What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-12 compared with 2022-11-14 · 136 added, 217 removed, 194 unchanged (65% of the section changed)

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product sales;

management of our growth and integration of our acquisitions and impacts on our business as well as national and international markets and economies resulting from the COVID-19 pandemic.

management of our growth and integration of our acquisitions and generally unpredictable conditions in national and international markets.

While forward-looking statements reflect our beliefs and best judgment based upon current information, they are not guarantees of future performance.

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We are dedicated to providing innovative products that improve the quality of care for patients and address poorly met medical needs.

Our primary target sectors are hospital acute care, oncology, gastroenterology and rheumatology.

Our primary target sectors are hospital acute care, gastroenterology and oncology.

These medical specialties are characterized by relatively concentrated prescriber bases that we believe can be served effectively by small, targeted sales forces.

We promote our approved products through our hospital, oncology and field sales forces in the United States.

We have also established partnerships in Puerto Rico and the Middle East for our Vibativ ® product and are continuing to build a network of international partners to register and provide our medicines to patients in their countries.

We have also established international partnerships and are continuing to build a network of companies outside the U.S.

to register and provide our medicines to patients in their countries.

Our portfolio of FDA approved brands includes:

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and 3) Aspirin-Exacerbated Respiratory Disease (“AERD”), a severe form of asthma.

We are designing a fourth Phase II program to evaluate the use of ifetroban to treat patients with Progressive Fibrosing Interstitial Lung Diseases, and we have submitted an application to the FDA to support the new program, which we expect to launch in 2023.

Cumberland has built core competencies in the acquisition, development and commercialization of pharmaceutical products in the U.S.

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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.

In late 2022, we opened our new headquarter offices at the Broadwest campus in the Vanderbilt/West End corridor of Nashville.

Our move into the new state-of-the-art facilities will accommodate our growth, support our team, and better serve our international base of customers and partners.

The location allows us to remain close to and continue our collaboration with the Vanderbilt Medical Center, while also maintaining our presence in the Nashville healthcare community – which represents the nation’s largest concentration of healthcare companies.

International Agreements

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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.

Meanwhile, we continue to support our international partners in their efforts to register our Vibativ brand in their countries.

In late 2022, we announced a new partnership with Saudi Arabia-based Tabuk Pharmaceutical to introduce Vibativ into the Middle East.

The arrangement provides Tabuk exclusive rights to distribute Vibativ in Saudi Arabia and Jordan, with the option to expand into other countries in the region.

Tabuk is in the process of updating the Vibativ registration in Saudi Arabia with new manufacturing information as they also prepare for the launch in that country.

Also in 2022, we entered into an agreement with D.B.

Pharm to register and commercialize our Vibativ product in South Korea.

Pharm who also distributes our Caldolor product in South Korea, is progressing their application for the approval of Vibativ.

Meanwhile, our Vibativ partner for the Chinese market, SciClone Pharmaceuticals, had their approval application in China accepted for review in September 2021.

We’ve since been supporting SciClone and their requests associated with review of that submission.

They are working toward the approval and believe that there is significant potential for Vibativ in their country.

Nordic Pharma Arrangements

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, Nordic may assume responsibility for commercializing the methotrexate products in the U.S.

after June 30, 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 products through April 2035.

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

Cumberland has transferred the marketing authorization associated with the RediTrex product line to Nordic.

Nordic has returned the 180,000 shares we issued to them associated with the original License and has refunded the $1 million we paid 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.

Sancuso Acquisition and Promotion

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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.

In early 2022, Cumberland assumed commercial responsibility for the product in the U.S.

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

During 2022 we largely completed the transition of Sancuso to Cumberland.

In late 2022, the FDA approved moving the product’s manufacturer to a new facility, which will be a source of future product supplies.

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.

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.

In early 2022, we formed a new sales division, Cumberland Oncology, to support the brand.

The division was comprised of both field-based and inside sales representatives that were formerly associated with Kyowa Kirin.

