Cumberland Pharmaceuticals(US:CPIX)2022-03-11 22:12Part I Business Cumberland Pharmaceuticals specializes in acquiring, developing, and commercializing branded prescription products for acute care, gastroenterology, rheumatology, and oncology - Cumberland focuses on acquiring, developing, and commercializing branded prescription drugs for hospital acute care, gastroenterology, rheumatology, and oncology1112 - Cumberland markets eight FDA-approved brands: Acetadote®, Caldolor®, Kristalose®, Omeclamox®-Pak, RediTrex®, Sancuso®, Vaprisol®, and Vibativ®13 - The company is advancing Phase II clinical programs for ifetroban candidates in Duchenne Muscular Dystrophy (DMD), Systemic Sclerosis (SSc), and Aspirin-Exacerbated Respiratory Disease (AERD)1375 - In late 2021, Cumberland acquired U.S. rights to Sancuso®, an FDA-approved patch for preventing chemotherapy-induced nausea and vomiting, with the transaction closing in January 202262 Products The company markets eight FDA-approved products, including Acetadote, Caldolor, and Vibativ, with some facing recent supply chain disruptions Marketed Products and Indications | Products | | :--- | | Acetadote® (acetylcysteine) injection, for acetaminophen poisoning | | Caldolor® (ibuprofen) injection, for pain and fever | | Kristalose® (lactulose) for oral solution, for constipation | | Omeclamox®-Pak, for H. pylori infection and duodenal ulcer disease | | RediTrex® (methotrexate) injection, for arthritis and psoriasis | | Sancuso® (granisetron) transdermal system, for chemotherapy-induced nausea and vomiting | | Vaprisol® (conivaptan) injection, for hyponatremia | | Vibativ® (telavancin) injection, for serious bacterial infections | - Omeclamox-Pak became unavailable due to its packager suspending operations in 2020, leading to inventory depletion54 - Vaprisol is currently unavailable as all inventory was shipped in 2021, pending FDA approval for a new manufacturing facility68 - The national launch of RediTrex was delayed by the pandemic and implemented in Q4 202161 Pipeline The clinical pipeline focuses on ifetroban in Phase II trials for AERD, SSc, DMD, and PF-ILDs, alongside a completed Phase II study for a cholesterol-reducing agent - The company sponsors Phase II clinical programs for ifetroban candidates in Aspirin-Exacerbated Respiratory Disease (AERD), Systemic Sclerosis (SSc), and Duchenne Muscular Dystrophy (DMD)75 - In September 2021, the Board approved a new clinical program for ifetroban to treat Progressive Fibrosing Interstitial Lung Diseases (PF-ILDs)89 - A Phase II study for a new hospital cholesterol-reducing agent has completed patient enrollment, with next steps under determination92155 Sales and Marketing Cumberland employs approximately 60 sales professionals across Hospital, Field, and Oncology divisions, with a new oncology team formed in early 2022 for Sancuso - The company's sales and marketing organization comprises approximately 60 professionals across Hospital, Field, and Oncology divisions103 - A new oncology sales force was formed in early 2022 to promote the Sancuso brand104 Material Customers The company's primary customers are U.S. wholesale pharmaceutical distributors, with three customers accounting for a significant portion of 2021 gross revenues Revenue Concentration by Customer (2021) | Customer | % of Gross Revenue | | :--- | :--- | | Customer 1 | 27% | | Customer 2 | 24% | | Customer 3 | 20% | Patents, Trademarks and Other Intellectual Proprietary Rights Cumberland protects products via patents and trademarks, with key patents for Acetadote, Caldolor, Vibativ, and Sancuso, but none for Vaprisol, RediTrex, Omeclamox-Pak, or Kristalose - The '445 Acetadote Patent, covering the 200 mg/ml formulation, expires in August 2025 and has been upheld in court184190194 - Caldolor is protected by multiple patents, with some extending intellectual property protection to March 2032198 - Vibativ is covered by U.S. Patent 7,531,623, including composition of matter claims, expiring in January 2027204 - The company holds no issued patents for Vaprisol, RediTrex, Omeclamox-Pak, and Kristalose products206 Competition The company faces intense competition from branded drugs, generics, and alternative treatments across its product portfolio, including Acetadote, Caldolor, and Vibativ - Acetadote competes with generic versions of its old formulation and an Authorized Generic of its new EDTA-free formulation212213 - Caldolor's primary competitors include generic injectable opioids, ketorolac, IV acetaminophen (Ofirmev®), and other branded non-narcotic analgesics214215 - Vibativ's major competitors include generic antibiotics like vancomycin, linezolid, and daptomycin, and newer branded agents235236 Government Regulation The company's operations are extensively regulated by the FDA, involving rigorous approval processes, ongoing post-approval compliance, and adherence to healthcare legislation like the Physician Payments Sunshine Act - The company is subject to extensive regulation by U.S. authorities, including the FDA, and other federal, state, and local laws238239240 - Cumberland utilized the 505(b)(2) NDA pathway for Acetadote, Caldolor, and RediTrex approvals, allowing reliance on existing data not generated by the applicant259260 - The company must comply with the Physician Payments Sunshine Act, requiring reporting of transfers of value to physicians and teaching hospitals to CMS273 Risk Factors The company faces significant risks from the COVID-19 pandemic, supply chain dependence, generic competition, acquisition and pipeline development uncertainties, and stringent regulation - The COVID-19 pandemic has adversely impacted business through revenue loss, supply interruptions, clinical trial delays, and potential future liquidity effects313314 - Dependence on third-party manufacturers for all products poses significant supply disruption risks, as seen with Omeclamox-Pak and Vaprisol324329330 - Approval and sale of generic equivalents for branded products could significantly reduce revenues