What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-12 compared with 2022-05-13 · 221 added, 92 removed, 212 unchanged (60% of the section changed)

79 unchanged sentences

RECENT DEVELOPMENTS

COVID-19 Pandemic

In early 2020, the U.S.

declared a health care emergency following the outbreak of SARS-CoV-2, a novel strain of coronavirus that causes COVID-19, a respiratory illness.

Cumberland managed through the resulting pandemic, continuing to operate our business – keeping facilities open and our organization intact.

We moved quickly to ensure the health and safety of our team.

We also maintained our ongoing compliance with the many laws and regulations that apply to us as a publicly traded pharmaceutical company.

Throughout the pandemic, we faced the same challenges affecting other companies that rely on hospital admissions and patient visits to drive revenue.

Our clinical studies were also impacted, as fewer patients sought elective surgeries and our access to medical facilities was substantially limited.

We carefully monitored our supply chain, including the flow of raw materials and the batches of finished products emerging from the facilities that manufacture our products.

Several of our brands were negatively impacted by the lockdowns and postponement of physician office visits and elective procedures.

However, we are fortunate to have a diversified product portfolio that includes brands that have delivered a strong performance during the pandemic.

Despite the challenges of operating during a pandemic, Cumberland has remained committed to our mission of providing innovative products that improve the quality of care for patients and address poorly met medical needs.

We have continued to build our portfolio of innovative and differentiated products through a multifaceted strategy that includes the development of new candidates and acquisition of established brands.

Our resulting, diversified product line has enabled us to weather external challenges, while our team has remained responsive to the evolving medical market.

We are prepared for and look forward to future opportunities to carry out our mission.

Overall, we have been able to continue the delivery of our products while addressing the interests of our shareholders, employees, partners and community.

Sancuso Acquisition

We started off the first quarter of 2022 with an exciting announcement – Cumberland acquired the FDA-approved oncology-supportive care medicine Sancuso from Kyowa Kirin, Inc., the U.S.

In January 2022, Cumberland acquired the U.S.

rights to the FDA-approved oncology-supportive care medicine Sancuso from Kyowa Kirin, Inc., the U.S.

affiliate of Japan-based Kyowa Kirin Co., Ltd.

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Cumberland acquired U.S.

rights to Sancuso and assumed full commercial responsibility for the product – including its marketing, promotion, distribution, manufacturing and medical support activities.

rights to Sancuso and assumed full commercial responsibility for the product in the U.S.

– including its marketing, promotion, distribution, manufacturing and medical support activities.

We largely completed the transition of these responsibilities from Kyowa Kirin to Cumberland during the second quarter of 2022.

Sancuso Promotion

To support Sancuso, we have established an oncology sales division, which is initially comprised of two former Kyowa Kirin employees and their five contracted inside sales individuals.

Effective April 19, 2022, we also entered into an agreement with Verity Pharmaceuticals International Limited (“Verity”) for the national co-promotion of Sancuso.

In April 2022, we entered into an agreement with Verity Pharmaceuticals International Limited (“Verity”) for the national co-promotion of Sancuso.

Verity is a specialty pharmaceutical company that will utilize its established oncology commercial organization and customer network to co-promote Sancuso throughout the United States.

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Verity and Cumberland will share in the incremental contribution margin resulting from Verity’s efforts.

New Vibativ Agreements

In March 2022, we announced the launch of our Vibativ product in Puerto Rico.

The announcement followed an August 2021 agreement with Verity to license and commercialize our Vibativ product in that territory.

Verity has a particular strength and experience in the Puerto Rican market.

Vibativ can serve as a potentially life-saving treatment in patients with hospital-acquired and ventilator-associated pneumonia resulting from infections, including the flu and COVID-19.

Also in March 2022, we announced that we have entered into an agreement with Tabuk Pharmaceutical Manufacturing Company (“Tabuk”), a fully owned subsidiary of Saudi Arabia’s publicly traded Astra Industrial Group.

Under the terms of the agreement, Tabuk received an exclusive license to distribute Vibativ in Saudi Arabi and Jordan, with an option to expand into other countries in the region.

Cumberland has recognized an upfront payment from Tabuk.

In addition, the agreement calls for milestone payments as well as an agreed transfer price on supplies of the product for that territory.

