HROW - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Conference Call covering Harrow Health’s Financial Results and Business Update for the Third Quarter 2019. My name is Kate 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. By now, you should have received a copy of the earnings release.

received of please www.harrowinc.com. the not Investor to have page Relations company’s you a go copy, the If website at

we within me remarks let security begin that Before company’s the laws. remind include meanings the you statements of federal forward-looking today,

are time and many company’s Forward-looking as its filings, to are time subject certain of and risks the numerous or manner commercially control, available technologies formulation, drug approval timely make uncertainties to such the Health candidates in ability Harrow’s including to related risks uncertainties at which in a risks statements compounded uncertainties, beyond described all. to FDA and from SEC its and of

of XX-K those with Report description list For the and and a most section of risks on and Reports Securities recent filed subsequent Annual XX-Q please on Form see Quarterly Form uncertainties, Commission. and Exchange company’s the the Factors Risk

materially intention projections update projected. events, results those Harrow may Health or forward-looking otherwise. statements any or revise differ or new whether because disclaims information, Harrow of to future from any obligation or financial

time-sensitive contains only This as information some and is conference of call today. accurate

the reconciliation financial any Harrow earnings. on available refer adjusted adjusted non-GAAP measures A included comparable directly Additionally, EBITDA company’s will measures and/or specifically metrics, press release GAAP non-GAAP to with is most the of in the website.

is to Chief Executive Baum, yours? Mark Officer I that, over Mark, turn like would the Harrow. call With floor the to of

Mark Baum

call today. our joining for you Thank

The best of first in business. quarter ophthalmology XXXX for the of was the company history quarter the

that ophthalmology best company. and core I’m Why? for the the for best more of became of of history the of the proud the ophthalmology quarter business XXXX our XXXX quarter And our history highs quarter provided business. second the in third record today, was in the to report The company quarter

nine the Well, ophthalmology hitting new third QX goal growing record XXXX high $XXX XXXX in a for XXXX, the continued was at year towards with by XX% of up revenue march the in run months our year-over-year, XX% revenue ophthalmology first in versus we our reaching and million rate quarter. and revenue

as to high brought promised, to our rebounded, on year for our months the XX%, we Margins promised a XX% XX% record way the well of first gross of hitting our target. and to nine margins time

have in more today, today, visibility We more clarity we we and less business. have have our volatility

consolidation reached of is Our third with for earnings operational and of quarter, And pharmaceutical continued expenses fourth XXXX segment that record improvements we’ve million. quarter, successful matters to high non-cash-based and record make business. most $X.X a included EBITDA given the clean compounding restructuring ParkRx with and the the slate contributed growth a our alone $X.X and of us, $XXX,XXX. million new litigation in during which behind already various year apparent, Adjusted ourselves

only more we quarter, platform, the fourth not ophthalmology about records, the in paradigm-shifting the potential, in see Stowe months. expected terms to ophthalmology, and We more reveal but can’t wait businesses and Visionology. Pharmaceuticals ImprimisRx, of I within launching of businesses of two them potential have with businesses these will tremendous new in the funding performance become ophthalmology to Both and of new market-leading our in terms coming

a approved in from already drug and Eton for March first opportunity, one development significant their XXXX. as market after had less other IPO milestones expecting other many and much also approval a businesses. of their events drug along than date with larger XXXX We’re value Pharmaceuticals in month, filing year last PDUFA

MAY-XX expected first-half the Phase begin from have for data Melt will XXXX. Pharmaceuticals in And and program a MAY-XX and INDs to Mayfield of for finally, by the candidates We XXXX. their both anticipate and MAY-XX Pharmaceuticals human end the drug is X by Surface clinical of end Pharmaceuticals XXXX of file

in candidates pharmaceutical Health. XX stakes our equity bullish several been ImprimisRx, the drug companies value thriving on potential to catalysts have moving months, and significant that next on I year, continue deconsolidation have streams I efficient more as our as and be creation in ever royalty profitable, most deconsolidated two sustainably a next coming towards subsidiaries With exciting Harrow

we As our which – progress press forward, believe commentary going we more our business. in provide will described letter to a on to release, the provide are and stockholders, going our we color of

we will each session quarter. a course, Of analysts question-and-answer with conduct

without ado, said, let’s further that into with Q&A. jump the And

Operator? our operator have I will Now poll questions. pause to for

Operator

floor comes I’m Thank B.Riley, sorry. first Andrew. open And question now for our you. ahead, questions. [Operator Go from Andrew is – The from R.Riley Instructions] D’silva

