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What changed in HARROW, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HARROW, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+370 added−386 removedSource: 10-K (2025-03-27) vs 10-K (2024-03-19)

Top changes in HARROW, INC.'s 2024 10-K

370 paragraphs added · 386 removed · 254 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

62 edited+27 added−26 removed124 unchanged
Biggest changeIn December 2022, Melt announced topline data from its Phase 2 study for MELT-300 as set forth below: ● In a study of more than 300 patients, undergoing cataract surgery conducted at nine study sites, MELT-300 achieved its primary procedural sedation endpoint, demonstrating statistical superiority for procedural sedation compared to all comparator treatment arms, including midazolam 3mg (P=0.0129) and ketamine 50mg (P=0.0096). ● Using the validated Ramsey Sedation Scale (RSS), MELT-300 treatment arm patients were 50% less likely to require rescue sedation compared to midazolam 3mg (P=0.0198). ● Using the RSS, MELT-300 treatment arm patients were 66% less likely to require rescue sedation pre-operatively compared to the midazolam 3mg treatment arm. ● MELT-300’s safety profile was generally comparable to the placebo arm.
Biggest changeResults from the clinical study are summarized below: · MELT-300 achieved its primary procedural sedation endpoint, demonstrating statistical superiority for procedural sedation compared to all comparator treatment arms, including midazolam 3mg (P=0.009) and placebo (P · Using the validated Ramsey Sedation Scale (RSS), MELT-300 treatment arm patients were 50% less likely to require rescue sedation compared to midazolam 3mg (P=0.0198). · Proportion of patients requiring rescue sedation was nearly two-fold higher for sublingual midazolam compared with MELT-300 (P=0.003). · MELT-300’s safety profile was generally comparable to the placebo arm.
We do, however, believe that our proprietary drug formulations, drug candidates and drug products could have commercial appeal in international markets, and have engaged distributors and entered into out-licensing arrangements for certain of our products and proprietary formulations in certain non-U.S. markets, including Canada.
We do, however, believe that our drug candidates and drug products could have commercial appeal in international markets, and have engaged distributors and entered into out-licensing arrangements for certain of our products and proprietary formulations in certain non-U.S. markets, including Canada.
We own U.S. commercial rights to the following products: ● IHEEZO® (chloroprocaine hydrochloride ophthalmic gel) 3% a low-viscosity gel indicated for ocular surface anesthesia. ● VEVYE® (cyclosporine ophthalmic solution) 0.1%, utilizes a novel water-free vehicle (perfluorobutylpentane) based on semifluorinated alkanes, indicated for the treatment of the signs and symptoms associated with dry eye disease. ● TRIESENCE® (triamcinolone acetonide injectable suspension) 40 mg/ml, a steroid injection for the treatment of certain ophthalmic diseases and for visualization during vitrectomy. ● VIGAMOX® (moxifloxacin hydrochloride ophthalmic solution) 0.5%, a fluoroquinolone antibiotic eye drop for the treatment of bacterial conjunctivitis caused by susceptible strains of organisms. ● ILEVRO® (nepafenac ophthalmic suspension) 0.3%, a non-steroidal, anti-inflammatory eye drop indicated for pain and inflammation associated with cataract surgery. 3 ● FLAREX ® (fluorometholone acetate ophthalmic suspension) 0.1%, a corticosteroid prepared as a sterile topical ophthalmic suspension indicated for use in the treatment of steroid-responsive inflammatory conditions of the palpebral and bulbar conjunctiva, cornea, and anterior segment of the eye. ● NATACYN® (natamycin ophthalmic suspension) 5%, a sterile, antifungal drug for the treatment of fungal blepharitis, conjunctivitis, and keratitis caused by susceptible organisms, including Fusarium solani keratitis. ● TOBRADEX® ST (tobramycin and dexamethasone ophthalmic suspension) 0.3%/0.05%, a topical antibiotic and corticosteroid combination for steroid-responsive inflammatory ocular conditions for which a corticosteroid is indicated and where superficial bacterial ocular infection or a risk of bacterial ocular infection exists. ● ZERVIATE® (cetirizine ophthalmic solution) 0.24%, a histamine-1 (H1) receptor antagonist indicated for treatment of ocular itching associated with allergic conjunctivitis. ● VERKAZIA® (cyclosporine ophthalmic emulsion) 0.1%, an orphan designated drug that is a calcineurin inhibitor immunosuppressant indicated for the treatment of vernal keratoconjunctivitis. ● NEVANAC® (nepafenac ophthalmic suspension) 0.1%, a non-steroidal, anti-inflammatory eye drop indicated for pain and inflammation associated with cataract surgery. ● FRESHKOTE® Preservative Free (PF) is a lubricant eye drop that does not require a prescription and temporarily relieves burning, itching and other dry eye symptoms. ● MAXITROL® (neomycin and polymyxin B sulfates and dexamethasone ophthalmic suspension) is an eye drop used to treat steroid-responsive inflammatory ocular conditions where bacterial infection or a risk of bacterial ocular infection exist ● MAXIDEX® (dexamethasone ophthalmic suspension) 0.1%, a steroid eye drop for steroid-responsive inflammatory conditions of the palpebral and bulbar conjunctiva, cornea, and anterior segment of the globe. ● IOPIDINE® 1% (apraclonidine hydrochloride) 0.5%, an ophthalmic solution in a sterile isotonic solution indicated to control or prevent post-surgical elevations in intraocular pressure that occur in patients after argon laser trabeculoplasty, argon laser iridotomy or Nd:YAG posterior capsulotomy ● IOPIDINE® 0.5% (apraclonidine hydrochloride) an ophthalmic solution indicated for short-term adjunctive therapy in patients on maximally tolerated medical therapy who require additional intraocular pressure (or IOP) reduction.
We own U.S. commercial rights to the following products that we market and sell: · IHEEZO ® (chloroprocaine hydrochloride ophthalmic gel) 3% a low-viscosity gel indicated for ocular surface anesthesia. · VEVYE ® (cyclosporine ophthalmic solution) 0.1%, utilizes a novel water-free vehicle (perfluorobutylpentane) based on semifluorinated alkanes, indicated for the treatment of the signs and symptoms associated with dry eye disease. · TRIESENCE ® (triamcinolone acetonide injectable suspension) 40 mg/ml, a steroid injection for the treatment of certain ophthalmic diseases and for visualization during vitrectomy. · VIGAMOX ® (moxifloxacin hydrochloride ophthalmic solution) 0.5%, a fluoroquinolone antibiotic eye drop for the treatment of bacterial conjunctivitis caused by susceptible strains of organisms. · ILEVRO ® (nepafenac ophthalmic suspension) 0.3%, a non-steroidal, anti-inflammatory eye drop indicated for pain and inflammation associated with cataract surgery. 4 · FLAREX ® (fluorometholone acetate ophthalmic suspension) 0.1%, a corticosteroid prepared as a sterile topical ophthalmic suspension indicated for use in the treatment of steroid-responsive inflammatory conditions of the palpebral and bulbar conjunctiva, cornea, and anterior segment of the eye. · NATACYN ® (natamycin ophthalmic suspension) 5%, a sterile, antifungal drug for the treatment of fungal blepharitis, conjunctivitis, and keratitis caused by susceptible organisms, including Fusarium solani keratitis. · TOBRADEX ® ST (tobramycin and dexamethasone ophthalmic suspension) 0.3%/0.05%, a topical antibiotic and corticosteroid combination for steroid-responsive inflammatory ocular conditions for which a corticosteroid is indicated and where superficial bacterial ocular infection or a risk of bacterial ocular infection exists. · ZERVIATE ® (cetirizine ophthalmic solution) 0.24%, a histamine-1 (H1) receptor antagonist indicated for treatment of ocular itching associated with allergic conjunctivitis. · VERKAZIA ® (cyclosporine ophthalmic emulsion) 0.1%, an orphan designated drug that is a calcineurin inhibitor immunosuppressant indicated for the treatment of vernal keratoconjunctivitis. · NEVANAC ® (nepafenac ophthalmic suspension) 0.1%, a non-steroidal, anti-inflammatory eye drop indicated for pain and inflammation associated with cataract surgery. · FRESHKOTE ® Preservative Free (PF) is a lubricant eye drop that does not require a prescription and temporarily relieves burning, itching and other dry eye symptoms. · MAXITROL ® (neomycin and polymyxin B sulfates and dexamethasone ophthalmic suspension) is an eye drop used to treat steroid-responsive inflammatory ocular conditions where bacterial infection or a risk of bacterial ocular infection exist. · MAXIDEX ® (dexamethasone ophthalmic suspension) 0.1%, a steroid eye drop for steroid-responsive inflammatory conditions of the palpebral and bulbar conjunctiva, cornea, and anterior segment of the globe. · IOPIDINE ® 1% (apraclonidine hydrochloride) 0.5%, an ophthalmic solution in a sterile isotonic solution indicated to control or prevent post-surgical elevations in intraocular pressure that occur in patients after argon laser trabeculoplasty, argon laser iridotomy or Nd:YAG posterior capsulotomy. · IOPIDINE ® 0.5% (apraclonidine hydrochloride) an ophthalmic solution indicated for short-term adjunctive therapy in patients on maximally tolerated medical therapy who require additional intraocular pressure (or IOP) reduction.
Therefore, we believe as these products and product candidates gain commercial adoption, the number of annual intravitreal injections should increase further and at an increased rate as compared to recent years. 7 Vitrectomy is a surgical procedure undertaken by a specialist where the vitreous humor gel that fills the eye cavity is removed to provide better access to the retina.
Therefore, we believe as these products and product candidates gain commercial adoption, the number of annual intravitreal injections should increase further and at an increased rate as compared to recent years. Vitrectomy is a surgical procedure undertaken by a specialist where the vitreous humor gel that fills the eye cavity is removed to provide better access to the retina.
Entities voluntarily registering with FDA as outsourcing facilities are subject to additional requirements that do not apply to compounding pharmacies (operating under Section 503A of the FDCA), including adhering to standards such cGMPs or other FDA guidance documents and being subject to regular FDA inspection. 6 We operate two compounding facilities located in Ledgewood, New Jersey.
Entities voluntarily registering with FDA as outsourcing facilities are subject to additional requirements that do not apply to compounding pharmacies (operating under Section 503A of the FDCA), including adhering to standards such cGMPs or other FDA guidance documents and being subject to regular FDA inspection. We operate two compounding facilities located in Ledgewood, New Jersey.
Our talent acquisition team uses internal and external resources to recruit highly skilled candidates in the U.S. We believe that we continue to attract and retain superior talent as measured by our turnover rate and employee service tenure. Total Rewards Our total rewards philosophy has been to create investment in our workforce by offering competitive compensation and benefits packages.
Our talent acquisition team uses internal and external resources to recruit highly skilled candidates in the U.S. We believe that we continue to attract and retain superior talent as measured by our turnover rate and employee service tenure. 18 Total Rewards Our total rewards philosophy has been to create investment in our workforce by offering competitive compensation and benefits packages.
“Risk Factors” for additional risks related to reimbursement and government programs. We participate in, and have certain price reporting obligations to, the Medicaid Drug Rebate program, state Medicaid supplemental rebate program(s), and other governmental pricing programs. We also have obligations to report the average sales price for certain drugs to the Medicare program.
“Risk Factors” for risks related to reimbursement and government programs. We participate in, and have certain price reporting obligations to, the Medicaid Drug Rebate program, state Medicaid supplemental rebate program(s), and other governmental pricing programs. We also have obligations to report the average sales price for certain drugs to the Medicare program.
The governing statute provides for civil monetary penalties for failure to provide information timely or for knowingly submitting false information to the government. Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e., drugs that are not administered by a physician).
The governing statute provides for civil monetary penalties for failure to provide information timely or for knowingly submitting false information to the government. 12 Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e., drugs that are not administered by a physician).
In the same announcement, the FDA stated it does not intend to enforce the statutory 5% limit on the distribution of compounded drugs out of the state in which they are compounded by compounders located in states that do not sign the Final MOU for the duration of the rulemaking process. 14 Certain provisions of the FDCA govern the preparation, handling, storage, marketing and distribution of pharmaceutical products.
In the same announcement, the FDA stated it does not intend to enforce the statutory 5% limit on the distribution of compounded drugs out of the state in which they are compounded by compounders located in states that do not sign the Final MOU for the duration of the rulemaking process. 15 Certain provisions of the FDCA govern the preparation, handling, storage, marketing and distribution of pharmaceutical products.
International Regulation If we pursue commercialization of our branded products and proprietary formulations in countries other than the United States, then we may need to obtain the approvals required by the regulatory authorities of such foreign countries that are comparable to the FDA and state boards of pharmacy, and we would be subject to a variety of other foreign statutes and regulations comparable to those relating to our U.S. operations.
International Regulation If we pursue commercialization of our branded products and proprietary formulations in countries other than the U.S., then we may need to obtain the approvals required by the regulatory authorities of such foreign countries that are comparable to the FDA and state boards of pharmacy, and we would be subject to a variety of other foreign statutes and regulations comparable to those relating to our U.S. operations.
Thus, the Section 505(b)(2) applicant may invest a significant amount of time and expense in the development of its products only to be subject to significant delay and patent litigation before its products may be commercialized. 13 Pharmacy Regulation Our pharmacy operations are regulated by both individual states and the federal government.
Thus, the Section 505(b)(2) applicant may invest a significant amount of time and expense in the development of its products only to be subject to significant delay and patent litigation before its products may be commercialized. 14 Pharmacy Regulation Our pharmacy operations are regulated by both individual states and the federal government.
However, we may not be successful in doing so, whether due to the safety, quality or availability of our products and proprietary compounded formulations, the size of the markets for such products, which could be smaller than we expect, the timing of market entry relative to competitive products, the availability of alternative compounded formulations or FDA-approved drugs, the price of our products relative to alternative products or the success of our sales and marketing efforts, which is dependent on our ability to further build and continue to grow a qualified and adequate internal sales function.
However, we may not be successful in doing so, whether due to the size of the markets for such products, which could be smaller than we expect, the timing of market entry relative to competitive products, the availability of alternative compounded formulations or FDA-approved drugs, the price of our products relative to alternative products or the success of our sales and marketing efforts, which is dependent on our ability to further build and continue to grow a qualified and adequate internal sales function.
From its inception in 2014, ImprimisRx, whose business consists of integrated research and development, production, dispensing/distribution, sales, marketing, and customer-service capabilities, has offered ophthalmologist and optometrist customers and their patients access to critical medicines to meet their clinical needs. Initially, ImprimisRx focused exclusively on compounded medications to serve needs unmet by commercially available drugs.
From its inception in 2014, ImprimisRx, whose business consists of integrated research and development, production, dispensing/distribution, sales, marketing, and customer-service capabilities, has offered ophthalmologist and optometrist customers and their patients access to critical medicines to meet their clinical needs. ImprimisRx is focused on compounded medications to serve needs unmet by commercially available drugs.
ITEM 1. BUSINESS Overview We are a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical products for the U.S. market. Harrow helps U.S. eyecare professionals preserve the gift of sight by making its comprehensive portfolio of prescription and non-prescription pharmaceutical products accessible and affordable to millions of Americans each year.
ITEM 1. BUSINESS Overview We are a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical products for the U.S. market. We help U.S. eyecare professionals preserve the gift of sight by making its comprehensive portfolio of prescription and non-prescription pharmaceutical products accessible and affordable to millions of Americans each year.
Our sales and marketing activities consist primarily of efforts to educate doctors, ambulatory surgery centers, healthcare systems, hospitals and other users throughout the U.S. about our branded drug products and compounded formulations. We expect that we may experience growth in the sales of our products in future periods, particularly in light of our recent product launches and commercial campaigns.
Our sales and marketing activities consist primarily of efforts to educate doctors, ambulatory surgery centers, healthcare systems, hospitals and other users throughout the U.S. about our drug products. We expect that we may experience growth in the sales of our products in future periods, particularly in light of our recent product launches and commercial campaigns.
Private payor healthcare and insurance providers, health maintenance organizations, and pharmacy benefit managers in the United States are adopting more aggressive utilization management techniques and are increasingly requiring significant discounts and rebates from manufacturers as a condition to including products on formulary with favorable coverage and copayment/coinsurance.
Private payor healthcare and insurance providers, health maintenance organizations, and pharmacy benefit managers in the U.S. are adopting more aggressive utilization management techniques and are increasingly requiring significant discounts and rebates from manufacturers as a condition to including products on formulary with favorable coverage and copayment/coinsurance.
