Harrow Inc. (HROW): Applying a Proven Model to Ophthalmology
Article #9
Summary
Harrow is executing a focused rollup in ophthalmology, targeting branded drugs with limited competition and scaling through a concentrated commercial model.
Vevye is leading the portfolio, showing rapid adoption and becoming a key revenue driver with strong clinical and market momentum.
Cash flow and EBITDA are inflecting, supporting debt refinancing, margin expansion, and added manufacturing capacity.
Management’s high-stakes equity comp signals conviction but also requires attention to strategic discipline.
Valuation remains compelling, with potential upside from core execution, acquisitions, and Harrow’s stake in Melt Pharmaceuticals.
Intro
Harrow is a more mature name than we typically write on. Unlike most of the companies we cover, Harrow has meaningful sales and is expected to be earnings-per-share positive this year. We expect both revenue and earnings to grow in the coming years as the recently launched Vevye and the Byqlovi acquisition begin to make a larger impact on the company’s financials. As these contributions build, we anticipate Harrow will acquire the commercial rights to additional ophthalmic drugs, integrate them into its focused sales infrastructure, drive prescription and revenue growth, generate increasing cash flow, and repeat the process.
It appears the company is now at the turning point in its strategy, where it will begin to realize greater operating leverage, stronger cash flow, and higher earnings. There is an interesting setup today. Harrow recently experienced destocking in one of its key products, Iheezo, along with a slow initial relaunch of TriEsence. While these are setbacks, we believe they are temporary and have created a pullback in the stock price that investors should consider taking advantage of.
Although the recent missteps are disappointing, our focus is on the launch of Vevye. We believe this product has the potential to create significant value for the company, a view echoed by management. From the fourth quarter of 2024 to the first quarter of 2025, Vevye revenue increased by 35 percent quarter over quarter. This is clear evidence of accelerating adoption. Vevye is now approaching 50 percent of total revenue, within an underserved market worth over 3 billion dollars and growing at approximately 7 percent annually. This is why the product is important to our near-term thesis.
We expect the trend of accelerating Vevye sales to continue over the near and midterm due to the clinical profile. The drug is improving patient outcomes through a durable and long-lasting formulation. Remarkably, this is delivered through a novel, water-free vehicle that also excludes pH adjusters, osmolarity agents, and preservatives commonly found in competing treatments. These preservatives are known to cause eye irritation. The formulation’s benefits are leading physicians to recognize Vevye as a best-in-class product. That momentum has been strengthened by the company’s “Vevye Access for All” (VAFA) program, launched late in the first quarter of 2025.
On the Q1 call, Mark L. Baum, Chief Executive Officer of Harrow, commented:
“Early VAFA program data has been very promising, with new VEVYE prescription volumes at PhilRx more than quadrupling and prescribers increasing by over 4X, all while maintaining a strong average selling price. Our VEVYE refill rate continues to be buoyant, with the average covered patient receiving nine refills. Given these trends, we believe VEVYE is now poised to become Harrow's first product to generate annual nine-figure revenue. With the current order flow and potential unit demand expected from soon-to-close pipeline accounts for IHEEZO, TRIESENCE, and other operational improvements across the rest of our business, we remain confident that we will achieve – and hopefully exceed – our 2025 revenue target of over $280 million. We also remain committed to pursuing strategic acquisitions that add high-quality ophthalmic pharmaceutical assets to our best-in-class U.S. commercial platform.”
Pharmaceutical Rollups: A Well-Worn Strategy Because It Works
HROW is following the well-established strategy of pharmaceutical and biotech rollups, and it makes sense. If you are already paying for a sales team, why not have them promote more than one product? If you are maintaining a manufacturing base, why not use it for more than one drug? In our experience, the challenge arises when companies stretch themselves too thin by chasing unrelated opportunities. The leverage in this model is powerful, but only when the company stays focused on its core expertise.
That focus is what we like about HROW. The company is building a portfolio of high-quality branded ophthalmology drugs, supported by a compounding pharmacy and a strong commercial organization. In our opinion, ophthalmology is a smart segment to target because it tends to face less competition compared to other areas of the pharmaceutical industry. This is due in part to smaller patient populations and a more concentrated group of competitors.
We were involved with Horizon Pharmaceuticals when it applied a similar strategy in the rare and orphan drug space. Horizon acquired drugs that were already approved and on the market. It then improved marketing, expanded labels, patient access, and in some cases adjusted pricing. Acquiring products that are already generating revenue removes the regulatory risk associated with clinical development.
The primary challenge then becomes execution. That is where the leverage lies. When a company can identify a defined niche and build a system that improves access, drives prescription volume, and supports pricing, it creates a highly profitable business. Profits then fund further acquisitions, and a rising share price can be used as a currency to make additional deals.
Horizon was eventually acquired by Amgen for more than 26 billion dollars. For context, Horizon was about half the size of HROW when we first got involved. We mention this example to illustrate the scale of potential value creation and the most likely outcome for a company that succeeds with this strategy. The most probable exit is acquisition by a larger player in the ophthalmology space, such as Regeneron, Roche, AbbVie, Novartis, or similar companies.