Earnings Call Transcript - HROW Q2 2024

Operator, Operator

Good morning and welcome to the Harrow Second Quarter 2024 Earnings Conference Call. My name is Josh 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. As a reminder, this conference is being recorded. I would now like to turn the call over to Jamie Webb, Director of Communications and Investor Relations for Harrow. Please go ahead.

Jamie Webb, Director of Communications and Investor Relations

Thank you, operator. Good morning, and welcome to Harrow second 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 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. Additionally, Harrow refers 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. A reconciliation of any non-GAAP measures with the most directly comparable GAAP measures is included in the company's earnings release 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 L. Baum, and Harrow's Chief Financial Officer, Andrew Boll. 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 Baum, CEO

Thanks Jamie and good morning and welcome to our second quarter 2024 conference call. Hopefully, you've reviewed our earnings release, corporate presentation, and letter to stockholders, all of which are available on the Investor Relations section of our website. As you now know, Harrow achieved record quarterly revenue of $48.9 million, that's a 46% increase over the prior year quarter and a 42% increase over the previous quarter. Every part of our business contributed to these record results. I believe the data, some of which I will share shortly, demonstrate that IHEEZO is just ripe and we knocked it out of park with VEVYE. Our Anterior Segment business is performing beautifully with revenue increasing by over 40% versus the first quarter of this year. And our ImprimisRx compounding subsidiary achieved its highest quarterly revenue in its history. I'm happy to report that branded revenue is now firmly ahead of compounded revenue. This is now showing up in our margins as they float higher as promised. We expect that branded revenue will continue to dominate overall revenues going forward, and in fact, that this should accelerate. Based on our overall operational momentum, we expect revenue in the back half of 2024 to outpace revenue in the first half of this year, and that's especially true with TRIESENCE relaunched later this year. I remain confident that 2024 revenue will be greater than $180 million, excluding any TRIESENCE’s contribution. And at this point, I believe the question is just how much greater than $180 million we will print. I'll now provide some commentary on the quarter and why we are upbeat about the balance of this year, starting with our retina market products, which consist of IHEEZO and TRIESENCE. IHEEZO quarterly unit volumes nearly doubled, up about 98% from last quarter. We've now signed 24 supply agreements with strategic retina practice accounts this year, including 10 in the second quarter and another seven since June 30. Probably, no, definitely the most exciting statement in my letter to stockholders was the announcement of a recent agreement with the largest and highest volume retina practice group in the United States. This agreement could have a big impact for us. And while it will be phased in over the coming quarters, it should fuel and accelerate IHEEZO growth, and it's a major proof point for the value that IHEEZO can provide to the most respected practice groups in the country. On TRIESENCE, I have a good interim update to share. We are making progress towards the eventual relaunch of TRIESENCE with all initial analytical testing of the second PPQ batch being in specification. In fact, the third PPQ batch is now scheduled for production in a matter of days, actually, to be precise next week. More details on our TRIESENCE relaunch work can be found in my letter to stockholders, including my view of our commercial prospects, which follow meetings with numerous key figures in the retina community at the recent ASRS meeting in Stockholm, Sweden. Moving on to dry eye disease, our dry eye disease franchise, which is anchored by VEVYE, knocked it out of the park, and here's what I mean. Our latest corporate presentation, which provides select data from just PhilRx, that's our VEVYE pharmacy partner, shows total prescriptions in the second quarter of 2024, increasing 212% from the first quarter of this year. New prescriptions continue to roll in and critically, refills remain a major contributor to VEVYE growth with our eighth cycle of monthly refills underway. Keep in mind, this data doesn't include retail pharmacies and other access points for VEVYE, which would increase these numbers markedly. VEVYE prescribers are now about 3,000 strong, and this number grows literally every day. Another key factor driving VEVYE's success is our market access strategy. You see even the most clinically impressive drugs can fall short of their potential, if it's not accessible to patients. VEVYE is currently exceeding our internal market access goals with covered lives now beyond 166 million, and commercial coverage is at approximately 58%, and Medicaid coverage is currently at 80% and expected to reach 100% by the time we report third quarter results. We're particularly pleased with the positive feedback from physicians about their patient successes with VEVYE. Their feedback confirms that VEVYE works quickly, has a longer durability of action, is extraordinarily tolerable, resulting in wonderfully positive treatment outcomes. And here's a shameless plug. Given the number of people on this call, mathematically, there's a good chance that a fair number of you actually suffer from dry eye disease. I want to encourage you to speak to your eye care professionals to see if VEVYE can help you. The proof is in the pudding, especially if you're a Harrow stockholder, patients who have put other cyclosporine in their eyes, including me, family and our friends cannot believe how VEVYE feels. It just feels different, and it works differently in a good way. If you become a VEVYE user, I want to encourage you to please reach out to us, reach out to me and let me know what you think about VEVYE. Because of the VEVYE team's launch success and because we intend to compete for every single opportunity to help a dry eye patient, we are investing by expanding our VEVYE salesforce and opening new territories. We carved the national geography into 59 territories or markets. And currently, we cover only 36 of these markets with feet on the street. I don't worry; our inside salesforce fills the gaps where we don't have people in these markets. And they do a fantastic job, but a shift is underway given our success and assuming we can continue at this current pace with strong demand and geography-specific market access wins, we intend to open up new territories throughout the year. I love what we've done so far, and I really love VEVYE as a product, as you can tell, but we have barely scratched the surface with what we can do and what we intend to do with VEVYE. I believe, and certainly the VEVYE commercial team believes that VEVYE has best-in-class potential in the dry eye disease category. The VEVYE, you don't see nothing yet is a long-term play for us to help unions of people suffering from dry eye disease and we intend to sell more VEVYE in 2035 than we do in 2025. And as stockholders expect VEVYE to be a major driver of cash flow and stockholder value for many years to come. I'll conclude by adding that while the Harrow team delivered great results for the second quarter, executing beautifully, we are laser-focused on the back half of the year, meeting our revenue targets and exceeding them in fact, and seizing the opportunity we see to become North America's leading ophthalmic pharmaceutical company. I believe Harrow's contribution to our customers and their patients is growing, and that Harrow, which we started from scratch not too long ago, is on the cusp of becoming a very special and valuable ophthalmic pharmaceutical company. While we made a lot of progress, we truly are just getting started. We're happy now to answer your questions. I'll pause to have our operator poll for questions.