In July 2022, Verity launched their national co-promotion efforts in support of Sancuso.

Ifetroban Clinical Studies

We have been evaluating our ifetroban product candidate, a selective thromboxane-prostanoid receptor (“TPr”) antagonist, in a series of clinical studies.

It has been dosed in nearly 1,400 subjects and was found to be safe and well tolerated in healthy volunteers and various patient populations.

Cumberland is currently sponsoring three Phase II clinical programs to evaluate ifetroban in 1) Aspirin-Exacerbated Respiratory Disease, ("AERD") a severe form of asthma;

2) Systemic Sclerosis or scleroderma, a debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs;

and 3) patients with cardiomyopathy associated with Duchenne Muscular Dystrophy, a genetic neuromuscular disease that results in deterioration of the skeletal, heart and lung muscles.

We are awaiting results from the studies underway before deciding on the best development path for the registration of ifetroban.

We are also designing a fourth Phase II program to evaluate the use of ifetroban to treat patients with Progressive Fibrosing Interstitial Lung Diseases and we are currently preparing an application to the FDA to support the new program.

In addition to our Company-sponsored studies, Harvard clinical investigators have led a Phase II trial in patients with AERD.

Their study is designed to understand the mechanism of ifetroban in those patients and therefore complements the work we have underway.

Their work has been supported by a $5 million grant from the NIH.

Patient enrollment in the study is now closed, and the data analysis is underway.

We look forward to sharing the results of the study once we receive the study report from them in the coming months.

New Ifetroban Publication

In June 2022, the American Journal of Respiratory and Critical Care Medicine published preclinical studies that support the use of ifetroban as a promising therapeutic for patients with pulmonary fibrosis associated with lung disease.

Specifically, the researchers reported that ifetroban was used to block thromboxane receptor signaling in three preclinical models of lung fibrosis:

bleomycin-induced lung fibrosis, Hermansky-Pudlak Syndrome mice and radiation-induced lung fibrosis.

Ifetroban reduced pro-fibrotic signaling in the lungs and prevented lung fibrosis due to multiple causes (bleomycin, genetic, radiation).

Amendment to Revolving Credit Loan Agreement

On June 30, 2022, Cumberland entered into the eighth amendment to our revolving credit loan agreement with Pinnacle Bank permitting the Funded Debt Ratio to be calculated on a rolling four-quarter basis to be no more than 3.00 to 1.00 for the second and third quarters of 2022 and 2.50 to 1.00 for each quarter thereafter.

Nordic Pharma Arrangements

On July 12, 2022, we entered into an amendment to our agreement with Nordic Pharma (“Nordic”) that addresses the responsibilities and financial arrangements regarding our license to Nordic's methotrexate line of products for the U.S.

(the “License”).

Our line of prefilled methotrexate syringes, marketed under the brand name RediTrex ® in the U.S., is covered by the License.

Based on the amendment, we are providing Nordic with the opportunity to assume responsibility for commercializing the methotrexate products in the U.S.

after March 31, 2023.

We will continue to distribute and support the RediTrex product line during a transition period until then.

Following the return of the License, Nordic will provide us with a royalty on their future sales of the product through April 2035.

The companies will continue to collaborate on any transition and ongoing commercialization of the product line.

Cumberland will transfer to Nordic the marketing authorization associated with the RediTrex product line.

Nordic will return the 180,000 shares we issued to them associated with the License and refund the $1 million we paid to them following the brand’s approval in the U.S.

Nordic will also issue a credit note in favor of Cumberland in the amount of $1 million for the unpaid milestone payment due from us for our launch of the product line.

New Board Member

In July 2022, we were honored to welcome Martin Brown Jr.

to Cumberland’s Board of Directors.

His experience includes 10 years on the board of directors of Brown-Forman Corporation, a large American spirits and wine company whose shares are listed on the New York Stock Exchange.

Additionally, he has served since 2018 on the board of directors of the parent company of Aegis Sciences Corporation, a federally certified health care laboratory headquartered in Nashville.

Brown is an attorney at Adams and Reese LLP.

He has nearly 30 years of legal experience representing privately held businesses, counseling owners in complex business transactions, intellectual property licensing, international commerce, mergers and acquisitions, and estate planning.

