ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Tennessee | 62-1765329 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
2525 West End Avenue, Suite 950, Nashville, Tennessee | 37203 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | ý (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Class | Outstanding at November 1, 2016 | |
Common stock, no par value | 16,180,604 |
September 30, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 35,546,244 | $ | 38,203,059 | |||
Marketable securities | 14,600,404 | 14,564,115 | |||||
Accounts receivable, net of allowances | 6,672,300 | 6,077,120 | |||||
Inventories | 4,983,227 | 4,270,143 | |||||
Other current assets | 5,160,817 | 3,997,637 | |||||
Total current assets | 66,962,992 | 67,112,074 | |||||
Property and equipment, net | 482,591 | 536,450 | |||||
Intangible assets, net | 21,172,570 | 21,168,596 | |||||
Other assets | 2,456,118 | 3,101,839 | |||||
Total assets | $ | 91,074,271 | $ | 91,918,959 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 6,658,196 | $ | 2,877,479 | |||
Other current liabilities | 5,027,735 | 9,534,268 | |||||
Total current liabilities | 11,685,931 | 12,411,747 | |||||
Revolving line of credit | 3,700,000 | 1,700,000 | |||||
Other long-term liabilities | 1,265,725 | 987,429 | |||||
Total liabilities | 16,651,656 | 15,099,176 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Shareholders’ equity: | |||||||
Common stock—no par value; 100,000,000 shares authorized; 16,195,631 and 16,379,501 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | 55,175,133 | 57,338,294 | |||||
Retained earnings | 19,354,625 | 19,549,614 | |||||
Total shareholders’ equity | 74,529,758 | 76,887,908 | |||||
Noncontrolling interests | (107,143 | ) | (68,125 | ) | |||
Total equity | 74,422,615 | 76,819,783 | |||||
Total liabilities and equity | $ | 91,074,271 | $ | 91,918,959 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net revenues | $ | 8,791,753 | $ | 7,885,048 | $ | 23,944,120 | $ | 25,481,563 | |||||||
Costs and expenses: | |||||||||||||||
Cost of products sold | 1,973,948 | 980,176 | 4,353,148 | 3,379,018 | |||||||||||
Selling and marketing | 3,614,714 | 3,608,828 | 10,585,955 | 10,645,229 | |||||||||||
Research and development | 644,662 | 757,442 | 2,029,914 | 3,444,524 | |||||||||||
General and administrative | 1,865,575 | 1,794,279 | 5,817,943 | 5,591,982 | |||||||||||
Amortization | 562,722 | 473,439 | 1,632,920 | 1,471,879 | |||||||||||
Total costs and expenses | 8,661,621 | 7,614,164 | 24,419,880 | 24,532,632 | |||||||||||
Operating income (loss) | 130,132 | 270,884 | (475,760 | ) | 948,931 | ||||||||||
Interest income | 51,636 | 64,072 | 160,248 | 178,320 | |||||||||||
Interest expense | (29,088 | ) | (19,815 | ) | (77,777 | ) | (53,854 | ) | |||||||
Income (loss) before income taxes | 152,680 | 315,141 | (393,289 | ) | 1,073,397 | ||||||||||
Income tax (expense) benefit | (57,192 | ) | (193,439 | ) | 159,282 | (530,885 | ) | ||||||||
Net income (loss) | 95,488 | 121,702 | (234,007 | ) | 542,512 | ||||||||||
Net loss at subsidiary attributable to noncontrolling interests | 10,678 | 4,911 | 39,018 | 37,780 | |||||||||||
Net income (loss) attributable to common shareholders | $ | 106,166 | $ | 126,613 | $ | (194,989 | ) | $ | 580,292 | ||||||
Earnings (loss) per share attributable to common shareholders | |||||||||||||||
- basic | $ | 0.01 | $ | 0.01 | $ | (0.01 | ) | $ | 0.03 | ||||||
- diluted | $ | 0.01 | $ | 0.01 | $ | (0.01 | ) | $ | 0.03 | ||||||
Weighted-average shares outstanding | |||||||||||||||
- basic | 16,217,442 | 16,604,682 | 16,268,579 | 16,811,360 | |||||||||||
- diluted | 16,504,568 | 16,996,376 | 16,268,579 | 17,193,854 | |||||||||||
Comprehensive income (loss) attributable to common shareholders | 106,166 | 126,613 | (194,989 | ) | 580,292 | ||||||||||
Net loss at subsidiary attributable to noncontrolling interests | 10,678 | 4,911 | 39,018 | 37,780 | |||||||||||
Total comprehensive income (loss) | $ | 95,488 | $ | 121,702 | $ | (234,007 | ) | $ | 542,512 |
Nine months ended September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | (234,007 | ) | $ | 542,512 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | 1,785,057 | 1,677,906 | |||||
Deferred tax benefit | 662,689 | 43,991 | |||||
Share-based compensation | 623,504 | 426,651 | |||||
Excess tax expense (benefit) derived from exercise of stock options | 907,270 | (470,584 | ) | ||||
Noncash interest expense | 61,224 | 33,001 | |||||
Noncash investment gains | (69,140 | ) | (80,321 | ) | |||
Net changes in assets and liabilities affecting operating activities: | |||||||
Accounts receivable | (595,180 | ) | (293,665 | ) | |||
Inventory | (713,084 | ) | 1,394,280 | ||||
Other current assets and other assets | (1,241,372 | ) | (239,484 | ) | |||
Accounts payable and other current liabilities | (1,705,007 | ) | 1,457,656 | ||||
Other long-term liabilities | 267,730 | 61,553 | |||||
Net cash (used in) provided by operating activities | (250,316 | ) | 4,553,496 | ||||
Cash flows from investing activities: | |||||||
Additions to property and equipment | (98,275 | ) | (96,768 | ) | |||
Purchases of marketable securities | (3,643,894 | ) | (5,201,240 | ) | |||
Proceeds from sale of marketable securities | 3,676,745 | 5,684,149 | |||||
Additions to intangible assets | (1,554,410 | ) | (2,392,477 | ) | |||
Net cash used in investing activities | (1,619,834 | ) | (2,006,336 | ) | |||
Cash flows from financing activities: | |||||||
Net borrowings on line of credit | 2,000,000 | 1,700,000 | |||||
Exercise of stock options | — | 21,366 | |||||
Excess tax (expense) benefit derived from exercise of stock options | (907,270 | ) | 470,584 | ||||
Cash settlement of contingent consideration | — | (1,618,983 | ) | ||||
Repurchase of common shares | (1,879,395 | ) | (4,669,873 | ) | |||
Net cash used in financing activities | (786,665 | ) | (4,096,906 | ) | |||
Net decrease in cash and cash equivalents | (2,656,815 | ) | (1,549,746 | ) | |||
Cash and cash equivalents at beginning of period | 38,203,059 | 39,866,037 | |||||
Cash and cash equivalents at end of period | $ | 35,546,244 | $ | 38,316,291 | |||
Supplemental disclosure of cash flow information: | |||||||
Non-cash investing and financing activities: | |||||||
Net change in unpaid additions to intangibles, property and equipment | $ | (82,487 | ) | $ | 1,266,759 |
Noncontrolling interests | ||||||||||||||||||
Common stock | Retained earnings | Total equity | ||||||||||||||||
Shares | Amount | |||||||||||||||||
Balance, December 31, 2015 | 16,379,501 | $ | 57,338,294 | $ | 19,549,614 | $ | (68,125 | ) | $ | 76,819,783 | ||||||||
Share-based compensation | 223,587 | 623,504 | — | — | 623,504 | |||||||||||||
Exercise of options and related tax benefit | — | (907,270 | ) | — | — | (907,270 | ) | |||||||||||
Repurchase of common shares | (407,457 | ) | (1,879,395 | ) | — | — | (1,879,395 | ) | ||||||||||
Net loss | — | — | (194,989 | ) | (39,018 | ) | (234,007 | ) | ||||||||||
Balance, September 30, 2016 | 16,195,631 | $ | 55,175,133 | $ | 19,354,625 | $ | (107,143 | ) | $ | 74,422,615 |
Level 1 - | Quoted prices for identical instruments in active markets. |
Level 2 - | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
Level 3 - | Significant inputs to the valuation model are unobservable. |
September 30, 2016 | December 31, 2015 | ||||||||||||||||||||||
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | ||||||||||||||||||
U.S. Agency issued mortgage-backed securities – variable rate | $ | — | $ | 6,722,556 | $ | 6,722,556 | $ | — | $ | 5,700,335 | $ | 5,700,335 | |||||||||||