Operator, Operator

Thank you. We will now begin the question-and-answer session. Our first question comes from Jeffrey Cohen with Ladenburg Thalmann & Company. You may proceed.

Jeffrey Cohen, Analyst

Hey, good morning, Mark, how are you?

Mark Baum, CEO

Good morning, Jeff.

Jeffrey Cohen, Analyst

I got some great quotes much appreciated. So a few questions come to mind. So specific on VEVYE. Could you talk about Medicare? I heard you call out the $166 million covered by 58% in Medicaid at 80%. Could you call out Medicare, or is there any commentary there?

Mark Baum, CEO

Yeah. So we are going through the process of attaining Medicare coverage now. I think when we launched the product, we said that this was going to be an 18-month to 24-month process to get all of the requisite coverage. And we are absolutely pursuing Medicare coverage. We didn't call Medicare coverage out specifically because that's not a part of our coverage universe now. But we are certainly in the process and in an active negotiation process with those plans.

Jeffrey Cohen, Analyst

Got it. Okay, perfect. On the commercial side, could you talk about the size or scope of the VEVYE sales force and then maybe give us a general flavor of the overall commercial size now, perhaps FTEs, and then perhaps what kind of '24 growth and '25 growth on that organization you should anticipate?

Mark Baum, CEO

Yes, so the VEVYE sales force, as I mentioned on the call, we divide the national geography into specific markets, and we only cover a little over half of those markets with feet on the street. The rest of the markets that we don't have discrete individuals covering is covered by our inside sales force. And as I mentioned on the call, they do a fantastic job. However, because of the market access wins that we've had, because of the word sort of spreading, I think, within the ophthalmic community amongst ophthalmologists and optometrists, and the growing interest in VEVYE, we are going to invest in expanding our sales organization. And so the goal is to certainly have all of those markets covered with feet on the street, and I think you should expect that to happen over the coming quarters. It's not going to happen instantaneously. Remember that when we launch products to not only serve our customers and their patients but to also ensure that we don't get over our skis financially. And so we've been able to launch products over the years in a profitable way, in a very disciplined way, and we're going to continue to do that over the coming quarters as we fill out our VEVYE sales organization, which has been remarkably productive. The degree to which this team and their leadership have executed is remarkable, and we're really proud of them and grateful for what they've done. But there's a lot left to be done. We've really just scratched the surface, as I said on the call, and we'll continue to grow the organization in '24 and '25. Andrew, do you want to add to that?

