Harrow Health(US:HROW)2024-03-19 21:26Licensing and Agreements - In February 2024, the company entered into a license and supply agreement with Apotex for exclusive rights to market products including VERKAZIA and Cationorm PLUS in Canada, with milestone payments and royalties on net sales [258]. - In July 2023, the company acquired U.S. and Canadian commercial rights to VEVYE for $8 million and will pay low double-digit royalties on net sales [266]. - The company entered into agreements to acquire exclusive commercial rights to several ophthalmic products from Santen, making an initial payment of $8 million [267]. Product Launches - The company launched VEVYE in January 2024, the first water-free cyclosporine ophthalmic solution approved for treating dry eye disease in the U.S. [259]. - The company initiated a full commercial launch of IHEEZO in May 2023, following a targeted launch in April 2023 [263]. Financial Performance - Total revenues for the year ended December 31, 2023, were $130,193,000, an increase of $41,598,000 (approximately 46.9%) compared to $88,595,000 in 2022 [282]. - Product sales, net for 2023 were $117,447,000, up $33,923,000 (approximately 40.7%) from $83,524,000 in 2022, driven by increased sales of branded ophthalmology products [282]. - Gross profit for 2023 was $90,553,000, an increase of $27,341,000 (approximately 43.3%) compared to $63,212,000 in 2022, with a gross margin of 69.6% [285]. Expenses and Losses - Cost of sales increased to $39,640,000 in 2023, up $14,257,000 (approximately 56.2%) from $25,383,000 in 2022, primarily due to amortization of acquired product NDAs [284]. - Selling, general and administrative expenses rose to $83,090,000 in 2023, an increase of $24,847,000 (approximately 42.7%) from $58,243,000 in 2022, largely due to stock-based compensation and new regulatory costs [287]. - Research and development expenses increased to $6,652,000 in 2023, up $3,602,000 (approximately 118.1%) from $3,050,000 in 2022, reflecting heightened activity related to product acquisitions and launches [289]. - The net loss for the year ended December 31, 2023, was $(24,411,000), compared to a net loss of $(14,086,000) in 2022, representing an increase in loss of $10,325,000 (approximately 73.2%) [298]. Cash Flow and Financing - Cash on hand at December 31, 2023, was $74,085,000, down from $96,270,000 at December 31, 2022, a decrease of $22,185,000 (approximately 23.0%) [299]. - Net cash provided by operating activities was $3,840,000 in 2023, an increase of $2,135,000 (approximately 125.3%) compared to $1,705,000 in 2022 [303]. - Net cash used in investing activities in 2023 was $(152,553,000), significantly higher than $(1,743,000) in 2022, primarily due to acquisitions [304]. - Net cash provided by financing activities increased to $126,528,000 in 2023 from $54,141,000 in 2022, driven by proceeds from the sale of the 2027 Notes and the Oaktree Loan [305]. Acquisitions - The company completed the acquisition of NVS 5 Products from Novartis for an initial payment of $130 million, with potential milestone payments of up to $45 million [275]. - Cash used in investing activities in 2023 was primarily associated with the NVS 5 Acquisition, Santen Products Acquisition, and VEVYE Acquisition [304]. Tax and Financial Position - As of December 31, 2023, the company had $2,853,000 of unrecognized tax benefits, which could affect the effective tax rate if recognized [323]. - The company owns approximately 47% of Melt Pharmaceuticals, Inc., with significant influence over its operating and financial decisions, using the equity method of accounting [324]. - As of December 31, 2023, the total investment in Melt amounted to $24,207,000, with losses recorded at the same amount [326]. Impairments and Stock-Based Compensation - An impairment charge of $380,000 was recorded in 2023 related to certain licenses, trademarks, patents, and patent applications [334]. - Stock-based compensation is recognized based on estimated fair values using the Black-Scholes-Merton option pricing model and Monte Carlo simulation [335]. Challenges and Future Outlook - The company may need significant additional capital to support its business plan and fund proposed operations, potentially leading to dilution for existing stockholders [307]. - The company may face challenges in obtaining financing due to its limited history of profitability and general economic conditions [308].