Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Disclosure regarding forward-looking statements
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. Actual results may differ significantly from the results discussed in these forward-looking statements. Some important factors which may cause results to differ from expectations include: availability of additional debt and equity capital; market conditions at the time additional capital is required; our ability to continue to acquire branded products; product sales; management of our growth and integration of our acquisitions and generally unpredictable conditions in national and international markets. While forward-looking statements reflect our beliefs and best judgment based upon current information, they are not guarantees of future performance. Other important factors that may cause actual results to differ materially from forward-looking statements are discussed in the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” of our Annual Report on Form 10-K for the year ended December 31, 2023, and our other filings with the SEC. 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 report on 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 pharmaceutical products. We are dedicated to our mission of working together to provide unique products that improve the quality of patient care.
Our primary target markets are hospital acute care, gastroenterology and oncology. These medical specialties are characterized by relatively concentrated prescriber bases that we believe can be served effectively by small, targeted sales forces. We promote our approved products through our hospital, field and oncology sales divisions in the United States, while we continue to build a network of international partners to register and provide our medicines to patients in their countries.
Our portfolio of brands approved for marketing by the U.S. Food and Drug Administration (“FDA”) 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 constipation;
•Sancuso® (granisetron) transdermal, for the prevention of nausea and vomiting in patients receiving certain types of chemotherapy treatment;
•Vaprisol® (conivaptan) injection, to raise serum sodium levels in hospitalized patients with euvolemic and hypervolemic hyponatremia; and
•Vibativ® (telavancin) injection, for the treatment of certain serious bacterial infections including hospital-acquired and ventilator-associated bacterial pneumonia, as well as complicated skin and skin structure infections.
In addition to these commercial brands, we have Phase II clinical programs underway evaluating our ifetroban product candidate in 1) Systemic Sclerosis (“SSc”) or scleroderma, a debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs, 2) patients with cardiomyopathy associated with Duchenne Muscular Dystrophy (“DMD”), a rare, fatal, genetic neuromuscular disease results in deterioration of the skeletal, heart and lung muscles and 3) patients with Idiopathic Pulmonary Fibrosis (“IPF”), the most common form of progressive fibrosing interstitial lung disease. Investigational new study applications (“INDs”) have been cleared by the FDA enabling us to launch clinical studies in each of these areas.
Cumberland has built core competencies for the acquisition, development and U.S. commercialization of pharmaceutical products, and we believe we can leverage this existing infrastructure to support our growth. Our management team consists of pharmaceutical industry veterans with experience in business development, product development, regulatory, manufacturing, sales, marketing and finance.
Our business development team identifies, evaluates, and negotiates product acquisition, licensing and co- promotion agreements. Our product development team creates proprietary formulations, manages our clinical studies, prepares our FDA submissions and staffs our medical call center. Our quality and manufacturing professionals oversee the manufacturing, release and shipment of our brands. Our marketing and sales organization is responsible for our commercial activities, and we work closely with our distribution partners to ensure the availability and delivery of our product.
GROWTH STRATEGY
Cumberland’s growth strategy involves maximizing the potential of our existing brands, while continuing to build a portfolio of differentiated products. We currently own six products approved by the FDA in the United States. We are also continuing to build international partnerships to bring our medicines to patients in other countries. We also look for opportunities to expand our brands into new patient populations through clinical trials, new product presentations and our support of select, investigator-initiated studies. We actively pursue opportunities to acquire additional marketed brands as well as late-stage development product candidates in our target medical specialties. Our clinical team is also developing a pipeline of new product candidates to address poorly met medical needs.
We are supplementing these activities with the earlier-stage drug development at Cumberland Emerging Technologies (“CET”), our majority-owned subsidiary. CET partners with academic research institutions to identify and support the progress of promising new product candidates, which Cumberland can further develop and commercialize.
Specifically, we are seeking long-term, sustainable growth by:
•Supporting and expanding the use of our marketed products. We continue to evaluate our products following their FDA approval to determine if additional clinical data could expand their market and use. For example, we have secured pediatric approval of Acetadote and Caldolor and expanded the labeling for both brands accordingly. We also added pre-surgery dosing for Caldolor, and recently included newborns to the patients who can benefit from the product.
