CUMBERLAND PHARMACEUTICALS INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Disclosure regarding forward-looking statements The following discussion contains certain forward-looking statements which reflect management’s current views of future events and operations. These statements involve certain risks and uncertainties, and actual results may differ materially from them. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ significantly from the results discussed in these forward-looking statements. Some important factors which may cause results to differ from expectations include: availability of additional debt and equity capital; market conditions at the time additional capital is required; our ability to continue to acquire branded products; product sales; 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. Other important factors that may cause actual results to differ materially from forward-looking statements are discussed in the sections entitled "Risk Factors" and "Special Note Regarding Forward-Looking Statements" of our Annual Report on Form 10-K for the year ended December 31, 2023, and our other filings with the SEC. We do not undertake to publicly update or revise any of our forward-looking statements, even in the event that experience or future changes indicate that the anticipated results will not be realized. The following presentation of management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this report on Form 10-Q. 16 OVERVIEW Our Business Cumberland Pharmaceuticals Inc. ("Cumberland," the "Company," or as used in the context of "we," "us," or "our"), is a specialty pharmaceutical company focused on the acquisition, development and commercialization of branded prescription pharmaceuticals. We are dedicated to our mission of working together to provide unique products that improve the quality of patient care. Our primary target markets 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, field and oncology sales divisions in the United States. We continue to build a network of established international partners with the needed regulatory and commercial capabilities to register and provide our medicines to patients in their countries. Our portfolio of brands approved for marketing by the U.S. Food and Drug Administration ("FDA") includes: • Acetadote ® ( acetylcysteine ) injection, for the treatment of acetaminophen poisoning; • Caldolor ® ( ibuprofen ) injection, for the treatment of pain and fever; • Kristalose ® ( lactulose ) for oral solution, a prescription laxative, for the treatment of constipation; • Sancuso ® ( granisetron ) transdermal, for the prevention of nausea and vomiting in patients receiving certain types of chemotherapy treatment; • Vaprisol ® ( conivaptan ) injection, to raise serum sodium levels in hospitalized patients with euvolemic and hypervolemic hyponatremia; and • 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. In addition to these commercial brands, we have Phase II clinical programs underway evaluating our ifetroban product candidate in 1) Systemic Sclerosis ("SSc") or scleroderma, a debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs, 2) patients with cardiomyopathy associated with Duchenne Muscular Dystrophy ("DMD"), a rare, fatal, genetic neuromuscular disease results in deterioration of the skeletal, heart and lung muscles and 3) patients with Idiopathic Pulmonary Fibrosis ("IPF"), the most common form of progressive fibrosing interstitial lung disease. Investigational new study applications ("INDs") have been cleared by the FDA enabling us to launch Phase II clinical studies in each of these areas. Cumberland has built core competencies for the acquisition, development and commercialization of pharmaceutical products, and we believe we can leverage this existing infrastructure to support our growth. Our management team consists of pharmaceutical industry veterans with experience in business development, product development, regulatory, manufacturing, sales, marketing and finance. Our business development team identifies, evaluates, and negotiates product acquisition, licensing and co- promotion agreements. Our product development team creates proprietary formulations, manages our clinical studies, prepares our FDA submissions and staffs our medical call center. Our quality and manufacturing professionals oversee the manufacturing, release and shipment of our brands. Our marketing and sales organization is responsible for our commercial activities, and we work closely with our distribution partners to ensure the availability and delivery of our products. 