Q3 2025 Harrow Inc Earnings Call

Good day and welcome to the hero. Third quarter 2025 earnings conference call.

At this time, all participants are listening mode. After the speaker's presentation, there'll be a question and answer session, instructions will be given at that time,

As a reminder, this call may be recorded.

I would like to turn the call over to Mike Biggio, vice president of investor relations and Communications. Please go ahead.

Thank you, operator. Good morning and welcome to Harrow's third quarter 2025 earnings conference. Call my name is Mike bega, vice president of investor relations and Communications and excited to be introducing today's call.

Similar to our last quarterly call, we will be presenting slides during the webcast today. If you have registered and joined through the live conference call link, I would highly recommend that you also join through the webcast. You can find the link in the investor section of our website at www.hero.com or in our earnings press release that was issued yesterday.

The companies marked 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'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 and FDA-approved products, compounded formulations, and technology, and FDA 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.

Harold'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.

Parallel refer to non-gaap financial and that's metric, specifically adjusted ibida and our adjusted earnings as well as core results. Such as core gross margin cornet income and core diluted net income per share. A Reconciliation of any non-gaap measures with the most directly comparable. Gaap measures is included in the company's earnings release and letter to stockholders, both of which are available on the website.

Now joining me on today's call are Mark, El bomb, chief, executive officer, Andrew B, president, and Chief Financial Officer and Patrick Sullivan head of commercial with that. I would like to turn the call over to Mark Mark.

Thanks, Mike, and good morning to everyone. Thanks for joining us today. As always, please review our supplemental documents for the third quarter, including our earnings release, corporate presentation, and letter to stockholders, all of which are now available in the investor relations section of our corporate website.

During this call and in future quarterly conference calls. I'm pleased to have Pat Sullivan Heroes head of commercial join us next quarter. I intend to have our chief scientific officer Air Show Jay, join us, as well.

Today Harold is 1 of the leading providers of aulic disease, Management Solutions in North America. Our portfolio helps manage both front and back of the eye conditions and I believe we are the only upto company in the world to offer branded, generic over-the-counter compounded and biosimilars literally every legally available type of option.

At the center of everything we do is our vision to become the next great U.S. ophthalmology company. Now, 12 years in the building this patient and physician-centric business, I believe we're still just getting started. Our key products are in their early stages of launch with tremendous and durable growth ahead as adoption continues to accelerate over the next 2 years. We have 4 new product launches scheduled, each representing a significant opportunity to expand our reach, strengthen our leadership, and pave the way for even greater growth in the future. I am particularly proud of the fully scalable commercial infrastructure we've built, which will soon support multiple launches and continued expansion without requiring heavy additional investments.

Combine that with a low-risk, capital-efficient pipeline development and M&A strategy, and it's clear Arrow's growth and market impact are in their infancy.

Now, momentum continued during the third quarter with rising revenue and clear evidence of the operating leverage in our business model. As I've mentioned before, some areas of our business will overperform, while others may lag sometimes due to seasonal factors, and the third quarter was no exception. What matters most, though, is the overall trajectory of the business, and that trajectory remains very strong.

Our key growth engines, such as V iho and, to a certain extent, very recently, Trysence, are rolling, and momentum continues to build across the business, especially as we approach the launch of the Samsung biosimilar portfolio and conclude the acquisition of Melt Pharmaceuticals, which I'm very excited about.

Now BVI and Ihea continue to lead the way and are on track to finish the year very strong. In fact, 2025 is expected to be a record year for both products. They've shown consistent momentum and continue to drive the majority of our growth, driven by strong demand and best-in-class clinical performance. Levi delivered 22% quarter-over-quarter revenue growth. Perhaps a key highlight of my remarks, though, should be the news that we have recently signed agreements with several leading national payers for Vivi. Beginning in January 2026, only a couple of months away, Levi will be listed on multiple new formularies with Preferred Product status, including the largest U.S. pharmacy benefit manager.

And going forward, Levy will be covered on those formularies. This particular PBM covers tens of millions of lives and I view this as a major development for Vivi and for hero.

With major improvements in coverage and the addition of Apollo care and Alto joining. Our Specialty, Pharmacy Network this quarter. We expect a higher. Proportion of patients will receive the v as a covered therapy.

These advancements strengthen Vees Market, access foundation, and fuel continued, prescription growth resulting in an improved ratio of covered to cash. Pay prescriptions. This includes estimates of current cash pay patients who are likely to convert to covered prescriptions and that gives us confidence in viviz, pricing stability and long-term growth. Izo also had an excellent quarter delivering 20% quarter of a quarter Revenue growth. That's an impressive performance. Given the typical seasonal slowdown for that product in the third quarter. Meanwhile, triesence in our rare and specialy portfolio, underperformed this year as I talk more about in our stockholder letter and that also included the third quarter, the good news though is that we have the right leadership and strategies and

Place I believe to get both on track in short order triesence in particular is gaining traction and retina. And as of October of this year, we launched it in its largest market opportunity. Yet, ocular inflammation, our rare and Specialty portfolio, also has new leadership and they are supporting our hero access for all program which is positioned to return the portfolio to growth beginning in the fourth quarter and into 2026. Please review the letter to stockholders for more specific thoughts, though on triesence and our rare, and specialy products portfolio.

We also made important strategic moves this quarter. As we work to complete the acquisition of milk Pharmaceuticals and it's non-opioid procedural, sedation candidate, melt 300. And we also expanded our access for all models across our entire upcoming portfolio. We're also preparing for 4 product, launches over the next 3 years bio Vis opioids by closing and melt 300, which I'm particularly excited about in short. Our strategy is bearing fruit. We're executing with discipline scaling with purpose and building a company defined by Innovation access and

Sustainable growth creating meaningful long-term value for both patients and shareholders. Before I hand it over to Andrew, I want to take a moment to address our Infamous RX business in California, where, as many of you know, we have been engaged in a dispute with a California border, Pharmacy for many years, Infamous RX remains licensed to operate in California, but it's licenses up. For renewal on December 1st 2025. We are actively communicating with the California Board towards a global resolution.

Which would include a renewal of our license.

Because these discussions are ongoing and, frankly, no outcome can be certain, I can't comment on other specific details. But this is top of mind for us, and we believe a solution may be at hand.