All of our compounded products that we sell, produce and dispense are made in the United States. We believe that, with our current compounding pharmacy facilities and licenses and FDA registration of NJOF, we have the infrastructure to scale our business appropriately under the current regulatory landscape and meet the potential growth in demand we are targeting.
All of our compounded products that we sell, produce and dispense are made in the U.S. We believe that, with our current compounding pharmacy facilities and licenses and FDA registration of NJOF, we have the infrastructure to scale our business appropriately under the current regulatory landscape and meet the potential growth in demand we are targeting.
The same report stated the global dry eye product market is expected to grow from $5.8 billion in 2023 to $7.5 billion in 2028. Dry eye is among the most common conditions seen by eyecare professionals. Intravitreal injections are one of the most common procedures performed by ophthalmologists in the United States.
The same report stated the global dry eye product market is expected to grow from $5.8 billion in 2023 to $7.5 billion in 2028. Dry eye is among the most common conditions seen by eyecare professionals. Intravitreal injections are one of the most common procedures performed by ophthalmologists in the U.S.
Product General Subject Matter Expiration IHEEZO Methods using topical formulations September 2038 VEVYE Formulation composition for treatment of dry eye syndrome Ophthalmic composition comprising cyclosporine Semiflourinated compounds for ophthalmic administration Topical administration method December 2030 September 2037 November 2038 October 2039 TRIESENCE Composition of injectable suspension Methods for treating ophthalmic disorder December 2029 March 2029 ILEVRO Compositions containing a synergistic combination of polymers Composition comprising carbomer, galactomannan and borate Carboxyvinyle polymer-containing nanoparticle suspension June 2024 December 2030 March 2032 TOBRADEX ST Methods for treating inflammation where infection may occur Compositions containing tobramycin and dexamethasone December 2027 August 2028 VERKAZIA Methods for treating eye disease Compositions of oil-in-water cationic emulsion Compositions containing quaternary ammonium compounds May 2027 November 2027 June 2029 ZERVIATE Methods for treating ophthalmic allergic conjunctivitis Ophthalmic topical compositions of cetirizine March 2030 July 2032 Governmental Regulation Our business is subject to federal, state and local laws, regulations, and administrative practices, including, among others: federal, state and local licensure and registration requirements concerning the operation of pharmacies and the practice of pharmacy; the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”); the Health Care Reform Law; statutes and regulations of the FDA, the U.S.
Product General Subject Matter Expiration IHEEZO Methods using topical formulations Compositions compromising chloroprocaine September 2038 May 2039 VEVYE Formulation composition for treatment of dry eye syndrome Ophthalmic composition comprising cyclosporine Semiflourinated compounds for ophthalmic administration Topical administration method December 2030 September 2037 November 2038 October 2039 TRIESENCE Composition of injectable suspension Methods for treating ophthalmic disorder December 2029 March 2029 ILEVRO Composition comprising carbomer, galactomannan and borate Carboxyvinyle polymer-containing nanoparticle suspension December 2030 March 2032 TOBRADEX ST Methods for treating inflammation where infection may occur Compositions containing tobramycin and dexamethasone December 2027 August 2028 VERKAZIA Methods for treating eye disease Compositions of oil-in-water cationic emulsion Compositions containing quaternary ammonium compounds May 2027 November 2027 June 2029 13 Governmental Regulation Our business is subject to federal, state and local laws, regulations, and administrative practices, including, among others: federal, state and local licensure and registration requirements concerning the operation of pharmacies and the practice of pharmacy; the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”); the Health Care Reform Law; statutes and regulations of the FDA, the U.S.
These companies are pursuing market approval for their drug candidates under the Federal Food Drug and Cosmetic Act (the “FDCA”), including in some instances under the abbreviated pathway described in Section 505(b)(2), which permits the submission of a new drug application (an “NDA”) where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference.
These companies are pursuing market approval for their drug candidates under the FDCA, including in some instances under the abbreviated pathway described in Section 505(b)(2), which permits the submission of a new drug application (an “NDA”) where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference.
Medicare, Medicaid and Other Reimbursement Options Sales in the United States of our marketed products are dependent, in large part, on the availability and extent of reimbursement from third-party payors, including private payor healthcare and insurance programs, health maintenance organizations, pharmacy benefit management companies, and government programs such as Medicare and Medicaid, see also Part I, Item 1A.
Medicare, Medicaid and Other Reimbursement Options Sales in the U.S. of our marketed products are dependent, in large part, on the availability and extent of reimbursement from third-party payors, including private payor healthcare and insurance programs, health maintenance organizations, pharmacy benefit management companies, and government programs such as Medicare and Medicaid. See Item 1A.
Section 503A of the FDCA provides that a pharmacy is only permitted to compound a drug for an individually identified patient based on a prescription for the patient and is only permitted to distribute the drug interstate if the pharmacy is licensed to do so in the states where it is compounded and where the medication is received.
Section 503A of the Federal Food, Drug and Cosmetic Act (the “FDCA”) provides that a pharmacy is only permitted to compound a drug for an individually identified patient based on a prescription for the patient and is only permitted to distribute the drug interstate if the pharmacy is licensed to do so in the states where it is compounded and where the medication is received.
Depending on the formulation, the regulations of a specific state, and ultimately the needs of the patient, ImprimisRx products may be dispensed as patient-specific medications from our 503A pharmacy, or for in-office use, made according to current good manufacturing practices (“cGMPs”) or other guidance documents from the U.S.
Depending on the formulation, the regulations of a specific state, and ultimately the needs of the patient, ImprimisRx products may be dispensed as patient-specific medications from our 503A pharmacy, or for in-office use, made according to current good manufacturing practices (“cGMPs”) or other guidance documents from the FDA, in our FDA-registered New Jersey outsourcing facility.
Ophthalmology Market For any ocular procedure, a surgeon may require drugs for sedation, dilation, anesthesia, inflammation and infection prevention, and ocular surface preservation. The cataract surgery market continues to experience significant growth.
MAXITROL Belgium IOPIDINE 1% France 8 Ophthalmology Market For any ocular procedure, a surgeon may require drugs for sedation, dilation, anesthesia, inflammation and infection prevention, and ocular surface preservation. The cataract surgery market continues to experience significant growth.
Even though we have registered NJOF with the FDA, our compounding business may not be scalable on the scope available to our competitors that produce FDA-approved drugs, which may limit our potential for profitable operations. These facets of our operations may subject our business to limitations our competitors offering only FDA-approved drugs may not face.
Even though we have registered NJOF with the FDA, our compounding business may not be scalable on the scope available to our competitors that produce FDA-approved drugs, which may limit our potential for profitable operations.
Food and Drug Administration (the “FDA”), in our FDA-registered New Jersey outsourcing facility. Our current ophthalmology formulary includes over 30 compounded formulations, many of which are patented or patent-pending, that are customizable for the specific needs of a patient. We make our formulations available at prices that are, in most cases, lower than non-customized commercial drugs.
Our current ophthalmology formulary includes over 30 compounded formulations, many of which are patented or patent-pending, that are customizable for the specific needs of a patient. We make our formulations available at prices that are, in most cases, lower than non-customized commercial drugs.
We own commercial rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in North America, all of which are marketed under the Harrow name. We also own and operate ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding businesses. In addition, we have a non-controlling equity interest in Melt Pharmaceuticals, Inc.
We own commercial rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in North America, all of which are marketed under the Harrow name. We also own and operate ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding businesses.
Some regulatory bodies such as state boards of pharmacy adopted these changes at that time, and some have not or plan to on different dates, on a case-by-case basis.
Some regulatory bodies such as state boards of pharmacy adopted these changes at that time, and some have not or plan to on different dates, on a case-by-case basis. The revisions to USP has had little impact to our business.
While we strive to provide real-time recognition of employee performance, we have a formal annual review process not only to determine pay and equity adjustments tied to individual contributions, but to identify areas where training and development may be needed.
While we strive to provide real-time recognition of employee performance, we have a formal annual review process not only to determine pay and equity adjustments tied to individual contributions, but to identify areas where training and development may be needed. Company Information We were incorporated in Delaware in January 2006 as Bywater Resources, Inc.
This allows for a variety of repairs, including the removal of scar tissue, laser repair of retinal detachments and treatment of macular holes. According to an October 2022 article published on the Cleveland Clinic website, U.S. surgeons perform about 225,000 vitrectomies each year. The number is likely to continue to grow as eye care providers find more uses for vitrectomy.
This allows for a variety of repairs, including the removal of scar tissue, laser repair of retinal detachments and treatment of macular holes. According to data from Definitive Health from 2023, U.S. surgeons perform about 420,000 vitrectomies each year. The number is likely to continue to grow as eye care providers find more uses for vitrectomy.
Environmental and Other Matters We are or may become subject to environmental laws and regulations governing, among other things, any use and disposal by us of hazardous or potentially hazardous substances in connection with our research and preparation of our formulations.
We currently partner with companies to sell, market and distribute some of our products in certain foreign countries. 17 Environmental and Other Matters We are or may become subject to environmental laws and regulations governing, among other things, any use and disposal by us of hazardous or potentially hazardous substances in connection with our research and preparation of our formulations.
Although we believe we are positioned to compete favorably with respect to many of these factors, if our proprietary formulations are unable to compete with the products of our competitors, we may never gain a significant market share or achieve profitability. 8 Factors Affecting Our Performance We believe the primary factors affecting our performance are our ability to increase revenues of our ophthalmic products, grow and gain operating efficiencies in our pharmacy operations, successfully adjust our operations to account for any future regulatory-related restrictions, optimize pricing and obtain reimbursement options for our ophthalmic products, and continue to pursue development and commercialization opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available or have been recently launched.
Factors Affecting Our Performance We believe the primary factors affecting our performance are our ability to increase revenues of our ophthalmic products, grow and gain operating efficiencies in our pharmacy operations, successfully adjust our operations to account for any future regulatory-related restrictions, optimize pricing and obtain reimbursement options for our ophthalmic products, and continue to pursue development and commercialization opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available or have been recently launched.
Below are descriptions of some of the various federal and state laws and regulations which may govern or impact our current and planned operations. 12 FDA New Drug Application Process As discussed in other sections of this Annual Report, we are pursuing, and may continue to pursue, alone or with project partners, FDA approval to market and sell one or more of our product candidates through the FDA’s NDA process.
FDA New Drug Application (NDA) Process As discussed in other sections of this Annual Report, we are pursuing, and may continue to pursue, alone or with project partners, FDA approval to market and sell one or more of our product candidates through the FDA’s NDA process.
All long-lived assets at December 31, 2023 and 2022 were located in the United States. Human Capital As of March 1, 2024, we employed 315 employees. Our employees are engaged in pharmacy operations, sales, marketing, research, development, and general and administrative functions.
All long-lived assets at December 31, 2024 and 2023 were located in the U.S. Human Capital As of February 28, 2025, we employed 382 individuals. Our employees are engaged in pharmacy operations, sales, marketing, research, development, and general and administrative functions.
New drugs approved by the FDA that are used in surgeries performed in a hospital outpatient departments or ambulatory surgical centers may receive a transitional pass-through reimbursement under Medicare, provided they meet certain criteria, including a “not insignificant” cost criterion.
TRIESENCE has a permanent product specific J-code (J3300) as well, which physicians can use for reimbursement purposes of that product. New drugs approved by the FDA that are used in surgeries performed in a hospital outpatient departments or ambulatory surgical centers may receive a transitional pass-through reimbursement under Medicare, provided they meet certain criteria, including a “not insignificant” cost criterion.
Under the Medicaid Drug Rebate program, we are required to pay a rebate to each state Medicaid program for our covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program as a condition of having federal funds being made available for our drugs under Medicaid and Part B of the Medicare program.
Under the Medicaid Drug Rebate program, we are required to pay a rebate to each state Medicaid program for our covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program as a condition of having federal funds being made available for our drugs under Medicaid and Part B of the Medicare program. 10 Medicare is a federal program that is administered by the federal government that covers individuals age 65 and over or that are disabled as well as those with certain health conditions.
The 340B ceiling price is calculated using a statutory formula, which is based on the average manufacturer price and Medicaid rebate amount for the covered outpatient drug as calculated under the Medicaid Drug Rebate program.
The 340B ceiling price is calculated using a statutory formula, which is based on the average manufacturer price and Medicaid rebate amount for the covered outpatient drug as calculated under the Medicaid Drug Rebate program. In general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price calculation and discount requirement.
Pharmaceutical Compounding Businesses Pharmaceutical Compounding Pharmaceutical compounding is the science of combining different active pharmaceutical ingredients (APIs), all of which are approved by the FDA (either as a finished form product or as a bulk drug ingredient), and excipients to create specialized pharmaceutical preparations.
ImprimisRx’s customer base has grown to include more than 10,000 U.S. eyecare-dedicated prescribers and institutions. 5 Pharmaceutical Compounding Pharmaceutical compounding is the science of combining different active pharmaceutical ingredients (APIs), all of which are approved by the FDA (either as a finished form product or as a bulk drug ingredient), and excipients to create specialized pharmaceutical preparations.
Our investments in this regard have led to the pursuit and completion of several announced transactions, all of which are focused on eyecare pharmaceuticals primarily for the U.S. and Canadian markets.
Branded Ophthalmic Pharmaceuticals Over the past few years, we have invested in broadening our product portfolio of Food and Drug Administration (“FDA”)-approved products. Our investments in this regard have led to the pursuit and completion of several announced transactions, all of which are focused on eyecare pharmaceuticals primarily for the U.S. and Canadian markets.
In each of these areas, as described above, the FDA and other government agencies have broad regulatory and enforcement powers, including, among other things, the ability to levy fines and civil penalties, suspend or delay issuance of approvals, licenses or permits, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect on our business. 16 Research and Development Expenses Our research and development (“R&D”) expenses incurred in 2023 and 2022 primarily included expenses related to development of intellectual property, researcher and investigator-initiated evaluations, and formulation development related primarily to our ophthalmic products, formulations and certain other assets, in addition to costs associated with our drug candidate development programs.
In each of these areas, as described above, the FDA and other government agencies have broad regulatory and enforcement powers, including, among other things, the ability to levy fines and civil penalties, suspend or delay issuance of approvals, licenses or permits, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect on our business.
Nonetheless, if all or some of the bulk drug substances we use are removed from the 503B Bulk’s List, this may result in a disruption in our operations, revenues and cash flows.
Nonetheless, if all or some of the bulk drug substances we use are removed from the 503B Bulk’s List, this may result in a disruption in our operations, revenues and cash flows. 16 From March 2024 through April 2024, NJOF was inspected by the FDA (the “2024 Inspection”), and the FDA issued a Form 483 with five observations.
Program benefits are intended to provide protection and security, so employees can have peace of mind concerning events that may require time away from work or that may impact their financial well-being. 17 Diversity, Equity, and Inclusion We believe a workforce with diverse life experiences is critical to our success.
We provide our employees and their families with access to a variety of innovative, flexible, and convenient health and wellness programs. Program benefits are intended to provide protection and security, so employees can have peace of mind concerning events that may require time away from work or that may impact their financial well-being.
Temporary pass-through reimbursement for IHEEZO was awarded by CMS and made effective in the second quarter of 2023. Following the expiration of pass-through status, under current CMS policy, non-opioid pain management surgical drugs when used on Medicare Part B patients in an outpatient setting can qualify for ongoing separate payments.
Following the expiration of pass-through status, under current CMS policy, non-opioid pain management surgical drugs when used on Medicare Part B patients in an outpatient setting can qualify for ongoing separate payments. CMS’ current non-opioid separate payment policy, like other CMS policies, can be changed by CMS through its annual rulemaking and comment process.
Failure to comply with requirements under the drug price negotiation program is subject to an excise tax and a civil monetary penalty.
Failure to comply with requirements under the drug price negotiation program is subject to an excise tax and a civil monetary penalty. This or any other legislative change could impact the market conditions for our products.
Melt Pharmaceuticals, Inc. Melt is a clinical-stage pharmaceutical company focused on the development and commercialization of proprietary non-intravenous, sedation and anesthesia therapeutics for human medical procedures in hospital, outpatient, and in-office settings. Melt is seeking regulatory approval for its proprietary technologies, where possible.