17 GROWTH STRATEGY Cumberland’s growth strategy involves maximizing the potential of our existing brands, while continuing to build a portfolio of differentiated products. We currently own six products approved by the FDA in the United States. We are also continuing to build international partnerships to bring our medicines to patients in other countries. Additionally, we look for opportunities to expand our brands into new patient populations through clinical trials, new product presentations and our support of select, investigator-initiated studies. Meanwhile, our clinical team is developing a pipeline of new product candidates to address poorly met medical needs. We also pursue opportunities to acquire additional marketed brands as well as late-stage development product candidates in our target medical specialties. We are supplementing these activities with the earlier-stage drug development at Cumberland Emerging Technologies ("CET"), our majority-owned subsidiary. CET partners with academic research institutions to identify and support the progress of promising new product candidates, which Cumberland can further develop and commercialize. Specifically, we are seeking long-term, sustainable growth by: • Supporting and expanding the use of our marketed products. 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 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. • Selectively adding complementary brands. In addition to our product development activities, we are also seeking to acquire approved brands or late-stage development product candidates to continue to build our portfolio. We seek under-promoted, FDA-approved drugs as well as late-stage development products that can improve patient care. We will continue to target product acquisition candidates that are competitively differentiated and have valuable intellectual property or other protective features. 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. We believe it is important to build a pipeline of innovative new product opportunities, as we are doing through our ifetroban Phase II development programs. We are also supplementing our acquisitions and late-stage development activities with the early-stage drug development activities at CET. • Leveraging our infrastructure through co-promotion partnerships. We believe that our commercial infrastructure can help drive prescription volume and product sales. We also 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 across the U.S. • Building an international contribution to our business. We have established our own commercial capabilities, including three sales divisions, that focus on the U.S. market for our products. We are also working with a network of select international partners to register our products and make them available to patients in their countries. We will continue to support our partners’ registration and commercialization efforts in their respective territories. The acquisition of Vibativ resulted in several new international partners and market opportunities. • Managing our operations with financial discipline. We continually work to manage our expenses in line with our revenues, to deliver positive cash flow from operations. We seek to maintain favorable gross margins and a strong balance sheet. 18 RECENT DEVELOPMENTS Kristalose Covered on Wisconsin Medicaid Plans We have found that Kristalose, our prescription-strength laxative, performs best in states where we have Medicaid coverage. Wisconsin recently added Kristalose to its Medicaid formulary, and we are implementing a special initiative to announce this development in that market. We also have Medicaid coverage for the brand in New York state and Texas, two of the largest states for the product. Kristalose Recommended for Opioid-induced Constipation We recently launched a campaign featuring the American Gastroenterological Association’s (“AGA”) guidelines that include Kristalose as a first-line treatment option for opioid-induced constipation. As the guidelines state, “Constipation is by far the most common and debilitating gastrointestinal effect of opioids, and some degree of constipation is near universal in patients taking opioid medications.” We believe the AGA’s recommendation will support the use of Kristalose in those patients. New Study Supports Vibativ as an Effective Treatment for Anthrax Infections In June, Antimicrobial Agents and Chemotherapy published a study evaluating Vibativ (telavancin) as a novel therapeutic against anthrax inhalation, the most dangerous form of those infections. Researchers were particularly interested in finding alternatives to current antibiotics in case anthrax bacteria become resistant to them. Researchers tested telavancin against 17 different anthrax strains in the lab to determine how well it could stop their growth. Additionally, they tested telavancin in rabbits that were infected with a deadly dose of airborne anthrax spores and compared telavancin’s effectiveness to another antibiotic (levofloxacin) and a placebo. The results showed that: a. Telavancin was very effective at killing all the anthrax strains tested in the lab. b. In the rabbit study, all the animals