Rising Specialty Ophthalmics And Biosimilars Will Open New Markets

Key Takeaways

• Accelerating demand for Harrow's specialty eye drugs and expansion into new treatment areas support strong, sustained top-line and margin growth.
  
• Improved patient access, partnerships, and integration of new innovative products strengthen competitive positioning and enable outsized earnings growth.
  
• Heavy dependence on flagship products, unsustainable recent growth, high execution risks, and pricing pressures threaten Harrow's revenue stability, margin expansion, and long-term profitability.

Catalysts

An eyecare pharmaceutical company, engages in the discovery, development, and commercialization of ophthalmic pharmaceutical products.

• The rapidly growing demand for Harrow's portfolio of specialty ophthalmic drugs, particularly VEVYE, IHEEZO, and TRIESENCE, is positioned to accelerate further as aging populations and increased prevalence of chronic ocular diseases expand the baseline patient pool-supporting sustainable long-term revenue growth.
  
• Strategic expansion into new indications and broader patient segments (e.g., TRIESENCE's expected launch into the large ocular inflammation market and BYQLOVI's entry into the post-operative care segment), coupled with rising healthcare access and coverage in the U.S., should increase prescription volumes and elevate top-line performance.
  
• Operating leverage is set to improve meaningfully as Harrow's scalable commercial infrastructure-already built out and profitable-absorbs additional high-margin revenue from both organic growth (e.g., expanded refill rates, market share gains) and new product launches, likely driving further net margin expansion.
  
• Enhanced distribution and patient access programs (such as the VAFA initiative and partnerships with Apollo Care) are reducing access barriers and converting more commercial insurance-covered prescriptions at higher average selling prices, directly benefitting both revenue quality and gross margins.
  
• Harrow's ability to secure, integrate, and commercialize new branded and biosimilar ophthalmic assets (notably the Samsung biosimilars portfolio and BYQLOVI) leverages secular shifts toward preference for innovative/specialty medications, positioning the company for outsized earnings growth as competitive barriers rise in a consolidating, increasingly regulated sector.

Harrow Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Harrow's revenue will grow by 37.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from -4.5% today to 35.6% in 3 years time.
• Analysts expect earnings to reach $209.0 million (and earnings per share of $4.03) by about September 2028, up from $-10.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.4x on those 2028 earnings, up from -135.1x today. This future PE is lower than the current PE for the US Pharmaceuticals industry at 19.5x.
• Analysts expect the number of shares outstanding to grow by 3.9% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Harrow Future Earnings Per Share Growth

Risks

• Heavy reliance on a few flagship products like VEVYE, IHEEZO, and TRIESENCE exposes Harrow to significant competitive and generic risk; any loss of market exclusivity, failure to achieve further market penetration, or competitive product launches could lead to notable revenue declines and impair long-term earnings.
  
• Recent rapid growth in flagship products may not be sustainable-management acknowledged that some surges (e.g., VEVYE growth) were driven by temporary patient switches or program-driven boluses, and future growth rates could slow if organic demand normalizes, directly impacting revenue trajectory and earnings growth expectations.
  
• Harrow's aggressive sales and revenue guidance, especially for the Specialty Branded segment and TRIESENCE, is contingent on "overperforming" in execution, successful penetration into new markets, and ramp-up of new leadership; if key launches underperform or operational challenges emerge, forecasted revenue and net margin expansion could fall short.
  
• Expansion into biosimilars and new product classes carries integration and execution risk; operational missteps, regulatory delays, or slower-than-expected market uptake could increase SG&A/R&D costs, hurt operating leverage, and delay profitability improvements.
  
• Persistent pressure on drug pricing and reimbursement in the U.S. and from public payers (especially as Harrow increases exposure to insurance reimbursed markets) could compress average selling prices (ASPs), limit future price increases, and restrict net margin expansion even if prescription volumes rise.

Valuation

• The analysts have a consensus price target of $60.1 for Harrow based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $76.0, and the most bearish reporting a price target of just $42.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $586.7 million, earnings will come to $209.0 million, and it would be trading on a PE ratio of 14.4x, assuming you use a discount rate of 6.8%.
• Given the current share price of $37.34, the analyst price target of $60.1 is 37.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.