# Cumberland Pharmaceuticals Inc: Form 10-Q for the period ended Sep 30, 2015

- Company: [Cumberland Pharmaceuticals Inc](/companies/cpix.md) (CIK 1087294)
- Form: 10-Q
- Filed: 2015-11-06
- Accepted by EDGAR: Nov 6, 2015, 17:12 ET
- Period: 2015-09-30
- Accession: 0001628280-15-008469
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1087294/000162828015008469/q3201510q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1087294/000162828015008469/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2015-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2015-07-01 to 2015-09-30 | $7.9m | us-gaap:SalesRevenueNet |
| Revenue | 9 months, 2015-01-01 to 2015-09-30 | $25.5m | us-gaap:SalesRevenueNet |
| Cost of revenue | 3 months, 2015-07-01 to 2015-09-30 | $980.2k | us-gaap:CostOfGoodsSold |
| Cost of revenue | 9 months, 2015-01-01 to 2015-09-30 | $3.4m | us-gaap:CostOfGoodsSold |
| Research and development | 3 months, 2015-07-01 to 2015-09-30 | $757.4k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2015-01-01 to 2015-09-30 | $3.4m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2015-07-01 to 2015-09-30 | $270.9k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2015-01-01 to 2015-09-30 | $948.9k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2015-07-01 to 2015-09-30 | $19.8k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2015-01-01 to 2015-09-30 | $53.9k | us-gaap:InterestExpense |
| Income tax | 3 months, 2015-07-01 to 2015-09-30 | $193.4k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2015-01-01 to 2015-09-30 | $530.9k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2015-07-01 to 2015-09-30 | $126.6k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2015-01-01 to 2015-09-30 | $580.3k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2015-07-01 to 2015-09-30 | $0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2015-01-01 to 2015-09-30 | $0.03 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2015-07-01 to 2015-09-30 | $0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2015-01-01 to 2015-09-30 | $0.03 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2015-07-01 to 2015-09-30 | 16,996,376 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2015-01-01 to 2015-09-30 | 17,193,854 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2015-01-01 to 2015-09-30 | $4.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2015-01-01 to 2015-09-30 | $96.8k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2015-01-01 to 2015-09-30 | $4.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2015-09-30 | $38.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2015-09-30 | $67.7m | us-gaap:AssetsCurrent |
| Total assets | at 2015-09-30 | $92.1m | us-gaap:Assets |
| Current liabilities | at 2015-09-30 | $11.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2015-09-30 | $14.5m | us-gaap:Liabilities |
| Shareholders' equity | at 2015-09-30 | $77.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 45,585 characters.

The following discussion contains certain forward-looking statements which reflect management’s current views of future events and operations. These statements involve certain risks and uncertainties, and actual results may differ materially from them. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We caution you that our actual results may differ significantly from the results we discuss in these forward looking statements. Some important factors which may cause results to differ from expectations include: availability of additional debt and equity capital required to finance the business model; market conditions at the time additional capital is required; our ability to continue to acquire branded products; product sales; and management of our growth and integration of our acquisitions. Other important factors that may cause actual results to differ materially from forward-looking statements are discussed in “Risk Factors” on pages 21 through 36, and “Special Note Regarding Forward-Looking Statements” on pages 36 and 37 of our Annual Report on Form 10-K for the year ended December 31, 2014. We do not undertake to publicly update or revise any of our forward-looking statements, even in the event that experience or future changes indicate that the anticipated results will not be realized. The following presentation of management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Form 10-Q.

### OVERVIEW

### Our Business

Cumberland Pharmaceuticals Inc. (“Cumberland,” the “Company,” or as used in the context of “we,” “us,” or “our”), is a specialty pharmaceutical company focused on the acquisition, development and commercialization of branded prescription products. Our primary target markets are hospital acute care and gastroenterology. These medical specialties are characterized by relatively concentrated prescriber bases that we believe 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. We market and sell our approved products through our hospital and gastroenterology sales forces in the United States and are establishing a network of international partners to bring our products to patients in their countries.

Our product portfolio includes:

- **Acetadote® (***acetylcysteine*) Injection, for the treatment of acetaminophen poisoning;
- **Caldolor® (***ibuprofen*) Injection, for the treatment of pain and fever;
- **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;
- **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; and
- **Boxaban™** *(ifetroban)* oral capsules, a Phase II candidate for the treatment of patients with Aspirin-Exacerbated Respiratory Disease.

We have both product development and commercial capabilities, and believe we can leverage our existing infrastructure to support our expected growth. Our management team consists of pharmaceutical industry veterans experienced in business development, product development, regulatory, manufacturing, sales, marketing and finance. Our business development team identifies, evaluates and negotiates product acquisition, in-licensing and out-licensing opportunities. Our product development team develops proprietary product formulations, manages our clinical trials, prepares all regulatory submissions and manages our medical call center. Our quality and manufacturing professionals oversee the manufacture and release of our products. Our marketing and sales professionals are responsible for our commercial activities, and we work closely with our distribution partners to ensure availability and delivery of our products.

### Growth Strategy

Our growth strategy involves maximizing the potential of our existing brands while continuing to build a portfolio of differentiated products. We currently market five products approved for sale in the United States. Through our international partners, we are working to bring our products to patients in countries outside the U.S. We also look for opportunities to expand our products into additional patient populations through clinical trials, new indications, and select investigator-initiated studies. We actively pursue opportunities to acquire additional marketed products as well as late-stage development product candidates in our target medical specialties. Further, we are supplementing these activities with the pipeline drug development activities at Cumberland Emerging Technologies ("CET"), our majority-owned subsidiary. CET partners with universities and other research organizations to identify and develop promising, early-stage product candidates, which Cumberland has the opportunity to further develop and commercialize. Specifically, we expect to grow by executing the following plans:

- **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. In addition, we may explore further clinical work that could be used to support our sales and marketing activities and maximize their efforts to further penetrate existing markets. 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. The addition of Omeclamox-Pak and Vaprisol reflects our strategy and commitment to selectively expanding our product portfolio as both brands met our acquisition criteria. We will also continue to explore opportunities for label expansion to bring our products to new patient populations.
- **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.
- **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.

