CUMBERLAND PHARMACEUTICALS INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Disclosure regarding forward-looking statements The following discussion contains certain forward-looking statements which reflect management’s current views of future events and operations. These statements involve certain risks and uncertainties, and actual results may differ materially from them. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ significantly from the results discussed in these forward-looking statements. Some important factors which may cause results to differ from expectations include: availability of additional debt and equity capital; market conditions at the time additional capital is required; our ability to continue to acquire branded products; product sales; management of our growth and integration of our acquisitions and impacts on our business as well as national and international markets and economies resulting from the 2020 COVID-19 pandemic. While forward-looking statements reflect our beliefs and best judgment based upon current information, they are not guarantees of future performance. Other important factors that may cause actual results to differ materially from forward-looking statements are discussed in the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” of our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and other filings with the SEC. We do not undertake to publicly update or revise any of our forward-looking statements, even in the event that experience or future changes indicate that the anticipated results will not be realized. The following presentation of management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this report on Form 10-Q. 15 OVERVIEW Our Business Cumberland Pharmaceuticals Inc. (“Cumberland,” the “Company,” or as used in the context of “we,” “us,” or “our”), is a specialty pharmaceutical company focused on the acquisition, development and commercialization of branded prescription products. Our primary target markets are hospital acute care and gastroenterology. These medical specialties are characterized by relatively concentrated prescriber bases that we believe can be penetrated effectively by small, targeted sales forces. Cumberland is dedicated to providing innovative products that improve the quality of care for patients and address unmet or poorly met medical needs. We promote our approved products through our hospital and field sales forces in the United States and are establishing a network of international partners to bring our medicines to patients in their countries. Our portfolio of FDA approved brands includes: • Acetadote ® ( acetylcysteine ) Injection, for the treatment of acetaminophen poisoning; • Caldolor ® ( ibuprofen ) Injection, for the treatment of pain and fever; • Kristalose ® ( lactulose ) for Oral Solution, a prescription laxative, for the treatment of chronic and acute constipation; • Omeclamox ® -Pak , ( omeprazole, clarithromycin, and amoxicillin ) for the treatment of Helicobacter pylori ( H. pylori ) infection and related duodenal ulcer disease; • Vaprisol ® ( conivaptan ) Injection, to raise serum sodium levels in hospitalized patients with euvolemic and hypervolemic hyponatremia; • Vibativ ® ( telavancin ) Injection, for the treatment of certain serious bacterial infections including hospital-acquired and ventilator-associated bacterial pneumonia, as well as complicated skin and skin structure infections, and • RediTrex ® ( methotrexate ) Injection, for the treatment of active rheumatoid, juvenile idiopathic and severe psoriatic arthritis, as well as disabling psoriasis. Additionally, we have Phase II clinical programs underway evaluating our ifetroban product candidates in patients with cardiomyopathy associated with Duchenne Muscular Dystrophy, Systemic Sclerosis, and Aspirin-Exacerbated Respiratory Disease. We have also completed initial Phase II clinical studies with ifetroban in patients with Hepatorenal Syndrome and patients with Portal Hypertension. The Company has both product development and commercial capabilities, and we believe we can leverage our existing infrastructure to support our expected growth. Our management team consists of pharmaceutical industry veterans experienced in business development, product development, regulatory, manufacturing, sales, marketing, and finance. Our business development team identifies, evaluates and negotiates product acquisition, licensing and co-promotion agreements. Our product development team creates proprietary formulations, manages our clinical studies, prepares all regulatory submissions and staffs our medical call center. Our quality and manufacturing professionals oversee the manufacture, release and shipment of our products. Our marketing and sales team is responsible for our commercial activities, and we work closely with our distribution partners to ensure availability and delivery of our products. Growth Strategy