Good day, ladies and gentlemen, and welcome to your Harrow Health -- I'm sorry good afternoon, and welcome to the conference call covering Harrow Health’s Financial Results and Business Update for the Second Quarter of 2019. My name is Christy and I will be your operator today. At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session. By now, you should have received a copy of the earnings press release. If you have not received a copy, please go to the Investor Relations page of the company's website at www.harrowinc.com.

Before we begin today, let me remind you that the company's remarks include forward-looking statements within the meaning of federal securities law.

Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond Harrow Health’s control, including risks and uncertainties described from time to time in its SEC filings such as the risks and uncertainties related to the company's ability to make commercially available its compounded formulations and technologies and FDA approval of certain drug candidates in a timely manner or at all.

For a list and description of those risks and uncertainties, please see the Risk Factors section of the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Harrow Health results may differ materially from those projected.

Harrow's disclaims any intention or obligation to update or revise any financial projections or forward-looking statements whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and as accurate only as of today.

Additionally, Harrow will refer to non-GAAP financial metrics, specifically adjusted EBITDA and/or adjusted earnings. A reconciliation of any non-GAAP measures with the most directly comparable GAAP measures is included in the company's press release available on the website.

With that, I would like to turn the call over to Mark Baum, Chief Executive Officer of Harrow.

Mark?.

Thanks for joining us. Today we will discuss progress made by Harrow Health businesses during the second quarter of 2019. At Harrow, our vision is simple in pursuit of shareholder value, we’re advocates for patients and providers, and we’re advocates for healthcare innovation.

Today, Harrow holds and manages stakes in a growing portfolio of healthcare businesses and this includes equity in these businesses and royalty rights in certain drug candidates they are developing.

Our objective is to grow our capital base by building healthcare businesses from the ground up and to eventually return earned capital to Harrow shareholders. This strategy takes advantage of the skills and the experience of Harrow management team, and provide our shareholders with a potentially attractive way to build wealth.

Some Harrow businesses are based on programs or ideas developed internally. But many include assets developed outside of Harrow.

Regardless of how a business is formed, once the business is financed and deconsolidated or spun out, our interest is maximizing Harrow's shareholder value, which may include eventually divesting some or all of a stake we hold or otherwise leveraging our assets in pursuit of financing new potentially value-driving activities.

With the exception of our 3.5 million shares stake in Nasdaq listed Eton Pharmaceuticals, the businesses we own are private companies. However, more of our businesses may become publicly-traded in the future. Being public can offer the advantages of liquidity, access to capital, and transparency for all shareholders.

Other businesses, we own such as Surface Pharmaceuticals are operating in "stealth mode", purposely keeping their activities as quiet as possible. This doesn't mean, however, that they aren't doing well or building shareholder value, because in the case of Surface, under the leadership of Dr.

Kamran Hosseini, in my view, they are exceeding our expectations. So, regardless of whether a Harrow business is public or private, we'll do our best to inform our shareholders about its status and progress.

As we enter into the back half of 2019, I believe it is important to note that in less than five years from scratch, we've created a market leading profitable fast-growing ophthalmology pharmaceutical business as well as equity ownership positions in six subsidiary pharmaceutical development businesses and in four of those, we hold royalty rights in drug candidates they are developing.

When you consider the math and add the aggregate equity value of the businesses we own, along with the royalty interest we own in drug candidates, that may serve the unmet needs in markets that equal many billions of dollars per year, you may see promise in being and hopefully continuing to be a shareholder of Harrow Health.

Let's jump into our updates. I'll start with our wholly-owned compounding businesses, which are responsible for all of Harrow's consolidated revenue. On a consolidated basis, Q2 2019 revenue grew to another new record of $13.5 million.

Our market leading ImprimisRx ophthalmology business reported revenue of $12.1 million equal to 47% growth in Q2 2019 compared to Q2 2018. ImprimisRx revenue growth was related to an increase in demand and unit volumes.

