Q3 2021 Harrow Health Inc Earnings Call
Good afternoon, and welcome to Harrow Health's third quarter 2021 earnings Conference call. My name is Eileen 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.
A reminder, this conference is being recorded.
I would now like to turn the call over to Jamie Webb Director of Communications and Investor Relations for Harrow Health.
Thank you operator, good afternoon, and welcome to Harrow Health's third quarter 2021 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 law.
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.
The approval of certain drug candidates in a timely manner or at all.
For a list and description of those risks and uncertainties. Please see the risk factors section of the company's most recent annual report on Form 10-K, and subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission.
Harrow Health's results may differ materially from those projected Harrow disclaims any intention or obligation to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise. This conference call contains time sensitive information and is accurate only as of.
Today.
Additionally, Harold we refer to non-GAAP financial metrics, specifically adjusted EBITDA and adjusted earnings a reconciliation of any non-GAAP measures with the most directly comparable GAAP measures is included in the company's letter to stockholders are available on the website.
By now you should have received a copy of the earnings press release. If you have not received a copy. Please go to the Investor Relations page of the company's website Www Dot Harrow Inc. Dot com.
Joining me on today's call are heralds, Chief Executive Officer, Mark L. Baum, and Harris, Chief Financial Officer, Andrew Boll, but then I'd like to turn the call over to Mark to go over some prepared remarks prior to the question and answer session Mark.
Good afternoon, and thanks for taking the time to join US today as usual I would encourage you to review our third quarter 2021 earnings release corporate presentation and letter to stockholders all of which were posted on the Investor Relations section of our website just after the close of trading.
Today.
Before we take your questions I'd like to provide some highlights of our results for the third quarter ended September 32021.
Even though the third quarter has historically been the slowest quarter of the year.
The effects of the COVID-19 pandemic, we're still lingering in certain regions of the country Harrow health delivered record top line revenue and year over year earnings growth. We have now delivered our fifth consecutive quarter of record results in terms of revenue and many other key operational metrics.
In the third quarter of 2021 Harold reported record revenues of $18 $7 million and that was a 30% increase compared with $14 4 million reported for the same period in 2020.
A 3% sequential increase over our previous record revenues of $18 1 million in the second quarter of 2021.
Margin of 74% for the third quarter of 2021 was consistent with the prior year period, but was slightly down on a sequential quarter basis, primarily due to an investment in additional personnel to accommodate a second shift at our production facilities as we prepare to increase our capacity in.
2022 adjusted.
EBIT was $4 $9 million for the third quarter of 2021, compared with $3 million in the prior year period and that was a 62% year over year increase our implements Rx subsidiary segment contribution for the third quarter was $6.6 million, including.
Noncash expenses related to depreciation amortization and stock based compensation of about $653000. This compares to segment contribution of $4 $7 million in the prior year period amounting to a 39% year over year increase.
In addition to our strong operating results, we continue to build momentum in the execution of our strategic vision, which includes incorporating high value F. D. A approved products into our family of ophthalmic pharmaceutical products and using technology to make it easier than ever to order.
Our products and stay connected to our ophthalmic brands, that's imprimis Rx envision allergy.
This momentum should lead to further customer base expansion and increased revenue as a result of greater product purchasing depth within the practices we serve.
Going forward, we expect these initiatives and others. We are pursuing all of which are focused on our core competency of ophthalmic health care to fuel arrows mission of becoming a leading U S eye care company.
As you may recall during the third quarter, we announced several transactions, including the purchase of two drug candidates <unk> 100, and Mack 100, we are excited about the potential for the transformative power of these acquisitions and note that they are consistent with it.
Types of deals we've been promising our stockholders, we would complete AMT.
Amp 100 is a patented topical anesthetic intra operative pain drug candidate with a Tam or total addressable market estimated at over $10 million annual ophthalmic procedures that includes cataract surgeries and it proved vitriol injections, we expect a new drug application.
<unk> filing to be submitted to the FDA very soon.
Mac 100 is a preservative free steroid triamcinolone Acetonide ophthalmic injectable drug candidate for visualization of the vitreous during vitrectomy.
Aero intends to communicate with the FDA in early 2022 about presenting the clinical data used for Japanese market approval of Mac 100, which is marketed in Japan as my Kate for four separate indications. Our objective is to use the 11 year.
Your experience of Mccain and jet, Japan to support a U S and Canada market NDA submission.
As we wind up 2021 we have used this past year to plow the ground and begin to make the capital investments necessary to transition hero into a company offering not only the compounded pharmaceuticals that our business was built upon but also F. D. A approved ophthalmic pharmaceutical.