Cumberland's growth strategy involves maximizing the potential of our existing brands while continuing to build a portfolio of differentiated products. We currently market six FDA-approved products in the United States and expect to market our seventh product, RediTrex, before the end of 2020. Through our international partners, we are working to bring our medicines to patients in their countries. Our clinical team is developing a pipeline of new product candidates largely to address unmet medical needs. We also look for opportunities to expand the approved use of our products for additional patient populations through clinical trials, through new presentations, and through our support for select, investigator-initiated studies. Through our active business development initiative, we are pursuing the acquisition of additional marketed brands and late-stage development product candidates in our target medical specialties. Furthermore, we are supplementing these activities with the earlier stage drug development at Cumberland Emerging Technologies ("CET"), our majority-owned subsidiary. CET partners with academic research institutions to identify and progress promising, new product candidates, which Cumberland has the opportunity to further develop and commercialize. 16 Specifically, we are seeking long term sustainable growth by executing on the following: Support and expand the use of our marketed products. We continue to evaluate our products following their FDA approval to determine if additional clinical data could expand their market and use. We will continue to explore opportunities for label expansion to bring our products to new patient populations. As examples, we have secured pediatric approval, expanding the labeling for both our Acetadote and Caldolor brands. Selectively add complementary brands. In addition to our product development activities, we are also seeking to acquire products and late-stage development product candidates to continue to build a portfolio of complementary brands. We focus on under-promoted, FDA approved drugs, as well as late-stage development products that address poorly met medical needs. We will continue to target product acquisition candidates that are competitively differentiated, have valuable intellectual property or other protective features, and allow us to leverage our existing infrastructure. Our acquisition of Vibativ represents the largest product acquisition we have completed. Progress clinical pipeline and incubate future product opportunities at CET. We believe it is important to build a pipeline of innovative new product opportunities. Our ifetroban Phase II development programs represent the implementation of this strategy. At CET, we are supplementing our acquisition and late-stage development activities with the early-stage drug development activities. CET partners with universities and other research organizations to develop promising, early-stage product candidates, which Cumberland has the opportunity to further develop and commercialize. Leverage our infrastructure through co-promotion partnerships. We believe that our commercial infrastructure can help drive prescription volume and product sales. We also look for strategic co-promotion partners that can complement our capabilities and enhance the opportunity for our brands. Our co-promotion arrangements with Poly Pharmaceuticals, Inc. and Foxland Pharmaceuticals, Inc allow us to expand current promotional support for Kristalose across the U.S. Build an international contribution to our business. We have established our own commercial capabilities, including two sales divisions to promote our approved brands in the U.S. We have also entered into agreements with a group of international partners to register our products and make them available to patients in their countries. The acquisition of Vibativ resulted in several new international partners and market opportunities. We will continue to support and selectively expand our network of international partners, while assisting with the registration and commercialization efforts in their respective territories. Manage our operations with financial discipline. We work to manage our expenses in line with our revenues in order to deliver positive cash flow from operations. Our goal is to maintain a healthy financial position, with favorable gross margins, and a strong balance sheet. We were incorporated in 1999 and have been headquartered in Nashville, Tennessee since inception. During 2009, we completed an initial public offering of our common shares and listing on the Nasdaq stock exchange. Our website address is www.cumberlandpharma.com. We make available through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all material press releases and other reports as soon as reasonably practicable after their filing with the U.S. Securities and Exchange Commission, (“SEC”). These filings are also available to the public at www.sec.gov . In April 2020, we issued our inaugural Environmental, Social and Governance (“ESG”) report which is also available on our website. 