VEVYE And TRIESENCE Programs Will Expand Prescription Access

Key Takeaways

• Harrow is focusing on boosting sales and profitability through patient affordability programs, strategic supply chain improvements, and next-gen product developments.
  
• Increasing market share with products like IHEEZO and transitioning to FDA-approved alternatives are key to enhancing revenue growth and financial stability.
  
• Harrow's growth and investor confidence are at risk due to execution challenges, transparency issues, and dependence on new product adoption and effective cost management.

Catalysts

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

• Harrow's new VEVYE Access For All program aims to boost prescription volumes and revenue by improving patient affordability and eliminating prescriber barriers, likely enhancing both sales growth and net margins.
  
• IHEEZO is experiencing significant unit volume growth due to its focus on anti-VEGF injections in the retina market, signaling continued revenue increases and potential margin improvements as the market for injections expands.
  
• TRIESENCE expects substantial revenue contribution starting in Q2 2025, supported by recent CMS market access wins, contributing to both top-line growth and profit margins.
  
• Strategic supply chain improvements and plans for a next-generation TRIESENCE product indicate a focus on long-term revenue sustainability and gross margin enhancement through product lifecycle management.
  
• The implementation of Project Beagle aims to transition customers from compounded products to FDA-approved alternatives, potentially increasing profitability and reducing regulatory risks, contributing to financial stability and margin expansion.

Harrow Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Harrow's revenue will grow by 49.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from -8.8% today to 29.6% in 3 years time.
• Analysts expect earnings to reach $198.8 million (and earnings per share of $4.79) by about May 2028, up from $-17.5 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 12.8x on those 2028 earnings, up from -54.2x today. This future PE is lower than the current PE for the US Pharmaceuticals industry at 17.2x.
• Analysts expect the number of shares outstanding to grow by 0.77% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.

Harrow Future Earnings Per Share Growth

Risks

• Harrow faces execution risk related to its market access strategy, particularly with the new VEVYE Access For All program, which could impact its anticipated revenue growth if it fails to increase prescription volumes as expected.
  
• There is a risk of disruption from the company's reliance on its new auditing firm, which could affect timely regulatory and financial filings, potentially impacting investor confidence and the company's stock performance. This risk could eventually influence the company's earnings and share price.
  
• Harrow's strategy of exiting the IQVIA reporting system for prescription data introduces potential transparency challenges that might concern investors about the accuracy and reliability of revenue projections, thereby impacting stock valuations and investor sentiment.
  
• The company's revenue growth is heavily dependent on the successful scaling of newer products like TRIESENCE, and any delays in market adoption or reimbursement issues could significantly affect revenue targets.
  
• Harrow's current and projected revenue exceedance relies on product performance under assumptions of high demand and effective cost management, creating a risk from any deviation in market conditions, such as increased competition or supply chain disruptions, which could negatively affect net margins and cash flows.

Valuation

• The analysts have a consensus price target of $57.44 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 $65.0, and the most bearish reporting a price target of just $52.2.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $671.0 million, earnings will come to $198.8 million, and it would be trading on a PE ratio of 12.8x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of $25.83, the analyst price target of $57.44 is 55.0% 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.