We believe this trend of increasing units sold will continue and this coupled with a slight price increase, which will be reflected in Q3 numbers and continued innovation, should help fuel further revenue growth over the coming quarters. Many shareholders ask us about the ImprimisRx regulatory environment.

Over the past few years, it is true that inspections have become more challenging. Believe it or not, we like this. We believe increased quality demands mean higher quality products for customers and higher quality products are the key for the long-term prospects of this business.

Also, as the regulatory environment has tightened, smaller players have left the market and this trend is likely to continue.

Given the investments, ImprimisRx has made in infrastructure and equipment, analytical chemistry and personnel training, it is well positioned to continue to be the national leader in ophthalmic compounded pharmaceuticals, a business, we believe, is a critical part of the way ophthalmic healthcare providers treat patients in the United States.

While the ImprimisRx brand and value proposition within ophthalmology has never been greater, propelling the business to a 187% compound annual growth rate over the last four years, there are many thousands of doctors who have never used ImprimisRx or who are customers but who do not use the entire platform.

And of course, there are still areas of ophthalmology, ImprimisRx hasn't touched, but eventually will, which represent major growth opportunities like retina, presbyopia, allergy and others. Therefore, we have confidence in our 2021, $100 million revenue run rate goal for our ImprimisRx business.

Customer counts continue to increase as ophthalmologist and optometrists adopt the ImprimisRx platform. The ImprimisRx commercial team is executing on broadening its reach within existing accounts through new inside sales initiatives in addition to the recent launch of several new products to its growing base of thousands of prescribers.

Also, as we have discussed in prior quarters, more revenue is increasingly coming from chronic care medication refills, creating a more predictable form of revenues and profits.

Consistent with our past communications and due primarily to the introduction of new formulations in the exiting of others, we saw gross margins come in lower in the second quarter of 2019 relative to the record-setting first quarter of 2019.

That said, 61% for the period is still an improvement over the 60% gross margin figure we recorded in the same period last year. We do expect gross margins to improve quickly in the second half of this year as we look to get back on track working towards our 70% target, which we believe is achievable.

Despite various onetime costs, which Andrew will discuss in more detail, adjusted EBITDA was positive again for the second quarter equaling about $250,000. And moving on, recently we entered into an agreement to sell most of the assets associated with our non-ophthalmology pharmaceutical compounding business called Park Compounding.

As part of the transaction, Harrow was issued an $8 million note from the buyer that bears interest at 9.5% and includes 20% warrant coverage. The Park transaction is contingent on the California Board of Pharmacy issuing a pharmacy license to the buyer buy on and around August 27, 2019.

This transaction will result in an estimated $8 million per year reduction in our consolidated revenues.

However, should the transaction close, it will have minimal if any impact on our cash flows, while allowing us to streamline certain corporate overhead costs, and most importantly, focus on executing our strategy to expand our fast growing ImprimisRx ophthalmology business.

We believe continued innovation and increasing volumes of an ophthalmology-focused formulary will more than make up for the lost Park revenue. To reiterate, we continue to have confidence in our 2021 $100 million revenue run rate goal for the ImprimisRx business.

Our deconsolidated subsidiaries Eton, Surface, and Melt continue to make impressive progress. You can read about Eton and its public company filings on sec.gov and get more information on Eton's website. Surface Pharmaceuticals continues to exceed our expectations albeit quietly.

Cameron and his team are doing exactly what they promised ahead of schedule and under budget. They are executing a clinical development strategy for dry eye product candidates that we believe provides more ways to demonstrate primary endpoint clinical trials success.

From an exit strategy perspective, Novartis' recent purchase of the Xiidra franchise for more than $5 billion is also helpful. We anticipate Surface will have its promised INDs in place in the next six months and hopefully human clinical data next year. These data readouts should create a significant value inflection point.

As a reminder, we own 30% of the equity in Surface and mid single-digit royalties on the Surface and dry eye disease drug candidates Surface is developing. Melt Pharmaceuticals, much like Surface, remains on plan. And importantly, the payment landscape for non-opioid products continues to be strong.

