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' ...

[Part I](index=3&type=section&id=PART%20I) This section provides a comprehensive overview of the company's business operations, product portfolio, strategic initiatives, and associated risk factors [Business](index=3&type=section&id=Item%201%3A%20Business) Cumberland Pharmaceuticals focuses on acquiring, developing, and commercializing branded prescription products for hospital acute care and gastroenterology [Company Overview](index=3&type=section&id=The%20Company) Cumberland Pharmaceuticals is a specialty pharmaceutical company focused on the acquisition, development, and commercialization of branded prescription products, primarily targeting hospital acute care and gastroenterology - The company's **primary target markets are hospital acute care and gastroenterology**, which are addressed by small, targeted sales forces[9](index=9&type=chunk) - Cumberland's portfolio includes **seven FDA-approved brands**: Acetadote®, Caldolor®, Kristalose®, Omeclamox®-Pak, Vaprisol®, Vibativ®, and RediTrex™[10](index=10&type=chunk) - The company is advancing **Phase II clinical programs** for its ifetroban product candidates for multiple indications, including Duchenne Muscular Dystrophy (DMD) and Systemic Sclerosis (SSc)[11](index=11&type=chunk) - **Growth strategy focuses on maximizing existing brands, acquiring new products, progressing the clinical pipeline, and expanding internationally**[14](index=14&type=chunk) [Products](index=4&type=section&id=PRODUCTS) The company markets a portfolio of seven FDA-approved products, including Acetadote, Caldolor, and Vibativ, while also managing product rights and discontinuing certain distributions Marketed and Approved Products | Products | Indication | Status | | :--- | :--- | :--- | | Acetadote ® | Acetaminophen Poisoning | Marketed | | Caldolor ® | Pain and Fever | Marketed | | Kristalose ® | Chronic and Acute Constipation | Marketed | | Omeclamox ® -Pak | H. pylori infection and related Duodenal Ulcer disease | Marketed | | Vaprisol ® | Euvolemic and Hypervolemic Hyponatremia | Marketed | | Vibativ ® | Serious bacterial infections | Marketed | | RediTrex™ | Arthritis and psoriasis | Approved | - A court ruling upheld the validity of the Acetadote® patent for its EDTA-Free formulation, with a term until **August 2025**[24](index=24&type=chunk) - In January 2019, the FDA approved a **next-generation Caldolor® product**, with initial shipments beginning in April 2019 and a full launch planned for 2020[32](index=32&type=chunk) - The company acquired all remaining assets for Omeclamox-Pak® in December 2018, ending royalty and manufacturing fee payments to GEL[41](index=41&type=chunk) - Vibativ® was acquired from Theravance in November 2018, with Cumberland assuming **global responsibility** for the injectable anti-infective[46](index=46&type=chunk) - RediTrex™ received FDA approval in December 2019, with a launch planned for 2020[51](index=51&type=chunk) - Following a strategic review in 2019, the company concluded its distribution and support for Ethyol® and Totect®, transitioning responsibilities back to Clinigen[54](index=54&type=chunk)[57](index=57&type=chunk) [Pipeline](index=9&type=section&id=PIPELINE) Cumberland's development pipeline focuses on its new chemical entity, ifetroban, advancing multiple Phase II trials for indications like DMD and HRS, alongside a new hospital product candidate - The pipeline is focused on ifetroban, a **Phase II product candidate** being developed for several niche indications including HRS, AERD, SSc, and PH[59](index=59&type=chunk) - A **Phase II efficacy study** for Boxaban® in patients with AERD was enrolling patients across the U.S. during 2019[64](index=64&type=chunk) - In September 2019, the company announced a **new Phase II clinical program for ifetroban to treat cardiomyopathy in Duchenne Muscular Dystrophy (DMD)**, supported by a **$1 million FDA Orphan Drug Grant**[73](index=73&type=chunk) - A new, unnamed hospital product candidate for cholesterol reduction progressed in its **Phase II study** during 2019[75](index=75&type=chunk)[76](index=76&type=chunk) [Our Strategy](index=11&type=section&id=OUR%20STRATEGY) The company's growth strategy centers on maximizing existing products, acquiring new brands, advancing its clinical pipeline, expanding internationally, and maintaining financial discipline - Support and expand the use of marketed products through **label expansions**, such as the pediatric approvals for Acetadote and Caldolor[78](index=78&type=chunk) - **Selectively acquire complementary brands and late-stage product candidates**, focusing on under-promoted, FDA-approved drugs[79](index=79&type=chunk) - **Progress the clinical pipeline**, with the ifetroban Phase II programs as a key example, and incubate early-stage opportunities at CET[80](index=80&type=chunk) - **Leverage infrastructure through co-promotion partnerships**, such as the one with Poly Pharmaceuticals for Kristalose[81](index=81&type=chunk) - **Build an international business** by establishing a network of partners to register and commercialize products abroad[82](index=82&type=chunk) - **Manage operations with financial discipline to deliver positive cash flow and support the ongoing share repurchase program**[84](index=84&type=chunk) [Sales and Marketing](index=11&type=section&id=SALES%20AND%20MARKETING) Cumberland employs two targeted sales forces, hospital and gastroenterology, to promote its products in the U.S., supported by marketing efforts and national accounts management - The company has approximately **50 sales representatives and district managers** across its hospital and gastroenterology sales forces[85](index=85&type=chunk) - The hospital sales division promotes Caldolor, Vaprisol, Acetadote, and Vibativ, targeting **key hospitals across the U.S.