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Operator
Good afternoon, and welcome to the Cumberland Pharmaceutical's second quarter 2024 financial report and company update. This call is being recorded at the company's request and will be archived on its website for one year from today's date. I would now like to turn the call over to Molly Agate, Accountant Supervisor at the Dalton Agency, who handles Cumberland's communications. Molly, please go ahead.
Molly Agate
Hello, everyone. Thanks for joining us today. Earlier this afternoon, Cumberland issued a press release announcing the company's financial results as well as an operational update for the second quarter of 2024. The release, which includes the related financial tables, can be found on the company's website at www.cumberlandpharma.com. Cumberland's management will share an overview of those financial results during today's call. They'll also provide an overall company update, including a discussion of Cumberland's brands, pipeline, and partners. Participating in today's call are A.J. Kazemi, Cumberland's Chief Executive Officer, Todd Anthony, Vice President, Organizational Development, and John Hamm, Chief Financial Officer. Please keep in mind that their discussions may include forward-looking statements as defined in the Private Securities Reform Act. Those statements reflect the company's current views and expectations concerning future events and may involve risks with uncertainties. There are many factors that could affect Cumberland's future results, including natural disasters, economic downturns, public health epidemics, international conflicts, and others that are beyond the company's control. Those issues are described under the caption Risk Factors in Cumberland's Form 10-K and any additional updates filed with the SEC. Any forward-looking statements made during today's call are qualified by those risk factors. Despite the company's best efforts, actual results may differ materially from expectations, so information shared on this call should be considered current as of today only. Please remember that the company isn't responsible for updating any forward-looking statements, whether as a result of new information or due to future developments. During today's call, there will also be references to several of Cumberland's marketed brands. Full prescribing and safety information for each brand is included on the individual product website, and you can find the links to those sites on the corporate website at www.cumberlandpharma.com. The company will be providing some non-GAAP financial measures with respect to its performance. An explanation and reconciliation to GAAP measures can be found in the financial tables of the earnings release that was issued earlier this afternoon. If you have any questions, please hold them until the end of the call, at which point we will be happy to answer them. Management's also prepared to hold a follow-up conversation after the call if you prefer. With that introduction, I will turn the call over to Cumberland's Chief Executive Officer, A.J. Kazemi.
A.J. Kazemi
Thank you, Molly, and good afternoon, everyone. We do appreciate your taking the time to join us today as we share how the first half of the year has gone. On today's call, we'll provide a company update, as well as a review of our financial results for the second quarter of 2024. So let's get started. Given the number of ongoing positive developments here at Cumberland, which we'll cover in today's call, we remain very optimistic about our future prospects. And we do believe we're still on track to post double-digit revenue growth and deliver positive cash flow from operations in 2024. During the second quarter, our line of FDA-approved brands provided $9.9 million in net revenue, which represented 16% in sequential growth from the first quarter of the year. We also generated adjusted earnings of $.2 million, which was a $.8 million improvement over the prior period. Our June ending balance sheet included $79 million in total assets, with $17 million in cash and investments. Total liabilities were $53 million, and shareholders' equity totaled $26 million. With that financial overview, I'd next like to share several updates regarding our products, including a number of growth opportunities. First, we're pleased to share that Crystalose, our prescription strength laxative, is now covered on Wisconsin Medicaid plans. Also, we recently launched a campaign featuring the American Gastroenterological Association's guidelines that include Crystallose as a first-line treatment for opioid-induced constipation. Next, recall the federal No Pain Act, which was passed last year, is designed to provide special, favorable reimbursement for non-opioid products like Caldivore. The Act is scheduled to go into effect in early 2025 for an initial three-year period. There was recently another request from CMS for new products to be considered for this special reimbursement, and we will provide updated submission information next month. Regarding Vibative, our potent antibiotic, we're pleased to announce that we launched a new product package this summer. It's designed for smaller accounts that either don't have the space to store or the patient volume to support investment in larger quantities of the product. And we've now introduced new Cumberland package Sancuso, following the successful manufacture of the product at the newly FDA-approved facility. Additionally, we continue to work with our partners in their efforts to advance Vibatid in several international markets, which can significantly contribute to the brand's growth in the future. Tabook Pharmaceuticals has obtained the final approval needed to commercialize Vibative in Saudi Arabia. They've now begun ordering the product in preparation for its launch there, which is planned for later this year. Sky Cologne Pharmaceuticals, our partner for the Chinese market, continues to respond to regulatory inquiries as they seek the approval for Vibative in their country. And DB Farm, our partner in South Korea who also distributes Caldolor, plans to submit additional manufacturing information based on the feedback they received from the Korean regulatory authorities. So with that financial update and operational overview, I'd now like to turn to Todd Anthony, Cumberland's Vice President, Organizational Development, to further discuss our team and our brands. Todd?
