What changed in this filing

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Item 1A. Risk Factors

2023-03-23 compared with 2022-03-10 · 878 added, 750 removed, 758 unchanged (68% of the section changed)

Factors Summary

are subject to a variety of risks and uncertainties, including risks related to the COVID-19 pandemic, financial risks, operational risks,

human capital risks, legal proceedings and regulatory risks and certain general risks, which could have a material adverse effect on

our business results of operations, financial condition and prospects.

Risks that we deem material are described under “Risk Factors”

below and include, but are not limited to, the following:

are subject to a variety of risks and uncertainties, including financial risks, operational risks, human capital risks, legal proceedings

and regulatory risks and certain general risks, that could have a material adverse effect on our business results of operations, financial

condition and prospects.

Risks that we deem material are described under “Risk Factors” below and include, but are not limited

to, the following:

Related to Economic Conditions and Operations of Our Business.

ability to achieve and maintain profitability for our business;

ability to successfully market, commercialize, and sell current and future products;

potential adverse impact of health epidemics, including the COVID-19 pandemic;

and maintaining patent or other intellectual property protection for our products and related improvements;

acceptance of our drug products, drug candidates, compounded drugs and pharmacies;

ability to successfully research, develop and timely manufacture our current and future products and drug candidates;

regulations, including, but not limited to, potential changes to USP 797, 503B bulks list and others, that could or currently do

burden operations or narrow the market for our products;

exposure to liabilities and reputation harm if our products give rise to defects, recalls, patient injury or death;

ability to successfully market, commercialize, and sell current, recently acquired and future products;

current indebtedness and ability to access additional capital;

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reliance on third parties for manufacturing certain components, FDA approved drugs and to conduct clinical trials;

exposure to liabilities and reputation harm if our products give rise to defects, recalls, patient injury or death;

potential adverse impact of health epidemics, including the COVID-19 pandemic;

Related to Government Regulations and Third-Party Policies

regulations, including, but not limited to, potential changes to USP 797, 503B bulks list and others, that could or currently do

burden operations or narrow the market for our products;

sales depend on coverage and reimbursement from government and commercial third-party payers, and pricing and reimbursement pressures

have affected, and are likely to continue to affect, our profitability.

adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability.

business may be affected by litigation and government investigations.

Related to Competition

and maintaining patent or other intellectual property protection for our products and related improvements;

acceptance of our drug products, drug candidates, compounded drugs and pharmacies;

ability to successfully research, develop and timely manufacture our current and future products and drug candidates;

ability to enforce protect our intellectual property rights along with the potential of future legal proceedings filed against us

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recruitment, and training of senior management and key personnel;

Related to Product Development, Regulatory Approval, Manufacturing and Commercialization

may not be able to develop commercial products despite significant investments in R&D;

branded products and product candidates in development cannot be sold without regulatory approval;

drug candidates may face competition sooner than we expect;

rely on third parties to manufacture and conduct clinical trials of our branded drug products and product candidates

may not be successful in obtaining market exclusivity for our product candidates;

Related to Our Notes

ability pay the interest and debt service payments associated with the Notes;

Notes are unsecured, effectively subordinated to any secured indebtedness, with limited protection for its holders;’

Notes are subject to various market factors, including market interest rates, trading activity, third-party ratings and other factors

of the price of our common stock;

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financial condition, results of operations and stock price could be materially adversely affected by any of these risks.

Related to Our Business

Related to Economic Conditions and Operations of Our Business.

may not be profitable in the future.

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which would cause our business to suffer.

COVID-19 pandemic has had an adverse effect on our business and results of operations and is expected to continue to have further adverse

effects, which could be material, on our business, results of operations, financial condition, liquidity, and capital investments.

may fail to realize the anticipated benefits of our recent and any future product acquisitions.

success of our product acquisitions will depend on, among other things, our ability to successfully integrate the products into our commercial

platform, transfer the products NDAs, maintain payer reimbursement coverage, maintain an adequate supply of the products, market the

products to our existing customers and re-introduce TRIESENCE to the ophthalmic market.

If we experience difficulties with the implementation

of plans with respect to our acquisitions, the anticipated benefits of the recent or future acquisition may not be realized fully or

at all, or may take longer to realize than expected.

Integration efforts will also divert management’s attention and resources.

These matters could have an adverse effect during any transition period and for an undetermined period after completion of the acquisitions.

may not be able to correctly estimate our future operating expenses, which could lead to cash shortfalls.

estimates of our future operating and capital expenditures are based upon our current business plan, our current operations and our current

expectations regarding the commercialization of our proprietary formulations.

Our projections have varied significantly in the past as

a result of changes to our business model and strategy, our termination of efforts to pursue FDA approval of a drug candidate in November

2013, our acquisitions of compounding facilities and various product and corporate development opportunities since 2014, and the expenses

in developing our pharmacy facilities into outsourcing facilities and registering them as such with the FDA.

We may not accurately estimate

the potential revenues and expenses of our operations.