17 RECENT DEVELOPMENTS COVID-19 Pandemic In March 2020, the U.S. declared a health care emergency following the outbreak of the (SARS-CoV-2) strain of coronavirus that causes COVID-19, a respiratory illness. Cumberland has remained open for business, as we are considered to be essential by the United States Department of Homeland Security. We have implemented measures to address the impact of the novel coronavirus on our business and taken appropriate action to protect our employees, secure our supply chain, and support the patients who can benefit from our medicines. All our corporate, sales and CET employees have been provided the opportunity to work remotely, and those who wish to work at our offices are encouraged to follow the health guidelines outlined by the Centers for Disease Control. Our sales organization has continued to interact with medical professionals, providing information and product samples as requested. However, their contact has largely shifted from in person to telephonic and electronic communications. Travel across the organization and attendance at medical meetings have largely been discontinued. We rely on third-party organizations around the world to supply components, manufacture and distribute our products. We are aware that we may experience revenue loss, supply interruptions, time delays and incur unplanned expenses as a result of the impact of the ongoing COVID-19 pandemic. Given the uncertainty, magnitude and impact of such changes, the Company is unable to quantify the impact on our future results as of the date of this filing. We continue to monitor the coronavirus situation both in the U.S. and internationally in order to maintain our employees’ safety and well-being, while also keeping our business operating. Acute Care Product Special Supply Arrangements In March 2020, Cumberland announced an initiative to expand the availability of Vibativ ® along with special financial arrangements for hospitals and clinics to help ensure supply during this unprecedented health care crisis. In addition, we sponsored a national program with infectious disease experts to provide information on the management of complicated respiratory infections resulting from COVID-19. Also in March 2020, we announced an initiative to expand the availability of Caldolor ® with special supply and financial arrangements, including favorable pricing and payment terms for hospitals and clinics to help ensure timely access to Caldolor during this health care crisis. Additionally, in April 2020, the Company announced a third COVID-19-related initiative. This initiative increases the availability of Vaprisol ® to hospitals and clinics including special supply and financial arrangements, with favorable pricing and payment terms, to help ensure timely access to Vaprisol during this health care crisis. Vibativ Clinical Manuscripts In May 2020, Cumberland announced a new study published in Drugs - Real World Outcomes , detailing the positive clinical outcomes that resulted from treating patients with bacteremia or endocarditis with Vibativ. This publication is a sub analysis of The Telavancin Observational Use Registry (TOUR™), a study conducted to record population characteristics, prescription information, and real-world clinical outcomes of patients with Gram-positive infections treated with Vibativ. The analysis suggests Vibativ is a promising and viable option for patients with bacteremia or endocarditis, including those with MRSA or another S. aureus pathogen. Additionally, in May 2020, we announced the publication of two studies confirming the continued in vitro potency of telavancin. Both publications were part of continued surveillance of telavancin activity since 2011. The first publication tested a global collection of 24,408 Gram-positive clinical isolates, and the second publication tested a U.S. collection of 15,882 S. aureus isolates. Both studies documented the sustained in vitro antimicrobial activity and spectrum of telavancin—many years after its clinical approval—against Gram-positive clinical isolates collected worldwide over 7 years, from 2011 through 2017. Vibativ is a patented, FDA-approved injectable anti-infective for the treatment of certain serious bacterial infections including hospital-acquired and ventilator-associated bacterial pneumonia and complicated skin and skin structure infections. It addresses a range of Gram-positive bacterial pathogens, including those that are considered difficult-to-treat and multidrug-resistant. In November 2018, Cumberland reached an agreement to acquire Vibativ from Theravance Biopharma and assume global responsibility for the product. 