And this is a feat, which I believe we will be the first to accomplish in the ophthalmic industry, our ability to offer both compounded and F. D. A approved ophthalmic pharmaceuticals branded products will uniquely differentiate us not only in the ophthalmic pharmaceutical industry.
But also among publicly traded pharmaceutical companies.
Once approved by F D a.
100, and Mac 100.
We will expand our product portfolio and broaden our depth of offerings to include products for surgeries and interventions aimed at the back of the eye as well as the front of the eye.
I also believe that our upcoming revenues from these new FDA approvable products when approved should exceed our current level of revenues from compounded products not long after their respective approvals and we remain on the hunt for other acquisition opportunities.
<unk> to add fuel to our strategic vision.
This whole initiative is about leveraging our commercial platforms strong customer relationships and national direct distribution capabilities that is what we're working towards and that is why I believe we are still in the very early stages of our revenue opportunity now let's take your.
<unk> I will pause to have our operator poll for questions operator.
We will now begin the question and answer session to ask a question you May press star one on your telephone keypad. Thank you are using a speakerphone. Please pick up your handset before pressing the keys.
So withdraw your question. Please press Star then two.
Our first question today comes from Jeffrey Cohen with Ladenburg Thalmann.
Oh, Hi, Jeremy Marc and Andrew how are you.
Real good Jeff good to speak with you.
So a few questions. So firstly I see you're adding a second shift are you, having any labor issues to speak of whatsoever.
You know not not really.
We do have a no problem at least right now finding talent believe it or not I think.
The issue is we do have a lot of open positions, where we're growing and we need to fuel that growth and hire the right folks.
But we arent, having too much trouble finding folks it's a pretty exciting place to work. It's dynamic there's a lot going on so we're finding people want to when I joined the hero team.
In New Jersey.
Yeah.
Got it okay.
Could you talk about this upcoming.
Meaning are there any presentations or posters or anything of note that our folks should be aware.
We're going to have a presence today you know, it's a little bit different I would say somewhat more muted than.
We have had in the past you know the last couple of meetings during COVID-19 have not been as is fantastic.
Fantastic is there's a lot of companies in the industry would have liked but we are going to be there. We've got a great boots are we've got a sales organization there and we're looking forward to meeting customers.
Both existing customers and new customers, but there arent any specific poster presentations that I can I can point you to it's really going to be a a commercial activity as I said meeting existing customers and then hopefully building our customer base and getting some new folks as well that we can help.
Got it looks like a a strong revenue quarter. However, we saw we've seen some continual seasonality into Q3 and a lot of other sectors as far as weakness goes so what drove it is there anything to read into as far as the patient population or the ophthalmologist population.
Sure.
I have heard you may you may have noted that we really have not mentioned COVID-19 much in the last couple of quarters in the third quarter. We did hear some echoes of Covid some customers in different parts of the country that were having challenges not only with.
Their workforces, but also getting patients into the office, but it was definitely the more minority of conversations that we had the and and you know we did experience a little bit of that but the third quarter is always a tough quarter for us. It's the time of year when Dr.
There's travel they go on vacations.
And so we were really delighted that we were able to see sequential revenue growth between Q2 and Q3.
We put out more product made more product it was really a surprisingly strong quarter and then I think importantly.
It's just been a fantastic because we've gotten into the fourth quarter here Fortunately as well.
Okay got it and then.
Okay commentary on check security as far as what you were seeing out there it looks like a strong read off for the quarter Dirty Lemonade your lessons out in the marketplace.
We continue to love the execute we think it's a great product the feedback we get from customers is is strong its solid they liked the product we saw unit volume Gropes sequentially.
And it's I think we're up north of 18% quarter over quarter and the challenge has been that the a S. P is is slightly depressed, but we loved execute customers loved execute it's been a great relationship with the people that I point.
And we think as we get into next year, we'll see what what's gonna happen with pass through but hopefully.
The folks at I point, you're working on strategies to extend at pass through period and if so we're really looking forward to continue to make it available the door our customer base because they like it.
And it helps patients.
Got it okay. That's great that does it for us thanks for the commentary.
Thank you Jeff.
Our next question comes from Nathan Weinstein with H S capital.
Hi, and thanks for taking my call. This is Brian Holland and on for Nathan Weinstein.
Hi, Brian line and pleased with Ya, Yeah could you speak with you as well would you would you mind. Please discussing vision allergy in particular were interested in what trends you're seeing there what the competitive landscape look like.
And what could that business become in the future.
Yes. So thanks for the question you know, we we are building vision ology not for what it is right this minute or what it's going to be frankly, this year or even next year, we really believe that the future of bike here.