As more information becomes available, we will communicate with our stockholders. I would now like to turn it over to our President and Chief Financial Officer, Andrew Bowls. Andrew.

Thanks, Mark. And thank you to everyone joining the call today.

Turning now to our financial performance, total revenue for the third quarter was 71.6 Million representing a 45% increase over the same period in 2024 and a 12%, sequential increase from the second quarter of this year.

For the first 9 months of 2025 total revenue reached 183.2 million, we remain firmly on track for another strong year of Revenue growth.

Advancing toward our long-term Financial targets with disciplined execution.

Here, Revenue Outlook to a range of 270 to 280 million.

While hitting our original Target of over 280 million is still Within Reach. We want to take a slightly more, conservative approach and update guidance for a range, we believe we can deliver on.

Adjusted IBA for the third quarter was $22.7 million, with GAAP-based net income of $1 million.

Operating expenses continue to be relatively stable quarter to quarter, and we are seeing more operating leverage manifest itself within the new revenue gains.

As we continue to scale, our ability to translate revenue growth into earnings remains a core strength of Harrow's model.

As we advance into the fourth quarter, we expect to see operating expenses. Moderately increase as further Investments are made in our commercial infrastructure to accelerate sales and that Trend should continue into 2026.

Let's turn to our product performance.

Vivi continues to outperform, generating approximately $22.6 million in revenue during the third quarter.

This is a 22% increase from the second quarter of 2025.

This Revenue increase was driven on continued. Increase in unit volumes year-over-year and quarter over quarter.

V is set up for a record. Fourth quarter, October hidden all-time high in prescriptions, and that momentum has carried right through the first week of November.

Q4 was Vivi's strongest period last year, and with the trends we're seeing, I'm confident we're on track to finish near our $100 million annual revenue target for 2025, with additional meaningful growth expected in 2026 as improved coverage kicks in. We will further invest in Vivi's commercial infrastructure to fuel the next phase of growth.

Turning to izo.

Revenue for the third quarter came in at $21.9 million. This is up 20% from the second quarter.

As we've seen in Prior years, the third quarter tends to be seasonally softer due to the July and August slowdown as both patients and Physicians take time off.

That said, demand rebounded sharply in September and remained strong through October.

Aiza has significantly outperformed our expectations this year and is also on track for a very strong, fourth quarter, and a record year.

The fourth quarter has historically been the highest volume quarter, supported by end-of-year ordering patterns and stocking activity.

And we've already seen large orders placed early in the period.

Based on those Dynamics, we expect that heizo to deliver a strong close to 2025.

Our try Essence and broader specialty branded portfolio generated 6.9 million in Revenue. This is a 33% sequential increase.

As Mark discussed and highlighted in our letter to stockholders, with new leadership in place at our dedicated sales force, the launch of Hero Access for all, and the Try Essences launch into ocular inflammation, we now have the focus and strategies in place to reignite growth.

Surgeon. As early as the fourth quarter of this year.

Miss RX products. Continue to provide stable recurring Revenue generating approximately 20.1 million dollars of Revenue in the third quarter.

as Mark mentioned earlier, if we are unable to resolve the dispute with the California Board of Pharmacy, we may see a minor impact on imper rx's, fourth quarter Revenue,

In addition, infirmis RX had an inventory shortage during the month of October.

Causing a one-time decrease of about $4 to $6 million in its revenue for the fourth quarter.

In summary, we are fully focused on achieving our third consecutive year, 40% or higher annual revenue growth with all hands on deck across your organization.

Viva and he's are both positioned for a strong finish to the year and a record quarter.

However, given that certain near-term factors were updating a full year outlook to a range of 270 to 280 million.

Our original Target is still Within Reach this. New range is a 1, I believe we can deliver on based on where we are today.

that said the fundamentals of our business remains strong and it can be more confident in the long term growth trajectory

looking at ahead.

Following what we expect to be a strong fourth quarter. We anticipate a typical seasonal decline from Q4 2025 to q1 2026, likely consistent with the pattern. We saw earlier this year.

This doesn't mean that we won't achieve record results next year, which is what we expect to happen.

However, we want to establish a Q1 presence, a seasonality that we need to consider.

I'll provide more color on the magnitude of that Dynamic when we report full year results, including the expected impact from the fourth quarter stocking activities.

Thanks Andrew.

Commercial leader is Crystal Clear, unlock the massive commercial potential in our portfolio and position Harrow for sustained profitable growth. As many of, you know, I've been in this role for less than 6 months, but I am not new to commercial leadership. Building successful teams to execute, thoughtful, strategies, and ultimately, delivering extraordinary results.

I would like to highlight the 5 commercial priorities, that will drive my team's efforts. First, we're activating our Advanced key account management initiative. This is about deepening relationships with high value accounts. Fueling trial accelerating adoption and building long-term loyalty across the brands. Second, we're elevating our focus on driving depth and breadth.

Expanding our reach to more prescribers and new accounts while going deeper within existing users is key to unlocking the full potential of our portfolio.

Third, we have a scalable investment model across the commercial organizations 1, that allows us to grow efficiently, invest intelligently and maximize return on every dollar spent

We're expanding awareness of our Harrow Access Solutions program to ensure a smooth and positive experience for both Eye Care Professionals and their patients. Removing barriers to access remains a cornerstone of our strategy.

And finally, we're sustaining operational discipline and stability, maintaining an efficient cost base while continuing to execute at a high level.

These commercial acceleration priorities position us to drive stronger, adoption, profitable growth, and continue our journey as an emerging leader in the atomic market.

V continued to strengthen and expand its position in the dry eye market during the third quarter, delivering strong and sustained growth. Our commercial strategy is working. We're seeing increasing competitive positioning, excellent patient outcomes, and faster, more affordable access to therapy.

By the end of September, we saw a 36% increase in prescribing Physicians a strong indicator. Continued growth and expanding physician adoption. Our V access for all initiative. Remains a key enabler of growth for V simplifying, the patient experience and fueling demand.

Starting in January, V will appear on several new national formulas with preferred status, including the largest pharmacy benefit manager in the United States.

He advised improving coverage serves as another Catalyst to expand utilization among Eye Care Physicians and among more patients with dry disease.

We anticipate that these increased coverage wins, many current cash pay patients will take advantage of you guys improve coverage in their plans.