treated with telavancin survived. c. Telavancin was better at clearing anthrax from the blood and organs than levofloxacin. Based on these results, the researchers concluded that telavancin could potentially be an effective new treatment option for anthrax infections, especially if current antibiotics become less effective due to resistance. Antimicrobial resistance continues to pose a significant challenge in the treatment of bacterial infections, necessitating the development of new antibiotic therapies. While many recently introduced antibiotics are quickly losing the battle to fight the bacteria they were designed to kill because those bacteria have become drug-resistant, Vibativ was specifically designed to kill drug-resistant bacteria. International Agreements We continue to support our international partners in their efforts to register Vibativ 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 has obtained the final approvals needed to commercialize Vibativ in Saudi Arabia and has now begun ordering the product in preparation for its launch planned for this year. Also in 2022, we entered into an agreement with D.B. Pharm to register and commercialize our Vibativ product in South Korea. D.B. Pharm also distributes our Caldolor product there. They filed for the approval of Vibativ in November 2022 and we have been supporting their efforts through the review process of their application in the country. The Korean regulatory authorities did not approve the submission, and indicated that additional manufacturing information will be required, which we will work with D.B. Pharm to address. Meanwhile, our Vibativ partner for the Chinese market, SciClone Pharmaceuticals, had their approval application in China accepted for review in September 2021. We have since been supporting SciClone and their requests associated with the review of that submission. They are working toward the approval and believe that there is significant potential for Vibativ in their country. 19 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 now been dosed in nearly 1,400 subjects and has been found to be safe and well tolerated in healthy volunteers and various patient populations. We have three Phase II clinical programs underway evaluating our ifetroban product candidate in patients with 1) Systemic Sclerosis or scleroderma, a debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs, 2) cardiomyopathy associated with Duchenne Muscular Dystrophy, a rare, fatal, genetic neuromuscular disease results in deterioration of the skeletal, heart, and lung muscles and 3) Idiopathic Pulmonary Fibrosis, the most common form of progressive fibrosing interstitial lung disease. This third program is our newest, with enrollment now underway. We recently applied for two FDA designations for our Duchenne Muscular Dystrophy product candidate: 1) Orphan Drug Designation , which is granted to products that show promise in the treatment, prevention or diagnosis of rare – or orphan – diseases; such designation can result in a number of benefits associated with the FDA review process including exclusivity after approval of the product. 2) Rare Pediatric Disease Designation , which is given to products intended to prevent or treat serious or life-threatening diseases that primarily affect children from birth to 18 years of age. Upon FDA approval this designation may result in a priority review voucher from the FDA for a different product. We expect to hear back on both applications this year. We have also completed a pilot Phase II study involving 1) patients suffering from Hepatorenal Syndrome, a life-threatening condition involving liver and kidney failure, 2) patients with Portal Hypertension associated with chronic liver disease and 3) patients with Aspirin-Exacerbated Respiratory Disease, a severe form of asthma. There were no significant safety issues identified with the use of ifetroban in these patients. Additional pilot 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. Federal NOPAIN Act We announced in April 2023 that we expected that Caldolor would be eligible for special Medicare reimbursement under the Non-Opioids Prevent Addiction in the Nation Act (which was enacted as part of the Consolidated Appropriations Act of 2023 (the “NOPAIN Act”). The NOPAIN Act requires Medicare to provide separate reimbursement for non-opioid products that are used to manage pain during surgeries conducted in hospital outpatient 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 expected that the NOPAIN Act would affect Medicare reimbursement for Caldolor, our non-opioid analgesic injection product. The 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 late 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. In July 2023, Medicare Hospital Outpatient Prospective Payment System (“OPPS”) Proposed Rule , CMS requested that manufacturers with potentially applicable