**[87](index=87&type=chunk) - The gastroenterology sales team promotes Kristalose and Omeclamox-Pak to a **targeted group of high-prescribing physicians**[89](index=89&type=chunk) [Material Customers](index=12&type=section&id=MATERIAL%20CUSTOMERS) The company's primary customers are wholesale pharmaceutical distributors in the United States. For the year ended December 31, 2019, four major customers accounted for a significant portion of consolidated gross revenues, with individual contributions of 26%, 25%, 16%, and 14% respectively 2019 Revenue by Major Customer (Percentage of Gross Revenue) | Customer | % of Gross Revenue | | :--- | :--- | | Customer 1 | 26% | | Customer 2 | 25% | | Customer 3 | 16% | | Customer 4 | 14% | [International Partnerships](index=13&type=section&id=INTERNATIONAL%20PARTNERSHIPS) Cumberland's international strategy involves partnering with local companies to register and commercialize its products globally, with partners handling regulatory and commercial activities - The company's international strategy is to **partner with local companies to handle registration and commercialization** in their respective countries[96](index=96&type=chunk) Key International Partners | International Partner | Product(s) | Territory | Status | | :--- | :--- | :--- | :--- | | Phebra Pty Ltd | Acetadote | Australia and New Zealand | Marketed | | DB Pharm Korea Co., Ltd. | Caldolor & Vibativ | South Korea | Marketed / Registration | | Seqirus (a CSL company) | Caldolor | Australia and New Zealand | Marketed | | WinHealth Pharma Group Co. | Caldolor & Acetadote | China and Hong Kong | Development | | R-Pharm JSC | Vibativ | Russia | Marketed | | Hikma Pharmaceuticals | Vibativ | Arabian Peninsula | Registration | - In 2019, the company continued to **transition Vibativ license arrangements** for several international markets from Theravance[100](index=100&type=chunk) [Clinical and Regulatory Affairs](index=14&type=section&id=CLINICAL%20AND%20REGULATORY%20AFFAIRS) Cumberland manages in-house clinical and regulatory affairs, overseeing the entire product lifecycle from trials and submissions to post-approval compliance and medical support - The in-house team manages clinical trials, prepares regulatory submissions (INDs, NDAs), and handles post-approval responsibilities[101](index=101&type=chunk)[103](index=103&type=chunk) - The team successfully secured **FDA approvals for Acetadote, Caldolor, and RediTrex**[101](index=101&type=chunk) - Professional and medical affairs provides support through a **medical information call center and medical science liaisons**[104](index=104&type=chunk) [Business Development](index=16&type=section&id=BUSINESS%20DEVELOPMENT) In 2019, Cumberland expanded international partnerships and refined its portfolio through new license agreements and the dissolution of its strategic alliance with Clinigen - A **2019 strategic review** led to an expansion of international partnerships and a refinement of the product portfolio[116](index=116&type=chunk)[117](index=117&type=chunk) - A new license agreement was signed with WinHealth for Caldolor and Acetadote in China and Hong Kong, with anticipated milestone payments of **$2 million**[118](index=118&type=chunk) - The company concluded its strategic alliance with Clinigen, returning the rights to Ethyol and Totect for a **$5 million consideration** to be paid over two years[129](index=129&type=chunk) - The co-promotion agreement with Poly Pharmaceuticals for Kristalose was extended in 2019[124](index=124&type=chunk) [Manufacturing and Distribution](index=18&type=section&id=MANUFACTURING%20AND%20DISTRIBUTION) Cumberland outsources all manufacturing and distribution to third parties, maintaining quality oversight and managing diverse supply relationships for its key products - The company partners with third parties for all manufacturing and distribution, managing **quality review and release internally**[133](index=133&type=chunk) - For Vaprisol, the historical manufacturer will no longer provide the product, prompting an evaluation of alternatives for long-term supply. The company has a **multi-year supply** on hand[136](index=136&type=chunk) - Following the Vibativ acquisition, manufacturing activities were transferred to a **new supplier** in 2019[138](index=138&type=chunk) - Cardinal Health exclusively