•Selectively adding complementary brands. In addition to our product development activities, we are also seeking to acquire approved brands or late-stage development product candidates to continue to build our portfolio. We seek under-promoted, FDA-approved drugs as well as late-stage development products that can improve patient care. We will continue to target product acquisition candidates that are competitively differentiated and have valuable intellectual property or other protective features. Our acquisitions of Vibativ and Sancuso are examples of the implementation of this strategy.
•Progressing our clinical pipeline and incubating future product opportunities at CET. We believe it is important to build a pipeline of innovative new product opportunities, as we are doing through our ifetroban Phase II development programs. We are also supplementing our acquisitions and late-stage development activities with the early-stage drug development activities with CET.
•Leveraging our infrastructure through co-promotion partnerships. We believe that our commercial infrastructure can help drive prescription volume and product sales. We also look for strategic partners that can complement our capabilities and enhance opportunities for our brands. For example, our co-promotion partnerships have allowed us to expand the support for Kristalose across the U.S.
•Building an international contribution to our business. We have established our own commercial capabilities, including three sales divisions, that focus on the U.S. market for our products. We are also building a network of select international partners to register our products and make them available to patients in their countries. We will continue to develop and expand our network of international partners, while supporting our existing partners’ registration and commercialization efforts in their respective territories. The acquisition of Vibativ resulted in several new international partners and market opportunities.
•Managing our operations with financial discipline. We continually work to manage our expenses in line with our revenues, to deliver positive cash flow from operations. We seek to maintain favorable gross margins and a strong balance sheet.
RECENT DEVELOPMENTS
Caldolor Special Report
We are implementing a strategy to increase awareness of our products and their attributes throughout the medical community. In March, a Special Report featuring Caldolor was published in Anesthesiology News, General Surgery News and Pharmacy Practice News. This new publication presented the growing amount of data supporting the use of our Caldolor (ibuprofen) injection as a standard of care for the treatment of pain and fever. The reports noted that as part of a comprehensive developmental plan, our intravenous ibuprofen was studied in various treatment areas, including surgical pain, fever and nonsurgical acute pain. The results, which are highlighted in the report, demonstrate that the product is a safe and effective treatment for pain and fever in adults, children and infants as young as 3 months of age.
Pain management has become one of the most common health care problems. As this Special Report states, comprehensive multimodal pain regimens have become key in preventing pain and optimizing pain control, while minimizing the need for opioids. A non-steroidal anti-inflammatory drug, such as Caldolor, can provide a cornerstone for many treatment paradigms, and we are encouraged by the substantial database emerging from our studies in patients of all ages.
Federal NOPAIN Act
We announced in April 2023 that we expect that Caldolor will be eligible for special Medicare reimbursement under the Non-Opioids Prevent Addiction in the Nation Act (the “NOPAIN Act”), which was enacted as part of the Consolidated Appropriations Act of 2023.
The NOPAIN Act requires Medicare to provide separate reimbursement for non-opioid products that are used to manage pain during surgeries conducted in hospital outpatient departments or in ambulatory surgical centers. The NOPAIN Act applies, in part, to products that are indicated to provide analgesia without acting upon the body’s opioid receptors. As a result, we expect that the NOPAIN Act will affect Medicare reimbursement for Caldolor, our non-opioid analgesic injection product.
The reimbursement for non-opioid pain alternatives under the NOPAIN Act will apply to those products that are furnished between January 1, 2025 and January 1, 2028. It is anticipated that in 2024, Centers for Medicare & Medicaid Services (“CMS”) will issue regulations implementing the NOPAIN Act and detailing the conditions for, and amount of, the separate reimbursement.
In the Medicare Hospital Outpatient Prospective Payment System Proposed Rule, the CMS requested that manufacturers with potentially applicable non-opioid products submit comments and supporting clinical evidence regarding products that should be eligible for separate payment. We submitted a comment letter along with the requisite clinical information to the CMS in September 2023 explaining why Caldolor should be included and separately reimbursed. We now await information from CMS regarding the reimbursement status and price for the product.