We were incorporated in 1999 and have been headquartered in Nashville, Tennessee since inception. During 2009, we completed an initial public offering of our common stock and listing on the NASDAQ exchange. Our website address is *www.cumberlandpharma.com*. We make available through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all other press releases, filings and amendments to those reports as soon as reasonably practicable after their filing with the SEC. These filings are also available to the public at *www.sec.gov.*

### Recent Developments and Highlights

### Clinigen Strategic Alliance

In September 2015, we announced our strategic alliance with Clinigen Group plc (AIM: CLIN) ("Clinigen"), the global pharmaceutical and services company. Clinigen is a specialty pharmaceutical and services company focused on delivering the right drug to the right patient at the right time by providing medicines to patients with high unmet needs through clinical trials, licensed and ethically unlicensed supply.

The alliance will combine the respective strengths, expertise and geographical footprints of Cumberland and Clinigen with respect to potential future products. Under the agreement, we will have the opportunity to support Clinigen products through distribution, marketing and promotion within the United States. Clinigen will be responsible for the marketing, promotion, distribution and sale of our pharmaceutical products in select markets outside of the United States, allowing us to use Clinigen’s international reach to enter new markets for our products.

### Cumberland Emerging Technologies

#### Cumberland Emerging Technologies Strategic Alliance with Piramal

In October 2015, we executed a Strategic Alliance Agreement with Piramal Enterprises Limited ("Piramal") for the manufacture and supply of Active Pharmaceutical Ingredients ("API"). Under the terms of this agreement, we will collaborate with Pirarmal on the manufacture and supply of API for New Chemical Entities ("NCE"). Piramal will provide both development and commercial supplies of API for select product candidates. Piramal is a diversified conglomerate with operations in over thirty countries and five API manufacturing plants.

### Caldolor®

#### Caldolor Patents Issued

We have an exclusive, worldwide license to clinical data for intravenous ibuprofen from Vanderbilt University, in consideration for royalty obligations related to Caldolor. During the third quarter of 2015, we obtained three additional patents for Caldolor. On July 7, 2015, the United States Patent and Trademark Office ("USPTO") issued U.S. Patent number’s 9,072,710 (the “710 Caldolor Patent”) and 9,072,661 (the “661 Caldolor Patent”) which are assigned to us. The claims of the 710 Caldolor Patent and the 661 Caldolor Patent include composition and methods of treating pain, inflammation and fever using intravenous ibuprofen. These Caldolor Patents are scheduled to expire in March 2032.

On August 25, 2015, the USPTO issued U.S. Patent number 9,114,068 (the “068 Caldolor Patent”) which is assigned to us. The claims of the 068 Caldolor Patent include methods of treating pain and inflammation using intravenous ibuprofen. Following its issuance, the 068 Caldolor Patent was listed in the FDA Orange Book and is scheduled to expire in September 2029.

#### Caldolor Competition

Information and discussion of Caldolor's competing products are included in *Part 1, Item 1, Business - Competition*, of our Form 10-K for the year ended December 31, 2014. As noted, Caldolor is marketed for the treatment of pain and fever, primarily in a hospital setting. A variety of other products address the acute pain market including Dyloject, an injectable diclofenac product approved by the FDA during 2014. We anticipate this new competing product will be launched by its manufacturer during 2015.

#### Caldolor Pediatric Information

Cumberland has completed a series of Phase IV studies for Caldolor in more than 1,000 patients in over 30 leading medical centers across the U.S. These studies included evaluation of the product in both children and adults. Following the completion of these Phase IV studies, we submitted a supplemental new drug application (sNDA) to the FDA for the product during the first quarter of 2015. This submission requested changes to the package insert to include pediatric data from Cumberland's post-marketing pediatric development program and we expect a response to this request during the fourth quarter of 2015.

#### Caldolor Label Safety Update

In July 2015, the FDA decided to strengthen the existing cardiovascular warning for nonsteroidal anti-inflammatory drugs (NSAIDs). This is a class label change for all NSAIDs including over-the-counter and prescription products. It was previously thought that all NSAIDs may have similar cardiovascular risks. While newer information makes it less clear that the cardiovascular risks are similar for all NSAIDs, this information is not sufficient for the FDA to determine that the risk of any particular NSAID is definitely higher or lower than that of any other particular NSAID. While we have not seen a cardiovascular side effect in our extensive Caldolor safety database, we will update our Caldolor label for this requested information once it becomes finalized by the FDA.

### Hepatoren®

#### Top Line Study Results

We are developing Hepatoren as a potential treatment for Hepatorenal Syndrome ("HRS") - a life threatening condition, with a high mortality rate and no approved pharmaceutical therapy in this country. We initiated a sixty four patient Phase II study to evaluate the safety, efficacy and pharmacokinetics of Hepatoren for this unmet medical need.

The study was designed to evaluate escalating dose levels of Hepatoren in HRS patients. Progression to higher dose levels is reviewed and approved by an independent safety committee. The study was stratified into Type I or Type II patients with HRS based upon the progression of their disease.

We completed the enrollment of Type II patients at the end of 2014. Top line results from these patients indicate that Hepatoren was overall well tolerated with no safety concerns noted. Furthermore, the patients receiving the higher dose levels of Hepatoren were more likely to experience increases in urine output, a signal of improved kidney function, compared to patients who received placebo. Based on these results, we will proceed with clinical development of this product candidate.

We subsequently completed enrollment of the Type I patients during the third quarter of 2015 and the analysis of those patient results is underway.

### Boxabantm

#### New Phase II Program

During 2015, Cumberland announced an expansion of its pipeline with another Phase II development program. The Company is developing Boxaban for the treatment of Aspirin-Exacerbated Respiratory Disease ("AERD"). AERD is a respiratory disease involving chronic asthma and nasal polyposis that is worsened by aspirin. It is characterized by sharp increases in inflammatory mediators and platelet activity within the respiratory system. Ifetroban, an active thromboxane receptor antagonist, may interfere with these pathways to modify the disease and provide symptomatic relief.

