building momentum and it is clearly showing in the demand data. Because of this, underlying demand is tracking in line with or above our expectations. And therefore, we're fully reaffirming our 2026 revenue guidance of between $350 million to $365 million for the full year. Furthermore, this accelerating commercial engine underpins our unified corporate initiative to achieve $250 million in quarterly revenue by the end of 2027. I will now turn the call over to Andrew Boll, our President and Chief Financial Officer. Andrew?

Andrew Boll, President and Chief Financial Officer

Good morning, everyone. For the first quarter of 2026, we reported consolidated revenues of $44.2 million and adjusted EBITDA of negative $12.7 million. As we previously communicated, Q1 was expected to be the lowest revenue quarter of the year. This reflects several factors, as expected: a minimal GAAP contribution from IHEEZO as channel inventories absorbed, and softer revenue from the compounding business as we worked through prior inventory constraints. Breaking down Q1 performance by product, VEVYE generated about $20.9 million in revenue. IHEEZO contributed $1.9 million, in line with expectations. Our specialty and TRIESENCE portfolio delivered $7.8 million and Access+ revenue was $13.5 million. As Mark noted, during the quarter, we experienced a gross-to-net modeling dynamic related to the VEVYE coverage rollout, which resulted in a discrete reduction of reported revenue by approximately $8 million. To provide additional financial context, ahead of the January 1 coverage launch, we implemented business rules based on specific assumptions regarding patient mix and patient out-of-pocket costs. While January net pricing tracked in line with our forecast, the mix shifted sharply as the quarter progressed. We saw a significantly higher-than-anticipated proportion of high deductible patients filling prescriptions through their pharmacy benefit and our average out-of-pocket buydowns increased rapidly. This growing utilization drove incremental gross-to-net pressure beyond our internal assumptions, resulting in lower realized net revenue per unit for the period. Due to the standard industry lag in claims reporting, the full magnitude of this mix shift was confirmed in mid-April. We acted immediately, implementing targeted business rule changes, including strict caps on co-pay buydowns and other program refinements to protect our net pricing going forward. These program changes have isolated this to be primarily a first quarter issue, and we are now well positioned to receive the complete economic benefit we expect from our expanded coverage moving forward beginning in Q2. Based on updated modeling and what we have seen through April, net pricing is much better aligned with our internal expectations and should be notably higher than in the first quarter. Importantly, early indicators prove these changes have not negatively impacted underlying demand or patient access to VEVYE. Given these adjustments and current demand trends, we expect VEVYE to deliver sequential growth and remain fully on track to exceed our $100 million revenue outlook for the year. Looking ahead to the second quarter, we expect total revenues to be in the range of $71 million to $81 million. At the product level, VEVYE is expected to show sequential growth. We should see IHEEZO revenue start back in Q2, though likely still below prior year levels due to channel dynamics and dependent upon stocking levels associated with our new 5-pack presentation. We will also begin to recognize initial revenues from BYOOVIZ as distributors take on initial stocking orders. As Mark already stated, we are reiterating our full year 2026 revenue guidance of $350 million to $365 million. Based on current demand trends and customer interactions, we expect the second half of the year to be even stronger than initially anticipated. We have clear visibility into several catalysts that support this robust second half, including continued growth in demand across our core commercial drivers, full deployment of the expanded VEVYE sales force with a modest impact in Q2 and a highly meaningful contribution beginning in the second half of the year; realization of the full financial benefit from expanded coverage for VEVYE following our mid-April business rule adjustments; the commercial launch of BYOOVIZ on July 1; the permanent J-code for IOPIDINE 1% becoming effective July 1, potentially expanding utilization in the in-office procedural setting; an approximate 20% to 25% improvement in IHEEZO net pricing, along with the introduction of multiunit packaging beginning in Q3; upcoming clinical milestones for IHEEZO, including initial retina data at the ASRS meeting in July and top line results from the QUELL study in the fourth quarter; and finally, continued growth in TRIESENCE, building on momentum in ocular inflammation with a dedicated sales force that recently doubled in size. Taken together, these drivers give us high confidence in accelerating growth and improved financial performance as we move through the remainder of 2026. I'll now turn it over to Chief Commercial Officer, Pat Sullivan.