New Manufacturing & Supplies of Sancuso
After acquiring U.S. rights to Sancuso, we successfully completed the transition from Kyowa Kirin to Cumberland in 2023, including the NDA transfer. A new facility was approved by the FDA for Sancuso and we have completed the manufacturing of Cumberland-packaged product there. We will begin shipping these new supplies of our Cumberland-branded product this year. We are supporting the product through our expanded oncology sales division to help cancer patients by addressing certain side effects associated with their chemotherapy treatments.
Vaprisol Supply Update
Demand for our Vaprisol product increased in 2020 during the pandemic, and we worked to support the expanded use of the product in hospitals and clinics during the health care crisis. In 2021, we shipped all remaining inventory of the product and notified the FDA that supplies of the product are not currently available. We have since transferred the manufacturing of the product to a new facility. Our new manufacturing and distribution partner, Nephron Pharmaceuticals (“Nephron”), is working with the FDA to address several Form 483 and warning letter issues in a timely manner.
As we await FDA approval for making the branded product there, Nephron is providing a special supply of compounded product in support of critically ill patients. The companies will share in the sales of this compounded product. Vaprisol is the first and only intravenously administered vasopressin receptor antagonist. It is used to raise serum sodium levels in hospitalized patients with hyponatremia, the most common electrolyte disorder among such patients.
Omeclamox-Pak Supply Update
The packager for Omeclamox-Pak encountered financial difficulties in 2020 due to the impact of the COVID-19 pandemic, and their operations were suspended. As a result, we depleted our inventory of the product and notified the FDA that it is currently unavailable. As we have not been able to identify an alternative site to package the product, we decided to discontinue it and expense the remaining brand intangible assets in late 2023.
International Agreements
We continue to support our international partners in their efforts to register Vibativ in their countries.
In late 2022, we announced a new partnership with Saudi Arabia-based Tabuk Pharmaceutical to introduce Vibativ into the Middle East. The arrangement provides Tabuk exclusive rights to distribute Vibativ in Saudi Arabia and Jordan, with the option to expand into other countries in the region. Tabuk has obtained approval for Vibativ in Saudi Arabia and we are now in discussions with them regarding their plans for the product in that country.
Also in 2022, we entered into an agreement with D.B. Pharm to register and commercialize our Vibativ product in South Korea. D.B. Pharm also distributes our Caldolor product there. They filed for the approval of Vibativ in November 2022 and we have been supporting their efforts through the review process of their application in the country. The Korean regulatory authorities did not approve the submission, and indicated that additional manufacturing information will be required, which we will work with D.B. Pharm to address.
Meanwhile, our Vibativ partner for the Chinese market, SciClone Pharmaceuticals, had their approval application in China accepted for review in September 2021. We have since been supporting SciClone and their requests associated with the review of that submission. They are working toward the approval and believe that there is significant potential for Vibativ in their country.
In April 2024, we terminated our license and commercialization agreement with Verity Pharmaceuticals for Vibativ in Puerto Rico due to material default.
Ifetroban Clinical Studies
We have been evaluating our ifetroban product candidate, a selective thromboxane-prostanoid receptor antagonist, in a series of clinical studies. It has now been dosed in nearly 1,400 subjects and has been found to be safe and well tolerated in healthy volunteers and various patient populations. We have three Phase II clinical programs underway evaluating our ifetroban product candidate in patients with 1) Systemic Sclerosis or scleroderma, a debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs, 2) cardiomyopathy associated with Duchenne Muscular Dystrophy, a rare, fatal, genetic neuromuscular disease results in deterioration of the skeletal, heart and lung muscles and 3) Idiopathic Pulmonary Fibrosis, the most common form of progressive fibrosing interstitial lung disease. This third program is our newest, with enrollment now underway.
We also completed a pilot Phase II study involving 1) patients suffering from Hepatorenal Syndrome, a life-threatening condition involving liver and kidney failure 2) patients with Portal Hypertension associated with chronic liver disease and 3) patients with Aspirin-Exacerbated Respiratory Disease, a severe form of asthma. There were no significant safety issues identified with the use of ifetroban in these patients.