We previously held ownership interest in Eton Pharmaceuticals, Inc. (“Eton”) and sold such interests in April 2024. 6 Melt Pharmaceuticals, Inc. Melt is a clinical-stage pharmaceutical company focused on the development and commercialization of proprietary non-intravenous, sedation and anesthesia therapeutics for human medical procedures in hospital, outpatient, and in-office settings.
Effective in 2022, CMS modified Medicaid Drug Rebate program regulations to, among other things, permit reporting multiple best price figures with regard to value-based purchasing arrangements and provide definitions for “line extension,” “new formulation,” and related terms with the practical effect of expanding the scope of drugs considered to be line extensions.
Effective in 2022, CMS modified Medicaid Drug Rebate program regulations to, among other things, permit reporting multiple best price figures with regard to value-based purchasing arrangements and provide definitions for “line extension,” “new formulation,” and related terms with the practical effect of expanding the scope of drugs considered to be line extensions. 11 Civil monetary penalties can be applied if we are found to have knowingly submitted any false pricing or other information to the government, if we are found to have made a misrepresentation in the reporting of our average sales price, or if we fail to submit the required data on a timely basis.
It is currently unclear how HRSA will apply its enforcement authority under this regulation. Any charge by HRSA that we have violated the requirements of the regulation could result in civil monetary penalties.
Any charge by HRSA that we have violated the requirements of the regulation could result in civil monetary penalties.
We plan to invest in one or both of our facilities to further their capacity and efficiencies. Also, we may seek to access greater pharmacy and production related redundancy and markets through acquisitions, partnerships or other strategic transactions. Sales and Marketing The focus of our sales and marketing is in the U.S.
We plan to invest in one or both of our facilities to further their capacity and efficiencies. Also, we may seek to access greater pharmacy and production related redundancy and markets through acquisitions, partnerships or other strategic transactions. Carved-Out Subsidiaries (De-Consolidated Businesses) We have ownership interests in Melt Pharmaceuticals, Inc. (“Melt”) and Surface Ophthalmics, Inc.
In addition, as of March 1, 2024, we owned and/or licensed more than 50 total issued and pending patent applications, which include U.S.-issued patents, international-issued patents, and U.S. and foreign/international patent pending applications. We expect to file additional patent applications in the U.S. and pursue patent protection for certain of our formulations in other important international jurisdictions in the future.
We expect to file additional patent applications in the U.S. and pursue patent protection for certain of our formulations in other important international jurisdictions in the future. As of March 1, 2025, we had, on a worldwide basis, more than 100 issued trademarks, pending trademark and copyright applications, or registered copyrights and/or trademarks.
Biotechnology and related pharmaceutical technologies are subject to rapid and significant change. Our future success will depend in large part on our ability to maintain a competitive position with respect to these technologies. Products developed by our competitors, including FDA-approved drugs and compounded formulations created by other pharmacies, could render our products and technologies obsolete or unable to compete.
These facets of our operations may subject our business to limitations our competitors offering only FDA-approved drugs may not face. 9 Biotechnology and related pharmaceutical technologies are subject to rapid and significant change. Our future success will depend in large part on our ability to maintain a competitive position with respect to these technologies.
Although we prepare some of our compounded formulations in accordance with cGMP standards and our other formulations are produced according to the standards provided by United States Pharmacopoeia (USP) Chapter (“USP 795”) and USP Chapter (“USP 797”) and applicable state and federal law, our compounded formulations are not required to be, and have not been, approved for marketing and sale by the FDA.
Pharmacopoeia (USP) Chapter (“USP 795”) and USP Chapter (“USP 797”) and applicable state and federal law, our compounded formulations are not required to be, and have not been, approved for marketing and sale by the FDA. As a result, some physicians may be unwilling to prescribe, and some patients may be unwilling to use, our compounded formulations.
In general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price calculation and discount requirement. 10 HRSA issued a final regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities, which became effective on January 1, 2019.
HRSA issued a final regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities, which became effective on January 1, 2019. It is currently unclear how HRSA will apply its enforcement authority under this regulation.
In February 2023, we announced that CMS had issued a permanent, product specific J-code for IHEEZO (J2403) which will become effective under the Healthcare Procedure Coding System (HCPCS) on April 1, 2023. TRIESENCE has a permanent product specific J-code (J3300) as well, which physicians can use for reimbursement purposes of that product.
IHEEZO and TRIESENCE are covered under Medicare Part B and we may develop other product candidates and/or acquire drug products that are also covered under Medicare Part B. In February 2023, we announced that CMS had issued a permanent, product specific J-code for IHEEZO (J2403) which became effective under the Healthcare Procedure Coding System (HCPCS) on April 1, 2023.
Surface is developing four product candidates at various stages of development for certain ocular surface related indications. We own 3,500,000 shares of Surface common stock, which represented approximately 20% of Surface’s equity and voting interests as of December 31, 2023. Harrow owns mid-single-digit royalty rights on net sales on Surface’s drug candidates SURF-100, SURF-200 and SURF-201. Eton Pharmaceuticals, Inc.
Surface is a clinical-stage pharmaceutical company focused on development and commercialization of innovative therapeutics for ocular surface diseases. Surface is developing four product candidates for certain ocular surface related indications. We own 3,500,000 shares of Surface common stock, which represented approximately 20% of Surface’s equity and voting interests as of December 31, 2024.
During the year ended December 31, 2023, we incurred $6,652,000 in R&D expenses, compared to $3,050,000 during the year ended December 31, 2022. Financial Information About Segments and Geographic Areas The Company operates the business on the basis of a single reportable segment, which is the business of discovery, development, and commercialization of innovative ophthalmic therapies.
During the year ended December 31, 2024, we incurred $12,230,000 in R&D expenses, compared to $6,652,000 during the year ended December 31, 2023. Financial Information About Segments and Geographic Areas During 2024, the Company identified two operating segments as reportable segments.
The core intellectual property Melt owns is a patented series of combination non-opioid sedation drug formulations that we estimate to have many clinical applications. MELT-300 is a novel, sublingually delivered, non-IV, opioid-free drug candidate being developed for procedural sedation. In February 2021, Melt announced data from, and the successful completion of, its Phase 1 study.
Melt is seeking regulatory approval for its proprietary technologies, where possible. MELT-300 is a novel, sublingually delivered, non-IV, opioid-free drug candidate being developed for procedural sedation. In November 2024, Melt announced data from, and the successful completion of, its pivotal Phase 3 study for MELT-300.
Regulatory frameworks and requirements vary by country and could involve significant additional licensing requirements and product testing and review periods. We currently partner with companies to sell, market and distribute some of our products in certain foreign countries.
Regulatory frameworks and requirements vary by country and could involve significant additional licensing requirements and product testing and review periods.
In September 2007, we closed a merger transaction with Transdel Pharmaceuticals Holdings, Inc. and changed our name to Transdel Pharmaceuticals, Inc. We changed our name to Imprimis Pharmaceuticals, Inc. in February 2012. We changed the name of our company to Harrow Health, Inc. in December 2018 and then to Harrow, Inc. in September 2023.
Then to align with a shift in our corporate strategy that included the expansion into branded ophthalmic products and product candidates, we changed the name of our company to Harrow Health, Inc. in December 2018 and then to Harrow, Inc. in September 2023.
The Company’s chief operating decision-maker is the Chief Executive Officer, who evaluates the Company as a single operating segment. The Company categorizes revenues by geographic area based on selling location. All operations are currently located in the United States; therefore, total revenues for 2023 and 2022 were attributed to the United States.
The CODM does not review segment assets when assessing segment performance and deciding how to allocate resources. The Company categorizes revenues by geographic area based on selling location. All operations are currently located in the U.S.; therefore, total revenues for 2024 and 2023 were attributed to the U.S.
These payors may not cover or adequately reimburse for use of our products or may do so at levels that disadvantage them relative to competitive products. 11 Our proprietary ophthalmic compounded formulations are primarily available on a cash-pay basis and generally are not subject to Medicare, Medicaid, or other payor-related initiatives.
These payors may not cover or adequately reimburse for use of our products or may do so at levels that disadvantage them relative to competitive products. Intellectual Property Our success and ability to compete depends upon our ability to protect our intellectual property.
Melt is required to make mid-single digit royalty payments to the Company on net sales of MELT-300 while any patent rights remain outstanding, subject to other conditions. Melt can require the Company to cease compounding like products at the time of FDA approval of MELT-300.
Melt can require ImprimisRx to cease compounding like products at the time of FDA approval of MELT-300. As of December 31, 2024, we owned approximately 45% of Melt’s equity and voting interests issued and outstanding, along with a mid-single digit royalty on future net sales of MELT-300. Surface Ophthalmics, Inc.
Intellectual Property Our success and ability to compete depends upon our ability to protect our intellectual property. We conduct a fulsome analysis of the intellectual property landscape prior to acquiring rights to formulations and filing patent applications.
We conduct a fulsome analysis of the intellectual property landscape prior to acquiring rights to formulations and filing patent applications. In addition, as of March 1, 2025, we owned and/or licensed more than 50 total issued and pending patent applications, which include U.S.-issued patents, international-issued patents, and U.S. and foreign/international patent pending applications.
Removed
(“Melt”), and two other companies that began as subsidiaries of Harrow and were subsequently carved-out of our corporate structure and deconsolidated from our financial statements. Branded Ophthalmic Pharmaceuticals Over the past few years, we have invested in broadening our product portfolio of FDA-approved products.
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(“Surface”) and hold royalty interests in some of Surface’s and Melt’s drug candidates.
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ImprimisRx’s customer base has grown to include more than 10,000 U.S. eyecare-dedicated prescribers and institutions. 4 Carved-Out Subsidiaries (De-Consolidated Businesses) We have ownership interests in Melt, Surface Ophthalmics, Inc. (“Surface”) and Eton Pharmaceuticals, Inc. (“Eton”) and hold royalty interests in some of Surface’s and Melt’s drug candidates.
Added
The MELT-300 pivotal Phase 3 clinical trial was a randomized, double-blind, three-arm study comparing, at a 4:1:1 ratio, MELT-300, sublingual midazolam, and sublingual placebo, respectively, for procedural sedation in patients undergoing cataract surgery. The study was conducted at 13 clinical sites in the U.S. and enrolled over 530 patients.
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In December 2018, we entered into an Asset Purchase Agreement with Melt (the “Melt Asset Purchase Agreement”), pursuant to which Harrow assigned to Melt the underlying intellectual property for Melt’s current pipeline, including its lead drug candidate MELT-300.
Added
The Phase 3 study was conducted following the successful completion of the MELT-300 Phase 2 clinical trial in patients undergoing cataract surgery, which compared MELT-300 against (i) sublingual placebo alone, (ii) sublingual midazolam, and (iii) sublingual ketamine in over 300 patients.
Removed
Melt expects to begin Phase 3 program activities in 2024, which will consist of a single pivotal study comparing MELT-300 to sublingual midazolam and placebo in subjects undergoing cataract surgery. Beginning in July 2023 through March 1, 2024, Melt had raised over $23,000,000 in gross proceeds from the sale and issuance of Melt’s Series B Preferred Stock.
Added
MELT-300 was statistically superior for procedural sedation compared to all individual comparator arms: (i) sublingual placebo (P During 2024, Melt reached an agreement with the FDA on a Special Protocol Assessment (“SPA”) for the MELT-300 Phase 3 study.
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We own 3,500,000 shares of Melt common stock, 2,260,000 shares of Melt’s Series B-1 Preferred Stock and 74,256 shares of Melt’s Series B Preferred Stock, which in aggregate represented approximately 47% and 46% of Melt’s equity and voting interests issued and outstanding as of December 31, 2023 and March 1, 2024, respectively.
Added
FDA agreed the study would “adequately address the objectives necessary to support a regulatory submission.” The SPA agreement establishes a binding agreement on key elements to support a future marketing application. During 2025, we believe Melt intends to conduct ancillary studies including a confirmatory pharmacokinetic, hepatic impairment, renal impairment and 28-day toxicity studies.
Removed
If approved, we do not expect a cessation of compounding like products to have a material impact on our operations and financial performance. 5 Surface Ophthalmics, Inc. Surface is a clinical-stage pharmaceutical company focused on development and commercialization of innovative therapeutics for ocular surface diseases.
Added
Following completion of those ancillary studies, in early 2026, we believe Melt intends to submit an NDA to the FDA for marketing approval of MELT-300. A final decision regarding marketing approval will be based on the FDA’s review of the full MELT-300 submission package.
Removed
Eton is an innovative pharmaceutical company focused on developing, acquiring, and commercializing treatments for rare diseases. Eton currently commercializes ALKINDI SPRINKLE® and Carglumic Acid tablets and has additional rare disease products under development, including dehydrated alcohol injection and the ZENEO® hydrocortisone autoinjector. In May 2017, we gave up our controlling interest in Eton.
Added
We own mid-single-digit royalty rights on future net sales of Surface’s drug candidates SURF-100, SURF-200 and SURF-201. 7 Eton Pharmaceuticals, Inc. Eton is an innovative pharmaceutical company focused on developing, acquiring, and commercializing treatments for rare diseases. Eton was created and formed as a wholly-owned subsidiary of Harrow. In May 2017, we gave up our controlling interest in Eton.
Removed
We own 1,982,000 shares of Eton common stock, which represented less than 10% of Eton’s equity and voting interests issued and outstanding as of December 31, 2023.
Added
In April 2024, we sold all of our remaining equity interests in Eton which was 1,982,000 shares of common stock in a block trade at a gross price of $3.00 per share.
Removed
As a result, some physicians may be unwilling to prescribe, and some patients may be unwilling to use, our compounded formulations.
Added
After deducting trading expenses and commissions of approximately $436,000, we received net proceeds of $5,510,000 and recorded a loss of $3,171,000 related to the sale of our investment in Eton. Sales and Marketing The focus of our sales and marketing is in the U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs a result of the MedWatch notice, warning letters and other regulatory notifications, some physicians may be hesitant to prescribe and some patients may be hesitant to purchase and use non-FDA-approved compounded formulations, particularly when an FDA-approved potential alternative is available.
Biggest changeSee “— We have been in discussions with the federal government regarding past FDA inspections of our 503B facility, and to the extent we are unable to demonstrate compliance with cGMPs and other required regulations, the government could pursue enforcement actions, the effects of which could be costly to us and could result in adverse consequences to our business.” As a result of the MedWatch notice, warning letters and other regulatory notifications, some physicians may be hesitant to prescribe and some patients may be hesitant to purchase and use non-FDA-approved compounded formulations, particularly when an FDA-approved potential alternative is available.
In addition, during the 2020 Inspection, the FDA noted that we were compounding drugs for which there is no change that produces for an individual patient a clinical difference, as determined by a prescribing practitioner between a compounded drug and the comparable approved drug.
In addition, during the 2020 inspection, the FDA noted that we were compounding drugs for which there is no change that produces a clinical difference for an individual patient, as determined by a prescribing practitioner between a compounded drug and the comparable approved drug.
The degree of market acceptance for any of our drug candidates will depend on a number of factors, including: ● demonstration of clinical safety and efficacy; ● relative convenience, dosing burden and ease of administration; ● the prevalence and severity of any adverse effects; ● the willingness of physicians to prescribe our drug candidates, and the target patient population to try new therapies; ● efficacy of our drug candidates compared to competing products; ● the introduction of any new products that may in the future become available targeting indications for which our drug candidates may be approved; 36 ● new procedures or therapies that may reduce the incidences of any of the indications in which our drug candidates may show utility; ● pricing and cost-effectiveness; ● the inclusion or omission of our drug candidates in applicable therapeutic and vaccine guidelines; ● the effectiveness of our own or any future collaborators’ sales and marketing strategies; ● limitations or warnings contained in approved labeling from regulatory authorities; ● our ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid, private health insurers and other third-party payors or to receive the necessary pricing approvals from government bodies regulating the pricing and usage of therapeutics; and ● the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement or government pricing approvals.
The degree of market acceptance for any of our drug candidates will depend on a number of factors, including: ● demonstration of clinical safety and efficacy; ● relative convenience, dosing burden and ease of administration; ● the prevalence and severity of any adverse effects; ● the willingness of physicians to prescribe our drug candidates, and the target patient population to try new therapies; ● efficacy of our drug candidates compared to competing products; ● the introduction of any new products that may in the future become available targeting indications for which our drug candidates may be approved; ● new procedures or therapies that may reduce the incidences of any of the indications in which our drug candidates may show utility; ● pricing and cost-effectiveness; ● the inclusion or omission of our drug candidates in applicable therapeutic and vaccine guidelines; ● the effectiveness of our own or any future collaborators’ sales and marketing strategies; ● limitations or warnings contained in approved labeling from regulatory authorities; ● our ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid, private health insurers and other third-party payors or to receive the necessary pricing approvals from government bodies regulating the pricing and usage of therapeutics; and ● the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement or government pricing approvals.