Patrick (Pat) Sullivan, Chief Commercial Officer

Thanks, Andrew. Good morning, everyone. I will detail the commercial execution across our portfolio. The thread that runs through every one of these slides is exactly the same. Demand is accelerating, access is improving, and our scaled commercial organization is now actively converting that demand into revenue. Starting with VEVYE. The four numbers at the top of this slide tell the demand story. New prescriptions grew approximately 25% sequentially. Total prescriptions grew about 11%. Our prescriber base expanded by another 12% sequentially, and we exited March at roughly 14% branded share, officially surpassing XIIDRA on a monthly TRx basis and steadily gaining ground on MIEBO. Crucially, all of this was achieved with a smaller sales force of fewer than 50 representatives. Now that we have doubled the VEVYE team, we are aggressively deploying these new reps into both uncovered and underserved territories, which will directly fuel further growth in NRx and TRx. This is happening in a market that has real underlying tailwinds. The dry eye category has grown 20% year-over-year in prescription volume in each of the last two years, and VEVYE was effectively the only branded product to grow in Q1. We are actively taking share in an expanding market, and that is the absolute cleanest signal you can get that the brand is winning on its own merit. Moving to IHEEZO. Demand continues to build. Unit demand grew 18% year-over-year. New ordering accounts increased 21% in the quarter and total accounts are up nearly 50% versus last year. Retina remains the core driver, representing over 80% of volume and the momentum we saw in Q1 has continued in the early part of Q2. Interest in IHEEZO continues to build with demand increasing and new accounts continuing to come on board. There is substantial runway ahead within the retina market, and we are starting to see early and encouraging signs of adoption in the in-office setting. That expanding interest across settings reflects growing physician familiarity and confidence in the product and reinforces our view of the broader long-term opportunity for IHEEZO. Looking ahead, this growth story is driven by two engines: continued momentum in retina; and expansion into the broader in-office market. What underpins both is a very strong refill dynamic. Once a practice adopts IHEEZO, they continue to reorder. We also have four distinct catalysts that will drive the next step change in growth. First, expanding into the full in-office market adds more than 2.5 million procedures to the addressable opportunity. This expansion is underway and off to a strong start. Second, the first available retina-specific clinical data begins reading out in July, followed by additional data in the fourth quarter, which is designed to accelerate adoption. Third, we are launching multiunit packaging tailored for high-volume practices. And fourth, we expect a meaningful improvement in net pricing in the second half of the year. These four catalysts completely underpin our conviction in IHEEZO's accelerating trajectory from Q3 onwards. On TRIESENCE, the headline number is 136% year-over-year unit volume. March alone was up 113% year-over-year. This is now our sixth consecutive quarter of demand growth and unit demand has grown roughly 250% over those six quarters. The composition of this growth matters. Forty-four percent of Q1 volume came from the ocular surgery accounts, and we expect that segment to drive the majority of new volume going forward. New account growth was approximately 28% sequentially. We are seeing increasing integration into the procedural workflows, particularly among cataract surgeons, driven by the product's ability to simplify postoperative care and improve the patient experience. That value proposition is directly translating into reordering. In addition, our label expansion study in cataract surgery and pain is underway, which is positioned to materially expand the long-term opportunity. This slide is a reminder of the sheer breadth of what sits behind our three lead products. We have one of, if not the largest, portfolios of ophthalmic prescription medications in the U.S. market, spanning specialty steroids, NSAIDs and anti-inflammatories, antihistamines, antibiotics, plus the most comprehensive ophthalmic compounded portfolio in the U.S. market. Two highlights from Q1. We secured the IOPIDINE J-code, which I will cover in a moment, and we are unlocking the value of two additional historically underappreciated assets. Each of these assets is positioned to enter new on-label markets and contribute meaningful incremental revenue. VERKAZIA is the first and only labeled product for vernal keratoconjunctivitis, a devastating form of severe ocular allergies that affects children and adults. Our research clearly shows the degree to which the disease is underdiagnosed. We intend to share our plans regarding VERKAZIA opportunity in the near term. The second is NATACYN, a product for fungal blepharitis and other sight-threatening fungal infections. We are conducting a study for that product, and we'll share more information later this year. Lastly, within our Access+ cash pay business, our supply chain operations successfully cleared the back orders accumulated last year for certain compounded products, rebuilt inventory across the key SKUs and completely restored the operational confidence our customers expect. Let me close on IOPIDINE 1%, the only FDA-approved therapy to prevent intraocular pressure spikes following various in-office procedures, backed by strong, well-established clinical data supporting its use in this setting. Despite that clinical profile, IOPIDINE has historically been underutilized for one specific reason. Physicians have no reimbursement pathway and the product sat as a cost center within capitated fees. That fundamentally changes on July 1 when the permanent J-code takes effect at ASP plus 6%. Physician incentives are now perfectly aligned with evidence-based practice. The addressable market for laser procedures alone exceeds 1.5 million annual use cases. There is no FDA-approved alternative with an established J-code. Critically, IOPIDINE runs through the exact same in-office call point as IHEEZO, meaning we are directly leveraging existing commercial relationships rather than building new ones. We expect this to be a highly incremental, high-margin contributor as we move through the second half of this year. To summarize the commercial picture, VEVYE is taking share in a growing market and now has the access and sales force density to dramatically accelerate. IHEEZO's demand continues to grow sequentially, armed with four independent growth catalysts landing in the second half, alongside continued strength in retina and a highly successful expansion into the in-office setting. TRIESENCE has delivered six straight quarters of growth with a major label expansion in motion. And IOPIDINE hits a critical reimbursement inflection on July 1 that unlocks a market that has been waiting for it. Demand across the entire portfolio is robust, and our commercial organization has never been better positioned to convert it. With that, I will now turn the call over to Amir to discuss the assets we recently acquired from Melt Pharmaceuticals.