We also expanded our Specialty Pharmacy Network. Fill our X handled all prescriptions in Q3, while Apollo Care went live in Q4, and also RX will follow later this quarter.

Step to further improve patient access for patients.

Combined with the broader payer coverage coming 2026. These developments favorably positioned by continued growth and pricing stability.

Let's look at Outlook.

Looking at the chart on the top left, the picture is clear.

The dry eye disease market is large and actively growing. The branded segment is the key driver for growth in the overall market.

By the end of the third quarter, we captured 10.5% of the total dry market, up 2.7 share points from the prior quarter, effectively doubling our market share in just 2 quarters. This is a clear sign of strong, sustained growth and proves that our strategy is delivering results. Our goal remains the same: to make V the number one prescriber in therapy in the U.S. And we're making steady progress toward that.

We're building momentum every quarter increasing adoption.

Improving access and expanding coverage. We remain confident in our path to becoming the leading cyclist foreign therapy in the dry space.

Looking ahead. We're focused on accelerating growth, through both depth, and breath. Deepening utilization, with existing Eye Care, Physicians while expanding use among new positions, and their patients.

Now that we are comfortable with our supply, we are also preparing for the next phase of expansion with plans to invest in V by commercial infrastructure and open 10, additional sales territories to fuel, the next phase of growth.

We anticipate that more territories will open during the first half of 2026, and we are going to focus on markets served by the new plans that will cover V.

The momentum behind by is clear with growing adoption. Strong clinical outcomes, a patient Centric, access model and improving coverage. We're just getting started. Vivi has doubled. Its market share over the past 2 quarters and with new investments. In our commercial infrastructure, to support. The next phase of expansion. The opportunity ahead is tremendous. I'm confident our team is fully aligned and focused on making V the new standard of care for dry disease.

Let's look at izo.

47% from last year and 3% sequentially. That's strong sustained growth and continued proof that I ease. Those value proposition is resonating in the market.

As expected, the third quarter followed normal seasonality, with a brief slowdown in July and August. However, demand rebounded quickly in September and continued into October, with a large order already placed in October, entering its strongest quarter of the year. When we typically see increased stocking activity, IO is well positioned for a strong finish to 2025 and real momentum heading into 2026.

Our strategy is working exactly as planned. The retina pivot we executed last year along with our new iho for all education. Initiatives is driving awareness engagement and adoption across retina practices. Nearly half of the accounts ordering iisa. This year are brand new, a clear sign that we're expanding reach, and deepening loyalty with an 86% reorder rate. Izo is not only winning new users, but also keeping them a strong foundation for sustained. Growth ahead.

Looking ahead. We're still just scratching the surface of azo's potential, we're in the very early stages of this growth story. And the opportunity ahead is tremendous

Our retina team is focused on both driving breadth and depth, reaching out to accounts and deepening relationships with existing customers, and expanding awareness among retina specialists as adoption continues to grow. We're confident that Aiza will become an even stronger growth engine for Harrow, especially once we introduce our buyer similars starting in mid-2026.

Shifting to Trias, we are seeing real progress in the retina market. The trends we're seeing now indicate an acceleration in adoption and growing traction in the retail community. Since we launched Trias last October 2024, there has been a four-times growth factor, with significant headroom remaining.

Triac unit demand grew 67% sequentially.

Importantly, more than half of the accounts ordering try Assets in the third quarter, about 53% were new customers. That tells us our reach is expanding and positions are responding to triac and strong clinical performance and favorable reimbursement profiles.

With its proven safety. Excellent efficacy and Broad payer coverage traces is well positioned to continue gaining share in the retina Market.

The big news is our official launch of Tris into the ocular inflammation Market, the largest and most promising opportunity for the brand to date. We're still early in the launch but the response from the field has been encouraging.

Physicians are giving strong positive feedback and early utilization. Trends are moving in the right direction.

The early traction reinforced exactly what we believed from the start that traces delivers, real clinical value and fit seamlessly into position, workflows. We see this launch as a true Catalyst opening a major New Growth channel for traces with proven safety, strong efficacy and Broad payer coverage. Try Essence is gaining Traction in the retina market and is just entered its largest opportunity yet ocular inflammation with positive early feedback.

As awareness builds and adoption expands, I'm confident that Triesence will become a key growth driver and an increasingly important contributor to Harrow's leadership in healthcare.

Turning to rare and specialty products.

This is an area of untapped potential for Harold earlier this quarter. We're excited to welcome Tom peralo as the vice president of this segment. Tom brings deep commercial experience and a proven track record of driving growth. And his leadership comes at exactly the right time as we work to unlock the full value of this portfolio right now. These products represent less than 1% of the total Market volume, which means the upside is significant with Tom leading the charge and a dedicated sales, force being built to focus exclusively on the

This business, we're tightening execution.

Re-energizing our commercial approach and positioning these brands to return to growth.

We're launching the Harrow Access for All program this quarter, which will improve affordability and expand patient access. It leverages to drive sustainable growth across the portfolio.

This portfolio once generated nearly $10 million in quarterly revenue, and we see a clear path to ignite that growth and ultimately exceed those levels with strong leadership now in place. With renewed focus and clear strategies, I am confident this business is positioned to return to growth and deliver stronger, more consistent performance moving forward.

To close, I couldn't be more excited about where Harrow is headed. We're still very early in the growth stage of the Cross. All of our key growth drivers have significant catalysts and ample room for further growth.

Charge expanding its share, broadening access improving coverage. And deepening adoption among prescribers in retina, we're striving relationships expanding awareness and gearing up for 2, major launches bio Vis, and mid 2026, and Opus, and mid 2027.

In the surgical segment, we're building a differentiated portfolio that supports the Perry operative, space, delivering, efficiency and value for practices.

In rare and specialty new leadership, a focused plan of action, and the launch of Harrow Access for All are unlocking the potential of a diverse portfolio that represents less than 1% of its addressable market today.

The opportunity across these four segments is tremendous: the best-in-class products, a scalable commercial platform, and a disciplined strategy. For execution, we're building a company with durable long-term growth.

Long-term growth potential; Harrow's path forward is clear: stronger execution, expanding leadership, and sustained momentum across every part of the business.

