What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-12 · 127 added, 149 removed, 284 unchanged (49% of the section changed)

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Cumberland’s growth strategy involves maximizing the success of our existing brands while continuing to build a portfolio of differentiated products.

We currently feature eight FDA products approved for sale in the United States.

We currently feature eight products approved by the FDA in the United States.

We are also continuing to explore international partnerships to bring our medicines to patients in other countries.

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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 and Sancuso are examples of this strategy.

Our acquisitions of Vibativ and Sancuso are examples of this strategy.

• Progressing our clinical pipeline and incubating future product opportunities at CET.

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RECENT DEVELOPMENTS

Sancuso Acquisition

In January 2022, Cumberland acquired the U.S.

New Headquarters Location

We recently announced the relocation of our headquarters into new offices located on the Broadwest campus in the Vanderbilt/West End corridor of Nashville in late October 2022.

We are delighted to continue our presence and participation in the Nashville healthcare community, which represents the largest concentration of healthcare companies in the country.

Our new, state-of-the-art headquarters keeps us close to the Vanderbilt University Medical Center, enabling our continued collaboration, as we work to develop new medicines for the future.

Broadwest is a 1.2 million-square-foot urban, mixed-use complex and business park – with office space, a Conrad Hilton hotel and supportive retail space.

Our move allows us to accommodate recent growth and better serve our international base of customers and partners.

Following this relocation, our organization is expected to grow to over 100 individuals, with a majority employed at our Nashville headquarters.

International Agreements

During the third quarter of 2022, we signed a new agreement with PiSA Pharmaceutical ("PiSA") for the exclusive supply and distribution of our ibuprofen injection product in Mexico.

Cumberland will be responsible for sharing the U.S.

dossier and providing product supply, while PiSA will be responsible for obtaining the regulatory approval and then commercializing the product in Mexico.

PiSA expects to provide the product in both 400- and 800-milligram vials.

Additionally, during the third quarter of 2022, we entered into an agreement with Phebra PTY Ltd.

("Phebra") to market and distribute Caldolor in Australia.

Caldolor was registered and launched by CSL Seqirus in Australia, with the marketing authorization and distribution now shifted to Phebra who also distributes our Acetadote product in that country.

Caldolor, our proprietary, intravenously delivered formulation of ibuprofen, can be a key component in cost-effective Enhanced Recovery After Surgery multimodal treatment protocols.

When administered immediately prior to surgery, the non-narcotic pain reliever enables patients to wake in significantly less pain and to suffer significantly less pain during their recovery.

Ibuprofen delivered through intravenous injection can also considerably reduce the need for post-operative opioids and improve recovery by reducing the side effects associated with those narcotics.

Sancuso Acquisition and Promotion

In early 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.

We largely completed the transition of Sancuso to Cumberland during the third quarter of 2022.

Cumberland has assumed commercial responsibility for the product in the U.S.

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

Sancuso is the first and only FDA-approved prescription patch for the prevention of nausea and vomiting in patients receiving certain types of chemotherapy treatment.

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Alternative oral treatments must be taken several times (day and night) to deliver the same therapeutic doses.

Cumberland acquired U.S.

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

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.

Verity will cover a majority of the U.S.

To support Sancuso we formed a specialty sales division, Cumberland Oncology.

To augment those efforts we also entered into a co-promotion agreement with Verity Pharmaceuticals (“Verity”) to feature Sancuso through their national oncology sales organization.

Verity completed training of its sales force and in July 2022 launched their promotion of Sancuso.

Verity will promote the product across the U.S.

market for an initial three-year term, with an option to extend for an additional two years.

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

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.

In July 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.

Based on the amendment, Nordic may 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

The packager for our Omeclamox-Pak product has been unable to provide us with supplies of the product, having encountered difficulties and therefore suspending operations during the pandemic.

We are currently awaiting the facility’s packaging to resume, while also exploring other alternatives to restart the product’s packaging before we build new inventory and resupply the market.

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

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

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

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

Nordic has also issued a credit note in favor of Cumberland in the amount of $1 million for the unpaid milestone payment due from us which was associated with our launch of the product line.

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 has been 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 patients with:

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;

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, which we believe has the potential to help many patients.

In addition to our Company-sponsored studies, researchers at Brigham and Women’s Hospital have completed an investigator-initiated study evaluating the impact of ifetroban on the aspirin desensitization process in patients with AERD.

This single center study closed early due to poor patient accrual and exhausted funding.

The researchers found no statistical difference in the dose of aspirin needed to provide an increase in an extended version of the patient’s total nasal symptom score.

A publication by the researchers with the full study results will be forthcoming..

It should be noted that the results from this investigator study were inconsistent with the previously published preclinical findings that demonstrated ifetroban blockade inhibited all features of aspirin reactions in a model of AERD.

Vaprisol 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.