Additional pilot studies of ifetroban are underway, including several investigator-initiated trials.
Our plan going forward is to complete each of our Company-sponsored studies, analyze their final data, announce top-line results and decide on the best development path for the registration of ifetroban, which we continue to believe has the potential to benefit many patients with orphan diseases that represent unmet medical needs.
Summary
We are dedicated to our mission of working together to provide unique products that improve the quality of patient care – which we have pursued by building a portfolio of FDA-approved brands with outstanding safety and efficacy profiles that can make a difference in patients’ lives.
We continue to grow our portfolio of innovative and differentiated products through a multifaceted strategy that includes the development of new candidates as well as the acquisition of established brands. Our resulting, diversified product line has enabled us to weather external challenges while our team remains responsive to the evolving market.
We look forward to future opportunities to carry out our mission throughout the remainder of the year and beyond.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
Please see a discussion of our critical accounting policies and significant judgments and estimates in Note 1 to the Company's Condensed Consolidated Financial Statements accompanying this report and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Annual Report on Form 10-K.
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. 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) valuation of contingent consideration liabilities associated with business combinations.
RESULTS OF OPERATIONS
Three months ended March 31, 2024 compared to the three months ended March 31, 2023
The following table presents the unaudited interim statements of operations for continuing operations for the three months ended March 31, 2024 and 2023: | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, |
| 2024 | | 2023 | | Change | |
| Net revenues | $ | 8,497,701 | | | $ | 9,224,638 | | | $ | (726,937) | | |
| Costs and expenses: | | | | | | |
| Cost of products sold | 1,575,542 | | | 1,250,264 | | | 325,278 | | |
| Selling and marketing | 4,154,588 | | | 4,277,318 | | | (122,730) | | |
| Research and development | 1,158,253 | | | 1,499,670 | | | (341,417) | | |
| General and administrative | 2,367,907 | | | 2,498,993 | | | (131,086) | | |
| Amortization | 1,110,661 | | | 1,230,071 | | | (119,410) | | |
| Total costs and expenses | 10,366,951 | | | 10,756,316 | | | (389,365) | | |
| Operating loss | (1,869,250) | | | (1,531,678) | | | (337,572) | | |
| Interest income | 96,746 | | | 50,190 | | | 46,556 | | |
| Other income | — | | | 1,847,065 | | | (1,847,065) | | |
| | | | | | |
| | | | | | |
| Interest expense | (118,526) | | | (186,353) | | | 67,827 | | |
| | | | | | |
| Loss before income taxes | (1,891,030) | | | 179,224 | | | (2,070,254) | | |
| Income tax expense | (11,442) | | | (6,938) | | | (4,504) | | |
| Net loss | $ | (1,902,472) | | | $ | 172,286 | | | $ | (2,074,758) | | |
| | | | | | |
The following table summarizes net revenues by product for the periods presented: | | | | | | | | | | | | | | | | | |
| Three months ended March 31, |
| 2024 | | 2023 | | Change |
| Products: | | | | | |
| Kristalose | $ | 3,195,609 | | | $ | 4,315,128 | | | $ | (1,119,519) | |
| Sancuso | 1,827,769 | | | 1,886,793 | | | (59,024) | |
| Vibativ | 1,605,489 | | | 1,848,187 | | | (242,698) | |
| Caldolor | 1,470,699 | | | 935,043 | | | 535,656 | |
| Acetadote | 80,203 | | | 169,856 | | | (89,653) | |
| Vaprisol | 8,662 | | | 16,008 | | | (7,346) | |
| Omeclamox-Pak | (1,615) | | | (2,518) | | | 903 | |
| RediTrex | 35,556 | | | (141,045) | | | 176,601 | |
| Other revenue | 275,329 | | | 197,186 | | | 78,143 | |
| Total net revenues | $ | 8,497,701 | | | $ | 9,224,638 | | | $ | (726,937) | |
Net revenues. Net revenues for the three months ended March 31, 2024, were $8.5 million compared to $9.2 million for the three months ended March 31, 2023.
