Part I [Business](index=4&type=section&id=Item%201.%20Business%2E) Cumberland Pharmaceuticals specializes in acquiring, developing, and commercializing branded prescription products for hospital acute care, gastroenterology, and rheumatology - The company's primary target markets are **hospital acute care, gastroenterology, and rheumatology**, which are addressed by small, targeted sales forces[10](index=10&type=chunk) - The COVID-19 pandemic created headwinds by reducing hospital admissions and elective surgeries, which impacted revenues. However, the company's **diversified product portfolio** provided some resilience[18](index=18&type=chunk) Portfolio of FDA Approved Brands | Product | Indication | | :--- | :--- | | Acetadote® | Acetaminophen Poisoning | | Caldolor® | Pain and Fever | | Kristalose® | Chronic and Acute Constipation | | Omeclamox®-Pak | H. pylori infection and related Duodenal Ulcer disease | | Vaprisol® | Euvolemic and Hypervolemic Hyponatremia | | Vibativ® | Serious bacterial infections | | RediTrex® | Arthritis and psoriasis | - The company's growth strategy focuses on maximizing existing brands, acquiring new products, advancing its clinical pipeline, leveraging co-promotion partnerships, and expanding internationally[14](index=14&type=chunk)[75](index=75&type=chunk) [Products](index=6&type=section&id=Products) The company markets seven FDA-approved products, including Acetadote, Caldolor, Vibativ, and RediTrex, with Omeclamox-Pak currently unavailable - Acetadote® and its Authorized Generic, both using an EDTA-free formulation, maintained a **significant market share in 2020**. The product's patent is upheld until **August 2025**[24](index=24&type=chunk)[26](index=26&type=chunk) - A full-scale launch of the new ready-to-use Caldolor® product began in January 2020 but was impacted by the **COVID-19 pandemic** and the postponement of elective surgeries[36](index=36&type=chunk) - Demand for Vibativ® grew in 2020, as it was used to treat pneumonia from secondary bacterial infections in hospitalized **COVID-19 patients**[57](index=57&type=chunk) - The packager for Omeclamox®-Pak suspended operations in 2020 due to financial difficulties, leading to the product being **currently unavailable**. The FDA has been notified[51](index=51&type=chunk) - RediTrex®, for arthritis and psoriasis, received FDA approval in December 2019 and began initial shipments in November 2020, with a national launch planned for the **second half of 2021**[60](index=60&type=chunk) [Pipeline](index=10&type=section&id=Pipeline) The pipeline focuses on ifetroban candidates in Phase II for AERD, SSc, and DMD, with enrollment slowed by COVID-19 - The clinical pipeline is focused on **ifetroban**, with Phase II programs for Aspirin-Exacerbated Respiratory Disease (AERD), Systemic Sclerosis (SSc), and Duchenne Muscular Dystrophy (DMD)[62](index=62&type=chunk)[65](index=65&type=chunk)[70](index=70&type=chunk) - The Phase II study for ifetroban in DMD is supported by **over $1 million in funding** from the FDA's Orphan Drug Grant program[70](index=70&type=chunk) - Clinical trial enrollment was **significantly slowed during 2020** due to the COVID-19 pandemic, but many study sites have since reopened[61](index=61&type=chunk)[112](index=112&type=chunk) - A Phase II study for a new hospital-based cholesterol-reducing agent has completed patient enrollment, and the company has filed the study report with the FDA[73](index=73&type=chunk)[114](index=114&type=chunk) [Sales, Marketing, and Customers](index=13&type=section&id=Sales%2C%20Marketing%2C%20and%20Customers) Cumberland employs two sales forces targeting hospitals and specialists, with three major distributors accounting for 71% of 2020 gross revenues - The company operates two specialized sales forces: a hospital division and a field sales team for gastroenterology and rheumatology, totaling approximately **50 representatives and managers**[82](index=82&type=chunk)[83](index=83&type=chunk)[85](index=85&type=chunk) 2020 Revenue Concentration by Customer | Customer | Percentage of Gross Revenue | | :--- | :--- | | Customer 1 | 25% | | Customer 2 | 25% | | Customer 3 | 21% | [Patents, Trademarks and Other Intellectual Proprietary Rights](index=21&type=section&id=Patents%2C%20Trademarks%20and%20Other%20Intellectual%20Proprietary%20Rights) The company protects products via patents and trademarks, with key patents for Acetadote and Caldolor extending to 2025-2032 - A series of patents protect the Acetadote® EDTA-free formulation, with the '445 patent expiring in **August 2025** and the '356 patent expiring in **May 2026**. The company has successfully defended the '445 patent in court, securing an injunction against a generic version until 2025[152](index=152&type=chunk)[160](index=160&type=chunk)[168](index=168&type=chunk) - Caldolor® is protected by numerous patents, including formulation patent '286 (expiring **Nov 2021**) and several method-of-use patents expiring between **2029 and 2032**[172](index=172&type=chunk)[173](index=173&type=chunk)[176](index=176&type=chunk) - Vibativ® is protected by eleven patents listed in the FDA Orange Book, including a composition of matter patent ('623) that expires in **January 2027**[182](index=182&type=chunk) - The company has **no issued patents** for its RediTrex, Omeclamox-Pak, and Kristalose products[183](index=183&type=chunk) [Competition](index=25&type=section&id=Competition) Cumberland faces intense competition from branded, generic, and alternative treatments across its Acetadote, Caldolor, and Vibativ portfolios - Acetadote® competes with generic injectable products, including an Authorized Generic version of its own EDTA-free formulation distributed by Perrigo, and older formulations containing EDTA from competitors like Akorn and Fresenius Kabi[189](index=189&type=chunk)[190](index=190&type=chunk) - Caldolor®'s primary competitors in the acute pain market include generic injectable opioids, ketorolac, and branded non-narcotic analgesics such as Mallinckrodt's Ofirmev® (IV acetaminophen) and Baudax Bio's Anjeso™ (IV meloxicam)[191](index=191&type=chunk)[192](index=192&type=chunk) - Vibativ® faces competition from major generic antibiotics like vancomycin, linezolid, and daptomycin, as well as newer branded agents including Teflaro®, Dalvance®, and Orbactiv®[206](index=206&type=chunk)[207](index=207&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors%2E) The company faces risks from COVID-19, third-party manufacturing, competition, regulation, IP, and financial volatility - The COVID-19 pandemic has **adversely impacted the business** by disrupting day-to-day activities, limiting sales force access to medical facilities, and potentially causing revenue loss and supply interruptions[278](index=278&type=chunk)[280](index=280&type=chunk) - The company is highly dependent on **third-party manufacturers** for all its products. Any failure by these suppliers to produce sufficient quantities or comply with GMP regulations could lead to product shortages and lost revenue. The packager for Omeclamox-Pak suspended operations due to COVID-19's financial impact[288](index=288&type=chunk)[289](index=289&type=chunk)[294](index=294&type=chunk) - Competition from generic equivalents poses a **significant threat**. The introduction of a generic can lead to a substantial loss in revenues for a branded product[306](index=306&type=chunk)[308](index=308&type=chunk) - The company's strategy of acquiring products has resulted in significant intangible assets (**29% of total assets** as of Dec 31, 2020), which are subject to amortization and potential impairment, potentially harming operating results[419](index=419&type=chunk)[420](index=420&type=chunk) - As of December 31, 2020, officers and directors control approximately **41% of the company's common stock**, allowing them to significantly influence corporate actions[437](index=437&type=chunk) [Properties](index=60&type=section&id=Item%202.