The commencement and completion of clinical studies can be delayed for a number of reasons, including delays related to: ● the FDA or a comparable foreign regulatory authority failing to grant permission to proceed and placing the clinical study on hold; ● subjects for clinical testing failing to enroll or remain in our trials at the rate we expect; ● a facility manufacturing any of our drug candidates being ordered by the FDA or other government or regulatory authorities to temporarily or permanently shut down due to violations of cGMP requirements or other applicable requirements, or cross-contaminations of drug candidates in the manufacturing process; ● any changes to our manufacturing process that may be necessary or desired; ● subjects choosing an alternative treatment for the indications for which we are developing our drug candidates, or participating in competing clinical studies; ● subjects experiencing severe or unexpected drug-related adverse effects; ● reports from clinical testing on similar technologies and products raising safety and/or efficacy concerns; ● third-party clinical investigators losing their license or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or employing methods consistent with the clinical trial protocol, cGMP requirements, or other third parties not performing data collection and analysis in a timely or accurate manner; ● inspections of clinical study sites by the FDA, comparable foreign regulatory authorities, or IRBs finding regulatory violations that require us to undertake corrective action, result in suspension or termination of one or more sites or the imposition of a clinical hold on the entire study, or that prohibit us from using some or all of the data in support of our marketing applications; 45 ● third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or any of the data produced by such contractors in support of our marketing applications; ● one or more IRBs refusing to approve, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; ● deviations of the clinical sites from trial protocols or dropping out of a trial; ● adding new clinical trial sites; ● the inability of the CRO to execute any clinical trials for any reason; and ● government or regulatory delays or “clinical holds” requiring suspension or termination of a trial.
The commencement and completion of clinical studies can be delayed for a number of reasons, including delays related to: ● the FDA or a comparable foreign regulatory authority failing to grant permission to proceed and placing the clinical study on hold; ● subjects for clinical testing failing to enroll or remain in our trials at the rate we expect; ● a facility manufacturing any of our drug candidates being ordered by the FDA or other government or regulatory authorities to temporarily or permanently shut down due to violations of cGMP requirements or other applicable requirements, or cross-contaminations of drug candidates in the manufacturing process; ● any changes to our manufacturing process that may be necessary or desired; ● subjects choosing an alternative treatment for the indications for which we are developing our drug candidates, or participating in competing clinical studies; ● subjects experiencing severe or unexpected drug-related adverse effects; ● reports from clinical testing on similar technologies and products raising safety and/or efficacy concerns; ● third-party clinical investigators losing their license or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or employing methods consistent with the clinical trial protocol, cGMP requirements, or other third parties not performing data collection and analysis in a timely or accurate manner; ● inspections of clinical study sites by the FDA, comparable foreign regulatory authorities, or IRBs finding regulatory violations that require us to undertake corrective action, result in suspension or termination of one or more sites or the imposition of a clinical hold on the entire study, or that prohibit us from using some or all of the data in support of our marketing applications; 46 ● third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or any of the data produced by such contractors in support of our marketing applications; ● one or more IRBs refusing to approve, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; ● deviations of the clinical sites from trial protocols or dropping out of a trial; ● adding new clinical trial sites; ● the inability of the CRO to execute any clinical trials for any reason; and ● government or regulatory delays or “clinical holds” requiring suspension or termination of a trial.
To assure compliance with USP guidelines, we have a policy whereby 100% of all sterile compound batches produced by our ImprimisRx compounding pharmacies are tested prior to their delivery to patients and physicians both in-house and externally by an independent, FDA-registered laboratory that has represented to us that it operates in compliance with current good laboratory practices.
To assure compliance with USP guidelines, we have a policy whereby 100% of all sterile compound batches produced by our ImprimisRx compounding pharmacies are tested prior to their delivery to patients and physicians both in-house and externally by an FDA-registered laboratory that has represented to us that it operates in compliance with current good laboratory practices.
In addition to the potential period of exclusivity, orphan designation makes a company eligible for grant funding of up to $400,000 per year for four years to defray costs of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA application user fee. 46 If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan designation is revoked; (ii) its marketing approval is withdrawn; (iii) the orphan exclusivity holder consents to the approval of another applicant’s product; (iv) the orphan exclusivity holder is unable to assure the availability of a sufficient quantity of drug; or (v) a showing of clinical superiority to the product with orphan exclusivity by a competitor product.
In addition to the potential period of exclusivity, orphan designation makes a company eligible for grant funding of up to $400,000 per year for four years to defray costs of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA application user fee. 47 If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan designation is revoked; (ii) its marketing approval is withdrawn; (iii) the orphan exclusivity holder consents to the approval of another applicant’s product; (iv) the orphan exclusivity holder is unable to assure the availability of a sufficient quantity of drug; or (v) a showing of clinical superiority to the product with orphan exclusivity by a competitor product.
In addition, the perception by the investment community or stockholders that such recommendations or guidelines will result in decreased use and dosage of our products could adversely affect the market price of our common stock. 32 Risks Related to Competition There are many competitive risks related to marketing and selling our proprietary formulations and operating our compounding pharmacy business.
In addition, the perception by the investment community or stockholders that such recommendations or guidelines will result in decreased use and dosage of our products could adversely affect the market price of our common stock. Risks Related to Competition There are many competitive risks related to marketing and selling our proprietary formulations and operating our compounding pharmacy business.
Although we believe we are positioned to compete favorably with respect to many of these factors, if our proprietary formulations are unable to compete with the products of our competitors, we may never gain market share or achieve sustained profitability. 33 Concentration of sales at certain of our wholesaler distributors and consolidation of private payors may negatively affect our business.
Although we believe we are positioned to compete favorably with respect to many of these factors, if our proprietary formulations are unable to compete with the products of our competitors, we may never gain market share or achieve sustained profitability. Concentration of sales at certain of our wholesaler distributors and consolidation of private payors may negatively affect our business.
Section 503A of the FDCA sets a 5% limit on compounded drugs distributed outside the state by a pharmacist, pharmacy or physician located in a state that has not entered into the Final MOU. In February 2022, the FDA said it would suspend implementation of the Final MOU and engage in a formal rulemaking process.
Section 503A of the FDCA sets a 5% limit on compounded drugs distributed outside the state by a pharmacist, pharmacy or physician located in a state that has not entered into the Final MOU. 29 In February 2022, the FDA said it would suspend implementation of the Final MOU and engage in a formal rulemaking process.
If any of these events occur, we could be subject to significant costs and damage to our reputation, business, results of operations and financial condition. 22 If we are unable to establish, train and maintain an effective sales and marketing infrastructure, we will not be able to commercialize our drug candidates successfully.
If any of these events occur, we could be subject to significant costs and damage to our reputation, business, results of operations and financial condition. If we are unable to establish, train and maintain an effective sales and marketing infrastructure, we will not be able to commercialize our drug candidates successfully.
If any of these events were to occur, we may be subject to significant litigation or other costs and loss of revenue, and we may be unable to continue our pharmacy operations and further develop and commercialize our proprietary formulations. We carry product and professional liability insurance, which may be inadequate.
If any of these events were to occur, we may be subject to significant litigation or other costs and loss of revenue, and we may be unable to continue our pharmacy operations and further develop and commercialize our proprietary formulations. 24 We carry product and professional liability insurance, which may be inadequate.
These matters could have an adverse effect during any transition period and for an undetermined period after completion of the acquisitions. 20 We may not be able to correctly estimate our future operating expenses, which could lead to cash shortfalls.
These matters could have an adverse effect during any transition period and for an undetermined period after completion of the acquisitions. We may not be able to correctly estimate our future operating expenses, which could lead to cash shortfalls.
Any of the foregoing scenarios could materially harm the commercial success of our drug candidates. Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.
Any of the foregoing scenarios could materially harm the commercial success of our drug candidates. 38 Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.
Moreover, attempting to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Our products, drug candidates and compounded formulations and technologies could potentially conflict with the rights of others.
Moreover, attempting to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. 36 Our products, drug candidates and compounded formulations and technologies could potentially conflict with the rights of others.
We are currently pursuing development and commercialization opportunities with respect to a number of these products, drug candidates and formulations, and we are in the process of assessing certain of our other assets in order to determine whether to pursue their development or commercialization.
We are currently pursuing development and commercialization opportunities with respect to a number of these products and drug candidates, and we are in the process of assessing certain of our other assets in order to determine whether to pursue their development or commercialization.
Although we have secured product and professional liability insurance for our pharmacy operations and the marketing and sale of our formulations, our current or future insurance coverage may prove insufficient to cover any liability claims brought against us.
Although we have secured product and professional liability insurance for our products, pharmacy operations and the marketing and sale of our formulations, our current or future insurance coverage may prove insufficient to cover any liability claims brought against us.
Risks that we deem material are described under “Risk Factors” below and include, but are not limited to, the following: Risks Related to Economic Conditions and Operations of Our Business. ● Our ability to achieve and maintain profitability for our business ● Our ability to successfully market, commercialize, and sell current, recently acquired and future products ● Our current indebtedness and ability to access additional capital ● Our ability to attract customers and increase sales of current and future products ● Our ability to obtain marketing approval and ongoing expense associated with it for any of our drug candidates, including those for which we own royalty rights ● Our reliance on third parties for manufacturing certain components, FDA approved drugs and to conduct clinical trials ● Our exposure to liabilities and reputation harm if our products give rise to defects, recalls, patient injury or death ● Our information technology systems exposure to cyberattack or information security breach could significantly compromise the confidentiality, integrity and availability of our information technology systems Risks Related to Government Regulations and Third-Party Policies ● Governmental regulations, including, but not limited to, potential changes to USP 797, 503B bulks list and others, that could or currently do burden operations or narrow the market for our products ● Our sales depend on coverage and reimbursement from government and commercial third-party payors, and pricing and reimbursement pressures have affected, and are likely to continue to affect, our profitability ● The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability ● Our business may be affected by litigation and government investigations Risks Related to Competition ● Securing and maintaining patent or other intellectual property protection for our products and related improvements ● Market acceptance of our drug products, drug candidates, compounded drugs and pharmacies ● Our ability to successfully research, develop and timely manufacture our current and future products and drug candidates ● Our ability to enforce protect our intellectual property rights along with the potential of future legal proceedings filed against us claiming intellectual property infringement ● Retention, recruitment, and training of senior management and key personnel Risks Related to Product Development, Regulatory Approval, Manufacturing and Commercialization ● We may not be able to develop commercial products despite significant investments in R&D ● Our branded products and product candidates in development cannot be sold without regulatory approval ● Our drug candidates may face competition sooner than we expect ● We rely on third parties to manufacture and conduct clinical trials of our branded drug products and product candidates ● We may not be successful in obtaining market exclusivity for our product candidates Risks Related to the Notes ● Our ability to pay the interest and debt service payments associated with the Notes ● The Notes are unsecured, effectively subordinated to any secured indebtedness, with limited protection for holders of the Notes ● The Notes are subject to various market factors, including market interest rates, trading activity, third-party ratings and other factors 19 Risks Related to Our Common Stock ● Volatility of the price of our common stock ● Our stock price falling as a result of future offerings or sales You should carefully consider the following risk factors in addition to the other information contained in this Annual Report.
Risks that we deem material are described below and include, but are not limited to, the following: Risks Related to Economic Conditions and Operations of Our Business. ● Our ability to achieve and maintain profitability for our business ● Our ability to successfully market, commercialize, and sell current, recently acquired and future products 19 ● Our current indebtedness and ability to access additional capital ● Our ability to attract customers and increase sales of current and future products ● Our ability to obtain marketing approval and ongoing expense associated with it for any of our drug candidates, including those for which we own royalty rights ● Our reliance on third parties for manufacturing certain components, FDA approved drugs and to conduct clinical trials ● Our exposure to liabilities and reputation harm if our products give rise to defects, recalls, patient injury or death ● Our information technology systems exposure to cyberattack or information security breach could significantly compromise the confidentiality, integrity and availability of our information technology systems Risks Related to Government Regulations and Third-Party Policies ● Our business may be affected by litigation, government investigations and injunctive actions ● Governmental regulations, including, but not limited to, 503B bulks list and others, that could or currently do burden operations or narrow the market for our products ● Our sales depend on coverage and reimbursement from government and commercial third-party payors, and pricing and reimbursement pressures have affected, and are likely to continue to affect, our profitability ● The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability Risks Related to Competition ● Securing and maintaining patent or other intellectual property protection for our products and related improvements ● Market acceptance of our drug products, drug candidates, compounded drugs and pharmacies ● Our ability to successfully research, develop and timely manufacture our current and future products and drug candidates ● Our ability to enforce protect our intellectual property rights along with the potential of future legal proceedings filed against us claiming intellectual property infringement ● Retention, recruitment, and training of senior management and key personnel Risks Related to Product Development, Regulatory Approval, Manufacturing and Commercialization ● We may not be able to develop commercial products despite significant investments in R&D ● Our branded products and product candidates in development cannot be sold without regulatory approval ● Our drug candidates may face competition sooner than we expect ● We rely on third parties to manufacture and conduct clinical trials of our branded drug products and product candidates ● We may not be successful in obtaining market exclusivity for our product candidates Risks Related to Our Indebtedness ● Our ability to pay the interest and debt service payments associated with the Notes ● The Notes are unsecured, effectively subordinated to any secured indebtedness, with limited protection for holders of the Notes ● The Notes are subject to various market factors, including market interest rates, trading activity, third-party ratings and other factors Risks Related to Our Common Stock ● Volatility of the price of our common stock ● Our stock price falling as a result of future offerings or sales You should carefully consider the following risk factors in addition to the other information contained in this Annual Report.
Any future clinical trial results for our drug candidates may not be successful. 37 In addition, a number of factors could contribute to a lack of favorable safety and efficacy results for any of our drug candidates.
Any future clinical trial results for our drug candidates may not be successful. In addition, a number of factors could contribute to a lack of favorable safety and efficacy results for any of our drug candidates.
Our failure or the failure of our CROs or clinical sites to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties. 44 Although we intend to design the clinical trials for our drug candidates in consultation with CROs, we expect that the CROs will manage all of the clinical trials conducted at contracted clinical sites.
Our failure or the failure of our CROs or clinical sites to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties. 45 Although we intend to design the clinical trials for our drug candidates in consultation with CROs, we expect that the CROs will manage all of the clinical trials conducted at contracted clinical sites.
If we cannot provide reliable financial results, our consolidated financial statements could be misstated, our reputation may be harmed and the trading price of our common stock could decline. As we discuss in Item 9A of this Annual Report, our management concluded that our internal controls over financial reporting were effective as of December 31, 2023.
If we cannot provide reliable financial results, our consolidated financial statements could be misstated, our reputation may be harmed and the trading price of our common stock could decline. As we discuss in Item 9A of this Annual Report, our management concluded that our internal controls over financial reporting were effective as of December 31, 2024.
Our current projections indicate that we will have operating income and/or net income during 2024; however, these projections may not be correct and our plans could change. Also, we could incur increasing operating losses in the foreseeable future for our commercialization activities, research and development, and our pharmaceutical compounding business, which would impact net income.
Our current projections indicate that we will have operating income and/or net income during 2025; however, these projections may not be correct and our plans could change. Also, we could incur increasing operating losses in the foreseeable future for our commercialization activities, research and development, and our pharmaceutical compounding business, which would impact net income.