U.S. Agency notes and bonds – fixed rate | — | 1,802,779 | 1,802,779 | — | 2,447,066 | 2,447,066 | |||||||||||||||||
SBA loan pools – variable rate | — | 1,440,069 | 1,440,069 | — | 1,681,714 | 1,681,714 | |||||||||||||||||
Municipal bonds – VRDN | 4,635,000 | — | 4,635,000 | 4,735,000 | — | 4,735,000 | |||||||||||||||||
Total fair value of marketable securities | $ | 4,635,000 | $ | 9,965,404 | $ | 14,600,404 | $ | 4,735,000 | $ | 9,829,115 | $ | 14,564,115 |
Three months ended September 30, | |||||||
2016 | 2015 | ||||||
Numerator: | |||||||
Net income attributable to common shareholders | $ | 106,166 | $ | 126,613 | |||
Denominator: | |||||||
Weighted-average shares outstanding – basic | 16,217,442 | 16,604,682 | |||||
Dilutive effect of other securities | 287,126 | 391,694 | |||||
Weighted-average shares outstanding – diluted | 16,504,568 | 16,996,376 | |||||
Nine months ended September 30, | |||||||
2016 | 2015 | ||||||
Numerator: | |||||||
Net income (loss) attributable to common shareholders | $ | (194,989 | ) | $ | 580,292 | ||
Denominator: | |||||||
Weighted-average shares outstanding – basic | 16,268,579 | 16,811,360 | |||||
Dilutive effect of other securities | — | 382,494 | |||||
Weighted-average shares outstanding – diluted | 16,268,579 | 17,193,854 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Products: | |||||||||||||||
Acetadote | $ | 1,807,495 | $ | 2,065,081 | $ | 5,532,893 | $ | 6,386,767 | |||||||
Omeclamox-Pak | 752,808 | 691,120 | 2,154,596 | 2,393,495 | |||||||||||
Kristalose | 3,671,397 | 3,939,294 | 10,915,276 | 12,160,037 | |||||||||||
Vaprisol | 496,279 | 670,621 | 1,286,126 | 2,199,645 | |||||||||||
Caldolor | 1,357,289 | 352,343 | 3,060,441 | 2,007,076 | |||||||||||
Ethyol | 519,400 | — | 519,400 | — | |||||||||||
Other | 187,085 | 166,589 | 475,388 | 334,543 | |||||||||||
Total net revenues | $ | 8,791,753 | $ | 7,885,048 | $ | 23,944,120 | $ | 25,481,563 |
September 30, 2016 | December 31, 2015 | ||||||
Raw materials | $ | 2,618,737 | $ | 2,576,621 | |||
Consigned inventory | 336,504 | 235,636 | |||||
Finished goods | 2,027,986 | 1,457,886 | |||||
Total | $ | 4,983,227 | $ | 4,270,143 |
• | Acetadote® (acetylcysteine) Injection, for the treatment of acetaminophen poisoning; |
• | Caldolor® (ibuprofen) Injection, for the treatment of pain and fever; recently approved for use in pediatric patients; |
• | Kristalose® (lactulose) for Oral Solution, a prescription laxative, for the treatment of chronic and acute constipation; |
• | Omeclamox®-Pak, (omeprazole, clarithromycin, amoxicillin) for the treatment of Helicobacter pylori (H. pylori) infection and related duodenal ulcer disease; |
• | Vaprisol® (conivaptan) Injection, to raise serum sodium levels in hospitalized patients with euvolemic and hypervolemic hyponatremia, and |
• | Ethyol® (amifostine) Injection for the reduction of xerostomia (dry mouth) as a side-effect in patients undergoing post-operative radiation treatment for head and neck cancer. It also reduces renal toxicity associated with the repeated administration of cisplatin in patients with advanced ovarian cancer. |
• | Hepatoren® (ifetroban) Injection, a Phase II candidate for the treatment of critically ill hospitalized patients suffering from liver and kidney failure associated with hepatorenal syndrome (“HRS”); |
• | Boxaban™ (ifetroban) oral capsules, a Phase II candidate for the treatment of patients with aspirin-exacerbated respiratory disease (AERD); |
• | Vasculan™ (ifetroban) oral capsules, a Phase II candidate for the treatment of patients with systemic sclerosis (SSc); and |
• | Portaban™ (ifetroban) oral formulation, a Phase II candidate for the treatment of patients with portal hypertension associated with liver disease. |
• | Continue to build a high-performance sales organization to address our target markets. We believe that our commercial infrastructure can help drive prescription volume and product sales. We currently utilize two distinct sales teams to address our primary target markets: a hospital sales force for the acute care market and a field sales force for the gastroenterology market. We believe that active promotion of our products, supported by non-personal promotional activities developed and implemented by our marketing team, can maximize the opportunity for our brands. |
• | Further develop our existing products and develop new late stage product candidates. We continue to evaluate our products following FDA approval to determine if further clinical work could expand the potential market opportunities for our products and help new patient populations. We will also continue to explore opportunities for label expansion to bring our products to new patient populations. The Caldolor pediatric approval reflects our successful implementation of this strategy. Our clinical team is also working to develop late stage product candidates that could further expand our product portfolio if approved by the FDA. |
• | Expand our product portfolio by acquiring rights to additional products and late-stage product candidates. In addition to our product development activities, we are also seeking to acquire products or late-stage development product candidates to continue to build a portfolio of complementary brands. We focus on under-promoted, FDA-approved drugs as well as late-stage development products that address poorly met medical needs. We plan to continue to target product acquisition candidates that are competitively differentiated, have valuable intellectual property or other protective features, and allow us to leverage our existing infrastructure. Our acquisition of rights to Ethyol in the U.S. represents a recent example of our implementation of this strategy. |
• | Expand our global presence through select international partnerships. We have established our own commercial capabilities, including a sales organization to cover the U.S. market for our products. We are building a network of select international partners to register our products and make them available to patients in their countries. We will continue to expand our network of international partners and continue to support our partners’ registration and commercialization efforts in their respective territories. The launch of Caldolor in Australia by CSL's Seqirus is an example of our international partnerships. |
• | Develop a pipeline of early-stage products through Cumberland Emerging Technologies ("CET"). In order to build our product pipeline, we are supplementing our acquisition and late-stage development activities with the early-stage drug development activities at CET. CET partners with universities and other research organizations to develop promising, early-stage product candidates, and Cumberland has the opportunity to negotiate rights to further develop and commercialize them in the U.S and other markets. |
Date issued | U.S. Patent number | Expiration | Patent claims | |||
April 2012 | 8,148,356 | May 2026 | Acetadote formulation and composition of matter | |||
March 2013 | 8,399,445 | August 2025 | 200 mg/ml Acetadote formulation to treat patients with acetaminophen overdose | |||
February 2014 | 8,653,061 | August 2025 | 200 mg/ml Acetadote formulation to treat patients with acetaminophen overdose | |||
May 2014 | 8,722,738 | April 2032 | Administration method of acetylcysteine injection, without specification of the presence or lack of EDTA in the formulation | |||
February 2015 | 8,952,065 | August 2025 | 200 mg/ml Acetadote formulation to treat patients with acetaminophen overdose | |||
May 2016 | 9,327,028 | July 2031 | Administration methods of acetylcysteine injection, without specification of the presence or lack of EDTA in the injection |