The company has begun work on pre-clinical an IND enabling studies. In addition, they recently executed an agreement with a world-class contract manufacturer, which we believe will make important formulation improvements for Melt lead drug candidate allowing for the dissolution of the drug under the tongue in about five seconds.

This new agreement also adds to the growing Melt, intellectual property estate and as a practical matter, the future commercial appeal of a product. We own 44% of the equity in Melt and an up to 8% royalty on its non-opioid, non-IV sublingual sedation and analgesia drug candidates.

Now, it's important to remind our shareholders that both Surface and Melt are developing drug candidates we know quite a bit about, as all of their respective drug candidates were products of our ImprimisRx business. They were compounded and dispensed.

This means that compounded versions of the Surface formulations have been prescribed and used in practice. The same is true with Melts drug candidates, which have been administered well over 100,000 times.

The management teams of these companies are focused on translating what we know anecdotally from the real world human experience of dispensing these formulations into a clinical trial strategy and dataset that will lead to FDA approval.

Some shareholders have asked, why we're taking some of our compounded drug formulations through an FDA approval process at all. If something already works, why invest to get it FDA approved.

While we are so proud of our best-in-class pharmaceutical compounding business and the amazing work we've done to meet the needs of patients and physicians, we believe FDA approval is and will always be the gold standard in the pharmaceutical business. Our customers want FDA approved products.

So if it is feasible, economically and clinically, we will work to pursue FDA approval. Unfortunately, this isn't currently possible with our entire formulation library. But who knows, perhaps one day FDA policies regarding clinical efficacy studies will allow for more of what we own to reasonably become FDA approvalable.

Regardless, in pursuit of shareholder value, we intend to always advocate for patients, their providers and health care innovation. Let's keep going. Since the February announcement that our subsidiary Mayfield Pharmaceuticals acquired the MAY-44 drug candidate for Dyspareunia, we've made great progress.

Perhaps most importantly, we came to an agreement with Melissa Bradford-Klug to be CEO of Mayfield once we close our planned financing. Melissa is the ideal executive to run Mayfield. She has a record of success, driving shareholder value where ever she's been. I look forward to Harrow’s shareholders getting to know Melissa.

Beyond doing the MAY-44 deal and engaging Melissa, Mayfield is also developing an oral liquid drug candidate to treat interstitial cystitis, sometimes debilitating condition that affects 8 million people in the U.S.

And with Melissa's help, Mayfield recently in licensed another major asset MAY-66, a patented new chemical entity drug candidate initially designed to treat recurrent bacterial vaginosis, a billion dollar plus U.S. market opportunity for a condition currently without a good FDA approved treatment option for women.

MAY-66 came to us with a battery of very impressive preclinical data, including what we believe is a translatable model that pre clinically not only demonstrated how MAY-66 may perform clinically, but also contrasted how well May-66 performed against various other treatments, currently commonly prescribed for BV.

We recently filed a Form 8-K with a Mayfield presentation deck on July 31st and encourage anyone interested in Harrow to review the Mayfield materials. We have engaged with a banking firm with the intent of raising about $20 million for Mayfield with the hope of deconsolidating it from Harrow by the end of the year. We're excited about Radley as well.

We're making serious progress with our RAD-100 drug candidate, with two well-respected health care institutions recently starting investigator led studies on the asset. We are also completing our pre-IND package for RAD-100 and hope to meet with FDA to discuss our program for that drug candidate before the end of the year.

In addition to RAD-100, we are also evaluating additional assets to add to the Radley pipeline as we build and form that business.

We recently executed an agreement through a newly created subsidiary called Stowe Pharmaceuticals, to acquire an exclusive worldwide license to Zian, a patented new chemical entity for first-in-class uses and the ophthalmology and OTC fields of use.

This novel molecule has shown tremendous promise, pre-clinically as an anti-infective, efficiently killing broad spectrum of bacteria colonies, viruses, fungi and mold.

The results of the preclinical data, which we intend to make available in coming periods are extremely impressive and give us cause to be hopeful that we may have the ability to advance drug candidates in several large ophthalmic and OTC markets.