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

During the second quarter of 2022, the new manufacturer was issued an FDA Form 483 followed by a warning letter in the fourth quarter, after 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.

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

Omeclamox-Pak Supply Update

The packager for our Omeclamox-Pak product has been unable to provide us with supplies of the product, having encountered difficulties and therefore suspending operations during the pandemic.

We are currently awaiting the facility’s packaging to resume, while also exploring other alternatives to restart the product’s packaging before we seek to resupply the market.

Financial Statement Adjustment

After announcing preliminary earnings on November 8, 2022, Cumberland identified a balance sheet adjustment, which is reflected in the financial results included in this Quarterly Report on Form 10-Q.

As a result of this adjustment, accounts receivable were increased by $0.15 million, property and equipment were reduced by $0.8 million and current liabilities were reduced by $0.65 million from the amounts reported in the earnings release as of September 30, 2022.

This adjustment only affected the balance sheet and the statement of cash flows but did not change net loss for the period.

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

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RESULTS OF OPERATIONS

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,

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

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

Three months ended September 30,

2022 2021 Change

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Interest income 21,602 7,394 14,208

Other income — 2,187,140 (2,187,140)

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

Interest expense (149,340) (20,021) (129,319)

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

Three months ended June 30,

Three months ended September 30,

2022 2021 Change

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Net revenues.

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:

Caldolor and RediTrex during the quarter.

Net revenues for the three months ended September 30, 2022, were $11.4 million compared to $8.1 million for the three months ended September 30, 2021.

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

RediTrex and Vibativ.

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.

Kristalose revenue of $3.9 million for the third quarter of 2022, represented a decrease of $0.1 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 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.

During the quarter, there was a decrease in the branded product's revenue due to sales adjustments related to expired product returns.

There was no Vaprisol revenue for the third quarter of 2022, a decrease of $0.3 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.

Caldolor revenue was $0.9 million for the third quarter of 2022, a decrease of $0.3 million, compared to the third quarter of 2021.

The decrease was due to the timing of international shipments of the product in 2021 and 2022.

Vibativ revenue was $1.9 million for the three months ended September 30, 2022, which is comparable to the product's revenue in 2021.

Sancuso revenue was $4.0 million for the third quarter of 2022, which was $1.1 million higher than the third 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 second quarter of 2022, as Cumberland is currently out of commercial inventory of this product.

Omeclamox-Pak had no sales for the third 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 three months ended June 30, 2022, was negatively impacted by various revenue adjustments.

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

Cost of products sold .

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.

Co st of products sold for the third quarter of 2022 and 2021 were $2.2 million and $1.3 million, respectively.

Cost of products sold, as a percentage of net revenues, were 19.5% during the three months ended September 30, 2022, compared to 16.5% during the three months ended September 30, 2021.

Selling and marketing .

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

Selling and marketing expense for the third quarter of 2022 increased $0.3 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 second quarter of 2022 and 2021 were $1.8 million and $1.4 million, respectively.

Research and development costs for the third quarter of 2022 and 2021 were $1.7 million and $1.5 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.

We continue to fund our ongoing clinical initiatives associated with our pipeline products.

We continue to fund our ongoing clinical initiatives associated with our pipeline product candidates.

General and administrative .

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 .

General and administrative expense increased to $2.2 million for the third quarter of 2022, compared to $2.0 million for the third 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 June 30,

Financial Impact of Vibativ Three months ended September 30,

Net revenue $ 1,909,750 $ 1,896,584

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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 June 30,

Financial Impact of Sancuso Three months ended September 30,

Net revenue (1)

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Sancuso contribution $ 2,648,103 $ —

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

(1) In the third quarter of 2022, net revenue includes a $100,000 payment to Cumberland required under a new sales representation 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 June 30, 2022 and 2021, totaled approximately $1.5 million and $1.2 million, respectively.

Amortization for the three months ended September 30, 2022 and 2021, totaled approximately $1.5 million and $1.0 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.

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

As of September 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,

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

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

Nine months ended September 30,

2022 2021 Change

9 unchanged sentences

Interest income 52,709 19,411 33,298

Other income — 2,187,140 (2,187,140)

Other income - gain on debt forgiveness — 2,187,140 (2,187,140)

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

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

Six months ended June 30,

Nine months ended September 30,

2022 2021 Change

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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.

Net revenues for the nine months ended September 30, 2022, were $32.9 million compared to $27.7 million for the nine months ended September 30, 2021, an increase of $5.2 million.

The addition of our newest product Sancuso contributed to an overall 18.9% 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.

Kristalose revenue was $11.4 million during the first nine months of 2022, compared to $12.3 million for 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.

Vibativ revenue was $6.0 million for the nine months ended September 30, 2022, compared to $8.8 million for the same period last year.

The decrease in net revenue was a result of higher sales volume for the product during the nine months ended September 30, 2021.

The decline was also 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 nine 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.

Omeclamox-Pak had no sales for the nine months ended September 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.