Three months ended September 30, | ||||||||||||
2016 | 2015 | Change | ||||||||||
Net revenues | $ | 8,791,753 | $ | 7,885,048 | $ | 906,705 | ||||||
Costs and expenses: | ||||||||||||
Cost of products sold | 1,973,948 | 980,176 | 993,772 | |||||||||
Selling and marketing | 3,614,714 | 3,608,828 | 5,886 | |||||||||
Research and development | 644,662 | 757,442 | (112,780 | ) | ||||||||
General and administrative | 1,865,575 | 1,794,279 | 71,296 | |||||||||
Amortization | 562,722 | 473,439 | 89,283 | |||||||||
Total costs and expenses | 8,661,621 | 7,614,164 | 1,047,457 | |||||||||
Operating income | 130,132 | 270,884 | (140,752 | ) | ||||||||
Interest income | 51,636 | 64,072 | (12,436 | ) | ||||||||
Interest expense | (29,088 | ) | (19,815 | ) | (9,273 | ) | ||||||
Income before income taxes | 152,680 | 315,141 | (162,461 | ) | ||||||||
Income tax expense | (57,192 | ) | (193,439 | ) | 136,247 | |||||||
Net income | $ | 95,488 | $ | 121,702 | $ | (26,214 | ) |
Three months ended September 30, | |||||||||||
2016 | 2015 | Change | |||||||||
Products: | |||||||||||
Acetadote | $ | 1,807,495 | $ | 2,065,081 | $ | (257,586 | ) | ||||
Omeclamox-Pak | 752,808 | 691,120 | 61,688 | ||||||||
Kristalose | 3,671,397 | 3,939,294 | (267,897 | ) | |||||||
Vaprisol | 496,279 | 670,621 | (174,342 | ) | |||||||
Caldolor | 1,357,289 | 352,343 | 1,004,946 | ||||||||
Ethyol | 519,400 | — | 519,400 | ||||||||
Other | 187,085 | 166,589 | 20,496 | ||||||||
Total net revenues | $ | 8,791,753 | $ | 7,885,048 | $ | 906,705 |
Nine months ended September 30, | ||||||||||||
2016 | 2015 | Change | ||||||||||
Net revenues | $ | 23,944,120 | $ | 25,481,563 | $ | (1,537,443 | ) | |||||
Costs and expenses: | ||||||||||||
Cost of products sold | 4,353,148 | 3,379,018 | 974,130 | |||||||||
Selling and marketing | 10,585,955 | 10,645,229 | (59,274 | ) | ||||||||
Research and development | 2,029,914 | 3,444,524 | (1,414,610 | ) | ||||||||
General and administrative | 5,817,943 | 5,591,982 | 225,961 | |||||||||
Amortization | 1,632,920 | 1,471,879 | 161,041 | |||||||||
Total costs and expenses | 24,419,880 | 24,532,632 | (112,752 | ) | ||||||||
Operating income (loss) | (475,760 | ) | 948,931 | (1,424,691 | ) | |||||||
Interest income | 160,248 | 178,320 | (18,072 | ) | ||||||||
Interest expense | (77,777 | ) | (53,854 | ) | (23,923 | ) | ||||||
Income (loss) before income taxes | (393,289 | ) | 1,073,397 | (1,466,686 | ) | |||||||
Income tax (expense) benefit | 159,282 | (530,885 | ) | 690,167 | ||||||||
Net income (loss) | $ | (234,007 | ) | $ | 542,512 | $ | (776,519 | ) |
Nine months ended September 30, | |||||||||||
2016 | 2015 | Change | |||||||||
Products: | |||||||||||
Acetadote | $ | 5,532,893 | $ | 6,386,767 | $ | (853,874 | ) | ||||
Omeclamox-Pak | 2,154,596 | 2,393,495 | (238,899 | ) | |||||||
Kristalose | 10,915,276 | 12,160,037 | (1,244,761 | ) | |||||||
Vaprisol | 1,286,126 | 2,199,645 | (913,519 | ) | |||||||
Caldolor | 3,060,441 | 2,007,076 | 1,053,365 | ||||||||
Ethyol | 519,400 | — | 519,400 | ||||||||
Other | 475,388 | 334,543 | 140,845 | ||||||||
Total net revenues | $ | 23,944,120 | $ | 25,481,563 | $ | (1,537,443 | ) |
September 30, 2016 | December 31, 2015 | ||||||
Cash and cash equivalents | $ | 35,546,244 | $ | 38,203,059 | |||
Marketable securities | 14,600,404 | 14,564,115 | |||||
Total cash, cash equivalents and marketable securities | $ | 50,146,648 | $ | 52,767,174 | |||
Working capital (current assets less current liabilities) | $ | 55,277,061 | $ | 54,700,327 | |||
Current ratio (multiple of current assets to current liabilities) | 5.7 | 5.4 | |||||
Revolving line of credit availability | $ | 8,300,000 | $ | 10,300,000 |
Nine months ended September 30, | |||||||
2016 | 2015 | ||||||
Net cash provided by (used in): | |||||||
Operating activities | $ | (250,316 | ) | $ | 4,553,496 | ||
Investing activities | (1,619,834 | ) | (2,006,336 | ) | |||
Financing activities | (786,665 | ) | (4,096,906 | ) | |||
Net decrease in cash and cash equivalents | $ | (2,656,815 | ) | $ | (1,549,746 | ) |
Period | Total Number of Shares (or Units) Purchased | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1) | |||||||
July | 8,500 | $ | 4.72 | 8,500 | $ | 8,332,816 | |||||
August | 21,246 | (1) | 4.59 | 21,246 | 8,235,204 | ||||||
September | 10,971 | 4.86 | 10,971 | 8,181,885 | |||||||
Total | 40,717 | 40,717 |
No. | Description | |
10.33.1 | First Amendment to Revolving Credit Loan Agreement, dated July 29, 2016, by and between Cumberland Pharmaceuticals Inc. and SunTrust Bank. | |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Chief Executive and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL INSTANCE DOCUMENT | |
101.SCH | XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT | |
101.CAL | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT | |
101.DEF | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT | |
101.LAB | XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT | |
101.PRE | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT | |
Cumberland Pharmaceuticals Inc. | ||||||
November 3, 2016 | By: | /s/ A.J. Kazimi | ||||
A.J. Kazimi | ||||||
Chief Executive Officer | ||||||
By: | /s/ Michael Bonner | |||||
Michael Bonner | ||||||
Chief Financial Officer |
1. | I have reviewed this Form 10-Q of Cumberland Pharmaceuticals Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
November 3, 2016 | By: | /s/ A.J. Kazimi | |
A.J. Kazimi | |||
Chief Executive Officer |
1. | I have reviewed this Form 10-Q of Cumberland Pharmaceuticals Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
November 3, 2016 | By: | /s/ Michael Bonner | |
Michael Bonner | |||
Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ A. J. Kazimi |
A.J. Kazimi |
Chief Executive Officer |
November 3, 2016 |
/s/ Michael Bonner |
Michael Bonner |
Chief Financial Officer |
November 3, 2016 |
Document and Entity Information - shares |
9 Months Ended | |
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Sep. 30, 2016 |
Nov. 01, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CUMBERLAND PHARMACEUTICALS INC | |
Entity Central Index Key | 0001087294 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 16,180,604 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 16,195,631 | 16,379,501 |
Common stock, shares outstanding (in shares) | 16,195,631 | 16,379,501 |
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Income Statement [Abstract] | ||||
Net revenues | $ 8,791,753 | $ 7,885,048 | $ 23,944,120 | $ 25,481,563 |
Costs and expenses: | ||||
Cost of products sold | 1,973,948 | 980,176 | 4,353,148 | 3,379,018 |
Selling and marketing | 3,614,714 | 3,608,828 | 10,585,955 | 10,645,229 |
Research and development | 644,662 | 757,442 | 2,029,914 | 3,444,524 |
General and administrative | 1,865,575 | 1,794,279 | 5,817,943 | 5,591,982 |
Amortization | 562,722 | 473,439 | 1,632,920 | 1,471,879 |
Total costs and expenses | 8,661,621 | 7,614,164 | 24,419,880 | 24,532,632 |
Operating income (loss) | 130,132 | 270,884 | (475,760) | 948,931 |
Interest income | 51,636 | 64,072 | 160,248 | 178,320 |
Interest expense | (29,088) | (19,815) | (77,777) | (53,854) |
Income (loss) before income taxes | 152,680 | 315,141 | (393,289) | 1,073,397 |
Income tax (expense) benefit | (57,192) | (193,439) | 159,282 | (530,885) |
Net income (loss) | 95,488 | 121,702 | (234,007) | 542,512 |
Net loss at subsidiary attributable to noncontrolling interests | 10,678 | 4,911 | 39,018 | 37,780 |
Net income (loss) attributable to common shareholders | $ 106,166 | $ 126,613 | $ (194,989) | $ 580,292 |
Earnings (loss) per share attributable to common shareholders | ||||