18 Environmental, Social and Governance (ESG) Activities In April 2020, we released our first Sustainability Report. This report describes the Company’s activities pertaining to Environmental, Social and Governance (“ESG”) matters, otherwise known as corporate sustainability. It includes details about Cumberland’s community involvement, ethical marketing, and drug safety. Our board appointed Caroline R. Young, former president of the Nashville Health Care Council, as the company’s first ESG board director. The report notes that, during 2019, Cumberland provided nearly 4 million patient doses of products, safely disposed of over 9,700 pounds of expired and damaged products and had no product recalls. We also had no product listings on the FDA’s Safety Alerts Database and no products identified in the FDA Adverse Event Reporting System during 2019. Paycheck Protection Program On April 20, 2020, Cumberland received the funding of a loan from Pinnacle Bank in the aggregate amount of $2,187,140 pursuant to the Paycheck Protection Program (the “PPP”) under the Federal Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which was enacted March 27, 2020. The PPP is administered by the U.S. Small Business Administration. The loan matures April 14, 2022, and bears interest at a rate of 1.0% per year, payable monthly commencing during November 2020. The loan may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the loan are to be used to maintain payroll, continue group health care benefits and pay for rent and utilities. Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act, including qualifying payroll costs, covered rent payments, and covered utilities. From the date of funding we have used the loan amount for such qualifying expenses. We applied for this loan after carefully considering, with our bank, the eligibility criteria to participate in this program, and determining that Cumberland met these criteria. We evaluated and provided information on our payroll and other qualifying expenses to determine the amount of PPP funds to apply for. Cumberland has not laid off or furloughed any employees as a result of the COVID-19 pandemic and, based on assistance from our PPP loan, we currently do not foresee doing so. We will continue to monitor and evaluate changes to this program as they emerge and will take appropriate action, if necessary. Ifetroban Phase II Clinical Programs We have been evaluating our ifetroban product candidate in a series of clinical studies. We have completed three pilot Phase II studies involving 1) patients suffering from Hepatorenal Syndrome, a life-threatening condition involving liver and kidney failure, 2) patients with Portal Hypertension associated with chronic liver disease and 3) patients suffering from Aspirin-Exacerbated Respiratory Disease, a severe form of asthma. A follow-up Phase II study is currently underway for this asthma indication. In addition, we are currently evaluating ifetroban in two pilot Phase II studies of 1) patients with Systemic Sclerosis or scleroderma, a debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs and 2) patients with cardiomyopathy associated with Duchenne Muscular Dystrophy. This rare, fatal, genetic neuromuscular disease results in deterioration of the skeletal, heart and lung muscles. Additional pilot studies of ifetroban are underway, including several investigator-initiated trials. Enrollment in our clinical studies declined during the first and second quarters of 2020 due to the COVID-19 pandemic. While enrollment of new patients is currently limited, we are working to ensure that patients already entered into a trial continue to receive their study drug. We are awaiting further study results before deciding on the best path for approval for ifetroban, our first new chemical entity. 19 New Hospital Product Candidate Cumberland was responsible for the formulation, development and FDA approval of both Acetadote and Caldolor. Our Medical Advisory Board has helped us identify additional opportunities that address unmet or poorly met medical needs. As a result, Cumberland has successfully designed, formulated and completed the preclinical studies for a cholesterol-reducing agent for use in the hospital setting. During 2017, we completed a Phase I study which defined the pharmacokinetic properties and provided a favorable safety profile for this new product candidate. The study results and a proposed clinical development plan were discussed with the FDA. A Phase II study has been initiated and patient enrollment completed. We are now evaluating the results from this study and will then determine the next steps for this product development program. CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES Please see a discussion of our critical accounting policies and significant judgments and estimates in Note 1 to the Company's Condensed Consolidated Financial Statements accompanying this report and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2019 Annual Report on Form 10-K. Accounting Estimates and Judgments The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. We base our estimates on past experience and on other factors we deem reasonable given the circumstances. Past results help form the basis of our judgments about the carrying value of assets and liabilities that cannot be determined from other sources. Actual results could differ from these estimates. These estimates, judgments and assumptions are most critical with respect to our accounting for revenue recognition, fair value of marketable securities, inventories, provision for income taxes, fair value of contingent consideration liability, share-based compensation, research and development expenses and intangible assets. 