Three Small Caps I’m Watching (Part 1/3): Harrow, Inc.

Jul 31, 2025

The initial plan was to write a single article with an overview of three small-cap stocks I've been watching, allowing you to choose which one to dive deeper into.

However, I quickly realized I have a hard time keeping overviews short.

After asking my subscribers for feedback, I decided to change course and write a separate article for each company, offering a more in-depth analysis (but not as deep as usual).

At the end, I’ll run a poll for paid subscribers to see which one I should explore further.

The first one is Harrow, Inc. (HROW).

Introduction

Harrow, Inc. (HROW) is a U.S.-based, founder-led pharmaceutical company specializing in ophthalmology. Originally established as a compounding pharmacy, Harrow has evolved into a diversified eyecare platform through strategic acquisitions and partnerships. The company now operates a hybrid business model that includes FDA-approved branded pharmaceuticals, high-quality compounded formulations (via its ImprimisRx brand), and equity stakes in emerging ophthalmic innovators.

At the center of Harrow’s portfolio is VEVYE, the company’s most valuable branded asset. Approved by the FDA for the treatment of dry eye disease, VEVYE is the first and only cyclosporine ophthalmic solution formulated with a non-aqueous vehicle, enabling improved ocular absorption and tolerability. With dry eye disease affecting tens of millions of Americans and growing as one of the largest therapeutic areas in ophthalmology, VEVYE positions Harrow at the forefront of this expanding market.

Complementing VEVYE are other important assets, including IHEEZO, a topical ocular anesthetic; TRIESENCE, a preservative-free intraocular corticosteroid, and a portfolio of other specialty products. Most recently, Harrow acquired U.S. rights to BYQLOVI, a next-generation ophthalmic steroid, and two biosimilars for retinal diseases, BYOOVIZ and OPUVIZ, marking its entry into the high-value retina and surgical segments.

Backed by a growing commercial infrastructure and a broad product lineup addressing both front- and back-of-the-eye conditions, Harrow is positioned as a full-spectrum ophthalmic pharmaceutical company.

Business Model

Harrow operates a multi-channel ophthalmic pharmaceutical platform designed to address the needs of both physicians and patients across the U.S. eyecare landscape.

1. Branded Pharmaceuticals

Harrow’s product portfolio is purposefully designed to address the full anatomy of the eye, spanning the ocular surface, anterior segment, and posterior segment. This diversified lineup allows Harrow to serve a broad spectrum of ophthalmic needs, from routine care to advanced surgical interventions.

Ocular Surface

The ocular surface portfolio includes therapies for dry eye disease, inflammation, infection, allergy, and lubrication. These are foundational to daily eyecare practice and often address chronic or recurring conditions:

VEVYE (cyclosporine ophthalmic solution 0.1%) – Harrow’s flagship and most valuable asset, indicated for dry eye disease.
IHEEZO – A groundbreaking ophthalmic anesthetic gel (chloroprocaine 3%) that enables needle-free anesthesia during cataract surgery.
Verkazia – Cyclosporine emulsion for vernal keratoconjunctivitis, a rare allergic eye condition.
ZERVIATE – A topical antihistamine targeting allergic conjunctivitis.
FRESHKOTE – A preservative-free lubricant drop for dry eye relief.
TobraDex ST – A combination of tobramycin and dexamethasone for inflammation and infection.
Vigamox and Moxeza – Moxifloxacin-based antibiotics for bacterial conjunctivitis.
Maxitrol – A triple-combination antibiotic and steroid.
Maxidex, Flarex – Steroidal agents used for ocular inflammation.
Natacyn – The only FDA-approved antifungal for ophthalmic use.

This segment forms the bedrock of Harrow’s relationships with eyecare professionals, delivering reliable, everyday solutions for high-volume clinical scenarios.