Andrew Boll, CFO

I'll just echo what you said, Mark, about letting sort of the access and revenue drive the sales force and making sure we're not going to get over our skis. That said, I think I said this on the last call, I love VEVYE. We see so much potential from a revenue standpoint, from a long-term value perspective. The refill rate just continues to perform amazingly well for that product, and as Mark said, the leadership on that sales team is just doing a fantastic job. And so as we make investments, I love making investments in that sales force, and we're looking for ways to do that every day. And so it's going to be an exciting product for us for a long time. And certainly, I know the patients are benefiting and we're excited to increase access and increase the patient availability of the product.

Mark Baum, CEO

I think the number one patient that you know about is your dear old dad, Andrew. I mean, your dad is a VEVYE patient who just loves VEVYE.

Andrew Boll, CFO

That's right.

Jeffrey Cohen, Analyst

Got it. I got one more quick one on IHEEZO, if you don't mind. You talked about these in 2024 supply agreements. Can you give us a little taste of what a supply agreement looks like, how many users are associated with the typical supply agreement and any geographical commentary? Thanks.

Mark Baum, CEO

Sure. The supply agreements are essentially licenses to access specific organizations. Many of these groups are supported by private equity and require that to sell to the whole organization, we must contract with its leader. These agreements enable us to enter the individual locations within these organizations and market our products there. However, we need to have people within these organizations who are interested in our products to finalize these deals. Our ability to secure the supply agreements has been driven by the support from physicians within these organizations who advocate for our products, particularly for IHEEZO. With the agreements in place, we will begin to roll out these programs. Recently, we signed a deal with the largest retina practice group in the U.S., which is a significant milestone and opportunity for us. Implementation will take several quarters to ensure the products are distributed throughout these organizations. This is one of the reasons we are optimistic about growing revenue in the upcoming quarters as we fully implement these agreements.

Jeffrey Cohen, Analyst

Super, Mark and Andrew thanks for taking the questions.

Mark Baum, CEO

Thanks, Jeff.

Operator, Operator

Thank you. Our next question comes from Chase Knickerbocker with Craig Hallum. You may proceed.

Chase Knickerbocker, Analyst

Good morning, Mark and Andrew. Obviously, the quarter speaks for itself, but I want to share my congratulations as well on the execution here. Maybe just first, a couple of specific market access questions for me. Can you just share what you would expect the average co-pay to be for Medicaid patients? And then kind of the same question on commercial co-pays are we still doing kind of $0 on the first prescription speaking on VEVYE, of course. And then maybe speak to some of the barriers that might be up on some of those commercial contracts, kind of speak to what steps are there in place? Thanks.

Mark Baum, CEO

Yeah. I'll just comment, and I think it's referenced in the letter of stockholders that we've had some big wins on Medicaid specifically and some very large markets in Texas and certainly in California. As I said in my letter to stockholders, now Medicaid patients have access to VEVYE with zero co-pay. So zero out-of-pocket, which is fantastic for a market of that size. Andrew, do you want to comment on some additional market access information and specifically any barriers and step-edit.

Andrew Boll, CFO

Regarding the Medicaid aspect, this typically varies by state and plan. As Mark mentioned, co-pays are usually very low, sometimes even zero dollars, with many falling into the single digits. This is a significant achievement for the access team. On the step-edit front, we are noticing that some plans require prior authorization, generally for patients who have had previous treatment failures with different products. Fortunately, there is a large market of patients who have tried and failed other options. As you mentioned during the launch of VEVYE, the current dry eye market is lacking effective treatments, which means there are many patients who have not succeeded with existing products. Thus, while prior authorization can be a barrier, our ability to navigate this process is leading to more approvals.