Amir Shojaei, Chief Scientific Officer

Thanks, Pat. I wanted to spend a few minutes on G-MELT, our IV and opioid-free procedural sedation candidate. Having spent nearly 30 years in drug development, advancing major global assets, I view G-MELT as a pipeline candidate of the highest caliber. It is uniquely positioned to disrupt standard procedural sedation and positively impact millions of patients. Regarding our clinical and regulatory progress, following the acquisition of Melt, the program's required deliverables included three pharmacokinetic studies and a nonclinical toxicology study. We have successfully initiated all of these programs. The nonclinical study is now in the reporting phase and the first pharmacokinetic study has also been completed and is in the CSR drafting stage. The other two PK studies, the renal and hepatic impairment studies, are both underway, and we anticipate final reports in Q4 2026. On the manufacturing front, our integration and scale-up activities are advancing rapidly. A major manufacturing campaign scheduled for later this quarter will formalize the data package required for our NDA submission. Based on our current trajectory, we remain firmly on track with our targeted timelines. By our next quarterly call, we expect to provide a definitive update regarding our pre-NDA meeting date with the FDA. With that, I would now like to turn it over to our operator for Q&A.

Operator, Operator

Our first question will come from Timur Ivannikov with Cantor.

Timur Ivannikov, Analyst (Cantor)

This is Timur Ivannikov on for Steve Seedhouse. So in terms of VEVYE, could you talk about the gross-to-net adjustment in more detail? And to what extent this was driven by typical seasonality? And maybe what were the major buckets such as co-pay assistance, high deductible buydowns, cash pay economics? And to what extent this gross-to-net adjustment is isolated to Q1?

Mark L. Baum, Chief Executive Officer

Thank you, Timur. First of all, the first quarter typically for Part D products with the deductibles resetting is always a challenging period for these types of products. As we noted in one of our documents, the dry eye category for the first quarter was actually down in total prescriptions. In fact, the branded market was down 18%, in the face of the overall category improving better than 20% for the last two years. But what we highlighted and what I think is important is that our NRx growth, our new prescription growth, was actually up 25% sequentially in the face of a branded market that was down 18%. Our TRx growth was up 11% once again in the face of a branded market that was down 18%. And with CVS specifically, the new benefit manager that we brought on, the new coverage on the commercial side, we were up 170% in sequential growth with that set of plans alone. So we did very well. What I would say is, and I want Andrew to comment on this, is that we had to make a bet with our model in terms of what the likely volume would be for patients with high deductibles. The surge in volume that we saw was so large that it exceeded the modeling that Andrew and his team had done. On the one hand, it's a bad thing to see this $8 million revenue reduction as a result of this. But on the other hand, we do know that we retain these commercial patients for a long time. While we didn't do as well with these patients during January, February and March, we're going to do very well with them on a go-forward basis. Andrew, do you want to specifically add to that regarding gross-to-net in the first quarter and any co-pay assistance?