With that, we can turn it over to the operator for Q&A.

Thank you, if you'd like to ask a question. Please press star 1, 1 1.

If your question has been answered and you'd like to remove yourself from the queue, press star 1 again.

Our first question comes from Jeffrey Cohen with ladenburg, your line is open.

Hey, good morning. Thanks for taking our questions, and congrats on the quarter. Um, a couple from Aaron. Firstly, could you talk about the V prescription data and why?

We don't see it this quarter.

Hey, hey Jeff, this is Mark. Thanks for the question. Uh,

You know what we decided to do, uh, is to make sure that we have the most accurate information available. As you know, we withdrew from some of the reporting services, some of the data reporting services, uh, a few quarters ago, and it's really important that we have confidence—absolute confidence—that what we're putting out is as accurate as possible. And, you know, from our perspective, I think the key metric was, uh, revenue generated from these products and not necessarily, uh, IQ via data or data from a data feed that may or may not be completely accurate. So, um, because of that, we decided to change the way that we're reporting. Andrew, do you want to add to that at all?

Yeah. And thanks, Jeff. Um, no. The only other part of that to add, uh, to what Mark was saying, is really, you know, one of the reasons we kind of were pulling out of these third-party aggregators was for competitive reasons.

And so if we're doing that, it doesn't really make sense to us to present the data, to then present the data, and make it available to all of our competitors. You know, our earnings release.

so there's, um, that's driven a lot of the, the decision making with, um, presentation of the the TRX data, but the Mark's point, we're going to do our best to be transparent about the progress of v, um, without giving up, um, competitive positioning

Okay, that's perfect. And then secondly, maybe for you and Andrew, could you talk about the leverage that you're achieving? You have some pretty nice leverage on the SDNA in the third quarter, but as you continue to expand your commercial teams, how should we think about leverage overall into 2026, mainly in support of revenue growth?

Yeah, and this is a, this has been a topic for us that we've brought up for a long time. Now where we expected to see operating leverage especially this year in the model on the new Revenue growth that we expected, um, we spent a lot of money on the, the operational commercial infrastructure to support the, the Branded group, um, that is mostly in place. And we're seeing that leverage show.

Up and the numbers. Um,

Obviously Q3 we had, great trusted I but I just under 23 million. The business is producing a lot of cash. Um I think about 16 million of cash in the third quarter from operations. Um and as we look out, Pat talked a little bit about um

adding to that commercial infrastructure to drive Revenue. The the the additional Opex that we're looking at is revenue generating Opex.

So we should start seeing immediate return on that expense. Um, so again,

Even though we're going to be making investments in the commercial infrastructure, it's not like it's going to be a 50% increase in Opex. It's going to be a moderate increase, and importantly, and this is probably the most important thing.

Okay. Got it. Thanks for taking our questions. Congrats on the quarter.

Thank you J. Thanks Jeff.

Thank you. Our next question comes from. Chase Knickerbocker with Craig Hallam. Your line is open.

Good morning, thanks for taking the questions. Uh, maybe just just first to start, um, a couple on Vivi.

Um,

Mark, you had mentioned in uh, stockholder letter uh that ASP was down modestly sequentially. Um, in Q3, could you just Define the magnitude of that modest decline for us? Um, just so we can kind of understand that and then, um, just as we think about, you know, you kind of spoke to stabilization and then in the near term, can you just walk us through some of your modeling assumptions on Vivi that kind of lead to that? ASP stabilization in the near term? As it, you know, improving mix that you're seeing so far in October. Uh and then I've got a follow-up. Thanks.

so, thanks for the question Chief uh, in terms of defining

What modesty means, you know, I, I, I keep giving you the, a definition with Precision. I mean, it's it's I think it's less than 10%, um, but I think the more important issue is how is ASP or net revenue per unit, how is that going to stabilize in the near term? And then, as I said, you know, on prior calls, begin to float up. What is the justification for that? And I, you know, to be very clear. Um, you know,

We're really counting on coverage coming through. We're counting on the ratio of covered prescriptions versus cash. Pay prescriptions to flip or begin to uh change. So that there's more of a bias towards covered prescriptions versus cash pay prescriptions. If that happens, that's when you see the stabilization happen, that's when you see the ASP, begin to float up and the Beautiful Thing. I think the exciting thing for us. And uh, you know, I think, you know, you've actually noted this uh, in your notes that I've seen is that, that increase will affect the entire Corpus every single unit of Vivi. And so the question is how, and when is that going to happen? And I tried to address that in the letter of the stockholders, we discussed that on our in our prepared remarks, when we now have landed, you know, this coverage win with the largest Pharmacy benefit manager in the US.

And specifically their commercial lives. Uh uh group.

You know, you're talking about tens of millions of new potential uh lives covered. And when you think about that ratio of covered prescriptions versus cash pay prescriptions, be beginning January 1st, we anticipate uh, that ratio is going to begin to flip, actually, to be candid with you. I've had doctors send me letters that I know that have all

Already gone out from this benefit manager to the physicians, letting them know about the plan changes that will take effect.

Drugs, that will not be covered and the specific patients names.

Who will no longer be covered for that product and letting them know what the new formulary looks like. So this is really exciting for Vivi. Um, you know, we expect to start seeing some of those those changes. Those uh, prescription flips from uh, other uh, dry eye products to Vivi and the fourth quarter. We expect that'll start to happen but it'll really kick in in the first quarter. And as I said, once that takes place that ratio of covered versus cash, pay will begin to change. You'll see that stabilization happen. And I think, as I said in the, in the, the last call, uh, we'll start to see, I think a bias towards ASP improving and, uh, you know, potentially improving, uh, maybe even more than modestly.

Yeah, that's what I was hoping to follow up on is just um,

Any more specifics, you'd be willing to share as far as that uh that you know, the largest PBM that win was its uh, was it their commercial plans? Was it the commercial land Medicare? Um, just any sort of details there and then, as we think about that, ASP Improvement to your point. Um, you know, any way you can help us kind of Define how you see your current volume and, and kind of the, um, the amount of your current volume that could benefit from that win. And, and how that affects a

SP. And, and any thoughts you'd be willing to give as we enter next year.