Our success depends on the receipt of regulatory approval and the issuance of such regulatory approvals is uncertain and subject to a number of risks, including the following: ● the results of toxicology studies may not support the filing of an investigational new drug application for our drug candidates; ● the FDA or comparable foreign regulatory authorities or Institutional Review Boards (“IRBs”) may disagree with the design or implementation of our clinical trials; ● we may not be able to provide acceptable evidence of our drug candidates’ safety and efficacy; ● the results of our clinical trials may not be satisfactory or may not meet the level of statistical or clinical significance required by the FDA, the European Medicines Agency (the “EMA”), or other regulatory agencies for marketing approval; ● the dosing of our drug candidates in a particular clinical trial may not be at an optimal level; ● patients in our clinical trials may suffer adverse effects for reasons that may or may not be related to our drug candidates; ● the data collected from clinical trials may not be sufficient to support the submission of an NDA, BLA or other submission or to obtain regulatory approval in the United States or elsewhere; 40 ● the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and ● the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Our success depends on the receipt of regulatory approval and the issuance of such regulatory approvals is uncertain and subject to a number of risks, including the following: ● the results of toxicology studies may not support the filing of an investigational new drug application for our drug candidates; ● the FDA or comparable foreign regulatory authorities or Institutional Review Boards (“IRBs”) may disagree with the design or implementation of our clinical trials; ● we may not be able to provide acceptable evidence of our drug candidates’ safety and efficacy; 41 ● the results of our clinical trials may not be satisfactory or may not meet the level of statistical or clinical significance required by the FDA, the European Medicines Agency (the “EMA”), or other regulatory agencies for marketing approval; ● the dosing of our drug candidates in a particular clinical trial may not be at an optimal level; ● patients in our clinical trials may suffer adverse effects for reasons that may or may not be related to our drug candidates; ● the data collected from clinical trials may not be sufficient to support the submission of an NDA, BLA or other submission or to obtain regulatory approval in the U.S. or elsewhere; ● the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and ● the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
We may incorrectly assess the risks and benefits of the commercialization options or we may not pursue a commercialization strategy that proves to be successful. If we are unable to successfully commercialize one or more of our proprietary formulations, drug products and drug candidates, our operating results would be adversely affected.
We may incorrectly assess the risks and benefits of the commercialization options or we may not pursue a commercialization strategy that proves to be successful. If we are unable to successfully commercialize one or more of our drug products and drug candidates, our operating results would be adversely affected.
In September 2017, the FDA released a letter confirming that the alleged misuse of certain ingredients in our curcumin emulsions were due to mislabeling by the underlying supplier, and not of our own misdoing. We no longer compound curcumin emulsion products.
In September 2017, the FDA released a letter confirming that the alleged misuse of certain ingredients in our curcumin emulsions was due to mislabeling by the underlying supplier and not of our own misdoing. We no longer compound curcumin emulsion products.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a drug available in the Unites States for this type of disease or condition will be recovered from sales of the product.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making a drug available in the Unites States for this type of disease or condition will be recovered from sales of the product.
Any such event or occurrence could severely and negatively impact our operations and prospects. 47 The indenture under which the Notes were issued contains limited protection for holders of the Notes. The indenture under which the Notes were issued offers limited protection to holders of the Notes.
Any such event or occurrence could severely and negatively impact our operations and prospects. 48 The indenture under which the Notes were issued contains limited protection for holders of the Notes. The indenture under which the Notes were issued offers limited protection to holders of the Notes.
The success of our product acquisitions will depend on, among other things, our ability to successfully integrate the products into our commercial platform, transfer the products NDAs, maintain payor reimbursement coverage, maintain an adequate supply of the products, market the products to our existing customers and re-introduce TRIESENCE to the ophthalmic market.
The success of our product acquisitions will depend on, among other things, our ability to integrate the products into our commercial platform, transfer the products NDAs, maintain and obtain sufficient payor reimbursement coverage, maintain an adequate supply of the products, market the products to our existing customers and re-introduce TRIESENCE to the ophthalmic market.
Even if we are able to successfully sell one or more proprietary formulations, drug products and drug candidates, we may never recoup our investment in acquiring or developing the formulations, drug products and drug candidates.
Even if we are able to successfully sell one or more drug products and drug candidates, we may never recoup our investment in acquiring or developing the drug products and drug candidates.
These distributors, in turn, sell our products to their customers, which include physicians or their clinics, ambulatory surgical centers, hospitals and pharmacies. Similarly, as discussed above, there has been significant consolidation in the health insurance industry, including that a small number of PBMs now oversee a substantial percentage of total covered lives in the United States.
These distributors, in turn, sell our products to their customers, which include physicians or their clinics, ambulatory surgical centers, hospitals and pharmacies. Similarly, as discussed above, there has been significant consolidation in the health insurance industry, including that a small number of PBMs now oversee a substantial percentage of total covered lives in the U.S.
Certain of our distributors, customers and payors have substantial purchasing leverage, due to the volume of our products they purchase or the number of patient lives for which they provide coverage. The substantial majority of our U.S. branded product sales are made through three pharmaceutical product wholesaler distributors: McKesson Corporation, AmerisourceBergen Corporation and Cardinal Health, Inc.
Certain of our distributors, customers and payors have substantial purchasing leverage, due to the volume of our products they purchase or the number of patient lives for which they provide coverage. The substantial majority of our U.S. branded product sales are made through four pharmaceutical product wholesaler distributors: McKesson Corporation, AmerisourceBergen Corporation, Western Wellness and Cardinal Health, Inc.
Policy reforms advanced by Congress or the Biden administration that refine the role of PBMs in the U.S. marketplace could have downstream implications or consequences for our business and how we interact with these entities. Guidelines and recommendations published by various organizations can reduce the use of our branded products.
Policy reforms advanced by Congress or the others in the federal administration that refine the role of PBMs in the U.S. marketplace could have downstream implications or consequences for our business and how we interact with these entities. 33 Guidelines and recommendations published by various organizations can reduce the use of our branded products.
In addition, we will not have control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel.
In addition, we do not have control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel.
Although we have been generating revenue from our pharmaceutical operations, our ability to generate the revenues necessary to achieve profitability will depend on many factors, including those discussed in this “Risk Factors” section.
Although we have been generating revenue from our operations, our ability to generate the revenues necessary to achieve and maintain profitability will depend on many factors, including those discussed in this “Risk Factors” section.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our drug candidates, restrict or regulate post-approval activities and affect our ability to profitably sell our drug candidates.
In the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our drug candidates, restrict or regulate post-approval activities and affect our ability to profitably sell our drug candidates.
Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. In the United States, the Medicare Modernization Act (the “MMA”) changed the way Medicare covers and pays for pharmaceutical products.
Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. In the U.S., the Medicare Modernization Act (the “MMA”) changed the way Medicare covers and pays for pharmaceutical products.
The research, testing, manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country.
The research, testing, manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the U.S. and other countries, which regulations differ from country to country.
Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional pre-clinical studies or clinical trials, as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions.
Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the U.S., including additional pre-clinical studies or clinical trials, as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions.
We are unable to predict the full impact of any repeal or modification in the implementation of the Health Care Reform Law on us at this time. In addition, other legislative changes have been proposed and adopted in the United States since the Health Care Reform Law was enacted.
We are unable to predict the full impact of any repeal or modification in the implementation of the Health Care Reform Law on us at this time. In addition, other legislative changes have been proposed and adopted in the U.S. since the Health Care Reform Law was enacted.
Although we have established and plan to grow our internal sales teams to market and sell our products and formulations and other non-proprietary products, we have limited experience with such activities and may not be able to generate sufficient physician and patient interest in our products and formulations to generate significant revenue from sales of these products.
Although we have established and plan to grow our internal sales teams to market and sell our products, we have limited experience with such activities and may not be able to generate sufficient physician and patient interest in our products to generate significant revenue from sales of these products.
In the United States, the FDA generally requires the completion of clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its quality before an NDA is approved. Regulatory authorities in other jurisdictions impose similar requirements.
In the U.S., the FDA generally requires the completion of clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its quality before an NDA is approved. Regulatory authorities in other jurisdictions impose similar requirements.
In many jurisdictions outside the United States, a drug candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
In many jurisdictions outside the U.S., a drug candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
In addition, we distribute our products in the United States primarily through three pharmaceutical wholesalers, and a security breach that impairs the distribution operations of our wholesalers could significantly impair our ability to deliver our products to healthcare providers and patients.
In addition, we distribute our products in the U.S. primarily through three pharmaceutical wholesalers, and a security breach that impairs the distribution operations of our wholesalers could significantly impair our ability to deliver our products to healthcare providers and patients.
We are not permitted to market our drug candidates as prescription pharmaceutical products in the United States until we receive approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from such countries.
We are not permitted to market our drug candidates as prescription pharmaceutical products in the U.S. until we receive approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from such countries.
We may be unable to successfully develop and commercialize our proprietary formulations or any other assets we may acquire. We have acquired assets related to compoundable formulations, drug products and drug candidates.
We may be unable to successfully develop and commercialize our drug products, candidates or any other assets we may acquire. We have acquired assets related to drug products and drug candidates.
Our future success depends in large part on our ability to maintain a competitive position with respect to biotechnology and related pharmaceutical technologies . Biotechnology and related pharmaceutical technologies have undergone and continue to be subject to rapid and significant change.
Biotechnology and related pharmaceutical technologies have undergone and continue to be subject to rapid and significant change. Our future success will depend in large part on our ability to maintain a competitive position with respect to these technologies.
In the United States, particularly over the past few years, a number of legislative and regulatory proposals have been introduced and/or signed into law that attempt to lower drug prices.
In the U.S., particularly over the past few years, a number of legislative and regulatory proposals have been introduced and/or signed into law that attempt to lower drug prices.
For example, the CCPA became effective on January 1, 2020 and gave California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used.
For example, the California Consumer Privacy Act (the “CCPA”) became effective on January 1, 2020 and gave California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used.
In June 2019, our outsourcing facility was issued a warning letter related to an April 2017 inspection and our use of certain active pharmaceutical ingredients in our compounded medications.
In June 2019, our New Jersey-based outsourcing facility (“NJOF”) was issued a warning letter related to an April 2017 inspection and our use of certain active pharmaceutical ingredients in our compounded medications.
We expect to rely on third parties to conduct clinical trials for our drug candidates. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize any of our drug candidates, and our business would be substantially harmed.
If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize any of our drug candidates, and our business would be substantially harmed.
Even if we are successful in registering certain of our facilities as outsourcing facilities, our business may not be scalable on the scope available to our competitors that produce FDA-approved drugs, which may limit our potential for profitable operations. These facets of our operations may subject our business to limitations our competitors with FDA-approved drugs may not face.
Even if we are successful in registering certain of our facilities as outsourcing facilities, our business may not be scalable on the scope available to our competitors that produce FDA-approved drugs, which may limit our potential for profitable operations.
For example, in the United States, as of the beginning of 2024, we believe the top five integrated health plans and PBMs controlled approximately 92% of all pharmacy prescriptions.
For example, in the U.S., as of the beginning of 2024, we believe the top five integrated health plans and PBMs controlled approximately 92% of all pharmacy prescriptions.
Our ability to make scheduled payments on our indebtedness depends on our future performance and ability to raise additional capital, which is subject to economic, financial, competitive and other factors, some of which are beyond our control.
We may incur additional indebtedness in the future. Our ability to make scheduled payments on our indebtedness depends on our future performance and ability to raise additional capital, which is subject to economic, financial, competitive and other factors, some of which are beyond our control.
Our business, financial condition, results of operations, and prices of our common stock and Notes could be materially adversely affected by any of these risks. Risks Related to Economic Conditions and Operations of Our Business. We may not be profitable in the future. As of December 31, 2023, our accumulated deficit was $(133,904,000).
Our business, financial condition, results of operations, and prices of our common stock and Notes could be materially adversely affected by any of these risks. 20 Risks Related to Economic Conditions and Operations of Our Business. We may not be profitable in the future. As of December 31, 2024, our accumulated deficit was $(151,385,000).
Government actions or ballot initiatives at the state level also represent a highly active area of policymaking and experimentation, including pursuit of proposals that limit drug reimbursement under state run Medicaid programs based on reference prices or permitting importation of drugs from Canada.
Government actions or ballot initiatives at the state level also represent a highly active area of policymaking and experimentation, including pursuit of proposals that limit drug reimbursement under state run Medicaid programs based on reference prices or permitting importation of drugs from Canada. Such state policies may also eventually be adopted at the federal level.
In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget.
In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget. 51 ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
While we have not experienced any cybersecurity or system failure, accident or breach to date, if an event were to occur, it could result in a material disruption of our operations, substantial costs to rectify or correct the failure, if possible, and potentially violation of HIPAA and other privacy laws applicable to our operations.
While we have not experienced any cybersecurity or system failure, accident or breach to date that has been determined to have had a material impact, if a significant event were to occur, it could result in a material disruption of our operations, substantial costs to rectify or correct the failure, if possible, and potentially violation of HIPAA and other privacy laws applicable to our operations.
See “ – Our sales depend on coverage and reimbursement from government and commercial third-party payors, and pricing and reimbursement pressures have affected, and are likely to continue to affect, our profitability.” The three largest PBMs in the United States are now part of major health insurance providers.
See the risk factor Our sales depend on coverage and reimbursement from government and commercial third-party payors, and pricing and reimbursement pressures have affected, and are likely to continue to affect, our profitability. The three largest PBMs in the U.S. are now part of major health insurance providers.
In addition, if any of our drug candidates are approved for a particular indication, our product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription products.
Similar requirements exist in many of these areas in other countries. 39 In addition, if any of our drug candidates are approved for a particular indication, our product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription products.
Our drug candidates may face competition sooner than expected. Our success will depend in part on our ability to obtain and maintain patent protection for certain of our drug candidates and technologies and to prevent third parties from infringing upon our proprietary rights.
Our success will depend in part on our ability to obtain and maintain patent protection for certain of our drug candidates and technologies and to prevent third parties from infringing upon our proprietary rights.
The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed. 38 If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, problems with the facility where the product is manufactured, or we or our manufacturers fail to comply with applicable regulatory requirements, we may be subject to the following administrative or judicial sanctions: ● restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls; ● issuance of warning letters or untitled letters; ● clinical holds; ● injunctions or the imposition of civil or criminal penalties or monetary fines; ● suspension or withdrawal of regulatory approval; ● suspension of any ongoing clinical trials; ● refusal to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals; ● suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or ● product seizure or detention or refusal to permit the import or export of product.
If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, problems with the facility where the product is manufactured, or we or our manufacturers fail to comply with applicable regulatory requirements, we may be subject to the following administrative or judicial sanctions: ● restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls; ● issuance of warning letters or untitled letters; ● clinical holds; ● injunctions or the imposition of civil or criminal penalties or monetary fines; ● suspension or withdrawal of regulatory approval; ● suspension of any ongoing clinical trials; ● refusal to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals; ● suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or ● product seizure or detention or refusal to permit the import or export of product.
We depend upon consultants, outside contractors and other third-party service providers for key aspects of our business. We are substantially dependent on consultants and other outside contractors and service providers for key aspects of our business.
We are substantially dependent on consultants and other outside contractors and service providers for key aspects of our business.
We expect that additional federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected value of certain development projects and reduce or eliminate our profitability.
We expect that additional federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected value of certain development projects and reduce or eliminate our profitability. 43 Our drug candidates may face competition sooner than expected.
As an example, we stated that smoke studies related to airflow in our laminar airflow hoods had been redone to satisfy FDA requirements, however, we did not provide the FDA with supporting documentation (such as smoke study protocol, updated detailed report and/or videos). We have responded to this warning letter and provided the FDA with additional information requested.
As an example, we stated that smoke studies related to airflow in our laminar airflow hoods had been redone to satisfy FDA requirements, however, we did not provide the FDA with supporting documentation (such as smoke study protocol, updated detailed report and/or videos).
If we were to experience delays in the commencement or completion of, or if we were to terminate, any clinical or non-clinical trials we pursue in the future, the commercial prospects for the applicable drug candidates may be limited or eliminated, which may prevent us from recouping our investment in research and development efforts for the drug candidate and would have a material adverse effect on our business, results of operations, financial condition and prospects.
If we were to experience delays in the commencement or completion of, or if we were to terminate, any clinical or non-clinical trials we pursue in the future, the commercial prospects for the applicable drug candidates may be limited or eliminated, which may prevent us from recouping our investment in research and development efforts for the drug candidate and would have a material adverse effect on our business, results of operations, financial condition and prospects. 40 We may depend on the success of our drug candidates, and those we have royalty rights to, which have not yet demonstrated efficacy for their target or any other indications.
With respect to sales and marketing activities by us or any future partner, advertising and promotional materials must comply with FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in other countries.
With respect to sales and marketing activities by us or any future partner, advertising and promotional materials must comply with FDA rules in addition to other applicable federal, state and local laws in the U.S. and similar legal requirements in other countries. In the U.S., the distribution of product samples to physicians must comply with the requirements of the U.S.
Although the Notes are listed, we cannot provide any assurances that an active trading market will be maintained for the Notes or that a holder will be able to sell the Notes.