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 agreed to utilize its established oncology commercial organization to co-promote Sancuso throughout the United States.

Verity was to provide sales representation in 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.

Nordic Pharma Arrangements

(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, 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 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.

In January 2023, we sent a 30-day notice of default to Verity due to failure of the parties to reach agreement regarding fundamental elements of the agreement, including targets and detailing obligations, among other items.

As a result, the agreement t erminated effective February 25, 2023.

The agreement provides for arbitration of any unresolved issues and we are in agreement with Verity that such arbitration should proceed.

Ifetroban Clinical Studies

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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.

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.

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 have submitted an application to the FDA to support the new program, which we expect to launch in 2023.

In late 2022, we closed enrollment in our Phase II study in patients with AERD.

We then conducted a quality review of the data and clinical sites, closed the database for the study and are awaiting the initial results.

We have also completed Phase II clinical programs with ifetroban in patients with Hepatorenal Syndrome (“HRS”) and patients with Portal Hypertension (“PH”).

Additional preclinical and pilot clinical studies of ifetroban are underway, including several investigator-initiated trials.

Our plan going forward is to complete each of our Company-sponsored studies, analyze their final data, announce top-line results and decide on the best development path for the registration of ifetroban, which we continue to believe has the potential to benefit many patients with orphan diseases that represent unmet medical needs.

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.

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Vaprisol Supply Update

We are transitioning to a new manufacturer for our Vaprisol product.

During 2021, we shipped all remaining inventory of the product and notified the FDA that supplies of the product were then not currently available.

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

Demand for the product increased in 2020 during the pandemic, and we worked to support the expanded use of the product in hospitals and clinics during the health care crisis.

During 2021, we shipped all remaining inventory of the product and have notified the FDA that supplies of the product are not currently available.

We have since transferred the manufacturing of the product to a new facility.

Our new manufacturing partner is working with the FDA to address several Form 483 and warning letter issues in a timely manner.

Meanwhile, we are working with them to support a special, interim supply of compounded product for critically ill patients, while awaiting the needed facility approval to relaunch Vaprisol.

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.

The packager for Omeclamox-Pak encountered financial difficulties in 2020 due to the impact of COVID-19, and their operations were suspended.

As a result, we depleted our inventory of the product and notified the FDA that it is currently unavailable.

We are awaiting resumption of those operations, while also exploring other alternatives to restart the product’s packaging.

Sustainability Report

Earlier this year we provided updated sustainability metrics, which cover company activities pertaining to environmental, social and governance issues.

Highlights for 2022 include:

Providing 2.2 million doses of our products to patients;

Safely disposing of over 2,750 pounds of expired and damaged products;

Having no product recalls or terminated clinical trials due to failure to practice good clinical standards.

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.

Through our sustainability initiatives, we will continue to identify and address critical industry issues, monitor relevant guidelines and utilize best practices.

FDA Fee Waiver

In March 2023, the FDA informed us that it had granted a barrier-to-innovation waiver, which will result in a refund of approximately $1.8 million that we previously paid for prescription drug program fees associated with the RediTrex ® product line.

The FDA granted the barrier-to-innovation waiver after concluding that the Company met the statutory criteria, based on the innovation associated with Cumberland’s ifetroban clinical development programs, as the funds could be better used to advance those studies which are designed to address a series of unmet medical needs.

The FDA’s decision was in response to a request for reconsideration that Cumberland provided on November 28, 2021, after the agency had initially denied Cumberland’s submission for a waiver in a decision dated November 1, 2021.

Cumberland paid the FDA the fiscal year 2022 RediTrex prescription drug program fees in the amount of approximately $1.8 million on or about October 4, 2021.

The fees were assessed under the Prescription Drug User Fee Act.

The FDA informed Cumberland on March 30, 2023, that the agency’s Office of Financial Management had been asked to provide a refund of the fees, which is expected within 45 days.