From an exit strategy perspective, we remember the Shire purchase of four sites dexamethasone and povidone-iodine combination drug candidate at the completion of Phase 2 for $300 million and this was for what was essentially a compounded drug and for an opportunity far narrower than we believe ours to be.

We are confident that as Harrow shareholders and the market learns more about Stowe’s patented Zian molecule, they will share in the promise we see in our potentially lucrative ownership position in a scientifically important, and potentially commercially meaningful pharmaceutical business.

Before I turn the call over to Andrew, I want to quickly touch on the recent corporate change that we announced in June, when we moved our corporate headquarters from San Diego to Nashville, Tennessee. We are excited about the business environment in Tennessee, and on the heels of announcing the move. We also announced the hiring of Dr.

Larry Dillaha as our Chief Medical Officer who has joined us here in Nashville. We believe the Harrow team that will be based in Nashville, including our research and development group will be a potent force in continuing to catalyze shareholder value as we execute this next phase of our long-term business strategy.

Now, I will turn the call over to Andrew to provide more detail on our financials, before I provide closing comments.

Andrew?.

Hi, everyone. Thank you for taking the time to join our call today. As Mark mentioned, during the second quarter of 2019, we continue to experience the strong growth we've seen in recent quarters. Total revenues for the second quarter were $13.5 million, compared to $10.4 million a year ago.

A 30% percent increase and a 10% increase in the first quarter to second quarter. As expected revenue growth was driven primarily by our ImprimisRx ophthalmology business, with a continued increase in unit volumes associated with both our chronic care and acute use formulations.

Ophthalmology revenues increased 47% year-over-year during the second quarter. Total cost of sales for the second quarter 2019 was $5.2 million, yielding a gross profit of $8.3 million and a gross margin of 61% compared to a gross profit of $6.2 million for prior year and a gross margin of 60%.

Operating expenses totaled $9.1 million, which resulted in a loss from operations of $800,000 during the second quarter of 2019.

Our second quarter operating expenses included roughly $1.1 million in costs associated with settling and defending legal matters and about $800,000 related to R&D costs, mostly related to formulation development from our pharmaceutical compounding business.

This is compared to the second quarter of last year; we reported operating expenses of $6.9 million and an operating loss of approximately $624,000.

At the segment level, our drug development segment contributed a loss of just $170,000, while our pharmaceutical compounding business contributed about $2 million of segmented earnings, which after being adjusted and offset by shared costs; help drive consolidated adjusted earnings in the second quarter of 2019 to about $250,000.

Other expenses totaled $1.65 million during the second quarter, giving us a net loss of about $2.4 million for the second quarter in 2019 or about $0.09 per share. Looking out at the rest of the year, our third quarter financials should be impacted by the divestiture of Park.

We expect to lose about $8 million a year in annual revenues, once the Park transaction closes. Assuming the Park sale closes in the third quarter, we do expect to record a sizable gain related to the sale in the third quarter and remove any income from the Park operations into a discontinued operations line item.

We are confident that we can continue to improve on and grow our ImprimisRx revenues.

We implemented a small price increase in the third quarter and as Mark mentioned, the price increase coupled with our operational focus on that business, we expect our gross margin to improve this year, as we aim to get gross margins back to the mid to high 60% range in the third quarter, increasing gradually from there towards our 70% target, with my ever cautionary statement that we should not expect this gross margin growth to 70% to be perfectly linear quarter-to-quarter.

Our selling and general and administrative expenses have been steady for the past few quarters due to temporarily elevated litigation costs. However, with a major litigation item pretty much over, we expect little cost to retreat in the second half of the year and start turning back the figures we saw in the third quarter of 2018 and before.

Our sales and marketing expenses will continue to grow as our revenues increase, because our primarily commission-only based sales force. We expect R&D costs associated with our pharmaceutical compounding business to slow down in the second half of the year.

However, that may be offset somewhat by R&D expenses associated with our drug development segment as our Bradley, Mayfield and our Stowe subsidiary start to take shape and we begin our pursuit of their deconsolidating transactions, in addition to taking on new opportunities within our platform.