If we are unable to correctly estimate the amount of cash necessary to fund our

business, we could spend our available financial resources much faster than we expect.

If we do not have sufficient funds to continue

to operate and develop our business, we could be required to seek additional financing earlier than we expect, which may not be available

when needed or at all, or be forced to delay, scale back or eliminate some or all of our proposed operations.

we do not successfully identify and acquire rights to potential formulations and successfully integrate them into our operations, our

growth opportunities may be limited.

plan to pursue the development of new proprietary compounded formulations in the ophthalmology and/or other therapeutic areas, which

may include continued activities to develop and commercialize current assets or, if and as opportunities arise, potential acquisitions

of new intellectual property rights and assets.

We also intend to seek opportunities to FDA approved products and drug candidates.

we expect acquisitions of compounding pharmacies to provide us with only limited research and development support and access to additional

novel compounded formulations.

We have historically relied, and we expect to continue to rely, primarily upon third parties to provide

us with additional development opportunities.

We may seek to enter into acquisition agreements or licensing arrangements to obtain rights

to develop new formulations and FDA approved products in the future, but only if we are able to identify attractive products and formulations

and negotiate acquisition or license agreements on terms acceptable to us, which we may not be able to do.

Moreover, we have limited

resources to acquire additional potential product development assets and integrate them into our business.

Acquisition opportunities

may involve competition among several potential purchasers, which could include large multi-national pharmaceutical companies and other

competitors that have access to greater financial resources than we do.

If we are unable to obtain rights to development and commercial

opportunities from third parties and we are unable to rely upon our compounding pharmacies and current and future relationships with

pharmacists, physicians and other inventors to provide us with additional development opportunities, our growth and prospects could be

product development strategy is to focus on a ophthalmology and eye care related products and formulations in which we believe there

is broad market potential, large unmet needs and/or unique value to physicians and patients and to develop and offer formulations and

products within these therapeutic areas that could afford us with gross and operating margins consistent with our current and historical

However, our expectations and assumptions about market potential and patient needs may prove to be wrong, and we may invest

capital and other resources on products, drug candidates, and formulations that do not generate sufficient revenues for us to recoup

our investment.

may be unable to successfully develop and commercialize our proprietary formulations or any other assets we may acquire.

have acquired assets related to compoundable formulations, drug products and drug candidates.

We are currently pursuing development and

commercialization opportunities with respect to a number of these products, drug candidates and formulations, and we are in the process

of assessing certain of our other assets in order to determine whether to pursue their development or commercialization.

we expect to consider the acquisition of additional intellectual property rights or other assets in the future.

Once we decide to pursue

a potential drug candidate, we develop a commercialization strategy for it, which may include marketing and selling the formulation in

compounded form through compounding pharmacies or outsourcing facilities, or pursuing FDA approval of the drug candidate.

We may incorrectly

assess the risks and benefits of the commercialization options or we may not pursue a commercialization strategy that proves to be successful.

If we are unable to successfully commercialize one or more of our proprietary formulations, drug products and drug candidates, our operating

results would be adversely affected.

Even if we are able to successfully sell one or more proprietary formulations, drug products and

drug candidates, we may never recoup our investment in acquiring or developing the formulations, drug products and drug candidates.

failure to identify and expend our resources and technologies with commercial potential and execute an effective commercialization strategy

for each of our formulations, drug products and drug candidates would negatively impact the long-term profitability of our business.

may need additional capital in order to continue operating our business, and such additional funds may not be available when needed,

on acceptable terms, or at all.

only recently started generating cash from operations, but we do not currently earn sufficient revenues to support our operations.

may need significant additional capital to execute our business plan, execute on future acquisitions and fund our proposed business operations.

Additionally, our plans may change or the estimates of our operating expenses and working capital requirements could be inaccurate, we

may pursue acquisitions of FDA-approved products, drug candidates, pharmacies or other strategic transactions that involve large expenditures,

or we may experience growth more quickly or on a larger scale than we expect, any of which may result in the depletion of capital resources

more rapidly than anticipated and could require us to seek additional financing earlier than we expect to support our operations.

have raised over $200,000,000 in funds through equity and debt financings since 2021.

We may seek to obtain additional capital through

equity or debt financings, funding from corporate partnerships or licensing arrangements, sales of assets or other financing transactions.

If we issue additional equity or convertible debt securities to raise funds, our existing stockholders may experience substantial dilution,

and the newly issued equity or debt securities may have more favorable terms or rights, preferences and privileges senior to those of

our existing stockholders.

If we raise additional funds through collaboration and licensing arrangements or sales of assets, we may have

to relinquish potentially valuable rights to our drug candidates or proprietary technologies, or grant licenses on terms that are not

favorable to us.

If we raise funds by incurring additional debt, we may be required to pay significant interest expenses and our leverage

relative to our earnings or to our equity capitalization may increase.