handles all U.S. product logistics, including **warehousing and shipping**[142](index=142&type=chunk) [Patents, Trademarks and Other Intellectual Proprietary Rights](index=20&type=section&id=PATENTS%2C%20TRADEMARKS%20AND%20OTHER%20INTELLECTUAL%20PROPRIETARY%20RIGHTS) Cumberland protects its products through patents, trademarks, and FDA exclusivity, holding key patents for Acetadote, Caldolor, and Vibativ, while also pursuing applications for pipeline candidates - The company has multiple patents for its new formulation of Acetadote®, 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[152](index=152&type=chunk)[161](index=161&type=chunk)[167](index=167&type=chunk)[171](index=171&type=chunk) - Caldolor® is protected by a series of patents covering its formulation and methods of use, with expiration dates ranging from **2021 to 2032**[173](index=173&type=chunk)[174](index=174&type=chunk)[176](index=176&type=chunk) - Vibativ® is protected by numerous U.S. and international patents, with eleven listed in the FDA Orange Book. The key composition of matter patent ('623) is scheduled to expire in **January 2027**[182](index=182&type=chunk) - The company has **no issued patents for RediTrex, Omeclamox-Pak, and Kristalose**, but has patent applications pending for its ifetroban products[183](index=183&type=chunk) [Competition](index=23&type=section&id=COMPETITION) Cumberland faces intense competition across its product portfolio from branded, generic, and alternative treatments, impacting products like Acetadote, Caldolor, Kristalose, and Vibativ - Acetadote® competes with orally administered NAC and generic injectable formulations, including an **Authorized Generic distributed by Perrigo**[188](index=188&type=chunk)[189](index=189&type=chunk) - Caldolor®'s primary competitors in the acute pain market include **generic injectable opioids** (morphine, fentanyl), ketorolac, and branded products like Mallinckrodt's Ofirmev® (IV acetaminophen) and Baudax Bio's Anjeso™ (IV meloxicam)[191](index=191&type=chunk) - Kristalose® competes with **branded prescription products** such as Amitiza®, Movantik®, and Linzess®, as well as generic liquid lactulose and numerous OTC products[196](index=196&type=chunk) - Vibativ® competes with **major generic antibiotics** like vancomycin, linezolid, and daptomycin, as well as newer branded agents including Teflaro®, Dalvance®, and Orbactiv®[204](index=204&type=chunk) [Government Regulation](index=26&type=section&id=GOVERNMENT%20REGULATION) The company's operations are extensively regulated by the FDA and other governmental bodies, requiring compliance with pre-market approvals, post-market surveillance, and various healthcare legislation - The company is subject to **extensive regulation by the FDA**, covering research, development, manufacturing, and marketing of its products[206](index=206&type=chunk) - Cumberland successfully used the **505(b)(2) NDA pathway**, which allows reliance on existing data, to secure approvals for Acetadote, Caldolor, and RediTrex[225](index=225&type=chunk) - The company must comply with the Patient Protection and Affordable Care Act (PPACA), which includes an **annual pharmaceutical industry fee** and reporting requirements under the Physician Payments Sunshine Act[233](index=233&type=chunk)[234](index=234&type=chunk)[236](index=236&type=chunk) - The company is in compliance with the Drug Supply Chain Security Act (DSCSA), which mandates a **national track and trace system** for prescription drugs[239](index=239&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A%3A%20Risk%20Factors) The company faces significant risks that could adversely affect its business. Key risks include dependence on a limited number of products, potential for weakened demand, and reliance on third-party manufacturers, which could lead to supply interruptions. Intense competition from branded and generic drugs, challenges in acquiring and integrating new products, and the potential failure of pipeline candidates to achieve commercial success are major business risks. The company is also subject to stringent government regulation, patent challenges, and potential product liability lawsuits. Financial risks include operating result fluctuations, the need for additional funding, and the potential impairment of intangible assets [Risks Related to Our Business](index=32&type=section&id=RISKS%20RELATED%20TO%20OUR%20BUSINESS) The company's business is subject to numerous risks, including potential adverse impacts from public health crises like COVID-19. Its financial success is highly dependent on the performance of its six marketed products, and any negative development or weakened demand could harm revenues. Cumberland relies entirely on third-party manufacturers, creating risks of supply disruption and non-compliance with GMPs. The business faces intense competition, the potential for generic erosion of its brands, and challenges in successfully acquiring and integrating new products. Future growth is also contingent on the successful development and commercialization of its pipeline candidates, which