Harrow Health, Inc.
Q4 2020 Earnings Call Transcript

Published: 8 Mar 2021

[Operator:]

Good afternoon. And welcome to the Harrow Health’s Q4 2020 Earning Conference Call. My name is John, 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 call is being recorded. I would now like to turn the call over to Jamie Webb, Director of Communications and Investor Relations for Harrow Health. Jamie, please go ahead.

[Jamie Webb:]

Thank you, John. Good afternoon. And welcome to Harrow Health’s fourth quarter 2020 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 Health’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 compounded formulations and technologies and FDA approval of certain drug candidates in a timely manner or at all.

[Mark Baum:]

Thanks, Jamie, and thanks for joining our call today. I would encourage everyone listening to review our fourth quarter 2020 earnings release and letter to stockholders, which was posted on the Investor Relations section of our website just after the close of trading today. Before we begin the Q&A portion of today’s call, I’d like to quickly touch on a few items to provide some additional color on our business since we last spoke in November. The Harrow team showed financial and operating resilience for the fourth quarter of 2020, reflecting a continuation of the momentum we saw in the record setting third quarter of 2020. On both a year-over-year and sequential quarter basis key financial metrics continued to improve despite interim challenges we faced during the fourth quarter related to COVID-19 resurgence and unpredictable weather. We also saw significant progress in terms of major milestones, customer growth, product development and the expansion of our revenue sources. We were pleased to report that total revenues for the fourth quarter were $14.6 million, an increase of 16%, compared with the $12.6 million reported in the prior year period, and slightly up from revenue of $14.4 million in the third quarter of 2020.

[Operator:]

Thank you. And your first question is coming from Brooks O’Neil. Brooks, your lines live.

[Brooks O’Neil:]

Oh! Good afternoon, everyone. That is Brooks O’Neil. But I’m not too offended by the operator. So we’ll just get by that. So let’s start off by talking just a little bit about the COVID resurgence impact in Q4, the bad weather, sort of what you guys are seeing now here in Q1, and obviously, everyone’s focused on what the impact of reopening might be on your business?

[Mark Baum:]

Well, thanks for the question, Brooks. I promise I’ll never call you, Brooke.

[Brooks O’Neil:]

Thank you.

[Mark Baum:]

That isn’t unless you asked me to.

[Brooks O’Neil:]

Right.

[Mark Baum:]

Which -- in which case I will.

[Brooks O’Neil:]

Okay.

[Mark Baum:]

But let’s talk about COVID resurgence. Look, it’s -- we’re about 10 days away from the anniversary of when there were stay-at-home orders, mandatory stay-at-home orders. So it’s been a full year of COVID-19 being in our lives in a major way and certainly in our lives at Harrow, because we’re in the eye surgery business. And to this day, there are many markets that have -- are still impacted. Markets -- particularly markets like California, as an example. And it is the case that many offices around the country are not that -- in states that are open are not operating at full capacity.

[Brooks O’Neil:]

Great. Let me just ask you -- let me just say, I am personally very excited about the shift to an eye-focused strategy. That makes a lot of sense to me. But I’m trying to be sure I understand how you think about Melt and Eton, in particular as assets you hold that do that strike me as consistent with your strategic direction. I’m just curious how you think about handling those assets going forward?

[Mark Baum:]

Sure. I tried to lay this out in our stockholder letter, which I would encourage everyone to read. But we burst if you will Eton and Surface and Melt, because we had really great pharmaceutical assets that we want to develop and we wanted to use external capital to do that, and we wanted manage -- a management team in each instance to focus exclusively on the development of those assets. The upshot for us is that we have a really nice set of assets in terms of equity in those businesses. Eton has kind of been -- it’s gone in a different direction under the leadership of Sean Brynjelsen. He has made that company in his own eyes. And are they in the eye care business? No. Are we really excited about what Sean is building? Absolutely. Are we even more excited that we own 3.5 million shares of that stock? Most certainly. Is it a critical eyecare asset? No, it’s not. But we will decide down the line what to do with our ownership interest. But I’m really happy that Eton is in terrific shape, has great leadership. And the same is true with Surface and Melt. And Melt, by the way, their initial indication for their Melt-100 program is in fact for ophthalmic surgery. So it is very much connected to what we’re doing here in the eyecare world.