He has been listed since 2009 in the corporate law category of Best Lawyers ® .

He has been an active board member for many community organizations, including the Land Trust for Tennessee, Nashville Public Radio, Montgomery Bell Academy, Nashville Public Television, Centerstone Mental Health Center, Cheekwood Estate and Gardens, and Tennessee chapter of the Nature Conservancy.

Brown brings significant legal, public company, health care and civic experience to our Board.

We expect his contributions will be valuable in our efforts to acquire, develop and deliver innovative products to improve the quality of care for patients.

Board Special Committee

The Board has formed a Special Committee (the “Committee”) as an ad hoc committee of the Board of Directors to facilitate certain corporate development activities, including the review and evaluation of potential mergers, acquisitions, joint ventures, significant investments or divestitures of material assets.

The Committee is composed solely of directors who meet the independence requirements of the NASDAQ Global Select Market.

The Committee was activated so that the Company may properly consider and evaluate any corporate development opportunities that might arise as a result of the recent volatility in the financial markets associated with the biopharmaceutical industry.

Sustainability Report

In early August 2022, we announced the results of our 2021 Sustainability Report, outlining our activities pertaining to environmental, social and governance matters.

As the largest biopharmaceutical company founded and headquartered in the Mid-South, we hold ourselves to the highest standards of ethical practices and understand the importance of recognizing and addressing our impact on our constituents, the community and the environment.

Highlights from the report include:

• We provided 2.43 million doses of our products for patients in 2021.

• We also safely disposed of over 6,200 pounds of expired or damaged products during the year.

• We had no products recalled, no Company marketed brands listed on the FDA’s MedWatch Safety Alerts for Human Medical Products, no marketed Company product issues identified by FDA from their Adverse Event Reporting System and no clinical trials terminated due to failure to practice good clinical standards.

The 2021 Sustainability Report also highlights our investment in our employees through our continuing education programs, employee development initiatives and employee recognition awards.

Cumberland’s workforce is 44% women, and 15% of our employees are minorities.

State of Tennessee and Tennessee Valley Authority Grants

The State of Tennessee and the Tennessee Valley Authority have awarded Cumberland a total of $250,000 in grants to support the buildout of the new offices at 1600 West End Ave.

and the relocation of the Company to this new headquarters.

This new headquarters location keeps Cumberland near the Vanderbilt University Medical Center to enable our continued collaboration.

With our portfolio of FDA-approved drug brands, and a deep pipeline of new drugs under development, Cumberland is poised to attain significant milestones in the coming years.

We believe this well-located, state-of-the-art new headquarters will play an important role in the Company’s future success.

Omeclamox-Pak Supply Update

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We have transferred manufacturing to a new facility and await the submission and FDA approval for that plant before resuming shipments.

That company plans to provide an interim supply of compounded product to the market while awaiting the needed facility approval.

Ifetroban Clinical Studies

We have been evaluating our ifetroban product candidate, a selective thromboxane-prostanoid receptor (“TPr”) antagonist, in a series of clinical studies.

It has been dosed in nearly 1,400 subjects and was found to be safe and well tolerated in healthy volunteers and various patient populations.

Cumberland is currently sponsoring three Phase II clinical programs to evaluate ifetroban in 1) Aspirin-Exacerbated Respiratory Disease, a severe form of asthma;

2) Systemic Sclerosis or scleroderma;

a debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs;

and 3) patients with cardiomyopathy associated with Duchenne Muscular Dystrophy, a genetic neuromuscular disease that results in deterioration of the skeletal, heart and lung muscles.

After being interrupted by the pandemic, enrollment in these studies has resumed as many of our clinical study sites have reopened and begun screening patients for potential participation.

We are awaiting results from the studies underway before deciding on the best development path for the registration of ifetroban.

We are also designing a Phase II study to evaluate the use of ifetroban to treat patients with Progressive Fibrosing Interstitial Lung Diseases.

We are preparing an application to the FDA to support the new program.

In addition to our company-sponsored studies, an NIH-funded, Harvard-clinical-investigator-led trial has closed enrollment of patients with Aspirin Exacerbated Respiratory Disease.