Stockholder letter. I think it's the most important part of the stockholder letter. Is this coverage win? Um, because it dramatically changes things. I mean, if you get a twenty dollar or 30 or $40 Improvement, and I'm not suggesting that, you know, we'll see a forty dollar Improvement on ASP, but if it's a 20 dollar Improvement as an example, it affects every single 1 of those those units and is units are growing and they will grow regardless. We are going to to see significant Improvement in in total units, uh for vvi. But the question is is is how much money are we going to make from all of those units? And I think that this Improvement in coverage is, is is uh, going to be a major factor beginning at the beginning of this coming year. And you also know that, you know, we are very conservative in terms of how we invest commercially. We don't do Extravaganza launches because we dip our toes into the

Water. We kind of get in. We see what works. Um, it's just our style and it's the way that we've been able to invest in new product launches and for us to now, uh, make investments in Vivi, and specifically open up 10 new territories, in the very near term. And then I think, by the middle part of next year, we're going to have upwards of about a hundred total territories for Vivi. The reason why we're making those Investments is because, you know, candidly it would be malpractice for us, not to make

those Investments now that we have such strong coverage in these

Specific markets. So we're very bullish on V next year. Um, I think you can expect to see some improvements in ASP. As this ratio, begins to flip and bias more, uh, covered versus cash, pay prescriptions and uh, you know, it's just, it's a, it's a really good time for, for Vivi and the drug, by the way, is phenomenal. If you've ever put the drug in your eye, it's phenomenal. It's, I think it's the best in best product in the class. So does a great job in patients? Love it and the refill rates are absolutely extraordinary. I I believe Best in Class

Very helpful caller, mark. Thank you.

Thank you. Thank you.

Our next question comes from.

Steve seed house with cancer. Your line is open.

Hey, good morning. Thanks for the question. Uh, hoping uh, just to start, you could give us a sense of What proportion of the uh, V like cash pay patients. Currently you'd actually expect to transition to uh, insurance coverage in 2026 and just ballpark the expected impact, uh, that, that uh, particular variable would have on on net price per unit.

Yeah, I can't. Thanks for the question, Steve. I don't I don't know that we can give you the answer with with Precision. We actually have built internal models to try and uh estimate what that would look like. Um this is the largest commercial uh PBM in you know if you just model out how many uh dry eye patients uh they have and you know, we do know how many bright eye prescriptions come from those plants. You know we can see a couple of things happening 1. As I said there are uh patients that have been denied coverage from those plans who are paying cash, who we will be able to reach out to and hopefully transition them from cash pay to covered because this is not just, uh, a non-preferred brand status. This is a preferred status, so this is the lowest, or in some cases, no co-pay type coverage.

So it's really favorable coverage for Vivi. And then, of course, as I said, we are seeing the letters that have already gone out to physicians, letting them know that Legacy products that patients were being prescribed are no longer covered.

I know what those specific products are. And I mean, I, I was looking at the number of patients, of course, not looking at the specific patients names or any of that but uh just 1 physician and 1 small community on 1 Street uh the number of patients and you know, you start adding up these letters going out to thousands and thousands of Physicians and it could be you know you know it could absolutely hit what we are thinking about internally in our modeling and or do you want to add to that at all?

Yeah, I think the, the 1 thing that um, I'm really excited about this. Um,

The The Vapor program is almost call it a temporary program, um, it's not meant to be the program forever. The goal of the program is to gain coverage when to and gain coverage wins, um, and to increase patient access through insurance reimbursement. Um, and through that we think ASP will improve. Um, what's great about the program though? Is it also sets us up where we kind of have a, a base to work off of when we're negotiating with ebms and payers, there's no reason for us to take less money.

From a payer. So when we're bidding, we're not going to bid ourselves into a hole, um, the vafa program is working really well. It's, I mean, it's exceeding our expectations on the cash pay side. Um, and what that's doing is setting us up for a lot of long-term growth for the product, especially as the, the insurance. Winds come in and we think they will and we think that the program itself just with the volume and demand, we're seeing brings us more negotiating power when we go to the payers and go through these bid cycles and I think this like I said the first coverage when is a good demonstration of that, we should see more of that in 26 and 27.

Um, I I just want to ask a good just focusing on uh I guess fourth quarter specifically. Um and on that point you were just noting like you're in this this moment, right? Where the the volume growth is tremendous, um, and you have this sort of couple month window between now and 20.

26, where it would be critical to keep people on PRO on drug. Um,

You know, until their insurance coverage kicks in. So, are you doing anything? Like providing free prescriptions beyond the first month to Vafa patients, or just anything new to bridge that gap? Given the new coverage decisions that would impact fourth quarter revenue. And then on the flip side, um, just with the addition of the new specialty pharmacies, is there any expected inventory or stocking sort of one-time impact to fourth quarter that we should be considering for our models?

Andrew, why don't you take the last question, and I'll touch on the first question and ask Pat for some guidance as well.

yeah, and on the

On the, um, on any inventory stocking. See I I I don't think we'll see anything really that impactful with Vivi in particular for the fourth quarter. Um, these guys are ordering pretty almost just in time type ordering. Um, not quite that that regularly, but, but it's, um, I would say they're taking less inventory than wholesalers. Typically would

Um, so no. No, real end of end of your impact related to that.

And and specifically on keeping patients on therapy. Um I don't know that we want to go into any specific tactics but I know that uh the dry eye team. You know Maria and uh her entire team, her hustling Pat. You want to add to that at all?

Yeah. Thanks Mark. I think this is a super exciting opportunity and this is part of the plan. So I think to me, we have a very, very clear. Um, activation plan to really take advantage of evolving from Fafa, to support these patients to really capitalize on our Managed Care wins. And I think to me it's very much focused on the communications that are happening from the plans at this point in time to their patients. Making sure the doctors know about our vafa program and these winds. They're going to be taking place to ultimately support the patient of the year. So we have a very robust. I touch program. That is taking place and activating as we speak. Now that'll continue to wrap up the year to support these patients and really accelerate growth at the end of the year. I think, in addition, you know, our, our program right now, our fill program, in VA is a very high touch program. So we have very, very clear view into who the patients are that are coming on our product and that are eligible for conversion to this, uh, commercial win. So super exciting time, but to answer your question, we have a very clear plan to really drive conversion and help these patients.

