What changed in this filing

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Item 1A. Risk Factors

2021-03-12 compared with 2020-03-20 · 76 added, 62 removed, 581 unchanged (19% of the section changed)

Risk Factors.

Risk Factor Summary

Investing in our common stock involves a high degree of risk.

You should carefully consider all information in this Annual Report on Form 10-K prior to investing in our common stock.

These risks are discussed more fully in the section titled “Risk Factors.” These risks and uncertainties include, but are not limited to, the following:

• General economic conditions can have a material adverse effect on our business, financial conditions and result of operations.

• The ongoing COVID-19 pandemic may adversely affect our revenues, results of operations and financial condition.

• Failure to implement strategies to enhance our performance could have a material adverse effect on our business, results of operations and financial conditions.

• Our ability to perform depends on keeping and hiring exceptionally talented management and employees, and our failure to do so could have a material adverse effect on our business, revenues, results of operations and financial condition.

• Our success depends, in part, on our ability to successfully obtain or retain high-performing third-party performers on commercially acceptable terms, and the failure to do so can have a material adverse effect on our business, financial conditions and results of operations.

• Our business is subject to stringent government regulations, it must adhere to numerous complex pieces of legislation, and all of our products face regulatory challenges.

• Our business depends on the successful protection of our intellectual property rights and our product candidates becoming approved by regulatory agencies, commercially viable, and accepted by the market.

• Our business faces a serious financial risk if generic products that compete with any of our branded pharmaceutical products are approved and sold because sales of our products will be adversely-affected and our business may not recover the capital costs of bringing that product to market.

• Our business faces an inherent risk of product liability lawsuits related to the testing of our product candidates and the commercial sale of our products, and if we cannot successfully defend ourselves against the product liability claim, we may incur substantial liabilities.

• We may attempt to develop internationally and license our products globally, as well as invest in other businesses or joint ventures, all of which may be unsuccessful, divert our management’s attention and harm our operating results and prospects.

The risk factors described below and throughout this report should be carefully considered and could materially affect our business.

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Our business could be adversely affected by natural disasters, public health epidemics, and other events beyond our control.

Our business could be adversely impacted by the recent coronavirus (“COVID-19”) outbreak which has affected more than 100 countries and has significantly disrupted the day-to-day activities of both individuals and businesses.

Our business has been adversely impacted by the recent coronavirus (“COVID-19”) outbreak which has affected more than 200 countries and has significantly disrupted the day-to-day activities of both individuals and companies.

For example, we have been following the recommendations of health authorities to minimize exposure risk for our employees since March 2020, including allowing employees to work remotely to the extent possible.

This has included our home office employees and our hospital and field based sales representatives.

We rely on individuals and third-party organizations around the world to supply components, manufacture and distribute our products and execute our clinical trials.

We are aware of a few instances where these individuals and third-party organizations were adversely impacted by the COVID-19 pandemic.

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.

The COVID-19 pandemic’s impact on global markets could affect our future access to liquidity and materially adversely affect our results of operations and financial condition.

The coronavirus has spread throughout much of the world after initially surfacing in Wuhan, China in December 2019.

State and local authorities in the United States, like their counterparts in many other countries, have since forced many businesses to temporarily shut down in an attempt to slow the spread of the virus, and Americans are being told by public officials to practice “social distancing.” Global stock markets have reacted very negatively, and economists are projecting a sharp economic slowdown, at least in the near term, even as governments take emergency relief measures.

While the economic impact brought by, and the duration of, COVID-19 is difficult to assess or predict, the COVID-19 pandemic could result in significant disruption of global financial markets, reducing our ability to access capital in the future, which could negatively affect our liquidity in the future.

The situation is constantly evolving, however, so the extent to which the COVID-19 outbreak will impact businesses and the economy is highly uncertain and cannot be predicted.

Accordingly, we cannot predict the extent to which our results of operations, financial condition and cash flows will be affected.

An adverse development regarding our products could have a material and adverse impact on our future revenues and profitability.

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At this time, no unforeseen or serious adverse effects outside of those specified in current product labeling have been directly attributed to our approved products.

We currently market and sell six products:

Acetadote, Caldolor, Kristalose, Vaprisol, Omeclamox-Pak, and Vibativ with RediTrex being marketed in early 2020.

A product contamination or other safety or regulatory issues,

such as a failure to meet certain FDA reporting requirements involving our products could negatively impact us and possibly lead to a product recall.

We currently market and sell seven products:

Acetadote, Caldolor, Kristalose, Vaprisol, Omeclamox-Pak, and Vibativ with RediTrex being marketed since late 2020.