%20Properties%2E) Cumberland leases its Nashville headquarters and a subsidiary's office/lab space, relying on third-party manufacturers - The company leases approximately **25,500 sq. ft.** for its corporate headquarters in Nashville, TN, with the lease expiring in **October 2022**[461](index=461&type=chunk) - Its subsidiary, CET, leases approximately **14,200 sq. ft.** of office and lab space in Nashville, TN, through **April 2023**, with an option to extend to 2028[462](index=462&type=chunk) [Legal Proceedings](index=60&type=section&id=Item%203.%20Legal%20Proceedings%2E) Legal proceedings, particularly Acetadote patent defense, are referenced from the Business section - Information regarding legal proceedings, particularly concerning Acetadote patent defense, is incorporated by reference from the Business section (Part 1, Item 1)[463](index=463&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=60&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities%2E) Cumberland's common stock trades on Nasdaq, with no cash dividends paid, and a share repurchase program active in 2020 - The company's common stock trades on the **Nasdaq Global Select Market** under the symbol **CPIX**[465](index=465&type=chunk) - The company has a **$10.0 million share repurchase program** and repurchased **503,626 shares** for approximately **$1.8 million** during the year ended December 31, 2020[469](index=469&type=chunk) Share Repurchases in Q4 2020 | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | October | 38,501 | $3.14 | | November | 31,162 | $3.02 | | December | 26,280 | $3.06 | | **Total** | **95,943** | | [Selected Financial Data](index=62&type=section&id=Item%206.%20Selected%20Financial%20Data%2E) The company reported increased net revenues in 2020 but continued operating and net losses, with total assets and equity declining Selected Historical Financial Data (in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net revenues | $37,441 | $34,388 | $29,345 | | Operating income (loss) | $(6,382) | $(9,288) | $(11,173) | | Net income (loss) from continuing operations | $(6,626) | $(9,212) | $(10,821) | | Net income (loss) attributable to common shareholders | $(3,339) | $(3,538) | $(6,963) | | Earnings (loss) per share – diluted | $(0.22) | $(0.23) | $(0.45) | | Total assets | $96,463 | $104,549 | $112,694 | | Total equity | $46,873 | $51,085 | $55,571 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%2E) Net revenues increased by 8.9% in 2020, narrowing the operating loss, while liquidity remained solid with positive cash from operations [Results of Operations](index=68&type=section&id=Results%20of%20Operations) Net revenues rose 8.9% to $37.4 million in 2020, driven by Kristalose and Vibativ, improving the operating loss Net Revenues by Product (2020 vs. 2019, in thousands) | Product | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Kristalose | $15,568 | $12,895 | $2,673 | | Vibativ | $10,871 | $8,692 | $2,179 | | Caldolor | $5,337 | $5,222 | $115 | | Acetadote | $1,874 | $3,824 | $(1,950) | | Omeclamox-Pak | $257 | $838 | $(581) | | Vaprisol | $1,077 | $937 | $140 | | RediTrex | $857 | $0 | $857 | | **Total Net Revenues** | **$37,441** | **$34,388** | **$3,053** | - Operating loss for 2020 improved to **$(6.4) million** from **$(9.3) million** in 2019, a change of **$2.9 million**, driven by revenue growth and cost management[508](index=508&type=chunk) - Cost of products sold as a percentage of net revenues increased from **21.6% in 2019 to 23.1% in 2020**, mainly due to a shift in product mix towards Vibativ, which has a higher cost basis due to purchase accounting[516](index=516&type=chunk) - Selling and marketing expenses decreased by **$0.5 million** in 2020 due to lower promotional spending and travel, while R&D costs decreased by **$1.1 million** due to reduced study activity[517](index=517&type=chunk)[518](index=518&type=chunk) [Liquidity and Capital Resources](index=73&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and equivalents decreased to $24.8 million in 2020, with positive operating cash flow and a $15 million credit facility Liquidity Summary (as of Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Cash and cash equivalents ($) | $24,753,796 | $28,212,635 | | Working capital ($) | $24,302,146 | $26,012,840 | | Revolving line of credit availability ($) | $0 | $1,500,000 | Summary of Cash Flows (Year ended Dec 31) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Operating activities ($) | $5,415,061 | $3,056,356 | | Investing activities ($) | $(1,757,789) | $2,297,848 | | Financing activities ($) | $(7,116,111) | $(5,080,529) | - In April 2020, the company received a **$2,187,140 loan** under the Paycheck Protection Program (PPP) and submitted a request for forgiveness in October 2020[549](index=549&type=chunk)[744](index=744&type=chunk) - The company has a revolving credit agreement with Pinnacle Bank, extended through **October 2022**, with up to **$15 million available**. As of Dec 31, 2020, **$15.0 million was outstanding**[545](index=545&type=chunk)[737](index=737&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=77&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk%2E) The company faces interest rate risk from its variable-rate credit facility but minimal foreign currency risk - The company has interest rate risk from its revolving line of credit, which is based on LIBOR plus a spread of **1.75% to 2.75%**. As of Dec 31, 2020, **$15.0 million was outstanding**[565](index=565&type=chunk) - Foreign currency exchange rate risk is considered minimal as operations are primarily in the U.S. and foreign currency transactions are limited[566](index=566&type=chunk)[567](index=567&type=chunk) [Controls and Procedures](index=77&type=section&id=Item%209A.%20Controls%20and%20Procedures%2E) Disclosure controls and internal control over financial reporting were deemed effective as of December 31, 2020 - Management concluded that as of December 31, 2020, the company's disclosure controls and procedures were **effective**[571](index=571&type=chunk) - Based on the COSO framework, management concluded that internal control over financial reporting was **effective** as of December 31, 2020[610](index=610&type=chunk)[611](index=611&type=chunk) [Other Information](index=78&type=section&id=Item%209B.