Andrew Boll, President and Chief Financial Officer

Yes. Timur, thanks for the question. Just to add onto what Mark was saying, as we looked at the average net pricing for these CVS patients in particular, and our out-of-pocket paydown for patients in general, the CVS patients were coming in about 40% higher out-of-pocket buydown amount than any other covered patient for us. When we modeled things, we didn't expect that buydown to be significantly higher for these patients. Once we accumulated all the data and could make a decision based on the trends in mid-April, we adjusted those rules to basically take down the amount of out-of-pocket buydowns that we were putting into that patient bucket. We also made some tweaks that will affect patients on other plans as well, but should improve net pricing. I think it will have minimal impact on that patient's actual out-of-pocket in many cases; in some cases the patient's out-of-pocket will get better based on some of these tweaks we made to the business rules. Importantly, the initial trends show minimal to no impact to demand in the first few weeks of implementing the new business rules. And importantly, we will now go from those CVS patients essentially being on average negative revenue to much more positive and contributing to overall net revenue on a go-forward basis.

Operator, Operator

The next question is from Chase Knickerbocker with Craig-Hallum.

Chase Knickerbocker, Analyst (Craig-Hallum)

Maybe just to kind of ask it directly on VEVYE around ASPs. You had mentioned kind of an $8 million impact if the business rules had been unchanged for the entirety of the first quarter. So as we look kind of in Q2 and onward, I mean, that's about a, call it, mid-30s percent kind of impact. Is that what we should be assuming sort of from an increase and potential increase of ASP or maybe just making sure that I'm thinking about that the right way?

Mark L. Baum, Chief Executive Officer

Andrew, I don't know that we can give a specific answer regarding ASP, but I know you've done some calculations on what the likely improvement is, and it's impressive. Do you want to try and tackle that one?

Andrew Boll, President and Chief Financial Officer

Yes. And Chase, obviously that's assuming status quo. But I think that's a reasonable assumption to assume roughly a 30% increase.

Chase Knickerbocker, Analyst (Craig-Hallum)

Helpful. And maybe you've had a couple of weeks of additional visibility relative to us on kind of the VEVYE data. So far, since those business rule changes, could you maybe give us some commentary as far as what you've seen in recent weeks as it relates to volume, just confirming this isn't having an impact? And maybe around that, Andrew, if you could explain in a little bit greater detail how the out-of-pockets could actually be coming down for these patients with these business changes, respecting the fact that there's a lot of detail here?

Mark L. Baum, Chief Executive Officer

Thanks for that, Chase. In terms of VEVYE volumes in the last 20 days, and I mentioned this in my stockholder letter, we watch new prescription volumes closely. We have a dashboard that gives real-time data. For example, at 4:00 Central we know what the likely total day volume will be because we have a lot of data in our system about the balance of the day as Mountain Time and Pacific physicians begin to write for VEVYE. What I'm really pleased with, and I mentioned this in my opening remarks, is that I am seeing higher highs and higher lows in the last 15 days, especially. I think that's a result of these new reps actually being out in the field, making calls and beginning to bear fruit. That's exciting. In particular, I'm seeing days in the week that are usually lower in volume than other days, and now they are popping up, breaking trend lines and becoming much better days in the week. We're having record days, record weeks and, as I said, higher highs and higher lows. So the work we are doing in the field with this doubling of the sales force is beginning to have an impact. Andrew, do you want to talk about patient out-of-pocket?

Andrew Boll, President and Chief Financial Officer

Yes. And Chase, I'm going to try to speak to this without giving too much detail because a lot of our competitors listen to this call as well. But what I would say is we are going to leverage our VAFA program and cash pay program with some of those patients as well, which, as you know, the cash pay price there is $59 for the product.