non-opioid products submit comments and supporting clinical evidence regarding products that they believe should be eligible for separate payment. We submitted a comment letter along with the requisite clinical information to CMS in September 2023, explaining why Caldolor should be included and separately reimbursed. In July 2024 Medicare OPPS Proposed Rule, CMS proposed that, in 2025, several drugs that were previously eligible for separate payment via existing CMS policies continue to be eligible for separate payment in the hospital outpatient setting under the CAA of 2023 and solicited comments on whether there are additional drugs or biologicals that meet the statutory definition. In response, we plan to submit a comment letter along with the requisite information in September 2024 and will then await information from CMS regarding the reimbursement status and price for Caldolor in the CY 2025 OPPS Final Rule. 20 New Manufacturing & Supplies of Sancuso After acquiring U.S. rights to Sancuso, we successfully completed the transition from Kyowa Kirin to Cumberland in 2023, including the NDA transfer. A new facility was approved by the FDA for Sancuso and we have completed the manufacturing of Cumberland-packaged product there. We began shipping these new supplies of our Cumberland-branded product this summer. We continue to support the product through our expanded oncology sales division to help cancer patients by addressing certain side effects associated with their chemotherapy treatments. Vaprisol Supply Update 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. In 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 and distribution partner, Nephron, is working with the FDA to address several Form 483 and warning letter issues in a timely manner. As we await FDA approval for making the branded product there, Nephron is providing a special supply of compounded product in support of critically ill patients. The companies will share in the sales of this compounded product. Vaprisol is the first and only intravenously administered vasopressin receptor antagonist. It is used to raise serum sodium levels in hospitalized patients with hyponatremia, the most common electrolyte disorder among such patients. Summary We are dedicated to our mission of working together to provide unique products that improve the quality of patient care. We have pursued our mission by building a portfolio of FDA-approved brands, with outstanding safety and efficacy profiles that can make a difference in patients’ lives. We continue to build our 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 market. We will continue in those efforts and look forward to future opportunities to carry out and our mission and report on our progress throughout the remainder of the year and beyond. 21 CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES Please see a discussion of our critical accounting policies and significant judgments and estimates in Note 1 to the Company's Condensed Consolidated Financial Statements accompanying this report and the section entitled " Management’s Discussion and Analysis of Financial Condition and Results of Operations " in our 2023 Annual Report on Form 10-K. Accounting Estimates and Judgments The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. We base our estimates on past experience and on other factors we deem reasonable given the circumstances. Past results help form the basis of our judgments about the carrying value of assets and liabilities that cannot be determined from other sources. Actual results could differ from these estimates. The Company's most significant estimates include: (1) its allowances for chargebacks and accruals for rebates and product returns, (2) the allowances for obsolescent or unmarketable inventory and (3) valuation of contingent consideration liabilities associated with business combinations. 22 RESULTS OF OPERATIONS Three months ended June 30, 2024 compared to the three months ended June 30, 2023 The following table presents the unaudited interim statements of operations for continuing operations for the three months ended June 30, 2024 and 2023: Three months ended June 30, 2024 2023 Change Net revenues $ 9,848,849 $ 10,888,877 $ (1,040,028) Costs and expenses: Cost of products sold 1,710,944 1,520,774 190,170 Selling and marketing 4,248,401 4,672,075 (423,674) Research and development 1,059,187 1,145,038 (85,851) General and administrative 2,757,148 2,369,883 387,265 Amortization 1,099,857 1,158,248 (58,391) Total costs and expenses 10,875,537 10,866,018 9,519 Operating income (loss) (1,026,688) 22,859 (1,049,547) Interest income 61,841 57,061 4,780 Other income — 981,806 (981,806) Interest expense (126,347) (192,635) 66,288 Income (loss) before income taxes (1,091,194) 869,091 (1,960,285) Income tax expense (11,443) (6,937) (4,506) Net income (loss) $ (1,102,637) $ 862,154 $ (1,964,791) The following table summarizes net revenues by product for the periods presented: Three months ended June 30, 2024 2023 Change Products: Kristalose $ 4,107,834 $ 4,110,718 $ (2,884) Sancuso 2,188,776 1,916,966 271,810 Vibativ 2,454,481 2,147,826 306,655 Caldolor 844,248 1,226,314 (382,066) Acetadote 43,396 150,163 (106,767) Vaprisol (941) 8,062 (9,003) Omeclamox-Pak (1,581) 23,857 (25,438) RediTrex (1,156) 9,493 (10,649) Other revenue 213,792 1,295,478 (1,081,686) Total net revenues $ 9,848,849 $ 10,888,877 $ (1,040,028) Net revenues. Net revenues for the three months ended June 30, 2024, were $9.8 million compared to $10.9 million for the three months ended June 30, 2023. Kristalose revenue of $4.1 million for the second quarter of 2024, was similar to the same period in the prior year. Acetadote revenue includes net sales of our Acetadote brand and our share of net sales from our Authorized Generic. During the second quarter of 2024, there was a decrease of $0.1 million in the product's revenue when compared to the prior year period due to a decrease in shipments. There were no Vaprisol branded product sales for the second quarter of 2024 as Cumberland is currently out of inventory of the product as we await FDA approval on a new manufacturer. The revenue stated represents our share of sales of the compounded product offset by expired product returns. 23 Caldolor revenue was $0.8 million for the second quarter of 2024, compared to $1.2 million for the second quarter of 2023 primarily due to decreased international shipments in the current quarter. Vibativ revenue was $2.5 million for the three months ended June 30, 2024, an increase of $0.3 million from the same prior year period. The increase in net revenue of the product was the result of international shipments and the introduction of our 4-pak carton. Sancuso revenue was $2.2 million for the second quarter of 2024, compared to $1.9 million for the second quarter of 2023 resulting in an increase of $0.3 million. The increase resulted primarily from increased sales volume along with lower sales deductions associated with the product. Other revenue was $0.2 million for the three months ended June 30, 2024, compared to $1.3 million for the three months ended June 30, 2023. The prior year period included two $500,000 milestone payments associated with Vibativ. Cost of products sold . Co st of products sold for the second quarter of 2024 and 2023 were $1.7 million and $1.5 million, respectively. Cost of products sold, as a percentage of net revenues, were 17.4% during the three months ended June 30, 2024, compared to 14.0% during the three months ended June 30, 2023. The increase is primarily due to the mix of products sold. Selling and marketing . Selling and marketing expense for the second quarter of 2024 decreased $0.4 million compared to the same period last year. This decrease is primarily attributable to the timing of advertising costs and accrual adjustments. Research and development . Research and development costs for the second quarter of 2024 and 2023 were relatively the same at $1.1 million. A portion of our research and development costs is variable as we continue to fund the ongoing clinical initiatives associated with our pipeline product candidates. These variable costs depend on the number of active trials, study sites and patients as well as the cost per patient in each of our clinical programs. General and administrative . General and administrative expense for the second quarter of 2024 was $2.8 million compared to $2.4 million for the same period in 2023. The increase is due to higher salaries and contract labor costs. 24 The components of the statements of operations discussed above reflect the following impacts from Vibativ: Financial Impact of Vibativ Three months ended June 30, 2024 2023 Net revenue $ 2,454,481 $ 3,147,826 Cost of products sold (1) 549,583 270,571 Royalty and operating expenses 600,007 597,019 Vibativ contribution $ 1,304,891 $ 2,280,236 (1) The Vibativ inventory included in the costs of product sold during the period was acquired and paid for by Cumberland as part of the acquisition of the brand during 2018. The components of the statements of operations discussed above reflect the following impacts from Sancuso: Financial Impact of Sancuso Three months ended June 30, 2024 2023 Net revenue $ 2,188,776 $ 1,916,966 Cost of products sold (1) 299,547 281,828 Royalty and operating expenses 1,002,354 1,407,097 Sancuso contribution $ 886,875 $ 228,041 (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 three months ended June 30, 2024 and 2023, totaled approximately $1.1 million and $1.2 million, respectively. The decrease in amortization expense resulted from the write down of Omeclamox-Pak intangible assets as we discontinued the sales of the product in late 2023. Income taxes . Income tax expense for the three months ended June 30, 2024, was comparable to the income tax expense for the three months ended June 30, 2023. 