%20Other%20Information%2E) New employment agreements for key executive officers, effective January 2021, updated base salaries and covenants - New employment agreements were executed for key officers, including the CEO, CCO, CDO, and CFO, effective **January 1, 2021**[574](index=574&type=chunk)[575](index=575&type=chunk) - The new agreement for CEO A.J. Kazimi sets his base salary at **$610,132**[576](index=576&type=chunk) Part III [Part III](index=79&type=section&id=PART%20III) Information for Part III (Items 10-14) is incorporated by reference from the company's 2021 proxy statement - Information for Part III (Items 10-14) is incorporated by reference from the registrant's Proxy Statement for its **2021 annual meeting of shareholders**[587](index=587&type=chunk) Part IV [Part IV](index=80&type=section&id=PART%20IV) [Exhibits, Financial Statement Schedules](index=80&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules%2E) This section lists all documents filed as part of the Form 10-K report, including financial statements and exhibits - This section contains the list of financial statements, schedules, and exhibits filed with the Form 10-K[591](index=591&type=chunk)

Financial Data and Key Metrics Changes - For Q4 2020, net revenues from continuing operations were $10.3 million, a 10% increase from $9.3 million in the prior year period [25] - Full year 2020 net revenues were $37.4 million, an 8.9% increase over the prior year [26] - Adjusted earnings for Q4 were $0.2 million, or $0.01 per share, a significant turnaround from a loss of $1.9 million, or $0.12 per share, during the prior year period [29] - Adjusted earnings for the full year were a loss of $0.1 million, or $0.01 per share, compared to a loss of $3.4 million, or $0.22 per share, in the prior year [30] Business Line Data and Key Metrics Changes - Q4 revenues by product included $5.2 million for Kristalose, $2.3 million for Vibativ, $1.7 million for Caldolor, and $0.9 million for RediTrex [26] - Annual 2020 net revenues by products included $15.6 million for Kristalose, $10.9 million for Vibativ, $5.3 million for Caldolor, and $0.9 million for RediTrex [27] - Vibativ has been a significant contributor, delivering a total cash contribution of $18 million since its launch in late 2018 [31] Market Data and Key Metrics Changes - The company faced challenges due to the pandemic, impacting hospital admissions and physician office visits, but managed to mitigate the impact through a diverse product portfolio [9] - The introduction of the next-generation Caldolor product was affected by the pandemic, but is expected to perform better as elective surgeries resume [17] Company Strategy and Development Direction - The company aims to expand its product portfolio through business development initiatives and currently features seven FDA-approved brands with a robust pipeline [40] - The focus is on maximizing the potential of existing brands while adding differentiated products [41] Management's Comments on Operating Environment and Future Outlook - Management expressed gratitude for maintaining operations and organizational integrity during 2020 despite challenges [39] - The company is optimistic about future growth opportunities from products like Vibativ and RediTrex, with expected sales potential of $20 million to $30 million for Vibativ and $30 million to $40 million for RediTrex over the next several years [48] Other Important Information - The company ended 2020 with over $96 million in total assets, including $24.8 million in cash and equivalents [35] - The company received a $2.2 million loan under the paycheck protection program, which helped prevent employee layoffs during the pandemic [36] Q&A Session Summary Question: Where are the greatest opportunities for revenue growth? - Management highlighted significant growth opportunities in Kristalose, Vibativ, Caldolor, and RediTrex, along with pipeline products [45] Question: What is the expected growth rate for the company? - Management refrained from providing specific guidance but indicated that pipeline products could lead to significant future growth [47] Question: What is included in the non-current inventory? - Non-current inventory primarily consists of API and work in process inventory for Vibativ, expected to be used over multiple years [49] Question: Plans to reduce high inventory levels? - Management acknowledged the need to work down inventory acquired with Vibativ and plans to do so over time [51]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-33637 | --- | --- | |----------------------------------------------------------------------------------------|------------- ...

CUMBERLAND® PHARMACE UTICALS Corporate Presentation Nasdaq CPIX Safe Harbor Statement This presentation contains forward-looking statements concerning our approved products and product development, our technology, our competitors, our intellectual property, our financial condition and our plans for research and development programs that involve risks, uncertainties and assumptions. These statements are based on the current estimates and assumptions of the management of Cumberland Pharmaceuticals as of the d ...

Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX) Q3 2020 Earnings Conference Call November 10, 2020 4:30 PM ET Company Participants Erin Gull - Senior Corporate Relations Associate A. J. Kazimi - Founder, Chairman, President & CEO Martin Cearnal - EVP, Chief Commercial Officer & Director Michael Bonner - CFO and Senior Director, Finance & Accounting Conference Call Participants James Terwilliger - Paulson Investment Company Operator Thank you for joining the Cumberland Pharmaceuticals Third Quarter 2020 Finan ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-33637 | --- | --- | |---------------------------------------------------|------------------------------------------------------- ...

CUMBERLAND® PHARMACE UTICALS Corporate Presentation Nasdaq CPIX Safe Harbor Statement This presentation contains forward-looking statements concerning our approved products and product development, our technology, our competitors, our intellectual property, our financial condition and our plans for research and development programs that involve risks, uncertainties and assumptions. These statements are based on the current estimates and assumptions of the management of Cumberland Pharmaceuticals as of the d ...

Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX) Q2 2020 Earnings Conference Call August 11, 2020 4:30 PM ET Company Participants Erin Gull - IR A. J. Kazimi - CEO Marty Cearnal - Chief Commercial Officer Michael Bonner - CFO Conference Call Participants Andrew D'Silva - B. Riley FBR Operator Thanks to everyone participating on today’s call as Cumberland Pharmaceuticals provides Second Quarter 2020 Financial Report and Company Update. Please note that this call is being recorded and will be archived on Cumber ...