20 RESULTS OF OPERATIONS Three months ended June 30, 2020 compared to the three months ended June 30, 2019 The following table presents the unaudited interim statements of operations for continuing operations for the three months ended June 30, 2020 and 2019: Three months ended June 30, 2020 2019 Change Net revenues $ 9,598,177 $ 9,417,443 $ 180,734 Costs and expenses: Cost of products sold 2,609,982 1,792,293 817,689 Selling and marketing 3,865,406 3,982,379 (116,973) Research and development 1,421,502 1,716,169 (294,667) General and administrative 2,190,764 2,270,318 (79,554) Amortization 1,091,485 1,029,708 61,777 Total costs and expenses 11,179,139 10,790,867 388,272 Operating income (loss) (1,580,962) (1,373,424) (207,538) Interest income 28,661 130,565 (101,904) Interest expense (119,455) (91,200) (28,255) Income (loss) from continuing operations before income taxes (1,671,756) (1,334,059) (337,697) Income tax (expense) benefit (7,455) (4,462) (2,993) Net income (loss) from continuing operations $ (1,679,211) $ (1,338,521) $ (340,690) The following table summarizes net revenues by product for the periods presented: Three months ended June 30, 2020 2019 Change Products: Acetadote $ 595,310 $ 983,473 $ (388,163) Omeclamox-Pak 10,948 478,604 (467,656) Kristalose 3,477,471 3,476,807 664 Vaprisol 174,159 212,526 (38,367) Caldolor 1,166,569 1,054,718 111,851 Vibativ 3,299,507 2,599,280 700,227 Other revenue 874,213 612,035 262,178 Total net revenues $ 9,598,177 $ 9,417,443 $ 180,734 Net revenues. Net revenues for the three months ended June 30, 2020, were $9.6 million compared to $9.4 million for the three months ended June 30, 2019. As detailed in the table above, net revenue increased for three of our marketed products: Vibativ, Caldolor, and Kristalose during the quarter. There were decreases in Acetadote, Omeclamox-Pak and Vaprisol. We returned the exclusive rights to commercialize Ethyol and Totect in the United States to Clinigen effective January 1, 2020. As a result, the 2019 revenues and expenses associated with the products are combined and reclassified into discontinued operations in our financial statements. In exchange for the return of these product license rights and associated not-compete provisions, Cumberland is receiving $5 million in financial consideration paid over the two-years following the return date. The second installment of $0.8 million due from Clinigen was recorded during the three months ended June 30, 2020, as discontinued operations. We do not incur expenses associated with these payments from Clinigen. Vibativ revenue was $3.3 million for the three months ended June 30, 2020, an increase of $0.7 million over the same period last year. The 26.9% increase was a result of improved sales volumes. Kristalose revenue increased slightly during the second quarter of 2020, when compared to the prior year period. The increase was primarily the result of increased sales volumes for the product. 21 Vaprisol revenue was $0.2 million for the second quarter of 2020, and this slight decrease of net sales compared to the second quarter of 2019 is primarily due to lower sales volumes. Omeclamox-Pak revenue decreased $0.5 million for the second quarter of 2020, compared to the second quarter of 2019, primarily due to a decrease in sales volumes. Acetadote revenue includes net sales of our Acetadote brand and our share of net sales from our Authorized Generic. During the quarter, there was a decrease of $0.4 million in the product's revenue when compared to the prior year period as a result of lower sales volumes. Caldolor revenue was $1.2 million for the second quarter of 2020, an increase of $0.1 million compared to the same period last year. The improvement in net revenue was the result of an increase in international shipments of Caldolor when compared to the prior year period, which were partially offset by lower domestic shipments of the product, significantly impacted by COVID - 19 and a reduction in elective surgeries. Cost of products sold . Co st of products sold for the second quarter of 2020 and 2019 were $2.6 million and $1.8 million, respectively. Cost of products sold, as a percentage of net revenues, were 27.2% during the three months ended June 30, 2020, compared