This Phase II, placebo-controlled study, complements our programs and we will announce top-line results following a completion of the data analysis.

During the second quarter of 2022, the new manufacturer was issued an FDA Form 483 following an inspection of their facility.

The FDA notified us that our application to manufacture Vaprisol at the new facility would need to be resubmitted once those 483 issues are satisfactorily resolved.

Our new manufacturing partner is working with the FDA to address those issues on a timely basis.

Meanwhile, the Company plans to provide an interim supply of compounded product to the market while awaiting the needed facility approval.

Cumberland remains committed to our mission of providing innovative products that improve the quality of care for patients and address poorly met medical needs.

We are working to fulfill this mission by building a portfolio of innovative and differentiated products through a multifaceted strategy that includes the development of new candidates as well as the acquisition of established brands.

Our resulting, diversified product line has enabled us to weather external challenges amid the pandemic, while our team remains responsive to the evolving medical market.

Our resulting, diversified product line has enabled us to weather external challenges while our team remains responsive to the evolving medical market.

We are prepared for and look forward to future opportunities to carry out our mission throughout the remainder of the year.

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Actual results could differ from these estimates.

These estimates, judgments and assumptions are most critical with respect to our accounting for revenue recognition, inventories, fair value of contingent consideration liabilities associated with business combinations, share-based compensation and intangible assets.

The Company's most significant estimates include:

(1) its allowances for chargebacks and accruals for rebates and product returns, (2) the allowances for obsolescent or unmarketable inventory and (3) valuation of contingent consideration liabilities associated with business combinations.

RESULTS OF OPERATIONS

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

The following table presents the unaudited interim statements of operations for continuing operations for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

Three months ended June 30, 2022 compared to the three months ended June 30, 2021

The following table presents the unaudited interim statements of operations for continuing operations for the three months ended June 30, 2022 and 2021:

Three months ended June 30,

2022 2021 Change

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Interest income 15,066 6,591 8,475

Other income — 2,187,140 (2,187,140)

Other income - gain on insurance proceeds 611,330 — 611,330

Interest expense (137,624) (25,859) (111,765)

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The following table summarizes net revenues by product for the periods presented:

Three months ended March 31,

Three months ended June 30,

2022 2021 Change

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Net revenues.

Net revenues for the three months ended March 31, 2022, were $11.2 million compared to $10.5 million for the three months ended March 31, 2021.

Net revenues for the three months ended June 30, 2022, were $10.3 million compared to $9.1 million for the three months ended June 30, 2021.

As detailed in the table above, net revenue increased for two of our marketed products:

Kristalose and RediTrex during the quarter, as well as the addition of Sancuso.

Kristalose revenue increased by 31.8% during the first quarter of 2022 to $3.9 million, when compared to the prior year period.

The increase was primarily the result of growth in shipments of the product to our wholesale customers.

Caldolor and RediTrex during the quarter.

We also continued significant shipments of Sancuso which we launched earlier in the year.

Kristalose revenue of $3.6 million for the second quarter of 2022, represented a decrease of $1.7 million when compared to the prior year period.

The decrease was primarily the result of timing of shipments to one of our co-promotion partners.

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 slight decrease in the product's revenue when compared to the prior year period.

Vaprisol revenue was $(0.1) million for the first quarter of 2022, a decrease of $1.3 million compared to the same period last year.

This decrease of net sales compared to the first quarter of 2021 is primarily due to a stock shortage as we await pending FDA approval on a new manufacturer.

Caldolor revenue was $1.0 million for the first quarter of 2022, a decrease of $0.6 million compared to the same period last year.

The decrease was the result of lower international shipments of the product, due to order timing.

Vibativ revenue was $2.5 million for the three months ended March 31, 2022, compared to $5.1 million for the same period last year.

The decrease was a result of increased purchases in 2021 due in part to a new packaging change.

Sancuso revenue was $3.4 million for the first quarter of 2022, which was $0.3 million higher than the first quarter of 2021 U.S.

During the quarter, there was a slight decrease in the branded product's revenue when compared to the prior year period.

Vaprisol revenue was $(0.1) million for the second quarter of 2022, a decrease of $0.5 million compared to the same period last year.