Kristalose revenue of $3.2 million for the first quarter of 2024, compared to $4.3 million for the same period in the prior year. The decrease was primarily the result of timing of shipments to one of our co-promotion partners.
Acetadote revenue includes net sales of our Acetadote brand and our share of net sales from our Authorized Generic. During the first quarter of 2024, there was a decrease of $0.09 million in the product's revenue when compared to the prior year period due to a decrease in shipments.
There were no Vaprisol sales for the first quarter of 2024 as Cumberland is currently out of inventory of the product as we await FDA approval on a new manufacturer. The revenue stated represents our share of sales of the compounded product.
Caldolor revenue was $1.5 million for the first quarter of 2024, which was $0.5 million, or 57.3%, higher than the first quarter of 2023 primarily due to increased international shipments.
Vibativ revenue was $1.6 million for the three months ended March 31, 2024, a decrease of $0.2 million from the same prior year period. The slight decrease in net revenue of the product was the result of wholesaler buying patterns.
Sancuso revenue was $1.8 million for the first quarter of 2024, compared to $1.9 million for the first quarter of 2023. The decline resulted primarily from decreased sales volume, offset by improved pricing of the product.
Omeclamox-Pak had no sales for the first quarter of 2024, as Cumberland has discontinued the sale of the product. Net revenue for the three months ended March 31, 2024, reflects sales deduction adjustments.
There were no RediTrex sales in the first quarter of 2024, as Cumberland concluded our distribution of the product effective June 30, 2023. Net revenue for the three months ended March 31, 2024, reflects sales deduction adjustments.
Other revenue was $0.3 million for the three months ended March 31, 2024, compared to $0.2 million for the three months ended March 31, 2023.
Cost of products sold. Cost of products sold for the first quarter of 2024 and 2023 were $1.6 million and $1.3 million, respectively. Cost of products sold, as a percentage of net revenues, were 18.5% during the three months ended March 31, 2024, compared to 13.6% during the three months ended March 31, 2023. The increase is primarily due to international sales having higher manufacturing costs as a percent of sales.
Selling and marketing. Selling and marketing expense for the first quarter of 2024 decreased $0.1 million compared to the same period last year. This decrease is primarily attributable to accrual adjustments.
Research and development. Research and development costs for the first quarter of 2024 and 2023 were $1.2 million and $1.5 million, respectively. A portion of our research and development costs is variable as we continue to fund the ongoing clinical initiatives associated with our pipeline product candidates. These variable costs depend on the number of active trials, study sites and patients as well as the cost per patient in each of our clinical programs. The decrease in research and development costs for the first quarter of 2024 resulted from a decrease in study costs accruals.
General and administrative. General and administrative expense for the first quarter of 2024 remained consistent with $2.4 million compared to $2.5 million for the same period in 2023.
The components of the statements of operations discussed above reflect the following impacts from Vibativ: | | | | | | | | | | | | | | |
| Financial Impact of Vibativ | | Three months ended March 31, |
| | 2024 | | 2023 |
| Net revenue | | $ | 1,605,489 | | | $ | 1,848,187 | |
Cost of products sold (1) | | 277,063 | | | 246,742 | |
| Royalty and operating expenses | | 478,473 | | | 519,608 | |
| Vibativ contribution | | $ | 849,953 | | | $ | 1,081,837 | |
(1) The Vibativ inventory included in the costs of product sold during the period was acquired and paid for by Cumberland as part of the acquisition of the brand during 2018.
The components of the statements of operations discussed above reflect the following impacts from Sancuso:
| | | | | | | | | | | | | | |
| Financial Impact of Sancuso | | Three months ended March 31, |
| | 2024 | | 2023 |
| Net revenue | | $ | 1,827,769 | | | $ | 1,886,793 | |
Cost of products sold (1) | | 256,578 | | | 289,478 | |
| Royalty and operating expenses | | 527,697 | | | 415,707 | |
| Sancuso contribution | | $ | 1,043,494 | | | $ | 1,181,608 | |
(1) The Sancuso inventory included in the costs of product sold during the period was acquired and paid for by Cumberland as part of the acquisition of the brand during 2022.