is uncertain - The business could be adversely affected by public health epidemics like the COVID-19 outbreak, potentially causing **revenue loss and supply interruptions**[258](index=258&type=chunk) - The company is dependent on third-party manufacturers for all its products; **failure to supply or comply with regulations could lead to an inability to meet demand**[266](index=266&type=chunk)[267](index=267&type=chunk) - If generic products competing with Cumberland's branded pharmaceuticals are approved and sold, **sales of its products will be adversely affected**[284](index=284&type=chunk) - Future growth depends on the ability to **identify, acquire, and successfully integrate new products**, which involves significant competition and risk[289](index=289&type=chunk)[291](index=291&type=chunk) - Pipeline candidates like Hepatoren, Boxaban, and others have not been approved for sale and may never be successfully commercialized, posing a **risk to future revenue growth**[294](index=294&type=chunk) [Risks Relating to Government Regulation](index=43&type=section&id=RISKS%20RELATING%20TO%20GOVERNMENT%20REGULATION) Cumberland operates in a highly regulated environment, facing stringent oversight from the FDA and other agencies. All aspects of its business, from manufacturing to promotion, are subject to regulations like GMPs. Post-approval, products face ongoing scrutiny, and new safety concerns could lead to recalls or withdrawals. The company must comply with complex pricing and rebate programs like the Medicaid Drug Rebate program and the 340B program, where errors can lead to significant penalties. Additionally, compliance with anti-bribery laws like the Foreign Corrupt Practices Act and transparency laws like the Physician Payment Sunshine Act is mandatory and carries risks of severe penalties for non-compliance - The company is subject to **stringent government regulation** from agencies like the FDA, FTC, and EPA, covering all aspects of its business[342](index=342&type=chunk)[343](index=343&type=chunk) - Failure to comply with GMPs by third-party manufacturers could result in **fines, suspension of production, product seizure, or withdrawal of approval**[276](index=276&type=chunk)[277](index=277&type=chunk) - Failure to comply with reporting and payment obligations under the Medicaid Drug Rebate program and other governmental pricing programs could result in **penalties, sanctions, and fines**[355](index=355&type=chunk) - The company must comply with the Physician Payment Sunshine Act, which requires reporting of payments to physicians and teaching hospitals, with **severe penalties for failure to report accurately**[354](index=354&type=chunk) [Risks Relating to Intellectual Property](index=47&type=section&id=RISKS%20RELATING%20TO%20INTELLECTUAL%20PROPERTY) The company's success depends on its ability to secure and defend its intellectual property. There is a risk that its patents may provide limited protection or be invalidated. Cumberland has engaged in and may continue to face costly litigation to enforce its patent rights, such as those for Acetadote. The company also relies on trade secrets and confidentiality agreements, which can be breached. If its technology conflicts with third-party IP rights, Cumberland could face substantial liabilities and be unable to commercialize its products. Furthermore, for licensed products, the company depends on its licensors to maintain and enforce the associated IP rights - The company's strategy to secure patent rights may provide only limited protection, and it has engaged in **costly litigation to defend its Acetadote patents**[370](index=370&type=chunk)[371](index=371&type=chunk) - If the company is unable to protect the confidentiality of its proprietary information and know-how, the **value of its technology and products could be adversely affected**[374](index=374&type=chunk) - Potential conflicts with third-party intellectual property rights could lead to **substantial liabilities and prevent the commercialization of products**[379](index=379&type=chunk) - **Breaching license agreements could result in the loss of rights to commercialize key products and product candidates**[387](index=387&type=chunk) [Risks Related to Financial Condition and Results of Operations](index=49&type=section&id=RISKS%20RELATED%20TO%20OUR%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Cumberland's operating results are subject to fluctuation due to factors like new product launches, acquisition activity, and changes in the competitive environment. A significant portion of its assets consists of intangible assets from acquisitions, which are at risk of impairment and could negatively affect earnings. The company may need additional funding in the future and might be unable to raise capital on favorable terms. Maintaining effective internal financial controls is critical, and failure to do so could lead to reporting failures and regulatory sanctions. Furthermore, officers, directors, and principal shareholders control approximately 40% of the common stock, allowing them to significantly