The Notes are listed on Nasdaq under the symbols “HROWL” and “HROWM”. Although the Notes are listed, we cannot provide any assurances that an active trading market will be maintained for the Notes or that a holder will be able to sell the Notes.
Other countries also have, or are developing, laws governing the collection, use and transmission of personal information, such as the GDPR in the EU that became effective in May 2018 and the Personal Information Protection and Electronic Documents Act that became effective in Canada in April 2000.
Other countries also have, or are developing, laws governing the collection, use and transmission of personal information, such as the General Data Protection Regulation (“GDPR”) in the European Union (the “EU”) that became effective in May 2018 and the Personal Information Protection and Electronic Documents Act that became effective in Canada in April 2000.
We have made, and expect to continue to make, significant investments in certain of our proprietary formulations prior to the grant of any patents covering these formulations, and we may not receive a sufficient return on these investments if patent coverage or other appropriate intellectual property protection is not obtained and their competitiveness and value decreases. 34 The patent and intellectual property positions of pharmacies and pharmaceutical companies, including ours, are uncertain and involve complex legal and factual questions.
We have made, and expect to continue to make, significant investments in certain of our proprietary formulations prior to the grant of any patents covering these formulations, and we may not receive a sufficient return on these investments if patent coverage or other appropriate intellectual property protection is not obtained and their competitiveness and value decreases.
In addition, we expect to consider the acquisition of additional intellectual property rights or other assets in the future. Once we decide to pursue a potential drug candidate, we develop a commercialization strategy for it, which may include marketing and selling the formulation in compounded form through compounding pharmacies or outsourcing facilities, or pursuing FDA approval of the drug candidate.
In addition, we expect to consider the acquisition of additional intellectual property rights or other assets in the future. Once we decide to pursue a potential drug candidate, we develop a commercialization strategy for it, which may include pursuing FDA approval of the drug candidate.
The availability for sale of a substantial number of shares of our common stock, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future, when needed, on acceptable terms or at all. 50 Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.
The availability for sale of a substantial number of shares of our common stock, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future, when needed, on acceptable terms or at all.
Any unanticipated disruption to a future contract manufacturer caused by problems at suppliers could delay shipment of any of our drug candidates, increase our cost of goods sold and result in lost sales.
Any unanticipated disruption to a future contract manufacturer caused by problems at suppliers could delay shipment of any of our drug candidates, increase our cost of goods sold and result in lost sales. We expect to rely on third parties to conduct clinical trials for our drug candidates.
Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. 49 A consistently active trading market for shares of our common stock may not be sustained.
Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. 50 Our stock price may be volatile.
As part of our commitment to actively work with regulators, at times, we have become aware of concerns related to certain formulations, and as a result, discontinued compounding certain drug formulations in an attempt to help mitigate potential regulatory risk.
These regulatory actions could increase further scrutiny and could create negative publicity on us as a company. As part of our commitment to actively work with regulators, at times, we have become aware of concerns related to certain formulations, and as a result, discontinued compounding certain drug formulations in an attempt to help mitigate potential regulatory risk.
Moreover, even if the FDA were to grant regulatory approval of a drug candidate, the approval may be limited to specific therapeutic areas or limited as to its distribution, which could reduce revenue potential, and we will be subject to extensive and costly post-approval requirements and oversight with respect to commercialization of the drug candidate.
Moreover, even if the FDA were to grant regulatory approval of a drug candidate, the approval may be limited to specific therapeutic areas or limited as to its distribution, which could reduce revenue potential, and we will be subject to extensive and costly post-approval requirements and oversight with respect to commercialization of the drug candidate. 37 Even if we receive regulatory approval for any of our drug candidates, we may not be able to successfully commercialize the product and the revenue that we generate from its sales, if any, may be limited.
Such state policies may also eventually be adopted at the federal level. 30 We are unable to predict which or how many policy, regulatory, administrative or legislative changes may ultimately be, or effectively estimate the consequences to our business if, enacted and implemented.
We are unable to predict which or how many policy, regulatory, administrative or legislative changes may ultimately be, or effectively estimate the consequences to our business if, enacted and implemented.
If we do not have sufficient funds to continue to operate and develop our business, we could be required to seek additional financing earlier than we expect, which may not be available when needed or at all, or be forced to delay, scale back or eliminate some or all of our proposed operations.
If we do not have sufficient funds to continue to operate and develop our business, we could be required to seek additional financing earlier than we expect, which may not be available when needed or at all, or be forced to delay, scale back or eliminate some or all of our proposed operations. 21 If we do not successfully identify and acquire rights to new products and drug candidates and successfully integrate them into our operations, our growth opportunities may be limited.
Failure to obtain patents that sufficiently cover our formulations and technologies would limit our protection against compounding pharmacies, outsourcing facilities, generic drug manufacturers, pharmaceutical companies and other parties who may seek to copy our products, produce products substantially similar to ours or use technologies substantially similar to those we own. 42 We also intend to seek data exclusivity or market exclusivity for our drug candidates provided under the FDCA and similar laws in other countries.
Failure to obtain patents that sufficiently cover our formulations and technologies would limit our protection against compounding pharmacies, outsourcing facilities, generic drug manufacturers, pharmaceutical companies and other parties who may seek to copy our products, produce products substantially similar to ours or use technologies substantially similar to those we own.
We must successfully complete clinical trials for our drug candidates before we can apply for marketing approval. Even if we complete our clinical trials, it does not assure marketing approval. Our clinical trials may be unsuccessful, which would materially harm our business.
Even if we complete our clinical trials, it does not assure marketing approval. Our clinical trials may be unsuccessful, which would materially harm our business.
We note that most drug candidates never reach the clinical development stage and even those that do commence clinical development have only a small chance of successfully completing clinical development and gaining regulatory approval.
We note that most drug candidates never reach the clinical development stage and even those that do commence clinical development have only a small chance of successfully completing clinical development and gaining regulatory approval. Therefore, aspects of our business depend on the successful development, regulatory approval and commercialization of our drug candidates, which may never occur.
If any disruption or security breach resulted in a loss of or damage to our data or applications or inappropriate disclosure of confidential or protected information, we could incur liability, further development of our proprietary formulations could be delayed, and our pharmacy operations could be disrupted, subject to restriction or forced to terminate their operations, any of which could severely harm our business and prospects.
If any disruption or security breach resulted in a loss of or damage to our data or applications or inappropriate disclosure of confidential or protected information, we could incur liability, further development of our proprietary formulations could be delayed, and our pharmacy operations could be disrupted, subject to restriction or forced to terminate their operations, any of which could severely harm our business and prospects. 26 A breakdown of our information technology systems, or a cyberattack or information security breach could significantly compromise the confidentiality, integrity and availability of our information technology systems, network-connected control systems and/or our data, interrupt the operation of our business and/or affect our reputation.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Director of Information Technology reports directly to the Chief Executive Officer of ImprimisRx and Chief Commercial Officer, who reports directly to our CEO. We utilize a layered approach in assessing, identifying, evaluating and managing material risks from cybersecurity threats, and leverage outside partners to gain intelligence on threats.
Biggest changeOur Vice President of Information Technology reports directly to our CEO. We utilize a layered approach in assessing, identifying, evaluating and managing material risks from cybersecurity threats, and leverage outside partners to gain intelligence on threats. We take input from industry activities, third party assessments and internal simulations and continuously adjust our protection mechanisms to be effective.
Overall cybersecurity risk reporting is integrated with our enterprise risk management program, is included in discussions with the Audit Committee of our board of directors and disclosed where appropriate. Our information technology and cybersecurity function is headed by our Chief Executive Officer (“CEO”), and Director of Information Technology, who are responsible for managerial oversight of our cybersecurity program.
Overall cybersecurity risk reporting is integrated with our enterprise risk management program, is included in discussions with the Audit Committee of our Board of Directors and disclosed where appropriate. Our information technology and cybersecurity function is headed by our Chief Executive Officer (“CEO”), and Vice President of Information Technology, who are responsible for managerial oversight of our cybersecurity program.
Finally, in the event a material cybersecurity incident were to occur, the CEO and Director of Information Technology would brief the Audit Committee which would then be responsible for assessing the materiality of the incident and making the determination of materiality and any related disclosure. 51 We face a number of cybersecurity risks in connection with our business.
Finally, in the event a material cybersecurity incident were to occur, the CEO and Vice President of Information Technology would brief the Audit Committee which would then be responsible for assessing the materiality of the incident and making the determination of materiality and any related disclosure. We face a number of cybersecurity risks in connection with our business.
In the event an incident were to occur, a Security Incident Response Team would be convened that consists of members from many functions, including legal counsel, the Director of Information Technology and the CEO.
In the event an incident were to occur, a Security Incident Response Team would be convened that consists of members from many functions, including legal counsel, the Vice President of Information Technology and the CEO.
If we learn of a cybersecurity incident at a third-party service provider, our information technology department will maintain communication with that third-party service provider and communicate any cybersecurity incidents to the Director of Information Technology and CEO.
If we learn of a cybersecurity incident at a third-party service provider , our information technology department will maintain communication with that third-party service provider and communicate any cybersecurity incidents to the Vice President of Information Technology and CEO .
Although the risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition, such incidents could have a material adverse effect in the future as cyberattacks continue to increase in frequency and sophistication.
Although the risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition, such incidents could have a material adverse effect in the future as cyberattacks continue to increase in frequency and sophistication. 52 In November 2024, we became aware of a cybersecurity incident that involved unauthorized access of an employee’s email account.
We take input from industry activities, third party assessments and internal simulations and continuously adjust our protection mechanisms to be effective. We also assess operational and data security risks associated with our use of third-party service providers, understanding where failure points may exist within our supply chain operations and data protections.
We also assess operational and data security risks associated with our use of third-party service providers, understanding where failure points may exist within our supply chain operations and data protections.
For more information about the cybersecurity risks and other information technology and data privacy risks we face, see Item 1A.
We believe this early detection ultimately resulted in an immaterial impact to our financial results and at no point was our ability to generate revenues disrupted. For more information about the cybersecurity risks and other information technology and data privacy risks we face, see Item 1A.
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Through this unauthorized access the threat actor was able to fraudulently divert Company funds to its bank account. We detected the incident in a timeframe management believes minimized any financial, operational or reputational risk to the Company.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe current lease term commenced in June 2022 and expires in June 2027. This office generally serves as our customer service center and analytical laboratory.
Biggest changeWe lease approximately 11,600 square feet of lab and office space in Nashville, Tennessee. The current lease term commenced in June 2022 and expires in June 2027. This office generally serves as ImprimisRx’s customer service center and analytical laboratory. We lease approximately 5,800 square feet of office space in Carlsbad, California.
ITEM 2. PROPERTIES We lease approximately 38,200 square feet of lab, warehouse, and office space in Ledgewood, New Jersey, in three separate suites. The current lease term expires on July 31, 2027 and includes options to extend the lease term through 2037. This space serves as an outsourcing facility and pharmacy for ImprimisRx.
We lease approximately 38,200 square feet of lab, warehouse, and office space in Ledgewood, New Jersey, in three separate suites. The current lease term expires on July 31, 2027 and includes options to extend the lease term through 2037. This space serves as an outsourcing facility and pharmacy for ImprimisRx.
The current lease term began January 1, 2022 and expires on March 31, 2025 and includes an option to extend the lease term through March 2028. This office generally supports the certain marketing and administrative functions. We lease approximately 11,600 square feet of lab and office space in Nashville, Tennessee.
The current lease term began January 1, 2022 and expires on March 31, 2025 and includes an option to extend the lease term through March 2028. This office generally supports the certain marketing and administrative functions. We notified our landlord that we will not renew this lease upon expiration of its initial term on March 31, 2025.
We lease approximately 5,500 square feet of office space in Nashville, Tennessee. The current lease term expires on December 31, 2024. This office serves as our corporate headquarters. We lease approximately 5,800 square feet of office space in Carlsbad, California.
ITEM 2. PROPERTIES We lease approximately 17,700 square feet of office space in Nashville, Tennessee. The current lease term expires on June 30, 2032 and includes the option to extend the term for two additional, consecutive five-year terms. This office serves as our corporate headquarters.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS See Note 18 to our consolidated financial statements included in this Annual Report for information on various legal proceedings, which is incorporated into this Item by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS See Note 18 to our consolidated financial statements included in this Annual Report for information on various legal proceedings, which is incorporated into this Item by reference. Additionally, we have been in discussions with the federal government regarding past inspections at NJOF. For information regarding these discussions see Part I, Item 1A.
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“Risk Factors – We have been in discussions with the federal government regarding past FDA inspections of our 503B facility, and to the extent we are unable to demonstrate compliance with cGMPs and other required regulations, the government could seek injunctive remedies, including through a consent decree and temporary injunction, the effects of which could be costly to us and could result in adverse consequences to our business.” ITEM 4.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 52 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 52 Item 6. [Reserved] 52 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 53 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 66 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 53 PART II 53 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 53 Item 6. [ Reserved] 54 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 55
Removed
Financial Statements and Supplementary Data 67 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 67 Item 9A. Controls and Procedures 67 Item 9B. Other Information 68

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on The Nasdaq Stock Market LLC under the symbol “HROW” and the Notes are listed on The Nasdaq Stock Market LLC under the symbols “HROWL” and “HROWM.” Holders As of March 18, 2024, there were approximately 67 stockholders of record (excluding an indeterminable number of stockholders whose shares are held in street or “nominee” name) of our common stock.
Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on The Nasdaq Stock Market LLC under the symbol “HROW” and the Notes are listed on The Nasdaq Stock Market LLC under the symbols “HROWL” and “HROWM.” 53 Holders As of February 28, 2025, there were approximately 57 stockholders of record (excluding an indeterminable number of stockholders whose shares are held in street or “nominee” name) of our common stock.
Dividends We have not paid any dividends on our common stock since our inception and do not expect to pay dividends on our common stock in the foreseeable future. Purchase of Equity Securities We did not purchase any of our equity securities during the fourth quarter of 2023. Recent Sales of Unregistered Securities None.
Dividends We have not paid any dividends on our common stock since our inception and do not expect to pay dividends on our common stock in the foreseeable future. Purchase of Equity Securities We did not purchase any of our equity securities during the fourth quarter of 2024. Recent Sales of Unregistered Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following presents our cost of sales for the years ended December 31, 2023 and 2022: For the Years Ended December 31, $ 2023 2022 Variance Cost of sales $ 39,640,000 $ 25,383,000 $ 14,257,000 The increase in our cost of sales was largely attributable to the amortization of acquired product NDAs which totaled $9,314,000 for the year ended December 31, 2023, compared to $1,364,000 during the prior year, offset by lesser increases in expenses associated with unit volumes sold and increased direct and indirect costs associated with production of our products.
Biggest changeThe following presents our cost of sales for the years ended December 31, 2024 and 2023: Branded For the Years Ended December 31, $ 2024 2023 Variance Cost of sales $ 21,667,000 $ 12,662,000 $ 9,005,000 The increase in cost of sales associated with our branded products between the years ended December 31, 2024 and 2023 was largely attributable to the increase in products sold and amortization of acquired product NDAs which totaled $10,093,000 for the year ended December 31, 2024, compared to $9,314,000 during the prior year. 57 ImprimisRx For the Years Ended December 31, $ 2024 2023 Variance Cost of sales $ 27,578,000 $ 26,978,000 $ 600,000 The increase in our ImprimisRx cost of sales between the years ended December 31, 2024 and 2023 was largely attributable to expenses associated with the increase in unit volumes sold.
For branded products, orders are received through the Company’s 3PL partner, and the customer takes title of the products via formal purchase orders placed and fulfilled. 2. Identify the performance obligations in the contract: Obligations for fulfillment of our contracts consist of delivering the product to customers at their specified destination.
For branded products, orders are received through our 3PL partner, and the customer takes title of the products via formal purchase orders placed and fulfilled. 2. Identify the performance obligations in the contract: Obligations for fulfillment of our contracts consist of delivering the product to customers at their specified destination.
Selling, General and Administrative Expenses Our selling, general and administrative expenses include personnel costs, including wages and stock-based compensation, corporate facility expenses, and investor relations, consulting, insurance, filing, legal and accounting fees and expenses as well as costs associated with our marketing activities and sales of our proprietary compounded formulations and other non-proprietary pharmacy products and formulations.