Obtaining commercial loans, assuming those loans would be available,

would increase our liabilities and future cash commitments and may impose restrictions on our activities, such as the financial and operating

Further, we may incur substantial costs in pursuing future capital and/or financing transactions, including investment banking

fees, legal fees, accounting fees, printing and distribution expenses and other costs.

We may also be required to recognize non-cash

expenses in connection with certain securities we may issue, such as options, convertible notes and warrants, which would adversely impact

our financial results.

have in the past and may in the future participate in strategic transactions that could impact our liquidity, increase our expenses and

distract our management.

time to time, we consider engaging in strategic transactions, such as out-licensing or in-licensing of compounds, drug candidates, drug

products or technologies, acquisitions of companies, and asset purchases.

We may also consider a variety of different business arrangements

in the future, including strategic partnerships, joint ventures, spin-offs, carve-outs, restructurings, divestitures, business combinations

and investments.

In addition, another entity may pursue us or certain of our assets or aspects of our operations as an acquisition target.

Any such transactions may require us to incur expenses specific to the transaction and not incident to our operations, may increase our

near- and long-term expenditures, may pose significant integration challenges, may require us to hire or otherwise engage personnel with

additional expertise, or may result in our selling or licensing of our assets or technologies under terms that may not prove profitable,

any of which could harm our operations and financial results.

Such transactions may also entail numerous other operational and financial

risks, including, among others, exposure to unknown liabilities, disruption of our business and diversion of our management’s time

and attention in order to develop acquired products, drug candidates, technologies or businesses.

part of our efforts to complete any significant transaction, we would need to expend significant resources to conduct business, regulatory,

legal and financial due diligence, with the goal of identifying and evaluating material risks involved in the transaction.

unsuccessful in ascertaining or evaluating all the risks and, as a result, we may not realize the expected benefits of the transaction,

whether due to unidentified risks, integration difficulties, regulatory setbacks or other events.

We may incur material liabilities for

the past activities of any businesses we partner with or acquire.

If any of these events occur, we could be subject to significant costs

and damage to our reputation, business, results of operations and financial condition.

we are unable to establish, train and maintain an effective sales and marketing infrastructure, we will not be able to commercialize

our drug candidates successfully.

have built an internal sales and marketing infrastructure to implement our business plan by developing internal sales teams and education

campaigns to market our proprietary formulations and FDA-approved drug products.

We will need to expend significant resources to further

establish and grow this internal infrastructure and properly train sales personnel with respect to regulatory compliance matters.

may also choose to engage or enter into other arrangements with third parties to provide sales and marketing services for us in place

of or to supplement our internal commercialization infrastructure.

We may not be able to secure sales personnel or relationships with

third-party sales organizations that are adequate in number or expertise to successfully market and sell our proprietary formulations,

drug products and pharmacy services.

Further, any third-party organizations we may seek to partner with or engage may not be able to

provide sales and marketing services in accordance with our expectations and standards, may be more expensive than we can afford or may

not be available on otherwise acceptable terms or at all.

If we are unable to establish and maintain compliant and adequate sales and

marketing capabilities, through our own internal infrastructure or third-party services or other arrangements, we may be unable to sell

our formulations, drug products or services or generate meaningful revenues.

business and operations would suffer in the event of cybersecurity or other system failures.

the implementation of security measures, our internal computer systems and those of any third parties with which we partner are vulnerable

to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

While we have not experienced any cybersecurity or system failure, accident or breach to date, if an event were to occur, it could result

in a material disruption of our operations, substantial costs to rectify or correct the failure, if possible, and potentially violation

of HIPAA and other privacy laws applicable to our operations.

For example, the CCPA became effective on January 1, 2020 and gave California

residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing

and receive detailed information about how their personal information is used.

The CCPA provides for civil penalties for violations,

as well as a private right of action for data breaches that may increase data breach litigation.

Although the CCPA includes exemptions

for certain clinical trials data, and HIPAA-protected health information, the law may increase our compliance costs and potential liability

with respect to other personal information we collect about California residents.

The CCPA has prompted a number of proposals for new

federal and state privacy legislation.

Other countries also have, or are developing, laws governing the collection, use and transmission

of personal information, such as the GDPR in the EU that became effective in May 2018 and the Personal Information Protection and Electronic

Documents Act that became effective in Canada in April 2000.

We anticipate that over time we may expand our business to include operations

outside of the United States.

With such expansion, we would be subject to increased governmental regulation in the EU countries in which

we might operate, including the GDPR.

These laws and similar laws adopted in the future could increase our potential liability, increase

our compliance costs and adversely affect our business.

If any disruption or security breach resulted in a loss of or damage to our data

or applications or inappropriate disclosure of confidential or protected information, we could incur liability, further development of

our proprietary formulations could be delayed, and our pharmacy operations could be disrupted, subject to restriction or forced to terminate

their operations, any of which could severely harm our business and prospects.

depend upon consultants, outside contractors and other third-party service providers for key aspects of our business.

are substantially dependent on consultants and other outside contractors and service providers for key aspects of our business.