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 three months ended March 31, 2024 and 2023, totaled approximately $1.1 million and $1.2 million, respectively. The decline in amortization expense resulted from the write down of Omeclamox Pak intangible assets as we discontinued the sales of the product in late 2023.
Income taxes. Income tax expense for the three months ended March 31, 2024, was comparable to the income tax expense for the three months ended March 31, 2023.
As of March 31, 2024, we had approximately $52.1 million in federal net operating loss carryforwards including approximately $44.1 million of net operating loss carryforwards resulting from the exercise of nonqualified stock options that have historically been used to significantly offset income tax obligations. We expect to continue to pay minimal income taxes during 2024 and beyond, through the continued utilization of these net operating loss carryforwards, on any taxable income generated from our operations.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Our primary sources of liquidity are cash equivalents, cash flows from operations and the amounts borrowed under our line of credit. We believe that our internally generated cash flows, existing working capital and our line of credit will be adequate to finance internal growth, finance business development initiatives, and fund capital expenditures for the foreseeable future.
The following table summarizes our liquidity and working capital as of March 31, 2024 and December 31, 2023: | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| | | |
| Cash and cash equivalents | $ | 18,548,485 | | | $ | 18,321,624 | |
| | | |
| Working capital (current assets less current liabilities) | $ | 9,780,571 | | | $ | 7,732,161 | |
| Current ratio (multiple of current assets to current liabilities) | 1.4 | | | 1.3 | |
| | | |
| Revolving line of credit availability | $ | 3,915,856 | | | $ | 7,215,856 | |
The following table summarizes our net changes in cash and cash equivalents for the three months ended March 31, 2024 and March 31, 2023: | | | | | | | | | | | |
| Three months ended March 31, |
| 2024 | | 2023 |
| Net cash provided by (used in): | | | |
| Operating activities | $ | (2,136,647) | | | $ | (1,418,209) | |
| Investing activities | (58,186) | | | (174,453) | |
| Financing activities | 2,421,694 | | | (1,779,142) | |
| Net increase (decrease) in cash and cash equivalents | $ | 226,861 | | | $ | (3,371,804) | |
The net $0.2 million decrease in cash and cash equivalents for the three months ended March 31, 2024, was primarily attributable to cash provided by financing activities partially offset by used in operating activities.
Cash used by operating activities totaled $2.1 million for the three months ended March 31, 2024, primarily is due to the result of $1.9 million net loss, a $1.1 million increase in account receivable, and a $0.6 million in accounts payable and other current liabilities, partially offset by the add back of $1.4 million depreciation and amortization expense and stock base compensation expense of $0.1 million.
Cash provided by financing activities totaled $2.4 million for the three months ended March 31, 2024, is primarily due to $3.3 million borrowings net on line of credit, partially offset by the $0.6 million used for the payment of a Sancuso milestone, plus royalties on sales of Vibativ and Sancuso, and the $0.2 million in cash used to repurchase shares of our common stock.
Debt Agreement
On September 5, 2023, the Company entered into a new Revolving Credit Loan Agreement with Pinnacle Bank. This facility provides for an aggregate principal funding amount of up to $25 million. The initial revolving line of credit is up to $20 million, with the ability for Cumberland to increase the amount to $25 million, under certain conditions. It has a three year term expiring on October 1, 2026. The interest rate is based on Benchmark (Term SOFR) plus a spread of 2.75%. Cumberland is subject to one financial covenant, the maintenance of a Funded Debt Ratio, determined on a quarterly basis. Borrowings under the line of credit are collateralized by substantially all of our assets.
On May 6, 2024, the Company entered into a First Amendment to the Loan Agreement which provides an alternative to the financial covenant by delivering to the lender a borrowing base certificate and complying with certain borrowing base requirements which set forth a maximum revolver amount equal to (a) up to $20 million or (b) the sum of the Company's cash balances and eligible accounts receivable.
OFF-BALANCE SHEET ARRANGEMENTS
During the three months ended March 31, 2024 and 2023, we did not engage in any off-balance sheet arrangements.