to 19.0% during the three months ended June 30, 2019. This change in costs of products sold as a percentage of revenue was attributable to a change in the product sales mix, particularly the increase in sales of Vibativ. Selling and marketing . Selling and marketing expense for the second quarter of 2020 decreased $0.1 million compared to the prior year period. This decrease is primarily attributable to decreases in direct sales promotion costs and travel expenses. There were partially offsetting increases in salaries and royalty costs during the quarter. Research and development . Research and development costs were $1.4 million for the second quarter of 2020 and $1.7 million for the same period last year. A portion of our research and development costs is variable based on the number of trials, study sites, cost of the per patient study protocol and patients involved in the development of our new product candidates. We continue to fund our ongoing clinical initiatives associated with our pipeline products. The decrease in costs were primarily the result of decreased study activity as well as decreases in the costs of our medical science liaison activities partially offset by increases in our annual FDA user fees. General and administrative . General and administrative expense for the second quarter of 2020 decreased to $2.2 million from $2.3 million during the second quarter of 2019 as a result of decreases in advisory and professional fees as well as a reduction in non-cash stock based compensation during the period. These decreases were partially offset by increases in salary and business development legal costs. Amortization. Amortization expense is the ratable use of our capitalized intangible assets including product and license rights, patents, trademarks and patent defense costs. Amortization for the three months ended June 30, 2020, and three months ended June 30, 2019, totaled approximately $1.1 million and $1.0 million, respectively. Income taxes . Income tax expense for the three months ended June 30, 2020, was comparable to the income tax expense for the three months ended June 30, 2019. As of June 30, 2020, we had approximately $44 million of net operating loss carryforwards resulting from the exercise of nonqualified stock options that have historically been used to significantly offset income tax obligations. We expect to continue to pay minimal income taxes during 2020 and beyond, through the continued utilization of these net operating loss carryforwards, on any taxable income generated from our operations. 22 RESULTS OF OPERATIONS Six months ended June 30, 2020 compared to the six months ended June 30, 2019 The following table presents the unaudited interim statements of operations for continuing operations for the six months ended June 30, 2020 and 2019: Six months ended June 30, 2020 2019 Change Net revenues $ 17,928,911 $ 18,147,303 $ (218,392) Costs and expenses: Cost of products sold 4,244,163 3,451,082 793,081 Selling and marketing 7,573,082 7,419,311 153,771 Research and development 3,144,057 3,115,856 28,201 General and administrative 4,227,048 4,807,057 (580,009) Amortization 2,167,524 2,051,353 116,171 Total costs and expenses 21,355,874 20,844,659 511,215 Operating income (loss) (3,426,963) (2,697,356) (729,607) Interest income 58,549 246,426 (187,877) Interest expense (152,520) (152,111) (409) Income (loss) from continuing operations before income taxes (3,520,934) (2,603,041) (917,893) Income tax (expense) benefit (41,695) 76,966 (118,661) Net income (loss) from continuing operations $ (3,562,629) $ (2,526,075) $ (1,036,554) The following table summarizes net revenues by product for the periods presented: Six months ended June 30, 2020 2019 Change Products: Acetadote $ 1,308,711 $ 1,832,976 $ (524,265) Omeclamox-Pak 124,371 678,141 (553,770) Kristalose 6,771,433 6,785,050 (13,617) Vaprisol 382,016 499,202 (117,186) Caldolor 2,261,286 2,372,599 (111,313) Vibativ 5,721,708 4,659,471 1,062,237 Other revenue 1,359,386 1,319,864 39,522 Total net revenues $ 17,928,911 $ 18,147,303 $ (218,392) Net revenues. Net revenues for the six months ended June 30, 2020, were $17.9 million compared to $18.1 million for the six months ended June 30, 2019. As detailed in the table above, net revenue increased for our marketed product Vibativ during the first six months of 2020. The overall 1.2% revenue decrease was the result of decreases in our other products. We returned the exclusive rights to commercialize Ethyol and Totect in the United States to Clinigen effective January 1, 2020. As a result, the 2019 revenues and expenses associated with the products are combined and reclassified into discontinued operations in our financial statements. In exchange for the return of these product license rights and associated non-compete provision, Cumberland is receiving $5 million in financial consideration paid over the two-years following the return date. The first two installments totaling $1.5 million due from Clinigen was recorded during the six months ended June 30, 2020, as discontinued operations. We do not incur expenses associated with these payments from Clinigen. Vibativ revenue was $5.7 million for the six months ended June 30, 2020, an increase of $1.1 million over the same period last year. The 22.8% increase in net revenue was a result of improved sales volume for the product. Kristalose revenue was $6.8 million during the first six months of 2020, consistent with the prior year period. 