I was just add, I'll just add that I was excited as soon as we got the coverage. When we got that information, I'll tell you, uh, it gave me a lot of confidence in Pat and Maria and the team. I mean, they had, I think they even had a name for the plan internally that they were going to begin to execute. And it was just a text message; it was just like, okay, let's fire it up. It just gave me a lot of confidence that we have the right people, we have the right strategy to take advantage of this great opportunity, and then continue the growth in Levi. So, kudos to the work that Pat and Maria are doing.

With B, Riley Securities. Your line is open.

Uh, yes, good morning Dean. Thanks for taking our questions, and appreciate the detail on, uh, business momentum. So maybe just a higher level question on sort of this, uh, 3 Q to 4 q Dynamics. Um, you know, some you observed last year versus others, you know, you're talking to a unique to, uh, you have this year, uh, was just curious if you could, you know, comment a little bit on the, uh, notably High sort of 80 million Revenue threshold, in 4 q. It's it's it's out of sequentially. Double versus, you know, what? You had in 3Q and and it it seems a lot we still driven by VY. I I think 60% over sequentially. Um, you know, any color Rock You can give on volume versus price kind of dynamic here that you're assuming across the different uh, lines different product lines. Then I will follow up.

On on Q4, you know what I would say is I think last year Andrew Q4 was probably upwards of a third, maybe a smidge higher than a third of our overall revenue for, uh, the annual period, that'll Pro. I, you know, I I wouldn't expect that to change this year. I think that that, uh, you know, we can do around, you know, that range this year. Um, I think the exciting thing about Q4 for what it's worth is the emergence of trees, since finally, you know, I I think we, you know, I was quite candid in the letter. Uh, we we, uh, we could have done a lot.

Better. We should have done a lot better with triacs, uh, you know, in every period this year, the first 3 periods in the same is true with our rare and Specialty portfolio, um, but the key is is that we've taken action, try Essence. I think you know, we're we're seeing really exciting things not just in in words, but in Deeds uh you know, as I was telling the team we're not at a point where Mark can get on a conference call and say, hey, I'm really excited about trees since I think this is going to be fantastic. It's time for orders, it's time for Revenue, it's time for reorders, it's time for new accounts, starting an adopting. Um, and because I'm seeing that, I'm actually, you know, I've been involved in the sales process myself. I've been communicating with high volume surgeons and talking to them about trios and specifically and I'm actually seeing surgeries start with it. And

that's exciting. And I've been through that cycle, I've seen that cycle and so that gives me a lot of confidence and where we're going with that product, not only, uh, you know, beginning to feather, Inn in the fourth quarter. But really, for next year, it's going to get to where we thought we it would be and that's super important. Um, in terms of other Dynamics between Q3 and Q4. Andrew. Do you want to comment on any of that?

Hey, Mark. I think, you know, we've kind of talked about Vivi on, on the ASP side and expecting, you know, at least stabilization there. Um, typically at the end of the year, your your patients are out of that co-pay deductible and amounts. Like that's our co-pay buy Downs, are a little bit lower on a per unit basis so we should hopefully that helps to see a little bit of price Improvement. Um, but in general, we're the expectation is we're going to see volume improve across the portfolio. That'll drive, uh,

Drive, most of the revenue growth for the, the quarter.

Um, great and and then 1, uh, uh, actually couple of specific product, level questions. So project, beagle. Uh, enabled patients, who crossed over to branded by you, you may have some, uh, you know, information there on the conversion rate from Cache Bay, maybe to Commercial Insurance, uh, cover scripts. I don't know if that was something you can share or has, uh, you know, given you some learnings, uh, moving forward and then on try Essence, are you able to comment on what the new, uh, price point is, uh, uh, looks like you're really focused on access to enable, uh, you know, significant volume growth as you enter the ocular information Market. Uh, and, and obviously, you know, very curious to hear, uh, your, your goal here to how, how close you are trying to get to when the product was, uh, not on the shortage list a few years ago. Thanks for taking your questions.

But, you know, I expected for that to be kind of mopped up by the end of the year, for sure. And those patients, uh, who will have transition to Vivi will have have made that, that transition in terms of of triesence pricing, you know, the the, the pricing was at 9:44, you know, you're moving into uh, the, the ocular inflammation Market the, the products in that category,

probably 20 25% lower in price and I believed and I think our team believes that price was a

would have affected adoption. Um, and you know, in particular as we focused on that ocular inflammation Market, it was a good move. By the way, new orders are coming. As I said, it's not Mark talking about, you know, what might happen, What could happen, it's Mark talking about orders coming in Revenue reorders, um, and as I said in the stockholder letter, we have now confirmed reimbursement. So you're talking about a product that uh, is has, you know, tremendous coverage, an extraordinarily low, uh, prior authorization, rate attract, a multi-decade track record, uh, of performance. Um, it's a product that is, I would say beloved by, uh, ocular surgeons and, uh, you know, there are a number of other reasons why, you know,

Clinical reasons, as well as economic reasons why triesence is so exciting, uh, to to, uh, these Physicians that really didn't know, uh, that this level of reimbursement was available for this product. So, um, we are seeing really positive things. I have been through this before, you know, our first product was a product called trim oxy. It was a compounded, uh, combination of triamcinolone acetonide and Moxy, fluxes and hydrochloride

And I remember uh, the adoption cycle there, what happens in in the surgical environment in particular is you you get a few cases in and I tried to describe it in the letter of stockholders and then they see that it performs terrific clinically. Um, now we've gone through the reimbursement cycle. Um, there's really no reason why these Physicians can't use this, uh, pervasively through the throughout their practice. And so, you know, there is this cycle to adoption, and we're going through those Cycles right now. What's really neat, is once those Physicians adopt? This and it starts working. So well, for their patients and they see their patients coming in with clean wide eyes on their post-op day 1. Um, they don't want to change and then when they talk to their administrators at their surgery centers, when they hear that they were reimbursed and they didn't have to deal with prior authorizations, they just don't want to change. And then it grows and grows and grows.