Chase Knickerbocker, Analyst

Got it. That's helpful. And then kind of building off that. How should investors be thinking about Medicare coverage here? Obviously, it's early days, but do you guys have goals for kind of progress there by the end of the year by midway next? I mean how are you guys thinking about Medicare coverage? And then maybe speak to what you would expect there as far as how your market access team is trying to make that as affordable as possible for Medicare beneficiaries for VEVYE?

Mark Baum, CEO

Yes. So to be clear, as I said in my prepared remarks, we intend to compete for every single dry eye prescription and to be able to help every single dry eye disease patient in need, and that includes Medicare beneficiaries. So we are in active discussions and have been for quite some time to be able to serve that patient population. The goal, I think, from the time that we launched the product, we were realistic that it was going to take 18 months to 24 months or so to get all of the coverage in place that we would need for the following many, many years as we grew this product. And so I don't think that there's anything that's changed today from where we had been planning when we launched the product. But we are going after Medicare coverage. We intend to have coverage hopefully in the first quarter or so of next year to have that in place. But I can't really comment specifically on how those negotiations are going because these are very competitive markets for that patient population. And as I said, our goal is to be able to serve that patient population, and we intend to aggressively compete for every one of those patients.

Chase Knickerbocker, Analyst

That makes sense. Regarding the supply agreements for IHEEZO, it's great to see the developments for 2024. Could you help us understand the overall opportunity within those agreements? You mentioned they are licenses to hunt. How extensive is that territory? Whether you prefer to express it as a market share metric or overall revenue potential, please assist us in grasping the overall size of those supply agreements. Thank you.

Mark Baum, CEO

Yes, definitely. Currently, we have several agreements in place, but we haven't disclosed what percentage of the total addressable market these agreements represent. I don't anticipate that we will provide that information. However, I can share some insights to give you an idea of the scale of these agreements. For example, in our most recent agreement, which excites me greatly, we will be serving the largest retina practice group in the US, which handles about 2.1 million patient visits annually. This presents a significant market opportunity, particularly since many of those visits are likely linked to the administration of intravitreal injections. We currently have over two dozen such agreements and plan to support these groups over time. The implementation of these agreements will be gradual, and that’s one reason we are looking forward to the upcoming quarters and years. We have yet to see financial impacts from these agreements, but that change is forthcoming.

Chase Knickerbocker, Analyst

Got it. And just one last question for me before I hop back in the queue. Sorry for the many questions here. But assuming everything goes well, Mark, when do you expect to relaunch TRIESENCE this year, if all goes smoothly with the current batch? I also have the figure of 100,000 units, which is what we had previously in the TRIESENCE market before the supply constraints. How do you plan to penetrate that original opportunity in the first couple of quarters after the launch?

Mark Baum, CEO

The timing for TRIESENCE is that we are set to produce the third batch next week, which is exciting. I want to express my gratitude to the team that has been diligently working for about a year to reach this point; their efforts have been remarkable. We scheduled the third batch because preliminary indications suggest that the second batch has been successful. While we don't have all the data yet, the information we do have is encouraging, and we're optimistic about the additional data we expect in the coming days. If everything goes well with the third batch, it typically takes between 30 and 60 days to receive validated analytical test results. With this timeline in mind, and considering that there’s about 30 days of paperwork involved, we anticipate being able to relaunch the product in the fourth quarter, assuming all goes well. What excites me beyond finally having inventory is the positive feedback from retina specialists and the ASRS regarding TRIESENCE. When discussing potential programs with them, many received negative responses. However, when we mentioned TRIESENCE, almost all the specialists I spoke with—about 15 high-level professionals—expressed enthusiasm about having TRIESENCE back in the market. This gives me confidence that we will be able to sell everything we can produce for an extended period. Currently, we are focused on both preparing for the third batch and collaborating with our contract manufacturer to plan additional batches this year and into the first half of next year based on our product forecasts. TRIESENCE is a strong product, the demand is there, and we have exciting plans for its development not only this year but for several years to come.

Chase Knickerbocker, Analyst

Thanks Mark. Congrats again.

Mark Baum, CEO

Thanks Chase.

Operator, Operator

Thank you. Our next question comes from Mayank Mamtani with B. Riley Securities. You may proceed.