A product contamination or other safety or regulatory issues, such as a failure to meet certain FDA reporting requirements involving our products could negatively impact us and possibly lead to a product recall.

In addition, changes impacting any of our products in areas such as competition, lack of market acceptance or demand, government regulation, intellectual property, reimbursement and manufacturing could have an adverse impact on our future revenues and profitability.

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Furthermore, if we encounter delays or difficulties with contract manufacturers in producing our products, the distribution, marketing and subsequent sales of these products could be adversely affected.

Acetadote we have agreements with two manufacturers, and one manufacturer provided commercial supplies of the product during 2019.

If the manufacturer of Acetadote is unable to produce marketable inventory in sufficient quantities, in the agreed upon time period, we could suffer an inability to meet demand for our product.

A long-term inability to meet demand for our products could result in impairment of our brands overall future and the carrying value of the assets associated with our brands.

The recent COVID-19 pandemic may create local issues for our third party-manufacturers and introduce delays in our manufacturing process.

We have agreements with two manufacturers, and both manufacturers provided commercial supplies of the product during 2020.

If neither of the manufacturers of Acetadote are able to produce marketable inventory in sufficient quantities, in the agreed upon time period, we could suffer an inability to meet demand for our product.

We have agreements with multiple manufacturers for the supply of Caldolor and during 2020 we obtained commercial supplies from three of these manufacturers for our international and domestic Caldolor requirements.

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We also have manufacturing relationships with two packagers who provided finished supplies of the product for commercial and sampling purposes during 2020.

If these facilities are damaged or destroyed, or if

local conditions result in a work stoppage, we could suffer an inability to meet demand for our product.

If these facilities are damaged or destroyed, or if local conditions result in a work stoppage, we could suffer an inability to meet demand for our product.

Kristalose is manufactured through a complex process.

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During 2019 we entered into a new packaging arrangement for this product.

The Company has been carefully monitoring its supply chain during the pandemic and preparing for its economic impact.

The packager for Cumberland’s Omeclamox-Pak product encountered financial difficulties due to the impact of COVID-19, and their operations are currently suspended.

Cumberland is awaiting resumption of those operations while also exploring other alternatives to restart the product’s packaging.

Meanwhile, we informed the FDA of a shortage of the Omeclamox-Pak effective October 14, 2020, and have not provided a date for the availability of new inventory.

Cumberland noted that there is currently some remaining inventory of the product in the distribution channels.

If we are unable to obtain marketable inventory in the future, we could suffer an inability to meet demand for our product.

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In addition, as part of this transaction, we were assigned a commercial supply agreement with the historical Vaprisol manufacturer.

In 2018, the manufacturer informed us that they would no longer be able to provide the product following the manufacturing of one final batch which is expected to provide us with a multi-year supply.

Therefore, we are evaluating alternatives for a new manufacturer to provide us with long term supplies of the product.

In 2018, the manufacturer informed us that they would no longer be able to provide the product following the manufacturing of one final batch which is providing us with a multi-year supply.

We are currently working with a new manufacturer to provide us with long term supplies of the product.

If we are unable to produce additional marketable inventory in sufficient quantities of Vaprisol, we could suffer an inability to meet demand for our product.

Through our acquisition of Vibativ, we acquired a multi-year supply of raw material, work in process and finished goods inventory.

As a result of the agreement, we are now responsible for the future manufacture of the product and completed the transfer of the product’s manufacturing activities to a new supplier in 2019.

As a result of the agreement, we are now responsible for the manufacture of the product and completed the transfer of the product’s manufacturing activities to a new supplier during 2020.

If we are unable to obtain marketable inventory in the future, we could suffer an inability to meet demand for our product.

Under our agreement with Nordic, they will be responsible for providing us the packaged and labeled commercial supply of the RediTrex product.

Under our agreement with Nordic, they are responsible for providing us the packaged and labeled commercial supply of the RediTrex product.

If we are unable to obtain marketable inventory in the future, we could suffer an inability to meet demand for our product.

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This could disrupt our business operations, increase our operating expenses or otherwise adversely affect our operating results.

The recent COVID-19 pandemic may create additional risk and delays at our independent third-party service providers.

Competitive pressures could reduce our revenues and profits.

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states allows or, in some instances mandates, that a pharmacist dispense an available generic equivalent when filling a prescription for a branded product, in the absence of specific instructions from the prescribing physician.

Governmental and private healthcare payors also emphasize substitution of branded pharmaceuticals with less expensive generic equivalents.

Governmental and private

healthcare payors also emphasize substitution of branded pharmaceuticals with less expensive generic equivalents.