Anterior Segment

Anterior segment products are used in and around the front part of the eye, commonly for cataract, glaucoma, and refractive procedures:

IOPIDINE – An alpha-adrenergic agonist used to manage intraocular pressure.
ILEVRO and Nevanac – Nepafenac-based nonsteroidal anti-inflammatory drugs (NSAIDs) used for post-operative inflammation and pain.

These products serve critical intraoperative and postoperative roles, helping Harrow expand its influence within surgical practices and ambulatory surgery centers.

Posterior Segment

The posterior segment includes the retina and vitreous, where specialized treatments are required for conditions like uveitis and retinal surgery:

TRIESENCE (triamcinolone acetonide injectable suspension 40 mg/mL) – A preservative-free corticosteroid used for posterior uveitis and as a surgical aid in vitrectomy procedures.

TRIESENCE represents Harrow’s growing presence in retina care, a high-value, specialty-driven market segment benefiting from recent reimbursement enhancements and expanded physician adoption.

Recent Portfolio Additions

First, Harrow acquired exclusive U.S. commercial rights to BYQLOVI, approved by the FDA in March 2024 for post‑operative inflammation and pain following eye surgery. This marks the first new ophthalmic steroid launched in over 15 years. Harrow expects to launch BYQLOVI in the fourth quarter of 2025, targeting a market exceeding 7 million surgeries annually. The product leverages Formosa Pharmaceuticals' APNT nanoparticle suspension technology, which supports consistent dosing and minimizes particle settling. Clinical studies show high efficacy, 77% to 85% patient-reported no pain by day 4 and 82% to 87% by day 8 post‑surgery, and low incidence (1.4%) of intraocular pressure elevation.

Secondly, in July 2025, Harrow entered into a commercialization agreement with Samsung Bioepis, gaining exclusive U.S. rights to two retinal disease biosimilars: BYOOVIZ and OPUVIZ. These FDA-approved biosimilars address key indications such as wet age‑related macular degeneration, diabetic macular edema, and retinal vein occlusion. The agreement becomes effective once Samsung Bioepis completes the transfer of rights from Biogen, expected by year-end 2025.

These transactions represent a strategic shift, positioning Harrow as a full‑spectrum ophthalmic pharmaceutical company. BYQLOVI expands the company’s footprint in post-surgical care, while the retina biosimilars give it entry into the high-value Medicare Part B segment dominated by anti‑VEGF therapies. These therapies represent substantial cost drivers under Medicare, where biosimilars can deliver lower-cost alternatives and potentially improve reimbursement and payer uptake.

Financially, these additions offer diversification of revenue streams and scale expansion into larger ophthalmology markets. If executed successfully, they can significantly accelerate top-line growth, enhance cash flow, and amplify Harrow’s commercial presence in both surgical and retina channels. However, integration challenges, such as building a dedicated sales infrastructure and competing with established branded therapies (e.g., Eylea, Lucentis, Vabysmo, and compounded Avastin), will test execution. Effective payer contracting and physician adoption will be critical to capturing value from these newly acquired assets.

In Q1 2025, the Branded Pharmaceuticals segment accounted for 58% of total revenue, up from just 40% a year earlier. Revenue for this segment grew by 100% YoY.

Intellectual Property

As of March 1, 2025, the company owns or licenses over 50 patents (issued and pending) across the U.S. and internationally. These patents help protect its drug formulations and technologies. The company plans to continue strengthening its IP by filing more patents in the U.S. and other key markets.

Some of Harrow’s core products, like IHEEZO and TRIESENCE, have patent protection extending into 2038–2039. Others, like ILEVRO and VEVYE, face earlier expirations (2029–2030), which may open the door to generic competition unless new protections are secured.

Strong and lasting IP is critical for Harrow to maintain pricing power, cash flow, and leverage in payer negotiations.

2. ImprimisRx

ImprimisRx is Harrow’s ophthalmology-focused compounding pharmacy business, founded in 2014 to address unmet clinical needs not served by FDA-approved drugs. It offers a broad portfolio of over 30 customizable formulations, including preservative-free options and multi-drug combinations, tailored to support post-surgical recovery, inflammation, dry eye, and other conditions.