Andrew D’silva

on detailed really, Congrats thank for afternoon. much very was you very and helpful. the Good the progress, It letter.

deal Just Can overhead you questions. versus And with prescribing. initiative? pursue guidance being you CMS’ where couple Dropless what quick able start of I’ll give next additional requirements with to physicians? for that are? now have and have any you a to are into And about, should patients are as steps there think insight off we

Mark Baum

if says therapy that explicitly And prescribe patient the a question, They amendment as can have Andy. a about as appropriate under the of Dropless be Amendment the CMS’ Dropless the at potential talk now, for speaks to From it to up drawbacks. if thanks to It their will that the I recent perspective freedom Amendment it for the benefits of have First it’s ultimately And physicians transact. therapy, write the to decide Dropless to and First freedom towards requests. patient itself. policy Well, really far so therapy point, think, and so prescription. the they

by be billing need patient These won’t a What are based transactions that it was billed not individual that, physicians pharmacy. be for transactions patients will prescription, going an physician. clear and CMS hospital, on is CMS center not a also a and is by or billed surgery Dropless therapy. between the be to in

interpretation. our was that so And

of process information extremely and a is to information that a part And question, great prescriptions built your piece technology because take think much second us question the or I really payment considerable service with for requirements, to shipping overhead year-and-a-half without this, we’ve the efficiently interface last of customer so, over agent. allows regarding a up individual

much these today the did and Dropless that policy we prescriptions CMS So towards six efficiently offers the opportunity about we answer in ago, differently is, excited patients. this months we’re amendment as process than can even

Andrew D’silva

transaction we efficiencies now force Okay, us great non-ophthalmology have and some that those now operating to it expenses, – And relates move obviously, have to the to Park? of a New not part you the And going sales the as are expect Park it’s complete? just Jersey. is you. any then non-ophthalmology-related should that transitional to of the Thank color. insight moved give as of business, to over products bit Could operations you into a little quarter

Mark Baum

Yes.

the clear. really additional So expenditures, are – new there no to be

to seven new and sales the jersey able that, the took to On And we facility those the products our the be be be XXXB will the operations. efficiency XXXB shifted hope them side, into volume shipped of actually, Park. We with is from able move products our to highest offers.

from that’s a important, perspective. margin really So think, I

all if without patient-specific buy easier sell believed those prescription to that we’ve that was a products it Also, along would more we units.

revenue so, that can products. sales And increase the for to a it’s after individual are way, recover coming that day-to-day, see months we green and back. on coming of see shoots fruition, an a say in so, to a And much of begun. quarters, to more more from sort would the we we said, expect, by what process now, And the week-to-week, – least those I going worth, and for half potentially coming month half idea the of revenues to expect say certainly or we I’m and out And as has even at not over on this and limb than Park.

Andrew Boll

And per reducing quarter OpEx then end up going should about $XXX,XXX expense operational restructuring on Park forward. side, the about by adding or our the

Andrew D’silva

lot Okay, out. as a Thank it the relates good, to to good. you. And unwind spin

payment Just viewing reimbursement one Melt the saw are and FDA as that CMS had all how I product, it about the non-opioid relates as there, initiatives? of very to just point that. Melt in third-party of my should well your some in it to related Congress, overlap as comments as you we and I to think And general curious and there you relates Thank issues question. any was was interesting much. sort that compound final MKO that’s and is those

Mark Baum

Yes. with that is Andy. approval. Formulation, Conscious obviously, Pharmaceuticals the to Non-Opioid the you, Melt one Sedation a seeking FDA Thank Certainly, is opportunity funded develop

product compounded to that for like reimbursement. the of now Melt. relates prohibits over there it are the version reimbursement the actually dispensed times, we’re a has that MKO the As regulations in that XXX,XXX There’s been pursuing opportunities nothing

when it’s a program we and formulations. to And certainly, so formulation paid it our we’re it’s advisors promises if our about think the our we financials. being and there’s that relates And from happen, were But be regulations, is I it sedation any prohibits important have non-opioid-based to pursuing, can’t that we’re there. in impactful for, that at to certainly we as say But said, as obviously, discussion were looking would said, make and I with as success offer but new. would that, to I we an nothing very to read if It’s it pursuing. that area

Andrew D’silva

the quarter, year. this closing luck Absolutely, Great out well. understandable as good and and execution

Mark Baum

Thank you, Andy.