Sancuso
Thank you, AJ. As a reminder, we support our portfolio of FDA-approved medicines through three national sales divisions. Our hospital sales division calls on key institutional accounts across the country. while our field sales division covers select office-based physicians. And our newest, Cumberland Oncology, focuses on cancer clinics. So now, an update for each of our major brands. As Ajay mentioned, we launched a new package for our Vibative product this summer. This additional presentation is designed to overcome a barrier at smaller hospitals and infusion centers that use less of the product at a time allowing them to better manage their costs and their workflow associated with the product. Vibative is an intravenous antibiotic approved by the FDA for the treatment of hospital-acquired and ventilator-associated bacterial pneumonias, as well as complicated skin and skin structure infections caused by certain gram-positive bacteria. In June, antimicrobial agents and chemotherapy published a study Evaluating Vibative, which is televansin for injection, its generic name, as a novel therapeutic against anthrax inhalation in the most dangerous forms of those infections. Researchers were particularly interested in finding alternatives to current antibiotics in case anthrax bacteria become resistant to them. Researchers tested televancin against 17 different anthrax strains in the lab to determine how well it could stop their growth. Additionally, they tested televancin in rabbits that were infected with a deadly dose of airborne anthrax spores and compared televancin's effectiveness to another antibiotic, levofloxacin, and a placebo. The results show that televancin was very effective at killing all the anthrax strains tested in the lab. In the preclinical study, all the animals treated with televancin survived, and televancin was better at clearing anthrax from the blood and organs than levofloxacin. Based on these results, the researchers concluded that televancin could potentially be an effective new treatment option for anthrax infections. especially if current antibiotics become less effective due to resistance. Antimicrobial resistance continues to pose a challenge in treating bacterial infections. While many recently introduced antibiotics are quickly losing the battle to fight the bacteria they were designed to kill because those bacteria have become drug resistant, Vibative was specifically designed to kill drug resistant bacteria. Moving next to Crystalose, our prescription-strength laxative packaged in a convenient pre-measured powder dose that dissolves quickly in just four ounces of water for a clear, taste-free, and grit-free solution. We found that Crystalose performs best in states where we have Medicaid coverage. Wisconsin recently added Crystalose to its Medicaid formulary, and we are implementing a special initiative to announce the development in that market. Recall that we also have Medicaid coverage for the brand in both New York and Texas, two of the largest states for this product. We recently launched a campaign featuring the American Gastroenterological Association's or AGA's guidelines that include crystallose as a first-line treatment option for opioid-induced constipation. As the guidelines state, constipation is by far the most common and debilitating gastrointestinal effect of opioids, and some degree of constipation is near universal in patients taking opioid medications. We believe the AGA's recommendation will support the use of crystallose in those patients. Chrysalose continues to be our largest selling product and is benefiting nicely from the support of our two co-promotion partners. Let's shift now to Caldolor, our intravenous ibuprofen product. Recall that in April, we shared a special report evaluating the growing amount of data supporting the use of Caldolor as a standard of care for the treatment of pain and fever in adults, children, and infants as young as three months of age. Takeaways from this special report included that intravenous ibuprofen results in significant reductions in temperature compared to placebo in adults and to acetaminophen in pediatric patients. Also, administration of the product prior to surgery leads to patients waking up in significantly less post-surgical pain while also lessening or even eliminating the need for opioids. And the use of intravenous ibuprofen in the hospital emergency department for acute pain can minimize opioid requirements while achieving significant pain control. Finally, Calvolor should be considered a foundation for any multimodal pain regimen. Pain management has become one of the most common healthcare problems in the United States. As this new 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 like Caldolor can provide a cornerstone for many treatment protocols, and we are encouraged by the substantial database emerging from our studies in patients of all ages. With its new pediatric