What changed in this filing

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Item 1. Business

2024-03-19 compared with 2023-03-23 · 408 added, 533 removed, 442 unchanged (68% of the section changed)

are an ophthalmic-focused pharmaceutical company.

Our business specializes in the development, production, sale, and distribution of

innovative prescription medications that offer unique competitive advantages and serve unmet needs in the marketplace through our subsidiaries

and deconsolidated companies.

We serve ophthalmologists and optometrists by providing FDA-approved branded ophthalmic pharmaceuticals

and innovative compounded prescription medicines that are accessible and affordable.

We own the U.S.

commercial rights to ten branded

ophthalmic pharmaceutical products, including IHEEZO TM , IOPIDINE® (both approved concentrations), MAXITROL® eye drops,

MOXEZA®, ILEVRO®, NEVANAC®, VIGAMOX®, MAXIDEX®, and TRIESENCE®.

We own and operate ImprimisRx, one of the nation’s

leading ophthalmology-focused pharmaceutical-compounding businesses, and our branded drugs are marketed under our Harrow name.

we also have non-controlling equity positions in Surface Ophthalmics, Inc.

(“Surface”) and Melt Pharmaceuticals, Inc.

both companies that began as subsidiaries of Harrow and were subsequently carved-out of our corporate structure and deconsolidated from

our financial statements.

We also own royalty rights in certain drug candidates being developed by Surface and Melt.

are a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical

products for the U.S.

Harrow helps U.S.

eyecare professionals preserve the gift of sight by making its comprehensive portfolio

of prescription and non-prescription pharmaceutical products accessible and affordable to millions of Americans each year.

We own commercial

rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in North America, all of which are marketed under

the Harrow name.

We also own and operate ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding

In addition, we have a non-controlling equity interest in Melt Pharmaceuticals, Inc.

(“Melt”), and two other

companies that began as subsidiaries of Harrow and were subsequently carved-out of our corporate structure and deconsolidated from our

financial statements.

Ophthalmic Pharmaceuticals

the past few years, we have invested in broadening our product portfolio of FDA-approved products.

Our investments in this regard have

led to the pursuit and completion of several announced transactions, all of which are focused on eyecare pharmaceuticals primarily for

and Canadian markets.

We believe that our continued investments in these and other products will result in our ability to provide

more physician prescribers and their patients with access to a complete portfolio of affordable eyecare pharmaceuticals to address their

clinical needs.

commercial rights to the following products:

(chloroprocaine hydrochloride ophthalmic gel) 3% a low-viscosity gel indicated for ocular surface

(cyclosporine ophthalmic solution) 0.1%, utilizes a novel water-free vehicle (perfluorobutylpentane) based on semifluorinated alkanes,

indicated for the treatment of the signs and symptoms associated with dry eye disease.

(triamcinolone acetonide injectable suspension) 40 mg/ml, a steroid injection for the treatment of certain ophthalmic diseases and

for visualization during vitrectomy.

(moxifloxacin hydrochloride ophthalmic solution) 0.5%, a fluoroquinolone antibiotic eye drop for the treatment of bacterial conjunctivitis

caused by susceptible strains of organisms.

(nepafenac ophthalmic suspension) 0.3%, a non-steroidal, anti-inflammatory eye drop indicated for pain and inflammation associated

with cataract surgery.

(fluorometholone acetate ophthalmic suspension) 0.1%, a corticosteroid prepared as a sterile topical ophthalmic suspension indicated

for use in the treatment of steroid-responsive inflammatory conditions of the palpebral and bulbar conjunctiva, cornea, and anterior

segment of the eye.

(natamycin ophthalmic suspension) 5%, a sterile, antifungal drug for the treatment of fungal blepharitis, conjunctivitis, and keratitis

caused by susceptible organisms, including Fusarium solani keratitis.

ST (tobramycin and dexamethasone ophthalmic suspension) 0.3%/0.05%, a topical antibiotic and corticosteroid combination for steroid-responsive

inflammatory ocular conditions for which a corticosteroid is indicated and where superficial bacterial ocular infection or a risk

of bacterial ocular infection exists.

(cetirizine ophthalmic solution) 0.24%, a histamine-1 (H1) receptor antagonist indicated for treatment of ocular itching associated

with allergic conjunctivitis.

(cyclosporine ophthalmic emulsion) 0.1%, an orphan designated drug that is a calcineurin inhibitor immunosuppressant indicated for

the treatment of vernal keratoconjunctivitis.

(nepafenac ophthalmic suspension) 0.1%, a non-steroidal, anti-inflammatory eye drop indicated for pain and inflammation associated

with cataract surgery.

Preservative Free (PF) is a lubricant eye drop that does not require a prescription and temporarily relieves burning, itching and

other dry eye symptoms.

(neomycin and polymyxin B sulfates and dexamethasone ophthalmic suspension) is an eye drop used to treat steroid-responsive inflammatory

ocular conditions where bacterial infection or a risk of bacterial ocular infection exist

(dexamethasone ophthalmic suspension) 0.1%, a steroid eye drop for steroid-responsive inflammatory conditions of the palpebral and

bulbar conjunctiva, cornea, and anterior segment of the globe.

1% (apraclonidine hydrochloride) 0.5%, an ophthalmic solution in a sterile isotonic solution indicated to control or prevent post-surgical

elevations in intraocular pressure that occur in patients after argon laser trabeculoplasty, argon laser iridotomy or Nd:YAG posterior

0.5% (apraclonidine hydrochloride) an ophthalmic solution indicated for short-term adjunctive therapy in patients on maximally tolerated

medical therapy who require additional intraocular pressure (or IOP) reduction.

also own U.S.

rights to some discontinued products.

In February 2024, we announced that we out-licensed Canadian rights for VERKAZIA,

Cationorm® PLUS (a preservative-free formulation for dry eye or allergy relief), VEVYE, ZERVIATE and IHEEZO to Apotex Inc.

We also own worldwide rights to NATACYN and FRESHKOTE.

is our ophthalmology-focused pharmaceutical compounding businesses.

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integrated research and development, production, dispensing/distribution, sales, marketing, and customer-service capabilities, has offered

physician customers and their patients access to critical medicines to meet their clinical needs.

Initially, ImprimisRx focused

exclusively on compounded medications to serve needs unmet by commercially available drugs.

Our compounded medications include various

combinations of drugs formulated into one bottle and numerous preservative-free formulations.

Depending on the formulation, the regulations

of a specific state, and ultimately the needs of the patient, ImprimisRx products may be dispensed as patient-specific medications from

our 503A pharmacy, or for in-office use, made according to current good manufacturing practices (“cGMPs”) or other guidance

ophthalmologist and optometrist customers and their patients access to critical medicines to meet their clinical needs.

Initially, ImprimisRx

focused exclusively on compounded medications to serve needs unmet by commercially available drugs.

Our compounded medications include

various combinations of drugs formulated into one bottle and numerous preservative-free formulations.

Depending on the formulation, the

regulations of a specific state, and ultimately the needs of the patient, ImprimisRx products may be dispensed as patient-specific medications

from our 503A pharmacy, or for in-office use, made according to current good manufacturing practices (“cGMPs”) or other guidance

documents from the U.S.

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eyecare-dedicated prescribers and institutions.

Pharmaceuticals and Drug Candidates

the past three years, in order to more fully serve the needs of our growing customer base, we have invested in broadening our product

portfolio to include FDA-approved products.

Our investments in this regard have led to the pursuit and completion of several announced

transactions, and others we are continuing to pursue, all of which are focused on eyecare pharmaceuticals.

We believe that our continued

investments in these and other products will result in our ability to provide more physician prescribers and their patients with access

to a complete portfolio of affordable eyecare pharmaceuticals to address their clinical needs.

NEVANAC®, VIGAMOX®, MAXIDEX®, TRIESENCE®

December 2022, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Novartis Technology, LLC and Novartis

Innovative Therapies AG (together, “Novartis”), pursuant to which the Company agreed to purchase from Novartis the exclusive

commercial rights to assets associated with the following ophthalmic products (collectively the “Fab 5 Products”) in the

(the “Fab 5 Acquisition”):

(nepafenac ophthalmic suspension) 0.3%, a non-steroidal, anti-inflammatory eye drop indicated for pain and inflammation associated

with cataract surgery.