23 Vaprisol revenue was $0.4 million for the first six months of 2020, which is a decrease of net sales of $0.1 million compared to the first six months of 2019 primarily due to lower sales volumes. Omeclamox-Pak revenue decreased $0.6 million for the six months ended June 30, 2020, compared to the six months ended June 30, 2019, primarily due to a decrease in sales volumes. Acetadote revenue includes net sales of our Acetadote brand and our share of net sales from our Authorized Generic. There was a decrease of $0.5 million in the product's year to date revenue for the six months ended June 30, 2020, when compared to the prior year period as a result of lower sales volumes, partially offset by improved net pricing. Caldolor revenue was $2.3 million for the first two quarters of 2020, a decrease of $0.1 million compared to the same period last year. There were lower domestic shipments of the product, that were significantly impacted by COVID - 19 and a reduction in elective surgeries. These lower domestic sales were partially offset by an increase in international shipments of Caldolor when compared to the prior year period. Cost of products sold . Co st of products sold for the first six months of 2020 and 2019 were $4.2 million and $3.5 million, respectively. Cost of products sold, as a percentage of net revenues, were 23.7% during the six months ended June 30, 2020, compared to 19.0% during the six months ended June 30, 2019. This change in costs of products sold as a percentage of revenue was attributable to a change in the product sales mix, particularly the increase in sales of Vibativ. Selling and marketing . Selling and marketing expense for the six months ended June 30, 2020, increased $0.2 million compared to the prior year period. This increase is primarily attributable to increases in salaries as well as an increase in the non-cash expense related to the decrease in the fair value of Cumberland owned life insurance. These increases were partially offset by decreases in royalty costs, direct sales promotion costs and travel expenses. Research and development . Research and development costs were $3.1 million for both the first six months of 2020 and for the same period last year. A portion of our research and development costs is variable based on the number of trials, study sites, cost of the per patient study protocol and patients involved in the development of our new product candidates. We continue to fund our ongoing clinical initiatives associated with our pipeline products. We experienced a decrease in study activity offset by increases in our annual FDA user fees. General and administrative . General and administrative expense for the six months ended June 30, 2020, decreased to $4.2 million from $4.8 million during the six months ended June 30, 2019 as a result of decreases in advisory, legal and professional fees. We also experienced a reduction in non-cash stock based compensation during the period. A portion of these decreased costs were related to 2019 expenses related to our acquisition of Vibativ. Amortization. Amortization expense is the ratable use of our capitalized intangible assets including product and license rights, patents, trademarks and patent defense costs. Amortization for the six months ended June 30, 2020, and six months ended June 30, 2019, totaled approximately $2.2 million and $2.1 million, respectively. Income taxes . Income tax expense (benefit) for the six months ended June 30, 2020, as a percentage of loss from continuing operations before income taxes, was 1.2%, compared to (3.0)% for the six months ended June 30, 2019. 24 LIQUIDITY AND CAPITAL RESOURCES Working Capital Our primary sources of liquidity are cash flows provided by our operations, the proceeds from the Paycheck Protection Program loan, the amounts borrowed and available under our line of credit and the cash proceeds from our initial public offering of common stock that was completed in August 2009. We believe that our internally generated cash flows, existing working capital and our line of credit will be adequate to finance internal growth, finance business development initiatives, and fund capital expenditures for the foreseeable future. We invest a portion of our cash reserves in marketable securities including short-term cash investments, U.S. Treasury notes and bonds, corporate bonds and commercial