Mayank Mamtani, Analyst

Good morning, team. Congrats on a strong quarter and thanks for taking the question. So before we go into the three growth products, could you just maybe help us understand that 40% growth quarter-over-quarter in the Anterior product business?

Mark Baum, CEO

Well, there's not much to say other than that portfolio of products, which we acquired from Santen and Novartis, so those two transactions that we did make up that portfolio. And as you recall, we, I think, got a pretty good deal when we acquired those products, and our goal was to stabilize them. They have been falling in terms of their revenues for many years before we got involved. And I think not only were we trying to stabilize things but get them back into a growth position. And the thesis was that if we could do that, given the price that we paid and given the long-term need for these products that we would have a financial winner and that we would be able to serve our customers with a very broad portfolio of an amazing toolkit for ophthalmologists and optometrists for many years to come and make a lot of friends in the ophthalmic community with these products to make sure they had access to them. And so that's what we've done. I think we've met our promise there. These products have certainly stabilized. And in fact, from the first quarter to the second quarter, as we said, we had over 40% growth. And to be candid with you, as Andrew told me the other day, the third quarter is looking really good too. So this is turning out to be a very positive transaction. And I think is in keeping with the other transactions that we were able to complete five transactions over the course of a couple of years. I think all of them have worked out really well for our stockholders.

Mayank Mamtani, Analyst

Yes. No, that's great to hear. And then on IHEEZO, if you're able to segment how unilateral versus bilateral procedure proportions could look like. As you know, there are certain forms of treatments that are having side effects in the other eye where you may need a VEGF, and I'm talking about these complement drugs. So I was just curious what's your expectation unilateral versus bilateral? And then also some of these procedures could be retroactively built to January 1. Is that a reasonably interesting number? Or is that relatively small? And then I have a follow-up on VA.

Mark Baum, CEO

Yes. In terms of the retro activity, I wouldn't make a big deal out of that. That's mainly a benefit for our customers to be able to ensure that any issues with billing that were in the past are kind of cleaned up. And that's a good thing from a credibility perspective for us. In terms of bilateral versus unilateral, this is a really big point to make because it's simple math that if you are selling an account 2,000 units a year, and they're only using IHEEZO on one eye and half of the patients are being administered bilateral injections, then you're going to increase your unit volumes with that one account by 50%. And if it's being used on 100% of the patients bilaterally, then your revenues or your unit volume demand is going to double. So it's really easy math. It's good math. But I think the important thing is that the product is really performing well in the clinic. And not only in surgical cases but in laser interventions for glaucoma surgeries. Certainly in intravitreal injections, we're getting very positive feedback, and I think that's where the greatest opportunity for unit demand will be well north of 10 million units per year and growing, especially with these GA products now that are in the market. So we're excited about that market. That's one of the reasons why Greg DiPasquale joined our company. He's already making a big impact. The reason why we have so many of these strategic agreements done and not only done but now we're seeing pull-through purchases through these agreements is because of the great work that Greg and the entire team that's working on IHEEZO is doing. I mean we have a phenomenal team commercially on IHEEZO and they're really producing results, but they're just getting started. This is if you look at the overall market share in, what we're doing versus what we maybe can do. We have, as I said in the letter, just scratched the surface.

Mayank Mamtani, Analyst

Yes. No, absolutely looking forward to the penetration trends, including through the course of this year. And I know you're not going to comment on the proportion of contribution to guidance for IHEEZO. But sort of my other related question is also around VEVYE, net price assumption longer term that we could model here? And also like based on the refill rate, what duration of treatment on average you anticipate patients being on drug would also be helpful just given we are seeing one of your peers materially increase guidance. So just kind of trying to understand what IHEEZO and VEVYE on an annual rate basis, contribution would be and what are some of those at least for VEVYE where we still have to learn more about net price and number of units per patient over the course of the year, if you're able to give some color, that would be helpful.

Mark Baum, CEO

Sure. To clarify, we will not discuss ASP for either VEVYE or IHEEZO due to competitive reasons. In the future, as we report more specific product information, analysts like you will be better positioned to gauge net pricing or ASP for these products. Regarding refill rates or treatment durations, if a patient diagnosed with chronic dry disease starts on VEVYE and refills their prescription, we have observed refill rates that greatly surpass those of our compounded products, which have historically performed well compared to FDA-approved products. Currently, we are on our eighth refill cycle. As we analyze NRx as part of TRx, we expect the NRx percentage of the TRx to decrease over time as more patients refill their prescriptions. This decline isn't negative; it's beneficial. As we increase our sales force in these areas, NRx will continue to expand, leading to a positive compounding effect in prescriptions. Andrew, would you like to add anything?