[Brooks O’Neil:]

Okay. I’ll just asked one more, Mark. Thank you for taking my question. So, again, I’m excited about the outlook for Visionology and yet you haven’t fully decided to how you might seek to monetize your investment in that platform. But just tell us your sort of current thoughts of do you think you’ll spin that out as a separate company? Will it stay a part of Imprimis? How are you thinking about that right this minute?

[Mark Baum:]

Yeah. So, we developed the Visionology platform, because from the moment we started Harrow, operationally, myself, Andrew, our entire team is 100% customer and patient centric. I mean, we are, as a team, completely obsessed with delivering an amazing experience for customers. And historically, the way that we’ve -- when I say customers, I mean, patients actually, the people who use our products. Our parents, grandparents, cousins, et cetera, who benefit from the innovation that we’ve been able to bring to the market. So we are really focused and I like to use the word obsessed with delivering a great user experience for those people, the end users, the patients and we’ve done that, historically, through institutional customers, hospitals, doctors and ambulatory surgery centers. It is a natural progression of for us to get closer to the end user, the customer and we’re going to do that by partnering with local doctors to deliver an incredible experience and eyecare experience. And that’s really because for the consumer, eyecare really hasn’t changed that much about 50 years and it’s going to change we believe when we roll this business out. In terms of, how we finance it? We have the resources right now to do the work to make this what we believe to be a really valuable business. So we’re going to make the investments at the Harrow level right now and figure out what our customer acquisition costs are and get a better idea of what the long-term expected value is of a new relationship that we create with a patient. And once we have all of that data, we’ll be able to determine better how we ultimately finance the business. But we’re going to be we believe first to market with a platform like this and there isn’t anyone out there, the hims, the hers, the tele docs, the other telemedicine companies are not really in eyecare. But we’re going to hopefully be first to market with an exciting platform and we believe as we roll this out and learn more about how the business operates a very valuable platform, one that will be a subsidiary of Harrow for now.

[Brooks O’Neil:]

Okay. Perfect. Thanks a lot and congratulations on continued progress.

[Mark Baum:]

Thank you, Brooks.

[Operator:]

Okay. Your next question is coming from Andrew D’Silva from B. Riley. Andrew, your line is live.

[Andrew D’Silva:]

Yeah. Thanks for taking my questions and congrats on strong quarter. So we’ll start off with ImprimisRx on that side of the business today. Could you just touch on how initiatives to bring in additional approved branded drugs is going? And then can you give an insight into how conversion from Tri-Moxi to Dexycu is charting? Is that resonating the way, we discussed or what you were thinking previously?

[Mark Baum:]

Sure. And Andy, thanks for the questions. We are -- we have been working on and currently have four active initiatives to bring in either approved products or near approved products under the Harrow umbrella that we can then commercialize through one of our channels and then there are -- there is another service-oriented program that working. So it’s a total of five and they’re at various stages of engagement. Some are quite close, others less so. But we believe that we will get some over the line, can’t guarantee that we’ll get any over the line, but there’s a strong likelihood that we get one of these done and maybe more. And over time it’s not necessarily about even these five programs that we’re engaged with now. It’s really just in the big picture the idea that the platform will benefit, the business will benefit, and ultimately, our shareholders will benefit from bringing on this high value FDA approved products. So we’re very focused there and we’re going to get something done. In terms of the first proof point of that we can actually do that. You mentioned the Dexycu partnership with EyePoint and that -- in terms of conversions of that -- of our Tri-Moxi customers to Dexycu. It does take longer to convert customers. The sale cycle is a little bit longer. But I’m really pleased with the progress that we made, particularly in the fourth quarter, which is really the last couple of months of the fourth quarter, were really the first couple of months that we actually had it. We had our people trained up. They were out in the field making calls. And even in a COVID-19 environment, we did really well and I think EyePoint, we were grateful that they acknowledged that we made a material impact in the fourth quarter. I think that trend is going to continue by the way. I think we’re going to see more and more conversions of some of our customers. And they may not necessarily be just Tri-Moxi customers, but other customers that may want to benefit from what Dexycu offer. So, but it is not like flipping on a light switch. It’s -- it takes time and our team though is doing a superb job and I’m really proud of the job they’re doing. And I think EyePoint is quite happy with the job that we’re doing as well.

