What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-11 compared with 2023-05-12 · 247 added, 140 removed, 190 unchanged (67% of the section changed)

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pylori ) infection and related duodenal ulcer disease;

• RediTrex ® ( methotrexate ) injection, for the treatment of active rheumatoid, juvenile idiopathic and severe psoriatic arthritis, as well as disabling psoriasis;

• Sancuso ® ( granisetron) transdermal, for the prevention of nausea and vomiting in patients receiving certain types of chemotherapy treatment;

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• Vibativ ® ( telavancin ) injection, for the treatment of certain serious bacterial infections including hospital-acquired and ventilator-associated bacterial pneumonia, as well as complicated skin and skin structure infections.

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

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.

In addition to these commercial brands, we have Phase II clinical programs underway evaluating our ifetroban product candidates for patients with cardiomyopathy associated with 1) Duchenne Muscular Dystrophy (“DMD”), a fatal, genetic neuromuscular disease and 2) Systemic Sclerosis (“SSc”) or scleroderma, a debilitating autoimmune disorder characterized by fibrosis of the skin and internal organs.

In June 2023, we received FDA clearance to proceed directly to a Phase II study for patients with Idiopathic Pulmonary Fibrosis, the most common form of progressive fibrosing interstitial lung disease.

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

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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 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.

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

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

Additionally, we look for opportunities to expand our products into additional patient populations through clinical trials, new presentations and our support of select, investigator-initiated studies.

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We continue to evaluate our products following their FDA approval to determine if additional clinical data could expand their market and use.

For example, we have secured pediatric approval of Acetadote and Caldolor and are expanding the labeling for both brands accordingly.

We also recently further expanded the labeling for Caldolor to allow its use prior to surgery.

For example, we have secured pediatric approval of Acetadote and Caldolor and expanded the labeling for both brands accordingly.

We also added pre-surgery dosing for Caldolor, and recently included newborns to the patients who can benefit from the product.

We will continue to explore such opportunities to bring our products to new patient populations.

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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 acquisitions of Vibativ and Sancuso are examples of this strategy.

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

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

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We look for strategic partners that can complement our capabilities and enhance opportunities for our brands.

For example, our co-promotion partnerships have allowed us to expand the support for Kristalose and Sancuso across the U.S.

For example, our co-promotion partnerships have allowed us to expand the support for Kristalose across the U.S.

• Building an international contribution to our business.

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• Managing our operations with financial discipline.

We continually work to manage our expenses in line with our revenues to deliver cash flow from operations.

We continually work to manage our expenses in line with our revenues to deliver positive cash flow from operations.

We remain in a strong financial position, with favorable gross margins and a strong balance sheet.

RECENT DEVELOPMENTS

New Headquarters Location

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.

Caldolor for Treating Infants & Supporting Study Publication

In May 2023, we announced that the FDA has approved expanded labeling for Caldolor, an intravenously delivered formulation of ibuprofen, to now include use in infants.

The non-narcotic agent may now be administered for the treatment of pain and fever in patients 3 to 6 months of age.

The newly FDA-approved label includes information regarding the product’s indications and usage, appropriate patient populations, clinical study results, potential side effects, patient safety details and instructions for use in these young children.

With this newly approved labeling, Caldolor is the only non-opioid product approved to treat pain in infants that is delivered through injection.

Ketorolac and meloxicam are not approved for use in children, as the safety and efficacy of those drugs have not been established for pediatric patients.

Acetaminophen injection is not approved for treating pain in children less than 2 years of age, as the safety and efficacy of that drug has not been established for treating pain in those pediatric patients.

In June 2023, we shared the publication of positive results from a clinical study investigating the safety and pharmacokinetics of Caldolor in newborn infants, published in the journal Pediatric Drugs .

The clinical study evaluated the safety and drug exposure profile of Caldolor in 24 hospitalized infants between the ages of 1 and 6 months who required treatment for pain or fever.

Of the 24 patients included in the study, three were under 3 months of age, and the remaining 21 patients were 3 to 6 months of age.

Twenty patients received a single dose, and four patients received multiple doses.

In this study, single and multiple 10 mg/kg doses of Caldolor are reported safe, with no drug-related adverse events or renal concerns.

Drug exposure following a single dose of Caldolor in infants 1 to 6 months of age was similar to what was previously reported in older children.

The results of this study support the growing body of evidence that demonstrates Caldolor is a safe therapeutic option available to practitioners for the treatment of fever and pain in infants and children.