(nepafenac ophthalmic suspension) 0.1%, a non-steroidal, anti-inflammatory eye drop indicated for pain and inflammation associated

with cataract surgery.

(moxifloxacin hydrochloride ophthalmic solution) 0.5%, a fluoroquinolone antibiotic eye drop for the treatment of bacterial conjunctivitis

caused by susceptible strains of organisms.

(dexamethasone ophthalmic suspension) 0.1%, a steroid eye drop for steroid-responsive inflammatory conditions of the palpebral and

bulbar conjunctiva, cornea, and anterior segment of the globe.

(triamcinolone acetonide injectable suspension) 40 mg/ml, a steroid injection for the treatment of certain ophthalmic diseases and

for visualization during vitrectomy.

closed the Fab 5 Acquisition on January 20, 2023.

Under the terms of the Purchase Agreement, we made a one-time payment of $130,000,000

at closing, with up to another $45,000,000 due in a milestone payment related to the timing of the commercial availability of TRIESENCE.

Pursuant to the Purchase Agreement and various ancillary agreements, immediately following the closing and subject to certain conditions,

for a period that we expect to last approximately six months, and prior to the transfer of the Fab 5 Products new drug applications (the

“NDAs”) to us, Novartis will continue to sell the Fab 5 Products on our behalf and transfer the net profit from the sale

of the Fab 5 Products to us.

Novartis has agreed to supply certain Fab 5 Products to the Company for a period of time after the NDAs

are transferred to us and to assist with technology transfer of the Fab 5 Products manufacturing to other third-party manufacturers,

MAXITROL® EYE DROPS, MOXEZA®

December 2021, we acquired U.S.

commercial rights to four FDA-approved ophthalmic medicines:

IOPIDINE 1% and 0.5% (apraclonidine hydrochloride);

MAXITROL (neomycin/polymyxin B/dexamethasone) ophthalmic suspension;

and MOXEZA (moxifloxacin hydrochloride).

We believe by expanding

our product portfolio to include branded FDA-approved products, we will be uniquely positioned to leverage our commercial platform to

introduce unique lifecycle management strategies that could grow sales and address needs of our customers that we are unable to meet

with our other compounded product offerings.

the time of closing the acquisition of the four products, we agreed to a transition period with the seller, which lasted six months following

the closing of the transaction.

During the transition period, the seller continued to sell the products and transferred the net profit

from those sales to us.

Following the transition period which ended in June 2022, we made IOPIDINE 1% and MAXITROL commercially available,

and expect to re-launch MOXEZA at a later date.

July 2021, we acquired the exclusive U.S.

and Canadian marketing and supply rights to IHEEZO (chloroprocaine hydrochloride ophthalmic

gel) 3% from Sintetica S.A.

(“Sintetica”).

The FDA approved IHEEZO for ocular surface anesthesia in September 2022.

is protected by an Orange Book-listed patent that is valid until 2038.

We expect to commercially launch IHEEZO in the U.S.

market during

expect our commercial focus of IHEEZO to be on ophthalmic procedures that traditionally require the eye to be anesthetized, including

intravitreal injections and lens replacement procedures, which in aggregate we estimate to be over 11 million instances annually in the

(see also subheading “ Ophthalmology Market” ).

is protected by one issued, Orange Book listed patent and another patent-pending.

The issued patent includes composition of matter and

method of use claims and could provide protection for IHEEZO into 2037.

August 2021, we acquired exclusive marketing rights to MAQ-100 in the U.S.

and Canada from Wakamoto Pharmaceutical Co., Ltd.

(“Wakamoto”).

MAQ-100 is a preservative-free triamcinolone acetonide ophthalmic injection drug candidate.

MAQ-100 is marketed and sold by Wakamoto

in Japan as MaQaid®.

Following Japan’s Ministry of Health Labor and Welfare (“MHLW”) approval, MaQaid was launched

in Japan in 2010, indicated as an intravitreal injection for visualization for vitrectomy.

Since its initial MHLW approval, the indication

for MaQaid was expanded to include (a) treatments for alleviation of diabetic macular edema, (b) macular edema associated with retinal

vein occlusion (or RVO), and (c) non-infectious uveitis.

We are currently working with Wakamoto to assess a clinical pathway for MaQaid.

are currently evaluating several programs to internally develop product candidates based on technology and know-how we own.

We also expect

to continue to acquire and/or develop additional FDA-approved/approvable ophthalmic products and product candidates that will allow us

to leverage our commercial infrastructure to promote, sell, and ultimately bring these products to market.

Ophthalmology

any ocular procedure, a surgeon may require drugs for sedation, dilation, anesthesia, inflammation and infection prevention, and ocular

surface preservation.

The cataract surgery market continues to experience significant growth.

According to Market Scope , approximately

4.8 million lens procedures were performed in the U.S.

in 2021, 97% of those procedures for cataracts, with the number expected to grow

to 5.5 million lens procedures in 2026.

Nearly 96% of the refractive surgery procedures performed are LASIK (laser in situ keratomileusis)

surgeries, an outpatient surgical procedure used to treat nearsightedness, farsightedness, and astigmatism.

According to an article published

in 2021 in Clinical Ophthalmology , an estimated 800,000 eyes have been treated with laser correction surgery (such as LASIK) each

year for the last 10 years.

injections are one of the most common procedures performed by ophthalmologists in the United States.

According to a 2023 article

published in Healio , approximately 8 million intravitreal injections are expected to be performed this year.

These injections

are utilized to administer critical medications into the eye that treat diseases including but not limited to:

proliferative

diabetic retinopathy, diabetic macular edema, wet age-related macular degeneration, neovascular glaucoma, retinal vein occlusions,

intraocular tumors, and endophthalmitis.

In addition, products and product candidates are being developed and used to treat symptoms

associated with an eye disease known as geographic atrophy.

Most of the medicines in these products and product candidates are

administered via intravitreal injection.

Therefore, we believe as these products and product candidates gain commercial adoption,

the number of annual intravitreal injections should increase further and at an increased rate as compared to recent

is a surgical procedure undertaken by a specialist where the vitreous humor gel that fills the eye cavity is removed to provide

better access to the retina.

This allows for a variety of repairs, including the removal of scar tissue, laser repair of retinal

detachments and treatment of macular holes.

According to an October 2022 article on the Cleveland Clinic website,

surgeons perform about 225,000 vitrectomies each year.

The number is likely to continue to grow as eye care providers find more

uses for vitrectomy.

non-infectious uveitis affecting the posterior segment of the eye is an inflammatory disease that afflicts people of all ages, producing

swelling and destroying eye tissues, which can lead to severe vision loss and blindness.

We estimate this disease affects approximately

100,000 people each year in the U.S.

and causes approximately 30,000 new cases of blindness every year.

The standard of care treatment

for this disease typically involves the use of short-acting corticosteroids to reduce uveitic flares (such as TRIESENCE) followed by

additional treatments of sustained release, lower dose steroids to minimize the risk of further flares.

to the Glaucoma Research Foundation, there are over 3 million Americans experiencing glaucoma, and that only half of this population

are aware of their condition.

Open-angle glaucoma (the most common type of glaucoma) is a condition of increased intraocular

pressure that causes gradual loss of sight.

Glaucoma is incurable, and if not managed, can lead to blindness.

Generally, the first

line of treatment consists of a prostaglandin analog (PGA) eye drop regimen.

As the disease progresses, non-PGA products are

generally added as a second-line treatment.

Topical agents, other than PGAs, include beta blockers, alpha agonists, miotics, and

According to a 2013 article in Glaucoma Today , up to 50% of glaucoma patients require more than one drug following

a few months of initial treatment and there is a direct correlation between the number of glaucoma bottles and decreased adherence;

however, the FDA has yet to approve a PGA combination product despite that combination products including a PGA

(Xalacom ® , DuoTrav ® and Ganfort ® ) are available outside of the U.S.