[Andrew D’Silva:]

Yeah. Great. Great to hear that. Great insight. I’ll keep on with ImprimisRx, on the regulatory side, I believe there at least recently was guidance tied to the bulk list and then the MoU as well. Any impact to core products, markets and/or how we should be thinking about revenue as 2021 moves on?

[Mark Baum:]

Yeah. So the MoU that was recently published, we believe that our home state of New Jersey intends to sign the MoU and we’ve heard that from very reliable sources. So we do not believe there’ll be any impact from the MoU on the business. And in terms of FDA guidance and regulatory action on various ingredients, we too do not believe that there will be any impact on our offerings and that we’ll be able to continue to service the customers that we have now and that will bring on down the line with our products. We’ve been through this before by the way. This is not the first time that the FDA has come out and challenged the use of certain ingredients. And that’s okay, that’s the FDA doing its job. Our job is to always be compliant and we have alternative formulations, great formulations that we’ve done a lot of market work on and that we believe will be well-received with our customers. So we don’t anticipate any impact.

[Andrew D’Silva:]

Okay. Useful. Thank you. And then just last question, as it relates to Visionology, obviously, him just use that. I believe that’s a fairly similar business model. Obviously, you’re with an ophthalmology direct-to-consumer twist on it. So can you express just to where you are just setting up the infrastructure and things like physician network, the platform, et cetera. And then how should we think about products being distributed through Visionology, would it be largely the same offering that ImprimisRx has, will it be a narrower lift or will it have other proprietary branded offerings that that maybe ImprimisRx currently doesn’t offer?

[Mark Baum:]

Yeah. So, Visionology is going to be entirely focused on helping patients manage chronic eye disease. So Visionology, for example, isn’t in the surgical market at all. We want to help patients who are suffering from glaucoma, dealing with challenging dry eye disease. We intend to offer formulations and services that can help patients with presbyopia allergy, chronic eye conditions. And so, we will use some of the technology, some of the drug formulation assets that we have. But there will be also new formulations that have never been seen in the market. But it’s important to note that Visionology is not about prescription medications exclusively. Visionology is a service and Visionology is partnering with local doctors. We’re partnering with eyecare professionals in order to make this service available and to leverage the software, the technology that we’ve been building for quite some time. So it will extend beyond the prescription medication and it does involve the use of technology that has not been seen and is really even beyond I think what you see with a hims or hers in some of these other markets. So we’re really focused on helping manage these diseases, not just by going online and having a telemedicine visit and having a prescription sent to you. This exceeds that offering. The value to the consumer far exceeds just the prescription medication.

[Andrew D’Silva:]

All right. Thanks for the color and best of luck with you.

[Mark Baum:]

Thank you so much, Andy.

[Operator:]

Okay. I would like to turn the conference call back over to Mark Baum for any closing remarks.

[Mark Baum:]

Thanks again for attending our call today. In closing, let me again express my gratitude to the employees of the Harrow family for their unwavering hard work, dedication and loyalty delivered day-after-day in the face of an extraordinary year full of challenges brought on by a global health crisis. Thanks to the team approach of all of our employees. We have made significant progress on many levels and we are excited about the future prospects of our company as we begin this next major phase of our growth and development. Our pipeline of potential transformative transactions is strong and I am confident that our efforts will lead to new opportunities and the addition of new ophthalmic products that will continue to contribute to our success. If you have any investor related questions please contact Jamie Webb at jwebb -- that’s [e-mail]. This will conclude our call. Thank you.

[Operator:]

Thank you, ladies and gentlemen. This does conclude today’s conference call. You may now disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.