Once deconsolidated, as has been the case in the past, we expect to recover substantially all the investment we make in these subsidiaries to stand them up. I'll now turn the call over to Mark for closing remarks prior to our Q&A.

Mark?.

Thanks, Andrew. This is the most exciting and productive time I have seen since founding the company over seven years ago. We believe we can build a $1 billion plus market cap company. Getting there is achievable, although, it likely won't be a linear upward ride, and of course, nothing is guaranteed.

But as I stated at the outset of this call, consider where we started from and where we are going. Our trajectory is definitely in the right direction. We see blue skies ahead and great opportunities to build a company that will make our investors financially proud.

Before we open it up to Q&A, I would also like to once again voice my sincere gratitude to Harrow employees, employees at all Harrow businesses, including and especially Park Compounding, as well as our consultants and partner vendors for helping us build an exciting and fast growing health care company.

With that said, operator, please open the line to questions from today's participants..

Thank you. The floor is now open for questions. [Operator Instructions] And we'll take our first question from Brooks O'Neil with Lake Street Capital..

Good afternoon, guys. Congratulations on all the progress. I have a couple questions. I was hoping to start up focused on the success and improvements. Could you -- you commented Mark in the press release better than expected reception to some of the new products introduced in May.

Can you just give us any color about sort of the nature of some of those products and the success you're seeing in the marketplace?.

Sure. Thanks Brooks. The products are primarily centered around our surgical portfolio, so filling in gaps. Our goal is that if there is a refractive case, cataract surgery or LASIK procedure, where the setting is a surgical one that we have an entire suite of products that our customers need for the completion of that procedure.

While we had a great portfolio of pre and post care drops that were prescribed, there were numerous other formulations and there still are additional formulations that we intend to make available so that we can round out that portfolio.

We have a great advantage in that market, because physicians are in surgery centers are getting paid a fixed fee and we believe we are the high quality low cost provider of the medications required for that physician to complete that procedure. And we want to sell the entire suite of products and that's our objective.

And so we're rounding out that portfolio, but as I said on the call, we're going to enter new markets in retina, and we're really excited about presbyopia. I think it is the largest untapped market in ophthalmology. And we have some very interesting, I think, contributions in that market.

It's also likely a non-insurance market, which lines up really well for our business model. So we're going to continue to innovate ImprimisRx business, continue to provide high value products and you'll see more of that as we've said in the press release coming up in the third quarter and in quarters to come..

Great. So let me then it sort of leads into another question I had, which is obviously, you’re having tremendous success with ImprimisRx in the eye care area and at the same time, you continue to develop these project, 15 companies at least some of which have some interest in, are focus around ophthalmology as well.

So, how do you think about either continuing to invest in the Imprimis or setting up subsidiary companies that will also participate in the eye care segment?.

Look, we have a pretty -- well, I'm proud of our ophthalmology business, I’ll just say that we have a great team of people building a very special company, and as I said, we have this tailwind -- this tailwind at our back that exists in the ophthalmology pharmaceutical industry, which is interesting.

But look, we know a lot about the products for example that Melt is developing and I'll give you an idea of why that's so important, because to the extent Greg is successful as our CEO at Melt and getting that formulation FDA approved, believe me, all of our customers would love to and prefer to have the FDA approved version of that product and so just transitioning our existing customers for that one product, ophthalmology, and I would submit to you that the need for that formulation is far greater in other therapeutic areas like dental and OB/GYN and many others.

But just transition the existing ImprimisRx, ophthalmology customer base to the FDA approved version of the product and creates about $100 million revenue, annual revenue business. That's just transitioning the existing customer base flat-lining thing.

So, we're excited about what we learn in our ophthalmology compounding business, ImprimisRx and our ability to translate what we know to potentially FDA approved product and then to use our customer base to transition them to the FDA approved products.

It really derisk the opportunity to a certain extent for investors because, they know, that the product, if FDA approved is commercially relevant that it's going to be prescribed, not going to be one of these things that gets approved and never prescribed.