Federal NOPAIN Act

In April 2023, Cumberland announced that it expects that its Caldolor ® injection product should be eligible for special Medicare reimbursement under the Non-Opioids Prevent Addiction in the Nation Act (the “NOPAIN Act”), which was enacted as part of the Consolidated Appropriations Act of 2023.

The NOPAIN Act requires Medicare to provide separate reimbursement for non-opioid products that are used to manage pain during surgeries conducted in outpatient hospital departments or in ambulatory surgical centers.

The NOPAIN Act applies, in part, to products that are indicated to provide analgesia without acting upon the body’s opioid receptors.

As a result, the Company expects that the NOPAIN Act will affect Medicare reimbursement for Caldolor, Cumberland’s non-opioid analgesic injection product.

The methodology for reimbursement for non-opioid pain alternatives under the NOPAIN Act will apply to those products that are furnished between January 1, 2025 and January 1, 2028.

It is anticipated that in 2024, the Centers for Medicare & Medicaid Services (CMS) will issue regulations implementing the NOPAIN Act and detailing the conditions for, and amount of, the separate reimbursement.

Caldolor is approved by the U.S.

Food and Drug Administration (FDA) for use in adults and pediatric patients six months and older, for the management of mild to moderate pain as a sole therapy, and for the management of moderate to severe pain as an adjunct to an opioid.

A series of published clinical studies have demonstrated that Caldolor significantly reduces patient pain, while also significantly reducing patients’ need for opioids.

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 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,

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

The following table presents the unaudited interim statements of operations for continuing operations for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

2023 2022 Change

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Interest income 50,190 16,041 34,149

Other income 1,847,065 — 1,847,065

Interest expense (186,353) (119,575) (66,778)

Income (loss) from continuing operations before income taxes (416,326) (1,576,022) 1,159,696

Income (loss) before income taxes 179,224 (1,395,533) 1,574,757

Income tax (expense) benefit (6,938) (6,900) (38)

Net income (loss) from continuing operations $ (423,226) $ (1,583,480) $ 1,160,254

Net income (loss) $ 172,286 $ (1,402,433) $ 1,574,719

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

Three months ended September 30,

Three months ended March 31,

2023 2022 Change

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Caldolor 935,043 959,634 (24,591)

Vaprisol (436) 325,774 (326,210)

Acetadote 169,856 111,090 58,766

Omeclamox-Pak 35,600 22,689 12,911

RediTrex 85,809 11,459 74,350

Other revenue 496,789 178,886 317,903

Total net revenues $ 11,413,072 $ 8,072,540 $ 3,340,532

Net revenues.

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 $3.9 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 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 $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 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 September 30, 2022, was positively impacted by various revenue adjustments.

Cost of products sold .

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 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 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 product candidates.

General and administrative .

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 September 30,

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

Cost of products sold (1)

1,103,581 407,386

Royalty and operating expenses (179,303) 455,814

Vibativ contribution $ 985,472 $ 1,033,384

(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 September 30,

Net revenue (1)

$ 4,060,652 $ —

Cost of products sold (2)

Royalty and operating expenses 1,024,014 —

Sancuso contribution $ 2,648,103 $ —

(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.

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 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 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.

RESULTS OF OPERATIONS

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

Net revenues $ 32,887,269 $ 27,665,182 $ 5,222,087

Costs and expenses:

Cost of products sold 6,468,212 5,486,005 982,207

Selling and marketing 13,281,511 11,709,445 1,572,066

Research and development 5,283,083 4,071,638 1,211,445

General and administrative 6,672,442 6,367,438 305,004

Amortization 4,609,146 3,354,080 1,255,066

Total costs and expenses 36,314,394 30,988,606 5,325,788

Operating income (loss) (3,427,125) (3,323,424) (103,701)

Interest income 52,709 19,411 33,298

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

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

Interest expense (406,539) (70,297) (336,242)

Income (loss) from continuing operations before income taxes (3,169,625) (1,187,170) (1,982,455)