Cumberland completed manufacturing of Boxaban oral capsules and initiated a Phase II clinical study to evaluate Boxaban in patients suffering AERD. The study was designed to gather initial safety and tolerability data on ifetroban in AERD patients. It was a multicenter study of sixteen patients with enrollment at several U.S. medical centers including the Scripps Clinic. The enrollment in this study was recently completed and top line results indicate that no adverse events were experienced by patients receiving Boxaban when compared to those receiving placebo. Further analysis of the full data set obtained from the study is underway.

#### Acetadote Litigation and Arbitration updates

Information and discussion of Acetadote's competing products are included in *Part 1, Item 1, Business - Competition*, of our Form 10-K for the year ended December 31, 2014. As noted, Acetadote is our injectable formulation of N-Acetylcysteine ("NAC") for the treatment of acetaminophen overdose. NAC is accepted worldwide as the standard of care for acetaminophen overdose. Our competitors in the acetaminophen overdose market are those companies selling orally administered NAC as well as injectable products. Our branded Acetadote and Authorized Generic Acetadote products contain the new formulation that does not include ethylene diamine tetra acetic acid ("EDTA").

As included in *Part 2, Item 1, Legal Proceedings* in this Form 10-Q for the quarter ended September 30, 2015, on September 14, 2015, the arbitrator issued a final award in our favor, enjoining Mylan Pharma Group Limited and Mylan Teoranta, together with all their affiliates, from selling, delivering, or giving away any acetylcysteine injectable drug product to another entity or person until April 30, 2018. The award notes that as the prevailing party, we are entitled to reimbursement of our attorney’s fees and related costs associated with the arbitration.

As included in *Part 2, Item 1a, Risk Factors,* in this Form 10-Q for the quarter ended September 30, 2015, on September 30, 2015, the United States District Court for the Northern District of Illinois, Eastern Division ruled in our favor in our lawsuit against Mylan for infringement of our U.S. Patent number 8,399,445 (the “445 Acetadote Patent”). The opinion upheld our 445 Acetadote Patent and expressly rejected Mylan's validity challenge. The court ruled that Mylan is liable to us 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.

#### Acetadote Patents

We 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. Since 2012, the USPTO has issued the following patents to us associated with Acetadote:

| 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 |

We continue to seek additional claims to protect our intellectual property associated with Acetadote and have additional patent applications relating to Acetadote which are pending with the USPTO. We intend to defend and protect our Acetadote product and related intellectual property rights. Additional information and discussion regarding our Acetadote patents and defense is contained in *Part 1, Item 1, Business -Trademarks and Patents*, of our Form 10-K for the year ended December 31, 2014, which is incorporated by reference herein.

### Corporate Update

During the third quarter of 2015, we extended our lease agreement on the approximate 25,550 square feet of office space in Nashville, Tennessee for our corporate headquarters. The extended lease is now set to expire in October 2022 and we believe these facilities are adequate to meet our current and expected needs for office space.

On October 2, 2015, we announced that Rick S. Greene, who had been serving as the Company’s Vice President and Chief Financial Officer, transitioned out of that role effective October 14, 2015, as he pursues interests outside of the Company. A.J. Kazimi, Chief Executive Officer of the Company, serves as the Company’s Principal Financial Officer in addition to his duties as Principal Executive Officer.

### CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

Please see a discussion of our critical accounting policies and significant judgments and estimates on pages 43 through 46 in “Management’s Discussion and Analysis” of our Annual Report on Form 10-K for the year ended December 31, 2014.

### Accounting Estimates and Judgments

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. We base our estimates on past experience and on other factors we deem reasonable given the circumstances. Past results help form the basis of our judgments about the carrying value of assets and liabilities that cannot be determined from other sources. Actual results could differ from these estimates. These estimates, judgments and assumptions are most critical with respect to our accounting for revenue recognition, fair value of marketable securities, inventories, provision for income taxes, share-based compensation, research and development expenses and intangible assets.

### RESULTS OF OPERATIONS

### Three months ended September 30, 2015 compared to the three months ended September 30, 2014

The following table presents the unaudited interim statements of operations for the three months ended September 30, 2015 and 2014:

|  | Three months ended September 30, 2015 | 2014 | Change |
| --- | ---: | ---: | ---: |
| Net revenues | $7,885,048 | $9,729,047 | $(1,843,999) |
| Costs and expenses: |  |  |  |
| Cost of products sold | 980,176 | 1,339,723 | (359,547) |
| Selling and marketing | 3,608,828 | 3,821,953 | (213,125) |
| Research and development | 757,442 | 934,783 | (177,341) |
| General and administrative | 1,794,279 | 2,158,057 | (363,778) |
| Amortization | 473,439 | 485,493 | (12,054) |
| Total costs and expenses | 7,614,164 | 8,740,009 | (1,125,845) |
| Operating income | 270,884 | 989,038 | (718,154) |
| Interest income | 64,072 | 108,005 | (43,933) |
| Interest expense | (19,815) | (26,877) | 7,062 |
| Income before income taxes | 315,141 | 1,070,166 | (755,025) |
| Income tax expense | (193,439) | (340,982) | 147,543 |
| Net income | $121,702 | $729,184 | $(607,482) |

*Net revenues.* Net revenues for the three months ended September 30, 2015 were approximately $7.9 million compared to $9.7 million for the three months ended September 30, 2014, representing a decrease of $1.8 million, or 19.0%.

The following table summarizes net revenues by product for the periods presented:

| Products: | Three months ended September 30, 2015 | 2014 | Change |
| --- | ---: | ---: | ---: |
| Acetadote | $2,065,081 | $3,242,014 | $(1,176,933) |
| Omeclamox-Pak | 691,120 | 996,974 | (305,854) |
| Kristalose | 3,939,294 | 3,967,885 | (28,591) |
| Vaprisol | 670,621 | 653,070 | 17,551 |
| Caldolor | 352,343 | 821,024 | (468,681) |
| Other | 166,589 | 48,080 | 118,509 |
| Total net revenues | $7,885,048 | $9,729,047 | $(1,843,999) |

The change in revenue from the prior year period was driven primarily by a $1.2 million reduction in Acetadote revenue and decreases in Caldolor revenue of $0.5 million and Omeclamox-Pak revenue of $0.3 million, while Vaprisol net revenue improved compared to the third quarter of 2014.