Federal NOPAIN Act

We announced in April 2023 that we expect that our Caldolor injection product will 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, we expect that the NOPAIN Act will affect Medicare reimbursement for Caldolor, our 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 will issue regulations implementing the NOPAIN Act and detailing the conditions for, and amount of, the separate reimbursement.

Caldolor is approved by the FDA for use in adults and pediatric patients 3 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.

Ifetroban Clinical Studies

We have been evaluating our ifetroban product candidate, a selective thromboxane-prostanoid receptor 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.

Patient enrollment is well underway in two company sponsored Phase II clinical programs to evaluate ifetroban in Systemic Sclerosis or scleroderma, a debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs;

and the Cardiomyopathy associated with Duchenne Muscular Dystrophy (“DMD”), a rare and fatal genetic neuromuscular disease that results in deterioration of the skeletal, heart and lung muscles.

In June 2023, we presented results from an interim analysis for the FIGHT DMD TM trial at the 29th annual Parent Project Muscular Dystrophy Conference in Dallas, Texas.

The interim analysis was conducted on data from 25 patients with DMD who completed six of the 12 total months of treatment and assessments.

Both doses of ifetroban were reported well tolerated in DMD participants ages 7 years of age or older.

There was also a positive trend in leg muscle strength, but no statistically significant differences were yet identified at this point.

Cumberland is sponsoring the FIGHT DMD™ trial, a multicenter, randomized, placebo-controlled Phase II study evaluating the safety, pharmacokinetics and efficacy of two doses of oral ifetroban for the treatment of the cardiomyopathy associated DMD.

The trial is evaluating 12 months of oral ifetroban in 24 subjects with early-stage cardiomyopathy and 24 subjects with advanced-stage heart disease across 10 U.S.

centers that specialize in DMD cardiomyopathy.

The safety and efficacy endpoints include left ventricular ejection fraction using cardiac MRI, pulmonary function, quantitative muscle strength, daily activity and quality of life measures.

The FDA Orphan Product Division awarded Cumberland $1 million in funding under its Orphan Products Grants Program to support this trial.

This was the first DMD trial awarded such funding.

In May 2023, we announced that the FDA has cleared the Investigational New Drug Application for a Phase II study in patients with Idiopathic Pulmonary Fibrosis ("IPF"), the most common form of progressive fibrosing interstitial lung disease.

As a result, we will launch our FIGHTING FIBROSIS trial designed to enroll 128 patients in over 20 medical centers of excellence across the U.S.

This Phase II clinical trial will study the safety, tolerability and efficacy of oral ifetroban in patients with IPF.

Recent studies have shown ifetroban can both prevent and enhance resolution of lung fibrosis in multiple preclinical models.

We have also completed Phase II clinical programs with ifetroban in patients with Hepatorenal Syndrome, Portal Hypertension and Aspirin Exasperated Respiratory Disease.

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.

During the second quarter of 2023, the FDA informed us that it had granted two barrier-to-innovation waivers that would result in a refund of approximately $1.8 million and $1.0 million that we previously paid for prescription drug program fees.

The FDA granted each waiver after concluding that Cumberland met the statutory criteria based on the innovation associated with our 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.

We received both refunds in June 2023.

Sancuso Acquisition and Approval of New Manufacturing Plant

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.

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.

The active drug in Sancuso, granisetron, slowly dissolves in the thin layer of adhesive that sticks to the patient’s skin and is released into their bloodstream over several days, working continuously to prevent chemotherapy-induced nausea and vomiting (“CINV”).

It is applied 24 to 48 hours before receiving chemotherapy and can prevent CINV for up to five consecutive days.

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

We assumed commercial responsibility for the product in the U.S.

– including its marketing, promotion, distribution, manufacturing and medical support activities – early last year and largely completed the transition of Sancuso to Cumberland throughout the remainder of the year.

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

In June 2023, we launched an expanded oncology sales division to feature the product.

International Agreements

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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.

Pharm, which 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.

We have 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.

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(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.

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

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.

As of July 1, 2023, Nordic assumed responsibility for commercializing the methotrexate products in the U.S.

Now that we have returned the License, Nordic will provide us with a royalty on their future sales of the products through April 2035.

Additionally, 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

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.

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.

It is applied 24 to 48 hours before receiving chemotherapy and can prevent CINV for up to five consecutive days.

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

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.

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

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 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.

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.

Melinta Settlement

On June 16, 2023, we received consideration related to the breach of contract action with Melinta Therapeutics, LLC and Targanta Therapeutics Corporation (collectively, the “Defendants”) that finalized a settlement agreement that was entered into by the Company and the Defendants to close the case.