Operator, Operator

The next question is from Lachlan Hanbury-Brown with William Blair.

Lachlan Hanbury-Brown, Analyst (William Blair)

I guess, maybe I'll ask one on IHEEZO. Just how should we think about the dynamics in Q2? Is channel inventory sort of largely normalized at this point? And then how do we think about the sunsetting of the current packaging versus the introduction of the new packaging and how that may impact Q2?

Mark L. Baum, Chief Executive Officer

I'll make a few comments, Lachlan, and then turn it over to Andrew. A couple of important data points: in 2025, we saw 30% of our unit volume come from the ASC setting. In Q1, the ASC setting was down to 18%. As I said in the stockholder letter, we should be able to eclipse the entirety of that ASC volume through the in-office sales that we're beginning to see flow by the end of the year. So that's very promising. We've moved to a 5-pack presentation. We've made significant improvements to ASP that will begin to kick in in Q3, and I referenced the figure of better than 20% improvement. I think what our sales force is particularly excited about is finally having some retina-specific data to present to accounts. Everything we've done shows that the vast majority of the market opportunity remains underpenetrated. We believe that this data will help us, and that's showing up in Q2 with record new account starts. That bodes well for Q2, Q3 and beyond, and it supports our reiteration of guidance. Andrew, do you want to talk about the stocking dynamic and what to expect in Q2 versus Q3?

Andrew Boll, President and Chief Financial Officer

Yes, Lachlan. For Q2, we expect IHEEZO revenue to still be somewhat muted compared to the second quarter last year. We're still working through the remainder of channel inventory that was taken in Q4 and the loss of pass-through. But to Mark and Pat's points, we're seeing a big increase in demand, especially on the retina side, with a lot of new accounts coming through. So much of the revenue we book will be below last year in Q2, but we should start seeing revenue increase and get to a more normalized level beginning in Q3 and Q4, especially as we introduce the new multipack option, which we will commercially launch in July of this year.

Lachlan Hanbury-Brown, Analyst (William Blair)

Maybe if I could also ask on IOPIDINE 1% with the new J-code. How should we think about adoption and the market opportunity? Obviously, a lot of procedures out there where it could be used, but as we think about how it changes in terms of the contribution it makes starting in Q3, is that going to be a meaningful driver of the back half, or is it more incremental, especially in light of some of the changes with VEVYE and IHEEZO?

Mark L. Baum, Chief Executive Officer

I would say it will be an incremental contributor on launch in Q3 and Q4. We're more bullish on the contribution showing up in 2027. The J-code is sizable. The laser procedure market, which we quote in terms of TAM, is better than 1.5 million annual procedures, and that is only a fraction of potential use cases. Many in-office procedures can induce a pressure spike, and offices currently use a variety of off-label products that are paid out of capitated fees. The opportunity to use something that is on-label and reimbursable at ASP plus is attractive. We've done market research to validate that. We'll get incremental contribution this year and larger numbers in 2027.

Operator, Operator

The next question is from Tom Shrader with BTIG.

Thomas (Tom) Shrader, Analyst (BTIG)

Kind of one more on VEVYE. Can you give us a remedial rundown of the information flow, why you learned so late, why it took four months for you to get a hint that this problem was going on? Because I feel like you warned on everything this quarter, but then this one hit. And is that solved? And then one quick one on IHEEZO. It's interesting to see you still have 18% ASC use. Do you think that's stable? Do you think that's people who like it enough that are eating the cost? Or is that 18% going to continue to decline?

Mark L. Baum, Chief Executive Officer

I'll take the IHEEZO question first and then ask Andrew to talk about timing. For IHEEZO and the ASC, the IHEEZO business in the ASC is going to go to 0. These ASCs will not be purchasing IHEEZO for procedures in that environment. The unit volumes we had in 2025 from the ASC, which represented 30% of overall volume, are the unit volumes we expect to replace with in-office use cases by the end of the year. So it's a larger number overall and it will contribute meaningfully to our revenue in 2026 and certainly in 2027. We have durable reimbursement in the in-office market — better than 95% coverage and a prior authorization rate that is sub-5% — which is extraordinary coverage in-office and durable. Andrew, do you want to describe in more detail the timing of the work your team did on the business rules?

