Cumberland Pharmaceuticals(CPIX) - 2021 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents Cumberland Pharmaceuticals Inc.'s unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2021, including balance sheets, operations, cash flows, and equity Condensed Consolidated Balance Sheets Total assets decreased to $87.6 million from $96.5 million at year-end 2020, while total liabilities decreased to $40.9 million and equity remained stable at $46.6 million Condensed Consolidated Balance Sheets (Unaudited) | | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $47,215,628 | $49,969,592 | | Total assets | $87,570,774 | $96,463,305 | | Total current liabilities | $17,945,483 | $25,667,446 | | Total liabilities | $40,924,509 | $49,589,911 | | Total equity | $46,646,265 | $46,873,394 | Condensed Consolidated Statements of Operations Q3 2021 net revenues decreased to $8.1 million with a $1.6 million net loss, while nine-month net revenues increased to $27.7 million, and net loss from continuing operations improved to $1.2 million due to debt forgiveness Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $8,072,540 | $9,250,689 | $27,665,182 | $27,179,600 | | Operating Loss | ($1,563,395) | ($1,208,686) | ($3,323,424) | ($4,635,649) | | Other Income (PPP Loan Forgiveness) | — | — | $2,187,140 | — | | Net Loss from Continuing Operations | ($1,583,480) | ($1,275,620) | ($1,209,545) | ($4,838,249) | | Net Income (Loss) Attributable to Common Shareholders | ($1,055,278) | ($481,737) | $340,110 | ($2,455,632) | | Diluted EPS | ($0.07) | ($0.03) | $0.02 | ($0.16) | Condensed Consolidated Statements of Cash Flows Net cash from operations was $4.4 million for the nine months ended September 30, 2021, with $0.5 million used in investing and $2.8 million in financing, resulting in a $1.1 million net increase in cash Cash Flow Summary for Nine Months Ended September 30 (Unaudited) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,382,763 | $4,561,140 | | Net cash used in investing activities | ($475,098) | ($1,441,768) | | Net cash used in financing activities | ($2,818,230) | ($4,685,477) | | Net increase (decrease) in cash | $1,089,435 | ($1,566,105) | | Cash at end of period | $25,843,231 | $26,646,530 | Condensed Consolidated Statements of Equity Total equity slightly decreased to $46.6 million as of September 30, 2021, influenced by $0.3 million net income, $0.5 million share-based compensation, and $1.0 million share repurchases Reconciliation of Total Equity (Unaudited) | Description | Amount | | :--- | :--- | | Balance, December 31, 2020 | $46,873,394 | | Share-based compensation | $517,081 | | Repurchase of common shares | ($1,025,679) | | Net income (loss) | $281,469 | | Balance, September 30, 2021 | $46,646,265 | Notes to the Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies and financial statement items, including COVID-19 impact, discontinued operations, product revenue breakdown, inventory, debt, and Vibativ contingent consideration - The company focuses on acquiring, developing, and commercializing branded prescription products for hospital acute care, gastroenterology, and rheumatology[16] - Rights to Ethyol and Totect were returned to Clinigen as discontinued operations; Cumberland receives $5 million in quarterly payments over two years, with $1.5 million recognized in the first nine months of 2021[17][61] Net Revenues by Product (Nine Months Ended Sep 30) | Product | 2021 Revenue | 2020 Revenue | | :--- | :--- | :--- | | Kristalose | $12,286,729 | $10,387,046 | | Vibativ | $8,799,891 | $8,551,125 | | Caldolor | $3,734,273 | $3,677,434 | | Vaprisol | $1,861,130 | $790,817 | | Acetadote | $638,704 | $1,527,173 | | Omeclamox-Pak | ($451,683) | $640,435 | - The company received full forgiveness of its $2,187,140 Paycheck Protection Program (PPP) loan in June 2021, recorded as other income[50] - The contingent consideration liability for the Vibativ acquisition was $6.9 million as of September 30, 2021, down from $8.2 million at year-end 2020[57] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses business overview, growth strategy, recent developments, and financial results, including COVID-19 impact, RediTrex launch, ifetroban trials, Omeclamox-Pak supply, liquidity, and the renewed $15 million line of credit Overview and Growth Strategy Cumberland is a specialty pharmaceutical company focused on hospital acute care, gastroenterology, and rheumatology, with a growth strategy encompassing product expansion, selective acquisitions, clinical pipeline advancement, and international partnerships - The company's portfolio includes seven FDA-approved brands: Acetadote, Caldolor, Kristalose, Omeclamox-Pak, RediTrex, Vaprisol, and Vibativ[71][72] - Key growth strategies include supporting marketed products, selectively acquiring complementary brands, progressing the clinical pipeline for ifetroban, leveraging