[FORM 10-Q](index=1&type=section&id=FORM%2010-Q) [INDEX](index=2&type=section&id=INDEX) [PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, equity, and notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary | Metric | March 31, 2020 | December 31, 2019 | Change (vs. Dec 31, 2019) | | :-------------------------- | :------------- | :---------------- | :------------------------ | | Total Assets | $97,419,137 | $104,549,283 | $(7,130,146) | | Total Liabilities | $47,576,079 | $53,464,030 | $(5,887,951) | | Total Equity | $49,843,058 | $51,085,253 | $(1,242,195) | | Cash and Cash Equivalents | $27,026,734 | $28,212,635 | $(1,185,901) | | Accounts Receivable, net | $5,949,910 | $7,843,917 | $(1,894,007) | | Inventories | $8,150,152 | $8,871,254 | $(721,102) | | Total Current Assets | $44,737,017 | $50,163,075 | $(5,426,058) | | Total Current Liabilities | $19,372,591 | $24,150,235 | $(4,777,644) | [Condensed Consolidated Statements of Operations and Comprehensive Income (loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(loss)) Operating Results and Comprehensive Income (Loss) | Metric (Three months ended March 31) | 2020 | 2019 | Change (YoY) | | :----------------------------------- | :------------ | :------------ | :------------ | | Net Revenues | $8,330,734 | $8,729,860 | $(399,126) | | Total Costs and Expenses | $10,176,735 | $10,053,792 | $122,943 | | Operating Income (Loss) | $(1,846,001) | $(1,323,932) | $(522,069) | | Net Income (Loss) from Continuing Operations | $(1,883,418)$ | $(1,187,554)$ | $(695,864)$ | | Discontinued Operations | $818,273 | $1,147,136 | $(328,863) | | Net Income (Loss) | $(1,065,145)$ | $(40,418)$ | $(1,024,727)$ | | Net Income (Loss) attributable to common shareholders | $(1,055,620)$ | $(73,878)$ | $(981,742)$ | | EPS - Continuing Operations - Basic | $(0.12)$ | $(0.08)$ | $(0.04)$ | | EPS - Discontinued Operations - Basic | $0.05$ | $0.08$ | $(0.03)$ | | EPS - Basic | $(0.07)$ | $—$ | $(0.07)$ | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary | Cash Flow Activity (Three months ended March 31) | 2020 | 2019 | Change (YoY) | | :----------------------------------------------- | :------------ | :------------ | :------------ | | Net cash provided by (used in) operating activities | $888,539 | $(385,733)$ | $1,274,272$ | | Net cash used in investing activities | $(571,161)$ | $(1,723,388)$ | $1,152,227$ | | Net cash used in financing activities | $(1,503,279)$ | $(1,220,424)$ | $(282,855)$ | | Net decrease in cash and cash equivalents | $(1,185,901)$ | $(3,329,545)$ | $2,143,644$ | | Cash and cash equivalents at end of period | $27,026,734$ | $24,609,415$ | $2,417,319$ | - Cash provided by operating activities in Q1 2020 was **positively impacted by decreases in accounts receivable ($2.0 million) and inventory ($0.7 million)**, and non-cash expenses totaling **$1.4 million**, partially offset by a **$2.4 million decrease in accounts payable**[108](index=108&type=chunk) - Cash used in investing activities in Q1 2020 was primarily due to **additions to intangible assets of $0.5 million**[108](index=108&type=chunk) - Financing activities in Q1 2020 included **$0.4 million for common stock repurchases** and **$0.8 million for subsidiary share repurchases**[108](index=108&type=chunk) [Condensed Consolidated Statements of Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Equity Changes | Metric (Three months ended March 31) | 2020 | 2019 | | :----------------------------------- | :------------ | :------------ | | Balance, December 31 | $51,085,253$ | $55,570,501$ | | Share-based compensation | $264,574$ | $364,434$ | | Repurchase of common shares | $(441,624)$ | $(703,790)$ | | Net loss | $(1,055,620)$ | $(73,878)$ | | Balance, March 31 | $49,843,058$ | $55,190,727$ | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering company organization, accounting policies, significant estimates, and specific financial line items [(1) ORGANIZATION AND BASIS OF PRESENTATION](index=9&type=section&id=(1)%20ORGANIZATION%20AND%20BASIS%20OF%20PRESENTATION) Describes Cumberland Pharmaceuticals Inc. as a specialty pharmaceutical company focused on acquiring, developing, and commercializing branded prescription products for hospital acute care and gastroenterology, and outlines the basis of financial statement preparation [Discontinued Operations](index=9&type=section&id=Discontinued%20Operations) - Cumberland returned exclusive rights to commercialize Ethyol and Totect in the U.S. to Clinigen, effective **December 31, 2019**[22](index=22&type=chunk) - Operating results for Ethyol and Totect have been **reclassified as discontinued operations** for all periods presented[22](index=22&type=chunk) [COVID-19 Pandemic](index=9&type=section&id=COVID-19%20Pandemic) - Company is considered essential and has allowed employees to work remotely; sales contact shifted from **in-person to telephonic/electronic**[24](index=24&type=chunk) - Anticipates potential **revenue loss, supply interruptions, time delays, and unplanned expenses** due to COVID-19[25](index=25&type=chunk) - Unable to fully quantify the impact on future results due to **uncertainty**[28](index=28&type=chunk) [Recent Accounting Guidance](index=10&type=section&id=Recent%20Accounting%20Guidance) - Adopted **ASU 2018-18 (Collaboration Arrangements)** and **ASU 2017-04 (Goodwill Impairment)** effective January 1, 2020, with **no impact on financial statements**[29](index=29&type=chunk)[30](index=30&type=chunk) - Will adopt **ASU 2016-13** and **ASU 2019-05 (Financial Instruments-Credit Losses)** on January 1, 2023, with **no material impact expected**[31](index=31&type=chunk) [Accounting Policies: Use of Estimates](index=10&type=section&id=Accounting%20Policies%3A%20Use%20of%20Estimates) - Significant estimates include **allowances for chargebacks, rebates, product returns, obsolescent inventory, acquisition date fair value of assets, and contingent consideration liability**[32](index=32&type=chunk) [Operating Segments](index=11&type=section&id=Operating%20Segments) - The Company has **one operating segment: specialty pharmaceutical products**[34](index=34&type=chunk) - Substantially all assets are in the U.S., and total revenues are primarily from **U.S. customers**[34](index=34&type=chunk) [(2) INVESTMENTS IN CASH EQUIVALENTS AND MARKETABLE SECURITIES](index=11&type=section&id=(2)%20INVESTMENTS%20IN%20CASH%20EQUIVALENTS%20AND%20MARKETABLE%20SECURITIES) Details the company's investment strategy in marketable securities, primarily short-term commercial paper classified as cash equivalents, and their fair value measurement using Level 1 or Level 2 inputs - Marketable securities consist solely of **trading securities (commercial paper with <90-day maturities) classified as cash equivalents**[35](index=35&type=chunk) Marketable Securities Fair Value | Marketable Securities (Fair Value) | March 31, 2020 | December 31, 2019 | | :--------------------------------- | :------------- | :---------------- | | Commercial paper (Level 2) | $498,008 | $2,119,607 | | Total | $498,008 | $2,119,607 | [(3) EARNINGS (LOSS) PER SHARE](index=13&type=section&id=(3)%20EARNINGS%20(LOSS)%20PER%20SHARE) Reconciles the numerator and denominator used to calculate diluted earnings (loss) per share for the three months ended March 31, 2020, and 2019, noting the impact of antidilutive securities EPS Calculation | EPS Calculation (Three months ended March 31) | 2020 | 2019 | | :-------------------------------------------- | :------------ | :------------ | | Net income (loss) attributable to common shareholders | $(1,055,620)$ | $(73,878)$ | | Weighted-average shares outstanding – basic | $15,240,614$ | $15,472,952$ | | Dilutive effect of other securities | $337,695$ | $418,618$ | | Weighted-average shares outstanding – diluted | $15,578,309$ | $15,891,570$ | - Restricted stock awards and options for **431,226 shares (2020)** and **263,919 shares (2019) were antidilutive** and excluded from diluted EPS calculation[38](index=38&type=chunk) [(4) REVENUES](index=13&type=section&id=(4)%20REVENUES) Details the company's net revenues by product for the three months ended March 31, 2020, and 2019, and describes the recognition of other revenues from international partnerships and grant funding [Product Revenues](index=13&type=section&id=Product%20Revenues) Product Revenues Breakdown | Product (Three months ended March 31) | 2020 | 2019 | Change (YoY) | | :------------------------------------ | :---------- | :---------- | :----------- | | Acetadote | $713,899$ | $849,502$ | $(135,603)$ | | Omeclamox-Pak | $114,770$ | $199,537$ | $(84,767)$ | | Kristalose | $3,311,696$ | $3,307,658$ | $4,038$ | | Vaprisol | $208,763$ | $286,676$ | $(77,913)$ | | Caldolor | $1,096,291$ | $1,317,074$ | $(220,783)$ | | Vibativ | $2,425,755$ | $2,060,195$ | $365,560$ | | Other revenue | $459,560$ | $709,218$ | $(249,658)$ | | Total net revenues | $8,330,734$ | $8,729,860$ | $(399,126)$ | - **Kristalose revenue increased slightly** due to improved net pricing[104](index=104&type=chunk) - **Vibativ revenue increased by $0.4 million** due to improved sales volumes and net pricing[104](index=104&type=chunk) - **Caldolor revenue decreased by $0.2 million**, primarily due to a reduction in international shipments, despite higher domestic shipments and improved net pricing[106](index=106&type=chunk) [Other Revenues](index=13&type=section&id=Other%20Revenues) - International agreements provide **non-refundable upfront payments, milestone payments, royalties, and transfer prices** for product supplies[40](index=40&type=chunk) - CET generates revenue from **federal Small Business grant programs** and lease income from its Life Sciences Center[42](index=42&type=chunk) - Grant revenue from these programs was approximately **$0.2 million in Q1 2020, down from $0.6 million in Q1 2019**[42](index=42&type=chunk) [(5) INVENTORIES](index=15&type=section&id=(5)%20INVENTORIES) Describes the company's inventory accounting policies, including valuation at the lower of cost or net realizable value, and provides a breakdown of current and non-current inventory components - Inventories are valued at the **lower of cost or net realizable value** using the first-in, first-out (FIFO) method[43](index=43&type=chunk) - Non-current inventories, primarily Vibativ and ifetroban API, totaled **$15.6 million** at March 31, 2020, and December 31, 2019[43](index=43&type=chunk) Inventory Breakdown | Inventory Type | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | Raw materials and work in process | $19,456,867 | $19,345,723 | | Consigned inventory | $245,354 | $416,468 | | Finished goods | $4,017,923 | $4,664,055 | | Total inventories | $23,720,144 | $24,426,246 | | Less non-current inventories | $(15,569,992)$ | $(15,554,992)$ | | Total current inventories | $8,150,152$ | $8,871,254$ | [(6) LEASES](index=16&type=section&id=(6)%20LEASES) Details the company's accounting for operating leases under ASU 2016-02, including the recognition of right-of-use assets and liabilities for its corporate headquarters and CET's lab space - Adopted **ASU 2016-02**, recognizing **right-of-use assets and obligations for operating leases** on the balance sheet[46](index=46&type=chunk) - Significant operating leases include corporate headquarters (**expires Oct 2022**) and CET's lab/office space (**expires Apr 2023**)[47](index=47&type=chunk) Lease Position Summary | Lease Position | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | Operating lease right-of-use assets | $2,733,782$ | $2,960,569$ | | Current operating lease liabilities | $943,807$ | $920,431$ | | Noncurrent operating lease liabilities | $1,831,274$ | $2,076,472$ | | Total lease liabilities | $2,775,081$ | $2,996,903$ | - Weighted-average incremental borrowing rate for leases is **7.42%**, and the weighted-average remaining lease term at March 31, 2020, is **2.7 years**[47](index=47&type=chunk) [(7) SHAREHOLDERS' EQUITY AND DEBT](index=17&type=section&id=(7)%20SHAREHOLDERS'%20EQUITY%20AND%20DEBT) Covers activities related to shareholders' equity, including share repurchases, restricted stock grants, investments in Cumberland Emerging Technologies (CET), and details of the company's revolving credit facility [Share repurchases](index=17&type=section&id=Share%20repurchases) - Repurchased **164,876 shares for approximately $0.7 million in Q1 2020**[49](index=49&type=chunk) - Repurchased **121,466 shares for approximately $0.7 million in Q1 2019**[49](index=49&type=chunk) [Share purchases and sales](index=17&type=section&id=Share%20purchases%20and%20sales) - Board members **purchased company stock in March 2020** to increase ownership[49](index=49&type=chunk) - **No shares were issued** under the At-The-Market (ATM) feature of the Shelf Registration in Q1 2020 or Q1 2019[49](index=49&type=chunk) [Restricted Share Grants](index=17&type=section&id=Restricted%20Share%20Grants) - Issued **229,141 restricted shares in Q1 2020** and **222,269 in Q1 2019** to employees and directors[50](index=50&type=chunk) - Employee restricted stock generally **cliff-vests on the fourth anniversary**, while director grants vest on the one-year anniversary[50](index=50&type=chunk) [Cumberland Emerging Technologies](index=17&type=section&id=Cumberland%20Emerging%20Technologies) - In April 2019, WinHealth **invested $1 million in CET**, gaining a board position and licensing opportunity for the Chinese market[51](index=51&type=chunk) - Cumberland also **invested an additional $1 million in CET** through cash and conversion of intercompany loans[51](index=51&type=chunk) - Gloria Pharmaceuticals returned its CET shares for **$0.8 million**[51](index=51&type=chunk) [Debt Agreement](index=17&type=section&id=Debt%20Agreement) - Third Amendment extended the Pinnacle Agreement term to **July 31, 2021**, and modified financial covenants (**Funded Debt Ratio, Tangible Capital Ratio**)[52](index=52&type=chunk) - Maximum borrowing under the revolving credit facility **increased to $20.0 million** in October 2018[53](index=53&type=chunk) - Interest rate is LIBOR plus **1.75% to 2.75% (3.73% at March 31, 2020)**, with **$18.5 million outstanding**[53](index=53&type=chunk) - Company was in **compliance with the Tangible Capital Ratio financial covenant** as of March 31, 2020[52](index=52&type=chunk) [(8) INCOME TAXES](index=19&type=section&id=(8)%20INCOME%20TAXES) Discusses the impact of the Tax Cuts and Jobs Act, the company's significant net operating loss carryforwards, and its expectation to pay minimal income taxes in 2020 and beyond - Company has approximately **$44.1 million in net operating loss carryforwards** from nonqualified stock options[55](index=55&type=chunk) - Expects to pay **minimal income taxes in 2020 and beyond** by utilizing these NOL carryforwards[55](index=55&type=chunk) [(9) COLLABORATIVE AGREEMENTS](index=19&type=section&id=(9)%20COLLABORATIVE%20AGREEMENTS) Explains that the company's collaborative agreements with research institutions for product candidates do not meet ASC Topic 808 criteria, with funding primarily from federal grants recorded as net revenues and expenses as R&D - Collaborative agreements with research institutions are primarily funded by **federal Small Business grant programs**[56](index=56&type=chunk) - Grant