Harrow Health, Inc. (HROW) Earnings

Management highlights

### Overall Business Positioning - First half 2026 focused on building commercial capacity, strengthening product economics, expanding the portfolio, and launching new products to position for stronger second half revenue, growth, and profitability - First half 2026 revenue was lighter than expected primarily due to V-VI net revenue impacts, but all key operational first half priorities were completed ### Commercial Product Updates - **IHESO**: Delivered record quarterly unit demand (65,477 units, up 44% sequentially and 34% year-over-year) and record new account growth (62 new first-time ordering accounts, 224 total accounts) despite losing pass-through reimbursement April 1. Channel inventory is now normalized, and a 25% net pricing improvement took effect July 1, with gross margins over 90%. Less than 2% of the total addressable market has been captured to date, with the company focusing growth on in-office retina and procedure markets. - **V-VI (Vivi)**: Record Q2 revenue, with 21% sequential prescription growth, 15% prescriber base growth, and 14.6% branded dry eye market share (up from 14% in Q1 and 7.8% year-over-year, outpacing broader market growth). Business rule changes implemented at end of April reduced copay card utilization and improved average selling price (ASP) without restricting demand. Expanded commercial coverage for a top three PBM (adding millions of formerly blocked lives) took effect August 1, alongside an expanded sampling program. - **Triessence**: Achieved another quarterly demand record of 14,529 units (up 162% year-over-year), with 54% of demand now coming from ocular surgery (up from its historical retina base). The surgical commercial organization was tripled in Q2, and representatives are still early in their productivity ramp. - **BioViz**: Launched July 1, 2026, with encouraging early physician engagement, and fits naturally into the existing retina commercial organization. - **Pending Tervaya Acquisition**: The acquisition of global rights to Tervaya (approved in the US and China, under review in 5 additional countries) is expected to close soon. Tervaya is a nasal spray dry eye treatment with an excellent tolerability profile, is complementary to Vivi, and will add experienced commercial representatives with complementary territories to expand geographic reach. The upfront $30 million consideration will be funded with existing cash, and contingent milestones are expected to be self-funded. - **Specialty Portfolio**: Vercasia has been relaunched with rising prescription volumes, and IOPD now has a permanent J-code. The Access Plus commercial organization has been expanded to support the company's broad ophthalmic cash pay portfolio. ### R&D Pipeline Updates - **GMELT (MELT 300)**: Pre-NDA meeting with the FDA is scheduled for early Q4 2026, with NDA submission on track for H1 2027 and potential FDA approval in H1 2028, followed by a commercial launch later that year. GMELT is a non-IV, non-opioid procedural sedation candidate addressing a large unmet need. - **YoChill (MELT 210)**: A pediatric procedural sedation candidate being developed as an orally disintegrating tablet alternative to oral midazolam syrup. The team is modifying the pharmacokinetic study protocol to align with FDA feedback from the end-of-phase-2 meeting, with NDA submission targeted for 2027. ### Financial Operational Highlights - Ended Q2 with $83.9 million in cash and cash equivalents

Guidance

• Full year 2026 revenue guidance is reaffirmed at $350 million to $365 million, implying second half 2026 revenue of $235 million to $250 million. Adjusted EBITDA guidance is maintained at $80 million to $100 million. • Revenue is expected to grow sequentially in both Q3 2026 and Q4 2026, with the larger step-up in growth occurring in Q4 2026 as prior commercial initiatives contribute more fully. • Gross margins are expected to trend back to the high 70% range in the second half of 2026, driven by normalized IHESO revenue, improved product mix, and higher overall volume. Base SG&A (excluding new hires from the Tervaya acquisition) is expected to remain approximately flat with Q2 levels for the rest of 2026. • Tervaya is expected to contribute only modest 2026 revenue given transaction timing, with over $30 million in 2027 revenue and is expected to be financially accretive. Annualized SG&A will increase by approximately $20 million once Tervaya is fully integrated. • The 2027 $250 million annual exit revenue goal was originally set without counting the Tervaya acquisition, so Tervaya is incremental to this target. • The compounded portfolio 2026 full year revenue guidance of $60 million to $65 million is maintained, with improving gross margins expected in the second half.

Segment performance

For Q2 2026, total company revenue was $70.7 million, up 11% year-over-year and 60% sequentially, bringing first half 2026 total revenue to $115 million. V-VI (Vivi) generated $29.4 million in revenue, up nearly 58% year-over-year, contributing 41.6% of total Q2 revenue. IHESO generated $15.6 million in revenue, contributing 22.1% of total Q2 revenue. The combined specialty portfolio and Triessence generated approximately $11 million in revenue, contributing 15.6% of total Q2 revenue. The compounded portfolio generated $14.6 million in revenue, contributing 20.7% of total Q2 revenue. GAAP gross margin for Q2 was 71%. SG&A expense was $53.3 million, and adjusted EBITDA was negative $1.2 million.

Risks & headwinds

• Forward-looking statements, including expectations for regulatory approvals, revenue growth, and profitability, are subject to material risks and uncertainties, including the risk that FDA approval of pipeline candidates may not be obtained in a timely manner or at all, and that commercial launch of new products may not meet demand or growth expectations. • The second half of 2026 requires a substantial step-up in revenue from the first half to meet full year guidance, and there is no guarantee execution will meet management expectations. • The Tervaya acquisition has not yet closed, and integration of the product and commercial team may not deliver the expected synergies or revenue growth. • Pricing and reimbursement dynamics in the ophthalmic and pharmaceutical markets can impact net revenue and margins, including ongoing pressure from biosimilar competition.

Analyst Q&A

• Q: What does the new top three PBM coverage for Vivi consist of, what is the current IHESO split between office/retina and other markets, and will Vivi ASP continue to improve sequentially in the second half?

  A: The new PBM coverage adds millions of formerly blocked commercial lives, and was secured earlier than expected. Vivi ASP is expected to see continued sequential improvement from the full effect of the new business rules and increased patient deductible satisfaction through the year. For IHESO, most of the recent Q2 demand growth came from targeted retina practices, and the company now focuses entirely on the in-office market (which is still largely untapped at less than 2% market share), leaving the ASC surgical market aside for now.

• Q: What were Tervaya's recent sales, when does it lose exclusivity, and what is driving IHESO's unexpected strong demand?

  A: Management cannot share detailed Tervaya performance pre-close, but confirms it has exclusivity through 2034, is expected to exceed $30 million in 2027 revenue, and has strong clinical and operational synergy with Vivi. For IHESO, strong demand is driven by superior clinical product attributes that are driving word-of-mouth growth among retina physicians, even before expected future tailwinds from additional clinical data, and the company has barely scratched the surface of its large addressable market.

• Q: What is the expected ASP for the new PBM coverage, and how does the new Vivi sampling program compare to the prior $0 first fill program?

  A: The new PBM coverage will improve Vivi's per-unit revenue, as the company only signs coverage deals that are net positive. The new sampling program replaces the more expensive $0 first fill program, delivering similar patient access at a far lower cost (eliminating high COGS, processing, and pharmacy fees) while maintaining strong prescription growth, and has not negatively impacted new or total prescription demand.

• Q: Is the 2027 $250 million exit revenue goal inclusive of the Tervaya acquisition?

  A: The $250 million exit revenue goal was originally set without including the Tervaya acquisition, and targets that level with the company's existing organic portfolio. Tervaya will be additive to this goal, making it easier to hit the target after the acquisition closes.