influence corporate actions - Operating results are likely to fluctuate due to **new product launches, acquisition activity, and changes in the competitive and regulatory environment**[390](index=390&type=chunk)[391](index=391&type=chunk) - Intangible assets from acquisitions represented approximately **30% of total assets** as of December 31, 2019, and are subject to impairment risk[392](index=392&type=chunk)[393](index=393&type=chunk) - The company may need additional funding and may be unable to raise capital when needed, which could force **delays or reductions in development or commercialization efforts**[395](index=395&type=chunk) - As of December 31, 2019, officers, directors, and principal shareholders control approximately **40% of the common stock**, enabling them to significantly influence corporate actions[411](index=411&type=chunk) [Risks Related to Owning Our Stock](index=52&type=section&id=RISKS%20RELATED%20TO%20OWNING%20OUR%20STOCK) Ownership of the company's stock involves several risks. The market price of the common stock (CPIX) is highly volatile and may fluctuate substantially. Unstable market conditions could adversely affect the business and its ability to secure financing. As a public company, Cumberland incurs significant costs and management time for compliance with regulations like the Sarbanes-Oxley Act. Provisions in the company's charter and bylaws, along with Tennessee law, could inhibit potential acquisition bids, even those that shareholders might consider favorable. The company has never paid cash dividends and future payments are at the discretion of the Board - The market price of the company's common stock is likely to be **highly volatile and may fluctuate substantially**[414](index=414&type=chunk) - Operating as a public company involves **significant costs and regulatory risk**, requiring management to devote substantial time to compliance initiatives like the Sarbanes-Oxley Act[417](index=417&type=chunk) - Provisions in the company's charter, bylaws, and Tennessee law may **inhibit potential acquisition bids** that shareholders might consider favorable[422](index=422&type=chunk) - The company has never paid cash dividends on its capital stock, and any future decision to do so is at the **discretion of the Board of Directors**[425](index=425&type=chunk) [Properties](index=56&type=section&id=Item%202%3A%20Properties) As of December 31, 2019, Cumberland Pharmaceuticals leases approximately 25,500 square feet for its corporate headquarters in Nashville, Tennessee, with the lease expiring in October 2022. Its majority-owned subsidiary, CET, leases about 14,200 square feet of office and laboratory space, also in Nashville, under a lease that runs through April 2023. All manufacturing, packaging, and warehousing services are outsourced to third-party contractors - The company leases approximately **25,500 sq. ft.** for its corporate headquarters in Nashville, TN, with the lease expiring in October 2022[437](index=437&type=chunk) - Its subsidiary, CET, leases approximately **14,200 sq. ft.** of office and lab space in Nashville, TN, through April 2023[438](index=438&type=chunk) [Legal Proceedings](index=56&type=section&id=Item%203%3A%20Legal%20Proceedings) The company refers to the discussion of its legal proceedings related to the defense of its Acetadote patents, which is detailed in Part I, Item 1 of this Form 10-K - The company is involved in legal proceedings concerning the **defense of its Acetadote patents**[439](index=439&type=chunk) [Part II](index=56&type=section&id=PART%20II) This part presents the company's market information, selected financial data, management's discussion and analysis of financial condition, and internal controls [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=56&type=section&id=Item%205%3A%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Cumberland's common stock trades on the Nasdaq Global Select Market under the symbol "CPIX". The company has never paid cash dividends and any future dividends are at the Board's discretion. In 2019, the Board established a new $10.0 million share repurchase program. During the year ended December 31, 2019, the company repurchased 623,478 shares for approximately $3.5 million - The company's common stock trades on the **Nasdaq Global Select Market under the symbol "CPIX"**[441](index=441&type=chunk) - **No cash dividends have ever been declared or paid** on the common stock[442](index=442&type=chunk) - The company repurchased **623,478 shares of common stock for approximately $3.5 million** during the year ended December 31, 2019[446](index=446&type=chunk) Share Repurchases in Q4 2019 (in US Dollars) | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Dollar Value that May Yet Be Purchased | | :--- | :--- | :--- | :--- | | October | 39,536 | $5.64 | $8,667,406 | | November | 65,947 | $4.96 | $8,340,247 | | December | 65,840 | $5.16 | $8,000,709 | | **Total** | **171,323** | | | [Selected Financial Data](index=58&type=section&id=Item%206%3A%20Selected%20Financial%20Data) The company reported net revenues of $47.5 