Pursuant to the provisions of the Hatch-Waxman Act, manufacturers of branded products often bring lawsuits to enforce their patent rights against generic products released prior to the expiration of branded products’ patents, but it is possible for generic manufacturers to offer generic products while such litigation is pending.

As a result, branded products typically experience a significant loss in revenues following the introduction of a competing

generic product, even if subject to an existing patent.

As a result, branded products typically experience a significant loss in revenues following the introduction of a competing generic product, even if subject to an existing patent.

Our branded pharmaceutical products are or may become subject to competition from generic equivalents because there is no proprietary protection for some of the branded pharmaceutical products we sell, because our patent protection expires or because our patent protection is not sufficiently broad or enforceable.

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Such delays could impact our ability to explore opportunities for label expansion and limit our ability to bring our products to new patient populations.

In addition, we have only obtained regulatory approval to market our products in the United States.

In addition, we have largely obtained regulatory approval to market our products in the United States.

Not all foreign jurisdictions may represent attractive opportunities for our products due to pricing, competitive, regulatory or other factors.

In certain foreign jurisdictions, we have licensed the right to market some of our products to third parties.

These third parties are responsible for seeking regulatory approval for the products in their respective jurisdictions.

These third parties are responsible for seeking and maintaining regulatory approval for the products in their respective jurisdictions.

We have no control over these third parties and cannot be sure that marketing approval for our products will be obtained outside the United States.

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If we do not successfully integrate acquired product brands into our operations, our growth opportunities may be limited.

We added five marketed products to our portfolio of brands, roughly one brand per year, beginning in late 2013 through late 2018.

If we are unable to continue to optimize our sales of our brands or we are unable to successfully integrate the marketing, sale and distribution of any other potential products into our current infrastructure or if they require significantly greater resources than originally anticipated, we may face financial and operational risks and uncertainties.

We added six marketed products to our portfolio of brands, roughly one brand per year, beginning in late 2013 through the launch of RediTrex during late 2020.

financial and operational risks and uncertainties.

If we are unable to successfully integrate any acquired brands, both current and future, these product acquisitions may not be beneficial to us in the long term.

Our Hepatoren, Boxaban, Vasculan, Portaban, and RediTrex product candidates have not been approved for sale and may never be successfully commercialized.

We anticipate that a portion of our future revenue growth will come from sales of our Hepatoren, Boxaban, Vasculan, Portaban, and RediTrex product candidates.

Hepatoren (intravenous ifetroban) is used to treat hepatorenal syndrome ("HRS"), Boxaban (oral ifetroban) is used to treat aspirin exacerbated respiratory disease ("AERD"), Vasculan (oral ifetroban) is for the treatment of systemic sclerosis ("SSc"), Portaban (injection and oral ifetroban) is for the treatment of portal hypertension associated with liver disease, and methotrexate (injection) is used to treat active rheumatoid, juvenile idiopathic and severe psoriatic arthritis as well as severe disabling psoriasis.

Our Hepatoren, Boxaban, Vasculan, and Portaban product candidates have not been approved for sale and may never be successfully commercialized.

We anticipate that a portion of our future revenue growth will come from sales of our Hepatoren, Boxaban, Vasculan, and Portaban product candidates.

Hepatoren (intravenous ifetroban) is used to treat hepatorenal syndrome ("HRS"), Boxaban (oral ifetroban) is used to treat aspirin exacerbated respiratory disease ("AERD"), Vasculan (oral ifetroban) is for the treatment of systemic sclerosis ("SSc"), and Portaban (injection and oral ifetroban) is for the treatment of portal hypertension associated with liver disease.

However, none of these products have been approved by the FDA for marketing, and these product candidates are still subject to risks associated with their development.

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If we experience difficulties in hiring and retaining personnel in key positions, we could suffer from delays in product development, loss of customers and sales and diversion of management resources, which could adversely affect operating results.

The recent COVID-19 pandemic may introduce additional challenges in the retention and hiring of key personnel.

The size of our organization and our potential growth may lead to difficulties in managing operations.

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We could be adversely affected if we or our products are subject to negative publicity.

We could also be adversely affected if any of our products or any similar products sold by other companies prove to be, or are asserted to be,

harmful to patients.

We could also be adversely affected if any of our products or any similar products sold by other companies prove to be, or are asserted to be, harmful to patients.

Also, because of our dependence upon medical and patient perceptions, any adverse publicity associated with illness or other adverse effects resulting from the use or misuse of our products or any similar products sold by other companies could have a material adverse impact on our results of operations.

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These activities are also regulated by various agencies of the states and localities in which our products are sold.

For more information, see “ Business—Government Regulation" .