Selling, General and Administrative Expenses Our selling, general and administrative (“SG&A”) expenses include personnel costs, including wages and stock-based compensation, corporate facility expenses, and investor relations, consulting, insurance, filing, legal and accounting fees and expenses as well as costs associated with our marketing activities and sales of our proprietary compounded formulations and other non-proprietary pharmacy products and formulations.
Factors Affecting Our Performance We believe the primary factors affecting our performance are our ability to increase revenues of our branded pharmaceutical products, proprietary compounded formulations and certain non-proprietary products, grow and gain operating efficiencies in our operations, potential regulatory-related restrictions, optimize pricing and obtain reimbursement options for our drug products, and continue to pursue development and commercialization opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available.
Factors Affecting Our Performance We believe the primary factors affecting our performance are our ability to increase revenues of our branded pharmaceutical products, proprietary compounded formulations and certain non-proprietary products, grow and gain operating efficiencies in our operations, avoid or mitigate any potential regulatory-related restrictions, optimize pricing and obtain reimbursement options for our drug products, and continue to pursue development and commercialization opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available.
Overview We are a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical products for the U.S. market. Harrow helps U.S. eyecare professionals preserve the gift of sight by making its comprehensive portfolio of prescription and non-prescription pharmaceutical products accessible and affordable to millions of Americans each year.
Overview We are a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical products for the U.S. market. We help U.S. eyecare professionals preserve the gift of sight by making its comprehensive portfolio of prescription and non-prescription pharmaceutical products accessible and affordable to millions of Americans each year.
We are subject to taxation in the United States, California, New Jersey, Tennessee and various other states. Our tax years since 2000 may be subject to examination by the federal and state tax authorities due to the carryforward of unutilized net operating losses.
We are subject to taxation in the U.S., California, New Jersey, Tennessee, and various other states. Our tax years since 2000 may be subject to examination by the federal and state tax authorities due to the carryforward of unutilized net operating losses.
As a result of its assessment in 2023, we recorded an impairment charge of $380,000 related to the impairment of certain licenses, trademarks, patents and patent applications (see the Note 11 to our consolidated financial statements).
As a result of its assessment in 2024 and 2023, we recorded an impairment charge of $253,000 and $380,000, respectively, related to the impairment of certain licenses, trademarks, patents and patent applications (see Note 11 to our consolidated financial statements).
Impairment and Disposal of Long-Lived Assets During the year ended December 31, 2023, we recorded a charge of $548,000, of which, $380,000 was related to the impairment of licenses, trademarks, patents and patent applications and $168,000 was related to equipment that was no longer in service.
During the year ended December 31, 2023, we recorded a charge of $548,000, of which, $380,000 was related to the impairment of licenses, trademarks, patents and patent applications and $168,000 was related to equipment that was no longer in service.
Comparison of Years Ended December 31, 2023 and 2022 Revenues Our revenues include amounts recorded from sales of proprietary compounded formulations, sales of branded products to wholesalers through a third-party logistics facility, commissions from third parties and revenues received from royalty payments owed to us pursuant to out-license arrangements.
Comparison of Years Ended December 31, 2024 and 2023 Revenues Our revenues include amounts recorded from sales of branded products to wholesalers through a third-party logistics facility, sales of proprietary compounded formulations, and revenues received from royalty payments owed to us pursuant to out-license and like arrangements.
Our consolidated financial statements have been prepared and, unless otherwise stated, the information derived therefrom as presented in this discussion and analysis is presented, in accordance with accounting principles generally accepted in the United States (GAAP).
Our consolidated financial statements have been prepared and, unless otherwise stated, the information derived therefrom as presented in this discussion and analysis is presented, in accordance with accounting principles generally accepted in the U.S. (GAAP).
We had an accrual for interest or penalties of $40,000 and $0 in the consolidated balance sheets at December 31, 2023 and 2022, respectively, and have recognized interest and/or penalties in the consolidated statements of operations for the years ended December 31, 2023 and 2022 of $40,000 and $0, respectively.
We had an accrual for interest or penalties of $69,000 and $40,000 in the consolidated balance sheets at December 31, 2024 and 2023, respectively, and have recognized interest and/or penalties in the consolidated statements of operations for the years ended December 31, 2024 and 2023 of $69,000 and $40,000, respectively.
Recent Developments The following describes certain developments in 2023 and 2024 to date that are important to understand our financial condition and results of operations. See the notes to our consolidated financial statements included in this Annual Report for additional information about each of these developments.
Recent Developments The following describes certain developments in 2024 and 2025 to date that are important to understand our financial condition, results of operations, and expectations. See the notes to our consolidated financial statements included in this Annual Report for additional information about certain developments.
As of December 31, 2023 and 2022, there was $2,853,000 and $0, respectively, of unrecognized tax benefits included in the consolidated balance sheets that would, if recognized, affect the effective tax rate. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense.
As of December 31, 2024 and 2023, there was $2,858,000 and $2,822,000, respectively, of unrecognized tax benefits included in the consolidated balance sheets that would, if recognized, affect the effective tax rate. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense.
Following the core principles of ASC 606, the Company has identified the following: 1. Identify the contract(s) with a customer: A contract is deemed to exist when the customer places an order through receipt of a prescription, via an online order or via receipt of a purchase order from a customer.
Following the core principles of ASC 606, we have identified the following: 62 1. Identify the contract(s) with a customer: A contract is deemed to exist when the customer places an order through receipt of a prescription, via an online order or via receipt of a purchase order from a customer.
Other Income (Expense), net During the year ended December 31, 2023 we recorded other expense, net of $444,000 related primarily to transition services and write-off of inventories associated with the divestment of our non-ophthalmology business, and a charge related to equipment that was no longer in service.
During the year ended December 31, 2023 we recorded other expense, net of $(444,000) related primarily to transition services and write-off of inventories associated with the divestment of our non-ophthalmology business, and a charge related to equipment that was no longer in service. 59 Tax Expense During the years ended December 31, 2024 and 2023, we recorded income tax expense of $161,000 and $701,000, respectively.
In addition, we may consider the sale of certain assets including, but not limited to, part of, or all of, our investments in Eton, Surface, and Melt.
In addition, we may consider the sale of certain assets including, but not limited to, part of, or all of, our investments in Surface and Melt and any of our consolidated subsidiaries.
We have three primary streams of revenue (four in 2022): (1) product revenues, including revenue recognized from sales of products through its pharmacy and outsourcing facility and sales of branded products to wholesalers through a third-party logistics (“3PL”) partner, (2) revenue recognized from a commission agreement with a third party in 2022, (3) revenue recognized from transfer of acquired product sales and profits, and (4) revenue recognized from intellectual property licenses.
We have three primary streams of revenue: (1) product revenues, including revenue recognized from sales of products through its pharmacy and outsourcing facility and sales of branded products to wholesalers through a third-party logistics (“3PL”) partner, (2) revenue recognized from transfer of acquired product sales and profits, and (3) revenue recognized from intellectual property licenses.
Interest Expense, net Interest expense, net was $21,324,000 during the year ended December 31, 2023, compared to $7,244,000 during the year ended December 31, 2022. The increase was primarily due to an increase in the principal balance of our loans throughout the two periods presented.
Interest Expense, net Interest expense, net was $22,786,000 during the year ended December 31, 2024, compared to $21,324,000 during the year ended December 31, 2023. The increase was primarily due to an increase in the principal balance of our loans throughout the two periods presented.
Cash provided by financing activities during the year ended December 31, 2023 was primarily related to proceeds received from the sale of the 2027 Notes, the Oaktree Loan and Oaktree Amendment, and the Offering, offset by payment of payroll taxes upon vesting of PSUs in exchange for shares withheld from employees.
Cash provided by financing activities during the year ended December 31, 2023 was primarily related to proceeds received from the issuance of the Oaktree Loan and Oaktree Amendment, issuance of unsecured debt and sale of our equity, offset by payment of payroll taxes upon vesting of PSUs in exchange for shares withheld from employees.
Events or changes in circumstances considered as impairment indicators include but are not limited to the following: ● significant underperformance of the Company’s business relative to expected operating results; ● significant adverse economic and industry trends; ● significant decline in the Company’s market capitalization for an extended period of time relative to net book value; and ● expectations that a reporting unit will be sold or otherwise disposed. 65 The goodwill impairment test consists of a two-step process as follows: Step 1.
Events or changes in circumstances considered as impairment indicators include but are not limited to the following: ● significant underperformance of our business relative to expected operating results; ● significant adverse economic and industry trends; ● significant decline in our market capitalization for an extended period of time relative to net book value; and ● expectations that a reporting unit will be sold or otherwise disposed.
If we are unable to raise funds to satisfy our capital needs when needed, then we may need to forego pursuit of potentially valuable development or acquisition opportunities, we may not be able to continue to operate our business pursuant to our business plan, which would require us to modify our operations to reduce spending to a sustainable level by, among other things, delaying, scaling back or eliminating some or all of our ongoing or planned investments in corporate infrastructure, business development, sales and marketing and other activities, or we may be forced to discontinue our operations entirely. 61 Critical Accounting Policies We rely on the use of estimates and make assumptions that impact our financial condition and results.
If we are unable to raise funds to satisfy our capital needs when needed, then we may need to forego pursuit of potentially valuable development or acquisition opportunities, we may not be able to continue to operate our business pursuant to our business plan, which would require us to modify our operations to reduce spending to a sustainable level by, among other things, delaying, scaling back or eliminating some or all of our ongoing or planned investments in corporate infrastructure, business development, sales and marketing and other activities, or we may be forced to discontinue our operations entirely.
We believe that the accounting policies described below are critical to understanding our business, results of operations and financial condition because they involve the use of more significant judgments and estimates in the preparation of our consolidated financial statements.
Although we believe that the estimates we use are reasonable, actual results could differ materially from these estimates. We believe that the accounting policies described below are critical to understanding our business, results of operations and financial condition because they involve the use of more significant judgments and estimates in the preparation of our consolidated financial statements.
Loss on Early Extinguishment of Debt During the year ended December 31, 2023, we recorded a loss on extinguishment of debt of $5,465,000, related to the payoff of the BR Loan.
Loss on Early Extinguishment of Debt During the year ended December 31, 2023, we recorded a loss on extinguishment of debt of $5,465,000, related to the payoff of a loan. There were no extinguishments of debt during the year ended December 31, 2024.
We own commercial rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in North America, all of which are marketed under the Harrow name . We also own and operate ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding businesses. In addition, we have a non-controlling equity interest in Melt Pharmaceuticals, Inc.
We own commercial rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in North America, all of which are marketed under the Harrow name. We also own and operate ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding businesses.
We also met with CMS in January 2024 to request clarification related to its anesthesia billing policy which has historically not allowed for the separate billing of anesthesia services in the physician’s office.
IHEEZO Reimbursement In January 2024, we met with the Centers for Medicare & Medicaid Services (“CMS”) to request clarification related to its anesthesia billing policy which has historically not allowed for the separate billing of anesthesia services in the physician’s office.
Impairment of Other Long-Lived Assets Other long-lived assets, such as property, plant and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
As a result of our assessments in 2024 and 2023, we concluded that goodwill is not impaired as of December 31, 2024 and 2023. 66 Impairment of Other Long-Lived Assets Other long-lived assets, such as property, plant and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
We compare the fair value of each reporting unit to its carrying amount, including the existing goodwill. The fair value of each reporting unit is determined using a discounted cash flow valuation analysis.
The goodwill impairment test consists of a two-step process as follows: Step 1. We compare the fair value of each reporting unit to its carrying amount, including the existing goodwill. The fair value of each reporting unit is determined using a discounted cash flow valuation analysis.
Net Cash Flows The following provides detailed information about our net cash flows for the years ended December 31, 2023 and 2022: For the Years Ended December 31, 2023 2022 Net cash provided by (used in): Operating activities $ 3,840,000 $ 1,705,000 Investing activities (152,553,000 ) (1,743,000 ) Financing activities 126,528,000 54,141,000 Net change in cash and cash equivalents (22,185,000 ) 54,103,000 Cash and cash equivalents at beginning of the year 96,270,000 42,167,000 Cash and cash equivalents at end of the year $ 74,085,000 $ 96,270,000 Operating Activities Net cash provided by operating activities was $3,840,000 in 2023, compared to $1,705,000 in the prior year.
Net Cash Flows The following provides detailed information about our net cash flows for the years ended December 31, 2024 and 2023: For the Years Ended December 31, 2024 2023 Net cash provided by (used in): Operating activities $ (22,202,000 ) $ 3,840,000 Investing activities (33,164,000 ) (152,553,000 ) Financing activities 28,528,000 126,528,000 Net change in cash and cash equivalents (26,838,000 ) (22,185,000 ) Cash and cash equivalents at beginning of the year 74,085,000 96,270,000 Cash and cash equivalents at end of the year $ 47,247,000 $ 74,085,000 60 Operating Activities Net cash used in operating activities was $(22,202,000) in 2024, compared to cash provided by of $3,840,000 in the prior year.
As of the date of this Annual Report, we believe that cash and cash equivalents of $74,085,000 at December 31, 2023 will be sufficient to sustain our planned level of operations and capital expenditures for at least the next 12 months.
As of the date of this Annual Report, we believe that cash and cash equivalents of $47,247,000 at December 31, 2024 will be sufficient to sustain our planned level of operations and capital expenditures for at least the next 12 months. Management expects to refinance the Oaktree Loan during 2025.
We may also seek additional financing from a variety of sources, including other equity or debt financings, funding from corporate partnerships or licensing arrangements, sales of assets or any other financing transaction.
We may receive additional proceeds from the exercise of stock purchase warrants that are currently outstanding. We may also seek additional financing from a variety of sources, including other equity or debt financings, funding from corporate partnerships or licensing arrangements, sales of assets or any other financing transaction.
During the meeting we requested that CMS clarify that J-Code 2403, IHEEZO’s permanent J-Code, is appropriate to be billed for the anesthesia product itself (i.e., IHEEZO in our case) in the physician office setting. As of the date of this Annual Report, we had not received feedback from CMS following our meeting in January 2024.
During the meeting we requested that CMS clarify that J-Code 2403, IHEEZO’s permanent J-Code, is appropriate to be billed for the anesthesia product itself (i.e., IHEEZO in our case) in the physician office setting.
If the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to the excess, limited to the total amount of goodwill allocated to that reporting unit. As a result of its assessment in 2023, we concluded that goodwill is not impaired as of December 31, 2023.
If the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to the excess, limited to the total amount of goodwill allocated to that reporting unit.
Launch In January 2024, we launched VEVYE (cyclosporine ophthalmic solution) 0.1%, the first and only water-free cyclosporine dissolved in a semifluorinated alkane approved to treat both the signs and symptoms of dry eye disease, in the U.S. We partnered with various entities including PhilRx, Apollo Care and PARx Solutions to enhance our market and patient access program for VEVYE.
Launch In January 2024, we launched VEVYE (cyclosporine ophthalmic solution) 0.1%, the first and only water-free cyclosporine dissolved in a semifluorinated alkane approved to treat both the signs and symptoms of dry eye disease in the U.S.
During the year ended December 31, 2023, revenues, including transfer of acquired product sales and profits, from branded products totaled $50,258,000, as compared to $2,716,000 in the prior year. 57 Cost of Sales Our cost of sales includes direct and indirect costs to manufacture formulations and sell products, including active pharmaceutical ingredients, personnel costs, packaging, storage, royalties, shipping and handling costs, manufacturing equipment and tenant improvements depreciation, the write-off of obsolete inventory, amortization of acquired product NDAs, and other related expenses.
Cost of Sales Our cost of sales includes direct and indirect costs to manufacture formulations and sell products, including active pharmaceutical ingredients, personnel costs, packaging, storage, royalties, shipping and handling costs, manufacturing equipment and tenant improvements depreciation, the write-off of obsolete inventory, amortization of acquired product NDAs, and other related expenses.
Income Taxes As part of the process of preparing our consolidated financial statements, we must estimate the actual current tax assets and liabilities and assess permanent and temporary differences that result from differing treatment of items for tax and accounting purposes. The temporary differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheets.
Guaranteed minimum annual royalties are recognized on a straight-line basis over the applicable term. 65 Income Taxes As part of the process of preparing our consolidated financial statements, we must estimate the actual current tax assets and liabilities and assess permanent and temporary differences that result from differing treatment of items for tax and accounting purposes.
In exchange, Apotex will make payments to Harrow for milestones related to manufacturing arrangements, regulatory and commercial achievements, in addition to royalties on net sales of the Apotex Products. 53 VEVYE U.S.