Income tax (expense) benefit (20,700) (22,375) 1,675

Net income (loss) from continuing operations $ (3,190,325) $ (1,209,545) $ (1,980,780)

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

Nine months ended September 30,

2022 2021 Change

Kristalose $ 11,418,673 $ 12,286,729 $ (868,056)

Sancuso 10,756,411 — 10,756,411

Vibativ 6,008,005 8,799,891 (2,791,886)

Caldolor 3,075,355 3,734,273 (658,918)

Vaprisol 16,008 (117,000) 133,008

Acetadote 337,685 638,704 (301,019)

Omeclamox-Pak (2,518) 22,737 (25,255)

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Net revenues.

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 $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 $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 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 revenues for the three months ended March 31, 2023, were $9.2 million compared to $11.2 million for the three months ended March 31, 2022.

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

Kristalose and Acetadote.

Kristalose revenue of $4.3 million for the first quarter of 2023, represented an increase of $0.4 million when compared to the prior year period.

The increase was primarily the result of increased shipments of the product.

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

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.

During the first quarter of 2023, there was an increase of $0.1 million in the branded product's revenue when compared to the prior year period due to increased shipments of the product.

There was no Vaprisol revenue for the first quarter of 2023, an increase of $0.1 million compared to the same period last year.

This increase is primarily due to normal adjustments to expired product reserves.

We await FDA approval on a new manufacturer.

Caldolor revenue was $0.9 million for the first quarter of 2023, similar to the first quarter of 2022.

Vibativ revenue was $1.8 million for the three months ended March 31, 2023, which declined $0.7 million from the same prior year period.

The decrease in net revenue of the product was the result of lower unit shipments.

Sancuso revenue was $1.9 million for the first quarter of 2023, which was $1.5 million lower than the first quarter of 2022.

The decline resulted from larger product returns associated with the inventory acquired at the acquisition of the product and lower sales.

Omeclamox-Pak had no sales for the first quarter of 2023, as Cumberland is currently out of commercial inventory of this product.

The packager for our Omeclamox-Pak product encountered financial difficulties in 2020.

Net revenue for the three months ended March 31, 2023, reflects sales deduction adjustments.

Cost of products sold .

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.

Co st of products sold for the first quarter of 2023 and 2022 were $1.3 million and $2.2 million, respectively.

Cost of products sold, as a percentage of net revenues, were 13.6% during the three months ended March 31, 2023, compared to 19.8% during the three months ended March 31, 2022.

The improvement in cost of products sold is primarily due to the availability of new lower cost inventory and less inventory write-offs.

Selling and marketing .

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.

Selling and marketing expense for the first quarter of 2023 decreased $0.3 million compared to the same period last year.

This decrease is primarily attributable to lower royalty expenses.

Research and development .

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.

Research and development costs for the first quarter of 2023 and 2022 were $1.5 million and $1.7 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 product candidates.

The decrease in costs for the first quarter of 2023 results from lower FDA fees in 2023.

General and administrative .

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.

General and administrative expense increased to $2.5 million for the first quarter of 2023, compared to $2.3 million for the first quarter of 2022, an increase of $0.2 million.

The increase was primarily attributable to increases in deferred compensation expenses.

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

Financial Impact of Vibativ Nine months ended September 30,

Financial Impact of Vibativ Three months ended March 31,

Net revenue (1)

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(2) 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.

Financial Impact of Vibativ Since Acquisition

Net revenue (1)

Cost of products sold (2)

Royalty and operating expenses 6,938,102

Vibativ contribution $ 20,718,609

(1) Net revenue includes a $150,000 payment to Cumberland required under the terms of a new licensee agreement.

(2) 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 Nine months ended September 30,

Financial Impact of Sancuso Three months ended March 31,

Net revenue $ 1,886,793 $ 3,397,209

$ 11,106,411 $ —

Cost of products sold (1)

289,478 388,264

Royalty and operating expenses 415,707 910,100

Sancuso contribution $ 1,181,608 $ 2,098,845

(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.