labeling, which was just approved last year, Caldolor is now the only non-obioid product approved to treat pain in infants that's delivered via an injection. The new indication was further supported by the publication of positive results from a clinical study investigating the safety and pharmacokinetics of Caldolor in newborns. We're very pleased to have further expanded the product's labeling for use in patients of nearly all ages, and have launched a marketing initiative highlighting this new indication. Turning now to Sancuso, the first and only FDA approved prescription patch for the prevention of nausea and vomiting in patients receiving certain types of chemotherapy. A new manufacturing facility for Sancuso was approved by the FDA and we have successfully completed the first lots of Cumberland packaged product there. We began shipping these new supplies of our Cumberland branded product this summer. We continue to support the product through our expanded oncology sales division, and we're already seeing a favorable impact from that expansion, leading us to plan to build upon to increase customer frequency and reach. Meanwhile, our new manufacturing and distribution partner for Vaprosol has successfully produced the product in their facility. As we await FDA approval for making the branded product there, our partner is providing a special supply of compounded product in support of these critically ill patients. The companies will share in the sales of this compounded product. Recall Vaprosol is the first and only intravenously administered vasopressin receptor antagonist, and it's used to raise serum sodium levels in hospitalized patients with hypoentremia which is the most common electrolyte disorder among these patients. Well, that completes my updates for today, and so I'll turn it back to you, AJ.
A.J. Kazemi
Thank you, Todd. I'd like to take a few minutes to provide an update on our ongoing clinical programs. We've been evaluating our ifitroban product candidate, a selective thromboxane receptor antagonist, and a series of clinical studies. It's now been dosed in nearly 1,400 subjects, resulting in an excellent safety profile as it's been well-tolerated in those individuals. We currently have three Phase II clinical programs underway evaluating a fitter band in patients with orphan diseases that represent unmet medical needs. We've initiated our newest clinical program in medical centers across the country, with enrollment now underway for patients with idiopathic pulmonary fibrosis, the most common form of progressive fibrosing interstitial lung disease. This fighting fibrosis study is designed to enroll 128 patients in over 20 medical centers of excellence across the United States. Recent studies have shown that ifitroban can help both prevent and enhance resolution of lung fibrosis in multiple preclinical models. Meanwhile, enrollment has significantly progressed in our two other company-sponsored Phase II clinical programs. The first involves patients with systemic sclerosis or scleroderma, a debilitating autoimmune disorder characterized by the diffuse fibrosis of skin and internal organs. And the other study is evaluating ifitroban in patients with cardiomyopathy associated with Duchenne muscular dystrophy, a rare and fatal genetic neuromuscular disease that results in deterioration of the skeletal, heart, and lung muscles. We've now received over $1 million in grant awards from the FDA to support this muscular dystrophy study. Enrollment in the younger patient group is complete, and we are now working to address enrollment in the older patient cohort. Well, today I'm pleased to announce that we've applied for two FDA designations for our muscular dystrophy product candidate. The first is orphan drug designation. which is granted to products that address rare or orphan diseases. Such designation can result in an expedited FDA review process, waiver of FDA fees, and an extended exclusivity period after product approval. The second is rare pediatric disease designation, which is given to products that address diseases that primarily affect children. Upon FDA approval, this designation may result in a valuable priority review voucher from the FDA that can be used to accelerate approval of another product. And we should hear back on both these applications later this year. In addition to these company-sponsored programs, there are other preclinical and pilot patient studies of Ifetriban underway, including several investigator-initiated trials. We expect to have data available this year from studies, and we look forward to then sharing the results with you as we then decide on the best development path for iFitraBand, our first new chemical entity, which we believe has the potential to benefit many patients. So with that update on our clinical studies, I'd now like to turn it over to our Chief Financial Officer, John Hamm, to review our second quarter financial results. John?