For instance,

we rely upon pharmacist, physician and research consultants and advisors to provide us with significant assistance in the evaluation

of product development opportunities, and we have engaged or supported, and expect to continue to engage or support, consultants, advisors,

contract manufacturers, clinical research organizations (“CROs”), and others to design, conduct, analyze and interpret the

results of any clinical or non-clinical trials or other studies in connection with the research and development of our products.

of our consultants or other service providers terminates its engagement with us, or if we are unable to engage highly qualified replacements

as needed on commercially reasonable terms, we may be unable to successfully execute our business plan.

We must effectively manage these

third-party service providers to ensure that they successfully carry out their contractual obligations and meet expected deadlines.

these third parties often engage in other business activities and may not devote sufficient time and attention to our activities, and

we may have only limited contractual rights in connection with the conduct of the activities we have engaged the service providers to

If we are unable to effectively manage our outsourced activities or if the quality, timeliness or accuracy of the services provided

by third-party service providers is compromised for any reason, our development activities may be extended, delayed or terminated, and

we may not be able to commercialize our formulations or advance our business.

a compounded drug formulation provided through our compounding services leads to patient injury or death or results in a product recall,

we may be exposed to significant liabilities and reputational harm.

success of our business, including our proprietary formulations and pharmacy operations, is highly dependent upon medical and patient

perceptions of us and the actual safety and quality of our products.

We could be adversely affected if we, any other compounding pharmacies

or our formulations and technologies are subject to negative publicity.

We could also be adversely affected if any of our formulations

or other products we sell, any similar products sold by other companies, or any products sold by other compounding pharmacies prove to

be, or are asserted to be, harmful to patients.

For instance, if any of the components of approved drugs or other ingredients used to

produce our compounded formulations have quality or other problems that adversely affect the finished compounded preparations, our sales

could be adversely affected.

Because of our dependence upon medical and patient perceptions, adverse publicity associated with illness

or other adverse effects resulting from the use or misuse of our products, any similar products sold by other companies, or any other

compounded formulations could have a material adverse impact on our business.

assure compliance with USP guidelines, we have a policy whereby 100% of all sterile compound batches produced by our ImprimisRx compounding

pharmacies are tested prior to their delivery to patients and physicians both in-house and externally by an independent, FDA-registered

laboratory that has represented to us that it operates in compliance with current good laboratory practices.

However, we could still

become subject to product recalls and termination or suspension of our state pharmacy licenses if we fail to fully implement this policy,

if the laboratory testing does not identify all contaminated products, or if our products otherwise cause or appear to have caused injury

or harm to patients.

In addition, laboratory testing may produce false positives, which could harm our business and impact our pharmacy

operations and licensure even if the impacted formulations are ultimately found to be sterile and no patients are harmed by them.

adverse events or deaths or a product recall, either voluntarily or as required by the FDA or a state board of pharmacy, were associated

with one of our proprietary formulations or any compounds prepared by our ImprimisRx compounding pharmacies or any pharmacy partner,

our reputation could suffer, physicians may be unwilling to prescribe our proprietary formulations or order any prescriptions from such

pharmacies, we could become subject to product and professional liability lawsuits, and our state pharmacy licenses could be terminated

or restricted.

If any of these events were to occur, we may be subject to significant litigation or other costs and loss of revenue,

and we may be unable to continue our pharmacy operations and further develop and commercialize our proprietary formulations.

carry product and professional liability insurance, which may be inadequate.

we have secured product and professional liability insurance for our pharmacy operations and the marketing and sale of our formulations,

our current or future insurance coverage may prove insufficient to cover any liability claims brought against us.

Because of the increasing

costs of insurance coverage, we may not be able to maintain insurance coverage at a reasonable cost or at a level adequate to satisfy

liabilities that may arise.

COVID-19 pandemic had an adverse effect on our business and results of operations and could have future adverse effects, which could

be material, on our business, results of operations, financial condition, liquidity, and capital investments.

March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic.

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policies intended to protect our employees from the spread of COVID-19.

Those policies include employees working from home when possible

Those policies included employees working from home when possible

and employees in our facilities increasing physical distancing.

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impacted by the guidance.

In addition to limiting medical procedures, many hospitals and other healthcare providers have strictly limited

In addition to limiting medical procedures, many hospitals and other healthcare providers strictly limited

access to their facilities during the pandemic.

We cannot predict the duration or scope of the pandemic, actions that may be taken by

governments and businesses in response to the pandemic, or the impacts of the pandemic on healthcare systems.

The impacts of the pandemic

may include, but are not limited to:

While we believe our business has mostly recovered from the impact of the pandemic, if

conditions worsen, we believe future impact of the pandemic to our business could include, but is not limited to:

revenues from our customers, including our major customers, whose products are impacted by CMS guidance to limit elective medical

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cash flows, financial condition, and capital investments.

Actual or anticipated adverse effects on our cash flows or financial condition

may lead us to seek additional funding.

Any future debt financing into which we enter may impose upon us covenants that restrict our

operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make

certain investments and engage in certain merger, consolidation or asset sale transactions.