According to a 2023 Market

Scope report, the global glaucoma pharmaceuticals market was expected to be $4.3 billion in 2022.

eye occurs when the eye does not produce enough tears, or when the tears are not of the correct consistency and evaporate too quickly.

Inflammation of the surface of the eye may also occur.

We believe that dry eye disease (“DED”) affects over 30 million people

in the U.S., and a major epidemiological study, the Beaver Dam Offspring Study, published in 2014 in the American Journal of Ophthalmology ,

reported that in a cohort of over 3,000 patients, DED was self-reported by 14.5% of the patients.

According to a 2022 Market Scope

report, the global dry eye product market was expected to grow from $5.7 billion in 2022 to $7.0 billion in 2027.

Dry eye is among

the most common conditions seen by eyecare professionals.

Pharmaceutical

Compounding Businesses

Pharmaceutical

compounding is the science of combining different active pharmaceutical ingredients (APIs), all of which are approved by the FDA (either

as a finished form product or as a bulk drug ingredient), and excipients to create specialized pharmaceutical preparations.

and healthcare institutions use compounded drugs when commercially available drugs do not optimally treat a patient’s needs.

many cases, compounded drugs, such as ours, have wide market utility and may be clinically appropriate for large patient populations.

Examples of compounded formulations include medications with alternative dosage strengths or unique dosage forms, such as topical creams

or gels, suspensions, or solutions with more tolerable drug delivery vehicles.

majority of our sales revenue in 2021 and 2022 was derived from making, selling and dispensing our compounded prescription drug formulations

as cash payment transactions between us and our end-user customer.

As such, the majority of our commercial transactions did not involve

distributors, wholesalers, insurance companies, pharmacy benefit managers or other middle parties.

In regard to our compounded formulations,

by not being reliant on insurance company formulary inclusion and pharmacy benefit manager payment clawbacks, we are able to simplify

the prescription transaction process.

We believe the outcome of our compounding business model is a simple transaction, involving a patient-in-need,

a physician’s diagnosis, a fair price and great service for a quality pharmaceutical product.

Compounding Facilities

Pharmaceutical

compounding businesses are governed by Sections 503A and 503B of the Federal Food Drug and Cosmetic Act (the “FDCA”).

503A of the FDCA provides that a pharmacy is only permitted to compound a drug for an individually identified patient based on a prescription

for the patient and is only permitted to distribute the drug interstate if the pharmacy is licensed to do so in the states where it is

compounded and where the medication is received.

503B of the FDCA provides that a pharmacy engaged in preparing sterile compounded drug formulations may voluntarily elect to register

as an “outsourcing facility.” Outsourcing facilities are permitted to compound large quantities of drugs without a prescription

and distribute them out of state with certain limitations, such as the formulation appearing on the FDA’s drug shortage list or

the bulk drug substances contained in the formulations appearing on the FDA’s “clinical need” list.

Entities voluntarily

registering with FDA as outsourcing facilities are subject to additional requirements that do not apply to compounding pharmacies (operating

under Section 503A of the FDCA), including adhering to standards such cGMPs or other FDA guidance documents and being subject to regular

FDA inspection.

operate two compounding facilities located in Ledgewood, New Jersey.

Our New Jersey operations are comprised of two separate entities

and facilities, one of which is registered with the FDA as an outsourcing facility (“NJOF”) under Section 503B of the FDCA.

The other New Jersey facility (“RxNJ”) is a licensed pharmacy operating under Section 503A of the FDCA.

All of our compounded

products that we sell, produce and dispense are made in the United States.

believe that, with our current compounding pharmacy facilities and licenses and FDA registration of NJOF, we have the infrastructure

to scale our business appropriately under the current regulatory landscape and meet the potential growth in demand we are targeting.

We plan to invest in one or both of our facilities to further their capacity and efficiencies.

Also, we may seek to access greater pharmacy

and production related redundancy and markets through acquisitions, partnerships or other strategic transactions.

Subsidiaries (De-Consolidated Businesses)

have ownership interests in Surface, Melt, and Eton Pharmaceuticals, Inc.

(“Eton”) and hold royalty interests in some of

Surface’s and Melt’s drug candidates.

These companies are pursuing market approval for their drug candidates under the FDCA,

including in some instances under the abbreviated pathway described in Section 505(b)(2), which permits the submission of an NDA where

have ownership interests in Melt, Surface Ophthalmics, Inc.

(“Surface”) and Eton Pharmaceuticals, Inc.

and hold royalty interests in some of Surface’s and Melt’s drug candidates.

These companies are pursuing market approval

for their drug candidates under the Federal Food Drug and Cosmetic Act (the “FDCA”), including in some instances under the

abbreviated pathway described in Section 505(b)(2), which permits the submission of a new drug application (an “NDA”) where

at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant

has not obtained a right of reference.

Noncontrolling

Equity Interests

Pharmaceuticals, Inc.

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The core intellectual property Melt owns is a patented series of combination

non-opioid sedation drug formulations that we estimate to have multitudinous applications.

non-opioid sedation drug formulations that we estimate to have many clinical applications.

is a novel, sublingually delivered, non-IV, opioid-free drug candidate being developed for procedural sedation.

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In December 2022, Melt announced topline data from its Phase

2 study for MELT-300:

a study of more than 300 patients, at 9 study sites, all undergoing cataract surgery, MELT-300 achieved its primary procedural sedation

endpoint, demonstrating statistical superiority for procedural sedation compared to all comparator treatment arms, including midazolam

3mg (P=0.0129) and ketamine 50mg (P=0.0096).

2 study for MELT-300 as set forth below:

a study of more than 300 patients, undergoing cataract surgery conducted at nine study sites, MELT-300 achieved its primary procedural

sedation endpoint, demonstrating statistical superiority for procedural sedation compared to all comparator treatment arms, including

midazolam 3mg (P=0.0129) and ketamine 50mg (P=0.0096).

the validated Ramsey Sedation Scale (RSS), MELT-300 treatment arm patients were 50% less likely to require rescue sedation compared

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safety profile was generally comparable to the placebo arm.

January 2019, Melt closed an offering of its Series A Preferred Stock.

At that time, we gave up our controlling interest and deconsolidated

Melt from our consolidated financial statements.

We own 3,500,000 shares of Melt common stock, which was approximately 46% of Melt’s

equity and voting interests issued and outstanding as of December 31, 2022.

In September 2021, we provided Melt with a senior secured

loan with a principal amount of $13,500,000, which was used to fund the Phase 2 program of MELT-300.

expects to begin Phase 3 program activities in 2024, which will consist of a single pivotal study comparing MELT-300 to sublingual midazolam

and placebo in subjects undergoing cataract surgery.

Beginning in July 2023 through March 1, 2024, Melt had raised over $23,000,000 in

gross proceeds from the sale and issuance of Melt’s Series B Preferred Stock.

We own 3,500,000 shares of Melt common stock, 2,260,000

shares of Melt’s Series B-1 Preferred Stock and 74,256 shares of Melt’s Series B Preferred Stock, which in aggregate represented

approximately 47% and 46% of Melt’s equity and voting interests issued and outstanding as of December 31, 2023 and March 1, 2024,

respectively.

is required to make mid-single digit royalty payments to the Company on net sales of MELT-300 while any patent rights remain outstanding,

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is a clinical-stage pharmaceutical company focused on development and commercialization of innovative therapeutics for ocular surface

for Chronic Dry Eye Disease:

Surface completed its 350-patient Phase 2 clinical trial, comparing five active arms of SURF-100

study drugs with the current market-leading prescription chronic dry eye treatments.

According to Surface, the SURF-100 Phase 2 clinical

trial achieved superiority for both signs and symptoms of chronic dry eye disease compared to market leading incumbents, as well

as generating positive data on onset and duration of action.

for Acute Dry Eye :

Surface has completed enrollment of its Phase 2 clinical trial for SURF-200 and expects to announce top-line

results in 2023.

for Pain and Inflammation Following Ocular Surgery :

According to the Surface results, SURF-201 was dosed twice daily, met its

primary endpoints of absence of inflammation at both Day 8 and Day 15 and was found to be safe and well-tolerated by the patient

In addition, a secondary endpoint showed almost 90% of patients given SURF-201 were pain free at Day 15.