Andrew Boll, President and Chief Financial Officer

Yes, Tom. I appreciate the question. There's more than one data set we use to assess and calculate these figures: co-pay data, claims data from payers, script data from our partners and IQVIA. As we received that data, we made assumptions. January data came in mid-February and was pretty much in line with expectations, so in mid-February we thought we were in good shape. When February data came in, those numbers were much higher than anticipated. We didn't want to act on a single data point, so we waited to see how March looked. The final accumulation of March data came in mid- to late-April and at that point we knew we had to make changes. We had a final data set that allowed us to act, and we implemented new business rules over a weekend and had them out to partners by Sunday night. We aim to make decisions based on trends and not single data points, and that's what we did. We worked as quickly as possible to get those changes in place. Going forward, we should see much better improvement on pricing for the product, especially in some of these covered scripts we've been discussing.

Operator, Operator

The next question is from Mayank Mamtani with B. Riley Securities.

Mayank Mamtani, Analyst (B. Riley Securities)

Regarding the 100 reps hired in a relatively short period of time, Mark, could you touch on what sort of experience they bring and how you anticipate demand to inflect further as a result of that in the second half? And I don't know if I heard a commercial mix of the total NRx that you're seeing. If you could maybe give a little bit more color on also how these reps can have an impact on improving commercial mix? And I think in prepared remarks, Mark, you said there are some positive insurance reimbursement developments for VEVYE, if you could maybe lay that out in this 12- to 18-month period?

Patrick (Pat) Sullivan, Chief Commercial Officer

Thanks, Mark. Thanks for the question. This is all about demand and the indicators are very positive. As Mark mentioned, we delivered growth in Q1 with a smaller team of 50 representatives. The expansion's recruitment approach focused on candidates with ophthalmic experience in their exact areas. We recruited reps with relevant experience on the anterior side that will position us well against competitors. We're excited about the team; they've only been out a few weeks and early Q2 indicators are positive. We took a diligent approach to recruiting the right reps and put them through a rigorous program so they could have immediate impact. The signs are very positive and we expect ongoing growth acceleration from this unique profile. More to follow in Q2 on their progress with customers.

Mark L. Baum, Chief Executive Officer

Mayank, on how you improve the commercial mix, one of the things I like most about Pat is he believes strongly in incentives. What you incentivize, you end up getting. We value a commercial covered prescription more than a cash pay consignment prescription in terms of economic value. Pat supports that. Regarding new insurance reimbursement and coverage, the team is actively pursuing those opportunities and we expect to see improved coverage over the next 12 to 18 months. We can't be more specific about which benefit managers or payers at this time, but we do believe we'll have meaningful coverage wins over the next 12 to 18 months and we'll notify stockholders when they occur.

Mayank Mamtani, Analyst (B. Riley Securities)

Great. And then on the IHEEZO growth catalyst for the second half, I appreciate the color on which ones are demand versus net pricing improvement related. But I was just trying to understand the full year revenue target for that brand because the second half revenue uplift needed to get to the full year target. If you could help us understand how you get to the second half number across the different parts of your portfolio, that would be helpful.

Andrew Boll, President and Chief Financial Officer

Mayank, in the second half you also get a new product, BYOOVIZ, which we expect to have a meaningful contribution. IHEEZO we expect from a revenue perspective to be close to last year's number, hopefully exceeding it depending on demand. VEVYE revenue will continue to ramp quarter-over-quarter, and we hope to see a meaningful improvement in Q2 over Q1. In the second half, we expect to see the benefit of the sales force expansion accelerating unit volumes and net pricing stabilizing on VEVYE. Additionally, attention to other products this year—VERKAZIA, NATACYN—along with IOPIDINE with the J-code, should contribute. The Imprimis compounding and Access+ business is out of the inventory issues from Q4 and Q1 and should return to a growth trajectory, more sequential quarter-over-quarter than year-over-year.

Operator, Operator

The next question is from Thomas Flaten with Lake Street Capital Markets.