Our branded Acetadote net revenue accounted for $0.8 million of the decline in total Acetadote revenue. This decrease was primarily due to a reduction in sales volume during the three months ended September 30, 2015 as a result of generic competition. Total Acetadote net revenue for the third quarter of 2015 and 2014 included $1.1 million and $1.4 million in revenue, respectively, from sales of our Authorized Generic distributed by Perrigo. It is likely that there will be further reductions in our revenue generated by Acetadote and our Authorized Generic as a result of generic competition.

The Caldolor product revenue decrease of $0.5 million for the three months ended September 30, 2015 was a 57.1% decline compared to the same period last year. The revenue decline was primarily due to the resumption in the supply of competing products following shortages earlier in the year. During the first quarter of 2015, we experienced the highest quarterly net revenue for Caldolor since the product was launched, which has impacted this product's revenue and sales volume in the following two quarters. While we expect 2015 Caldolor annual product revenue to continue to grow compared to 2014, we anticipate quarterly fluctuations due to wholesaler and hospital buying patterns and other factors. During the third quarter of 2014 we also experienced higher than average net revenue for our Caldolor brand. Caldolor revenue in the third quarter of 2015 was also impacted by the lack of international sales while awaiting new supplies of the product. International Caldolor sales are expected to resume in the fourth quarter of 2015.

During the third quarter of 2015, Omeclamox-Pak revenue decreased $0.3 million compared to the same period last year. The decrease was the result of lower sales volume partially offset by improved pricing. The sales volume decrease was impacted by the lack of sales calls supporting the product by our co-promotion partner for this period.

Kristalose revenue remained relativley consistent during the third quarter of 2015 when compared to the prior year period. The product's net revenue was negativley impacted by reduced sales volume. It was positively impacted from improved pricing and improvements in product net revenue per unit as we incurred a lower level of net revenue deductions from managed care contracts.

Vaprisol's revenue increase over the prior year was attributable to improved pricing with relatively consistent sales volume.

*Cost of products sold*. Cost of products sold for the third quarter of 2015 decreased $0.4 million compared to the prior year. As a percentage of net revenues, cost of products sold experienced a decrease to 12.4% during the three months ended September 30, 2015 compared to 13.8% during the three months ended September 30, 2014. This decrease in costs of products sold as a percentage of revenue was attributable to a change in product mix during the quarter compared to the prior year.

*Selling and marketing*. Selling and marketing expense for the three months ended September 30, 2015 totaled approximately $3.6 million, which was a decrease of $0.2 million compared to the prior year's expense of $3.8 million. The decrease was the result of a $0.1 million reduction in Omeclamox product royalties and a decrease in sales force and promotional expenses. We continue to actively manage our selling and marketing efforts and expenses to efficiently support our five commercial brands.

*Research and development*. Research and development costs for the third quarter of 2015 were $0.8 million, compared to $0.9 million for the same period last year, representing a decrease of approximately 19.0%. We continued to fund clinical studies for both our Boxaban and Hepatoren product candidates during the third quarter of 2015. A portion of our research and development costs are variable based on the number of studies, sites and participants involved in our product development activities.

*General and administrative*. General and administrative expense decreased 16.9% to $1.8 million for the three months ended September 30, 2015 compared to $2.2 million for the prior year. The $0.4 million decrease was primarily driven by a decrease in compensation and benefit expense during the period.

*Amortization.* Amortization expense is the ratable use of our capitalized intangible assets including product and license rights, patents, trademarks and patent defense costs. Amortization for both the three months ended September 30, 2015 and the three months ended September 30, 2014 totaled approximately $0.5 million.

*Income tax expense*. Income tax expense for the three months ended September 30, 2015 totaled $0.2 million, compared to income tax expense of $0.3 million in the third quarter of 2014. The change was the result of the reduction in pretax income in the third quarter of 2015 compared to the same period last year. As a percentage of income before income taxes, income tax expense was 61.4% for the three months ended September 30, 2015 compared to 31.9% for the three months ended September 30, 2014. The income tax rate for the three months ended September 30, 2015 was primarily a result of the lower pretax income impacted by adjustments to our valuation allowance and increases in our state income tax expense, including changes from legislation. The income tax rate for the three months ended September 30, 2014 was positively impacted by a reduction in our state tax expense during 2014.

As of September 30, 2015, we have approximately $43.6 million of unrecognized net operating loss carryforwards resulting from the exercise of nonqualified stock options in 2009 that will be used to significantly offset future income tax obligations. These benefits will be recognized in the year in which they are able to reduce current income taxes payable.

### Nine months ended September 30, 2015 compared to the nine months ended September 30, 2014

The following table presents the unaudited interim statements of operations for the nine months ended September 30, 2015 and 2014:

|  | Nine months ended September 30, 2015 | 2014 | Change |
| --- | ---: | ---: | ---: |
| Net revenues | $25,481,563 | $27,572,459 | $(2,090,896) |
| Costs and expenses: |  |  |  |
| Cost of products sold | 3,379,018 | 3,692,256 | (313,238) |
| Selling and marketing | 10,645,229 | 11,365,966 | (720,737) |
| Research and development | 3,444,524 | 2,622,310 | 822,214 |
| General and administrative | 5,591,982 | 6,195,523 | (603,541) |
| Amortization | 1,471,879 | 1,083,706 | 388,173 |
| Total costs and expenses | 24,532,632 | 24,959,761 | (427,129) |
| Operating income | 948,931 | 2,612,698 | (1,663,767) |
| Interest income | 178,320 | 204,892 | (26,572) |
| Interest expense | (53,854) | (51,358) | (2,496) |
| Income before income taxes | 1,073,397 | 2,766,232 | (1,692,835) |
| Income tax expense | (530,885) | (1,052,330) | 521,445 |
| Net income | $542,512 | $1,713,902 | $(1,171,390) |

*Net revenues.* Net revenues for the nine months ended September 30, 2015 were approximately $25.5 million compared to $27.6 million for the nine months ended September 30, 2014, representing a decrease of $2.1 million, or 7.6%.