Andrew Boll, CFO

Yes, I can provide some insights. Earlier, Mark mentioned my father was using VEVYE. I witnessed his first experience with it; he has dealt with various eye issues, including severe dry eye, and has tried numerous products. I still remember the moment he applied that first drop and exclaimed, "wow." It has truly benefited him as a patient and has significantly improved his quality of life. This is one of the reasons we're observing these refill rates; there hasn't been a dry eye product available that offers this kind of benefit. I believe we'll see refill rates continue to rise, and as Mark mentioned, we'll observe more refills contributing to the TRx numbers. We'll also keep engaging with patients and drive new prescriptions. Regarding pricing, a key advantage of our market access program is our focus on profitability. With our successes in market access, we should see an improvement in average selling price. We're currently implementing a robust program to ensure patients get the therapy they need. Overall, our market access initiatives are performing well, leading to positive outcomes, and we can expect the average selling price of the product to improve. As refill rates increase, the average selling price will also rise, especially since many have navigated the prior authorization process and are now having their VEVYE claims covered. There's a lot of positive momentum for VEVYE, and it's one of the products I'm most enthusiastic about, which speaks to its quality. IHEEZO is also an outstanding product, and as Mark mentioned, we’ve experienced significant successes there, making it a key product for us moving forward.

Mayank Mamtani, Analyst

Great. And my final question about your ASRS Meeting at Stockholm. You identified, I believe, some additional strategic opportunities that you're getting to be on the table for now that you have a bigger brand in eye care. Could you just talk to how you plan to prosecute these and obviously, balance against the laser focus that you have with the current product portfolio? And congrats again, thanks for taking my questions.

Mark Baum, CEO

Thank you, Mike. As mentioned in the letter, we are actively seeking exceptional products with solid economics that can enhance our service to customers. Our goal is to be a significant player not only in the broader ophthalmic community but specifically for the doctors in their practices. We aim to support their staff by providing products that simplify their work, are reimbursable, and avoid complications with prior authorizations. We are focusing on products that will help establish our identity as a reputable ophthalmic pharmaceutical company that both our shareholders and employees can take pride in. There are certainly excellent products available, but there are also many that aren’t. Andrew and I collaborate closely on all these deals, consistently searching for opportunities that align with our objectives. However, we are cautious and will not overpay or rush into decisions that could jeopardize our financial stability. Our track record with past deals has been very positive, and we've generated substantial value for our shareholders. We are confident that there are more deals to pursue and are currently evaluating many options, while also being a strong partner offering considerable incentives. I’ll conclude by saying that our commercial team has proven expertise in driving success, whether with Anterior Segment products or those aimed at the Posterior segment. We possess greater credibility now, allowing us to negotiate better terms with potential partners. Nonetheless, our primary focus remains on executing our existing plans. We have a fantastic portfolio, including 17 branded products, and currently hold the top compounded franchise in the US. We have much to accomplish daily, but if we see an opportunity to acquire something valuable at a bargain price, we will definitely consider it seriously.

Mayank Mamtani, Analyst

Makes a lot of sense. Thank you.

Mark Baum, CEO

Thank you, Mayank.

Operator, Operator

Thank you. Our next question comes from Brooks O'Neil with Lake Street Capital Markets. You may proceed.

Brooks O'Neil, Analyst

Good morning, everyone. I appreciate the opportunity to ask a couple of questions. I want to focus on two points. In the shareholder letter, I noticed mention of approximately $11 million in revenue for the quarter from IHEEZO. I understand that the development and commercialization of that product are still in the early stages. Can you provide any insights on reorder activity so far? Are you observing any doctors or practices coming back to reorder IHEEZO?