John Hamm
Thank you, AJ. For the three months ended June 30th, 2024, net revenue from continuing operations was $9.9 million, an increase of 16% sequentially from the first quarter of 2024. Given this significant revenue growth, we continue to believe that our performance is best evaluated on an annual basis. Net revenue by product for the second quarter of 2024 included $4.1 million for Crystalos, $2.5 million for Vibatav, $2.2 million for Sancuso, and $0.8 million for Caldolor. Total year-to-date net revenues were $18.3 million. Year-to-date product revenues totaled $7.3 million for Crystalos, $4.1 million for Vibatav, $4 million for Sancuso, and $2.3 million for Caldolor. Turning to our expenditures, total operating expenses for the second quarter were $10.9 million. Year-to-date expenses totaled $21.2 million. That loss for the quarter was $1.1 million, and when the non-cash expenses are added back, the resolving adjusted earnings were $.2 million, which was a $.8 million improvement over the prior year period. Also, please note, that the adjusted earnings calculations do not include the additional benefit of the $0.6 million of Vibatav and Sancuso cost of goods during the second quarter. Those goods represent a non-cash item as they were received as part of each product's acquisition. We're pleased to see that the additions of Vibatav and Sancuso to our product portfolio continually to positively impact our financial performance. As a result of the Vibatav acquisition, a total of $34 million in new assets were added, including approximately $21 million in inventory, $12 million of intangible assets, and $1 million of goodwill. The financial terms for the Vibatav transaction included a $20 million payment upon closing and a subsequent $5 million milestone payment. We also continue to provide royalties tied to product sales. San Cuso added a total of $19 million in new assets, including $4 million in inventory and $14 million of intangibles. The estimated value of those assets was $11.6 million at the end of the second quarter. We provided $13.5 million at closing for the San Cuso acquisition, and we also paid $1.5 million in milestone payments There are ongoing royalties that we pay based on the brand sales. Turning to our balance sheet, as of June 30, 2024, we had $78.5 million in total assets, including $17.3 million in cash and cash equivalents. Liabilities totaled $52.5 million, including $16.1 million on our credit facility. Total shareholders' equity was $26 million at the end of the quarter. We continue to hold a bank line of credit which holds up to $20 million in capital and provides the ability for Cumberland to increase the amount to $25 million under certain conditions. The interest rate is based on benchmark term SOFR and is subject to one financial covenant determined on a quarterly basis. During the second quarter, we continued our corporate share repurchase program, buying a total of 77,000 shares. These repurchases included those on the open market and those needed to fund the taxes associated with employee vested restricted shares. We are also continuing the process of implementing new trading plans for our board members who will purchase Cumberland shares throughout the year to increase their holdings in the company. Lastly, I'd like to note that Cumberland continues to hold over $52 million in tax net operating loss carry-forwards, primarily resulting from the prior exercise of stock options. And that completes our financial report for the second quarter of 2024. Back to you, AJ.
A.J. Kazemi
Thank you, John. Well, overall, we've had a successful first half of the year, and we're pleased to report a strong second quarter financial performance. we remain dedicated to our mission of working together to provide unique products that improve the quality of patient care. We've pursued our mission by building a portfolio of FDA-approved brands that feature outstanding safety and efficacy profiles and that can make a difference in patient lives. We're particularly encouraged to see the growing number of states adding Crystallose to their Medicaid formularies. and we continue to see the positive impact of our sales and marketing initiatives that are supporting Sancuso and Vibatiff. Pleased to also share the publication highlighting Vibatiff's potential as an effective treatment for anthrax inhalation as well as the launch of our new packaging for the product. We're also encouraged by the progress of our Fit Your Band clinical studies as we continue to pursue therapeutic solutions for unmet medical needs. And we'd like to point out we have an active acquisition initiative underway as we seek selective FDA-approved brands to add to our portfolio and bolt onto our infrastructure. We'll continue in our efforts and look forward to future opportunities to carry out our mission and report on our progress through the remainder of this year and beyond. So now let's open the call to any questions. Operator, please proceed.
Operator
Thank you. At this time, we will conduct a question and answer session. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by.
A.J. Kazemi
Well, as we don't have any questions, we'd just like to thank everyone for joining today's call. We do understand that many of you prefer a private discussion with management, and if so, please feel free just to reach out, and we'll be happy to get such a call held with you and have such a discussion. As always, we appreciate your time and your interest in Cumberland, and we'll look forward to providing another update in the coming months.
Operator
Thank you. Ladies and gentlemen, that concludes today's call. If you would like to listen to a replay of the discussion, please visit the investor relations section on Cumberland's website. I would now like to thank you all for your participation. You may now disconnect.
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