The following table summarizes net revenues by product for the periods presented:

| Products: | Nine months ended September 30, 2015 | 2014 | Change |
| --- | ---: | ---: | ---: |
| Acetadote | $6,386,767 | $9,026,919 | $(2,640,152) |
| Omeclamox-Pak | 2,393,495 | 3,481,264 | (1,087,769) |
| Kristalose | 12,160,037 | 10,903,255 | 1,256,782 |
| Vaprisol | 2,199,645 | 2,022,835 | 176,810 |
| Caldolor | 2,007,076 | 1,950,106 | 56,970 |
| Other | 334,543 | 188,080 | 146,463 |
| Total net revenues | $25,481,563 | $27,572,459 | $(2,090,896) |

Revenue increases in three of our five branded prescription products were offset by decreases in Omeclamox-Pak revenue of $1.1 million and Acetadote product revenue of $2.6 million. Our products with revenue gains were led by increases in Kristalose revenue of $1.3 million and Vaprisol revenue of $0.2 million.

Kristalose revenue increased by $1.3 million or 11.5% over the prior year period primarily due to new positioning for the product. We increased the price of Kristalose during the first quarter of 2014 to bring Kristalose more in line with the other marketed branded prescription products in its class. Concurrent with the price increase, we increased our patient focused initiatives to enhance patient affordability and increase demand. During the nine months ended September 30, 2015 we also experienced improvements in product net revenue per unit as we incurred a lower level of net revenue deductions from managed care contracts.

Vaprisol revenue increased 8.7% during the nine months ended September 30, 2015 compared to the prior year period primarily due to greater sales volume as a result of owning the product two additional months during 2015 compared to 2014. This increase was partly offset by lower sales volume during a portion of the nine months ended September 30, 2015 as we transitioned our marketable inventory from the Astellas labeled product to our Cumberland labeled product. Vaprisol's revenue increase over the prior year was also attributable to improved pricing.

The Caldolor product revenue also experienced a $0.1 million improvement which represents an increase of 2.9% during the nine months ended September 30, 2015 compared to the same period last year. Caldolor sales and net revenue were positively impacted by the efforts of our sales force, marketing initiatives and a temporary shortage of a competing product. While we expect 2015 Caldolor annual product revenue to continue to grow compared to 2014, we anticipate quarterly fluctuations due to wholesaler buying patterns and other factors.

Acetadote net revenue for the first nine months of 2015 included $3.3 million in revenue from sales of our Authorized Generic distributed by Perrigo, compared to $4.6 million for the same period last year. This decrease in sales of our Authorized Generic product accounted for almost half of the decline in total Acetadote revenue. The Authorized Generic sales were impacted by a temporary packaging delay and resulting shortage of marketable product that impacted revenue during a portion of the year-to-date period. Our branded Acetadote product net revenue decreased $1.4 million due to a reduction in sales volume as a result of generic competition, along with an increase in revenue deductions related to an increase in expired product during the first quarter of 2015. It is likely that there will be further reductions in our revenue generated by Acetadote and our Authorized Generic as a result of generic competition.

Omeclamox-Pak revenue declined 31.2% during the first nine months of 2015 compared to the prior year. The decrease was the result of lower sales volume partially offset by improved pricing. The sales volume decrease was impacted by the lack of sales calls supporting the product by our co-promotion partner for this period.

*Cost of products sold*. Cost of products sold for the first nine months of 2015 decreased 8.5% as compared to the same period in the prior year. As a percentage of net revenues, cost of products sold was consistent with the prior year at 13.3% and is in line with the decline in net revenues.

*Selling and marketing*. Selling and marketing expense for the nine months ended September 30, 2015 totaled approximately $10.6 million, which was a decrease of $0.7 million compared to the prior year's expense of $11.4 million. The decrease was the result of a $0.3 million reduction in Omeclamox product royalties as well as decreases in sales force salaries and related costs. These decreases were partially offset by an increase in non-personal promotional spending. We continue to actively manage our selling and marketing efforts and expenses under our strategy to efficiently support our five commercial brands.

*Research and development*. Research and development costs for the first nine months of 2015 were $3.4 million, compared to $2.6 million for the same period last year, representing an increase of approximately $0.8 million, or 31.4%. This change was the result of a $1.2 million required fee that accompanied the Caldolor sNDA filed with the FDA during the first quarter of 2015. This submission requested changes to the Caldolor package insert to include pediatric data from Cumberland's post-marketing pediatric development program. We continued to fund clinical studies for both our Boxaban and Hepatoren product candidates during 2015. A portion of our research and development costs are variable based on the number of studies, sites and participants involved in our product development activities.

*General and administrative*. General and administrative expense was $5.6 million for the nine months ended September 30, 2015, compared to $6.2 million during the same period last year. The $0.6 million decrease was primarily driven by a $0.3 million gain on contingent consideration as the result of a reduction in the cost of the Vaprisol acquisition. General and administrative expense was also benefited by a reduction in our travel and legal fees along with a decrease in compensation and benefit expense during the period.

*Amortization.* Amortization expense is the ratable use of our capitalized intangible assets including product and license rights, patents, trademarks and patent defense costs. Amortization for the nine months ended September 30, 2015 totaled approximately $1.5 million, which was an increase of $0.4 million over the prior year. The increase in amortization was attributable to additional product and license rights, capitalized patents and patent defense costs.

*Income tax expense*. Income tax expense for the nine months ended September 30, 2015 totaled $0.5 million, compared to income tax expense of $1.1 million in the nine months ended September 30, 2014. The change was the result of the reduction in pretax income in the first nine months of 2015 compared to the same period last year. As a percentage of income before income taxes, income tax expense was 49.5% for the nine months ended September 30, 2015 compared to 38.0% for the nine months ended September 30, 2014. The income tax rate for the nine months ended September 30, 2015 was primarily a result of the lower pretax income impacted by adjustments to our valuation allowance and increases in our state income tax expense, including changes from legislation. The income tax rate for the nine months ended September 30, 2014 was positively impacted by a reduction in our state tax expense during 2014.

