Harrow (HROW) Q3 2026 earnings review
Harrow's branded eye drugs set records, but profit plans halve
Harrow, the North American eye-care drug company, posted record quarterly sales on strong demand for its branded drops and injections, but heavy spending forced a deep cut to its full-year profit target. Revenue climbed 39% from a year ago to $99 million as VEVYE dry eye sales grew faster than prescription volume after September pricing changes. Even so, chief executive Mark Baum cut the full-year Adjusted EBITDA outlook from $80–100 million to a floor of $40 million, and kept a revenue plan that by our math requires a 44% jump in the fourth quarter.
| Revenue | $99.3M +39% from a year ago, +41% from last quarter |
|---|---|
| Branded product revenue | $83.5M +62% from a year ago (84% of total sales) |
| Adjusted EBITDA | $21.2M -7% from a year ago |
| Full-year Adjusted EBITDA outlook | Cut to >$40M prior plan: $80M to $100M |
⚖️ Verdict: 🔴 Bearish
The story got worse because record prescription demand failed to deliver the second-half profit recovery management promised all year. While September rule changes started fixing VEVYE's price per prescription and the G-MELT sedation filing moved up to late 2026, clinical trial bills, a doubled sales force and unpaid customer receivables consumed the extra revenue and drained operating cash.
The question now is whether fourth-quarter sales can jump enough to hit the $350 million revenue floor and start turning paper profits into cash. Either peak seasonal demand for IHEEZO and the first quarter of TYRVAYA nasal spray sales carry Harrow across the line, or distributor order timing leaves full-year sales short for a second straight year. Fourth-quarter results and cash collections in early 2027 will settle it.
🐂 Bull Case
VEVYE Sales Rules Lift Price per Prescription
VEVYE, Harrow's water-free cyclosporine drop for dry eye disease, is the group's largest product. Earlier this year, too many patients filled prescriptions through low-price cash channels rather than insurance, which hurt average prices. Chief executive Mark Baum changed the programme rules in early September and said that "Since making these changes, net revenue per VEVYE prescription is improving in line with our internal expectations".
The numbers back him up because revenue grew twice as fast as prescription volume from last quarter. Sales jumped 35% from the second quarter to a record $39.7 million, while total prescriptions rose 17% after the eye-care company more than doubled its dry eye sales force. Eye doctors sent in more insurance approvals in September, especially for Medicare patients, and Harrow signed a national health plan covering more than 10 million people starting in January 2027.
What to watch: fourth-quarter VEVYE revenue growth relative to prescription growth. If revenue keeps outpacing volume as October refills stack up, the pricing fix is holding even before the new insurance plan begins in January.
IHEEZO and TRIESENCE Scale Across Eye Clinics
Harrow sells two main drugs that doctors administer in their clinics: IHEEZO, a numbing eye gel, and TRIESENCE, a preservative-free steroid injection for eye inflammation. Earlier this year, distributors burned through extra IHEEZO inventory, so Harrow's reported sales lagged behind actual clinic orders. This quarter, distributor shipments caught up with clinic demand and a July price increase took effect.
- IHEEZO revenue: $25.3 million, up 62% from last quarter and 15% from a year ago
- IHEEZO clinic demand: 62,210 units, up 21% from a year ago and about $407 of revenue per unit by our math
- TRIESENCE revenue: a record $10.7 million, nearly triple last year's $3.7 million
- TRIESENCE clinic demand: 20,022 units, up 37% from last quarter and 110% from a year ago
What to watch: fourth-quarter IHEEZO unit demand against last year's record 62,814 units. Because the fourth quarter is the busiest season for eye procedures, a new unit record will confirm that retina clinics have replaced lost surgical volume.
G-MELT Sedation Filing Moved Into This Year
G-MELT is Harrow's experimental tablet that dissolves under the tongue to sedate cataract surgery patients without intravenous lines or opioids. Management previously planned to submit its application to the Food and Drug Administration in the first half of 2027. After meeting with the regulator this autumn, Baum pulled the filing forward to November or December 2026.
Filing this year moves the regulator's application fee into fourth-quarter expenses, which hurts near-term profit, but it pulls potential approval into late 2027 ahead of a planned 2028 launch. What to watch: confirmation that the FDA accepts the G-MELT application early in 2027, which starts the standard review clock toward a fourth-quarter 2027 decision.
🐻 Bear Case
Operating Profit Outlook Cut by More Than Half
For three quarters, Harrow stood by its full-year target of $80 million to $100 million in Adjusted EBITDA, a measure of operating profit before interest, taxes, depreciation, stock pay and one-off items. Even after a loss in the first half, management said second-half sales would cover the gap. Today Baum dropped that target to a floor of "more than $40 million".
Baum said "our updated Adjusted EBITDA outlook reflects both the first half operating shortfall against our original plan and additional spending to accelerate our G-MELT NDA submission, advance important development programs, and integrate TYRVAYA". Even with record sales this quarter, Baum admitted that "third quarter profitability came in below our model" as Adjusted EBITDA fell 7% from a year ago to $21.2 million.
The cost of expanding the sales force and running clinical trials ate up the revenue gains. Selling, general and administrative expenses — sales reps, marketing and overhead — rose by 3.5 percentage points of revenue from a year ago to 53.5%. Research and development spending more than tripled to $10.3 million, rising 5.7 percentage points to 10.4% of revenue. What to watch: fourth-quarter Adjusted EBITDA against the $33 million floor, which will show whether new sales finally outpace the expanded cost base.
Keeping the Sales Plan Needs a 44% Jump
Baum kept the full-year revenue forecast at $350 million to $365 million and said "The third quarter delivered the second-half acceleration we anticipated". With $214.2 million booked in the first nine months, hitting that range requires $135.8 million to $150.8 million in the fourth quarter, or 44% growth from the third quarter at the middle of the range.
