HARROW, INC. 10-Q

Item 1A. Risk Factors In addition to the other information contained in this Quarterly Report you should consider the risk factors and the other information in our Annual Report on Form 10-K for the year ended December 31, 2021, including our audited financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any such risks actually occur, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock would likely decline and you may lose all or part of your investments. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. There are many competitive risks related to marketing and selling our proprietary formulations and operating our compounding pharmacy business. The pharmaceutical and pharmacy industries are highly competitive. We compete against branded drug companies, generic drug companies, outsourcing facilities and other compounding pharmacies. We are significantly smaller than some of our competitors. Currently we lack some of the financial and other resources needed to develop, produce, distribute and market our proprietary formulations at a level to capture a significant market share in these sectors. The drug products available through branded and generic drug companies with which our formulations compete have been approved for marketing and sale by the FDA and are required to be manufactured in facilities compliant with cGMP standards. Although we prepare our compounded formulations in accordance with the standards provided by the United States Pharmacopeia (“USP”) chapters <795> and <797> and applicable state and federal law, our proprietary compounded formulations are not required to be, and have not been, approved for marketing and sale by the FDA. As a result, some physicians may be unwilling to prescribe, and some patients may be unwilling to use, our formulations. Additionally, under federal and state laws applicable to our current compounding pharmacy operations, we are not permitted to prepare significant amounts of a specific formulation in advance of a prescription, compound quantities for office use or utilize a wholesaler for distribution of our formulations; instead, our compounded formulations must be prepared and dispensed in connection with a physician prescription for an individually identified patient. Pharmaceutical companies, on the other hand, are able to sell their FDA-approved products to large pharmaceutical wholesalers, which can in turn sell to and supply hospitals and retail pharmacies. Even if we are successful in registering certain of our facilities as outsourcing facilities, our business may not be scalable on the scope available to our competitors that produce FDA-approved drugs, which may limit our potential for profitable operations. These facets of our operations may subject our business to limitations our competitors with FDA-approved drugs may not face. In November 2022, USP published finalized revisions to USP chapters <795> and <797>, which had been previously proposed for public comment in September 2021. The revisions include limitations on beyond use dating of sterile and preservative-free products and batch sizes, among other changes. USP expects the published revisions to become effective November 1, 2023, however, regulatory bodies such as state boards of pharmacy may adopt these changes at that time, or on different dates, on a case-by-case basis. While USP has no role in enforcement, we believe the revisions to USP chapter <797> in particular will likely cause two changes to our business, which in the aggregate should have a neutral to positive revenue impact on Harrow: (i) we expect a reduction in revenues generated from sales of formulations compounded by our 503A pharmacy, and (ii) we expect an increase in revenues from sales of formulations compounded in our 503B facility. Further, we believe the changes to USP chapter <797> will likely cause a reduction in the ability of local 503A pharmacies to produce compounded formulations to serve local markets, and that these changes in policy affecting sterile compounded formulations, if adopted by the various states, may increase demand for compounded formulations from larger vendors such as Harrow and cause further consolidation in the market for compounded formulations as smaller 503A pharmacies see a reduction in revenues from certain segments of their formularies affected by these changes. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. 33 Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Mine Safety Disclosures Not applicable.