Like all pharmaceutical manufacturers, we are subject to regulation by the FDA under the FDCA.

For more information, see “ Business—Government Regulation" in Part I, Item 1 of this Form 10-K.

Like all pharmaceutical manufacturers, we are subject to regulation by the FDA under the Federal Food, Drug and Cosmetic Act ("FDCA").

All new drugs must be the subject of an FDA-approved new drug application, ("NDA"), before they may be marketed in the United States.

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Such changes, or new legislation, could have a material adverse effect on our business, financial condition and results of operations.

The recent COVID-19 pandemic has introduced additional strain on the FDA.

We are unable to fully understand the impact this may cause on regulations or the related timeframes pertaining to communication with the FDA.

Proposed legislation may permit re-importation of drugs from other countries into the U.S., including foreign countries where the drugs are sold at lower prices than in the U.S., which could materially and adversely affect our operating results and our overall financial condition.

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Changes to the definition of average manufacturer price and the Medicaid rebate amount under the Healthcare Reform Act and CMS's final regulations implementing those changes also could affect our 340B ceiling price calculations and negatively impact our results of operations.

The Healthcare Reform Act obligates the Secretary of the HHS to update the agreement that manufacturers must sign to participate in the 340B program to obligate a manufacturer to offer the 340B price to covered entities if the manufacturer makes the drug available to any other purchaser at any price and to report to the government the ceiling prices for its drugs.

The Healthcare Reform Act obligates the Secretary of the Department of Health and Human Services ("HHS") to update the agreement that manufacturers must sign to participate in the 340B program to obligate a manufacturer to offer the 340B price to covered entities if the manufacturer makes the drug available to any other purchaser at any price and to report to the government the ceiling prices for its drugs.

The Health Resources and Services Administration ("HRSA"), the federal agency that administers the 340B program, recently updated the agreement with participating manufacturers.

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In the event that CMS terminates our rebate agreement, federal payments may not be available under Medicaid or Medicare Part B for our covered outpatient drugs.

CMS and the OIG have pursued manufacturers that were alleged to have failed to report these data to the government in a timely manner.

CMS and the Office of Inspector General ("OIG") have pursued manufacturers that were alleged to have failed to report these data to the government in a timely manner.

Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid.

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Unexpected refunds to the government, and any response to government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

The recent COVID-19 pandemic may introduce temporary or permanent healthcare reform measures for which we cannot predict the financial implication of on our business.

RISKS RELATING TO INTELLECTUAL PROPERTY

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In addition, changes in either patent laws or in interpretations of patent laws in the U.S.

and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

Furthermore, our competitors may independently develop similar technologies or duplicate technology developed by us in a manner that does not infringe our patents or other intellectual property.

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For example, the manufacturing process for Kristalose involves substantial trade secrets and proprietary know-how.

We have entered into confidentiality agreements with certain key employees and consultants pursuant to which such employees and

consultants must assign to us any inventions relating to our business if made by them while they are our employees, as well as certain confidentiality agreements relating to the acquisition of rights to products.

We have entered into confidentiality agreements with certain key employees and consultants pursuant to which such employees and consultants must assign to us any inventions relating to our business if made by them while they are our employees, as well as certain confidentiality agreements relating to the acquisition of rights to products.

Confidentiality agreements can be breached, though, and we might not have adequate remedies for any breach.

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Because of their nature, these lawsuits can be costly and time-consuming, and we only experience limited benefits and patent protection.

A significant adverse ruling in any such lawsuit could put the Acetadote Patents at risk of being invalidated or interpreted narrowly and could compromise the issuance of our existing patent applications.

Competitors may infringe on our other patents or the patents of our collaborators or licensors.

A significant adverse ruling in any such lawsuit could put our patents at risk of being invalidated or interpreted narrowly and could compromise the issuance of our existing patent applications.

Competitors may infringe on our patents or the patents of our collaborators or licensors.

To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming.

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See also “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources.” Fluctuation in operating results, particularly if not anticipated by investors and other members of the financial community, could add to volatility in our stock price.

The recent COVID-19 coronavirus has

negatively impacted the financial markets and may create additional risk for our customers and their ability to pay for our products.

Our focus on acquisitions as a growth strategy has created intangible assets whose amortization could negatively affect our results of operations.

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We may never realize the value of these assets.

Generally Accepted Accounting Principles ("GAAP") require that we evaluate on a regular basis whether events and circumstances have occurred that indicate that all or a portion of the carrying amount of the asset may no longer be recoverable, in which case we would write down the value of the asset and

take a corresponding charge to earnings.

Any determination requiring the write-off of a significant portion of unamortized intangible assets would adversely affect our results of operations.