We cannot be certain that additional funding

will be available on acceptable terms, if at all.

If we do not have, or are not able to obtain, sufficient funds, we may have to delay

development or commercialization of our products or otherwise curtail our operations.

Any of these events could materially harm our business

and operating results.

disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

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of operations and financial condition.

August 2017, the FDA issued a MedWatch notification regarding our curcumin emulsion and two adverse events that had been associated with

the use of these emulsions by prescribing physicians.

We issued a press release on August 7, 2017, clarifying certain facts regarding

the notice which outlined our belief that the adverse events associated with the two patients occurred due to an allergic reaction caused

by the products being inappropriately administered and obtained by the prescribing physician, and our use of curcumin and excipients

in our curcumin emulsion formulation met regulatory standards required for dispensing of the curcumin emulsion.

In September 2017, the

FDA released a letter confirming that the alleged misuse of certain ingredients in our curcumin emulsions were due to mislabeling by

the underlying supplier, and not of our own misdoing.

We no longer compound curcumin emulsion products.

Separately, in December 2017,

we were issued a warning letter from the FDA alleging that, in their interpretation of our public communications, we had made false or

misleading claims and omitted risk and side effect information regarding certain of our ophthalmology focused compounded medications.

We immediately performed a full review of our public communications referenced in the warning letter and responded to the FDA in January

Notwithstanding our continued belief that our public communications were not in fact false and misleading, we have been in communication

with the FDA and are taking steps to address the items outlined in the FDA letter.

In June 2019, our outsourcing facility was issued

a warning letter related to an April 2017 inspection and our use of certain active pharmaceutical ingredients in our compounded medications.

During September 2020 through January 2021, our New Jersey based outsourcing facility was inspected by the FDA (the “2020 Inspection”)

and certain observations were made by the FDA in a Form 483.

Five observations made during the 2020 Inspection were considered repeat

observations from a 2017 FDA inspection.

In addition, during the 2020 Inspection, the FDA noted that we were compounding drugs for which

there is no change that produces for an individual patient a clinical difference, as determined by a prescribing practitioner between

a compounded drug and the comparable approved drug.

We have responded to the FDA regarding all of their observations from the 2020 Inspection,

including providing documentation from prescribing clinicians that indicate a clinical difference between our compounded drugs and the

comparable approved drugs, while also committing to amend our order process to collect “medical necessity/clinical difference”

information for each order of our compounded drugs on a go-forward basis.

August 2017, the FDA issued a MedWatch notification regarding our curcumin emulsion and two adverse events that had been associated

with the use of these emulsions by prescribing physicians.

We issued a press release on August 7, 2017, clarifying certain facts

regarding the notice which outlined our belief that the adverse events associated with the two patients occurred due to an allergic

reaction caused by the products being inappropriately administered and obtained by the prescribing physician, and our use of

curcumin and excipients in our curcumin emulsion formulation met regulatory standards required for dispensing of the curcumin

In September 2017, the FDA released a letter confirming that the alleged misuse of certain ingredients in our curcumin

emulsions were due to mislabeling by the underlying supplier, and not of our own misdoing.

We no longer compound curcumin emulsion

Separately, in December 2017, we were issued a warning letter from the FDA alleging that, in their interpretation of our

public communications, we had made false or misleading claims and omitted risk and side effect information regarding certain of our

ophthalmology focused compounded medications.

We immediately performed a full review of our public communications referenced in the

warning letter and responded to the FDA in January 2018, notwithstanding our continued belief that our public communications were

not in fact false and misleading, we have been in communication with the FDA and took steps to address the items outlined in the FDA

The Company received another warning letter from the FDA related to our alleged marketing activities;

we immediately

responded to this warning letter received and the FDA sent the Company notice in January 2023 that our corrective actions appear

In June 2019, our outsourcing facility was issued a warning letter related to an April 2017 inspection and our use of

certain active pharmaceutical ingredients in our compounded medications.

During September 2020 through January 2021, our New Jersey

based outsourcing facility was inspected by the FDA (the “2020 Inspection”) and certain observations were made by the

FDA in a Form 483.

Five observations made during the 2020 Inspection were considered repeat observations from a 2017 FDA inspection.

In addition, during the 2020 Inspection, the FDA noted that we were compounding drugs for which there is no change that produces for

an individual patient a clinical difference, as determined by a prescribing practitioner between a compounded drug and the

comparable approved drug.

We have responded to the FDA regarding all of their observations from the 2020 Inspection, including

providing documentation from prescribing clinicians that indicate a clinical difference between our compounded drugs and the

comparable approved drugs, while also committing to amend our order process to collect “medical necessity/clinical

difference” information for each order of our compounded drugs on a go-forward basis.

Our pharmacy was inspected in August

2022, and received a Form 483 with several observations from FDA.

We have responded to these observations and continue to dialogue

with the FDA related to this 483.

have worked and communicated, and will continue to work and communicate, with the FDA to assure that all allegations in the warning letters

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believe there will be any further action taken by the FDA in these matters.