2018, Surface closed an offering of its Series A Preferred Stock.

At that time, we lost our controlling interest and deconsolidated Surface

from our consolidated financial statements.

During May, June and July of 2021, Surface closed an offering of its preferred stock at a

purchase price of $4.50 per share resulting in gross proceeds to Surface of approximately $25,000,000 (the “Surface Series B Offering”).

We own 3,500,000 shares of Surface common stock, which was approximately 20% of Surface’s equity and voting interests as of December

Harrow owns mid-single-digit royalty rights on net sales of SURF-100, SURF-200 and SURF-201.

Surface is developing four product candidates at various stages of development for certain ocular surface related indications.

own 3,500,000 shares of Surface common stock, which represented approximately 20% of Surface’s equity and voting interests as of

December 31, 2023.

Harrow owns mid-single-digit royalty rights on net sales on Surface’s drug candidates SURF-100, SURF-200 and

Pharmaceuticals, Inc.

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outstanding as of December 31, 2023.

Pharmaceutical

Compounding Businesses

Pharmaceutical

compounding is the science of combining different active pharmaceutical ingredients (APIs), all of which are approved by the FDA (either

as a finished form product or as a bulk drug ingredient), and excipients to create specialized pharmaceutical preparations.

and healthcare institutions use compounded drugs when commercially available drugs do not optimally treat a patient’s needs.

many cases, compounded drugs, such as ours, have wide market utility and may be clinically appropriate for large patient populations.

Examples of compounded formulations include medications with alternative dosage strengths or unique dosage forms, such as topical creams

or gels, suspensions, or solutions with more tolerable drug delivery vehicles.

revenue from our compounded products are derived from us making, selling and dispensing our compounded prescription drug formulations

as cash payment transactions between us and our end-user customers.

As such, the majority of our commercial transactions for compounded

products do not involve distributors, wholesalers, insurance companies, pharmacy benefit managers or other middle parties.

to our compounded formulations, by not being reliant on insurance company formulary inclusion and pharmacy benefit manager payment clawbacks,

we are able to simplify the prescription transaction process.

We believe the outcome of our compounding business model is a simple transaction,

involving a patient-in-need, a physician’s diagnosis, a fair price and great service for a quality pharmaceutical product.

Compounding Facilities

Pharmaceutical

compounding businesses are governed by Sections 503A and 503B of the FDCA.

Section 503A of the FDCA provides that a pharmacy is only

permitted to compound a drug for an individually identified patient based on a prescription for the patient and is only permitted to

distribute the drug interstate if the pharmacy is licensed to do so in the states where it is compounded and where the medication is

503B of the FDCA provides that a pharmacy engaged in preparing sterile compounded drug formulations may voluntarily elect to register

as an “outsourcing facility.” Outsourcing facilities are permitted to compound large quantities of drugs without a prescription

and distribute them out of state with certain limitations, such as the formulation appearing on the FDA’s drug shortage list or

the bulk drug substances contained in the formulations appearing on the FDA’s “clinical need” list.

Entities voluntarily

registering with FDA as outsourcing facilities are subject to additional requirements that do not apply to compounding pharmacies (operating

under Section 503A of the FDCA), including adhering to standards such cGMPs or other FDA guidance documents and being subject to regular

FDA inspection.

operate two compounding facilities located in Ledgewood, New Jersey.

Our New Jersey operations are comprised of two separate entities

and facilities, one of which is registered with the FDA as an outsourcing facility (“NJOF”) under Section 503B of the FDCA.

The other New Jersey facility (“RxNJ”) is a licensed pharmacy operating under Section 503A of the FDCA.

All of our compounded

products that we sell, produce and dispense are made in the United States.

believe that, with our current compounding pharmacy facilities and licenses and FDA registration of NJOF, we have the infrastructure

to scale our business appropriately under the current regulatory landscape and meet the potential growth in demand we are targeting.

We plan to invest in one or both of our facilities to further their capacity and efficiencies.

Also, we may seek to access greater pharmacy

and production related redundancy and markets through acquisitions, partnerships or other strategic transactions.

and Marketing

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We do, however, believe that our proprietary drug formulations, drug candidates and drug

products could have commercial appeal in international markets, and in the past we have engaged distributors and entered into out-licensing

arrangements for certain of our proprietary formulations in certain non-U.S.

products could have commercial appeal in international markets, and have engaged distributors and entered into out-licensing arrangements

for certain of our products and proprietary formulations in certain non-U.S.

markets, including Canada.

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We expect that we may experience growth in the sales of our products

in future periods, particularly in light of our current and planned launches of new formulations and commercialization campaigns.

we may not be successful in doing so, whether due to the safety, quality or availability of our proprietary compounded formulations,

the size of the markets for such formulations, which could be smaller than we expect, the timing of market entry relative to competitive

products, the availability of alternative compounded formulations or FDA-approved drugs, the price of our compounded formulations relative

to alternative products or the success of our sales and marketing efforts, which is dependent on our ability to build and grow a qualified

and adequate internal sales function.

expect to continue to acquire and/or develop additional FDA-approved ophthalmic drugs that allow us to leverage our existing commercial

in future periods, particularly in light of our recent product launches and commercial campaigns.

However, we may not be successful in

doing so, whether due to the safety, quality or availability of our products and proprietary compounded formulations, the size of the

markets for such products, which could be smaller than we expect, the timing of market entry relative to competitive products, the availability

of alternative compounded formulations or FDA-approved drugs, the price of our products relative to alternative products or the success

of our sales and marketing efforts, which is dependent on our ability to further build and continue to grow a qualified and adequate

internal sales function.

expect to continue to acquire and/or develop additional FDA-approved ophthalmic products that allow us to leverage our existing commercial

infrastructure to promote, sell, and ultimately bring these products to market.

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our sales and marketing team, expertise and expenses.

This includes the addition of market access expertise and team members, where roles

include discussions with payors regarding the costs and benefits of our products for their members, assisting with the addition of our

products to the medical policy of payors, and providing the market with assistance regarding reimbursement queries.

the past, we entered into various sales and marketing agreements with certain organizations to provide exclusive sales and marketing

representation services in select geographies in the U.S., in connection with our pharmaceutical products and compounded formulations.

Under the terms of the sales and marketing agreements, we are required to make commission payments, generally equal to a certain percentage

of net sales for products above and beyond the initial existing sales amounts.

At the end of 2022, we began to end many of these arrangements

and we plan to replace these arrangements with and invest in a traditional salaried salesforce over time.

Ophthalmology

any ocular procedure, a surgeon may require drugs for sedation, dilation, anesthesia, inflammation and infection prevention, and ocular

surface preservation.

The cataract surgery market continues to experience significant growth.

According to Market Scope , approximately

4.8 million lens procedures were performed in the U.S.

in 2021, 97% of which were cataracts, with the number expected to grow to 5.5

million lens procedures in 2026.

Nearly 96% of the refractive surgery procedures performed are LASIK (laser in situ keratomileusis) surgeries,

an outpatient surgical procedure used to treat nearsightedness, farsightedness, and astigmatism.

According to an article published in

2021 in Clinical Ophthalmology , an estimated 800,000 eyes were treated with laser correction surgery (such as LASIK) each year

for the previous ten years.

eye occurs when the eye does not produce enough tears, or when the tears are not of the correct consistency and evaporate too quickly.

Inflammation of the surface of the eye may also occur.

According to a 2023 Market Scope report, there are 39 million people in

that suffer from both signs and symptoms of dry eye, with 49% of diagnosed dry eye patients having moderate to severe dry eye.

The same report stated the global dry eye product market is expected to grow from $5.8 billion in 2023 to $7.5 billion in 2028.

is among the most common conditions seen by eyecare professionals.

injections are one of the most common procedures performed by ophthalmologists in the United States.

According to a 2023 article published

in Healio , approximately 8 million intravitreal injections were expected to be performed that year.

These injections are utilized

to administer critical medications into the eye that treat diseases including but not limited to proliferative diabetic retinopathy,

diabetic macular edema, wet age-related macular degeneration, neovascular glaucoma, retinal vein occlusions, intraocular tumors, and

endophthalmitis.