funding is recorded as **net revenues**, and expenses are included in **R&D**[56](index=56&type=chunk) [(10) ADDITIONS AND RETURN OF PRODUCT RIGHTS](index=19&type=section&id=(10)%20ADDITIONS%20AND%20RETURN%20OF%20PRODUCT%20RIGHTS) Details significant changes in the company's product portfolio, including the acquisition of Vibativ, the FDA approval of RediTrex, and the return of Ethyol and Totect rights [Vibativ](index=19&type=section&id=Vibativ) - Acquired global rights to Vibativ in November 2018 for **$20 million upfront** and a **$5 million milestone payment in April 2019**, plus up to **20% royalty** on future net sales[57](index=57&type=chunk)[58](index=58&type=chunk) - Vibativ is an **FDA-approved injectable anti-infective** for serious bacterial infections[57](index=57&type=chunk) - Contingent consideration liability for future royalties was **$7,829,848** at March 31, 2020[63](index=63&type=chunk) Vibativ Acquisition Assets | Assets Acquired (Vibativ) | Fair Value | | :------------------------ | :----------- | | Total inventory | $21,550,000 | | Intellectual property | $11,750,000 | | Goodwill | $882,000 | | Total assets acquired | $34,182,000 | [RediTrex](index=21&type=section&id=RediTrex) - Received **FDA approval for RediTrex product line** in November 2019[63](index=63&type=chunk) - FDA approval resulted in the vesting of **180,000 restricted shares ($0.9 million value)** and a **$1.0 million current liability** to Nordic[63](index=63&type=chunk) [Ethyol and Totect](index=22&type=section&id=Ethyol%20and%20Totect) - Returned exclusive U.S. rights for Ethyol and Totect to Clinigen effective **December 31, 2019**[65](index=65&type=chunk) - Will receive **$5 million in financial consideration over two years**; **$0.8 million recorded as discontinued operations income in Q1 2020**[65](index=65&type=chunk) - Ethyol and Totect generated **$3.2 million in revenue** and **$1.1 million in discontinued operations income in Q1 2019**[65](index=65&type=chunk) [(11) SUBSEQUENT EVENTS](index=22&type=section&id=(11)%20SUBSEQUENT%20EVENTS) Discloses the company's receipt of a $2.187 million loan under the Paycheck Protection Program (PPP) in April 2020, intended for payroll, benefits, rent, and utilities, with potential for forgiveness - Received a **$2,187,140 loan under the Paycheck Protection Program (PPP)** on April 20, 2020[66](index=66&type=chunk) - Loan matures **April 14, 2022**, with a **1.0% interest rate**, and funds are for payroll, benefits, rent, and utilities[67](index=67&type=chunk) - Company intends to use the majority of the loan for qualifying expenses, which **may be forgiven**[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on the company's financial condition, results of operations, and future outlook, including discussions on business strategy, recent developments, critical accounting policies, and liquidity [OVERVIEW](index=24&type=section&id=OVERVIEW) Presents an overview of Cumberland Pharmaceuticals Inc.'s business as a specialty pharmaceutical company, its portfolio of FDA-approved products, and its strategic approach to growth through product expansion, acquisitions, pipeline development, and international partnerships [Our Business](index=24&type=section&id=Our%20Business) - **Specialty pharmaceutical company** targeting hospital acute care and gastroenterology[74](index=74&type=chunk) - Portfolio includes **seven FDA-approved brands**: Acetadote, Caldolor, Kristalose, Omeclamox-Pak, Vaprisol, Vibativ, and RediTrex[74](index=74&type=chunk) - Also has **Phase II clinical programs for ifetroban** in various conditions[75](index=75&type=chunk) [Growth Strategy](index=24&type=section&id=Growth%20Strategy) - Strategy includes **expanding use of marketed products** (e.g., pediatric approval for Acetadote and Caldolor)[80](index=80&type=chunk) - Seeks to acquire **under-promoted, FDA-approved drugs and late-stage development candidates**, with Vibativ being the largest acquisition to date[81](index=81&type=chunk) - Progressing **ifetroban Phase II programs** and incubating early-stage opportunities at CET[82](index=82&type=chunk) - Leveraging commercial infrastructure through **co-promotion partnerships** (e.g., Kristalose with Poly Pharmaceuticals and Foxland Pharmaceuticals)[83](index=83&type=chunk) - Building **international business through partners** and supporting their registration/commercialization efforts[84](index=84&type=chunk)[85](index=85&type=chunk) - Aims to manage operations with financial discipline to deliver **positive cash flow** and maintain a **healthy financial position**[86](index=86&type=chunk) [RECENT DEVELOPMENTS](index=27&type=section&id=RECENT%20DEVELOPMENTS) Highlights key recent operational and strategic developments, including new product launches, clinical study results, responses to the COVID-19 pandemic, ESG initiatives, and pipeline progress [Caldolor ®](index=27&type=section&id=Caldolor%20%C2%AE) - Launched a new **ready-to-use Caldolor (ibuprofen) Injection in January 2020**, the first FDA-approved pre-mixed bag of ibuprofen[89](index=89&type=chunk) - Announced **positive topline results in March 2020 for a pediatric study of Caldolor** in children from birth up to six months, indicating it was well tolerated[89](index=89&type=chunk) [COVID-19 Pandemic](index=27&type=section&id=COVID-19%20Pandemic) - Company is essential, allowing remote work and shifting sales calls to **telephonic/electronic**[90](index=90&type=chunk) - Anticipates potential **revenue loss, supply interruptions, and unplanned expenses** due to the pandemic[90](index=90&type=chunk) - Unable to quantify the impact on future results due to **uncertainty**[90](index=90&type=chunk) [Acute Care Product Special Supply Arrangements](index=27&type=section&id=Acute%20Care%20Product%20Special%20Supply%20Arrangements) - Expanded availability of Vibativ, Caldolor, and Vaprisol to hospitals with **special financial arrangements (favorable pricing/payment terms)** during the health crisis[91](index=91&type=chunk) - Sponsored a national program with infectious disease experts on **managing COVID-19 related respiratory infections**[91](index=91&type=chunk) [Paycheck Protection Program](index=28&type=section&id=Paycheck%20Protection%20Program) - Received a **$2,187,140 loan under the Paycheck Protection Program (PPP)** on April 20, 2020, to cover payroll, benefits, rent, and utilities[93](index=93&type=chunk)[94](index=94&type=chunk) - Intends to use the majority for qualifying expenses eligible for **loan forgiveness**[94](index=94&type=chunk) - Has **not laid off or furloughed employees** and does not foresee doing so due to the PPP loan[94](index=94&type=chunk) [Environmental, Social and Governance (ESG) Activities](index=28&type=section&id=Environmental,%20Social%20and%20Governance%20(ESG)%20Activities) - Released **first Sustainability Report in April 2020**, covering community involvement, ethical marketing, and drug safety[95](index=95&type=chunk) - Appointed **Caroline R. Young as the company's first ESG board director**[95](index=95&type=chunk) - In 2019, provided **nearly 4 million patient doses**, safely disposed of over **9,700 pounds of expired products**, and had **no product recalls or FDA safety alerts**[95](index=95&type=chunk) [Ifetroban Phase II Clinical Programs](index=28&type=section&id=Ifetroban%20Phase%20II%20Clinical%20Programs) - Ongoing **Phase II studies for ifetroban** in cardiomyopathy associated with Duchenne Muscular Dystrophy, Systemic Sclerosis, and Aspirin-Exacerbated Respiratory Disease[96](index=96&type=chunk) - Enrollment in clinical studies **declined in