Thomas (Tom) Flaten, Analyst (Lake Street Capital Markets)

Just to confirm on the sales force expansion. In your letter, you talked about hiring about 100 people. If I'm understanding, 50 of them went to the VEVYE sales team to double that team. How was the distribution of the balance of those new hires allocated? Was it all to the retina team or should we understand something else?

Mark L. Baum, Chief Executive Officer

Thanks, Tom. I'll clarify. We hired about 50 new reps for the dry eye team. We also tripled the sales force for TRIESENCE; that organization is now three times the size it once was. We've made incremental hires in retina and decided to bolster the Access+ team. VERKAZIA and NATACYN historically had limited dedicated sales and promotion; pre-Harrow they had inventory and distribution problems. We built out a specialty team around those products and that team makes up the balance of the roughly 100 hires. We'll share more about VERKAZIA in the coming weeks; I'm excited about it. It has strong pricing, excellent clinical efficacy, particularly for pediatric patients, and it's the only cyclosporine labeled for pediatrics. We plan a meaningful push in that category.

Thomas (Tom) Flaten, Analyst (Lake Street Capital Markets)

Previously you mentioned pulling the G-MELT submission earlier. I heard early 2027 today. Is there a chance that could get pulled forward and should we think about an early '27 NDA submission for G-MELT?

Mark L. Baum, Chief Executive Officer

Right now, think about a Q1 2027 submission. We're working hard to complete the remaining data and assemble the dossier. By our next conference call, we'll have more information and may be able to specify whether we can submit at the end of the year. If we did, it would be very late in the year. The potential for G-MELT is extraordinary; I believe it may become one of our largest-selling products by revenue. All of the high-risk work is behind us; the remaining work is lower risk data gathering. We're excited to meet with the FDA in a pre-NDA meeting and we'll have more information in August at our next call.

Operator, Operator

The next question is from Yi Chen with H.C. Wainwright.

Yi Chen, Analyst (H.C. Wainwright)

Could you comment on whether BYQLOVI has already been launched and whether your current full year revenue guidance includes sales of BYQLOVI and BYOOVIZ?

Mark L. Baum, Chief Executive Officer

Thank you, Yi. On BYQLOVI, if by launch you mean trade launch and sales, the trade portion—actual sales—will begin in the third quarter. Strictly speaking, samples are already being distributed to select customers; there are several thousand samples out. We'll continue sampling and engage customers over the next couple of months ahead of the trade launch. BYQLOVI is a best-in-class topical steroid and the topical steroid category is large. The trade launch begins in Q3. The numbers we're quoting for guidance are inclusive of BYQLOVI.

Yi Chen, Analyst (H.C. Wainwright)

Can you also comment on how much contribution you expect these two drugs to make beyond 2026?

Mark L. Baum, Chief Executive Officer

We are not providing product-level revenue guidance publicly for BYQLOVI or BYOOVIZ at this time. We have internal models, but we're not prepared to disclose expected revenue contribution for this year or next at a granular product level.

Operator, Operator

I show no further questions at this time. I would now like to turn the call back over to Mark for closing remarks.

Mark L. Baum, Chief Executive Officer

Thank you, operator, and thank you all for joining us today. Let me close with what matters most, and that is Harrow's demand strength is stable. It's a foundation that supports my confidence in our future. With the high deductible season now behind us, we're moving into a period of accelerating growth and execution. The first quarter included a discrete issue that we have resolved, and that does not impact the long-term trajectory of this business. We spent the past several years building this platform, expanding access, scaling our commercial organization, and positioning our portfolio for growth. That work is largely behind us. We're now entering a period where the foundation translates into sustained revenue growth and increasing profitability. Looking ahead, we have clear visibility into the drivers of our performance from improving access and pricing to new product contributions and clinical milestones. Beyond that, we're actively shaping our next five-year strategic plan with a clear path to scale our core assets, unlock additional value across the portfolio and hopefully complete some accretive and exciting acquisitions. When I step back, this is a stronger, more scalable and, in my view, a more valuable company than at any point in our history. We truly appreciate your continued trust and support. Thank you, and this will conclude our call.

Operator, Operator

This concludes today's conference call. Thank you for participating, and you may now disconnect.