million for the year ended December 31, 2019, an increase from $40.7 million in 2018. This resulted in an operating loss of $3.6 million, an improvement from the $7.4 million loss in the prior year. The net loss attributable to common shareholders was $3.5 million, or ($0.23) per share. As of year-end 2019, total assets were $104.5 million and total equity was $51.1 million Selected Statement of Income Data (in thousands, except per share data) | | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Net revenues | $ 47,534 | $ 40,742 | $ 41,150 | | Operating income (loss) | $ (3,623) | $ (7,391) | $ (4,081) | | Net income (loss) attributable to common shareholders | $ (3,538) | $ (6,963) | $ (7,979) | | Earnings (loss) per share – diluted | $ (0.23) | $ (0.45) | $ (0.50) | Selected Balance Sheet Data (as of December 31, in thousands) | | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $ 28,213 | $ 27,939 | $ 45,413 | | Working capital | $ 26,013 | $ 31,312 | $ 50,990 | | Total assets | $ 104,549 | $ 112,694 | $ 93,232 | | Total long-term debt and other long-term obligations | $ 29,314 | $ 29,319 | $ 11,616 | | Total equity | $ 51,085 | $ 55,571 | $ 63,922 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=60&type=section&id=Item%207%3A%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2019, Cumberland's net revenues increased 16.7% to $47.5 million, driven by strong performance from Vibativ, Ethyol, and Kristalose. The operating loss narrowed to $3.6 million from $7.4 million in 2018, reflecting higher revenues and controlled expenses. The net loss was $3.5 million. Key 2019 events included a strategic review resulting in new international partnerships and the discontinuation of the Ethyol/Totect distribution. The company received FDA approval for RediTrex and a next-gen Caldolor. Liquidity remains solid with $28.2 million in cash and cash equivalents and access to a $20 million credit line, supporting operations and business development [Executive Summary](index=60&type=section&id=EXECUTIVE%20SUMMARY) In 2019, Cumberland Pharmaceuticals executed a strategic review, leading to new international license agreements for Caldolor, Acetadote, and Vibativ, while concluding its distribution of Ethyol and Totect. The company saw revenue growth in key products like Caldolor and Kristalose. Significant regulatory milestones were achieved with FDA approval for RediTrex and a next-generation Caldolor product. The clinical pipeline advanced with FDA Orphan Drug Grant funding for a new Phase II study of ifetroban in DMD, and positive study results for Vibativ were published - A strategic review in early 2019 led to **new international license agreements** and the conclusion of distribution for Ethyol and Totect[462](index=462&type=chunk)[465](index=465&type=chunk) - **FDA approval was received for RediTrex**, with a 2020 launch planned[467](index=467&type=chunk) - The company received **FDA Orphan Drug Grant funding of over $1 million** to support a Phase II clinical study of ifetroban for Duchenne Muscular Dystrophy (DMD)[468](index=468&type=chunk) - Net revenue from Caldolor, Omeclamox, Kristalose, and Ethyol **grew in 2019 compared to 2018**[466](index=466&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=62&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20SIGNIFICANT%20JUDGMENTS%20AND%20ESTIMATES) The company's financial statements are prepared under GAAP, requiring significant management estimates and judgments. Critical accounting policies include revenue recognition (ASC 606), where estimates for chargebacks, rebates, and returns are crucial. Other key areas involve valuing marketable securities, assessing inventory for obsolescence, accounting for intangible assets and goodwill, and determining the provision for income taxes, including the realizability of deferred tax assets. Share-based payment expense is also a significant estimate, based on the fair value of awards - Revenue recognition requires significant judgment in estimating allowances for **chargebacks, rebates, and product returns**[476](index=476&type=chunk) - Sales-related accrued liabilities for rebates, returns, and fees totaled **$4.8 million** as of December 31, 2019[482](index=482&type=chunk) - Intangible assets and goodwill are assessed for impairment at least annually, requiring assumptions about **future cash flows**[499](index=499&type=chunk) - The company maintains a **full valuation allowance against its deferred tax assets**, as it was determined not more likely than not that they would be realized[490](index=490&type=chunk) [Results of Operations](index=66&type=section&id=RESULTS%20OF%20OPERATIONS) For the year ended December 31, 2019, net revenues increased by 16.7% to $47.5 million, primarily driven by a $3.6 million increase in Vibativ sales. This led to a reduced operating loss of $3.6 million compared to a $7.4 million loss in 2018. For 2018, net revenues were relatively flat at $40.7 million compared to $41.2 million in 2017, with the initial sales of Vibativ offsetting declines in Totect and Acetadote. The operating loss in 2018 