(1) 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 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.

Amortization for the three months ended March 31, 2023 and 2022, totaled approximately $1.2 million and $1.6 million, respectively.

The decline in amortization expense resulted from adjustments to the useful life of Sancuso during the valuation of the product in December 2022.

Income taxes .

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 2022, we recognized a gain on insurance proceeds of $0.6 million.

Income tax expense for the three months ended March 31, 2023, was comparable to the income tax expense for the three months ended March 31, 2022.

As of March 31, 2023, we had approximately $57.8 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 2023 and beyond, through the continued utilization of these net operating loss carryforwards, on any taxable income generated from our operations.

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 September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

The following table summarizes our liquidity and working capital as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

Cash and cash equivalents $ 16,386,166 $ 19,757,970

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Revolving line of credit availability $ 3,927,714 $ 3,800,000

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,

The following table summarizes our net changes in cash and cash equivalents for the three months ended March 31, 2023 and March 31, 2022:

Three months ended March 31,

Net cash provided by (used in):

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Net increase (decrease) in cash and cash equivalents $ (3,371,804) $ (9,774,031)

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 $8.2 million, mainly from the addition of Sancuso sales and the increase in long-term liabilities of $2.5 million.

The net $3.4 million decrease in cash and cash equivalents for the three months ended March 31, 2023, was primarily attributable to cash used in operating and financing activities.

A decrease of cash used in operating activities of $1.4 million was primarily the result of an increase of accounts receivable of $1.4 million (which includes a $1.8 million receivable for the approved PDUFA fee refund), a decrease of net accounts payable and other current liabilities of $1.1 million and the offsetting positive impact from the add backs of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $1.3 million.

Cash used in investing activities of $0.2 million was the result of additions to property and equipment and intangibles.

Financing activities use of cash was $1.8 million and include the repayments on our line of credit of $0.1 million, the $0.2 million in cash used to repurchase shares of our common stock as well as the $1.5 million used for the payment of a Sancuso milestone, plus royalties on sales of Vibativ and Sancuso.

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 $4.4 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $1.8 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 $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.

Operating activities were also offset by the decrease in accounts payable of $2.9 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 $0.2 million and the payment of $0.2 million to the WHC JV.

Our financing activities included the $1.0 million in cash used to repurchase shares of our common stock as well as the $1.8 million used for the payment of royalties to Theravance for sales of Vibativ.

Debt Agreement

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.

For the quarter ended March 31, 2023, 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.

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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 to the Revolving Credit Loan Agreement to renew the Revolving Credit Loan.

The original Pinnacle Agreement was dated July 2017.

Beginning on August 14, 2018, and continuing until October 7, 2020, the Company and Pinnacle Bank entered into a series of amendments to extend and update the Revolving Credit Note and Revolving Credit Agreement.

The Fifth Amendment extends the maturity date three years through October 1, 2024.

The interest rate on the Pinnacle Agreement is based on LIBOR plus an interest rate spread.

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 5.25% at September 30, 2022.

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

Interest and the unused line fee are payable quarterly.

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 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

On April 20, 2020, Cumberland received the funding of a loan from Pinnacle Bank in the aggregate amount of $2,187,140 pursuant to the Paycheck Protection Program (the “PPP”) under the Federal Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which was enacted March 27, 2020.

Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act, including qualifying payroll costs, covered rent payments, and covered utilities.

Cumberland used the PPP loan funds for such qualifying expenses.

Due to assistance from our PPP loan, the Company did not lay off or furlough any employees as a result of the COVID-19 pandemic.

In October 2020, Cumberland submitted a request for the loan’s forgiveness.

On June 11, 2021, the Company received a formal notice from the SBA that the full amount of the loan was forgiven.

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

Among other terms, the Fourth Amendment extended the maturity date to October 1, 2024.

OFF-BALANCE SHEET ARRANGEMENTS

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

During the three months ended March 31, 2023 and 2022, 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