So that's exciting for us and we know obviously a fair amount about the ophthalmology space and Stowe is a very exciting business that we had been chasing them for over seven months and our advisors and we have great advisors and the ophthalmology business are as excited or even more about that that project.

So we're going to do more in ophthalmology and as we have other opportunities even outside of ophthalmology, we'll pursue those as well. But it's a really interesting model and I think, over the next few years, you're going to see quite a bit of shareholder value created through this model..

Great. Let me ask just two more quick ones. I think you commented little bit about the gross margin trend in the quarter, I did not hear exactly what you said.

Would you mind just commenting a little bit more about what happened with gross margins this quarter and then the outlook into the back part of the year?.

Yes. The gross margins were better in Q2 of 2019 versus Q2 of 2018. So, this quarter traditionally has not been the strongest, when it comes to gross margins. But we still had an improvement over the prior year. What I think is really important is what you're going to see going forward as it relates to margins in particular.

We have great confidence that we can hit that 70% margin to be clear, we're not a retail pharmacy getting paid fixed fees to fill prescriptions, making 10%, 12% margins. We are a business that we think in short order here is going to produce gross margins that will rival and potentially exceed our brethren in the specialty pharmaceutical industry.

So, you know, that is a great thing -- you'll see that by the way this year, you'll see those improvements I'd mentioned and we said on the call that you'll see equipment come online that is going to quadruple our output, that will reduce our production times for our key products.

And so this new semi-automated and fully automated equipment that we're bringing on is going to make us much more efficient. It will happen in the back half of this year and you'll start to see those changes drive gross margin improvements..

Great. I have just one more. I think Andrew mentioned the sale of Park Compounding was contingent on getting regulatory approval for the buyer by August 27th.

I just want to check and make sure you guys think that's a realistic objective given that it's just a couple weeks out?.

Absolutely. Yes, it's an important point because we have heard from the Buyers Council and the Buyers Council has heard from and spoken to the Board of Pharmacy, and we are confident that we can meet the Board of Pharmacies' minor request in order to close the transaction. Nothing's guaranteed, but we have heard from the Board.

We understand what their needs are and we believe we can meet those needs here very quickly and hopefully close this transaction. I think the upshot -- this is a strategic transaction. It allows us to 100% laser-focus on this ophthalmology business. We've got a lot of great products to introduce to the market.

We've got a great customer base to introduce them too and this is part of that focus in ophthalmology..

Great. Thank you very much..

Thank you..

Our next question comes from Andrew D'silva with B. Riley FBR..

Hey, good afternoon. Sorry, if you answered any of these questions, I was bouncing between calls, but great quarter by the way as well.

Couple quick questions just as far as the ophthalmology growth, the sequential uptick was significantly above what we were looking for and was that primarily due to just seasonality in any way or are you seeing continued increased penetration quarter-over-quarter-over-quarter? And then just as it relates to the sale of Park, were they all of your non- ophthalmology products sales or will you retain some animal health and non-ophthalmology sales once that's divested?.

Thanks. Thanks for the question, Andy. Let me take the first -- the last question first. We're going to be an ophthalmology-focused company, so the revenue that we report is going to be ophthalmology related. Our team on the production side, on the dispensing side, on the commercial side, are going to be 100% focused on ophthalmology.

We're going to be working with our customers to expand our portfolio within their businesses to help them solve unmet needs for their patients.

And we're going to work with and continue to work with the largest surgery center operations in the country to help them get affordable access to medications that they need in order to care for the patients that they serve. The ophthalmology growth quarter-over-quarter has been consistent. We expect it to continue to be consistent.

The Q2 revenue growth did not include a slight price increase that we implemented in Q3. So you'll see that reflected in Q3, as Andrew mentioned.

But the reality is, is that it is quarter-over-quarter growth, new customers coming online, we're building a battery of refill orders for our chronic care prescriptions, which is very exciting, because it becomes a more predictable flow of revenue. The growth of 115% year-over-year and our chronic care formulations is meaningful.