Is going to be bringing the physician to the the home of the patient and that only that doesn't only include the physician that includes also diagnostics related to that course of care and it also means making it much easier for.
Patients to access pharmacy services to get access to medications that are delivered to their home and so the the vision for vision allergy is to integrate a national network of physicians that make available the latest technologies to empower physicians a national network of physicians.
To provide care to patients when and where they want it an on demand even so it's an exciting project, but as I said, it's it's it's a project for the future and we did do a regional launch.
And it has been successful learnings have been incredible and I think the important thing to note about vision Iology is that you know we are going to expand the program the rollout nationally in 2022.
We've been focusing on Sparks the patented diagnostic technology that we acquired from two partners and we're excited about that and I think the next thing that our shareholders can look forward to related division allergy is connected to Sparks, because we've done a lot of work on <unk>.
<unk> for Sparks, and so I think you'll see hopefully fairly soon here some interesting information about the reimburse ability.
Of some of the services that vision Iology offers visa V. R. A patent did Sparks technology.
Thanks for that color and then last one for me Harrow has clearly been very successful striking partnerships for example, with I quaint Pharmaceuticals can you speak at a high level to Buck the partnership funnel looks like and if you see any interesting potential out there.
Yeah. So we we are.
Said for gosh, a year and a half two years now that we were going to engage in transactions like we did with I point, but also go out and acquire products products that were near approval.
Or even products that were approved but we're in larger organizations and we're kind of under loved if you will and so we've done the Mac 100 deal with the Amp 100 deal. We are really close with a a couple of other really exciting opportunities that we hope to close and talk more about soon.
But finding.
Products like execute a pushed through our our platform or have not really been the focus the relationship with our partners that I point has been fantastic and we really love what we're doing with execute as I said, our customers like it and it provides.
Great surgical outcomes, but we have also I think been approached by other companies who are interested in our distribution capabilities are distribution platform. So with Mac 100, and with Amp 100. These are products that we will be able to self distribute.
And if you look at what the costs are to distribute a product using the traditional sort of big three distribution platforms that can be considerable and one of the things that we're investing in and that we're getting ready to deploy as as these two products and hopefully others that we get access to are under the hair.
Rowe umbrella is to self distribute and so for other potential partner companies that are looking to access are large and growing customer base I think they're not only looking at us as a potential commercial partner, but also as a partner that can help them distribute their products because our team distributes each.
Month to thousands and thousands of ophthalmology practices, the largest in the country, leading eye hospitals as well as all of the major ambulatory surgery center groups and so we're sending things to these customers and we can hopefully send their things as well and so we have been approached by a few and and we continue to have disc.
<unk> in that regard.
Thank you.
Thank you Brian.
I cannot further questions. Please <unk>.
<unk>.
Oh, My first time I'm showing no further questions. So I'd like to turn the call back over to <unk> get some closing remarks.
[noise]. Thank you eiley on a personal note.
Next month will Mark my 10th year at the helm of this company. It was December of 2011 went Andrew and I began to build what we now know is herrell health.
Along the way we've been blessed to grow our family of employees build strong relationships with new partners and attract new investors, who have been tremendously supportive and patient it certainly hasn't been a straight path to this point and as we set our sights on growing into a much larger revenue in public market capitalization.
The company I don't expect that process to be a straight path either with that said, we are very optimistic about our prospects for 2022 and beyond and look forward to what we believe will be a positive transformation of our company and a major step forward in our mission.
I also want to assure our stakeholders are stakeholders all of our stakeholders are always committed to its corporate values of integrity innovation evidence space development, great products and people are company has grown to where it is today by steadfastly following these corporate values.
And we intend to continue to do so we believe that our commitment to innovation quality in our corporate values are the source of long term business sustainability and value creation for our customers patience. The local communities, we serve other stakeholders and of course our shareholders.
Finally, I want to highlight that this Thursday is veterans day.
This is an important day for me.
My family because my wife served as in the United States Navy Officer and within the Harrow family. There are so many wonderful embraced folks who volunteered to serve our great nation to protect and even fight for our unique American way of life, the freedoms and trying to in our Constitution and our bill of rights are right to govern.
<unk> own choices to pursue opportunity and to enjoy the blessings of Liberty So veterans.
Zero health. Thanks, you, we appreciate and honor your service thanks to everyone today for attending our conference call and for your interest in Harrow Health. If you have any investor related questions. Please email Jamie Webb, that's two B's W. E B B at J Webb W. E.
E B B at Harrow, Inc. Dot Com this will conclude our call. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.