Andrew Boll

Thanks, Andy.

Operator

And our question Capital. ahead, comes Go O’Neil next Street from from Lake Brooks Brooks.

Brooks O’Neil

doing entire I’m Hi, forward haven’t in letter, great so. chance good place, road, on confess had a I a look the public read the to so afternoon. to but

were you curious about question pricing sort So minute figuring relates are was talking the I out you ago. the with that success your that of a any to you Dropless think if going my really optimize made product? that And progress in first to dynamics

Mark Baum

the for Sure. question, Thanks Brooks.

to bit about it prescriptions. a related really for increase a there suffice an talked publicly. We expensive little say prescriptions, not is those is this more individual certainly, have – that pricing But to process to

I we’re is the volumes. we unit wanting test testing what think, and be that related to the thing coming over will to important quarters

other opportunity looking there tremendous environment that when is family do competitors think so product well. to to very well. doing for see surgical there a ophthalmology this We not We out we’re

very think exciting. it our We’re volume. higher we and increase really would certainly well, now, keep financials that for think we make unit impact it a huge if is the would us modest And to can than doing, price level, a but also that’s and say, allow much I would at I

competing products in much of interested and unit the market in growing have with. the challenges been of very increasing that volumes in share, particularly market light our dealing some we’re So

Brooks O’Neil

going was Great, business. in terms have that lot. key think and you sort obviously, there Are into are of core that’s finishing perfect. up Thanks secondly, call of be you you’d items big to out other the ophthalmology XXXX? in I any to tremendous million business heading to appear curious, the this XXXX a Then driving a for milestone $XXX year momentum towards that

Mark Baum

in the And months double at margins our Look, next we we’ve revenue. growing that to laid hit target eight a quarters mentioned are order I Brooks. rebounding. XX% need mid-XXs, we the nine been clip. Thanks, to over great first out, our essentially in

to We hitting degree high And of areas number that that new be within market, products number get we there. have therapeutic continue have of and are able to new a of be a going ophthalmology business. to confidence we’ll products the the

the in our might that said, hopefully, do to to we essentially quarter revenue. I won’t ophthalmology ophthalmology then. target have think that And we we last the we month make are next be that that double last before wait to week the within during As that of eight certainly tremendous. continue grasp happen. our that to period business quarters, it the And in We need we timeframe. believe are that And of able until of doing our is our areas last

it’s I be worth also our noting value commercial of the But that to platform created. we’ve clear, think

customers. and thousands of thousands We have

SKUs of patients that of that setting. We users have of to so, are chronic who by, hundreds said, important as surgical week and we formulations customers, are in care have formulations. are XX Weekend I of our or the out thousands purchased products thousands

to valuable. go approved And and so come go them. they get sell to try out easy It’s a FDA in. is not we you with I’ve we have and And and to sell for a it’s ideas and that have platform and seen try commercial products, sell think example, of this then to when But someone, challenge. so bit that up easy It’s something very things. develop companies

we the really tremendous our we’re years. regularly us that’s of and helped a One very to And appeal of proud team in over injectable that few hope things the we show products, think is, is we’re has we of And that of that stockholders that. the sterile make of do large we coming and the value lot that next in quarters the a for build audience. products for proud it

Brooks O’Neil

Great.

ask of a is question. just little one this more bit philosophical me Let more and a

two ophthalmology we the related about Surface see and talking at businesses, time, projects, about the we same already. ophthalmology just now XX Stowe platform and know were You new

these about see philosophically to the that your new your these how you next of talk sort Just some thinking extent, which, of businesses, overlap new played again. couple and why base years? over Thanks, out create with companies, business,

Mark Baum

Thank you, Brooks.