This decrease is primarily due to the lack of inventory of the product, as we await FDA approval on a new manufacturer.

Caldolor revenue was $1.2 million for the second quarter of 2022, an increase of $0.3 million, or 27.2%, compared to the second quarter of 2021.

The increase was the result of higher international shipments of the product.

Vibativ revenue was $1.6 million for the three months ended June 30, 2022, compared to $1.8 million for the same period last year.

The decline was a result of increased purchases in 2021 associated in part with wholesaler stocking of our new packaged product.

Sancuso revenue was $3.4 million for the second quarter of 2022, which was $0.3 million higher than the second quarter of 2021 U.S.

results reported by Kyowa Kirin, from whom Cumberland acquired the U.S.

rights to Sancuso on January 3, 2022.

Omeclamox-Pak had no sales for the first quarter of 2022, as Cumberland is currently out of commercial inventory of this product.

Omeclamox-Pak had no sales for the second quarter of 2022, as Cumberland is currently out of commercial inventory of this product.

The packager for our Omeclamox-Pak product encountered financial difficulties, and currently is under new management and a reorganization.

We are in discussions about the resumption of packaging the product.

Net revenue for the first quarter of 2022 was positively impacted by various revenue adjustments.

Net revenue for the three months ended June 30, 2022, was negatively impacted by various revenue adjustments.

Cost of products sold .

Co st of products sold for the first quarter of 2022 and 2021 were $2.2 million and $2.4 million, respectively.

Cost of products sold, as a percentage of net revenues, were 19.8% during the three months ended March 31, 2022, compared to 22.9% during the three months ended March 31, 2021.

This change in costs of products sold as a percentage of revenue was attributable to a change in the product sales mix.

Co st of products sold for the second quarter of 2022 and 2021 were $2.0 million and $1.7 million, respectively.

Cost of products sold, as a percentage of net revenues, were 19.7% during the three months ended June 30, 2022, similar to 19.2% during the three months ended June 30, 2021.

Selling and marketing .

Selling and marketing expense for the first quarter of 2022 increased $0.8 million compared to the prior year period.

This increase is primarily attributable to an increase in marketing spending for Sancuso as well as royalty costs, direct promotional spending, meeting costs and travel expenses for all of our existing brands including our new oncology sales force.

Selling and marketing expense for the second quarter of 2022 increased $0.4 million compared to the same period last year.

This increase is primarily attributable to an increase in marketing expenses associated with the Sancuso acquisition, including royalty costs, promotional spending and the costs associated with our new oncology sales division.

Research and development .

Research and development costs for the first quarter of 2022 and 2021 were $1.7 million and $1.3 million, respectively.

Research and development costs for the second quarter of 2022 and 2021 were $1.8 million and $1.4 million, respectively.

A portion of our research and development costs is variable based on the number of trials, study sites, number of patients and the cost per patient in each of our clinical programs.

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General and administrative .

General and administrative expense for the first quarter of 2022 was $2.3 million, which was $0.1 million higher than the first quarter of 2021.

The increase was primarily attributable to increases in compensation expense.

General and administrative expense increased to $2.2 million for the second quarter of 2022, compared to $2.1 million for the second quarter of 2021, an increase of $0.1 million .

The increase was primarily attributable to increases in compensation expenses.

The components of the statements of operations discussed above reflect the following impacts from Vibativ:

Financial Impact of Vibativ Three months ended March 31,

Financial Impact of Vibativ Three months ended June 30,

Net revenue $ 1,596,821 $ 1,844,936

Cost of products sold (1)

402,320 678,146

Royalty and operating expenses (17,957) 767,813

Vibativ contribution $ 1,212,458 $ 398,977

(1) The Vibativ inventory included in the costs of product sold during the period was acquired and paid for by Cumberland as part of the acquisition of the brand during 2018.

The components of the statements of operations discussed above reflect the following impacts from Sancuso:

Financial Impact of Sancuso Three months ended June 30,

Net revenue (1)

$ 3,648,548 $ —

Cost of products sold (2)

Royalty and operating expenses 992,922 —

Sancuso contribution $ 2,295,054 $ —

(1) 2022 net revenue includes a $250,000 payment to Cumberland required under the terms of a new licensee agreement.

