Harrow, Inc. (HROW) - Q2 2026 10-Q Summary
Business Context and Reporting Period
Harrow, Inc. is a leading eyecare pharmaceutical company focused on the discovery, development, and commercialization of ophthalmic products in the U.S. market. The company operates two primary segments: Branded (FDA-approved ophthalmic products) and Compounding (ImprimisRx). This report covers the quarterly period ended June 30, 2026.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Total Revenues | $70.7M | $63.7M | $114.9M | $111.6M |
| Gross Profit | $50.4M | $47.5M | $77.4M | $79.8M |
| Operating Loss | $(11.0M) | $11.4M (Income) | $(33.1M) | $0.2M (Income) |
| Net Loss | $(17.3M) | $5.0M (Income) | $(44.9M) | $(12.8M) |
| Cash & Equivalents | $83.9M | $53.0M | $83.9M | $53.0M |
| Total Debt (Notes Payable) | $292.4M | $243.2M | $292.4M | $243.2M |
Segment Performance (Q2 2026): Branded revenue was $56.1M (up 33% YoY), while Compounding revenue was $14.6M (down 32% YoY). The Branded segment reported a contribution loss of $1.2M, while the Compounding segment reported a contribution profit of $0.3M.
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 11% in Q2 and 3% YTD, driven primarily by strong volume growth in the VEVYE product line (up 58% in Q2) and other branded products. This offset a decline in IHEEZO revenue (down 15% in Q2) and a significant drop in Compounding revenue due to lower volumes and the discontinuation of the Klarity-C formulation.
- Profitability Decline: The company swung from a net income of $5.0M in Q2 2025 to a net loss of $17.3M in Q2 2026. This was driven by a $20.1M increase in Selling, General, and Administrative (SG&A) expenses and a $5.2M increase in R&D expenses.
- Expense Increases: SG&A rose due to increased headcount in sales, marketing, and compliance, as well as higher stock-based compensation. R&D expenses surged due to clinical trials for the Melt Pharmaceuticals drug candidate acquired in late 2025.
- Debt Expansion: In March 2026, the company issued an additional $50M in 8.625% Senior Notes due 2030, increasing total principal debt to $300M. Net proceeds were approximately $48.4M.
Outlook, Risks, and Unusual Items
- Subsequent Acquisition: In August 2026, Harrow agreed to acquire global rights to TYRVAYA (varenicline nasal spray) from Viatris for $30M in cash at closing, plus up to $70M in contingent milestones. The company expects to fund this from cash on hand.
- Liquidity: Management believes current cash of $83.9M is sufficient to sustain operations for at least the next 12 months. The company has a $40M revolving line of credit (undrawn as of June 30, 2026).
- Legal Contingency: The company holds a $11.2M judgment against Ocular Science, Inc. (OSRX) following a 2024 jury verdict. However, due to an ongoing appeal by OSRX, no collection has been recognized, and the company has not recorded the receivable.
- Risk Factors: Key risks include reimbursement pressures from government and commercial payors, potential "most-favored-nation" pricing policies, and the uncertainty of collecting the OSRX judgment. The company also faces regulatory risks regarding its compounding operations.
Investor Verification Checklist
- TYRVAYA Acquisition Funding: Verify the impact of the $30M cash outflow on liquidity and the timeline for closing the transaction.
- OSRX Judgment Collection: Monitor the status of the OSRX appeal and the probability of collecting the $11.2M judgment.
- Compounding Segment Trajectory: Assess whether the decline in compounding revenue is a temporary volume fluctuation or a structural shift following the Klarity-C discontinuation.
- Expense Run Rate: Evaluate if the elevated SG&A and R&D spend levels are sustainable given the current revenue mix and operating loss.
- Debt Service: Confirm the company's ability to service the $300M debt load (8.625% interest) as it transitions from profitability to losses.