We believe this is evidenced by the FDA registration for

our outsourcing facility which was most recently renewed in November 2022.

Nonetheless, these items increased further scrutiny and negative

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substantially limit our market and cause our operations to suffer.

Related to Government Regulations and Third-Party Policies

business is significantly impacted by state and federal statutes and regulations.

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located in states that do not sign the Final MOU for the duration of the rulemaking process.

one of our pharmacies fails to comply with state statutes and regulations, the pharmacy could be required to cease operations or become

subject to restrictions that could adversely affect our business.

pharmacy laws require pharmacy locations in those states to be licensed as an in-state pharmacy to dispense pharmaceuticals.

state controlled substance laws require registration and compliance with state pharmacy licensure, registration or permit standards promulgated

by the state’s pharmacy licensing authority.

Pharmacy and controlled substance laws often address the qualification of an applicant’s

personnel, the adequacy of its prescription fulfillment and inventory control practices and the adequacy of its facilities.

our pharmacies, or one with which we may partner, is found not to comply with state pharmacy and controlled substance laws and regulations,

the pharmacy could be required to cease operations or become subject to burdensome restrictions and limitations on its business.

we or our partner facilities fail to comply with the Controlled Substances Act, FDCA, or similar state statutes and regulations, the

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with applicable regulatory requirements.

Further, if any of our compounding pharmacies (including Park) fail to comply with regulatory

requirements, they could be forced to permanently or temporarily cease or limit their compounding operations, which would severely limit

our ability to market and sell our proprietary formulations and would materially harm our operations and prospects.

Any noncompliance

could also result in complaints or adverse actions by other state boards of pharmacy.

FDA inspection of a facility to determine compliance

with the FDCA, if not successful, may result in the loss of FDCA exemptions provided under Sections 503A and 503B, warning letters, injunctions,

prosecution, fines and loss of required government licenses, certifications and approvals, any of which could involve significant costs

and could cause us to be unable to realize the expected benefits of these pharmacies’ operations.

Further, if any of our compounding pharmacies fail to comply with regulatory requirements, they

could be forced to permanently or temporarily cease or limit their compounding operations, which would severely limit our ability to

market and sell our proprietary formulations and would materially harm our operations and prospects.

Any noncompliance could also result

in complaints or adverse actions by other state boards of pharmacy.

FDA inspection of a facility to determine compliance with the FDCA,

if not successful, may result in the loss of FDCA exemptions provided under Sections 503A and 503B, warning letters, injunctions, prosecution,

fines and loss of required government licenses, certifications and approvals, any of which could involve significant costs and could

cause us to be unable to realize the expected benefits of these pharmacies’ operations.

Additionally, the permanent injunction

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Company to be in violation of the injunction, further sanctions, including fines and limitations on the pharmacies’ operations,

we market any of our drug candidates in a manner that violates healthcare fraud and abuse laws, or if we violate government price reporting

laws, we may be subject to civil or criminal penalties.

FDA enforces laws and regulations which require that the promotion of pharmaceutical products be consistent with the approved prescribing

While physicians may prescribe an approved product for a so-called “off label” use, it is unlawful for a pharmaceutical

company to promote its products in a manner that is inconsistent with its approved label, and any company which engages in such conduct

can subject that company to significant liability.

Similarly, industry codes in the EU and other foreign jurisdictions prohibit companies

from engaging in off-label promotion, and regulatory agencies in various countries enforce violations of the code with civil penalties.

While we intend to ensure that our promotional materials are consistent with our label, regulatory agencies may disagree with our assessment

and may issue untitled letters, warning letters or may institute other civil or criminal enforcement proceedings.

In addition to FDA

restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare fraud and abuse laws have been

applied in recent years to restrict certain marketing practices in the pharmaceutical industry.

These laws include the U.S.

Anti-Kickback

Statute, U.S.

False Claims Act and similar state laws.

Because of the breadth of these laws and the narrowness of the safe harbors, it

is possible that some of our business activities could be subject to challenge under one or more of these laws.

sales depend on coverage and reimbursement from government and commercial third-party payers, and pricing and reimbursement pressures

have affected, and are likely to continue to affect, our profitability.

of our branded products depend on the availability and extent of coverage and reimbursement from third-party payers, including government

healthcare programs and private insurance plans.

Governments and private payors continue to pursue initiatives to manage drug utilization

and contain costs.

Further, pressures on healthcare budgets from the pandemic, the economic downturn and inflation continue and are likely

to increase across the markets we serve.

Payors are increasingly focused on costs, which have resulted, and are expected to continue

to result, in lower reimbursement rates for our branded products or narrower populations for which payors will reimburse.

Continued intense

public scrutiny of the price of drugs and other healthcare costs, together with payor dynamics, have limited, and are likely to continue

to limit, our ability to set or adjust the price of our products based on their value, which can have a material adverse effect on our

In the United States, particularly over the past few years, a number of legislative and regulatory proposals have been introduced

and/or signed into law that attempt to lower drug prices.