In addition, products and product candidates are being developed and used to treat symptoms associated with an eye disease

known as geographic atrophy.

Most of the medicines in these products and product candidates are administered via intravitreal injection.

Therefore, we believe as these products and product candidates gain commercial adoption, the number of annual intravitreal injections

should increase further and at an increased rate as compared to recent years.

is a surgical procedure undertaken by a specialist where the vitreous humor gel that fills the eye cavity is removed to provide better

access to the retina.

This allows for a variety of repairs, including the removal of scar tissue, laser repair of retinal detachments

and treatment of macular holes.

According to an October 2022 article published on the Cleveland Clinic website, U.S.

surgeons perform

about 225,000 vitrectomies each year.

The number is likely to continue to grow as eye care providers find more uses for vitrectomy.

non-infectious uveitis affecting the posterior segment of the eye is an inflammatory disease that afflicts people of all ages, producing

swelling and destroying eye tissues, which can lead to severe vision loss and blindness.

Based on internal estimates and information

published on the MedScape website (which was updated as of March 2023) that cites various ranges of prevalence of uveitis, we estimate

this disease affects approximately 100,000 people each year in the U.S.

The standard of care treatment for this disease typically involves

the use of short-acting corticosteroids to reduce uveitic flares (such as TRIESENCE) followed by additional treatments of sustained release,

lower dose steroids to minimize the risk of further flares.

pharmaceutical and pharmacy industries are highly competitive.

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Although we prepare some of our compounded formulations in accordance with cGMP standards and our other formulations

are produced according to the standards provided by United States Pharmacopoeia (USP) <795> and USP <797> and applicable

state and federal law, our compounded formulations are not required to be, and have not been, approved for marketing and sale by the

As a result, some physicians may be unwilling to prescribe, and some patients may be unwilling to use, our compounded formulations.

Additionally, under federal and state laws applicable to our current compounding pharmacy operations operating under Section 503A of

the FDCA, 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, who can in turn sell to and supply hospitals

and retail pharmacies.

Even though we have registered NJOF with the FDA, our compounding 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 offering only FDA-approved drugs may not face.

are produced according to the standards provided by United States Pharmacopoeia (USP) Chapter <795> (“USP 795”) and

USP Chapter <797> (“USP 797”) and applicable state and federal law, our 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 compounded formulations.

Additionally, under federal and state laws applicable to our current compounding

pharmacy operations operating under Section 503A of the FDCA, 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;

our compounded formulations must be prepared and dispensed in connection with a physician prescription for an individually identified

Pharmaceutical companies, on the other hand, are able to sell their FDA-approved products to large pharmaceutical wholesalers,

who can in turn sell to and supply hospitals and retail pharmacies.

Even though we have registered NJOF with the FDA, our compounding

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 offering only FDA-approved

drugs may not face.

Biotechnology

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Although we believe we are positioned to compete favorably with respect to many of these factors, if our proprietary formulations are

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

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

Affecting Our Performance

believe the primary factors affecting our performance are our ability to increase revenues of our proprietary compounded formulations

and certain non-proprietary products, grow and gain operating efficiencies in our pharmacy operations, potential regulatory-related restrictions,

optimize pricing and obtain reimbursement options for our proprietary compounded formulations, and continue to pursue development and

commercialization opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available as

compounded formulations.

We believe we have built a tangible and intangible infrastructure that will allow us to scale revenues efficiently

in the near and long-term.

All of these activities will require significant costs and other resources, which we may not have or be able

to obtain from operations or other sources.

believe the primary factors affecting our performance are our ability to increase revenues of our ophthalmic products, grow and gain

operating efficiencies in our pharmacy operations, successfully adjust our operations to account for any future regulatory-related restrictions,

optimize pricing and obtain reimbursement options for our ophthalmic products, and continue to pursue development and commercialization

opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available or have been recently

We believe we have built a tangible and intangible infrastructure that will allow us to scale revenues efficiently in the near

and long-term.

All of these activities will require increased costs and other resources, which we may not have or be able to obtain from

operations or other sources.

See “Liquidity and Capital Resources” below.

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The manufacturer-submitted information may be used by CMS to calculate Medicare payment

Starting in 2023, manufacturers must pay refunds to Medicare for single-source drugs or biological products, or biosimilar biological

products, reimbursed under Medicare Part B and packaged in single-dose containers or single-use packages for units of discarded drug

reimbursed by Medicare Part B in excess of 10% of total allowed charges under Medicare Part B for that drug.

Manufacturers that fail

to pay refunds could be subject to civil monetary penalties.

Further, starting in 2023, the Inflation Reduction Act of 2022 (“IRA”)

establishes a Medicare Part B inflation rebate scheme under which, generally speaking, manufacturers will owe rebates if the average

sales price of a Part B drug increases faster than the pace of inflation.

Failure to timely pay a Part B inflation rebate is subject

to a civil monetary penalty.

IRA also creates a drug price negotiation program under which, after being on the market for a certain period of time, the prices for

Starting in 2023, manufacturers are now required to pay refunds to Medicare for single-source drugs or biological products, or

biosimilar biological products, reimbursed under Medicare Part B and packaged in single-dose containers or single-use packages for units

of discarded drug reimbursed by Medicare Part B in excess of 10% of total allowed charges under Medicare Part B for that drug.

Manufacturers

that fail to pay refunds could be subject to civil monetary penalties.

Further, starting in 2023, the Inflation Reduction Act of 2022

(“IRA”) established a Medicare Part B inflation rebate scheme, effective in 2023, under which, generally speaking, manufacturers

will owe rebates if the average sales price of a Part B drug increases faster than the pace of inflation.

Failure to timely pay a Part

B inflation rebate is subject to a civil monetary penalty.

IRA also created a drug price negotiation program under which, after being on the market for a certain period of time, the prices for

certain high Medicare spending drugs and biological products provided to Medicare patients without generic or biosimilar competition

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Temporary pass-through reimbursement for IHEEZO

was awarded by CMS and will be made effective in the second quarter of 2023.

Following the expiration of pass-through status, under current

CMS policy, non-opioid pain management surgical drugs when used on Medicare Part B patients in an outpatient setting can qualify for

ongoing separate payments.

CMS’ current non-opioid separate payment policy, like other CMS policies, can be changed by CMS through

its annual rulemaking and comment process.

We believe that CMS will continue its separate payment policy for non-opioid pain management

surgical drugs, which has been in effect since 2019.

July of 2022, CMS issued its Proposed CY 2023 Payment Rule for Hospital Outpatient Services and ASCs.

Based on the summary in the proposed

rule, DEXYCU, a product we previously promoted through a commercial alliance agreement with EyePoint Pharmaceuticals, Inc.

qualified as a separately payable product in an ASC or outpatient setting and instead is now bundled into the general cataract procedure

code effective January 1, 2023.

was awarded by CMS and made effective in the second quarter of 2023.

Following the expiration of pass-through status, under current CMS

policy, non-opioid pain management surgical drugs when used on Medicare Part B patients in an outpatient setting can qualify for ongoing

separate payments.

CMS’ current non-opioid separate payment policy, like other CMS policies, can be changed by CMS through its

annual rulemaking and comment process.

are also working to ensure our continued access to the Medicare market for the ambulatory surgery center (ASC), hospital and outpatient

department (HOPD), and in-office use markets for IHEEZO.

In this regard, we are designing and intend to execute, during 2024, clinical

studies to build data sets that could be presented to CMS to extend our temporary pass-through period for IHEEZO in ASCs and HOPDs.

also met with CMS in January 2024 to request clarification related to its anesthesia billing policy which has historically not allowed

for the separate billing of anesthesia services in the physician’s office.

During the meeting we requested that CMS clarify that

J-Code 2403, IHEEZO’s permanent J-Code, is appropriate to be billed for the anesthesia product itself (i.e., IHEEZO in our case)

in the physician’s office setting.

As of the date of this Annual Report, we have not received feedback from CMS following our meeting

in January 2024.

is a joint federal and state program that is administered by the states for low-income and disabled beneficiaries.