ImprimisRx operates from two facilities in New Jersey:

A 503A pharmacy for individualized, patient-specific prescriptions, and
A 503B FDA-registered outsourcing facility for producing sterile medications for in-office use.

Its direct cash-pay model minimizes reliance on wholesalers, PBMs, or insurance reimbursement, allowing for simpler transactions and more predictable pricing for providers and patients alike. With a base of over 10,000 eyecare prescribers, it remains one of the most trusted names in ophthalmic compounding.

In 2025, Harrow launched Project Beagle, a strategic initiative to transition high-volume compounded drugs into FDA-approved branded alternatives: starting with Klarity-C patients being shifted to VEVYE through the VEVYE Access for All (VAFA) program.

While ImprimisRx remains an important asset, it’s not the company’s growth engine. That role clearly belongs to Harrow’s branded pharmaceutical segment.

In Q1 2025, ImprimisRx accounted for 42% of total revenue, down from 60% a year earlier. Revenue for this segment declined by 3.3%, reflecting the impact of recent Project Beagle transition efforts.

3. Equity Holdings

Harrow has extended its business model through targeted investments in complementary clinical-stage companies, gaining pipeline exposure without overcommitting internal resources.

Melt Pharmaceuticals: Harrow holds a ~45% stake in this former subsidiary, which is developing MELT-300, a sublingual, non-opioid sedation candidate for short-duration medical procedures. Following a successful Phase 3 trial in late 2024, Melt plans to file an NDA in early 2026, with potential FDA approval by 2027. Harrow also holds royalty rights and a right of first refusal for U.S. commercialization.
Surface Ophthalmics: Harrow owns a 20% equity stake in Surface and holds royalty rights on three late-stage product candidates: SURF-100, SURF-200, and SURF-201. These programs target dry eye, ocular pain, and allergic conjunctivitis, giving Harrow long-term exposure to novel ocular surface therapies without the risk burden of early R&D.

Sales and Marketing: Harrow focuses its sales efforts primarily in the U.S., targeting healthcare professionals, surgery centers, hospitals, and health systems. It is also exploring international opportunities through distributors and out-licensing, including in Canada. Sales growth is expected from recent product launches and expanded marketing campaigns, though success will depend on factors such as market size, competition, pricing, and sales execution. The company plans to continue scaling its commercial infrastructure as part of its growth strategy.

Supply Chain: All ImprimisRx compounded products are manufactured in-house in New Jersey, while branded pharmaceutical products are outsourced to third-party manufacturers in countries including the U.S., France, and Belgium.

Tariffs: Harrow expects minimal impact from tariffs. A recent analysis estimated just a 0.52% hit to gross margins if proposed tariffs (as of April 2^nd) had been in effect in 2024, 0.11% from branded products and 0.41% from compounded products. The impact is expected to be even lower in 2025 due to higher branded product sales and lower-tariff sourcing for ImprimisRx.

Key Growth Drivers: VEVYE, IHEEZO, and TRIESENCE

Among Harrow’s broad ophthalmic portfolio, three branded products stand out as the company’s most strategically important growth drivers: VEVYE, IHEEZO, and TRIESENCE.

VEVYE

Launched in January 2024, VEVYE has quickly emerged as Harrow’s most valuable asset. VEVYE is the first and only FDA-approved cyclosporine-based treatment formulated without water, using a non-aqueous vehicle that enhances absorption and reduces ocular irritation in dry eye patients.

The product’s momentum has been extraordinary:

Q1 2025 revenue hit $21.5M, up 35% QoQ.
According to IQVIA, as of early Q2 2025, VEVYE ranks #1 in per-prescriber volume among all branded dry eye medications.
Harrow’s VEVYE Access for All (VAFA) program, launched in March 2025, removed prior authorization barriers, resulting in a 4x increase in weekly new prescriptions and prescribers within just seven weeks.
The average covered patient received 9 bottles per year, reflecting VEVYE’s chronic-use potential and high refill stability.

