Vevye's CVS Formulary Win Boosts Harrow's Growth Outlook Amid Persistent Risks

What happened

Harrow's flagship dry eye drug Vevye has secured a Tier 1 formulary position at CVS, replacing Xiidra, which should enhance patient access and drive prescription growth. This development aligns with bullish projections from Seeking Alpha, forecasting Vevye sales to reach $100 million in 2025 and $300 million in 2026, with potential for over $2 billion by 2030. However, the DeepValue master report highlights that Harrow operates with elevated leverage, including net debt to EBITDA of 8.21 times and interest coverage below 1 times, posing significant financial risk. Additionally, the company faces regulatory uncertainties around its New Jersey outsourcing facility and intense competition in the ophthalmic market, which could impair growth and cash flow. While the formulary advancement is a positive step, it does not resolve the underlying balance sheet strains or execution challenges that support a cautious investment stance.

Implication

In the near term, improved formulary access could boost Vevye's adoption, contributing to Harrow's top-line growth and potentially improving gross margins. Nonetheless, the optimistic financial projections in the article, such as free cash flow per share targets, are speculative and must be viewed in light of Harrow's historical volatility in net income and cash flow. The company's leverage ratio of 8.21 times net debt to EBITDA means that revenue gains may not translate quickly into debt reduction without consistent positive free cash flow. Regulatory headwinds, including ongoing FDA scrutiny of manufacturing practices, remain a tangible threat that could disrupt supply chains and erode confidence. Consequently, while the news is favorable, it does not alter the fundamental risk profile, and investors should prioritize monitoring cash generation and balance sheet health over growth projections.

Thesis delta

The formulary win for Vevye strengthens the growth narrative but does not mitigate the core financial and regulatory risks identified in the DeepValue report. Therefore, the potential sell recommendation remains appropriate until evidence of sustained deleveraging and stable cash flow emerges.