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Omeclamox®-Pak, Ethyol®, RediTrex®, Totect® and Vibativ® | 12 Months Ended
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Dec. 31, 2018
Business Combinations [Abstract] |
Omeclamox®-Pak, Ethyol®, Totect® and Methotrexate® | Omeclamox®-Pak, Ethyol®, RediTrex®, Totect® and Vibativ® Omeclamox-Pak In December 2018, Cumberland completed an agreement with Gasto-enterlogics Inc. ("GEL") to acquire the remaining product rights associated with Omeclamox-Pak including the Product’s FDA-approved New Drug Application and the domestic and international trademarks. As part of the transaction, which was accounted for as an asset acquisition, Cumberland paid $2.3 million during 2018 and ended Cumberland’s payments of royalties and manufacturing fees to GEL. The Company has now assumed responsibility for the maintenance of the Product’s FDA approval and for the oversight of the Product’s manufacturing and packaging. This agreement follows the November 2015 agreement between Cumberland and GEL to assume the remaining commercial rights to Omeclamox-Pak for the United States. The Company had previously signed an agreement with Pernix Therapeutics ("Pernix") to jointly commercialize the product in the United States in October 2013. As part of the November 2015 GEL Agreement, Cumberland and Pernix terminated their arrangements. The $4.0 million upfront payment that the Company paid in October 2013 to Pernix along with the payments made to GEL during 2018 are included in product and license rights and are being amortized over the remaining expected useful life of the acquired asset. The Company evaluated the remaining expected useful life and maintained the existing estimated life of the product, June 2032. Omeclamox-Pak contributed $0.6 million, $1.8 million, and $2.5 million in net revenues during 2018, 2017, and 2016, respectively. Ethyol During May 2016, the Company announced an agreement with Clinigen Group Plc ("Clinigen") in which Cumberland acquired the exclusive rights to commercialize Ethyol in the United States. Ethyol is a FDA approved cytoprotective drug indicated as an adjuvant therapy to reduce the incidence of xerostomia (dry mouth) as a side-effect in patients undergoing post-operative radiation treatment for head and neck cancer. It also reduces the cumulative renal toxicity associated with the repeated administration of cisplatin in patients with advanced ovarian cancer. Under the terms of the agreement, Cumberland is responsible for all marketing, promotion, and distribution of the product in the United States. There were no upfront payments required under the agreement. Royalty payments ranging from 30% to 50% based on tiered levels of net sales are paid by Cumberland to Clinigen. The Company began generating revenue from the sale of Ethyol during the third quarter of 2016. Ethyol contributed $10.5 million, $10.8 million and $0.8 million in net revenues during 2018, 2017 and 2016, respectively. RediTrex In November 2016, the Company announced an Agreement to acquire the exclusive U.S. rights to Nordic Group B.V.’s ("Nordic") injectable methotrexate product line. The products are designed for the treatment of active rheumatoid arthritis, juvenile idiopathic arthritis, severe psoriatic arthritis, and severe disabling psoriasis. The product line is approved for patient use in various European countries and Cumberland is in the process of registering and commercialize the products in the United States. Under the terms of the Agreement, Cumberland is responsible for the products’ FDA submission and registration. The regulatory submission are based on the dossier provided by Nordic. As consideration for the license, Cumberland paid a deposit of $100,000 and recorded an initial liability of $900,000 provided through 180,000 unvested restricted shares of Cumberland stock, valued on November 15, 2016, that will fully vest upon the FDA approval of the first Nordic product. Cumberland will also provide Nordic a series of payments tied to the products’ FDA approval, launch and achievement of certain sales milestones. Nordic will be responsible for manufacturing and supply of the products. The 180,000 shares of unvested restricted Cumberland stock was reflected in other current liabilities in the consolidated balance sheet and were valued at $1.1 million and $1.3 million at December 31, 2018 and 2017, respectively. Totect During January 2017, the Company announced an agreement with Clinigen in which Cumberland acquired the exclusive rights to commercialize Totect in the United States. Totect is an FDA-approved hospital based emergency oncology