Q1 2020 due to the COVID-19 pandemic**[96](index=96&type=chunk) [New Hospital Product Candidate](index=28&type=section&id=New%20Hospital%20Product%20Candidate) - Completed **preclinical and Phase I studies** for a new cholesterol-reducing agent for hospital use, showing a favorable safety profile[97](index=97&type=chunk) - Phase II study patient enrollment completed, and results are being evaluated to determine **next development steps**[97](index=97&type=chunk) [CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES](index=29&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20SIGNIFICANT%20JUDGMENTS%20AND%20ESTIMATES) Refers to Note 1 of the financial statements and the 2019 Annual Report on Form 10-K for a detailed discussion of critical accounting policies and significant judgments and estimates, which are crucial for financial statement preparation - Management's estimates and judgments are **critical for revenue recognition, fair value of marketable securities, inventories, income taxes, contingent consideration, share-based compensation, R&D expenses, and intangible assets**[100](index=100&type=chunk) [RESULTS OF OPERATIONS](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) Provides a comparative analysis of the company's financial performance for the three months ended March 31, 2020, versus 2019, detailing changes in net revenues, costs, and expenses, leading to an increased net loss from continuing operations [Three months ended March 31, 2020 compared to the three months ended March 31, 2019](index=30&type=section&id=Three%20months%20ended%20March%2031,%202020%20compared%20to%20the%20three%20months%20ended%20March%2031,%202019) Comparative Operating Results | Metric (Three months ended March 31) | 2020 | 2019 | Change (YoY) | % Change | | :----------------------------------- | :------------ | :------------ | :------------ | :------- | | Net Revenues | $8,330,734 | $8,729,860 | $(399,126)$ | (4.6)% | | Cost of products sold | $1,634,181$ | $1,658,789$ | $(24,608)$ | (1.5)% | | Selling and marketing | $3,707,676$ | $3,436,932$ | $270,744$ | 7.9% | | Research and development | $1,722,555$ | $1,399,687$ | $322,868$ | 23.1% | | General and administrative | $2,036,284$ | $2,536,739$ | $(500,455)$ | (19.7)% | | Amortization | $1,076,039$ | $1,021,645$ | $54,394$ | 5.3% | | Total costs and expenses | $10,176,735$ | $10,053,792$ | $122,943$ | 1.2% | | Operating income (loss) | $(1,846,001)$ | $(1,323,932)$ | $(522,069)$ | (39.4)% | | Net income (loss) from continuing operations | $(1,883,418)$ | $(1,187,554)$ | $(695,864)$ | (58.6)% | - Selling and marketing expenses **increased by $0.3 million** due to higher salaries and a non-cash expense related to life insurance, partially offset by lower royalty costs[106](index=106&type=chunk) - Research and development costs **increased by $0.3 million**, primarily due to increased annual FDA user fees[106](index=106&type=chunk) - General and administrative expenses **decreased by $0.5 million** due to reductions in advisory, legal, professional fees, and non-cash stock-based compensation[106](index=106&type=chunk) - Income tax expense (benefit) shifted from a **benefit of $81,428 in 2019 to an expense of $34,240 in 2020**[104](index=104&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=33&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Discusses the company's liquidity sources, including cash flows from operations, the PPP loan, and its revolving credit facility, and provides a summary of working capital and cash flow changes [Working Capital](index=33&type=section&id=Working%20Capital) - Primary liquidity sources are **cash flows from operations, PPP loan, and a $20 million revolving credit facility**[108](index=108&type=chunk) - Believes current liquidity is **adequate to finance internal growth, business development, and capital expenditures**[108](index=108&type=chunk) Working Capital and Liquidity | Metric | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $27,026,734$ | $28,212,635$ | | Working capital | $25,364,426$ | $26,012,840$ | | Current ratio | 2.3 | 2.1 | | Revolving line of credit availability | $1,500,000$ | $1,500,000$ | [Debt Agreement](index=35&type=section&id=Debt%20Agreement) - Third Amendment extended the Pinnacle Agreement through **July 31, 2021**, and modified financial covenants (**Funded Debt Ratio, Tangible Capital Ratio**)[111](index=111&type=chunk) - Company was in **compliance with the Tangible Capital Ratio financial covenant** as of March 31, 2020[111](index=111&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=35&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) The company did not engage in any off-balance sheet arrangements during the three months ended March 31, 2020, and 2019 - **No off-balance sheet arrangements** were engaged in during Q1 2020 or Q1 2019[112](index=112&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses the company's exposure to market risks, primarily interest rate risk on cash and its revolving credit facility, and minimal exchange rate risk, without using derivative financial instruments for hedging [Interest Rate Risk](index=35&type=section&id=Interest%20Rate%20Risk) - Exposed to **interest rate risk** on cash in money market accounts and its revolving credit facility[112](index=112&type=chunk) - Does **not use derivative financial instruments** to manage interest rate exposure[112](index=112&type=chunk) - Believes interest rate risk is **not material**, with **$18.5 million outstanding** on the LIBOR-based revolving credit facility (**3.73% at March 31, 2020**)[112](index=112&type=chunk) [Exchange Rate Risk](index=35&type=section&id=Exchange%20Rate%20Risk) - Operates primarily in the U.S. but has **minimal foreign currency risk exposure**[113](index=113&type=chunk) - Foreign currency exchange gains and losses were **immaterial** for Q1 2020 and Q1 2019[113](index=113&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020, and no material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated and deemed **effective as of March 31, 2020**[114](index=114&type=chunk) - **No material changes to internal control over financial reporting** occurred during Q1 2020[114](index=114&type=chunk) [PART II – OTHER INFORMATION](index=36&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - **No legal proceedings were reported**[117](index=117&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) Updates the risk factors from the 2019 Annual Report on Form 10-K, emphasizing new and existing risks related to business operations, government regulation, financial condition, and stock ownership, particularly in light of the COVID-19 pandemic [RISKS RELATED TO OUR BUSINESS](index=36&type=section&id=RISKS%20RELATED%20TO%20OUR%20BUSINESS) Highlights risks to the business including the adverse impact of the COVID-19 pandemic, dependence on third-party manufacturers and service providers, and reliance on key personnel [Impact of natural disasters, public health epidemics (COVID-19)](index=36&type=section&id=Impact%20of%20natural%20disasters,%20public%20health%20epidemics%20(COVID-19)) - **COVID-19 outbreak has significantly disrupted activities**, potentially causing **revenue loss, supply interruptions, time delays, and unplanned expenses**[119](index=119&type=chunk) - The pandemic's impact on global markets could affect **future access to liquidity** and **materially adversely affect results of operations and financial condition**[120](index=120&type=chunk)[121](index=121&type=chunk) [Dependence on third-party manufacturers](index=36&type=section&id=Dependence%20on%20third-party%20manufacturers) - Company