Harrow has begun standing up a second manufacturing site to meet rising demand and ensure uninterrupted supply, another indicator of the brand’s trajectory toward becoming the company’s first 9-figure annual revenue product.

A quick look at user reviews makes it clear that this product outperforms its competitors.

IHEEZO

Launched in May 2023, IHEEZO offers a needle-free alternative for ocular anesthesia during cataract and other anterior segment surgeries. Its differentiated delivery mechanism and efficacy have driven increasing adoption in both hospital and ASC settings.

In Q1 2025, IHEEZO generated $5.2M in revenue, up from $2.3M in Q1 2024, a 124% YoY increase.
Harrow adds approximately 30 new IHEEZO accounts per quarter, with the top 10 accounts alone representing a projected 80,000 annual units.
In April 2025, IHEEZO sales more than doubled versus the monthly average in Q1, signaling a rebound in demand as downstream inventory levels normalized.
Growth is supported by streamlined distribution, Group Purchasing Organization agreements, and Harrow Cares (a platform designed to ease onboarding and reimbursement for practices).

IHEEZO is a foundational buy-and-bill asset for Harrow, capturing volume in high-frequency ophthalmic procedures while maintaining favorable pricing and account retention.

TRIESENCE

TRIESENCE was re-launched in October 2024, and quickly regained relevance in posterior segment care, particularly for posterior uveitis and vitrectomy procedures. Its preservative-free formulation and re-established market access have made it a compelling choice for retina specialists.

In April 2025, TRIESENCE received transitional pass-through status and a product-specific J-code (J-3300), making it reimbursable in both ASC and hospital outpatient settings.
Since the reimbursement update, the number of ordering accounts has more than doubled, unlocking access to approximately 40% more of the market.
Adoption has accelerated with the support of the Harrow Cares platform and successful onboarding of five of the largest private equity-owned retina groups in the U.S.

TRIESENCE is expected to be one of Harrow’s top three revenue-generating products in 2025, as account wins and market access improvements drive significant volume growth in the back-of-eye space.

If Harrow captures even a modest share of the $20B+ U.S. ophthalmology drug market, it could emerge as a $1B+ revenue company over the next five years, with a margin profile that becomes more attractive each year.

Numbers

Harrow’s financial trajectory reflects a company entering a new phase of scalable, profitable growth. The topline has expanded rapidly, from just $48.9M in 2020 to $199.6M in 2024, representing a 42% CAGR. For 2025, management has guided to at least $280M in revenue (>40% YoY growth), with analysts expecting another ~40% growth in 2026.

With Branded Pharmaceuticals accounting for a growing share of revenue and expanding at a triple-digit rate, I believe this is achievable.

Gross margins have remained strong and stable, ranging from 68% to 74% over the past several years, reflecting the growing mix of high-margin branded products in the portfolio.

Adj. EBITDA margins improved from 11.7% in 2020 to 20.2% in 2024. By 2026, analysts expect margins to exceed 35%, as the company continues to benefit from operating leverage. This trend is likely to accelerate further in 2027 as scale increases and product launches mature.

Perhaps most importantly, Harrow is at an inflection point in terms of both GAAP Net Income and FCF. After years of reinvestment and cash burn to support aggressive growth, the company is now expected to achieve profitability on both fronts in 2025, marking a significant shift in its profile.

This setup, transitioning from cash-burning growth to profitable scale, is often a key catalyst for valuation re-rating.

Balance Sheet could be better but will improve soon:

While Harrow’s $222.75M debt load is not insignificant, the company is actively pursuing a refinancing. In the latest shareholder letter, management confirmed ongoing discussions with current lenders and new institutions, with plans to finalize a transaction by late summer or early fall 2025. The goal: a lower cost of capital, greater financial flexibility, and a stronger foundation for future growth.

Encouragingly, Harrow's move into GAAP profitability, combined with improving FCF, should enhance its credit profile, likely contributing to much more favorable conditions than it had before.