paper. At June 30, 2020 and December 31, 2019, all our investments had original maturities of less than ninety days and as a result were classified as cash equivalents. The following table summarizes our liquidity and working capital as of June 30, 2020 and December 31, 2019: June 30, 2020 December 31, 2019 Cash and cash equivalents $ 27,373,737 $ 28,212,635 Marketable securities — — Total cash, cash equivalents and marketable securities $ 27,373,737 $ 28,212,635 Working capital (current assets less current liabilities) $ 23,090,575 $ 26,012,840 Current ratio (multiple of current assets to current liabilities) 2.0 2.1 Revolving line of credit availability $ 3,000,000 $ 1,500,000 The following table summarizes our net changes in cash and cash equivalents for the six months ended June 30, 2020 and June 30, 2019: Six months ended June 30, 2020 2019 Net cash provided by (used in): Operating activities $ 3,704,071 $ 1,464,926 Investing activities (773,014) (6,547,278) Financing activities (3,769,955) (1,905,428) Net decrease in cash and cash equivalents $ (838,898) $ (6,987,780) The net $0.8 million decrease in cash and cash equivalents for the six months ended June 30, 2020, was primarily attributable to cash used in investing and financing activities. Cash provided by operating activities of $3.7 million was positively impacted by decreases in inventory of $1.2 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $2.9 million. Cash used by investing activities was the result of additions to intangibles of $0.7 million and equipment of $0.1 million. Our financing activities included the net repayment of $1.5 million on our revolving line of credit, the $1.2 million in cash used to repurchase shares of our common stock as well as the $0.8 million used for the repurchase of subsidiary shares. The net $7.0 million decrease in cash and cash equivalents for the six months ended June 30, 2019 was attributable to cash used in investing and financing activities, partially offset by the $1.5 million in cash provided by operating activities. Cash provided by operating activities of $1.5 million was positively impacted by the decrease in inventory of $0.8 million as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $2.9 million. Cash used in investing activities included the $5.0 million payment to Theravance as part of the acquisition of Vibativ. Cash used in investing activities also included net cash invested in marketable securities of $1.1 million and additions to intangibles of $0.4 million. Our financing activities reflected the $1.2 million in cash used to repurchase shares of our common stock. 25 Debt Agreement On May 10, 2019, we entered into a third amendment ("Third Amendment") to the Revolving Credit Loan Agreement, dated July 28, 2017, with Pinnacle Bank (“Pinnacle Agreement”). The Third Amendment extended the term of the Pinnacle Agreement through July 31, 2021, as well as modified certain definitions and terms of the existing financial covenants. On October 17, 2018, we entered into a second amendment (“Second Amendment”) which increased the maximum aggregate principal available for borrowing under the Pinnacle Agreement to $20.0 million. For a summary of the material terms of the Pinnacle Agreement, as amended, see Note 7 to the accompanying unaudited condensed consolidated financial statements. Under the Pinnacle Agreement, we were initially subject to one financial covenant, the maintenance of a Funded Debt Ratio. On August 14, 2018, we amended the Pinnacle Agreement ("First Amendment") to replace the single financial covenant with the maintenance of either the Funded Debt Ratio or a Tangible Capital Ratio, as defined in the First Amendment. The Third Amendment modified the definition of the Funded Debt Ratio and the compliance target of the Tangible Capital Ratio. Both Third Amendment modifications were related to the Vibativ transaction. We were in compliance with the Tangible Capital Ratio financial covenant as of June 30, 2020. We expect to maintain compliance with the Tangible Capital Ratio financial covenant in future periods. Paycheck Protection Program Loan On April 20, 2020, Cumberland received the funding of a loan from Pinnacle Bank in the aggregate amount of $2,187,140 pursuant to the Paycheck Protection Program (the “PPP”) under the Federal Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which was enacted March 27, 2020. For a summary of the material terms of the Paycheck Protection Program loan, see Note 7 to the accompanying unaudited condensed consolidated financial statements. UUnder the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act, including qualifying payroll costs, covered rent payments, and covered utilities. From the date of funding we have used the loan amount for such qualifying expenses. OFF-BALANCE SHEET ARRANGEMENTS During the six months ended June 30, 2020 and 2019, we did not engage in any off-balance sheet arrangements.