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However, in the event that our employees engage in such fraudulent behavior, we could suffer material adverse consequences.

Changes in, or interpretations of, accounting principles and tax laws could have a significant impact on our financial position and results of operations.

Changes in, or interpretations of, accounting principles could have a significant impact on our financial position and results of operations.

We prepare our consolidated financial statements in accordance with GAAP.

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The interests of this group may not always coincide with our interests or the interests of other shareholders and may prevent or delay a change in control.

This significant concentration of share ownership may adversely affect the trading price of our common stock because many investors perceive disadvantages to owning stock in companies with controlling shareholders.

This significant concentration of share ownership may adversely affect the trading price of our

common stock because many investors perceive disadvantages to owning stock in companies with controlling shareholders.

Research analysts may not continue to provide or initiate coverage of our common stock or may issue negative reports.

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Any such securities litigation brought against us could result in substantial costs and a diversion of management’s attention and resources, which could negatively impact our business, operating results and financial condition.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales may occur could cause the market price of our common stock to decline.

The recent COVID-19 pandemic may cause increased risk to our common stock’s liquidity and trading price.

Unstable market conditions may have serious adverse consequences on our business.

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There is a risk that one or more of our current service providers, manufacturers and other partners may encounter difficult economic circumstances, which would directly affect our ability to attain our operating goals on schedule and on budget.

The equity and lending markets have been and will most likely continue to be negatively impacted for an unknown period of time due to the COVID-19 pandemic.

We experience costs and regulatory risk as a result of operating as a public company, and our management is required to devote time to compliance initiatives.

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Despite the internal controls and procedures put in place to maintain compliance with securities laws and regulations, our employees may still fail to comply with all SEC disclosure and reporting requirements.

Such failure could lead to administrative and civil penalties, criminal penalties, and private litigation with shareholders.

Such failure could lead to administrative and civil

penalties, criminal penalties, and private litigation with shareholders.

The consequences could have a material effect on our ability to effectively market our products and operate our business.

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As of December 31, 2020, we did not have any outstanding interest rate swap contracts.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this Annual Report on Form 10-K that are not historical factual statements are “forward-looking statements.” Forward-looking statements include, among other things, statements regarding our intent, belief or expectations, and can be identified by the use of terminology such as “may,” “will,” “expect,” “believe,” “intend,” “plan,” “estimate,” “should,” “seek,” “anticipate” and other comparable terms or the negative thereof.

In addition, we, through our senior management, from time to time make forward-looking oral and written public statements concerning our expected future operations and other developments.

While forward-looking statements reflect our good-faith beliefs and best judgment based upon current information, they are not guarantees of future performance and are subject to known and unknown risks and uncertainties, including those mentioned in Item 1A, “Risk Factors,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-K.

Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements.

Actual results may differ materially from the expectations contained in the forward-looking statements as a result of various factors.

Such factors include, but are not limited to:

• The possible or assumed future results of operations, including the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

• Changes in national or regional economic conditions, including changes in interest rates and the availability and the cost of capital to us;

• Our competitive position and competitors, including the size and growth potential of the markets for our products and product candidates;

• The success, cost and timing of our product acquisition and development activities and clinical trials;

and our ability to successfully commercialize our product candidates;

• Product efficacy or safety concerns, whether or not based on scientific evidence, resulting in product withdrawals, recalls, regulatory action on the part of the FDA (or international counterparts) or declining sales;

• The performance of our third-party suppliers and manufacturers which impacts our supply chain and could create business shutdowns or product shortages;

and the retention of key scientific and management personnel;

• Challenges to our patents and the introduction of generic versions of our products and product candidates, which could negatively impact our ability to commercialize and sell our products and product candidates and decrease sales a result of market exclusivity;

• Changes in reimbursement available to us, including changes in Medicare and Medicaid payment levels and availability of third-party insurance coverage and the effects of future legislation or regulations, including changes to regulatory approval of new products, licensing and patent rights, environmental protection and possible drug re-importation legislation;

• Interruptions and breaches of our computer and communications systems, and those of our vendors, including computer viruses, hacking and cyber-attacks, that could impair our ability to conduct business and communicate internally and with our customers, or result in the theft of trade secrets or other misappropriation of assets, or otherwise compromise privacy of sensitive information belonging to us, our customers or other business partners;

• Issuance of new or revised accounting standards by the Financial Accounting Standards Board and the Securities and Exchange Commission.

The list above contains many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements.

Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties.

We have identified the factors on this list as permitted by the Private Securities Litigation Reform Act of 1995.

Unresolved Staff Comments.

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 1A. Risk Factors