Over the past two years, fourth-quarter sales grew by an average of 30% from the third quarter. Harrow counts on two new products to bridge the extra gap: TYRVAYA, a dry eye nasal spray acquired from Viatris on October 1, and BYOOVIZ, a retinal injection launched in July that had a "broad, but shallower start than we expected".
Yet Baum warned in his letter that "We also see reasonable scenarios in which we finish modestly below the low end of our revenue range, mostly because of order timing and year-end purchasing", and said 2027 targets will return to an open-ended floor. What to watch: fourth-quarter revenue against the $135.8 million lower bound when full-year results arrive in early 2027.
Unpaid Customer Bills Jump While Operations Burn Cash
Record sales have not turned into cash in the bank because customers are taking a long time to pay their bills. Accounts receivable — money owed by distributors and clinics for products already shipped — rose by $36.7 million in the third quarter to $155.3 million, which is double the $77.6 million balance a year ago and more than one and a half times the quarter's total revenue.
Because cash remained tied up in unpaid bills, Harrow used $8.6 million of cash in its operations during the third quarter by our math, bringing its nine-month operating cash outflow to $27.4 million. Cash on hand ended September at $75.3 million against $292.7 million in debt, right before Harrow paid $30 million upfront for TYRVAYA on October 1. What to watch: accounts receivable and operating cash flow in the fourth quarter to see whether distributors pay down their balances before year-end.
IHEEZO Missed Its Main Goal in Retina Trial
Harrow ran the Phase 4 QUELL trial in 231 patients receiving eye injections to prove that IHEEZO gel numbs the eye as effectively as standard drops plus a lidocaine needle injection. The company reported that "While QUELL did not meet its prespecified primary endpoint of non-inferiority", 55.2% of IHEEZO patients felt no pain or pressure only, compared with 59.7% on the needle regimen.
Because management designed the trial expecting 88% success in both groups, the lower rates left the statistical gap too wide to pass the main test. Patients using IHEEZO did report lower pain over 24 hours and fewer side effects (27% versus 47%), which sales reps will use, but missing the main goal limits formal label claims. What to watch: retina specialist adoption and full trial data at the Hawaiian Eye conference in January 2027.
👓 Other Themes
Four Selling Teams, TYRVAYA Close and HarrowRx
On October 1, Harrow closed its purchase of TYRVAYA nasal spray for $30 million in cash plus up to $70 million in sales milestones, bringing in about 40 sales reps from Viatris. Management reorganised its sales force into four specialized teams — Ocular Surface Disease, Retina, Surgical and Access+ — and on November 1 launched HarrowRx, an electronic portal that routes any Harrow prescription from a doctor's computer to the right pharmacy or distributor.
💲 Other KPIs
Revenue from custom-mixed pharmacy medications fell 21.0% from a year ago, though it ticked up 8.8% from the second quarter. Harrow is intentionally shifting patients from compounded drops to its FDA-approved branded drugs, and compounded products now make up 16% of total revenue, down from 28% a year ago.
Net profit swung from a $17.3 million loss last quarter and $1.0 million a year ago. The result included a one-off $5.0 million legal settlement gain from Ocular Science and OSRX; excluding that gain, net income was $4.8 million by our math.
Gross margin — the share of sales left after the cost of making the drugs and paying royalties — rebounded 4 percentage points from 71% in the second quarter and matched the 75% level from a year ago, as higher-margin branded drugs reached 84% of total sales.
🔮 Guidance
Unchanged. The eye-care group kept its full-year target of about 31% growth at the middle of the range. By our math, that leaves $135.8 million to $150.8 million for the fourth quarter, requiring a 37% to 52% jump from the third quarter and 61% growth from a year ago at the middle of the range, while Baum noted that order timing could leave full-year sales slightly below $350 million.
Cut. Management lowered its full-year operating profit target by more than half, moving from an $80 million to $100 million range to a floor of $40 million, down at least 35% from $61.9 million in 2025. The cut reflects first-half losses, lower gross margins, accelerated G-MELT filing fees and clinical trials, and TYRVAYA integration costs.
New. The fourth-quarter floor calls for at least $33 million in Adjusted EBITDA, up from $21.2 million in the third quarter and $24.2 million in the fourth quarter of 2025. By our math, a $33 million floor against the middle of the fourth-quarter revenue range implies an Adjusted EBITDA margin of about 23%.
❓ Key Questions
Why did unpaid customer bills jump to $155 million?
Accounts receivable rose by $36.7 million this quarter to $155.3 million, causing an $8.6 million operating cash outflow by our math despite $21.2 million in Adjusted EBITDA. Investors need to know the payment terms given to distributors and when those bills will convert to cash.
What was BYOOVIZ revenue in its first full quarter?
Baum acknowledged a third-quarter revenue miss for the BYOOVIZ retinal biosimilar against internal launch targets, but lumped its sales into the $7.6 million 'Other branded products' line. Breaking out BYOOVIZ sales and repeat-order rates is needed to judge the fourth-quarter ramp.
What is TYRVAYA's current quarterly sales run-rate?
Harrow paid $30 million upfront on October 1 for TYRVAYA and relies on its first quarter of sales to help reach the $350 million full-year revenue target, yet management still has not disclosed what the nasal spray earned under Viatris in 2025 or 2026.
Why did the BYQLOVI launch slip to the fourth quarter?
After going unmentioned for two quarters, the BYQLOVI post-surgery steroid drop reappeared on a presentation timeline for a fourth-quarter 2026 launch, two quarters behind the original plan. Management has not explained the delay or how much fourth-quarter revenue it assumes.