Um at our Peak with like non-fda approved compounded products, you know, we were doing an excessive probably 300,000 uh units of of trim oxy and trim oxygen, you know, years ago. And some of these other uh sterile injectables and so when I think about what I Essence had done many years ago versus what we were doing with a non-, FDA approved product, which was significantly more than trees. Since in terms of annual unit volumes, I say,

That the units that we were doing was a non- FDA approved product for minuscule relative to what the overall Market opportunity is. And I just wonder why uh, you know more, why any surgeon would not use triesence. And so we think that, you know, this is going to become, you know, hopefully, uh, the new standard of care for these patients. And if it was my mother, if it was someone that I loved, that was having a procedure, um, and they could have the physician inject the medication to ensure that they had the medication on board and that they would not have to as a 7578 80 year old patient with comorbidities have to administer. Eye drops postsurgery. Um I think I would want my mother's physician to choose triesence. So we think more and more Physicians, will it's an exciting time.

That product and you know we're just scratching the surface. I don't even know that you could even call it a scratch at this point.

Thank you.

Thank you. Our next question comes from Tom Shrader with BTIG. Your line is open.

User base before and we agree people loved the drug, is it easy to move back into those people or or have they moved on? Could you just give us a sense of is that low hanging fruit? Are those people waiting for the drug? And then you commented on uh, uh, fueling commercial operations for Vivi. Uh, does that mean adding conventional salespeople? And if so, what other products do you think they could most easily? Help is try Essence too far away for someone to Market both of you and try Essence. Uh, thanks

Yeah, I don't, I don't want to keep talking but if you don't mind I'm gonna, I'm gonna take both if that's all right. Uh, you know, in terms of how easy it is to re-engage and whether these Physicians have moved on when triesence was not available without question, they moved on, they started using analog, which has preserved this. It's got benzyl alcohol in it. Um, you know, if you're the patient, if the patient is, someone you love, you don't want the doctor putting uh, a chemical in their eyes that could potentially blind them. And and so that is why Alcon many years ago sought FDA approval for try acids. Because there was a clear unmet need in the marketplace for a preservative free, triumphant colon a seed night and that is triesence. Um, that's what makes the product, very special. And, you know, if you knew that an iPhone 7,

Was not available, maybe you go back to the Blackberry but boy, as soon as you found out that the iPhone 17 was available, you're going to switch back, it does take time to re-engage with these Physicians. Many of them even to this day. Don't know the triesence is available that it's in stock. They don't know about the low prior authorization, right? The, the reimbursement and coverage. Um but that's our job, that's Chad's job. That's the job of this team that is going out alley in in her folks uh in Adam and really making it happen for this product and it takes time, I mean you're talking about thousands and thousands of of call points but they're doing a great job, they're making progress, I think Pat talked about that.

Um, and, you know, for Hero and our stockholders, the juice will be worth the squeeze. I mean, this is a tremendous product. I've always said that I saw Try Essences as a 9-figure revenue product. I think we're going to get there, uh, in due course. Um, you wouldn't think that from the first quarter of the second quarter and the third quarter, but I think if we speak this time next year, you will see that I was not delusional. Uh, and then finally, in terms of commercial apps for you by, um, we're making those investments because we have coverage. Um, when you have coverage, when you have the ability to have.

Have a prescription written and to get it filled in sort of a friction-free way. Um, and what we do know, by the way and we've talked about this in Prior stockholder letters is that when we get a commercially covered V, patient through our process, we retain them, our, our refill rate is amazing for a commercial covered patient. So once we get that patient, now that we can get them covered, we can retain them because the product is so spectacular. Um, it provides us with, uh, you know, an a, a, uh, you know, a sort of a compounding effect as we would get more new patients and retain them. Uh, you know, you'll see that continued growth in terms of other products that we're going to put in their bag. If you go through the, the corporate deck 1 of the things, I'm really excited about is. We actually did add 2 products to the bag of our dry. It, we have an amazing dry eye team.

It will be growing, as I said, by the middle of the next year, we'll have a 100 territories. So Maria's going to have a much uh, larger group of folks to manage. And uh, they will also be helping patients, uh, and giving them access to flare X. And they'll be getting, uh, they'll have Fresh coat in their bag as well. And so the combination of a chronic Care by eye medication with other, uh, related products that cover ocular influ.

I think you can get it for under $30 a unit. It's over the counter. Uh so you don't need a prescription for it. So we're going to do some exciting things with Fresh coat or he has got flare X now. And of course uh the uh the Cornerstone product in her portfolio is Levi.

Got it right? Thanks for the detail.

Thank you, Tom.

Thank you. Our next question comes from Lachlan Hanbury brown with William Blair. Your line is open.

Hey guys, thanks for the questions. Um, I guess I'd be curious on the new coverage for Viva. Can you just talk about how the economics there shake up? Will Stack Up compared to the current? Net pricing because I know you can sort of vocal Mark in the past about

The economics of the pdms try to extract. Um, so it would be interesting to know just sort of, you know where that shakes out and also, once those new plans come online in 26,

what kind of coverage level are you looking at like What proportion of

Commercial lives nationally, uh, covered for Levi.

Yeah, I uh what what I can tell you and in in Andrew mentioned this is that when you have a vafa program and you establish a base it it takes you out of what we would call desperation mode to do bad deals with pbms. Andrew. Do you want to kind of add to that in? You know you you talked about it a little while earlier

Yeah, I've been without giving away the the the kind of bid. Um,

like Marcus saying like I was saying that we kind of start with a a base and we say okay if we're going to get it coverage when

Um, what we want. What is the economics need to be and and then obviously has to be an improvement on the cash number that we have.

Um, and so what that means and what I think and without getting being specific about, what what that impact is going to be. Um the expectation is it's going to be an improvement for those patients um over what they over the cash price that we would net on a per unit basis. And, you know, we've talked a lot about just the the ASP impact of the the coverage when um, and that that'll help stabilize. And and and and certainly increase that number um, in 2026 but there's there's another aspect to this which is

The Vive was not preferred in this plan and Mark kind of talked about this. The the fact that now it is preferred and another product got pulled out of that preferred status

The payer is letting the Physicians know. Hey, your patient was on,

this product and it's not going to be preferred next year, but Viva is

Um, so not only, are we going to get the the the, the increase in ASP but just getting that preferred status. The PBM is helping us drive volume.

Um, and so you're going to it kind of 1 b gets the other, but it's going to be an increase in ASP. It should also be an increase in in volume as well for the product.