### LIQUIDITY AND CAPITAL RESOURCES

### Working Capital

Our primary sources of liquidity are cash flows provided by our operations, the availability under our line of credit and the cash proceeds from our initial public offering of common stock that was completed in August 2009. For the nine months ended September 30, 2015 and 2014, we generated $4.6 million and $4.0 million in cash flow from operations, respectively, and we borrowed $1.7 million on our line of credit during 2015. We believe that our internally generated cash flows and amounts available under our line of credit will be adequate to finance internal growth and fund capital expenditures.

We invest a portion of our cash reserves in variable rate demand notes ("VRDNs") and a portfolio of government-backed securities (including U.S. Treasuries, government-sponsored enterprise debentures and government-sponsored adjustable rate, mortgage-backed securities). The VRDNs are generally issued by municipal governments and are backed by a financial institution letter of credit. We hold a put right on the VRDNs, which allows us to liquidate the investments relatively quickly (less than one week). The government-backed securities have an active secondary market that generally provides for liquidity in less than one week. At September 30, 2015 and December 31, 2014, we had approximately $14.4 million and $14.8 million invested in marketable securities, respectively.

The following table summarizes our liquidity and working capital as of September 30, 2015 and December 31, 2014:

|  | September 30, 2015 | December 31, 2014 |
| --- | ---: | ---: |
| Cash and cash equivalents | $38,316,291 | $39,866,037 |
| Marketable securities | 14,438,830 | 14,841,418 |
| Total cash, cash equivalents and marketable securities | $52,755,121 | $54,707,455 |
| Working capital (current assets less current liabilities) | $55,847,901 | $57,065,489 |
| Current ratio (multiple of current assets to current liabilities) | 5.7 | 5.2 |
| Revolving line of credit availability | $10,300,000 | $12,000,000 |

The following table summarizes our net changes in cash and cash equivalents for the nine months ended September 30, 2015 and September 30, 2014:

| Net cash provided by (used in): | Nine months ended September 30, 2015 | 2014 |
| --- | ---: | ---: |
| Operating activities | $4,553,496 | $3,957,854 |
| Investing activities | (2,006,336) | (4,521,429) |
| Financing activities | (4,096,906) | (661,801) |
| Net decrease in cash and cash equivalents | $(1,549,746) | $(1,225,376) |

Operating activities provided $4.6 million in cash during the nine months ended September 30, 2015. The net $1.5 million decrease in cash and cash equivalents for the nine months ended September 30, 2015 was attributable to cash used in investing and financing activities, which was partly offset by the $4.6 million in cash generated from operations. Cash used in investing activities included a net cash investment in our intangible assets of $2.4 million, which was partially offset by net proceeds of $0.5 million associated with our investing activities in marketable securities. Our financing activities included $4.7 million in cash used to repurchase shares of our common stock, $1.6 million used to settle the remaining cash consideration for Vaprisol and $1.7 million in cash provided by borrowings under our line of credit. Cash provided by operating activities benefited from the non-cash expenses of depreciation and amortization and share-based compensation expense totaling $2.1 million and included positive changes in our working capital of $2.4 million.

Operating activities provided $4.0 million in cash during the nine months ended September 30, 2014. The net decrease in cash and cash equivalents for the nine months ended September 30, 2014 was mainly attributable to our $2.0 million payment for the acquisition of Vaprisol, which is included in investing activities. We also used cash in investing activities as we increased our net investment in marketable securities by $0.8 million and our intangible assets by $1.6 million. Our financing activities included the $1.0 million investment Gloria Pharmaceuticals Co. Ltd. made in CET and the repurchase of shares of our common stock totaling $2.7 million during the nine months ended September 30, 2014. Cash provided by operating activities was $4.0 million and included net income of $1.7 million.

As of September 30, 2015, we have approximately $43.6 million of unrecognized net operating loss carryforwards resulting from the exercise of nonqualified stock options in 2009 that will be used to significantly offset future income tax obligations. These benefits will be recognized in the year in which they are able to reduce current income taxes payable.

On June 26, 2014, we entered into a Revolving Credit Loan Agreement (“Loan Agreement”) with SunTrust Bank, which replaced the agreement with a previous lender. At September 30, 2015 we had $1.7 million in borrowings under the Loan Agreement. The agreement has a three year term expiring on June 26, 2017 and 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 1.2% at September 30, 2015). 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, we are subject to certain financial covenants, including, but not limited to, maintaining an EBIT to Interest Expense Ratio and a Funded Debt Ratio, as such terms are defined in the Loan Agreement and that are determined on a quarterly basis. We were in compliance with all covenants at September 30, 2015.

### OFF-BALANCE SHEET ARRANGEMENTS

During the nine months ended September 30, 2015 and 2014, we did not engage in any off-balance sheet arrangements.

## Market risk

As filed, 2,895 characters.

### Interest Rate Risk

We are exposed to market risk related to changes in interest rates on our cash on deposit in highly-liquid money market accounts and revolving credit facility. We do not utilize derivative financial instruments or other market risk-sensitive instruments to manage exposure to interest rate changes. The main objective of our cash investment activities is to preserve principal while maximizing interest income through low-risk investments. Our investment policy focuses on principal preservation and liquidity.

We believe that our interest rate risk related to our cash and cash equivalents is not material. The risk related to interest rates for these accounts would produce less income than expected if market interest rates fall. Based on current interest rates, we do not believe we are exposed to significant downside risk related to a change in interest on our money market accounts.

We invest in VRDNs and a portfolio of government backed securities (including U.S. Treasuries, government sponsored enterprise debentures and government sponsored adjustable rate mortgage backed securities) to obtain a higher return while preserving our capital. The VRDNs are generally issued by municipal governments and are backed by a financial institution letter of credit. The VRDNs allow us the ability to liquidate the investment relatively quickly (less than one week). The government backed securities have an active secondary market that generally provides for liquidity in less than one week. The primary risk related to interest rates for these accounts are that they will produce less income than expected if market interest rates fall. Based on the $14.4 million in marketable securities outstanding at September 30, 2015, a 1% decrease in the fair value of the securities would result in a reduction in pretax net income of $0.1 million.