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

Caldolor revenue was $3.1 million for the first three quarters of 2022, a decrease of $0.7 million compared to the same period last year due to the timing of international shipments.

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.

Co st of products sold for the first nine months of 2022 were $6.5 million, an increase of $1.0 million compared to the same period last year due to the addition of Sancuso to the product mix.

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.

Selling and marketing expense for the nine months ended September 30, 2022, increased $1.6 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.

Research and development costs were $5.3 million for the first nine months of 2022 compared to $4.1 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.

We continue to fund our ongoing clinical initiatives associated with our pipeline product candidates.

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.

General and administrative expense for the nine months ended September 30, 2022, remained consistent with $6.7 million compared to $6.4 million during the nine months ended September 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,

Financial Impact of Vibativ Nine months ended September 30,

Net revenue (1)

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

Financial Impact of Sancuso Six months ended June 30,

Financial Impact of Sancuso Nine months ended September 30,

Net revenue (1)

3 unchanged sentences

Sancuso contribution $ 6,836,601 $ —

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

(1) 2022 net revenue includes a $250,000 payment to Cumberland required under the terms of a new licensee agreement and a $100,000 payment to Cumberland required under a sales representation 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 six months ended June 30, 2022, and six months ended June 30, 2021, totaled approximately $3.1 million and $2.3 million, respectively.

Amortization for the nine months ended September 30, 2022, and nine months ended September 30, 2021, totaled approximately $4.6 million and $3.4 million, respectively.

The increase was attributable to the Sancuso acquisition.

Income taxes .

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.

Income tax expense for the nine months ended September 30, 2022, as a percentage of income (loss) from continuing operations before income taxes, was 0.7% compared to 1.9% for the nine months ended September 30, 2021.

Other income.

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

In 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 June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

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

September 30, 2022 December 31, 2021

Cash and cash equivalents $ 19,541,538 $ 27,040,816

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Revolving line of credit availability $ 2,300,000 $ 5,000,000

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,

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

Nine months ended September 30,

Net cash provided by (used in):

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Net increase (decrease) in cash and cash equivalents $ (7,499,278) $ 1,089,435

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.

The net $7.5 million decrease in cash and cash equivalents for the nine months ended September 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 $4.8 million was primarily the result of a decreases in inventory of $1.3 million, decrease in other assets of $4.4 million and increases in accounts payable and other liabilities of $8.8 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $5.1 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.

This was partially offset by accounts receivable increasing by $8.2 million, mainly from the addition of Sancuso sales and the increase in long-term liabilities of $2.5 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 $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.

Our financing activities included the increase in our line of credit of $2.7 million partially offset by the $0.9 million in cash used to repurchase shares of our common stock as well as the $1.1 million used for the payment of royalties for sales of Vibativ and Sancuso.

The net $1.1 million increase in cash and cash equivalents for the nine months ended September 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 $4.4 million was positively impacted by decreases in inventory of $2.6 million and accounts receivable of $2.5 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $4.0 million.

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Debt Agreement

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 September 29, 2022, the Company entered into the Ninth Amendment to the Revolving Credit Loan Agreement with Pinnacle Bank (as amended, the "Pinnacle Agreement") to update the Funded Debt Ratio to mean the ratio of (i) Funded Debt less the amount of Unrestricted Cash in excess of $8,500,000, to (ii) EBITDA, as determined at the end of each fiscal quarter on a rolling four (4) quarter basis.

For the quarter ended September 30, 2022, we were in compliance with the Funded Debt Ratio financial covenant.

On June 30, 2022, the Company entered into the Eighth Amendment to the Revolving Credit Loan Agreement with Pinnacle Bank 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.

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.

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On December 31, 2021, the Company and Pinnacle Bank entered into the Fifth Amendment to the Revolving Credit Note and the Sixth Amendment to the Revolving Credit Loan Agreement in order to increase the principal amount of the Note from $15 million to $20 million.

On October 28, 2021, the Company and Pinnacle Bank entered into a Fourth Amendment to the Revolving Credit Note and Fifth Amendment ("Fifth Amendment") to the Revolving Credit Loan Agreement to renew the Revolving Credit Loan.

On October 28, 2021, the Company and Pinnacle Bank entered into a Fourth Amendment to the Revolving Credit Note and Fifth Amendment to the Revolving Credit Loan Agreement to renew the Revolving Credit Loan.

The original Pinnacle Agreement was dated July 2017.

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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 3.87% at June 30, 2022.

The applicable interest rate under the Pinnacle Agreement was 5.25% at September 30, 2022.

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

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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 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.

As of September 30, 2022 and December 31, 2021, the Company had $17.7 million and $15.0 million, respectively, in borrowings outstanding under its revolving credit facility.

Paycheck Protection Program Loan

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OFF-BALANCE SHEET ARRANGEMENTS

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

During the nine months ended September 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