In February 2022, the Company filed an action for breach of contract against the Defendants in the United States District Court for the Southern District of New York.

The Company and the Defendants are parties to an agreement (the “Agreement”), pursuant to which the Defendants have a license to develop and commercialize products under certain Company patents, in exchange for the Defendants paying the Company certain milestone payments and royalties on net sales of the licensed products.

Specifically, the Agreement requires the Defendants to, among other things, make a $500,000 payment to the Company within 30 days following the first filing of an sNDA in relation to the product (as defined in the Agreement) and a $500,000 payment to the Company following the approval of the first sNDA in relation to the product.

After the Defendants disclosed the domiciles of its limited partners to the Company, as required by the Court, in October 2022, the action for breach of contract was refiled in the Supreme Court of the State of New York, County of New York in November, 2022.

The complaint alleged that, despite the Defendants filing an NDA and sNDA for the Product and receiving FDA approval for both applications, the Defendants failed to make the required total of $1 million in milestone payments to the Company.

The Company sought damages in the amount of no less than $1 million.

Appointment of New Auditors

Our Board of Directors completed a review of the appointment of Cumberland’s independent registered public accounting firm for the fiscal year ending December 31, 2023.

In May 2023, we informed Carr, Riggs & Ingram CPAs and Advisors (“CRI”) that they were selected as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023.

CRI had obtained provisional approval as of that date, with the formal engagement of CRI being subject to CRI completing its final client acceptance process.

CRI subsequently completed its final client acceptance approval process and our Audit Committee formally engaged CRI as Cumberland’s independent registered public accounting firm.

Vaprisol Supply Update

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.

Demand for our Vaprisol 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 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.

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

Omeclamox-Pak Supply Update

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

The packager for Omeclamox-Pak encountered financial difficulties in 2020 due to the impact of the COVID-19 pandemic, 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 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.

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

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

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

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

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

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

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

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RESULTS OF OPERATIONS

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,

Three months ended June 30, 2023 compared to the three months ended June 30, 2022

The following table presents the unaudited interim statements of operations for continuing operations for the three months ended June 30, 2023 and 2022:

Three months ended June 30,

2023 2022 Change

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Other income 981,806 — 981,806

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

Interest expense (192,635) (137,624) (55,011)

Income (loss) before income taxes 869,091 (1,357,766) 2,226,857

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

Income tax expense (6,937) (6,900) (37)

Net income (loss) $ 862,154 $ (1,364,666) $ 2,226,820

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

Three months ended March 31,

Three months ended June 30,

2023 2022 Change

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Net revenues.

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.

Net revenues for the three months ended June 30, 2023, were $10.9 million compared to $10.3 million for the three months ended June 30, 2022.

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

Kristalose, Vibativ, Caldolor and Acetadote.

Kristalose revenue of $4.1 million for the second quarter of 2023, represented an increase of $0.5 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.

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.

During the second quarter of 2023, there was an increase of $0.02 million in the product's revenue when compared to the prior year period due to increased shipments of the product.

There was no Vaprisol revenue for the second quarter of 2023 as Cumberland is currently out of inventory of the product.

Net revenue was positively impacted due to normal adjustments to expired product returns.

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.

Caldolor revenue was $1.2 million for the second quarter of 2023, similar to the second quarter of 2022.

Vibativ revenue was $2.1 million for the three months ended June 30, 2023, an increase of $0.6 million from the same prior year period.

The increase in net revenue of the product was the result of increased unit shipments.

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

The decline primarily resulted from larger product returns associated with the inventory acquired at the acquisition of the product and other increased sales deductions.

Omeclamox-Pak had no sales for the second 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.

Net revenue for the three months ended June 30, 2023, reflects sales deduction adjustments.

Other revenue of $1.3 million for the three months ended June 30, 2023 was $0.8 million higher than the prior year period due to higher milestone payments recognized.

Cost of products sold .

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.

Co st of products sold for the second quarter of 2023 and 2022 were $1.5 million and $2.0 million, respectively.

Cost of products sold, as a percentage of net revenues, were 14.0% during the three months ended June 30, 2023, compared to 19.7% during the three months ended June 30, 2022.

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

Selling and marketing .

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.

Selling and marketing expense for the second quarter of 2023 increased $0.1 million compared to the same period last year.

This increase is primarily attributable to the timing of spending.

Research and development .

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

Research and development costs for the second quarter of 2023 and 2022 were $1.1 million and $1.8 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.