The interest rate related to our revolving credit facility is a variable rate based on LIBOR plus an interest rate spread. As of September 30, 2015, we had $1.7 million in borrowings outstanding under our revolving credit facility.

### Exchange Rate Risk

While we operate primarily in the United States, we are exposed to foreign currency risk. A portion of our research and development is performed abroad.

Currently, we do not utilize financial instruments to hedge exposure to foreign currency fluctuations. We believe our exposure to foreign currency fluctuation is minimal as our purchases in foreign currency have a maximum exposure of 90 days based on invoice terms with a portion of the exposure being limited to 30 days based on the due date of the invoice. Foreign currency exchange gains and losses were immaterial for the nine months ended September 30, 2015 and 2014. Neither a 10% increase nor decrease from current exchange rates would have a significant effect on our operating results or financial condition.

## Controls and procedures

As filed, 725 characters.

Our principal executive and principal financial officers evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2015. Based on that evaluation, our disclosure controls and procedures are considered effective to ensure that material information relating to us and our consolidated subsidiaries is made known to officers within these entities in order to allow for timely decisions regarding required disclosure. During the three months ended September 30, 2015, there has not been any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 13,257 characters.

Information regarding risk factors appears on pages 21 through 36 in our Annual Report on Form 10-K for the year ended December 31, 2014 under the section titled “Risk Factors.” The following risk factor was included in our Form 10-K for the year ended December 31, 2014 and has been updated for recent developments:

**Our strategy to secure and extend marketing exclusivity or patent rights may provide only limited protection from competition.**

Acetadote is indicated to prevent or lessen hepatic (liver) injury when administered intravenously within eight to ten hours after ingesting quantities of acetaminophen that are potentially toxic to the liver.

In April 2012, the United States Patent and Trademark Office (the “USPTO”) issued U.S. Patent number 8,148,356 (the “356 Acetadote Patent”) which is assigned to us. The claims of the 356 Acetadote Patent encompass the new Acetadote formulation and include composition of matter claims. Following its issuance, the 356 Acetadote Patent was listed in the FDA Orange Book. The 356 Acetadote Patent is scheduled to expire in May 2026, which time period includes a 270-day patent term adjustment granted by the USPTO.

Following the issuance of the 356 Acetadote Patent, we received separate Paragraph IV certification notices from InnoPharma, Inc., Paddock Laboratories, LLC ("Paddock") and Mylan Institutional LLC challenging the 356 Acetadote Patent on the basis of non-infringement and/or invalidity. On May 17, 2012, we responded to the Paragraph IV certification notices by filing three separate lawsuits for infringement of the 356 Acetadote Patent. The first lawsuit was filed against Mylan Institutional LLC and Mylan Inc. ("Mylan") in the United States District Court for the Northern District of Illinois, Eastern Division. The second lawsuit was filed against InnoPharma, Inc. in the United States District Court for the District of Delaware. The third lawsuit was also filed in the United States District Court for the District of Delaware against Paddock and Perrigo Company ("Perrigo"). On May 20, 2012, we received a Paragraph IV certification notice from Sagent Agila LLC challenging the 356 Acetadote Patent. On June 26, 2012, we filed a lawsuit for infringement of the 356 Acetadote Patent against Sagent Agila LLC and Sagent Pharmaceuticals, Inc. ("Sagent") in the United States District Court for the District of Delaware. On July 9, 2012, we received a Paragraph IV certification notice from Perrigo. On August 9, 2012, we filed a lawsuit for infringement of the 356 Acetadote Patent against Perrigo in the United States District Court for the Northern District of Illinois, Eastern Division.

On November 12, 2012, we entered into a Settlement Agreement (the “Settlement Agreement”) with Paddock and Perrigo to resolve the challenges and the pending litigation with each of Paddock and Perrigo involving the 356 Acetadote Patent. Under the Settlement Agreement, Paddock and Perrigo admit that the 356 Acetadote Patent is valid and enforceable and that any Paddock or Perrigo generic Acetadote product (with or without EDTA) would infringe upon the 356 Acetadote Patent. In addition, Paddock and Perrigo will not challenge the validity, enforceability, ownership or patentability of the 356 Acetadote Patent through its expiration currently scheduled for May 2026. On November 12, 2012, in connection with the execution of the Settlement Agreement, we entered into a License and Supply Agreement with Paddock and Perrigo (the “License and Supply Agreement”). Under the terms of the License and Supply Agreement, if a third party receives final approval from the FDA for an ANDA to sell a generic Acetadote product and such third party has made such generic version available for purchase in commercial quantities in the United States, we will supply Perrigo with an Authorized Generic version of our Acetadote product.

On May 18, 2012, we also submitted a Citizen Petition to the FDA requesting that the FDA refrain from approving any applications for acetylcysteine injection that contain EDTA, based in part on the FDA's request that we evaluate the reduction or removal of EDTA from its original Acetadote formulation. On November 7, 2012, the FDA responded to the Citizen Petition denying our request and stating that ANDAs referencing Acetadote that contain EDTA may be accepted and approved provided they meet all applicable requirements. We believe this response contradicts the FDA's request to evaluate the reduction or removal of EDTA. On November 8, 2012, we learned that the FDA approved the ANDA referencing Acetadote filed by InnoPharma, Inc. On November 13, 2012, we brought suit against the FDA in the United States District Court for the District of Columbia alleging that the FDA's denial of our Citizen Petition and acceptance for review and approval of any InnoPharma, Inc. product containing EDTA was arbitrary and in violation of law.

We found during the resulting legal proceedings that the FDA initially concluded that the original Acetadote formulation was withdrawn for safety reasons and no generic versions should be approved. The FDA later reversed its position based on the possibility of drug shortages and the presence of EDTA in other formulations. At the same time, the FDA noted that exclusively marketing a non-EDTA containing product would be preferable because it would eliminate the potential risk of EDTA.

On January 7, 2013, Perrigo announced initial distribution of our Authorized Generic acetylcysteine injection product.

