HROW · Harrow Health, Inc.

Period Performance

Harrow reported total revenue of $272.3 million for 2025, a 36.4% increase from $199.6 million in 2024. The growth was driven almost entirely by the Branded segment, especially VEVYE (cyclosporine) and IHEEZO (chloroprocaine gel), which together contributed $170.0 million, up from $77.4 million in 2024. VEVYE net sales more than tripled to $88.7 million as the company expanded commercial coverage and patient access programs. IHEEZO grew 65% to $81.3 million, benefiting from increased adoption in retinal and office-based procedures. Other branded products, including legacy Santen and Novartis products, declined 33% to $25.3 million, primarily due to product lifecycle and competitive dynamics. ImprimisRx revenue fell 8.3% to $76.5 million as Harrow discontinued compounding of Klarity-C and Klarity PF under Project Beagle, transitioning patients to branded alternatives.

Gross profit rose to $204.4 million (75.0% margin) from $150.4 million (75.3% margin) a year earlier. The slight margin compression was due to a mix shift toward Branded products with higher amortization of acquired product rights and increased royalties. Branded gross margin remained strong at 81.0%, while ImprimisRx gross margin dropped 710 basis points to 59.9% due to lower manufacturing efficiency and unfavorable product mix.

Operating expenses increased to $173.9 million from $141.5 million, largely driven by a $23.9 million rise in SG&A (primarily higher payroll and marketing) and an $8.7 million increase in R&D, which included an $8.5 million non-recurring charge from the acquired in-process R&D related to the Melt Pharmaceuticals acquisition. Income from operations swung to $30.5 million, compared to $8.8 million in 2024, representing an operating margin of 11.2% versus 4.4%.

Net loss improved to $5.1 million ($0.14 per share) from $17.5 million ($0.49 per share) in 2024. The improvement was partly offset by a $7.8 million loss on early extinguishment of debt and a $3.8 million income tax expense (compared to $0.2 million in 2024).

Balance Sheet & Liquidity

Cash and cash equivalents stood at $72.9 million as of December 31, 2025, up from $47.2 million a year earlier. The company had $243.2 million in notes payable (net of discounts), primarily the $250 million 8.625% Senior Notes due 2030 issued in September 2025. No borrowings were outstanding on the $40 million revolving credit facility. Total assets grew to $399.5 million from $389.0 million, driven by a $12.7 million increase in intangible assets (net of amortization) and higher cash. Stockholders' equity fell to $52.1 million from $69.3 million, mainly due to $25 million in shares withheld for tax settlements and the net loss.

Cash Flow Quality

Operating cash flow was $43.9 million, a dramatic turnaround from negative $22.2 million in 2024, driven by improved earnings and active working capital management (notably a $5.0 million reduction in accounts receivable). Capital expenditures were modest at $0.9 million, resulting in free cash flow of approximately $43.0 million. The company used $230.9 million to repay existing debt and raised $244.4 million from new debt issuance, net of costs. Share repurchases were limited to shares withheld for tax obligations ($25.0 million).

MD&A / Forward View

Management attributed 2025 performance to successful commercialization of VEVYE and IHEEZO, supported by expanded sales teams and patient access programs (VEVYE Access for All, Harrow Access for All). The company also advanced its pipeline: BYOOVIZ (ranibizumab biosimilar) and BYQLOVI (clobetasol suspension) are expected to launch in mid-2026, and OPUVIZ (aflibercept biosimilar) in mid-2027. The Melt acquisition closed in November 2025, adding MELT-300, a non-opioid, non-IV sublingual sedation candidate with NDA submission targeted for the first half of 2027. Harrow also launched Project Beagle to reduce its compounded formulary and transition patients to FDA-approved alternatives. The company projects operating income and/or net profitability in 2026, though specific guidance was not provided.

Notes & Operating Detail

• Segment Detail: Branded segment contribution was $53.5 million (27.3% margin), while ImprimisRx contributed $15.1 million (19.8% margin). Corporate expenses totaled $37.2 million, and corporate R&D (including Melt in-process R&D) was $0.9 million.
• R&D Expense: Total R&D of $20.9 million compared to $12.2 million in 2024; the increase primarily reflects the one-time Melt acquisition charge.
• Intangible Assets: Net intangible assets were $175.2 million at year-end, with $17.0 million in amortization expense. Goodwill remained unchanged at $0.3 million.
• Debt Refinancing: The $250 million 8.625% Senior Notes due 2030 were issued with net proceeds of $242.7 million, used to repay the Oaktree loan ($107.5M), 2026 Notes ($75M), and 2027 Notes ($40.25M), along with exit costs and make-whole premiums. The 5/3 Revolver ($40M) remains undrawn. As of December 31, 2025, the fixed charge coverage ratio covenant was satisfied.
• Stock-Based Compensation: Total stock-based compensation was $12.5 million in 2025, down from $17.6 million in 2024, primarily due to lower performance stock unit expense as prior PSUs vested.
• Concentrations: Two customers represented over 10% of Branded revenue; three customers accounted for 90% of accounts receivable. Two suppliers made up 54% of manufacturing supplies purchases.