(2) The Sancuso inventory included in the costs of product sold during the period was acquired and paid for by Cumberland as part of the acquisition of the brand during 2022.

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, 2022 and 2021, totaled approximately $1.5 million and $1.2 million, respectively.

The increase in amortization expense is due to the acquisition of Sancuso.

Income taxes .

Income tax expense for the three months ended June 30, 2022, was comparable to the income tax expense for the three months ended June 30, 2021.

As of June 30, 2022, we had approximately $56.6 million in federal net operating loss carryforwards including 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 2022 and beyond, through the continued utilization of these net operating loss carryforwards, on any taxable income generated from our operations.

Other income.

In the second quarter of 2022, we recognized a gain on insurance proceeds of $0.6 million.

RESULTS OF OPERATIONS

Six months ended June 30, 2022 compared to the six months ended June 30, 2021

The following table presents the unaudited interim statements of operations for continuing operations for the six months ended June 30, 2022 and 2021:

Six months ended June 30,

2022 2021 Change

Net revenues $ 21,474,197 $ 19,592,642 $ 1,881,555

Costs and expenses:

Cost of products sold 4,243,769 4,157,978 85,791

Selling and marketing 9,171,114 7,909,157 1,261,957

Research and development 3,568,829 2,617,765 951,064

General and administrative 4,506,324 4,327,639 178,685

Amortization 3,122,698 2,340,132 782,566

Total costs and expenses 24,612,734 21,352,671 3,260,063

Operating income (loss) (3,138,537) (1,760,029) (1,378,508)

Interest income 31,107 12,017 19,090

Other income — 2,187,140 (2,187,140)

Other income - gain on insurance proceeds 611,330 — 611,330

Interest expense (257,199) (50,276) (206,923)

Income (loss) from continuing operations before income taxes (2,753,299) 388,852 (3,142,151)

Income tax (expense) benefit (13,800) (14,917) 1,117

Net income (loss) from continuing operations $ (2,767,099) $ 373,935 $ (3,141,034)

The following table summarizes net revenues by product for the periods presented:

Six months ended June 30,

2022 2021 Change

Kristalose $ 7,515,368 $ 8,269,443 $ (754,075)

Sancuso 6,795,758 — 6,795,758

Vibativ 4,098,255 6,897,179 (2,798,924)

Caldolor 2,153,546 2,477,824 (324,278)

Vaprisol (251,623) 1,534,216 (1,785,839)

Acetadote 237,884 269,972 (32,088)

Omeclamox-Pak (3,676) (474,371) 470,695

RediTrex 152,904 (24,870) 177,774

Other revenue 775,781 643,249 132,532

Total net revenues $ 21,474,197 $ 19,592,642 $ 1,881,555

Net revenues.

Net revenues for the six months ended June 30, 2022, were $21.5 million compared to $19.6 million for the six months ended June 30, 2021, an increase of $1.9 million.

The addition of our newest product Sancuso contributed to an overall 9.6% revenue increase.

Kristalose revenue was $7.5 million during the first six months of 2022, a decrease of $0.8 million when compared with the prior year period.

Revenue decreased due to slightly lower sales volume associated with one of our co-promotion partners in 2022.

Vibativ revenue was $4.1 million for the six months ended June 30, 2022, compared to $6.9 million for the same period last year.

The decrease in net revenue was a result of improved sales volume for the product during the six months ended June 30, 2021.

The decline was a result of increased purchases in 2021 associated in part with wholesaler stocking of our new packaged product.

Vaprisol revenue was $(0.3) million for the first six months of 2022 as Cumberland is currently out of commercial inventory of the product.

Net revenue was negatively impacted by various sales adjustments.

Omeclamox-Pak had no sales for the six months ended June 30, 2022, as Cumberland is currently out of commercial inventory of this product.

The packager for our Omeclamox-Pak product encountered financial difficulties and currently is under new management and a reorganization.

We are in discussions about the resumption of packaging the product.

Net revenue for the six months ended June 30, 2022, was negatively impacted by product returns during the period.

Acetadote revenue includes net sales of our Acetadote brand and our share of net sales from our Authorized Generic.

There was a slight decrease in the product's year to date revenue for the six months ended June 30, 2022, when compared to the prior year period as a result of an increase in expired product returns in 2022.