- basic (in dollars per share) | $ 0.01 | $ 0.01 | $ (0.01) | $ 0.03 |
- diluted (in dollars per share) | $ 0.01 | $ 0.01 | $ (0.01) | $ 0.03 |
Weighted-average shares outstanding | ||||
- basic (in shares) | 16,217,442 | 16,604,682 | 16,268,579 | 16,811,360 |
- diluted (in shares) | 16,504,568 | 16,996,376 | 16,268,579 | 17,193,854 |
Comprehensive income (loss) attributable to common shareholders | $ 106,166 | $ 126,613 | $ (194,989) | $ 580,292 |
Net loss at subsidiary attributable to noncontrolling interests | 10,678 | 4,911 | 39,018 | 37,780 |
Total comprehensive income (loss) | $ 95,488 | $ 121,702 | $ (234,007) | $ 542,512 |
Condensed Consolidated Statement of Equity (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) |
Total |
Common stock |
Retained earnings |
Noncontrolling interests |
---|---|---|---|---|
Balance, Beginning of Period at Dec. 31, 2015 | $ 76,819,783 | $ 57,338,294 | $ 19,549,614 | $ (68,125) |
Balance, Beginning of Period (in shares) at Dec. 31, 2015 | 16,379,501 | 16,379,501 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Share-based compensation | $ 623,504 | $ 623,504 | ||
Share-based compensation (in shares) | 223,587 | |||
Exercise of options and related tax benefit | (907,270) | $ (907,270) | ||
Exercise of options and related tax benefit (in shares) | 0 | |||
Repurchase of shares | (1,879,395) | $ (1,879,395) | ||
Repurchase of shares (in shares) | (407,457) | |||
Net income (loss) | (234,007) | (194,989) | (39,018) | |
Balance, End of Period at Sep. 30, 2016 | $ 74,422,615 | $ 55,175,133 | $ 19,354,625 | $ (107,143) |
Balance, End of Period (in shares) at Sep. 30, 2016 | 16,195,631 | 16,195,631 |
Organization and Basis of Presentation |
9 Months Ended |
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Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BASIS OF PRESENTATION | ORGANIZATION AND BASIS OF PRESENTATION Cumberland Pharmaceuticals Inc. and its subsidiaries (the "Company," "Cumberland," or in certain context "our" or "we") is a specialty pharmaceutical company focused on the acquisition, development and commercialization of branded prescription products. The Company's primary target markets are hospital acute care and gastroenterology. These medical specialties are characterized by relatively concentrated prescriber bases that the Company believes can be penetrated effectively by small, targeted sales forces. Cumberland is dedicated to providing innovative products that improve quality of care for patients and address unmet or poorly met medical needs. Cumberland has both internal product development and commercial capabilities. The Company is focused on maximizing the commercial potential of its current brands, as well as expanding its product portfolio through select acquisitions and development of new product candidates. Cumberland’s products are manufactured by third parties, which are overseen by the Company’s quality assurance professionals. The Company works closely with its distribution partners to ensure the delivery and availability of the Company's products. In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the Company have been prepared on a basis consistent with the December 31, 2015 audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly present the information set forth herein. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements have been prepared in accordance with the regulations of the Securities and Exchange Commission, or the SEC, and omit certain information and footnote disclosure necessary to present the statements in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the entire fiscal year or any future period. Total comprehensive income (loss) was comprised solely of net income (loss) for the three and nine months ended September 30, 2016 and 2015. Recent Accounting Guidance Recently Issued Accounting Guidance Not Yet Adopted In August 2016, the Financial Accounting Standards Board ("FASB") issued amended guidance in the form of a FASB Accounting Standards Update ("ASU"), "Classification of Certain Cash Receipts and Cash Payments". The core principle of the new guidance is to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this update are effective for fiscal years beginning after December 15, 2017. The accounting guidance should be applied retrospectively and early adoption is permitted. The Company is evaluating the potential impact of this adoption on our condensed consolidated financial statements and disclosures. In May 2014, the FASB issued amended guidance in the form of a FASB ASU, "Revenue from Contracts with Customers". The core principle of the new guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The new guidance defines a five-step process to achieve this core principle and, in doing so, additional judgments and estimates may be required within the revenue recognition process. The new standard will replace most of the existing revenue recognition standards in U.S. GAAP when it becomes effective. In July 2015, the FASB issued a one-year deferral of the adoption date, which extended the effective date for the Company to January 1, 2018. Adoption prior to January 1, 2017, the original effective date, is not permitted. The new standard can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application. The Company is assessing the potential impact of the new standard on financial reporting and has not yet selected a transition method by which it will adopt the standard. In July 2015, the FASB issued amended guidance in the form of a FASB ASU, “Inventory: Simplifying the Measurement of Inventory.” The amended guidance requires entities to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The requirement would replace the current lower of cost or market evaluation. Accounting guidance is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail method. The amendments in this update are effective for fiscal years beginning after December 15, 2016. The accounting guidance should be applied prospectively and early adoption is permitted. The Company is evaluating the potential impact of this adoption on our condensed consolidated financial statements and disclosures. In November 2015, the FASB amended guidance in the form of a FASB ASU, "Balance Sheet Classification of Deferred Taxes", which requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The FASB determined that this simplification could reduce cost and complexity without decreasing the usefulness of information provided to financial statement users. The amendments in this update are effective for fiscal years beginning after December 15, 2016. The accounting guidance may be applied prospectively or retrospectively and early adoption is permitted. The Company does not anticipate adoption of this balance sheet classification ASU to have a material effect on its consolidated financial statements and disclosures. In February 2016, the FASB issued guidance in the form of a FASB ASU, "Leases". The new standard establishes a right-of-use (ROU) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain optional practical expedients available. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact of its pending adoption of the new standard on Cumberland’s consolidated financial statements and disclosures. In March 2016, the FASB released in the form of a FASB ASU, "Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting". The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, earnings per share ("EPS"), and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company is currently evaluating the impact of adoption on the consolidated financial statements including the unrecognized net operating loss carryforwards generated from the exercise of nonqualified options of approximately $44.0 million and the future vesting of shares of restricted stock issued to employees and directors. Accounting Policies: Use of Estimates In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management must make decisions that impact the reported amounts and the related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, management applies judgments based on its understanding and analysis of the relevant circumstances, historical experience, and other available information. Actual results could differ from those estimates under different assumptions and conditions. The Company's most significant estimates include: (1) its allowances for chargebacks and accruals for rebates and product returns, (2) the allowances for obsolescent or unmarketable inventory and (3) the projection of future taxable income for the realization of deferred tax assets. Operating Segments The Company has one operating segment which is specialty pharmaceutical products. Management has chosen to organize the Company based on the type of products sold. Operating segments are identified as components of an enterprise about which separate discrete financial information is evaluated by the chief operating decision maker, or decision-making group, in making decisions regarding resource allocation and assessing performance. The Company, which uses consolidated financial information in determining how to allocate resources and assess performance, evaluated that our specialty pharmaceutical products compete in similar economic markets and similar circumstances. Substantially all of the Company’s assets are located in the United States and total revenues are primarily attributable to U.S. customers. |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MARKETABLE SECURITIES | MARKETABLE SECURITIES The Company invests in marketable debt securities in order to maximize its return on cash. Marketable securities consist of U.S. Government Agency notes and bonds, and bank-guaranteed, variable rate demand notes ("VRDN"). At the time of purchase, the Company classifies marketable securities as either trading securities or available-for-sale securities, depending on the intent at that time. As of September 30, 2016 and December 31, 2015, the marketable securities are comprised solely of trading securities. Trading securities are carried at fair value with unrealized gains and losses recognized as a component of interest income in the condensed consolidated statements of operations and comprehensive income. The Company's fair value measurements follow the appropriate rules as well as the fair value hierarchy that prioritizes the information used to develop the measurements. It applies whenever other guidance requires (or permits) assets or liabilities to be measured at fair value and gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A summary of the fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels is described below:
The Company's fair values of marketable securities are determined based on valuations provided by a third-party pricing service, as derived from such services' pricing models, and are considered either Level 1 or Level 2 measurements, depending on the nature of the investment. The Company has no marketable securities in which the fair value is determined based on Level 3 measurements. The level of management judgment required in evaluating fair value for Level 1 investments is minimal. Similarly, there is little subjectivity or judgment required for Level 2 investments valued using valuation models that are standard across the industry and whose parameter inputs are quoted in active markets. Inputs to the models may include, but are not limited to, reported trades, executable bid and ask prices, broker/dealer quotations, prices or yields of securities with similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic events. Based on the information available, the Company believes that the valuations provided by the third-party pricing service, as derived from such services' pricing models, are representative of prices that would be received to sell the assets at the measurement date (exit prices). There were no transfers of assets between levels within the fair value hierarchy. The following table summarizes the fair value of our marketable securities, by level within the fair value hierarchy, as of each period end:
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Earnings (Loss) Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) PER SHARE The following table reconciles the numerator and denominator used to calculate diluted earnings per share for the three and nine months ended September 30, 2016 and 2015:
As of September 30, 2016 and 2015, restricted stock awards and options to purchase 21,950 and 54,798 shares of common stock, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effect would be antidilutive. |
Revenues |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUES | REVENUES Product Revenues The Company’s net revenues consisted of the following for the three and nine months ended September 30, 2016 and 2015:
Cumberland supplies Perrigo Company ("Perrigo") with an Authorized Generic version of the Company's Acetadote product. The Company's revenue generated by sales of its Authorized Generic distributed by Perrigo is included in the Acetadote product revenue presented above. The Company's share of Authorized Generic revenue was $1.2 million and $1.1 million for the third quarter of 2016 and 2015 and $3.5 million and $3.3 million on a year-to-date basis as of September 30, 2016 and 2015, respectively. Other Revenues The Company has entered into agreements, beginning in 2012, with international partners for commercialization of the Company's products. The international agreements provide that each of the partners are responsible for seeking regulatory approvals for the products, and following approvals, each partner will handle ongoing distribution and sales in the respective international territories. The Company maintains responsibility for the intellectual property and product formulations. Under the international agreements, the Company is entitled to receive non-refundable, up-front payments at the time the agreements are entered into and milestone payments upon the partners' achievement of defined regulatory approvals and sales milestones. The Company recognizes revenue for these substantive milestones using the milestone method. The Company is also entitled to receive royalties on future sales of the products under the agreements. During the nine months ended September 30, 2016, the Company recognized $200,000 in milestone payments associated with these international agreements. |
Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES | INVENTORIES The Company works closely with third parties to manufacture and package finished goods for sale. Based on the relationship with the manufacturer or packager, the Company will either take title to the finished goods at the time of shipment or at the time of arrival from the manufacturer. The Company then warehouses such goods until distribution and sale. Inventories are stated at the lower of cost or market with cost determined using the first-in, first-out method. The Company continually evaluates inventory for potential losses due to excess, obsolete or slow-moving inventory by comparing sales history and sales projections to the inventory on hand. When evidence indicates that the carrying value may not be recoverable, a charge is taken to reduce the inventory to its current net realizable value. At September 30, 2016 and December 31, 2015, the Company has recognized and maintained cumulative charges for potential obsolescence and discontinuance losses, primarily for Caldolor, of approximately $0.7 million and $2.7 million, respectively. During the third quarter of 2016, the Company began to destroy obsolete Caldolor inventory. This reduced both the inventory and the cumulative charges for obsolete inventory. Caldolor inventory on hand at September 30, 2016 and December 31, 2015 had varying original expiration dates ranging from the second quarter of 2014 and extending through January 2016. During 2013 and again in 2014, the Company provided stability data to the Food and Drug Administration ("FDA") supporting the extension of the Caldolor product expiration dates by an additional year. The FDA notified the Company that it had approved both requests to extend the original shelf life of the Caldolor 800mg vials from five to six years in January 2014 and from six to seven years in March 2015. The current Caldolor inventory at September 30, 2016 has FDA extended expiration dates through early 2017. The Company began to receive new Caldolor 800 mg supplies, with seven years of shelf life. During the third quarter of 2016 the Company began to sell the new inventory in the United States. In connection with the acquisition of certain product rights related to the Kristalose brand, the Company is responsible for the purchase of the active pharmaceutical ingredient ("API") for Kristalose and maintains the inventory at the third-party manufacturer. As the API is consumed in production, the value of the API is transferred from raw materials to finished goods. API for the Company's Vaprisol brand is also included in the raw materials inventory total at September 30, 2016 and December 31, 2015. As of September 30, 2016 and December 31, 2015, net inventory was comprised of the following:
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Shareholders' Equity and Debt |
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Sep. 30, 2016 | |
Equity and Debt [Abstract] | |
SHAREHOLDERS' EQUITY AND DEBT | SHAREHOLDERS’ EQUITY AND DEBT Share Repurchases On May 13, 2010, the Company announced a share repurchase program to purchase up to $10.0 million of its common stock pursuant to Rule 10b-18 of the Securities Act. In January 2011, April 2012, January 2013, January 2015 and January 2016, the Company's Board of Directors replaced the prior authorizations with new $10.0 million authorizations for repurchases of the Company's outstanding common stock. During the nine months ended September 30, 2016 and the nine months ended September 30, 2015, the Company repurchased 407,457 shares and 712,134 shares of common stock for approximately $1.9 million and $4.7 million, respectively. Restricted Share Grants During the nine months ended September 30, 2016, the Company issued approximately 226,425 shares of restricted stock to employees and directors. Restricted stock issued to employees generally cliff-vests on the fourth anniversary of the date of grant. Restricted stock issued to directors vests on the one-year anniversary of the date of grant. Stock compensation expense is presented as a component of general and administrative expense in the condensed consolidated statements of income and comprehensive income. Debt Agreement On June 26, 2014, Cumberland entered into a Revolving Credit Loan Agreement (“Loan Agreement”) with SunTrust Bank, which replaced the agreement with a previous lender. The Company had $3.7 million and $1.7 million in borrowings under the Loan Agreement at September 30, 2016 and 2015. On July 29, 2016, Cumberland amended the agreement to extend the original three-year term by an additional year. The agreement provides for an aggregate principal amount up to $20 million. The initial revolving line of credit is up to $12 million, with the ability to increase the borrowing amount up to $20 million, upon the satisfaction of certain conditions. The interest rate on the Loan Agreement is based on LIBOR plus an interest rate spread. There is no LIBOR minimum and the LIBOR pricing provides for an interest rate spread of 1.0% to 2.85% (representing an interest rate of 1.5% at September 30, 2016). In addition, a fee of 0.25% per year is charged on the unused line of credit. Interest and the unused line fee are payable quarterly. Borrowings under the line of credit are collateralized by substantially all of the Company’s assets. Under the Loan Agreement, Cumberland is subject to certain financial covenants, including, but not limited to, maintaining a Funded Debt Ratio, as such term is defined in the Loan Agreement and determined on a quarterly basis. On July 29, 2016, Cumberland obtained a compliance waiver for a financial covenant as of June 30, 2016. On October 28, 2016, the Company obtained a compliance waiver and amended the agreement to modify a financial covenant, replacing the EBIT to interest ratio covenant with a minimum liquidity requirement. As a result of the covenant waiver and modification in the October 28, 2016 amendment, the Company achieved compliance with all covenants as of September 30, 2016. |
Income Taxes |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES At September 30, 2016, the Company has unrecognized net operating loss carryforwards generated from the exercise of nonqualified options of approximately $44.0 million. These benefits occurred as a result of the actual tax benefit realized upon an employee's exercise exceeding the cumulative book compensation charge associated with the awards and will be recognized in the year in which they are able to reduce current income taxes payable. Accordingly, deferred tax assets are not recognized for these net operating loss carryforwards or credit carryforwards resulting from the exercise of nonqualified options. The Company's utilization of these net operating loss carryforwards and a net operating loss in 2013 resulted in minimal income taxes paid in each of the years 2009 through 2015. The Company expects to achieve taxable income through its operations and pay minimal income taxes in 2016 through utilization of these net operating loss carryforwards. |
Collaborative Agreements |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
COLLABORATIVE AGREEMENTS | COLLABORATIVE AGREEMENTS Cumberland is a party to several collaborative arrangements with certain research institutions to identify and pursue promising pre-clinical pharmaceutical product candidates. The Company has determined that these collaborative agreements do not meet the criteria for accounting under Accounting Standards Codification 808, Collaborative Agreements. The agreements do not specifically designate each party’s rights and obligations to each other under the collaborative arrangements. Except for patent defense costs, expenses incurred by one party are not required to be reimbursed by the other party. The funding for these programs is generally provided through private sector investments or Federal Small Business Administration (SBIR/STTR) grant programs. Expenses incurred under these collaborative agreements are included in research and development expenses and funding received from private sector investments and grants are recorded as net revenues in the condensed consolidated statements of operations and comprehensive income. |
Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Legal Matters The Company developed a new formulation of Acetadote (acetylcysteine) Injection as part of the Phase IV commitment in response to a request by the FDA regarding the role of EDTA in the products formulation. The Company has received several patents from the United States Patent and Trademark Office ("USPTO") since 2012 as well as notices that its Acetadote patents are being challenged on the basis of invalidity or non-infringement by others. During the third quarter of 2015, an arbitrator issued a final award in the Company’s favor, enjoining Mylan Pharma Group Limited and Mylan Teoranta, together with all their affiliates (“Mylan”), from selling, delivering, or giving away any acetylcysteine injectable drug product to another entity or person until April 30, 2018. The arbitration request was filed with the American Arbitration Association for claims against Mylan in connection with agreements which require that Mylan manufacture and supply acetylcysteine drug product, including Acetadote, for us exclusively until April 2016. As the prevailing party, the Company received reimbursement of its attorney’s fees and related costs associated with the arbitration. During the third quarter of 2015, the United States District Court for the Northern District of Illinois, Eastern Division ruled in the Company’s favor in its lawsuit against Mylan for infringement of its U.S. Patent number 8,399,445 (the “445 Acetadote Patent”). The opinion upheld the Company’s 445 Acetadote Patent and expressly rejected Mylan's validity challenge. The court ruled that Mylan is liable to Cumberland for infringement of the 445 Acetadote patent in light of Mylan's Abbreviated New Drug Application in which Mylan sought to market a generic version of Acetadote. On October 30, 2015, Mylan filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit. The Company is continuing to seek additional claims to protect its intellectual property associated with Acetadote and has additional patent applications pending. The Company continues to consider its legal options and intends to continue to defend and protect its Acetadote product and related intellectual property rights. Additional information on these matters is provided in the Company's Acetadote patent defense legal proceedings contained in Part 1, Item 1, Business -Trademarks and Patents, of the Company's Form 10-K for the year ended December 31, 2015, which is incorporated by reference herein. |
Products Added During 2016 |
9 Months Ended |
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Sep. 30, 2016 | |
Business Combinations [Abstract] | |
PRODUCTS ADDED DURING 2016 | PRODUCT ADDED DURING 2016 Ethyol On May 10, 2016, the Company announced an agreement with Clinigen Group Plc ("Clinigen") in which Cumberland acquired the exclusive rights to commercialize Ethyol® (amifostine) in the United States. Ethyol is a FDA approved cytoprotective drug indicated as an adjuvant therapy to reduce the incidence of xerostomia (dry mouth) as a side-effect in patients undergoing post-operative radiation treatment for head and neck cancer. It also reduces the cumulative renal toxicity associated with the repeated administration of cisplatin in patients with advanced ovarian cancer. Under the terms of the agreement, Cumberland is responsible for all marketing, promotion, and distribution of the product in the United States. There are no upfront payments required under the agreement. Cumberland acquires the intangible assets associated with the exclusive commercial rights in the United States through royalty payments to Clinigen based on tiered levels of net sales. The Company began generating revenue from the sale of Ethyol during the third quarter of 2016. |
Organization and Basis of Presentation (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Recent Accounting Guidance | Recent Accounting Guidance Recently Issued Accounting Guidance Not Yet Adopted In August 2016, the Financial Accounting Standards Board ("FASB") issued amended guidance in the form of a FASB Accounting Standards Update ("ASU"), "Classification of Certain Cash Receipts and Cash Payments". The core principle of the new guidance is to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this update are effective for fiscal years beginning after December 15, 2017. The accounting guidance should be applied retrospectively and early adoption is permitted. The Company is evaluating the potential impact of this adoption on our condensed consolidated financial statements and disclosures. In May 2014, the FASB issued amended guidance in the form of a FASB ASU, "Revenue from Contracts with Customers". The core principle of the new guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The new guidance defines a five-step process to achieve this core principle and, in doing so, additional judgments and estimates may be required within the revenue recognition process. The new standard will replace most of the existing revenue recognition standards in U.S. GAAP when it becomes effective. In July 2015, the FASB issued a one-year deferral of the adoption date, which extended the effective date for the Company to January 1, 2018. Adoption prior to January 1, 2017, the original effective date, is not permitted. The new standard can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application. The Company is assessing the potential impact of the new standard on financial reporting and has not yet selected a transition method by which it will adopt the standard. In July 2015, the FASB issued amended guidance in the form of a FASB ASU, “Inventory: Simplifying the Measurement of Inventory.” The amended guidance requires entities to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The requirement would replace the current lower of cost or market evaluation. Accounting guidance is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail method. The amendments in this update are effective for fiscal years beginning after December 15, 2016. The accounting guidance should be applied prospectively and early adoption is permitted. The Company is evaluating the potential impact of this adoption on our condensed consolidated financial statements and disclosures. In November 2015, the FASB amended guidance in the form of a FASB ASU, "Balance Sheet Classification of Deferred Taxes", which requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The FASB determined that this simplification could reduce cost and complexity without decreasing the usefulness of information provided to financial statement users. The amendments in this update are effective for fiscal years beginning after December 15, 2016. The accounting guidance may be applied prospectively or retrospectively and early adoption is permitted. The Company does not anticipate adoption of this balance sheet classification ASU to have a material effect on its consolidated financial statements and disclosures. In February 2016, the FASB issued guidance in the form of a FASB ASU, "Leases". The new standard establishes a right-of-use (ROU) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain optional practical expedients available. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact of its pending adoption of the new standard on Cumberland’s consolidated financial statements and disclosures. In March 2016, the FASB released in the form of a FASB ASU, "Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting". The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, earnings per share ("EPS"), and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company is currently evaluating the impact of adoption on the consolidated financial statements including the unrecognized net operating loss carryforwards generated from the exercise of nonqualified options of approximately $44.0 million and the future vesting of shares of restricted stock issued to employees and directors. |