These include legislation promulgated by the IRA that enables the U.S.

to set prices for certain drugs in Medicare, redesigns Medicare Part D benefits to shift a greater portion of the costs to manufacturers

and enables the U.S.

government to impose penalties if drug prices are increased at a rate faster than inflation in addition to rebates

imposed on manufacturers associated with drug waste (which could potentially impact sales of TRIESENCE).

Additional proposals focused

on drug pricing continue to be debated, and additional executive orders focused on drug pricing and competition are likely to be adopted

and implemented in some form.

Government actions or ballot initiatives at the state level also represent a highly active area of policymaking

and experimentation, including pursuit of proposals that limit drug reimbursement under state run Medicaid programs based on reference

prices or permitting importation of drugs from Canada.

Such state policies may also eventually be adopted at the federal level.

are unable to predict which or how many policy, regulatory, administrative or legislative changes may ultimately be, or effectively estimate

the consequences to our business if, enacted and implemented.

However, to the extent that payer actions further decrease or modify the

coverage or reimbursement available for our products, require that we pay increased rebates or shift other costs to us, limit or affect

our decisions regarding the pricing of or otherwise reduce the use of our products, such actions could have a material adverse effect

on our business and results of operations.

federal coverage and reimbursement policies and practices have affected and are likely to continue to affect access to, pricing

of and sales of our products.

substantial portion of our branded product portfolio relies on reimbursement from federal government healthcare programs and commercial

insurance plans regulated by federal and state governments.

Our business has been and will continue to be affected by legislative actions

changing U.S.

federal reimbursement policy.

The IRA’s drug pricing controls and Medicare redesign is likely to have a material

adverse effect on our sales (particularly for our branded products that are more substantially reliant on Medicare reimbursement), our

business and our results of operations.

However, as the degree of impact from this legislation on our business depends on a number of

implementation decisions, the extent of the IRA’s impact on our sales and, in turn, our business remains unclear.

reimbursement and pricing actions in various states have negatively affected and may continue to negatively affect access to and have

affected and may continue to affect sales of our products.

the state level, government actions or ballot initiatives can also affect how our branded products are covered and reimbursed and/or

create additional pressure on our pricing decisions.

Existing and proposed state pricing laws have added complexity to the pricing of

drugs and may already be affecting industry pricing decisions.

A number of states have adopted, and many other states are considering,

drug importation programs or other pricing actions, including proposals designed to require biopharmaceutical manufacturers to report

to the state proprietary pricing information or provide advance notice of certain price increases.

For example, a California law requires

biopharmaceutical manufacturers to notify health insurers and government health plans at least 60 days before scheduled prescription

drug price increases that exceed certain thresholds.

Similar laws exist in Oregon and Washington.

Additional proposals directed at Medicaid

seek to penalize manufacturers for pricing drugs above a certain threshold or limit spending on biopharmaceutical products.

also seeking to change the way they pay for drugs for patients covered by state programs.

New York has established a Medicaid drug spending

cap, and Massachusetts implemented a new review and supplemental rebate negotiation process.

Six states (Colorado, Maine, New Hampshire,

Maryland, Oregon and Washington) have enacted laws that establish Prescription Drug Affordability Boards (PDABs) to study drug prices

and identify drugs that pose affordability challenges, and in three states (Colorado, Maryland and Washington) include authority for

the state PDAB to set upper payment limits on certain drugs in state regulated plans.

Other states may consider implementing similar

policies and laws.

Additionally, Colorado, Florida, Maine, New Hampshire, New Mexico and Vermont have enacted laws, and several other

states have proposed bills, to implement importation of drugs from Canada.

The FDA has met with representatives from Colorado, Florida,

Maine and New Mexico to discuss those states’ proposed importation programs, and the FDA may be working towards approving such

Other states could adopt similar approaches or could pursue different policy changes in a continuing effort to reduce their costs.

Ultimately, as with U.S.

federal government actions, existing or future state government actions or ballot initiatives may also have

a material adverse effect on our product sales, business and results of operations.

commercial payer actions have affected and may continue to affect access to and sales of our products

including healthcare insurers, pharmacy benefit managers (“PBMs”), integrated healthcare delivery systems (vertically-integrated

organizations built from consolidations of healthcare insurers and PBMs) and group purchasing organizations, increasingly seek ways to

reduce their costs.

With increasing frequency, payors are adopting benefit plan changes that shift a greater proportion of drug costs

Such measures include more limited benefit plan designs, high deductible plans, higher patient co-pay or coinsurance obligations

and more significant limitations on patients’ use of manufacturer commercial co-pay assistance programs.

Further, government regulation

of payors may affect these trends.

For example, CMS finalized a policy for plan years starting on or after January 1, 2021 that has caused

commercial payors to more widely adopt co-pay accumulator adjustment programs.