On March 19, 2013, the USPTO issued U.S. Patent number 8,399,445 (the “445 Acetadote Patent”) which is also assigned to us. The claims of the 445 Acetadote Patent encompass the use of the 200 mg/ml Acetadote formulation to treat patients with acetaminophen overdose. On April 8, 2013, the 445 Acetadote Patent was listed in the FDA Orange Book. The 445 Acetadote Patent is scheduled to expire in August 2025. Following the issuance of the 445 Acetadote Patent we have received separate Paragraph IV certification notices from Perrigo, Sagent, and Mylan challenging the 445 Acetadote Patent on the basis of non-infringement, unenforceability and/or invalidity.

On June 10, 2013, we became aware of a Paragraph IV certification notice from Akorn, Inc. challenging the 445 Acetadote Patent and the 356 Acetadote Patent on the basis of non-infringement. On July 12, 2013, we filed a lawsuit for infringement of the 356 Acetadote Patent against Akorn, Inc. in the United States District Court for the District of Delaware.

On June 10, 2013, we announced that the FDA approved updated labeling for Acetadote. The new labeling revises the product's indication and offers new dosing guidance for specific patient populations.

On September 30, 2013, the United States District Court for the District of Columbia filed an opinion granting a Summary Judgment in favor of the FDA regarding Cumberland’s November 13, 2012 suit. On November 1, 2013, the United States District Court for the District of Delaware filed opinions granting Sagent’s and InnoPharma’s motions to dismiss our May 2012 and June 2012 suits.

On February18, 2014, the USPTO issued U.S. Patent number 8,653,061 (the “061 Acetadote Patent”) which is assigned to us. The claims of the 061 Acetadote Patent encompass the use of the 200 mg/ml Acetadote formulation to treat patients with acetaminophen overdose. Following its issuance, the 061 Acetadote Patent was listed in the FDA Orange Book. The 061 Acetadote Patent is scheduled to expire in August 2025.

On May 13, 2014, the USPTO issued U.S. Patent number 8,722,738 (the “738 Acetadote Patent”) which is assigned to us. The claims of the 738 Acetadote Patent encompass administration methods of acetylcysteine injection, without specification of the presence or lack of EDTA in the injection. Following its issuance, the 738 Acetadote Patent was listed in the FDA Orange Book and it is scheduled to expire in April 2032.

On December 11, 2014 and March 3, 2015, we became aware of Paragraph IV certification notices from Aurobindo Pharma Limited and Zydus Pharmaceuticals (USA) Inc., respectively, challenging the 356, 445, 061, and 738 Acetadote Patents on the basis of non-infringement.

By statute, where the Paragraph IV certification is to a patent timely listed before an Abbreviated New Drug Application (“ANDA”) is filed, a company has 45 days to institute a patent infringement lawsuit during which period the FDA may not approve another application. In addition, such a lawsuit for patent infringement filed within such 45-day period may stay, or bar, the FDA from approving another product application for two and a half years or until a district court decision that is adverse to the asserted patents, whichever is earlier.

On February 10, 2015, the USPTO issued U.S. Patent number 8,952,065 (the “065 Acetadote Patent”) which is assigned to us. The claims of the 065 Acetadote Patent encompass the use of the 200 mg/ml Acetadote formulation to treat patients with acute liver failure. The 065 Acetadote Patent is scheduled to expire in August 2025.

On September 30, 2015, the United States District Court for the Northern District of Illinois, Eastern Division ruled in our favor in our lawsuit against Mylan for infringement of the 445 Acetadote Patent. The opinion upheld our 445 Acetadote Patent and expressly rejected Mylan's validity challenge. The court ruled that Mylan is liable to us 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.

We also have additional patent applications relating to Acetadote which are pending with the USPTO and may or may not be issued. We intend to continue to vigorously defend and protect our Acetadote product and related intellectual property rights. If we are unsuccessful in protecting our Acetadote intellectual property rights, our competitors may be able to introduce products into the marketplace that reduce the sales and market share of our Acetadote product which may require us to take measures such as reducing prices or increasing our marketing expense, any of which may result in a material adverse effect to our financial condition and results of operations.

We have U.S. patents and related international patents which include composition of matter claims that encompass the Caldolor formulation, including methods of treating pain using intravenous ibuprofen and claims directed to ibuprofen solution formulations, methods of making the same, and methods of using the same, and which are related to our formulation and manufacture of Caldolor. Additionally, the active ingredient in Caldolor, ibuprofen, is in the public domain, and a competitor could try to develop, test and seek FDA approval for a sufficiently distinct formulation for another ibuprofen product that competes with Caldolor. The U.S. patents are listed in the FDA Orange Book, with one expiring in November 2021, two others expiring in September 2029 and one other expiring in September 2030.

We have numerous U.S. patents and related international patents for Vaprisol. These patents were acquired in our February 2014 acquisition of certain product rights, intellectual property and related assets of Vaprisol from Astellas. The primary patent is U.S. Patent No. 5,723,606 (the “606 Vaprisol Patent”) which includes composition of matter claims that encompass the Vaprisol formulation as well as methods for the intravenous treatment of patients with euvolemic hyponatremia. The 606 Vaprisol Patent is listed in the FDA Orange Book and expires in December 2019.

While we consider patent protection when evaluating product acquisition opportunities, any products we acquire in the future may not have significant patent protection. Neither the USPTO nor the courts have a consistent policy regarding the breadth of claims allowed or the degree of protection afforded under many pharmaceutical patents. Patent applications in the U.S. and many foreign jurisdictions are typically not published until 18 months following the filing date of the first related application, and in some cases not at all. In addition, publication of discoveries in scientific literature often lags significantly behind actual discoveries. Therefore, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in our issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these patent applications. In addition, changes in either patent laws or in interpretations of patent laws in the U.S. and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection. Furthermore, our competitors may independently develop similar technologies or duplicate technology developed by us in a manner that does not infringe our patents or other intellectual property. As a result of these factors, our patent rights may not provide any commercially valuable protection from competing products.

Filed Nov 6, 2015.
Source: SEC EDGAR, the filing index for accession 0001628280-15-008469. Last ingested by Listed: Nov 11, 2026, 03:05 ET. No prices; not investment advice.