intervention drug, indicated to treat the toxic effects of anthracycline chemotherapy. It treats anthracycline extravasation that occurs when the injected medication escapes from the blood vessels and circulates into surrounding tissues in the body, causing severe damage and serious complications. The Company launched Totect during a national shortage of dexrazoxane, resulting in strong initial demand for the product. It's our second oncology support product and the second product licensed to us through our Strategic Alliance with Clinigen. Under the terms of the agreement, Cumberland is responsible for all marketing, promotion, and distribution of the product in the United States. There are no upfront payments required under the agreement. Royalty payments ranging from 30% to 50% based on tiered levels of net sales are paid by Cumberland to Clinigen. The Company began generating revenue from the sale of Totect during the third quarter of 2017. Totect contributed approximately $0.9 million and $4.0 million in net revenue during 2018. and 2017, respectively. Vibativ During November 2018, the Company closed on an agreement with Theravance Biopharma ("Theravance") to acquire the global responsibility for Vibativ including the marketing, distribution, manufacturing and regulatory activities associated with the brand. Vibativ is a patented, FDA approved injectable anti-infective for the treatment of certain serious bacterial infections including hospital-acquired and ventilator-associated bacterial pneumonia and complicated skin and skin structure infections. It addresses a range of Gram-positive bacterial pathogens, including those that are considered difficult-to-treat and multidrug-resistant. Cumberland acquired Vibativ to further add to its product offerings, increase its net revenue and positively contribute to the Company's operating results. Cumberland is evaluating the tax deductibility of the goodwill acquired in the acquisition. Cumberland has accounted for the transaction as a business combination in accordance with ASC 805 and the product sales are included in the results of operations subsequent to the acquisition date. The Company paid an upfront payment of $20.0 million with a $5.0 million cash payment due in early 2019. In addition, Cumberland has agreed to pay a royalty of up to 20% on future net sales of the product. The future royalty payments are required to be recognized at their acquisition-date fair value as part of the contingent consideration transferred in the business combination. The following table summarizes the initial payments and consideration for the business combination:
Consideration: |
Cash paid at closing | $ | 20,000,000
Cash payment during early 2019 | 5,000,000
Fair value of contingent consideration - net sales royalty | 9,034,000
Total consideration | $ | 34,034,000
The contingent consideration liability represents the future net sales royalty payments discussed above. Cumberland prepared the valuations of the contingent consideration liability and the intangible assets utilizing significant unobservable inputs. As a result, the valuations are classified as Level 3 fair value measurements. The Company will continue to evaluate the assets acquired and liabilities assumed during the measurement period. Vibativ contributed $5.1 million in net revenues during 2018. The pro-forma effects of the acquisition on the consolidated financial statements were not deemed meaningful for disclosure purposes. The following table presents the changes in the Company's Level 3 contingent consideration liability that is measured at fair value on a recurring basis. The current and long-term portions of this liability are disclosed in Note 8. The contingent consideration earned and accrued in operating expenses is paid to the seller quarterly.
| Contingent consideration liability
Balance at November 12, 2018 | $ | 9,034,000
Change in fair value of contingent consideration included in operating expenses | (40,000)
Contingent consideration earned and accrued in operating expenses | 508,000
Balance at December 31, 2018 | $ | 9,502,000
The following table summarizes the preliminary allocation of the fair values of the assets acquired as of the acquisition date for Vibativ:
Finished goods inventory | $ | 6,624,000
Work in process - unlabeled vials | 3,970,000
Work in process - validation vials | 1,827,000
Raw materials | 9,129,000
Total inventory | $ | 21,550,000
Intellectual property amortizable intangible assets | $ | 11,700,000
Goodwill | 784,000
Total intangibles and goodwill | $ | 12,484,000
Total assets acquired | $ | 34,034,000

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