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average manufacturer price increases at a faster rate than inflation (measured by reference to the Consumer Price Index – Urban).

Currently, the rebate is capped at 100% of the average manufacturer price, but effective January 1, 2024, this cap on the rebate will

be removed, and our rebate liability could increase accordingly.

The rebate was previously capped at 100% of the average manufacturer price, but effective January 1, 2024, this cap on the rebate was

removed, and our rebate liability could increase accordingly.

we become aware that our reporting for a prior quarter was incorrect or has changed as a result of recalculation of the pricing data,

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our rebate liability for prior quarters.

The federal Patient Protection and Affordable Care Act (the “PPACA”) made significant

changes to the Medicaid Drug Rebate program, and CMS issued a final regulation, which became effective on April 1, 2016, to implement

the changes to the Medicaid Drug Rebate program under the PPACA.

Effective in 2022, CMS modified Medicaid Drug Rebate program regulations

to, among other things, permit reporting multiple best price figures with regard to value-based purchasing arrangements and provide definitions

for “line extension,” “new formulation,” and related terms with the practical effect of expanding the scope of

drugs considered to be line extensions.

The federal Patient Protection and Affordable Care Act (the “PPACA” or “Health

Care Reform Law”) made significant changes to the Medicaid Drug Rebate program, and CMS issued a final regulation, which became

effective on April 1, 2016, to implement the changes to the Medicaid Drug Rebate program under the PPACA.

Effective in 2022, CMS modified

Medicaid Drug Rebate program regulations to, among other things, permit reporting multiple best price figures with regard to value-based

purchasing arrangements and provide definitions for “line extension,” “new formulation,” and related terms with

the practical effect of expanding the scope of drugs considered to be line extensions.

monetary penalties can be applied if we are found to have knowingly submitted any false pricing or other information to the government,

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patent protection for certain of our formulations in other important international jurisdictions in the future.

of March 15, 2023, we had, on a worldwide basis, more than 100 issued trademarks, pending trademark and copyright applications, or

registered copyright and/or trademarks including, but not limited to IHEEZO™, Imprimis®, ImprimisRx®, Harrow

Health®, Dropless®, LessDrops®, Dropless Cataract Surgery®, Dropless Cataract Therapy®, Dropless Therapy®,

MKO Melt®, and Simple Drops®.

We may choose to pursue trademark protection in other jurisdictions for any one or more of

these or other marks in the future.

We also rely on unpatented trade secrets and know-how and continuing technological innovation in

order to develop our formulations, which we seek to protect, in part, by confidentiality agreements with our employees, consultants,

of March 1, 2024, we had, on a worldwide basis, more than 100 issued trademarks, pending trademark and copyright applications, or registered

copyrights and/or trademarks.

We also rely on unpatented trade secrets and know-how and continuing technological innovation in order

to develop our products and formulations, which we seek to protect, in part, by confidentiality agreements with our employees, consultants,

collaborators and others, including certain service providers.

We also have invention or patent assignment agreements with our

current employees and certain consultants.

However, our employees and consultants may breach these agreements, and we may not have

adequate remedies for any breach, or our trade secrets may otherwise become known or be independently discovered by competitors.

addition, inventions relevant to us could be developed by a person not bound by an invention assignment agreement with us, in which

case we may have no rights to use the applicable invention.

We also have invention or patent assignment agreements with our current

employees and certain consultants.

However, our employees and consultants may breach these agreements, and we may not have adequate remedies

for any breach, or our trade secrets may otherwise become known or be independently discovered by competitors.

In addition, inventions

relevant to us could be developed by a person not bound by an invention assignment agreement with us, in which case we may have no rights

to use the applicable invention.

following table lists our outstanding material patents in the U.S.

for certain branded products, general subject matter and latest expiry

One or more patents with the same or earlier expiry dates may fall under the same general subject matter and are not listed separately.

Subject Matter

using topical formulations

composition for treatment of dry eye syndrome

composition comprising cyclosporine

Semiflourinated

compounds for ophthalmic administration

administration method

of injectable suspension

for treating ophthalmic disorder

containing a synergistic combination of polymers

comprising carbomer, galactomannan and borate

Carboxyvinyle

polymer-containing nanoparticle suspension

2030 March 2032

for treating inflammation where infection may occur

containing tobramycin and dexamethasone

for treating eye disease

of oil-in-water cationic emulsion

containing quaternary ammonium compounds

for treating ophthalmic allergic conjunctivitis

topical compositions of cetirizine

business is subject to federal, state and local laws, regulations, and administrative practices, including, among others:

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The regulatory and quality compliance environment for compounded drugs has become significantly more rigorous, complex and strict

since the passage of The Drug Quality and Security Act of 2013.

The complexity of the current state and federal regulatory environment,

as well as the expected continued evolution of state and federal laws governing pharmaceutical compounding, have and will continue to

present potentially significant challenges to our business model and the fulfillment of our mission as a company.

Below are descriptions

of some of the various federal and state laws and regulations which may govern or impact our current and planned operations.

since the passage of The Drug Quality and Security Act of 2013 (the “DQSA”).

The complexity of the current state and federal

regulatory environment, as well as the expected continued evolution of state and federal laws governing pharmaceutical compounding, have

presented, and will continue to present, potentially significant challenges to our business model and the fulfillment of our mission

as a company.

Below are descriptions of some of the various federal and state laws and regulations which may govern or impact our current

and planned operations.

New Drug Application Process

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follow a Section 505(b)(2) path to approval are drugs that have a new dosage form, strength, route of administration, formulation or

The AMP-100 NDA that was submitted and we expect the MAQ-100 NDA will be submitted as Section 505(b)(2) NDAs.

Hatch-Waxman Amendments permit the applicant to rely upon certain published nonclinical or clinical studies conducted for an approved

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The Section 505(b)(2) application also will not be approved until any non-patent exclusivity, such as exclusivity

for obtaining approval of a new chemical entity, listed in the Orange Book for the reference product has expired.

Thus, the Section 505(b)(2)

applicant may invest a significant amount of time and expense in the development of its products only to be subject to significant delay

and patent litigation before its products may be commercialized.

for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired.

Thus, the Section

505(b)(2) applicant may invest a significant amount of time and expense in the development of its products only to be subject to significant

delay and patent litigation before its products may be commercialized.

pharmacy operations are regulated by both individual states and the federal government.

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certain additional reporting requirements.

On October 27, 2020, the FDA announced availability of a final MOU, Addressing Certain Distributions

of Compounded Human Drug Products Between the State Board of Pharmacy or Other Appropriate State Agency and the Food and Drug Administration

(the “Final MOU”).

The Final MOU describes the responsibilities of a state board of pharmacy, or other appropriate state

agency that chooses to sign the Final MOU, in investigating and responding to complaints related to drug products compounded in such

state and distributed outside such state and in addressing the interstate distribution of inordinate amounts of compounded human drug

Additionally, as part of the Final MOU, the FDA refined the definition of “inordinate amount,” a threshold for

certain information identification and sharing which does not place a limit on the distribution of compounded human drug products interstate

by a pharmacy located in a state that has entered into the Final MOU.

Section 503A of the FDCA sets a 5% limit on compounded drugs distributed

outside the state by a pharmacist, pharmacy or physician located in a state that has not entered into the Final MOU.

In February 2022,

the FDA said it would suspend implementation of the Final MOU and engage in a formal rulemaking process.

During the rulemaking process,

the agency will not enter into new agreements with states based on the Final MOU.

The FDA does not expect states that have signed the

Final MOU to carry out the activities described in the Final MOU.

Thus, there is no reporting requirement for any pharmacy concerning

interstate shipments pursuant to Section 503A and will not be until the Final MOU is finalized through the rulemaking process, which

will include the engagement of a notice-and-comment and rulemaking period to implement certain provisions of Section 503A.

indicated that the process may take “several years” to complete.

In the same announcement, the FDA stated it does not intend

to enforce the statutory 5% limit on the distribution of compounded drugs out of the state in which they are compounded by compounders

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

On October 27, 2020, the FDA announced availability of a final MOU, Memorandum of Understanding

Addressing Certain Distributions of Compounded Human Drug Products Between the State Board of Pharmacy or Other Appropriate State Agency

Food and Drug Administration (the “Final MOU”).

