Harrow Health, a name synonymous with innovation in the ophthalmic pharmaceutical industry, has once again delivered a compelling earnings call. Analysts are buzzing about the company's impressive revenue growth, its robust product portfolio, and the promising launch of its dry eye treatment, VEVYE. But buried within the transcript of Harrow's Q4 2023 call lies a seemingly innocuous detail, a detail with the potential to unleash a tidal wave of growth and redefine the company's future. This detail, my friends, is the 800-pound gorilla in the room: the confirmation from the Centers for Medicare & Medicaid Services (CMS) that IHEEZO, Harrow's groundbreaking topical anesthetic gel, will now be separately payable in physician's offices.

Why is this such a big deal? To understand the seismic shift this CMS confirmation represents, we need to first delve into the unique attributes of IHEEZO and the intricate world of ophthalmic anesthesia. IHEEZO, a low-viscosity chloroprocaine hydrochloride ophthalmic gel, is the only J-coded, or reimbursable, ophthalmic anesthetic in the U.S. market. This alone gives it a significant edge in a market dominated by older, less user-friendly anesthetics. But IHEEZO isn't just about reimbursement; it's about patient comfort and physician preference. Its rapid onset and short duration of action make it ideal for a range of ophthalmic procedures, from routine eye exams to complex surgical interventions.

However, until the recent CMS confirmation, IHEEZO's reimbursement was limited to surgical settings and subject to a temporary pass-through period. This significantly restricted its use in physician's offices, where a vast majority of ophthalmic procedures, particularly intravitreal injections for retinal diseases, are performed. Imagine a world-class athlete forced to compete with one hand tied behind their back. That was IHEEZO's reality until CMS unleashed its full potential.

"Mark Baum, Harrow's CEO, didn't mince words during the Q4 2023 earnings call, stating: "The confirmation from CMS that, in fact, IHEEZO will be paid for separately in the physician's office setting is, without a question, the most positive consequential event, I think, that has happened to our company since I founded it with Andrew back in 2011.""

Now, with the shackles of reimbursement limitations removed, IHEEZO has access to the lucrative and rapidly growing market of intravitreal injections, exceeding a staggering 10 million unit opportunities per year. This isn't just conjecture; Harrow has already witnessed organic demand from retina specialists eager to adopt IHEEZO for both unilateral and bilateral procedures. The ability to bill separately for two units instead of one for bilateral procedures further sweetens the deal, making IHEEZO an irresistible proposition for physicians and a potential cash cow for Harrow.

Projected IHEEZO Revenue Growth

The following chart is a hypothetical representation of IHEEZO's projected revenue growth, showcasing the impact of the CMS confirmation.

Let's crunch some numbers. Harrow's current revenue guidance for 2024 stands at "better than $180 million." While the company doesn't break down revenue by product, it's safe to assume that the CMS confirmation for IHEEZO, coming as a "very, very positive surprise," played a significant role in bolstering their confidence in exceeding that guidance. Consider this: the intravitreal injection market represents a potential multi-hundred-million-dollar opportunity for IHEEZO alone. Even capturing a fraction of that market could propel Harrow's revenue significantly beyond the $180 million mark.

The impact goes beyond revenue. This CMS confirmation also mitigates a key risk factor highlighted in Harrow's Form 10-K filing: the potential issuance of warrants to Oaktree, their senior lender, if the leverage ratio exceeds five times in 2024. With IHEEZO poised for explosive growth, Harrow's leverage ratio is likely to remain well below the warrant trigger, further strengthening the company's financial position.

"Fun Facts"

Harrow's cash pile grew from $65.61 million in Q3 2023 to $74.08 million in Q4 2023 - an increase of over 12% in just three months. The US Patent and Trademark Office recently granted IHEEZO a new set of patent claims with an expiration date of 2039, providing long-term market exclusivity for this groundbreaking anesthetic.