A recent example is PGY, the latest addition to my portfolio, which successfully restructured its capital at favorable terms following its own inflection to profitability. Harrow appears well-positioned to follow a similar path.

Valuation

As this article is intended to be a high-level overview of the company rather than a deep dive, I won’t be building a full valuation model.

That said, HROW looks very attractively valued, IMO.

The company is at an inflection point: transitioning to GAAP Net Income profitability while maintaining strong top-line growth. In 2025, Harrow is expected to grow revenue by over 40%, with a similar pace likely in 2026 (and room to continue). Despite this rapid growth, the stock trades at less than 9x Forward EBITDA 2026 (based on analysts’ estimates), a multiple that appears discounted given the company’s profile.

Importantly, Harrow is poised to benefit from even stronger operating leverage beginning in 2027, as its commercial infrastructure scales, high-margin branded products dominate the revenue mix, and R&D or integration costs normalize. This dynamic suggests that earnings growth will outpace revenue growth, compressing valuation multiples even further over the next few years.

As I always say: if a business requires a full DCF to justify its value, it likely isn't cheap enough. In Harrow’s case, the upside appears evident without complex modeling. The company's growth, improving profitability, and discounted multiple offer a compelling setup for at least the upcoming years.

Main Risks

While Harrow’s branded portfolio is growing quickly and profitability is improving, several risks could impact its long-term outlook:

1. Regulatory & Reimbursement Risk

Harrow’s branded drugs, such as VEVYE, IHEEZO, and TRIESENCE, rely heavily on Medicare and commercial payor reimbursement. Products currently benefiting from pass-through status may face reimbursement compression once that status expires. In addition, broader policies tied to the Inflation Reduction Act (IRA), 340B expansion, and ASP-based price limits could erode margins.

Political changes could also intensify pricing pressure. With President Trump focused on reducing drug costs, Harrow may face headwinds. Policies such as drug price caps, reference pricing, or accelerated generic/biosimilar pathways could directly impact the company’s pricing power and profitability.

2. Commercial Execution

Harrow’s recent expansion into retina and biosimilars adds new layers of operational complexity. Execution missteps, whether in market access, salesforce scaling, or supply chain readiness, could limit uptake of key new products like BYQLOVI or BYOOVIZ.

More broadly, Harrow operates in a highly competitive ophthalmic market, facing pressure from large pharmaceutical companies, generics, biosimilars, and other specialty players. Competitors often have greater resources, established physician relationships, and preferred formulary positions, all of which could challenge Harrow’s ability to sustain momentum across its full branded portfolio.

3. Competition and IP Durability

The branded ophthalmology space is competitive, and several of Harrow’s assets face patent expirations by 2029–2030 (e.g., ILEVRO, VEVYE). Without successful IP extensions or follow-on formulations, exposure to generics or biosimilars will grow. Larger competitors may also outpace Harrow in R&D or payer contracting.

These are just what I consider to be three of the most important fundamental risks. If I end up doing a deeper dive on the company, I will certainly include more.

Conclusion

Harrow, Inc. (HROW) looks like a compelling opportunity at first glance. Despite operating in a complex and highly regulated space, the business itself is not particularly difficult to understand, especially once you separate the stable compounding segment from the fast-growing branded pharmaceutical business.

The setup here is powerful: rapid top-line growth (with room to continue), expanding margins, a clear path to sustainable GAAP profitability, and a very attractive valuation. As branded products continue to scale and operating leverage accelerates post-2025, Harrow could be poised for a meaningful re-rating.

I’ve already begun drafting articles on the other two small caps I’m following, but so far, HROW is the name I’m most excited about. I’ve actually tracked the stock since it was trading in the $17s last year, but I removed it from my watchlist after missing the run to nearly $60. Revisiting the story now, I think the current price might be a good one.

I’ll definitely be keeping it on my radar.

That's it! Thank you so much for reading.

Disclaimer: As of this writing, M. V. Cunha does NOT hold a position in Harrow, Inc.