Payors, including PBMs, have sought, and continue to seek,

price discounts or rebates in connection with the placement of our branded products on their formularies or those they manage, and to

also impose restrictions on access to or usage of our branded products (such as step therapy), require that patients receive the payor’s

prior authorization before covering the product, and/or chosen to exclude certain indications for which our products are approved.

an effort to reduce barriers to access, we may reduce the net price of some of our branded products by providing greater discounts and

rebates to payors (including PBMs that administer Medicare Part D prescription drug plans), and we may introduce a set of new National

Drug Codes to make our branded products available at a lower list price.

However, affordability of patient out-of-pocket co-pay cost

has limited and may continue to limit patient use.

Further, despite these net and list price reductions, some payors may restrict, patient

access and may seek further discounts or rebates or take other actions, such as changing formulary coverage for some or all of our branded

These factors have limited, and may continue to limit, patient affordability and use, negatively affecting sales of our branded

significant consolidation in the health insurance industry has resulted in a few large insurers and PBMs, which places greater pressure

on pricing and usage negotiations with biopharmaceutical manufacturers, significantly increasing discount and rebate requirements and

limiting patient access and usage.

For example, in the United States, as of the beginning of 2023, we believe the top five integrated

health plans and PBMs controlled approximately 92% of all pharmacy prescriptions.

This high degree of consolidation among insurers and

PBMs and other payers, including through integrated healthcare delivery systems and/or with specialty or mail-order pharmacies and pharmacy

retailers, has increased the negotiating leverage such entities have over us and other biopharmaceutical manufacturers and has resulted

in greater price discounts, rebates and service fees realized by those payers from our business.

CVS, Express Scripts and United Health

Group (among the top five integrated health plans and PBMs), each have Rebate Management Organizations that further increase their leverage

to negotiate deeper discounts.

Ultimately, additional discounts, rebates, fees, coverage changes, plan changes, restrictions or exclusions

imposed by these commercial payers could have a material adverse effect on our product sales, business and results of operations.

reforms advanced by Congress or the Biden administration that refine the role of PBMs in the U.S.

marketplace could have downstream implications

or consequences for our business and how we interact with these entities.

and recommendations published by various organizations can reduce the use of our branded products.

agencies promulgate regulations and guidelines directly applicable to us and to our products.

Professional societies, practice management

groups, insurance carriers, physicians’ groups, private health and science foundations and organizations involved in various diseases

also publish guidelines and recommendations to healthcare providers, administrators and payers, as well as patient communities.

Recommendations

by government agencies or other groups and organizations may relate to such matters as usage, dosage, route of administration and use

of related therapies.

In addition, a growing number of organizations are providing assessments of the value and pricing of biopharmaceutical

products, and even organizations whose guidelines have historically been focused on clinical matters have begun to incorporate analyses

of the cost effectiveness of various treatments into their treatment guidelines and recommendations.

Value assessments may come from

private organizations that publish their findings and offer recommendations relating to the products’ reimbursement by government

and private payers.

Some companies and payers have announced pricing and payment decisions based in part on the assessments of private

organizations.

In addition, government health technology assessment organizations in many countries make reimbursement recommendations

to payers in their jurisdictions based on the clinical effectiveness, cost-effectiveness and service effects of new, emerging and existing

medicines and treatments.

Such health technology assessment organizations have recommended, and

may in the future recommend, reimbursement for certain of our products for a narrower indication than was approved by applicable regulatory

agencies or may recommend against reimbursement entirely.

See “- Our sales depend on coverage and reimbursement from government

and commercial third-party payers, and pricing and reimbursement pressures have affected, and are likely to continue to affect, our profitability.”

Such recommendations or guidelines may affect our reputation, and any recommendations or guidelines that result in decreased use,

dosage or reimbursement of our products could have a material adverse effect on our product sales, business and results of operations.

In addition, the perception by the investment community or stockholders that such recommendations or guidelines will result in decreased

use and dosage of our products could adversely affect the market price of our common stock.

Related to Competition

are many competitive risks related to marketing and selling our proprietary formulations and operating our compounding pharmacy business.

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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”)

<795> and USP <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

These facets of our operations may subject our business to limitations our competitors with FDA-approved drugs may not face.

September 2021, USP announced proposed revisions to USP <795> and <797> for public comment.

The proposed revisions include

limitations of beyond use dating of sterile and preservative-free products, and limitations on batch sizes, among other items.

a comment and review period, we expect USP to announce the final revisions to USP guidelines in 2022 or 2023 with an effective date some

time in 2023 or 2024.

If adopted, the proposed revisions to USP <797> would likely have a negative impact on revenues generated

from our 503A compounding pharmacy and limit the number of products we could sell from our 503A pharmacy.

Although we prepare our compounded formulations in accordance with the standards provided by USP chapter <795> and USP chapter

<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.

of our operations may subject our business to limitations our competitors with FDA-approved drugs may not face.

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.

future success depends in large part on our ability to maintain a competitive position with respect to biotechnology and related pharmaceutical

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unable to compete with the products of our competitors, we may never gain market share or achieve sustained profitability.