does not manufacture its products and depends on third parties, risking **adverse effects on profit margins and product delivery**[123](index=123&type=chunk) - Delays or difficulties with contract manufacturers, potentially exacerbated by COVID-19, could **adversely affect product distribution and sales**[123](index=123&type=chunk) - Specific products like Kristalose (**single API facility**) and Vaprisol (**seeking new manufacturer**) face unique supply risks[128](index=128&type=chunk)[130](index=130&type=chunk) - **Non-compliance by third-party manufacturers with GMPs** could lead to fines, production suspension, product recalls, or withdrawal of approvals[133](index=133&type=chunk)[134](index=134&type=chunk) [Dependence on other third parties](index=38&type=section&id=Dependence%20on%20other%20third%20parties) - Relies on third parties like **Cardinal Health for logistics and fulfillment**, and **Vanderbilt University/WinHealth for CET**[135](index=135&type=chunk) - Failure of these third parties could **disrupt business, increase expenses, or adversely affect operating results**, with additional risks from COVID-19[138](index=138&type=chunk) [Dependence on key personnel](index=40&type=section&id=Dependence%20on%20key%20personnel) - Highly dependent on **principal members of management, scientific staff, and sales**, especially CEO A.J. Kazimi[140](index=140&type=chunk) - **Loss of key personnel** could lead to delays in product development, loss of customers, and diversion of management resources[140](index=140&type=chunk) [RISKS RELATING TO GOVERNMENT REGULATION](index=40&type=section&id=RISKS%20RELATING%20TO%20GOVERNMENT%20REGULATION) The company faces stringent government regulation across all business activities, including manufacturing, marketing, and pricing, with potential for regulatory challenges, decreased product demand, and penalties for non-compliance [Stringent government regulation and regulatory challenges](index=40&type=section&id=Stringent%20government%20regulation%20and%20regulatory%20challenges) - Business activities are regulated by **FDA, FTC, EPA, and comparable agencies**, requiring compliance with GMPs[142](index=142&type=chunk)[143](index=143&type=chunk) - Post-market developments (e.g., new scientific info, recalls, labeling changes) or increased scrutiny on advertising/pricing could **decrease product demand**[144](index=144&type=chunk)[148](index=148&type=chunk) - **Failure to comply with regulations** could lead to warning letters, penalties, suspension of approvals/trials, or product recalls[149](index=149&type=chunk) - **COVID-19 pandemic may impact FDA regulations and timelines**[151](index=151&type=chunk) [Compliance with Medicaid Drug Rebate and other governmental pricing programs](index=42&type=section&id=Compliance%20with%20Medicaid%20Drug%20Rebate%20and%20other%20governmental%20pricing%20programs) - Required to participate in **Medicaid Drug Rebate, 340B drug pricing, and Medicare Part B average sales price reporting programs**[153](index=153&type=chunk)[154](index=154&type=chunk)[158](index=158&type=chunk)[160](index=160&type=chunk) - **Healthcare Reform Act changes increased compliance costs and complexity** for Medicaid Drug Rebate and 340B programs[155](index=155&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - **Errors in pricing data submission** can lead to retroactive rebates, civil monetary penalties, or termination of Medicaid rebate agreement[161](index=161&type=chunk)[162](index=162&type=chunk)[164](index=164&type=chunk) - Cannot predict financial implications of **temporary or permanent healthcare reform measures introduced by COVID-19**[168](index=168&type=chunk) [RISKS RELATED TO OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=44&type=section&id=RISKS%20RELATED%20TO%20OUR%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) The company's operating results are expected to fluctuate due to new product launches, acquisitions, R&D expenses, competitive/regulatory changes, and potential lawsuits, with the COVID-19 pandemic adding to market volatility [Fluctuating operating results](index=44&type=section&id=Fluctuating%20operating%20results) - Operating results are likely to **fluctuate due to new product launches, acquisition activity, R&D expenses, competitive/regulatory changes, and unexpected claims**[170](index=170&type=chunk) - **COVID-19 has negatively impacted financial markets** and may create additional risk for customers' ability to pay[171](index=171&type=chunk) [RISKS RELATED TO OWNING OUR STOCK](index=44&type=section&id=RISKS%20RELATED%20TO%20OWNING%20OUR%20STOCK) Risks associated with owning the company's stock include substantial market price fluctuations, potential declines from sales of large share volumes, and adverse impacts from unstable market conditions, all exacerbated by the COVID-19 pandemic [Market price volatility](index=44&type=section&id=Market%20price%20volatility) - The market price of common stock is **highly volatile and may fluctuate substantially**[173](index=173&type=chunk) [Sales of substantial shares](index=46&type=section&id=Sales%20of%20substantial%20shares) - Sales of a substantial number of shares or the perception of such sales could **cause the market price to decline**[175](index=175&type=chunk) - Realization of any risk factors could **dramatically impact stock price**, potentially leading to securities class action litigation[176](index=176&type=chunk) - **COVID-19 pandemic may increase risk to stock liquidity and trading price**[176](index=176&type=chunk) [Unstable market conditions](index=46&type=section&id=Unstable%20market%20conditions) - **Unpredictable and unstable market conditions**, including a radical economic downturn, could require additional financing on unfavorable or dilutive terms[177](index=177&type=chunk) - **Equity and lending markets are negatively impacted by the COVID-19 pandemic**, posing risks to operating goals[177](index=177&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the company's share repurchase program, under which it repurchased 164,876 shares for approximately $0.7 million during Q1 2020, leaving $7.3 million available under the $10 million program - Company has a **$10 million share repurchase program**, replacing prior authorizations in January 2019[178](index=178&type=chunk) Share Repurchase Program Details | Period | Total Shares Purchased | Average Price Paid per Share | Dollar Value Remaining Under Program | | :------- | :--------------------- | :--------------------------- | :----------------------------------- | | January | 34,817 | $5.19 | $7,820,088 | | February | 10,629 | $4.49 | $7,772,394 | | March | 119,430 | $3.74 | $7,326,010 | | Total | 164,876 | | | - **66,057 shares were repurchased directly through private purchases**[178](index=178&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed with the Form 10-Q, including employment agreements, certifications, and XBRL taxonomy documents - Includes **employment agreements for key executives, CEO/CFO certifications, and XBRL instance/taxonomy documents**[180](index=180&type=chunk) [SIGNATURES](index=48&type=section&id=SIGNATURES)

Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX) Q1 2020 Earnings Conference Call May 20, 2020 4:30 PM ET Company Participants Erin Gull - IR A. J. Kazimi - CEO Marty Cearnal - Chief Commercial Officer Michael Bonner - CFO Conference Call Participants Andrew D'Silva - B. Riley FBR Operator Ladies and gentlemen, thank you for standing by, and welcome to the Cumberland Pharmaceuticals’ 2020 First Quarter Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' ...