Mark Baum, CEO

Thank you for the question, Brooks. In the corporate presentation, we indicated that the reorder rate for IHEEZO this quarter is 87%. That's quite positive. However, I tend to be a bit cautious, so I remind our team to consider the remaining 13%. Still, 87% is a solid figure. Overall, we currently capture only about 1% of the total addressable market, which is quite small. However, the doctors who use it appreciate it and are placing more orders. I believe we can enhance that reorder rate beyond 87%, but that’s our current status.

Brooks O'Neil, Analyst

Like you say, 87% is a very impressive number at this stage of the rollout and with 1% of the market, I can even do the math to figure out what the opportunity is and it looks quite large. So my second and last question is just curious about this. Obviously, many times, we see Medicare come through commercial payers come through before Medicaid. It's my experience that our friends in state government are not always the most proactive players. Is there any reason you have been so successful in establishing VEVYE in the Medicaid market? I mean, is there anything unique to Medicaid patients in terms of their proclivity or incidence of dry eye disease? Or what do you think is driving that on the Medicaid side? And I'm guessing that over time, there's a big opportunity in Medicare and commercial as well.

Mark Baum, CEO

Yes. So in terms of what's driving Medicaid, look, I have to say that our market access team deserves a lot of credit from the leadership on down. And so I want to give them that credit because they're the ones when I walk back to Rob's office, he's got a big smile on his face because he's got a big win. I mean, he just loves this stuff. He's a competitive guy, and he loves getting these wins, and he is getting them. And I think it's going to get a lot more. As I said, we're going to have 100% of Medicaid by the time of our next quarterly report. That's what we expect. But as Andrew said, a few moments ago, we have to be profitable. So when we contract, we have to do that in a way that allows us to earn a profit; we take our time. We don't do launch extravaganzas with hundreds and hundreds of reps just right out of the gate. We are patient, and we are deliberate and we're disciplined. And that's the way we do things here. And that's the way we built this business over the last 10-plus years, and that's the way we'll continue to do that. Medicaid, though, is a big, big success for us. We will get Medicare. I do believe certainly this time next year, you'll see that coverage hopefully in place. But we're patient, and we're going to get the right deals done. And ultimately, I think we're going to be able to serve this patient population that will benefit tremendously from VEVYE.

Brooks O'Neil, Analyst

That's great. I have one last question, and I appreciate you taking my questions. It seems to me that for both IHEEZO and VEVYE, many patients are often in their doctor's office or require these medications frequently throughout the year, possibly even every month. Can you provide some insight on this so I can understand the market opportunity a little better, and perhaps other investors can as well?

Mark Baum, CEO

We examine our portfolio and see that on the compounded side, we offer medications that are affordable and preservative-free for patients in need. While they address a chronic condition, these compounded products aren't FDA approved. Our portfolio includes Vigamox, which is an exceptional product, and it serves as an excellent resource for ophthalmologists and optometrists. This range of products has fostered strong relationships with practitioners who rely on them. Although many of these products cater to smaller markets often overlooked by larger companies, we are committed to ensuring they remain available. We strive to keep prices controlled to maintain accessibility and affordability. While we occasionally need to increase prices, we also lower them in certain cases, which is uncommon in the pharmaceutical sector. Our goal is a well-rounded portfolio that addresses both acute and chronic care needs while being a dependable partner to the ophthalmic community. Regarding the market potential for IHEEZO, it is substantial, with over 17 million annual use cases in the US alone and more than 9 million patients suffering from moderate to severe dry eye disease. We aim to make VEVYE a top-tier option, and we anticipate significantly higher sales by 2035 compared to 2025.

Brooks O'Neil, Analyst

Great. Thank you very much.

Operator, Operator

Thank you. I would now like to turn the call back over to Mark Baum for any closing remarks.

Mark Baum, CEO

Hello.

Operator, Operator

I'd like to turn the call back over to Mark Baum for any closing remarks.

Mark Baum, CEO

Terrific. So thanks, again. We're, as you can tell, I think, enthusiastic about the second half of the year. The progress that we discussed is years in the making, and it comes from the efforts of a dedicated team at Harrow. I want to thank all of them, our stockholders, our customers and the entire Harrow family for their contributions and getting us to this place. As a reminder, if you have any investor-related questions, please e-mail Jamie Webb at [email protected]. Thank you. And this will conclude our call.

Operator, Operator

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.