and market share due to lower costs342343 - Future growth depends on successfully acquiring and integrating new products, which involves competition and financial and operational risks347348 - Ifetroban product candidates face a long, expensive, and uncertain development process with a high risk of failure, as they are not yet approved for sale351 Properties As of December 31, 2021, Cumberland leases 25,500 sq ft for its Nashville headquarters, with a new 16,631 sq ft lease commencing in late 2022 - The company leases 25,500 sq ft for its Nashville, TN headquarters, with the lease expiring in October 2022493 - A new lease for 16,631 sq ft at the Broadwest development in Nashville has been signed for a new corporate headquarters, commencing in late 2022493 Legal Proceedings The company is involved in ongoing legal proceedings defending its Acetadote patents and litigation with Melinta Therapeutics - The company is involved in legal proceedings to defend its Acetadote patents495 - The company is also involved in litigation with Melinta Therapeutics, as detailed in the Notes to Consolidated Financial Statements495 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Cumberland's common stock trades on Nasdaq under 'CPIX', has never paid dividends, and repurchased $1.4 million in shares in 2021 under its program - The company's common stock trades on the Nasdaq Global Select Market under the symbol 'CPIX'498 - The company has never declared or paid any cash dividends on its common stock499 - In 2021, the company repurchased 438,359 shares of common stock for approximately $1.4 million under its share repurchase program502 Share Repurchases in Q4 2021 | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | October | 33,071 | $2.74 | | November | 35,095 | $2.56 | | December | 43,656 | $4.68 | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2021, net revenues decreased to $36.0 million, resulting in a $5.6 million net loss, while the company maintained strong liquidity and saw its $2.2 million PPP loan forgiven Results of Operations Net revenues decreased to $36.0 million in 2021 from $37.4 million in 2020, resulting in a $5.6 million net loss, while 2020 revenues grew to $37.4 million from $34.4 million in 2019 Net Revenues by Product (2021 vs. 2020) | Product | 2021 Net Revenue ($M) | 2020 Net Revenue ($M) | Change ($M) | | :--- | :--- | :--- | :--- | | Kristalose | 16.0 | 15.6 | 0.4 | | Vibativ | 11.7 | 10.9 | 0.8 | | Caldolor | 5.0 | 5.3 | (0.3) | | Acetadote | 0.9 | 1.9 | (1.0) | | Vaprisol | 1.9 | 1.1 | 0.8 | | Omeclamox-Pak | (0.4) | 0.3 | (0.7) | | RediTrex | 0.1 | 0.9 | (0.8) | | Total Net Revenues | 36.0 | 37.4 | (1.4) | Net Revenues by Product (2020 vs. 2019) | Product | 2020 Net Revenue ($M) | 2019 Net Revenue ($M) | Change ($M) | | :--- | :--- | :--- | :--- | | Kristalose | 15.6 | 12.9 | 2.7 | | Vibativ | 10.9 | 8.7 | 2.2 | | Caldolor | 5.3 | 5.2 | 0.1 | | Acetadote | 1.9 | 3.8 | (1.9) | | Total Net Revenues | 37.4 | 34.4 | 3.0 | - In 2021, cost of products sold as a percentage of net revenues increased to 24.5% from 23.1% in 2020, primarily due to a product mix shift towards Vibativ556 Liquidity and Capital Resources As of December 31, 2021, cash and cash equivalents were $27.0 million, with working capital at $26.4 million, supported by an expanded $20 million revolving credit facility and a forgiven $2.2 million PPP loan Liquidity Summary | Metric | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $27,040,816 | $24,753,796 | | Working capital | $26,409,053 | $24,302,146 | | Revolving line of credit availability | $5,000,000 | $0 | - The revolving credit agreement with Pinnacle Bank was amended to increase the principal amount to $20 million and extend maturity to October 1, 2024586 - On June 11, 2021, the company received formal notice that the full $2,187,140 PPP loan received in 2020 was forgiven593776 Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk from its variable-rate revolving credit facility, with $15.0 million outstanding, and minimal foreign currency exchange rate risk - The company is exposed to interest rate risk on its revolving credit facility, with $15.0 million outstanding as of December 31, 2021606 - The company's exposure to foreign currency fluctuation is minimal, with purchases having a maximum exposure of 90 days608 Financial Statements and Supplementary Data This section presents consolidated financial statements for 2019-2021, including auditor reports and notes, with customer allowances identified as a critical audit matter for 2021 - Management concluded that as of December 31, 2021, the company's internal control over financial reporting was effective based on the COSO framework638 - BKD, LLP identified 'Customer Allowances for Chargebacks, Discounts and Damaged Goods, and Accruals for Rebates, Coupons, Product Returns, and Certain Fees' as a critical audit matter for the 2021 audit648649650 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2021, with no material changes in Q4 2021 - The CEO and CFO concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective610 - No material changes in internal control over financial reporting occurred during Q4 2021612 Part III Directors, Executive Officers, Compensation, and Corporate Governance Information for directors, executive officers, compensation, and corporate governance is incorporated by reference from the 2022 proxy statement - Information for Items 10 through 14 is incorporated by reference from the registrant's Proxy Statement for its 2022 annual meeting of shareholders616 Part IV Exhibits, Financial Statement Schedules This section lists all exhibits and financial statement schedules filed with the 10-K, including material contracts and Sarbanes-Oxley certifications - This section contains the list of financial statements, schedules, and exhibits filed with the 10-K619 - Key exhibits include the Asset Purchase Agreement for Sancuso, amendments to the Revolving Credit Loan Agreement, and various employment and compensation plan agreements620624626