Caldolor revenue was $2.2 million for the first two quarters of 2022, a decrease of $0.3 million compared to the same period last year.

International shipments decreased in 2022.

Cost of products sold .

Co st of products sold for first six months of 2022 and 2021 were consistent at $4.2 million for each period.

Selling and marketing .

Selling and marketing expense for the six months ended June 30, 2022, increased $1.3 million compared to the prior year period.

This increase is primarily attributable to an increase in marketing expenses associated with the Sancuso acquisition including royalty costs, promotional spending and the costs associated with our new oncology sales division.

Research and development .

Research and development costs were $3.6 million for the first six months of 2022 compared to $2.6 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.

General and administrative .

General and administrative expense for the six months ended June 30, 2022, remained consistent with $4.5 million compared to $4.3 million during the six months ended June 30, 2021.

In 2022, we experienced a slight increase in compensation expense.

The components of the statements of operations discussed above reflect the following impacts from Vibativ:

Financial Impact of Vibativ Six months ended June 30,

Net revenue (1)

$ 4,248,255 $ 6,897,179

Cost of products sold (2)

1,329,480 2,134,962

Royalty and operating expenses 663,360 1,170,165

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The components of the statements of operations discussed above reflect the following impacts from Sancuso:

Financial Impact of Sancuso Three months ended March 31,

Financial Impact of Sancuso Six months ended June 30,

Net revenue (1)

$ 7,045,758 $ —

Cost of products sold (2)

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Sancuso contribution $ 4,393,900 $ —

(1) 2022 net revenue includes a $250,000 payment to Cumberland required under the terms of a new licensee agreement.

(2) The Sancuso inventory included in the costs of product sold during the period was acquired and paid for by Cumberland as part of the acquisition of the brand during 2022.

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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 March 31, 2022, and three months ended March 31, 2021, totaled approximately $1.6 million and $1.2 million, respectively.

The increase in amortization expense is due to the acquisition of Sancuso.

Amortization for the six months ended June 30, 2022, and six months ended June 30, 2021, totaled approximately $3.1 million and $2.3 million, respectively.

The increase was attributable to the Sancuso acquisition.

Income taxes .

Income tax expense for the three months ended March 31, 2022, was comparable to the income tax expense for the three months ended March 31, 2021.

As of March 31, 2022, we had approximately $56.6 million in federal net operating loss carryforwards including 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.

Income tax expense (benefit) for the six months ended June 30, 2022, as a percentage of income (loss) from continuing operations before income taxes, was 0.5% compared to 3.8% for the six months ended June 30, 2021.

Other income.

In the second quarter of 2022, we recognized a gain on insurance proceeds of $0.6 million.

LIQUIDITY AND CAPITAL RESOURCES

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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.

The following table summarizes our liquidity and working capital as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

The following table summarizes our liquidity and working capital as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

Cash and cash equivalents $ 18,216,565 $ 27,040,816

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Revolving line of credit availability $ 1,000,000 $ 5,000,000

The following table summarizes our net changes in cash and cash equivalents for the three months ended March 31, 2022 and March 31, 2021:

Three months ended March 31,

The following table summarizes our net changes in cash and cash equivalents for the six months ended June 30, 2022 and June 30, 2021:

Six months ended June 30,

Net cash provided by (used in):

3 unchanged sentences

Net increase (decrease) in cash and cash equivalents $ (8,824,251) $ 916,666

The net $9.8 million decrease in cash and cash equivalents for the three months ended March 31, 2022, was primarily attributable to cash used in investing and partially offset by cash provided by financing activities.

Cash used in operating activities of $0.2 million was primarily the result of accounts receivable increasing by $7.8 million mainly from Sancuso sales, positively impacted by decreases in inventory of $2.3 million and increases in accounts payable and other liabilities of $4.1 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $1.8 million.

The net $8.8 million decrease in cash and cash equivalents for the six months ended June 30, 2022, was primarily attributable to cash used in investing and partially offset by cash provided by operating and financing activities.

Cash provided by operating activities of $2.2 million was primarily the result of a decreases in inventory of $2.9 million, decrease in other assets of $1.2 million and increases in accounts payable and other liabilities of $4.7 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $3.4 million.