25 RESULTS OF OPERATIONS Six months ended June 30, 2024 compared to the six months ended June 30, 2023 The following table presents the unaudited interim statements of operations for continuing operations for the six months ended June 30, 2024 and 2023: Six months ended June 30, 2024 2023 Change Net revenues $ 18,346,550 $ 20,113,515 $ (1,766,965) Costs and expenses: Cost of products sold 3,286,486 2,771,038 515,448 Selling and marketing 8,402,989 8,949,393 (546,404) Research and development 2,217,440 2,644,708 (427,268) General and administrative 5,125,055 4,868,876 256,179 Amortization 2,210,518 2,388,319 (177,801) Total costs and expenses 21,242,488 21,622,334 (379,846) Operating loss (2,895,938) (1,508,819) (1,387,119) Interest income 158,587 107,251 51,336 Other income — 2,828,871 (2,828,871) Interest expense (244,873) (378,988) 134,115 Income (loss) before income taxes (2,982,224) 1,048,315 (4,030,539) Income tax expense (22,885) (13,875) (9,010) Net income (loss) $ (3,005,109) $ 1,034,440 $ (4,039,549) The following table summarizes net revenues by product for the periods presented: Six months ended June 30, 2024 2023 Change Products: Kristalose $ 7,303,444 $ 8,425,846 $ (1,122,402) Sancuso 4,016,544 3,803,759 212,785 Vibativ 4,059,970 3,996,013 63,957 Caldolor 2,314,947 2,161,356 153,591 Acetadote 123,599 320,019 (196,420) Vaprisol 7,081 39,866 (32,785) Omeclamox-Pak (2,556) 5,544 (8,100) RediTrex 34,400 (131,552) 165,952 Other revenue 489,121 1,492,664 (1,003,543) Total net revenues $ 18,346,550 $ 20,113,515 $ (1,766,965) Net revenues. Net revenues for the six months ended June 30, 2024, were $18.3 million compared to $20.1 million for the six months ended June 30, 2023, a decrease of $1.8 million. Kristalose revenue was $7.3 million during the first six months of 2024, compared to $8.4 million for the prior year period. Revenue decreased due to 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 six months ended June 30, 2024, there was a decrease of $0.2 million in the product's revenue when compared to the prior year period due to a decrease in shipments. 26 Sancuso revenue was $4.0 million for the six months ended June 30, 2024, compared to $3.8 million for the same period last year. The increase resulted primarily from reduced sales deductions for product returns. Vibativ revenue was $4.1 million for the six months ended June 30, 2024, compared to $4.0 million for the same period last year. The increase in net revenue of the product was the result of international shipments in 2024. There was $0.01 million of Vaprisol revenue for the six months ended June 30, 2024 related to the sales of our compounded product. Omeclamox-Pak had no sales for the six months ended June 30, 2024, 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. Caldolor revenue was $2.3 million for the six months ended June 30, 2024, a $0.2 million increase over the same period in 2023. Higher international revenue is driving the increase. Other revenue was $0.5 million for the six months ended June 30, 2024, representing a $1.0 million decrease from the same period in 2023, as a result of a settlement recognized in 2023. Cost of products sold . Co st of products sold for the first six months of 2024 were $3.3 million, an increase of $0.5 million compared to the same period last year due to higher international sales with corresponding higher cost of goods. Selling and marketing . Selling and marketing expense for the six months ended June 30, 2024, decreased $0.5 million compared to the prior year period. This decrease is primarily attributable to the timing of the expenditures. Research and development . Research and development costs were $2.2 million for the first six months of 2024 compared to $2.6 million for the same period last year. A portion of our research and development costs is variable as we continue to fund the ongoing clinical initiatives associated with our pipeline product candidates. These variable costs depend on the number of active trials, study sites and patients as well as the cost per patient in each of our clinical programs. The year over year reduction results from lower FDA fees in 2024. General and administrative . General and administrative expense for the six months ended June 30, 2024, increased to $5.1 million compared to $4.9 million during the six months ended June 30, 2023. The components of the statements of operations discussed above reflect the following impacts from Vibativ: Financial Impact of Vibativ Six months ended June 30, 2024 2023 Net revenue (1) $ 4,059,970 $ 4,996,013 Cost of products sold 826,646 517,313 Royalty and operating expenses 1,078,480 1,116,627 Vibativ contribution $ 2,154,844 $ 3,362,073 (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. Financial Impact of Vibativ Since Acquisition Net revenue (1) $ 57,631,147 Cost of products sold (2) 17,975,152 Royalty and operating expenses 9,995,609 Vibativ contribution $ 29,660,386 (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. 