CUMBERLAND PHARMACEUTICALS INC Management's Discussion and Analysis of Financial Condition and Resultsof Operations (form 10-Q)

Published: 2022-05-13 17:09:07 ET CPIX

Disclosure regarding forward-looking statements

Our portfolio of FDA approved brands includes:

•Acetadote® (acetylcysteine) injection, for the treatment of acetaminophen poisoning;

•Caldolor® (ibuprofen) injection, for the treatment of pain and fever;

•Kristalose® (lactulose) oral, a prescription laxative, for the treatment of constipation;

•Omeclamox®-Pak, (omeprazole, clarithromycin, amoxicillin) oral, for the treatment of Helicobacter pylori (H. 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;

•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.

GROWTH STRATEGY

Specifically, we are seeking long-term sustainable growth by:

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

RECENT DEVELOPMENTS

COVID-19 Pandemic

Sancuso Acquisition

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

Cumberland acquired U.S. rights to Sancuso and assumed full commercial responsibility for the product - including its marketing, promotion, distribution, manufacturing and medical support activities.

Sancuso Promotion

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

New Vibativ Agreements

Omeclamox-Pak Supply Update

We have been evaluating our ifetroban product candidate, a selective thromboxane-prostanoid receptor ("TPr") antagonist, in a series of clinical studies. It has been dosed in nearly 1,400 subjects and was found to be safe and well tolerated in healthy volunteers and various patient populations.

Summary

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 2021 Annual Report on Form 10-K.

Accounting Estimates and Judgments

RESULTS OF OPERATIONS

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

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

Net income (loss) from continuing operations $ (1,402,433) $ (350,749) $ (1,051,684)

Total net revenues $ 11,175,045 $ 10,537,159 $ 637,886

Acetadote revenue includes net sales of our Acetadote brand and our share of net sales from our Authorized Generic. During the quarter, there was a slight decrease in the product's revenue when compared to the prior year period.

Vibativ revenue was $2.5 million for the three months ended March 31, 2022, compared to $5.1 million for the same period last year. The decrease was a result of increased purchases in 2021 due in part to a new packaging change.

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

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

Financial Impact of Vibativ Since Acquisition Net revenue (1)

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

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

(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.

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

LIQUIDITY AND CAPITAL RESOURCES

Working Capital

$ 26,409,053 Current ratio (multiple of current assets to current liabilities)

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

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

$ 169,129

Debt Agreement

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

As of March 31, 2022 and December 31, 2021, the Company had $20.0 million and $15.0 million, respectively, in borrowings outstanding under its revolving credit facility. The Company was in compliance with the Maximum Funded Debt Ratio financial covenant as of March 31, 2022.

Paycheck Protection Program Loan

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

Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act, including qualifying payroll costs, covered rent payments, and covered utilities. Cumberland used the PPP loan funds for such qualifying expenses. Due to assistance from our PPP loan, the Company did not lay off or furlough any employees as a result of the COVID-19 pandemic.

OFF-BALANCE SHEET ARRANGEMENTS

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