Harrow Health(US:HROW)2023-03-23 21:06Financial Performance - Total revenues for the year ended December 31, 2022, were $88,595,000, an increase of $16,119,000 (22.2%) compared to $72,476,000 in 2021[271]. - Product sales, net for 2022 were $83,524,000, up from $69,104,000 in 2021, reflecting an increase of $14,420,000 (20.9%) due to higher sales volumes of ophthalmology products[271]. - Gross profit for 2022 was $63,212,000, with a gross margin of 71.3%, down from 74.9% in 2021, primarily due to amortization of acquired NDAs and increased production costs[274][275]. - Selling, general and administrative expenses rose to $58,243,000 in 2022, an increase of $16,928,000 (41.0%) from $41,315,000 in 2021, driven by higher consulting and personnel costs[277]. - Research and development expenses decreased to $11,084,000 in 2022 from $3,050,000 in 2021, primarily due to a one-time payment for acquired R&D in 2021[279]. - The net loss for the year ended December 31, 2022, was $14,086,000, compared to a net loss of $18,479,000 for 2021, resulting in a net loss per share of $0.51 for 2022 versus $0.69 for 2021[288]. Cash Flow and Liquidity - Cash on hand at December 31, 2022, was $96,270,000, significantly up from $42,167,000 at the end of 2021, reflecting an increase in liquidity[289]. - Net cash provided by operating activities decreased to $1,705,000 in 2022 from $5,082,000 in 2021, primarily due to increased operating expenses related to product launches[293]. - Net cash used in investing activities was $(1,743,000) in 2022, a decrease from $(18,686,000) in 2021, mainly due to equipment purchases and the sale of non-ophthalmic assets[294]. - Net cash provided by financing activities increased to $54,141,000 in 2022 from $51,470,000 in 2021, primarily from proceeds of $35,000,000 from notes and common stock sales[295]. Acquisitions and Divestitures - The company completed the acquisition of five ophthalmic products (Fab 5 Products) from Novartis for a total of $130,000,000, with an additional milestone payment of up to $45,000,000[264]. - The company divested its non-ophthalmic assets for $6,000,000 in cash, with potential additional payments of up to $4,500,000 based on revenue milestones in 2023[262]. Debt and Interest - Interest expense increased to $7,244,000 in 2022 from $5,436,000 in 2021, attributed to a higher principal balance of loans[281]. - The company secured a loan facility of up to $100,000,000 with a maturity date of December 14, 2025, at an interest rate of 10.875% to finance the Fab 5 Acquisition[268]. Strategic Plans and Future Outlook - The company expects to launch IHEEZO in 2023, supported by increased expenses related to new hires in sales and marketing[277]. - The company plans to use its cash position and generated funds to develop and commercialize FDA-approved products and pursue strategic acquisitions[291]. Investment Losses and Equity - Aggregate losses incurred since inception through December 31, 2022, totaled $109,493,000, mainly due to selling, general and administrative expenses, and research and development costs[289]. - A gain of $5,259,000 was recorded from the sale of non-ophthalmology assets in 2022[286]. - The company recorded a loss of $11,133,000 for its share of losses from unconsolidated entities in 2022, compared to $5,334,000 in 2021[282]. - The company may consider selling ownership interests in Eton, Surface, Melt, or other subsidiaries to sustain operations and capital expenditures[290]. - As of December 31, 2022, the fair market value of Eton Pharmaceuticals, Inc. common stock was $5,589,000, down from $8,503,000 in 2021, reflecting an investment loss of $2,914,000 in 2022 and $10,126,000 in 2021[307]. - The company owns 3,500,000 shares of Surface Ophthalmics, Inc., representing approximately 20% of equity and voting interests, with a recorded equity in net loss of $1,314,000 for the year ended December 31, 2021[308]. - The investment in Melt Pharmaceuticals, Inc. was recorded at $0 as of December 31, 2022, with equity in net losses of $11,133,000 in 2021 and $4,020,000 in 2022[312][313]. - Melt Pharmaceuticals, Inc. raised approximately $11,400,000 in its Series A Preferred Stock Agreement, resulting in a gain of $5,810,000 at the time of deconsolidation[310][311]. Research and Development - Stock-based compensation is recognized based on estimated fair values using the Black-Scholes option pricing model and Monte-Carlo simulation model[315]. - Research and development expenses include costs related to clinical trials and contract services, with all costs expensed as incurred[318]. - Upfront and milestone payments for technology acquisition and licensing are expensed as R&D in the period incurred[319]. Other Financial Information - The company has not engaged in any off-balance sheet arrangements, except for standard operating leases[326]. - There were no unrecognized tax benefits affecting the effective tax rate as of December 31, 2022 and 2021[317]. - The company reviews goodwill and indefinite-lived intangible assets for impairment annually, with a two-step process for testing[323][324].