This was partially offset by accounts receivable increasing by $5.5 million, mainly from the addition of Sancuso sales and the decrease in long-term liabilities of $1.7 million.

Cash used in investing activities was the result of the acquisition of Sancuso.

Our financing activities included the increase in our line of credit of $5.0 million partially offset by the $0.6 million in cash used to repurchase shares of our common stock as well as the $0.5 million used for the payment of royalties for sales of Vibativ and Sancuso.

The net $0.2 million increase in cash and cash equivalents for the three months ended March 31, 2021, was primarily attributable to cash provided by operating activities, partially offset by cash used in investing and financing activities.

Cash provided by operating activities of $1.8 million was positively impacted by decreases in inventory of $1.9 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $1.4 million.

Our financing activities included the increase in our line of credit of $4.0 million partially offset by the $0.8 million in cash used to repurchase shares of our common stock as well as the $0.5 million used for the payment of royalties for sales of Vibativ.

The net $0.9 million increase in cash and cash equivalents for the six months ended June 30, 2021, was primarily attributable to cash provided by operating activities, partially offset by cash used in investing and financing activities.

Cash provided by operating activities of $4.5 million was positively impacted by decreases in inventory of $2.3 million and accounts receivable of $3.2 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $2.8 million.

Operating activities were also offset by the decrease in accounts payable of $3.0 million and the forgiveness of our PPP Loan of $2.2 million.

Cash used in investing activities was the result of additions to intangibles of $0.1 million and the payment of $0.2 million to the WHC JV.

1 unchanged sentence

Debt Agreement

On March 31, 2022, the Company and Pinnacle Bank entered into a Seventh Amendment to the Revolving Credit Loan Agreement (the "Pinnacle Agreement") to revise and update the Maximum Funded Debt Ratio financial covenant and to delete from the Pinnacle Agreement the Funded Debt to Tangible Capital Ratio financial covenant.

On June 30, 2022, the Company entered into the Eighth Amendment to the Revolving Credit Loan Agreement with Pinnacle Bank (the "Pinnacle Agreement") permitting the Maximum Funded Debt Ratio to be calculated on a rolling four-quarter basis to be no more than 3.00 to 1.00 for the second and third quarters of 2022 and 2.50 to 1.00 for each quarter thereafter.

For the quarter ended June 30, 2022, we slightly exceeded the Maximum Funded Debt Ratio, but we relied on our provision in the latest amendment to address it.

On March 31, 2022, the Company and Pinnacle Bank entered into a Seventh Amendment to the Revolving Credit Loan Agreement to revise and update the Maximum Funded Debt Ratio financial covenant and to delete from the Pinnacle Agreement the Funded Debt to Tangible Capital Ratio financial covenant.

These changes were made to more appropriately reflect the impact from the Sancuso acquisition.

6 unchanged sentences

The current pricing under the Pinnacle Agreement provides for an interest rate spread of 1.75% to 2.75% above LIBOR with a minimum LIBOR of 0.90%.

The applicable interest rate under the Pinnacle Agreement was 3.65% at March 31, 2022.

The applicable interest rate under the Pinnacle Agreement was 3.87% at June 30, 2022.

In addition, a fee of 0.25% per year is charged on the unused line of credit.

1 unchanged sentence

The parties have agreed on a process to determine a new interest rate benchmark at the point the LIBOR rate is expected to be discontinued over the next 12 to 24 months.

As of March 31, 2022 and December 31, 2021, the Company had $20.0 million and $15.0 million, respectively, in borrowings outstanding under its revolving credit facility.

The Company was in compliance with the Maximum Funded Debt Ratio financial covenant as of March 31, 2022.

As of June 30, 2022 and December 31, 2021, the Company had $19.0 million and $15.0 million, respectively, in borrowings outstanding under its revolving credit facility.

Paycheck Protection Program Loan

6 unchanged sentences

OFF-BALANCE SHEET ARRANGEMENTS

During the three months ended March 31, 2022 and 2021, we did not engage in any off-balance sheet arrangements.

During the six months ended June 30, 2022 and 2021, we did not engage in any off-balance sheet arrangements.

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-Q

Item 2. Management’s Discussion and Analysis