widened to $7.4 million from $4.1 million in 2017, mainly due to a $3.3 million increase in R&D expenses [Comparison of Fiscal Years 2019 and 2018](index=66&type=section&id=Year%20ended%20December%2031%2C%202019%20compared%20to%20year%20ended%20December%2031%2C%202018) In 2019, net revenues rose 16.7% to $47.5 million from $40.7 million in 2018. This growth was primarily driven by Vibativ, which contributed an additional $3.6 million in its first full year, and a $2.2 million increase from Ethyol. The operating loss significantly narrowed to $3.6 million from $7.4 million in the prior year. Total costs and expenses increased modestly to $51.2 million, with a $1.4 million rise in amortization expense from the Vibativ acquisition being a key factor. The net loss improved to $3.5 million from a $7.0 million loss in 2018 Financial Performance Comparison (2019 vs. 2018) (in US Dollars) | Metric | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $47,533,637 | $40,741,765 | $6,791,872 | | Operating Loss | $(3,623,005) | $(7,390,772) | $3,767,767 | | Net Loss | $(3,546,511) | $(7,038,772) | $3,492,261 | Net Revenue by Product (2019 vs. 2018) (in US Dollars) | Product | 2019 Revenue | 2018 Revenue | Change | | :--- | :--- | :--- | :--- | | Vibativ | $8,691,550 | $5,075,057 | $3,616,493 | | Ethyol | $12,774,831 | $10,545,906 | $2,228,925 | | Kristalose | $12,895,120 | $12,055,625 | $839,495 | | Vaprisol | $936,615 | $1,763,874 | $(827,259) | | Acetadote | $3,824,449 | $4,284,111 | $(459,662) | - Selling and marketing expenses increased by **$1.2 million** primarily due to promotional spending and sales force costs related to the addition of Vibativ[512](index=512&type=chunk) - Research and development costs decreased by **$1.1 million**, mainly because a **$1.3 million FDA program fee for RediTrex** was paid in 2018[513](index=513&type=chunk) [Comparison of Fiscal Years 2018 and 2017](index=68&type=section&id=Year%20ended%20December%2031%2C%202018%20compared%20to%20year%20ended%20December%2031%2C%202017) For 2018, net revenues were nearly flat at $40.7 million compared to $41.2 million in 2017. The launch of Vibativ, which generated $5.1 million, and growth from Caldolor and Kristalose were offset by significant declines in Totect ($3.1 million) and Acetadote ($2.3 million). The operating loss widened to $7.4 million from $4.1 million in 2017. This was primarily driven by a $3.3 million increase in research and development expenses, which included a $1.3 million FDA fee for the RediTrex submission and increased investment in clinical initiatives Financial Performance Comparison (2018 vs. 2017) (in US Dollars) | Metric | 2018 | 2017 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $40,741,765 | $41,150,131 | $(408,366) | | Operating Loss | $(7,390,772) | $(4,081,348) | $(3,309,424) | | Net Loss | $(7,038,772) | $(8,049,815) | $1,011,043 | Net Revenue by Product (2018 vs. 2017) (in US Dollars) | Product | 2018 Revenue | 2017 Revenue | Change | | :--- | :--- | :--- | :--- | | Vibativ | $5,075,057 | $— | $5,075,057 | | Totect | $850,965 | $3,992,467 | $(3,141,502) | | Acetadote | $4,284,111 | $6,576,720 | $(2,292,609) | | Omeclamox-Pak | $623,297 | $1,761,868 | $(1,138,571) | | Caldolor | $5,001,997 | $4,178,443 | $823,554 | - Research and development costs increased by **$3.3 million**, driven by a **$1.3 million RediTrex FDA submission fee** and **$1.6 million in additional investment** in pipeline products[521](index=521&type=chunk) [Liquidity and Capital Resources](index=71&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of December 31, 2019, Cumberland's liquidity is supported by $28.2 million in cash and cash equivalents and a revolving credit facility with up to $20 million available, of which $18.5 million was drawn. Cash provided by operations in 2019 was $3.1 million. Investing activities provided $2.3 million, primarily from the net sale of marketable securities, offset by a $5 million payment for the Vibativ acquisition. Financing activities used $5.1 million, mainly for a $1.5 million net repayment on the credit line and $3.5 million in share repurchases. The company believes its existing cash, operating cash flow, and credit facility are adequate to fund future operations and initiatives Liquidity Summary (as of Dec 31) (in US Dollars) | | 2019 | 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $28,212,635 | $27,938,960 | | Marketable securities | $— | $8,290,679 | | Working capital | $26,012,840 | $31,311,813 | Summary of Cash Flows (Year Ended Dec 31) (in US Dollars) | | 2019 | 2018 | | :--- | :--- | :--- | | Cash from Operating activities | $3,056,356 | $3,112,737 | | Cash from Investing activities | $2,297,848 | $(27,724,818) | | Cash from Financing activities | $(5,080,529) | $7,138,173 | - The company has a Revolving Credit Loan Agreement with Pinnacle Bank, extended through July 2021, with a maximum borrowing capacity of **$20.0 million**. As of Dec 31, 2019, **$18.5 million was outstanding**[531](index=531&type=chunk)[728](index=728&type=chunk) Contractual Cash Obligations as of Dec 31, 2019 (in US