infrastructure through co-promotion, and building an international market[78][79][80] Recent Developments Recent developments include the national launch of RediTrex in Q3 2021, resumed ifetroban clinical trials with a new PF-ILDs program, ongoing Omeclamox-Pak supply shortage, and the renewal of its $15 million line of credit - The national launch of RediTrex for arthritis and psoriasis was implemented in Q3 2021 after pandemic delays[91] - A supply shortage for Omeclamox-Pak, declared October 14, 2020, persists due to packager financial difficulties, with operations currently suspended[104] - The company's $15 million line of credit with Pinnacle Bank was renewed on October 28, 2021, extending maturity to October 2024[109] - A new Phase II clinical program for ifetroban was approved to study its use in treating Progressive Fibrosing Interstitial Lung Diseases (PF-ILDs)[102] Results of Operations Q3 2021 net revenues decreased 12.8% to $8.1 million, while nine-month net revenues increased 1.8% to $27.7 million, with operating loss improving to $3.3 million and net loss narrowing due to cost management and PPP loan forgiveness Comparison of Three Months Ended September 30 | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $8,072,540 | $9,250,689 | ($1,178,149) | | Operating Loss | ($1,563,395) | ($1,208,686) | ($354,709) | | Net Loss from Continuing Operations | ($1,583,480) | ($1,275,620) | ($307,860) | Comparison of Nine Months Ended September 30 | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $27,665,182 | $27,179,600 | $485,582 | | Operating Loss | ($3,323,424) | ($4,635,649) | $1,312,225 | | Net Loss from Continuing Operations | ($1,209,545) | ($4,838,249) | $3,628,704 | - For the nine-month period, Kristalose revenue grew by $1.9 million and Vaprisol revenue grew by $1.1 million, while Omeclamox-Pak revenue declined by $1.1 million due to supply issues[122] Liquidity and Capital Resources Liquidity is supported by $25.8 million in cash, $29.3 million working capital, $4.4 million operating cash flow, and a renewed $15 million revolving credit facility, bolstered by $2.2 million PPP loan forgiveness Working Capital Summary | Metric | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $25,843,231 | $24,753,796 | | Working capital | $29,270,145 | $24,302,146 | | Current ratio | 2.6 | 1.9 | - The net increase in cash for the nine months ended September 30, 2021, was $1.1 million, driven by $4.4 million from operations, offset by $2.8 million in financing and $0.5 million in investing[128] - The company renewed its revolving credit facility with Pinnacle Bank, providing up to $15 million in borrowing capacity until October 2024, with $15.0 million outstanding as of September 30, 2021[131][133] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rates from its variable-rate revolving credit facility and foreign currency exchange rates, with foreign exchange risk considered minimal due to primarily U.S. operations - Interest rate risk is associated with the $15.0 million outstanding on the revolving credit facility, based on LIBOR plus a spread, with an applicable rate of 3.65% at September 30, 2021[137] - Foreign currency exchange risk is deemed immaterial as the company operates mainly in the United States, with limited exposure from short invoice terms[138] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during Q3 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[139] - No material changes in internal control over financial reporting occurred during Q3 2021[139] PART II – OTHER INFORMATION Legal Proceedings No legal proceedings were reported - No legal proceedings were reported[142] Risk Factors This section directs investors to the comprehensive risk factors detailed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - Investors are advised to consider the risk factors included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020[143] Unregistered Sales of Equity Securities and Use of Proceeds The company details common stock repurchase activity for Q3 2021 under its $10 million program, with 76,408 shares repurchased for approximately $0.24 million, leaving $5.2 million available Share Repurchases for Three Months Ended September 30, 2021 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July | 39,264 | $3.28 | | August | 24,424 | $2.98 | | September | 12,720 | $2.84 | | Total | 76,408 | | - As of September 30, 2021, approximately $5.2 million remained available for repurchase under the company's $10 million share repurchase program[39][144] Exhibits This section lists exhibits filed with the Form 10-Q, including the Fifth Amendment to the Revolving Credit Loan Agreement and required CEO and CFO certifications - Key exhibits filed include the Fourth and Fifth Amendments to Revolving Credit Agreements, and CEO and CFO certifications pursuant to Sarbanes-Oxley Act sections 302 and 906[146]