Now from a revenue perspective for us, it exceeds 10% of our overall revenue. And that will continue to grow. We have barely scratched the surface on these chronic care formulations and that's for the existing market.

You know for conditions like dry eye disease, only about 10% of the overall patient population that needs a prescription gets a prescription. And so you have a tremendous opportunity on the chronic care side. So we expect that growth rate to continue to fuel growth quarter-over-quarter and quarters to come..

All right. That's great to hear. Just a few more quick questions.

As it relates to your New Jersey outsourcing facility, is there any update there with California license and the State Board Pharmacy?.

Yeah. What I can tell you is that, we were fortunate enough to get our -- to have our inspection completed. By the way, we had inspections by a number of the most -- well, the largest and I think the most critical Boards of Pharmacy in United States in the last six months.

And so, we've, of course, maintained our licensure, because of the great job the team does out there. But we have had our California inspection and we're working with the board there to make sure that we get access to serve the California market through that 503B facility.

It's noteworthy that we do have, following a California inspection for our 503A facility, the California ticket that they issued to us. So we had a successful 503A inspection and we're just waiting on the results of the 503B, which should be here fairly soon..

That'd be great, that'd be significant for you guys. And then, as far as the last couple of questions, one can be related to the drug shortage list. Just how nimble can you be at this point to capitalize on that in real time? There's obviously been a lot of movement on the shortage list.

And I was -- knock off my last question too, should we expect to benefit from the discrepancy between the accrued amount for the settlements that you've had versus the actual amount since they're significantly lower?.

Yeah. Let me touch on the last question first, if that's okay.

We settled a lawsuit of -- to give you a little bit of additional color, I think it's a poster child for the need for tort reform, but which we were able to settle a FACS lawsuit as an example, earlier -- was it earlier this year, I believe, end of last year and the settlement required us to send out a form that could be filled out by any one of our customers and I'm telling you, Andy, it was an easy form to fill out.

It took 30 seconds to fill out and you stick a stamp on it. You send it in and you get money. But the case was so ridiculous that I think at the end of the day less than 2% of the people who received the form actually decided to spend the 30 seconds or so and fill it out and send it in.

So the actual damages are 98% less than what the court was told in the settlement, so we'll have to see what happens as it relates to that particular case. You should know that the vast majority of the settlement amount actually goes to the lawyers that prosecute these nuisance tort cases.

And so we'll have to see what the judge does there with respect to the attorney's fees. But we did defend the case. We settled it. We went through the process and it is now behind us..

Yeah, sorry, I was actually talking about the $49,000 versus the $640,000 that you accrued for the Allergan litigation.

Just since it's significantly less, I was thinking that you'd have a benefit from that in the third quarter?.

Yeah. I'll let Andrew talk about that..

Yeah. Andy the $640,000 as accrued was for the FACS lawsuit that Mark was referring to..

Got it. Okay..

You asked a question about the outsourcing facility in New Jersey and the drug shortage list and whether or not we could nimbly serve those markets and in the past we have, as it relates to certain formulations in glaucoma. And so we'll continue to try and serve those markets.

We have a pretty robust growing formulation -- a formulary to offer customers. So as things pop up, if we're there, and we have the formulation available, we'll take advantage of it.

I think the focus for our team is not to get out in the drug shortage zone completely, but to totally focus on our ophthalmology customers and meeting their needs, and that as I said was part of the reason for the Park transaction. So we're going to focus on ophthalmology.

We've got great tailwinds that are back on the payer -- the payer side in the market. It's very exciting what we're seeing happen, the trends are friend in ophthalmology and we want to take advantage of it because we have -- we think that the number one ophthalmology franchise in the country..

Great. Hey, congrats on the progress. Best of luck closing out 2019. Talk to you soon..

Thank you, Andy..

And that does conclude our question-and-answer session for today. I'll turn the call back over to Mark Baum for any closing remarks..

Thanks for attending everyone. If you have any investor-related questions, please contact our Investor Relations associate, Jon Patton. His direct number 858-704-4587. And this will conclude our call. Thank you..

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time and have a great day..