The Final MOU describes the responsibilities of a state

board of pharmacy, or other appropriate state agency that chooses to sign the Final MOU, in investigating and responding to complaints

related to drug products compounded in such state and distributed outside such state and in addressing the interstate distribution of

inordinate amounts of compounded human drug products.

Additionally, as part of the Final MOU, the FDA refined the definition of “inordinate

amount,” a threshold for certain information identification and sharing which does not place a limit on the distribution of compounded

human drug products interstate by a pharmacy located in a state that has entered into the Final MOU.

Section 503A of the FDCA sets a

5% limit on compounded drugs distributed outside the state by a pharmacist, pharmacy or physician located in a state that has not entered

into the Final MOU.

In February 2022, the FDA said it would suspend implementation of the Final MOU and engage in a formal rulemaking

During the rulemaking process, the agency will not enter into new agreements with states based on the Final MOU.

not expect states that have signed the Final MOU to carry out the activities described in the Final MOU.

Thus, there is no reporting

requirement for any pharmacy concerning interstate shipments pursuant to Section 503A and there will not be one until the Final MOU is

finalized through the rulemaking process, which will include the engagement of a notice-and-comment and rulemaking period to implement

certain provisions of Section 503A.

The agency indicated that the process may take “several years” to complete.

announcement, the FDA stated it does not intend to enforce the statutory 5% limit on the distribution of compounded drugs out of the

state in which they are compounded by compounders located in states that do not sign the Final MOU for the duration of the rulemaking

provisions of the FDCA govern the preparation, handling, storage, marketing and distribution of pharmaceutical products.

The Drug Quality

and Security Act of 2013 (the “DQSA”) clarifies and strengthens the federal regulatory framework governing compounding pharmacies.

Title 1 of the DQSA, the Compounding Quality Act, modifies provisions of the Section 503A of the FDCA that were found to be unconstitutional

The DQSA clarifies

and strengthens the federal regulatory framework governing compounding pharmacies.

Title 1 of the DQSA, the Compounding Quality Act,

modified provisions of the Section 503A of the FDCA that were found to be unconstitutional by the U.S.

Supreme Court in 2002.

In general, Section 503A provides that pharmacies are exempt from the provisions of the FDCA requiring

compliance with cGMP, labeling with adequate directions for use and FDA approval prior to marketing if the pharmacy complies with certain

other requirements.

Among other things, to comply with Section 503A, a compounded drug must be compounded by a licensed pharmacist for

an identified individual patient on the basis of a valid prescription.

Pharmacies may only compound in limited quantities before receipt

of a prescription for an individual patient and are subject to limitations on anticipatory compounding for distribution, which generally

permit anticipatory compounding only based on historical prescription volumes.

Section 503A provides that pharmacies are exempt from the provisions of the FDCA requiring compliance with cGMPs, labeling with adequate

directions for use and FDA approval prior to marketing if the pharmacy complies with certain other requirements.

Among other things,

to comply with Section 503A, a compounded drug must be compounded by a licensed pharmacist for an identified individual patient on the

basis of a valid prescription.

Pharmacies may only compound in limited quantities before receipt of a prescription for an individual

patient and are subject to limitations on anticipatory compounding for distribution, which generally permit anticipatory compounding

only based on historical prescription volumes.

DQSA also contained new Section 503B of the FDCA, which established an outsourcing facility as a new form of entity that is permitted

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Entities voluntarily registering as outsourcing facilities are subject to cGMP requirements and regular FDA inspection, among other requirements.

As described above, our current pharmacy operations in NJ are governed by Section 503A of the FDCA, and our New Jersey based outsourcing

facility is governed by Section 503B of the FDCA.

As described above, our current pharmacy operations in New Jersey are governed by Section 503A of the FDCA, and our New Jersey based

outsourcing facility is governed by Section 503B of the FDCA.

July 30, 2020, the FDA issued a notice for comments related to certain bulk drug substances to be removed from the 503B Bulk’s

List (or Category 1 List).

Included in this notice for comment were certain bulk drug substances which we currently use in some of

our compounded products.

In the event one or more of these bulk substances are ultimately removed from the Category 1 List, we

intend to utilize commercially available versions of these substances or similar active pharmaceutical ingredients as replacements

of the bulk powders contained in our sterile products.

In addition, nothing in the FDA’s notice affects the dispensing of bulk

powder-containing products from our 503A pharmacy.

Nonetheless, if all or some of the bulk drug substances we use are removed from

the 503B Bulk’s List, this may result in a disruption in our operations, revenues and cash flows.

In addition, during

September 2020 through January 2021, NJOF 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 of NJOF.

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.

Included in this notice for comment were certain bulk drug substances which we currently use in some of our

compounded products.

In the event one or more of these bulk substances are ultimately removed from the Category 1 List, we intend to

utilize commercially available versions of these substances or similar active pharmaceutical ingredients as replacements of the bulk

powders contained in our sterile products.

Nonetheless, if all or some of the bulk drug substances we use are removed from the 503B Bulk’s

List, this may result in a disruption in our operations, revenues and cash flows.

In addition, between September 2020 and January 2021,

NJOF 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 of NJOF.

In addition, during the 2020

Inspection, the FDA noted that we were compounding drugs that did not produce for an individual patient a clinical difference from comparable

approved drugs, as determined by a prescribing practitioner.

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.

two recent California federal court (the “Court”) decisions, Allergan USA, Inc.

Prescribers Choice, Inc.

Imprimis Pharmaceuticals, Inc., the Court made rulings which impact 503B and 503A facilities operating in and

shipping to the state of California.

In the Prescribers Choice case, the Court determined that while the FDA’s interim

policies do not override the statutory obligations of the DQSA, the Court supported the FDA’s authority and flexibility as it

determines what clinical needs exist and finalizes the bulk drug substances list.

The Court would not hold a party liable under

California’s Sherman Food, Drug and Cosmetic Law (“Sherman Law”) for selling, delivering, or giving away any new

drug that has not been approved by the California Department of Health Services or the FDA if that party has complied with the

FDA’s Interim Policy.

In other words, it is not unlawful in California to utilize bulk drugs appearing on the Category 1 list

while the FDA finalizes its clinical needs list.

In the Imprimis Pharmaceuticals case, the Court made clear that its rulings

related to violations of California’s Unfair Competition Law (“UCL”) (Cal.

Code §17200) were

limited in geographical scope to drugs prepared in, dispensed from within or shipped to the State of California.

With respect to

503A facilities, the Court followed FDA’s guidance allowing compounding pharmacies to ship more than 5% of its medications out

of state while finalizing the MOUs.

It further held that 503A facilities operating within or shipping into the state of California

must follow statutory guidance found in 21 U.S.C.

With respect to the statutory guidance related to compounding in response

to valid prescription orders, the Court added a requirement that the valid prescription order must contain language that “an

FDA-approved drug is not medically appropriate.” The practical effect of these two rulings is that 503A and 503B facilities

operating within or shipping drugs into the State of California now have clear guidance as to what is, and is not, lawful behavior

with respect the California’s UCL and Sherman Law.

prepare our compounded formulations in accordance with the standards provided by the USP <795> and USP <797> and applicable

state and federal law.

In November 2022, USP published finalized revisions to USP chapters <795> and <797>, which had been

previously proposed for public comment in September 2021.

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.

prepare our compounded formulations in accordance with the standards provided by USP <795> and USP <797> and applicable state

and federal law.

In November 2023, USP made effective finalized revisions to USP <795> and USP <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.

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.

Some regulatory bodies such as state boards of pharmacy adopted these changes at that

time, and some have not or plan to on different dates, on a case-by-case basis.

While USP has no role in enforcement, we believe the

revisions to USP <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) a reduction in revenues generated from sales of formulations compounded by our 503A pharmacy,

and (ii) 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.

Confidentiality,

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data and protected health information.

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

of personal information, such as the General Data Protection Regulation (“GDPR”) in the European Union (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.