All right. Great, thanks. And maybe a quick 1 on the V expansion. The new territory. So just to make sure I heard correctly, is it, you're adding 10 new reps of this quarter and then we'll keep adding more until you get to about 100 next year, which

if I have my numbers right here is sort of roughly double where you're at now.

Yeah, so, we're going to, we're going to increase by 10. We'll get to, you know, a little bit more than 60 here in the very near term. And then by the, uh, second quarter, we'll hopefully have, uh, we'll reach the century mark. We'll have about a 100 Terrace.

Yeah, awesome. Thanks.

Thank you, Lachlan.

Thank you. Our next question comes from Thomas, flatten with Lakes Street Capital markets, your line is open.

Hey, good morning, I appreciate you taking the questions. Hey, Mark, just to follow up, you mentioned, the refill rates are great. Could you give us a sense of duration of therapy that, that, that some of these long, long duration patients are, are, are on products for

I think, I think La last time that we looked at the data for a commercial recovered patient. Uh, you know, if you look at the initial prescription plus the refills,

And you add, you know, you just think about the number of drops per bottle and the number of dosages per day. I mean, I think we were almost we're right at these commercial recovered, patients getting therapy for the entirety of the year. I mean, I think it was only a few weeks away from on average.

I mean, we, we would have never ever thought that we would get that sort of of, uh, of affinity of of, of refill rate for that, that patient. I mean, that was not anywhere even in the highest, the, the, the bullish of bull cases in our models. So, um, you know, that that's that's what we've seen. And and, uh, Andrew, you want to add to that at all.

No, nothing else.

And then, uh, maybe if I couldn't bigger picture, you guys have been pretty busy on the BD front and then kind of created a really impressive, to-do, list for yourselves, over the next couple of years. What, what should we anticipate in 2627? Is this more of a absorb digest and and act or is it, you know, more more deals, more deals. What, what do you land on that?

well, I think

it it at our office today and over the next week or so, we are, uh, over the moon excited about melt. And, you know, I don't think we've talked about melt really at all, but, um, you know, we're we're hoping to get this closed here in the very near term and, you know,

I don't think people really understand the value of melt and and what the potential is there. It's really transformative.

For us. And so, uh, yeah we can we look at deals constantly, we're always evaluating things, but if you look at our portfolio and you, you think about some of the Strategic goals that we've discussed. And I've laid out even in the letter, uh, in particular around cataract surgery, you know, the vision for a surgery that we have which is to have opioid Ivy and drop, free cat, cataract surgery, um that's exciting for patients, that's transformative. The idea that you can

Probably go into an office and office space maybe even bilateral same day cataract surgery and on the far side have no IVs. No opioids. And not need eye drops. Post-surgery, that's extraordinary. And that's what melt. And some of the other products that we have will enable that's transformative for, you know, the nearly 5 million, uh, surgeries. That occur annually in the US. So we are looking at other deals. Uh, we're very interested in other deals, but uh, right now, we're super pumped about melt. We want to get that closed. We want to get, uh, the the balance of the data collected and put into a dossier so that we can submit an NDA and uh, get that product approved.

realize this Vision that we have to really transform the, you know,

hopefully see the belt 300 drug candidate used outside of Opthalmology, which is really a much bigger Market opportunity in dental and ghee and claustrophobia for MRIs and the tens of millions of annual uses in the US, uh, where we think the Melt 300 will be impactful. And then, of course, it's also interesting. Is this will be the first Global play that we have. Um, historically, we've been a US focused business, and as you, I think know, melt 300 is not only patented multiple patents issued domestically, but in all of the, you know many of the major markets around the world. So it's a global opportunity as well that we hope to uh discuss with partners and other markets around the world. So um lots to look at. But I'll tell you when we look at what we have with melt and and the

Appreciate that. Thanks Mark.

Thank you. Our next question comes from Yu Chen with HC, Wayne Wright. Your line is open.

Morning, thank you for taking my question. Uh, Mark you mentioned that uh with the coverage Wing, some prescription flipped to a Vivi, could you uh give some additional color on Market than not Dynamics. Um, whether those prescriptions fluctuate, the originally came from

Uh, prescription for other cyclists, for rain formulations or they could be, uh, they could confirm non secular sporing prescriptions as well. Thank you.

yeah, the so the

You know, which product was the incurred the loss to our potential win, uh, you know, it it was really, uh, and I don't want to go into the specific products, but they were not cyclosporine based products, but they were anti-inflammatories and you might be able to figure out, uh, which ones they were. But in any case, you know, for us, we, we are really focused on being the number 1 cyclist born in the market. And I think this really gets, you know, adds to that momentum. I think to be the number 1 cyclist born in the market. You know, you're talking about, I think with generics probably 20 to 23% market, share. We're a little over 10. Um, we do expect to see, you know, NPP Improvement, uh as we get more and more coverage in that ratio flips, um, but this is going to really help us, uh, I think Drive, uh, you know, not only new prescriptions

Uh, from from uh, patients naturally. But I think from these flips, as I said, I've seen the letters that have gone out to the the Eye Care. Professionals it lists uh the product that is no longer covered and it lists the patients and I know from, you know, the few Physicians that I've spoken to that their intention is to uh uh to move them to Viva. However I have to say if you go around the country, there are many phys.

In many markets, all over the country that have no idea what V is, and it's our job to make sure that they not only know uh, about the clinical value, that that V brings. But also now the new coverage, which will, I think create a more friction-free process for prescribing.

Thank you.

Thank you.

I'm showing no further questions. I'd like to turn the call back over to Mark bomb CEO for closing remarks.

Thank you, operator. And thanks everyone for their questions and we really appreciate you joining us today. Uh, as we look into the future, I remain confident in where we're heading. Uh, we built a solid foundation, we brought together an outstanding leadership team, and to find a clear strategy that touches every part of our business. And we have a portfolio of best-in-class products and expanding access for patients and Physicians and driving a culture that thrives on focus and execution. It positions hero for sustained growth and long-term value creation. Uh, the opportunities that we have ahead of us with Triads and Vivi and I heizo, uh, are tremendous and we are ready to capture them. If you have any further questions or you need additional information, please don't hesitate to reach out to Mike viego.

His email address is M as in Mary B. As in bravo, i e g. A hero inc.com, this will conclude our call

Thank you for your participation. You may now disconnect good day.