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

General and administrative .

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.

General and administrative expense increased to $2.4 million for the second quarter of 2023, compared to $2.2 million for the second 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 Three months ended March 31,

Financial Impact of Vibativ Three months ended June 30,

Net revenue (1)

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Vibativ contribution $ 2,280,236 $ 1,212,458

(1) 2022 net revenue includes a $150,000 payment to Cumberland required under the terms of a new licensee agreement.

(1) In the second quarter of 2023, net revenue includes a $1,000,000 payment to Cumberland related to a settlement agreement of milestone payments.

(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 Three months ended March 31,

Financial Impact of Sancuso Three months ended June 30,

Net revenue $ 1,916,966 $ 3,648,548

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Amortization expense is the ratable use of our capitalized intangible assets including product and license rights, patents, trademarks and patent defense costs.

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

Amortization for the three months ended June 30, 2023 and 2022, totaled approximately $1.2 million and $1.5 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 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.

Income tax expense for the three months ended June 30, 2023, was comparable to the income tax expense for the three months ended June 30, 2022.

As of June 30, 2023, we had approximately $53.1 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.

Other income.

In the second quarter of 2023, we recognized a $1.0 million refund of 2023 FDA fees to be used to further our product research efforts.

RESULTS OF OPERATIONS

Six months ended June 30, 2023 compared to the six months ended June 30, 2022

The following table presents the unaudited interim statements of operations for continuing operations for the six months ended June 30, 2023 and 2022:

Six months ended June 30,

2023 2022 Change

Net revenues $ 20,113,515 $ 21,474,197 $ (1,360,682)

Costs and expenses:

Cost of products sold 2,771,038 4,243,769 (1,472,731)

Selling and marketing 8,949,393 9,171,114 (221,721)

Research and development 2,644,708 3,568,829 (924,121)

General and administrative 4,868,876 4,506,324 362,552

Amortization 2,388,319 3,122,698 (734,379)

Total costs and expenses 21,622,334 24,612,734 (2,990,400)

Operating loss (1,508,819) (3,138,537) 1,629,718

Interest income 107,251 31,107 76,144

Other income 2,828,871 — 2,828,871

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

Interest expense (378,988) (257,199) (121,789)

Income (loss) before income taxes 1,048,315 (2,753,299) 3,801,614

Income tax expense (13,875) (13,800) (75)

Net income (loss) $ 1,034,440 $ (2,767,099) $ 3,801,539

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

Six months ended June 30,

2023 2022 Change

Kristalose $ 8,425,846 $ 7,515,368 $ 910,478

Sancuso 3,803,759 6,795,758 (2,991,999)

Vibativ 3,996,013 4,098,255 (102,242)

Caldolor 2,161,356 2,153,546 7,810

Vaprisol 39,866 (251,623) 291,489

Acetadote 320,019 237,884 82,135

Omeclamox-Pak 5,544 (3,676) 9,220

RediTrex (131,552) 152,904 (284,456)

Other revenue 1,492,664 775,781 716,883

Total net revenues $ 20,113,515 $ 21,474,197 $ (1,360,682)

Net revenues.

Net revenues for the six months ended June 30, 2023, were $20.1 million compared to $21.5 million for the six months ended June 30, 2022, a decrease of $1.4 million.

Kristalose revenue was $8.4 million during the first six months of 2023, compared to $7.5 million for the prior year period.

Revenue increased due to overall increased unit volume in 2023.

Sancuso revenue was $3.8 million for the six months ended June 30, 2023, compared to $6.8 million for the same period last year.

The decline resulted from lower sales volume and higher sales deductions in 2023.

Vibativ revenue was $4.0 million for the six months ended June 30, 2023, compared to $4.1 million for the same period last year.

The decrease in net revenue was a result of higher sales volume for the product during the six months ended June 30, 2022.

There was no Vaprisol revenue for the first six months of 2023 as Cumberland is currently out of commercial inventory of the product.

Net revenue was positively impacted by various sales adjustments.

Omeclamox-Pak had no sales for the six months ended June 30, 2023, 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.

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

There was a $0.1 million increase in the product's year to date revenue for the six months ended June 30, 2023, when compared to the prior year period as a result of increased sales of our Authorized Generic and a decrease in expired product returns in 2023.

Caldolor revenue was $2.2 million for the first two quarters of 2023, at the same level as 2022.

Other revenue was $1.5 million for the six months ended June 30, 2023, representing a $0.7 million increase from the same period in 2022, as a result of two milestone payments recognized in 2023.