Use of Estimates | Use of Estimates In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management must make decisions that impact the reported amounts and the related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, management applies judgments based on its understanding and analysis of the relevant circumstances, historical experience, and other available information. Actual results could differ from those estimates under different assumptions and conditions. The Company's most significant estimates include: (1) its allowances for chargebacks and accruals for rebates and product returns, (2) the allowances for obsolescent or unmarketable inventory and (3) the projection of future taxable income for the realization of deferred tax assets. |
Operating Segments | Operating Segments The Company has one operating segment which is specialty pharmaceutical products. Management has chosen to organize the Company based on the type of products sold. Operating segments are identified as components of an enterprise about which separate discrete financial information is evaluated by the chief operating decision maker, or decision-making group, in making decisions regarding resource allocation and assessing performance. The Company, which uses consolidated financial information in determining how to allocate resources and assess performance, evaluated that our specialty pharmaceutical products compete in similar economic markets and similar circumstances. Substantially all of the Company’s assets are located in the United States and total revenues are primarily attributable to U.S. customers. |
Marketable Securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of marketable securities, by type | The following table summarizes the fair value of our marketable securities, by level within the fair value hierarchy, as of each period end:
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Earnings (Loss) Per Share (Tables) |
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Reconciliation of numerator and denominator | The following table reconciles the numerator and denominator used to calculate diluted earnings per share for the three and nine months ended September 30, 2016 and 2015:
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Revenues (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of net revenue | The Company’s net revenues consisted of the following for the three and nine months ended September 30, 2016 and 2015:
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Inventories (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory | As of September 30, 2016 and December 31, 2015, net inventory was comprised of the following:
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Organization and Basis of Presentation Organization (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
Segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Operating loss carryforwards | $ | $ 44.0 |
Number of operating segments | Segment | 1 |
Earnings (Loss) Per Share (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Numerator: | ||||
Net income attributable to common shareholders | $ 106,166 | $ 126,613 | $ (194,989) | $ 580,292 |
Denominator: | ||||
Weighted-average shares outstanding – basic (in shares) | 16,217,442 | 16,604,682 | 16,268,579 | 16,811,360 |
Dilutive effect of other securities (in shares) | 287,126 | 391,694 | 0 | 382,494 |
Weighted-average shares outstanding – diluted (in shares) | 16,504,568 | 16,996,376 | 16,268,579 | 17,193,854 |
Earnings (Loss) Per Share (Details Textual) - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Earnings Per Share [Abstract] | ||
Common stock available for purchase through restricted stock awards and options (in shares) | 21,950 | 54,798 |
Revenues (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Products: | ||||
Net revenues | $ 8,791,753 | $ 7,885,048 | $ 23,944,120 | $ 25,481,563 |
Acetadote | ||||
Products: | ||||
Net revenues | 1,807,495 | 2,065,081 | 5,532,893 | 6,386,767 |
Omeclamox-Pak | ||||
Products: | ||||
Net revenues | 752,808 | 691,120 | 2,154,596 | 2,393,495 |
Kristalose | ||||
Products: | ||||
Net revenues | 3,671,397 | 3,939,294 | 10,915,276 | 12,160,037 |
Vaprisol | ||||
Products: | ||||
Net revenues | 496,279 | 670,621 | 1,286,126 | 2,199,645 |
Caldolor | ||||
Products: | ||||
Net revenues | 1,357,289 | 352,343 | 3,060,441 | 2,007,076 |
Ethyol | ||||
Products: | ||||
Net revenues | 519,400 | 0 | 519,400 | 0 |
Other | ||||
Products: | ||||
Net revenues | $ 187,085 | $ 166,589 | $ 475,388 | $ 334,543 |
Revenues (Details Textual) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Revenues (Textual) [Abstract] | ||||
Milestone revenue recognized | $ 200,000 | |||
Acetadote, Generic | ||||
Revenues (Textual) [Abstract] | ||||
Share of product revenue from generic sales | $ 1,200,000 | $ 1,100,000 | $ 3,500,000 | $ 3,300,000 |
Inventories (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
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Inventory | ||
Raw materials | $ 2,618,737 | $ 2,576,621 |
Consigned inventory | 336,504 | 235,636 |
Finished goods | 2,027,986 | 1,457,886 |
Total | $ 4,983,227 | $ 4,270,143 |
Inventories (Details Textual) - USD ($) $ in Millions |
1 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2015 |
Jan. 31, 2014 |
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Inventory Disclosure [Abstract] | ||||
Reserve for potential obsolescence of products | $ 0.7 | $ 2.7 | ||
Shelf life | 6 years | 5 years | ||
Extended shelf life | 7 years | 6 years |
Shareholders' Equity and Debt (Shareholders' Equity) (Details) - USD ($) |
9 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Jan. 31, 2016 |
Jan. 31, 2015 |
Jan. 31, 2013 |
Apr. 30, 2012 |
Jan. 31, 2011 |
May 13, 2010 |
|
Shareholders' Equity (Textual) [Abstract] | ||||||||
Repurchase outstanding common shares | $ 10,000,000.0 | $ 10,000,000.0 | $ 10,000,000.0 | $ 10,000,000.0 | $ 10,000,000.0 | $ 10,000,000.0 | ||
Repurchase of shares, value | $ 1,879,395 | |||||||
Restricted Stock | ||||||||
Shareholders' Equity (Textual) [Abstract] | ||||||||
Restricted stock granted in period, shares | 226,425 | |||||||
Director | Restricted Stock | ||||||||
Shareholders' Equity (Textual) [Abstract] | ||||||||
Restricted stock awards, vesting period | 1 year | |||||||
Common stock | ||||||||
Shareholders' Equity (Textual) [Abstract] | ||||||||
Repurchase of shares (in shares) | 407,457 | 712,134 | ||||||
Repurchase of shares, value | $ 1,879,395 | $ 4,700,000 |
Shareholders' Equity and Debt (Debt) (Details) - USD ($) |
Jul. 29, 2016 |
Sep. 30, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
---|---|---|---|---|
Line of Credit Facility [Line Items] | ||||
Revolving line of credit | $ 3,700,000 | $ 1,700,000 | $ 1,700,000 | |
SunTrust Bank | Line of Credit | Revolving Credit Facility | ||||
Line of Credit Facility [Line Items] | ||||
Expiration period | 3 years | |||
Line of credit, maximum borrowing capacity upon satisfaction of certain conditions | $ 20,000,000 | |||
Line of credit, maximum borrowing capacity | $ 12,000,000 | |||
Interest rate spread, minimum | 1.00% | |||
Interest rate spread, maximum | 2.85% | |||
Effective interest rate | 1.50% | |||
Line of credit, unused capacity, commitment fee percentage | 0.25% |
Income Taxes (Details Textual) $ in Millions |
Sep. 30, 2016
USD ($)
|
---|---|
Income Tax Disclosure [Abstract] | |
Operating loss carryforwards | $ 44.0 |
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