Cumberland IPO now active: 10-year journey with Vanderbilt reaches milestone
By Milt Capps
UPDATED Aug. 11, 6:45 a.m.: Cumberland Pharmaceuticals [NASDAQ:CPIX] went effective 3 p.m. Aug. 10 and is listed this morning as CPIX on NASDAQ. The share price was set at $17 and the 5MM share offering was projected to raise $85MM in gross proceeds. Our story as originally reported:
A week ago, drivers from the Bowne financial printing company performed a ritual done thousands of times during the 234 years of Bowne's continuous operations.
They drove into Manhattan from a Bowne printing plant in New Jersey and deposited copies of Cumberland Pharmaceuticals' red-herring prospectus in the offices of the investment bankers managing Cumberland's much-anticipated initial public offering.
That timing and potential market reception to the new stock could be influenced by the fact that Memphis-based pharma GTX Inc. is due Monday to release it's quarterly earnings, and the company's stock was down a bit, this morning. (Another local, healthcare revenue-cycle player Emdeon Inc., which filed its 6th IPO amendment this morning, is expected to begin trading next week, and Dollar General is also believed moving toward an IPO.)
Signed-on to lead the IPO are UBS Investment Bank, Jefferies & Company and Wells Fargo Securites, with co-manager Morgan Joseph. The SEC filing indicates the costs of the transaction are more than $3.5 million.
After two years and three months on the SEC shelf, and a believed-to-be record 20 amendments, the prospective IPO boost comes shortly after Cumberland reported its fifth consecutive year of profitable operations, with $35 million in revenue and $4.8 million in net income.
The 10-year-old company's latest filing notes that the company has absorbed $14 million in private equity capital since its founding in 1999; and, as of March 31 the company had $2.7 million in retained earnings, "representing the amount by which our historical profits have exceeded our historical losses."
The prospectus indicates Vanderbilt now holds 60,000 shares of Cumberland stock, and will also receive a 2 percent royalty on sales of any product developed based on data Vanderbilt provided related to the use of intravenous ibuprofen for treatment of sepsis. That data has been crucial in development and FDA approval of Caldolor, the ibuprofen injectable Cumberland plans to commercially launch this fall, upon which the company pins much of his near-term hopes for sustained profitability and growth.
Founder, Chairman and CEO A. J. Kazimi, 51, whose 2008 compensation totaled just over $500,000, will probably find himself owning more than 3 million shares of CPIX after the IPO.
There could be some adrenaline coursing through the finger that is poised over the IPO trigger.
After all, in addition to the uncertain economy and the vagaries of the stock market, itself, Cumberland has dutifully laid out in its prospectus the obligatory 'parade of horribles'.
Reading through the 160-page prospectus and its recitation of numerous risks associated with Cumberland's business, a reader would have little trouble understanding why healthcare services, rather than bio or pharma, seems like more hospitable terrain for most Nashville angels or venture capitalists eyeing local startups.
The document contains the usual listing of intimidating regulatory, compliance, scientific, financial and competitive challenges, of course. But, there's also a long list of more obscure concerns.
For example, there's the fact that the active ingredient for the company's Kristalose drug is manufactured through a unique process in a single Inalco plant in Italy. As the company notes, a strike by Italian workers could make it impossible to meet demand for the product. Kristalose contributed $9.4 million, or nearly 27 percent, of Cumberland's 2008 net revenue.
Then, too, there's the possibility, remote or not, of a falling-out with CET co-owners Vanderbilt and Tennessee Technology Development Corporation (TTDC).
Cumberland needs to keep that Vanderbilt relationship in good health. Among other things, the SEC filing reveals the company is currently working with Vanderbilt researchers on "a new palliative treatment for fluid buildup in the lungs of cancer patients."
Also, it may be a good time to be a pharma salesperson in Nashville. While the largest share of IPO proceeds will, according to the company, probably go toward acquiring rights to additional products to commercialize, a solid $17 million or so will go to support Caldolor, Cumberland's new market entrant.
A big chunk of that Caldolor money will go toward hiring 47 new hospital sales reps to support Caldolor. Among the risks here: Not only is there uncertainty about the company's ability to recruit so many sales people; but, there are also questions regarding whether or not the soon-total 80 salespersons will prove sufficiently adaptible, should Cumberland gain access to and market new products outside its current acute care-emergency medicine and gastroenterology comfort areas.