In exchange for these licenses, Harrow will earn amounts related to manufacturing, regulatory and commercial achievement milestones, in addition to royalties on net sales of the Apotex Products.
Tax Expense During the years ended December 31, 2023 and 2022, we recorded income tax expense of $701,000 and $75,000, respectively. 59 The following table presents our net loss for the years ended December 31, 2023 and 2022: For the Years Ended December 31, 2023 2022 Net loss $ (24,411,000 ) $ (14,086,000 ) Net loss per share, basic and diluted $ (0.75 ) $ (0.51 ) Liquidity and Capital Resources Liquidity Our cash on hand at December 31, 2023 was $74,085,000, compared to $96,270,000 at December 31, 2022.
The following table presents our net loss for the years ended December 31, 2024 and 2023: For the Years Ended December 31, 2024 2023 Net loss $ (17,481,000 ) $ (24,411,000 ) Net loss per share, basic and diluted $ (0.49 ) $ (0.75 ) Liquidity and Capital Resources Liquidity Our cash on hand at December 31, 2024 was $47,247,000, compared to $74,085,000 at December 31, 2023.
These estimates and assumptions are based on historical results and trends as well as our forecasts of how results and trends might change in the future. Although we believe that the estimates we use are reasonable, actual results could differ materially from these estimates.
Critical Accounting Policies and Estimates We rely on the use of estimates and make assumptions that impact our financial condition and results. These estimates and assumptions are based on historical results and trends as well as our forecasts of how results and trends might change in the future.
Investment Gain (Loss) from Eton We recorded a gain of $3,092,000 related to the change in fair market value of our investment in Eton’s common stock for the year ended December 31, 2023. We recorded a loss of $2,914,000 related to our investment in Eton’s common stock for the year ended December 31, 2022.
Investment Gain (Loss) from Eton During the year ended December 31, 2024, we recorded a loss of $(3,171,000) related to the change in fair market value of Eton’s common stock at the time of its sale, including trading expenses and commissions of approximately $436,000, compared to a gain of $3,092,000 during the year ended December 31, 2023.
The following presents our R&D expenses for the years ended December 31, 2023 and 2022: For the Years Ended December 31, $ 2023 2022 Variance Research and development $ 6,652,000 $ 3,050,000 $ 3,602,000 The increase in R&D expenses between periods was primarily attributable to increased activity related to product acquisitions, product launches, clinical and medical support.
The following presents our R&D expenses for the years ended December 31, 2024 and 2023: For the Years Ended December 31, $ 2024 2023 Variance Research and development $ 12,230,000 $ 6,652,000 $ 5,578,000 The increase in R&D expenses between the years ended December 31, 2024 and 2023 was primarily attributable to activity related to our expanded branded product portfolio, technical transfer activities associated with the production of certain products related to our product acquisitions that occurred in 2023, product development efforts, product launches, and clinical and medical support.
The estimated fair value is determined at the date of grant. The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual effect differs from those estimates.
The estimated fair value is determined at the date of grant. The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual effect differs from those estimates. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.
Other areas of increased expenses included $3,257,000 related to new regulatory costs and enhancements and a $6,844,000 increase in expenses related to the addition of new employees in sales, marketing and other departments to support current and expected growth, including the transition of the Santen Products, and the commercial launch of IHEEZO in April 2023 and VEVYE in December 2023. 58 Research and Development Expenses Our research and development (“R&D”) expenses primarily included personnel costs, including wages and stock-based compensation, expenses related to the development of intellectual property, investigator-initiated research and evaluations, formulation development, acquired in-process R&D and other costs related to the clinical development of our assets.
Regulatory enhancements and costs to support the transition of recent product acquisitions also caused SG&A to be higher for the year ended December 31, 2024 compared to 2023. 58 Research and Development Expenses Our research and development (“R&D”) expenses primarily included personnel costs, including wages and stock-based compensation, expenses related to the development of intellectual property, investigator-initiated research and evaluations, formulation development, acquired in-process R&D and other costs related to the clinical development of our assets.
See the Note 5 to our consolidated financial statements for more information and related party disclosure regarding Melt. Goodwill and Intangible Assets Patents and trademarks are recorded at cost and capitalized at a time when the future economic benefits of such patents and trademarks become more certain.
Goodwill and Intangible Assets Patents and trademarks are recorded at cost and capitalized at a time when the future economic benefits of such patents and trademarks become more certain. At that time, we capitalize third-party legal costs and filing fees associated with obtaining and prosecuting claims related to its patents and trademarks.
Acquired product rights, including new drug applications (“NDAs”), are amortized over their estimated useful lives, generally 4-15 years, based on a straight-line method. Trademarks are an indefinite-lived intangible asset and are assessed for impairment based on future projected cash flows as further described below.
Trademarks are an indefinite-lived intangible asset and are assessed for impairment based on future projected cash flows as further described below.
We may acquire new products, product candidates and/or businesses and, as a result, we may need significant additional capital to support our business plan and fund our proposed business operations. We may receive additional proceeds from the exercise of stock purchase warrants that are currently outstanding.
There can be no assurance that any sale could be completed on a timely basis or on terms acceptable to us. 61 We may acquire new products, product candidates and/or businesses and, as a result, we may need significant additional capital to support our business plan and fund our proposed business operations.
Oaktree Credit and Guaranty Agreement On March 27, 2023, we entered into a Credit Agreement and Guaranty (the “Oaktree Loan”) with Oaktree Fund Administration, LLC, as administrative agent for the lenders (together, “Oaktree”), providing for a loan to us with a principal amount of up to $100,000,000.
Also, during October 2024, we entered into the Second Amendment (the “Second Amendment”) to the Credit Agreement and Guaranty originally entered into on March 27, 2023, as amended by that certain First Amendment to Credit Agreement and Guaranty and Consent, dated as of July 18, 2023 (as amended, the “Oaktree Loan”), with the lenders from time to time party thereto and Oaktree Fund Administration, LLC, as administrative agent for the lenders (together “Oaktree”).
At that time, we capitalize third-party legal costs and filing fees associated with obtaining and prosecuting claims related to its patents and trademarks. Once the patents have been issued, we amortize these costs over the shorter of the legal life of the patent or its estimated economic life, generally 20 years, using the straight-line method.
Once the patents have been issued, we amortize these costs over the shorter of the legal life of the patent or its estimated economic life, generally 20 years, using the straight-line method. Acquired product rights, including NDAs, are amortized over their estimated useful lives, generally 4-15 years, based on a straight-line method.
The following presents our selling, general and administrative expenses for the years ended December 31, 2023 and 2022: For the Years Ended December 31, $ 2023 2022 Variance Selling, general and administrative $ 83,090,000 $ 58,243,000 $ 24,847,000 The increase in selling, general and administrative expenses between periods was primarily attributable to an increase in stock-based compensation expense, including new expenses associated with performance stock units (“PSUs”) granted in April 2023 of $7,722,000 for the year ended December 31, 2023, compared to the prior year.
The following presents our SG&A expenses for the years ended December 31, 2024 and 2023: For the Years Ended December 31, $ 2024 2023 Variance Selling, general and administrative $ 129,064,000 $ 83,090,000 $ 45,974,000 The increase in SG&A expenses between periods was primarily attributable to the addition of new employees in sales, marketing and other departments to support current and expected growth, including the commercial launch of VEVYE, which when combined contributed to a $32,743,000 increase in SG&A during the year ended December 31, 2024 compared to the prior year.
Net cash provided by financing activities during the year ended December 31, 2022 was primarily related to net proceeds from the sale of the 2027 Notes and sale of common stock.
Cash provided by financing activities during the year ended December 31, 2024 was primarily due to additional borrowings under our long-term debt facility with Oaktree of $29,780,000, net of issuance costs, and proceeds from the exercise of stock options, offset by the payment of taxes associated with the vesting and exercise of share-based awards.
Following entry into the Oaktree Amendment and the funding of the Loan Increase upon closing of the Santen Products Acquisition, we have drawn down a total principal loan amount of $77,500,000 under the Oaktree Loan and an additional Tranche B loan amount of up to $35,000,000 remains available to us upon the commercialization of TRIESENCE, provided, that if Tranche B is not drawn by the Company on or before March 27, 2024, the amount available under Tranche B will decrease to $30,000,000.
No other material changes to the Oaktree Loan were provided in the Second Amendment. Following entry into the Second Amendment and the funding of the Novartis milestone payment, the Company has drawn down a total principal loan amount of $107,500,000 under the Oaktree Loan and no additional principal loan amount remains available to the Company under the Oaktree Loan.
Removed
(“Melt”), and two other companies that began as subsidiaries of Harrow and were subsequently carved-out of our corporate structure and deconsolidated from our financial statements.
Added
VEVYE Access for All In March 2025, we announced a patient access program called VEVYE Access for All. The program is designed to increase patient access to VEVYE at an out-of-pocket cost of $59 or below and, in many cases, reduce the need for prior authorizations, step edits, and other treatment obstacles facing dry eye patients and their prescribers.
Removed
Melt Loan Settlement In December 2023, we terminated the Loan and Security Agreement (the “Loan Agreement”), dated as of September 1, 2021, as amended, by and between us, as lender, and Melt, as borrower, which provided for a senior secured term loan with an initial aggregate principal amount of $13,500,000 bearing interest at 12.50% per annum.
Added
Project Beagle We recently initiated a 360-degree review of opportunities to offer ImprimisRx customers a Harrow-owned FDA-approved product alternative to a compounded formulation. We call this initiative Project Beagle.
Removed
As of the date of termination, approximately $18,400,000 remained outstanding under the Loan Agreement.
Added
In that vein, we began implementing a continuity of care program to transition approximately 25,000 ImprimisRx patients from our Klarity-C (0.1% cyclosporine) compounded formulation to VEVYE (0.1% cyclosporine), and we expect to discontinue compounding Klarity-C by June 30, 2025. We are also discontinuing another related compounded formulation called Klarity PF.
Removed
Pursuant to the terms of a Settlement and Payoff Agreement, dated as of December 28, 2023, by and between us and Melt (the “Settlement Agreement”), we received 2,260,000 shares of Melt’s Series B-1 Preferred Stock and 74,256 shares of Melt’s Series B Preferred Stock in consideration for the full payment of all amounts outstanding under the Loan Agreement.
Added
Klarity PF is primarily purchased by a concentrated group of customers who we expect to accept our FRESHKOTE product as an alternative. As we work through Project Beagle, we will continue to review opportunities to reduce the size of our compounded formulary, improve and simplify our compounding capabilities, and transition other ImprimisRx customers from compounded formulations to Harrow’s FDA-approved products.
Removed
The Settlement Agreement contains customary representations, warranties and releases of the parties and requires the parties to enter into a registration rights agreement providing us with rights consistent with other holders of preferred stock of Melt.
Added
Cybersecurity Incident In November 2024, we became aware of a cybersecurity incident that involved unauthorized access of an employee’s email account. Through this unauthorized access the threat actor was able to fraudulently divert Company funds to its bank account.
Removed
IHEEZO Reimbursement, Launch and Studies In February 2023, we announced that the Centers for Medicare & Medicaid Services (“CMS”) had issued a permanent, product specific J-code for IHEEZO (J2403) which became effective under the Healthcare Procedure Coding System (HCPCS) on April 1, 2023, which physicians can use for reimbursement purposes of that product. New drugs approved by the U.S.
Added
We detected the incident in a timeframe management believes minimized any financial, operational or reputational risk to the Company, and at no point was our ability to generate revenues disrupted. 55 TRIESENCE Re-Launch, Oaktree Second Amendment and Draw In October 2024, we announced the re-launch of TRIESENCE following the successful manufacturing of three process performance qualification batches of the product.
Removed
Food and Drug Administration (“FDA”) that are used in surgeries performed in hospital outpatient departments or ambulatory surgical centers may receive a transitional pass-through reimbursement under Medicare, provided they meet certain criteria, including a “not insignificant” cost criterion.
Added
In March 2025, we announced TRIESENCE was granted temporary pass-through reimbursement status to be made effective April 1, 2025. In connection with the re-launch, during October 2024 we made a one-time payment of $37,000,000 to Novartis Technology, LLC and Novartis Innovative Therapies AG (together, “Novartis”) pursuant to terms of an asset purchase agreement between Novartis and the Company.
Removed
Pass-through status allows for separate payment (i.e., outside the packaged payment rate for the surgical procedure) under Medicare Part B, which consists of Medicare reimbursement for a drug based on a defined formula for calculating the minimum fee that a manufacturer may charge for the drug.
Added
Upon satisfaction of certain conditions to funding, the Company drew down the principal amount of $30,000,000 (the “$30,000,000 Draw”) under a pre-existing commitment under the Oaktree Loan to partially fund the one-time payment to Novartis.
Removed
Under current regulations of CMS, pass-through status applies for a period of three years; which is measured from the date Medicare makes its first pass-through payment for the product. Following the three-year period, the product would be incorporated into the cataract bundled payment system, which could significantly reduce the pricing for that product.
Added
In the Second Amendment, the Company and Oaktree agreed to certain changes to the Oaktree Loan in connection with the Company’s draw under the Oaktree Loan.
Removed
Temporary pass-through reimbursement for IHEEZO was awarded by CMS and made effective in April 2023. We are also working to ensure our continued access to the Medicare market for the ambulatory surgery center (ASC), hospital and outpatient department (HOPD), and in-office use market for IHEEZO.
Added
Pursuant to the amendment, Oaktree agreed to waive any make-whole costs associated with the $30,000,000 Draw in the event of early repayment of the debt under the Oaktree Loan if paid before March 31, 2025. In addition, Oaktree agreed to exclude the $30,000,000 Draw from the calculation of the Total Leverage Ratio as defined in the Oaktree Loan.
Removed
In this regard, we are designing and intend to execute, during 2024, clinical studies to build data sets that could be presented to Centers for Medicare & Medicaid Services (CMS) to extend our temporary pass-through period for IHEEZO in ASCs and HOPDs.
Added
In March 2024, we received communication from a representative at CMS that the inclusion of J-Code 2403 in CMS’s April 2024 quarterly drug pricing file of the average sales prices (ASP) of some Medicare Part B-covered drugs and biologicals confirms that IHEEZO is separately payable in the physician office setting.
Removed
At the beginning of April 2023, we initiated a regional and targeted launch of IHEEZO (chloroprocaine HCL ophthalmic gel) 3%. In early May 2023, our full commercial launch of IHEEZO occurred, with the product being highlighted by our commercial team at the ASCRS (American Society of Cataract and Refractive Surgery) Annual Meeting.
Added
In February 2024, we made a request to CMS to consider increasing the Medically Unlikely Edits (“MUE”) for IHEEZO’s J-Code from 1 to 2.
Removed
Recently we invested in an in-vivo (in human) study to compare the effects of IHEEZO with povidone-iodine (PVI) compared to a low-viscosity tetracaine ophthalmic solution with PVI. The primary intent of the study is to show that IHEEZO does not act as a “barrier” to PVI, which had otherwise been shown with other ocular anesthetic gels.
Added
This request was made because the limitation of one MUE only allowed a single IHEEZO administration (equal to one single-use vial) to be used and billed, while many ophthalmologists perform bilateral ocular procedures, which would require two vials of IHEEZO to be used.
Removed
Findings from the study are positive and showed that IHEEZO demonstrated a similar barrier risk to tetracaine (e.g., a non-gel anesthetic). 54 Acquisition of VEVYE TM U.S. and Canadian Commercial Rights In July 2023, we acquired commercial rights of VEVYE for the U.S. and Canadian markets (the “VEVYE Acquisition”).
Added
On March 20, 2024, we received communication from the National Correct Coding Initiative (NCCI) program of CMS stating that CMS decided to increase the MUE for IHEEZO’s J-Code (J2403) from 1 to 2. The MUE edit was made effective on July 1, 2024. VEVYE U.S.
Removed
VEVYE, which is dispensed topically in a unique ten microliter per one drop and is labeled for twice-daily (BID) dosing, is the first and only cyclosporine-based product indicated for the treatment of both signs and symptoms of dry eye disease (DED). VEVYE was approved on May 30, 2023 by the FDA.
Added
We partnered with various entities including PhilRx, Apollo Care and PARx Solutions to enhance our market and patient access program for VEVYE. 56 Results of Operations The following period-to-period comparisons of our financial results are not necessarily indicative of results for any future period.

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