Further, several states have enacted more protective and comprehensive pharmacy-related privacy legislation that not only

applies to patient records but also prohibits the transfer or use for commercial purposes of pharmacy data that identifies prescribers.

These regulations impose substantial requirements on covered entities and their business associates regarding the storage, utilization

and transmission of and access to personal health and non-health information.

In addition, the California Invasion of Privacy Act prohibits the use of “any machine, instrument,

or contrivance” to tap any telephonic communication and use of any “electronic amplifying or recording device” to eavesdrop

upon a “confidential communication” without consent of all parties to the communication.

Other countries also have, or are

developing, laws governing the collection, use and transmission of personal information, such as the General Data Protection Regulation

(“GDPR”) in the European Union (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.

Further, several states have enacted more protective and

comprehensive pharmacy-related privacy legislation that not only applies to patient records but also prohibits the transfer or use for

commercial purposes of pharmacy data that identifies prescribers.

These regulations impose substantial requirements on covered entities

and their business associates regarding the storage, utilization and transmission of and access to personal health and non-health information.

Many of these laws apply to our business.

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and product testing and review periods.

We currently partner with companies to sell, market and distribute some of our products in certain

foreign countries.

Environmental

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approvals, any one or more of which could have a material adverse effect on our business.

pandemic caused by an outbreak of a new strain of coronavirus(the “COVID-19 pandemic”), that is affecting the U.S.

economy and financial markets and the related responses of government, businesses and individuals are impacting our employees, patients,

communities and business operations.

The implementation of travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and

social distancing orders and shutdowns, for example, affected our business in 2020 and 2021.

The full extent to which the COVID-19 pandemic

will continue to directly or indirectly impact our business, results of operations and financial condition and those of our customers,

vendors, suppliers, and collaboration partners will depend on future developments that are highly uncertain and cannot be accurately

predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the

economic impact on local, regional, national and international markets.

Management continues to actively monitor this situation and the

possible effects on our financial condition, liquidity, operations, suppliers, industry, and workforce.

In the paragraphs that follow,

we have described impacts of the COVID-19 pandemic on our clinical development programs.

For additional information on risks posed by

the COVID-19 pandemic, please see “Item 1A — Risk Factors,” included elsewhere in this Annual Report on Form 10-K.

and Development Expenses

research and development (“R&D”) expenses incurred in 2022 and 2021 primarily include expenses related to the upfront

and milestone payments from the acquisition and licensing of technology for drug and product candidates that were not yet approved by

the FDA (acquired in-process R&D), development of intellectual property, researcher and investigator-initiated evaluations, and formulation

development related primarily to our ophthalmic formulations and certain other assets, in addition to costs associated with our drug

candidate development programs.

research and development (“R&D”) expenses incurred in 2023 and 2022 primarily included expenses related to development

of intellectual property, researcher and investigator-initiated evaluations, and formulation development related primarily to our ophthalmic

products, formulations and certain other assets, in addition to costs associated with our drug candidate development programs.

the year ended December 31, 2023, we incurred $6,652,000 in R&D expenses, compared to $3,050,000 during the year ended December 31,

The 2021 R&D expenses included milestone payments of $8,117,000 to Sintetica related to our acquisition of rights to IHEEZO.

Information About Segments and Geographic Areas

evaluated the Company’s 2021 performance based on operating segments.

Segment performance for its two operating segments was based

on segment contribution.

Our reportable segments consisted of (i) our commercial stage pharmaceutical business (Pharmaceutical Compounding),

generally including the operations of our ImprimisRx business;

and (ii) our start-up operations associated with our pharmaceutical drug

development business (Pharmaceutical Drug Development).

Segment contribution for our segments represented net revenues less cost of sales,

R&D expenses, selling and marketing expenses, and select general and administrative expenses.

Management did not evaluate the following

items at the segment level:

expenses within selling, general and administrative expenses that result from the impact of corporate initiatives.

Corporate initiatives

primarily include integration, restructuring, acquisition and other shared costs;

general and administrative expenses that result from shared infrastructure, including certain expenses associated with legal matters,

our board of directors and principal executive officers, investor relations and other like shared expenses;

select revenues and operating expenses including R&D expenses, amortization, and asset sales and impairments, net as not all

such information has been accounted for at the segment level, or such information has not been used by both segments;

assets including capital expenditures.

defined segment net revenues as pharmaceutical compounded drug sales, revenues from licenses and other revenues derived from related

of sales within segment contribution includes direct and indirect costs to manufacture formulations and sell products, including active

pharmaceutical ingredients, personnel costs, packaging, storage, royalties, shipping and handling costs, manufacturing equipment and

tenant improvements depreciation, the write-off of obsolete inventory and other related expenses.

general and administrative expenses consisted mainly of personnel-related costs, marketing and promotion costs, distribution costs, professional

service costs, insurance, depreciation, facilities costs, transaction costs, and professional services costs, which are general in nature

and attributable to the segment.

in 2022, due to shifts in the Company’s strategic plans and its organizational structure, management no longer evaluates the Company’s

business in two segments and instead focuses on the performance of the business as a single operating business.

Note 19 to our consolidated financial statements included in this Annual Report for more information about our reportable segments.

Company operates the business on the basis of a single reportable segment, which is the business of discovery, development, and commercialization

of innovative ophthalmic therapies.

The Company’s chief operating decision-maker is the Chief Executive Officer, who evaluates

the Company as a single operating segment.

Company categorizes revenues by geographic area based on selling location.

All operations are currently located in the United States;

therefore, total revenues for 2023 and 2022 were attributed to the United States.

All long-lived assets at December 31, 2023 and 2022

were located in the United States.

of March 1, 2024, we employed 315 employees.

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and general and administrative functions.

We expect to add additional employees in all departmental functions, with a focus on commercial

activities as we carry out our business plan in the next 12 months.

We are not party to any collective bargaining agreements with any

of our employees.

We have never experienced a work stoppage, and we believe our employee relations are good.

We hire independent contractors

and consultants on an as-needed basis, and our salesforce is comprised primarily of contract sales organizations and contract labor.

We expect to add additional employees in all departmental functions, with a focus on sales

force additions and other commercial activities as we carry out our business plan in the next 12 months.

We are not party to any collective

bargaining agreements with any of our employees.

We have never experienced a work stoppage, and we believe our employee relations are

We hire independent contractors and consultants on an as-needed basis.

Acquisition and Retention

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Equity, and Inclusion

believe a diverse workforce is critical to our success.

Our mission is to value differences in races, ethnicities, religions, nationalities,

genders, ages, sexual orientations, as well as education, skill sets and experience.

We are focused on inclusive hiring practices, fair

believe a workforce with diverse life experiences is critical to our success.

We appreciate differences in the members of our workforce

such as, race, ethnicity, religion, nationality, gender, age, and sexual orientation, as well as education, skill sets and experience.

Because we are always interested in hiring the most productive and committed talent, we are focused on inclusive hiring practices, fair

and equitable treatment, organizational flexibility, and training and resources.

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tied to individual contributions, but to identify areas where training and development may be needed.

early 2022, we released and published on our corporate website (harrowinc.com) our Corporate Transparency Report, which describes and

summarizes the initiatives the Company has undertaken and associated metrics related to certain issues including:

2022, we released and published on our corporate website (harrow.com) our Corporate Transparency Report, which describes and summarizes

the initiatives the Company has undertaken and associated metrics related to certain issues including:

Emissions, Waste and Water

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We changed the name of our company to Harrow Health, Inc.

in December 2018.

June 26, 2011, we suspended our operations and filed a voluntary petition for reorganization relief under Chapter 11 of the United States

Bankruptcy Code in the United States Bankruptcy Court for the Southern District of California, Case No.

On December 8, 2011,

in connection with our entry into a line of credit agreement and securities purchase agreement with a third party, our voluntary petition

for reorganization relief was dismissed.

in December 2018 and then to Harrow, Inc.

corporate headquarters are located at 102 Woodmont Blvd., Suite 610, Nashville, Tennessee, 37205, and our telephone number at such office

is (615) 733-4730.

Our website address is www.harrowinc.com.

Our website address is www.harrow.com.

Information contained on our website is not deemed part of this Annual Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business