Dollars) | Contractual obligations | Total | Payments Due by Year... | | :--- | :--- | :--- | | Line of credit | $18,500,000 | $18.5M in 2021 | | Contingent consideration liability | $8,633,589 | Spread over 2020-2023+ | | Operating leases | $3,376,746 | Spread over 2020-2023 | | **Total** | **$31,759,085** | | [Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=Item%207A%3A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risk primarily from changes in interest rates affecting its cash equivalents and its variable-rate revolving credit facility. The objective of its cash investment policy is principal preservation. As of December 31, 2019, the company had $18.5 million in borrowings outstanding under its line of credit, which is based on LIBOR plus a spread. The company also has minimal exposure to foreign currency exchange rate risk, as most operations are in the U.S. and foreign currency purchases have short payment terms. Cumberland does not currently use derivative financial instruments to hedge these risks - The company is exposed to interest rate risk on its cash equivalents and its revolving credit facility, which bears a **variable interest rate based on LIBOR**[550](index=550&type=chunk) - As of December 31, 2019, **$18.5 million was outstanding** under the revolving line of credit[553](index=553&type=chunk) - Exposure to foreign currency fluctuation is considered minimal as operations are primarily in the U.S. and foreign currency purchases have **short payment terms**[554](index=554&type=chunk)[555](index=555&type=chunk) [Controls and Procedures](index=76&type=section&id=Item%209A%3A%20Controls%20and%20Procedures) The Chief Executive Officer and Chief Financial Officer evaluated the company's disclosure controls and procedures and concluded they were effective as of December 31, 2019. Management's report on internal control over financial reporting, included on page F-1 of the report, also confirms the effectiveness of these controls. No changes were made to the internal control over financial reporting during the fourth quarter of 2019 - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2019[560](index=560&type=chunk) - Management's report on internal control over financial reporting concluded that **controls were effective** as of December 31, 2019[561](index=561&type=chunk)[601](index=601&type=chunk) [Other Information](index=76&type=section&id=Item%209B%3A%20Other%20Information) On March 16, 2020, effective as of January 1, 2020, the company entered into new at-will employment agreements with its key executive officers. The agreements established new base salaries for the CEO, A.J. Kazimi ($589,500); CCO, Martin Cearnal ($325,000); CDO, Leo Pavliv ($422,000); CCO, James Herman ($260,000); and CFO, Michael Bonner ($205,500). The agreements include provisions for potential annual bonuses, restricted stock grants, and non-competition covenants but do not contain severance or change-in-control provisions - On March 16, 2020, the company entered into **new employment agreements with key executive officers**, effective January 1, 2020[562](index=562&type=chunk) Executive Base Salaries (Effective Jan 1, 2020) (Annual Base Salary) | Officer | Title | Base Salary | | :--- | :--- | :--- | | A.J. Kazimi | Chief Executive Officer | $589,500 | | Martin Cearnal | EVP and Chief Commercial Officer | $325,000 | | Leo Pavliv | EVP, Operations and Chief Development Officer | $422,000 | | James Herman | SVP, National Accounts and Chief Compliance Officer | $260,000 | | Michael Bonner | Senior Director, Finance and Accounting and CFO | $205,500 | [Part III](index=77&type=section&id=PART%20III) This part incorporates by reference information regarding the company's directors, executive officers, corporate governance, and security ownership from its 2020 proxy statement - Information for Items 10 through 14 is **incorporated by reference from the company's 2020 proxy statement**[575](index=575&type=chunk) [Part IV](index=78&type=section&id=PART%20IV) This part lists the exhibits and financial statement schedules filed with the report, along with a note on the absence of a voluntary 10-K summary [Exhibits, Financial Statement Schedules](index=78&type=section&id=Item%2015%3A%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K report. It includes the financial statements, the financial statement schedule for Valuation and Qualifying Accounts, and a comprehensive list of exhibits. Key exhibits include the company's charter and bylaws, employment agreements with executive officers, stock incentive plans, and material contracts such as lease agreements and the revolving credit loan agreement - This section contains the **financial statements, financial statement schedules, and a list of all exhibits** filed with the report[578](index=578&type=chunk) [Form 10-K Summary](index=83&type=section&id=Item%2016%3A%20Form%2010-K%20Summary) The company has elected not to include a voluntary summary of the Form 10-K information under this item - The Company has elected **not to include a summary of the 10-K report**[591](index=591&type=chunk)