I company had to I be focus. bring say for is think urology to do sort focus lost team was on results core a ago, executive it our our the me that in key really themselves. we And of running we business, great ophthalmology important some the and And for to can and our sinus products, for focus. and tried and growing business speak which I ophthalmology did and to a any products years able we for

think it target these As of management with a a have important focused subsidiary it’s we products. to developing to businesses, clear relates team these

And so, really so well. it’s far, worked

by Sean been Melt With is X Greg I data spoke seen the the Eton able Pharmaceuticals, to just have year, we’re terrific really to just at horn. And to Surface over a You’ve grabbing exciting. going next job is that has doing job. bull over at very Hosseini, do Phase who Pharmaceuticals. Kamran the

different once these example, Stowe terrific again at all doing. run but the to, when can very And doing you they’re are or team for that to looking I on we’re Visionology, focused job, specifically enterprises. So they’re what folks tell that the it that a looking comes we’re at

specific philosophically we a want that management on bankable, for of so enterprise. team focused And these issues. we the in the totally financeable strategy how execution that And is approach

Brooks O’Neil

all Keep work. Makes a good ton congratulations. up and of sense. Thanks a lot the

Mark Baum

Brooks. you, Thank

Andrew Boll

Thanks, Brooks.

Operator

And comes from ahead, question our Capital.] from Patrick. Roza Go next [Patrick Razor [ph]

Unidentified Analyst

simplified issues. complementary streamlined also great some the this the I you’ve year of quarter the that the afternoon, and way to do and and wanted on legal Good gentlemen. up Park another disposition with cleaning in story

I had one question.

letter Towards prospects growing the several shareholder capital. you the values, about end list for you talk where of of asset sources

should you currently, forward stack least core the spin-offs the or at in stocks tremendous XX issuing business both thinking growth, and don’t mention we a issue the don’t in despite see the You move need, the that foreseeable Project future? that on

Mark Baum

have certainly, are disinterested our Yes. for you year, to clear of the frankly, management the a why make We lot and Thank question. this on tried reasons diluting we shareholders it last ourselves. we team, year, diluting in

bias against a dilution. have we So

few also seen quarters, just when want or your And profit of don’t get there. there. on make never to I’ve the themselves as I’ve to hand a don’t want companies, sat just side fist, and money, We we raise of table every few go that that every an out get tailspin. they investor, over to months, seem companies

there. aren’t We

need We to have a We great don’t do business. that.

think. eventually, that’s prospects look sheet And be than stock. of think great maybe But of are our we be the sort balance stock We it that want candidly, sellers not would we it. a we our sooner have and to people and And the tremendous, happening way buyers at of bigger and to will. for someday

Unidentified Analyst

types Okay, of great. too for as Well, companies that. seen thanks many of I’ve Unfortunately, well. those

congratulations, up good and So keep the again, work.

Mark Baum

your Thank you support. for

Operator

And we Don. Don from question Go from have a Besser ahead, Manchester.

Donald Besser

in to? Hi. Good you million on spent the afternoon. I related $X.XXX latest R&D noticed XX-Q

Operator

Okay, one? moment. go. Sorry, star Don. one hit just Don, I’ll you him get into can back you There

Donald Besser

Okay, sorry.

R&D formulations, this for a so formulation So $X.XX increase. development you far big million that’s year, of spent on studies

spending what of or that the these the money are some what can products are So you clarify prospects on? these of some you’re

Andrew Boll

is this Andrew. Don, Hey, Sure.

in of on occurred a development actually lot So was QX. spend formulation the last R&D that

in related our some drops. Some of it antibiotic that was of the we ophthalmology to use changing of

are that to though, is R&D the currently. that spin-up related also of spend, Some consolidated businesses

are some we’re the So Mayfield these some we other working works work of development for on. of Stowe and doing and that

Donald Besser

Okay, good. helpful. That’s

Mark Baum

recoup the clear, that these ability be I have are We once – – to do notice. To we obviously, we you get Don, cash. think businesses deconsolidated,

Donald Besser

second Okay. lastly, of extra any million $X the line a SWK? drawn we question. down And from Have

Mark Baum

drawn down have zero. We exactly

Donald Besser

Good.

Okay. Thank you.

Mark Baum

Don. Thank you,

Andrew Boll

Don. Thanks,

Operator

back And Baum. to the yours, no have Mark questions. again. at more floor it this Sir, time, turn to like I’d we is

Mark Baum

new outlook progress again, Thanks, and attending our better insight I this the And shareholders provides for business. the hope format our call the future today. with for of into

questions, have our Jon phone this And is contact number XXX-XXX-XXXX. conclude you Investor-related Relations Patton. any call. If our associate, direct please Investor His will Thank you.

Operator

you. Thank does today’s thank your conclude conference. This for you We participation.

day. You lines may your disconnect wonderful a and time this have at

Harrow Health (HROW) 13 Nov 192019 Q3 Earnings call transcript