BLCO - Harrow: The Bull Thesis Is On Track But Short-Term Challenges Loom

2024-05-02 04:42:01 ET

Summary

• Harrow's long-term bull thesis is stronger than ever, but there may be a credible short-term bear thesis.
• The short-term bear thesis is the result of the Change Healthcare cyberattack, which has crippled reimbursement and caused huge financial headaches for healthcare providers.
• Harrow will definitely miss Q1 2024 earnings estimates as a result. Although the cyberattack is widely known, sell side estimates have not been updated to reflect the impact.
• This needs to be weighed against the swath of good news Harrow is experiencing, with every development other than the cyberattack turning out better than expected.

Harrow, Inc. ( HROW ) has built a best-of-breed business in a small niche. Their legacy compounding business, ImprimisRx, has grown rapidly to become the largest ophthalmic compounding pharmacy in the US in only 9 years. Roughly 35% of compounded ophthalmic pharmaceuticals in the US are sold by Imprimis, a market share that dwarfs competitors. Customers are very satisfied, with net promoter scores in the 80s and 90s in recent years.

In a bold move, Harrow pivoted in 2023 into the much larger FDA approved branded pharmaceutical product [BPP] market and is using its impressive distribution and large customer base to sell BPPs to the same customer base it already sells its compounded products to. The shift includes a number of smaller drugs and 4 major drugs. Two of these major BPPs, Iheezo and Vevye, have now been launched, and the results so far are impressive. The long-term future of HROW seems very bright....

For further details see: