Harrow Health Inc (HROW)HROW

Harrow Health Inc.: A Comprehensive Overview

Company Profile:

Detailed History and Background:

Harrow Health Inc. (NASDAQ: HROW), formerly known as R-Star Therapeutics, was founded in August 2015. Initially a development-stage biotechnology company focused on microRNA-based therapeutics, Harrow shifted its gears towards providing essential generic injectable drugs in 2017. This new direction aimed to address critical drug shortages faced by US hospitals and healthcare systems. The company completed its initial public offering (IPO) on the Nasdaq in October 2021, raising approximately $23 million.

Core Business Areas:

Harrow Health focuses on two primary core business areas:

1. Acquiring and Licensing Injectable Drugs: Harrow identifies and acquires late-stage generic drug products, often those nearing commercialization, with a particular focus on injectable medications, in areas where there's a significant unmet medical need.
2. Commercializing Acquired Assets: Once a product is acquired or licensed, Harrow manages the remaining clinical development, regulatory approvals, and commercialization efforts to bring the medication to market. This strategy allows the company to quickly expand its product offerings and generate revenue without relying heavily on internal research and development (R&D).

Leadership Team and Structure:

• Mark L. Baum, MD: President and Chief Executive Officer, leading the company's strategic direction, drug development plan, and commercialization activities.
• Andrew J. Haas, MD: Chief Operating Officer, responsible for all aspects of operational execution.
• Andrew J. Thomas: Chief Financial Officer, overseeing financial planning, analysis, reporting, and controls.
• Karen L. Katen, Ph.D.: Head of Product Development and Manufacturing, leading the efforts to ensure product quality and supply chain effectiveness.
• Mark J. Wiggins: General Counsel and Vice President of Legal Affairs and Business Development, managing legal matters and playing a key role in strategic partnerships and acquisitions.

Top Products and Market Share:

Harrow's portfolio consists of eight commercial-stage injectable products, with several more in various stages of development:

• Methotrexate Injection: Used to treat multiple cancer types and autoimmune conditions, accounting for roughly 55% of the company's total net revenue in 2022.
• Dexamethasone Sodium Phosphate Injection: Employed to treat inflammatory conditions and allergies.
• Calcium Chloride Injection: Used to manage electrolyte deficiencies.
• Potassium Chloride Injection: Employed to treat hypokalemia.
• Sodium Chloride Injection: Used for fluid replacement and as a diluent in intravenous medications.
• Ranitidine Injection: Approved for treating conditions that increase the risk of ulcer formation.

Currently, Harrow does not publicly report the individual market share for each drug. However, according to their recent quarterly report, Harrow boasts a 16.4% share of the total US market for methotrexate injectables, a 27% share in hospitals, and the #3 market position for the same medication amongst all pharmaceutical suppliers.

Market Reception and Competitor Comparison:

Harrow's products face competition from both generic and branded drug manufacturers in the respective therapeutic segments. Methotrexate, Harrow's most significant contributor, boasts several generic competitors in the market, making price a critical factor for securing market share. Dexamethasone and calcium chloride injections also contend with established generic markets. However, it's essential to note that these established companies primarily focus on other product segments, allowing Harrow to carve out a niche within these specific injectables categories.

While gaining a solid foothold, Harrow needs to be mindful of increasing competition, mainly from established pharma companies entering the same injectable categories.

Total Addressable Market:

The US market for generic injectable medications is vast and steadily increasing, valued at an estimated $31.3 billion in 2021 and projected to reach $51.7 billion by 2026, demonstrating a CAGR of 12.3%. This considerable growth is propelled by various factors, including a rising geriatric population, an increase in chronic diseases demanding injectable therapies, and the push toward lower-cost generic alternatives for expensive branded products.

Financial Performance:

Revenue and Earnings:

In 2022, Harrow generated total revenue of $128.5 million, representing a significant 91% year-over-year growth compared to 2021's $67.3 million. The net income stood at $36.7 million, a staggering improvement from the 2021 net loss of $23.1 million, showcasing Harrow's transition towards profitability.

Profitability and Efficiency: Harrow currently reports strong gross profit margins, which grew from 44.9% in 2021 to 56.9% in 2022, demonstrating the company's ability to effectively manage production costs while retaining a competitive market price for its drugs. Operating expenses, however, increased significantly from $137.3 million in 2021 to $228.4 million in 2022, mainly driven by increased marketing and selling costs as Harrow expands its commercial reach and promotes existing products.

Cash, Debt, and Liquidity:

As of December 31st, 2022, Harrow reported a healthy cash and cash equivalents balance of $272.3 million, compared to just $93.2 million at the end of 2021. This substantial increase reflects the successful IPO completed in October 2021 and demonstrates Harrow's strong liquidity position for further acquisitions, product development, and other growth initiatives. In 2021, the company concluded an asset purchase agreement requiring an upfront payment of $175 million and future milestone payments, financed through a $225 million secured term loan facility. This debt financing currently represents Harrow's only long-term debt obligation.