Cost of products sold .

Co st of products sold for the first six months of 2023 were $2.8 million, a decrease of $1.5 million compared to the same period last year due to the availability of new lower cost inventory and fewer inventory write downs.

Selling and marketing .

Selling and marketing expense for the six months ended June 30, 2023, decreased $0.2 million compared to the prior year period.

This decline is primarily attributable to the timing of spending.

Research and development .

Research and development costs were $2.6 million for the first six months of 2023 compared to $3.6 million for the same period last year.

A portion of our research and development costs is variable based on the number of trials, study sites, cost of the per patient study protocol and patients involved in the development of our new product candidates.

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

In addition, 2023 R&D costs declined by $0.9 million due to reduced FDA fees.

General and administrative .

General and administrative expense for the six months ended June 30, 2023, increased to $4.9 million compared to $4.5 million during the six months ended June 30, 2022.

In 2023, we experienced an increase in deferred compensation and hiring expenses.

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

Financial Impact of Vibativ Six months ended June 30,

Net revenue (1)

$ 4,996,013 $ 4,248,255

Cost of products sold (2)

517,313 1,329,480

Royalty and operating expenses 1,116,627 663,360

Vibativ contribution $ 3,362,073 $ 2,255,415

(1) 2023 net revenue includes a $1,000,000 payment to Cumberland related to a settlement agreement of milestone payments.

(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 7,653,817

Vibativ contribution $ 24,858,261

(1) Net revenue includes a $1,000,000 payment to Cumberland related to a settlement agreement of milestone payments.

(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 Six months ended June 30,

Net revenue $ 3,803,759 $ 7,045,758

Cost of products sold (1)

571,306 748,836

Royalty and operating expenses 1,822,804 1,903,022

Sancuso contribution $ 1,409,649 $ 4,393,900

(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.

Financial Impact of Sancuso Since Acquisition

Net revenue $ 17,359,362

Cost of products sold (1)

Royalty and operating expenses 6,024,830

Sancuso contribution $ 9,219,626

(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.

Amortization.

Amortization expense is the ratable use of our capitalized intangible assets including product and license rights, patents, trademarks and patent defense costs.

Amortization for the six months ended June 30, 2023, and six months ended June 30, 2022, totaled approximately $2.4 million and $3.1 million, respectively.

The decrease was attributable to the valuation of Sancuso acquisition completed in December 2022.

Income taxes .

Income tax expense for the six months ended June 30, 2023, as a percentage of income (loss) before income taxes, was 1.3% compared to (0.5)% for the six months ended June 30, 2022.

Other income.

In 2023, we recognized a $2.8 million refund of FDA fees for the periods of 2022 and 2023 to be used to further our product research efforts.

LIQUIDITY AND CAPITAL RESOURCES

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We believe that our internally generated cash flows, existing working capital and our line of credit will be adequate to finance internal growth, finance business development initiatives, and fund capital expenditures for the foreseeable future.

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

March 31, 2023 December 31, 2022

The following table summarizes our liquidity and working capital as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

Cash and cash equivalents $ 18,249,086 $ 19,757,970

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Revolving line of credit availability $ 6,851,875 $ 3,800,000

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,

The following table summarizes our net changes in cash and cash equivalents for the six months ended June 30, 2023 and June 30, 2022:

Six months ended June 30,

Net cash provided by (used in):

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Net increase (decrease) in cash and cash equivalents $ (1,508,884) $ (8,824,251)

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.

The net $1.5 million decrease in cash and cash equivalents for the six months ended June 30, 2023, was primarily attributable to cash used in investing and financing activities.

An increase of cash provided by operating activities of $3.8 million was primarily the result of an unfavorable increase in inventory of $0.2 million and the offsetting positive impact from a decrease of accounts receivable of $0.9 million, an increase of net accounts payable and other current liabilities of $0.5 million, an increase of long-term obligations of $0.3 million and the add backs of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $2.6 million.

Cash used in investing activities of $0.3 million was the result of additions to property and equipment and intangibles.

Financing activities use of cash was $5.1 million and include the repayments on our line of credit of $3.1 million, the $0.3 million in cash used to repurchase shares of our common stock as well as the $1.7 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.

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

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

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

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

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

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.

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 March 31, 2023, we were in compliance with the Funded Debt Ratio financial covenant.

For the quarter ended June 30, 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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OFF-BALANCE SHEET ARRANGEMENTS

During the three months ended March 31, 2023 and 2022, we did not engage in any off-balance sheet arrangements.

During the six months ended June 30, 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