27 Financial Impact of Sancuso Six months ended June 30, 2024 2023 Net revenue $ 4,016,544 $ 3,803,759 Cost of products sold (1) 556,125 571,306 Royalty and operating expenses 1,530,051 1,822,804 Sancuso contribution $ 1,930,368 $ 1,409,649 (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 $ 25,668,935 Cost of products sold (1) 3,314,551 Royalty and operating expenses 9,107,900 Sancuso contribution $ 13,246,484 (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, 2024, and six months ended June 30, 2023, totaled approximately $2.2 million and $2.4 million, respectively. The decrease was attributable to a reduction to the valuation of Omeclamox acquisition recognized in December 2023. Income taxes . Income tax expense for the six months ended June 30, 2024, was $0.02 million, comparable to the income tax expense recognized for the six months ended June 30, 2023. As of June 30, 2024, we had approximately $52.1 million in federal net operating loss carryforwards including approximately $44.1 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 2024 and beyond, through the continued utilization of these net operating loss carryforwards, on any taxable income generated from our operations. 28 LIQUIDITY AND CAPITAL RESOURCES Working Capital Our primary sources of liquidity are cash equivalents, cash flows from operations and the amounts borrowed under our line of credit. We believe that our internally generated cash flows, existing working capital and our line of credit will be adequate to finance internal growth, finance business development initiatives, and fund capital expenditures for the foreseeable future. The following table summarizes our liquidity and working capital as of June 30, 2024 and December 31, 2023: June 30, 2024 December 31, 2023 Cash and cash equivalents $ 17,336,446 $ 18,321,624 Working capital (current assets less current liabilities) $ 10,824,924 $ 7,732,161 Current ratio (multiple of current assets to current liabilities) 1.4 1.3 Revolving line of credit availability $ 3,908,408 $ 7,215,856 The following table summarizes our net changes in cash and cash equivalents for the six months ended June 30, 2024 and June 30, 2023: Six months ended June 30, 2024 2023 Net cash provided by (used in): Operating activities $ (2,992,307) $ 3,817,152 Investing activities (104,990) (271,261) Financing activities 2,112,119 (5,054,775) Net decrease in cash and cash equivalents $ (985,178) $ (1,508,884) The net $1.0 million decrease in cash and cash equivalents for the six months ended June 30, 2024, was primarily attributable to cash used in operating activities partially offset by cash provided by financing activities. Cash used in operating activities totaled $3.0 million for the six months ended June 30, 2024, primarily is due to the result of $3.0 million net loss, a $1.9 million decrease in accounts payable and other current liabilities and a $1.9 million increase in account receivable partially offset by a $2.3 million increase in depreciation and amortization expense and a $1.2 million decrease in inventories. Cash provided by financing activities totaled $2.1 million for the six months ended June 30, 2024, primarily due to $3.3 million borrowings net on our line of credit, partially offset by the $0.8 million used for the payment of a Sancuso milestone, plus royalties on sales of Vibativ and Sancuso and the $0.4 million in cash used to repurchase shares of our common stock. Debt Agreement On September 5, 2023, the Company entered into a new Revolving Credit Loan Agreement with Pinnacle Bank. This facility provides for an aggregate principal funding amount of up to $25 million. The initial revolving line of credit is up to $20 million, with the ability for Cumberland to increase the amount to $25 million, under certain conditions. It has a three year term expiring on October 1, 2026. The interest rate is based on Benchmark (Term SOFR) plus a spread of 2.75%. Cumberland is subject to one financial covenant, the maintenance of a Funded Debt Ratio, determined on a quarterly basis. Borrowings under the line of credit are collateralized by substantially all of our assets. On May 6, 2024, the Company entered into a First Amendment to the Loan Agreement which provides an alternative to the financial covenant by delivering to the lender a borrowing base certificate and complying with certain borrowing base requirements which set forth a maximum revolver amount equal to the lessor of (a) up to $20 million or (b) the sum of the Company's cash balances and eligible accounts receivable. OFF-BALANCE SHEET ARRANGEMENTS During the six months ended June 30, 2024 and 2023, we did not engage in any off-balance sheet arrangements. 29