Cumberland Pharmaceuticals: The first pharma IPO in nearly two years

Cumberland Pharmaceuticals (CPIX) IPO was the first by a pharmaceutical company in nearly two years. The company on Monday offered 5 million shares of common stock, initially priced at $17 per share, raising $85 million. This was below earlier projections of $19 to $21 a share cited in the SEC filing.

Nashville-based Cumberland is a specialty pharmaceutical company. It markets Acetadote, an injectable compound for the treatment of acetaminophen poisoning. Acetaminophen is the pain-relieving, fever-reducing ingredient in Tylenol and other prescription and over-the-counter medications. Total sales of Acetadote in 2008 were $25.4 million, of which, $24.3 million were to hospitals, according to the prospectus.
According to the American Association of Poison Control Centers' National Poison Data System, acetaminophen was the leading cause of toxic drug ingestions reported to poison control centers in the U.S. in 2007. Just recently, however, the FDA was considering lowering the daily recommended dosage of acetaminophen to combat the huge number of overdoses. While good for consumers, this could be tough for Cumberland.

Cumberland also markets Kristalose, a prescription-strength laxative. Data from IMS Health shows that sales of Kristalose were $344 million in 2008, of which Cumberland sold $9.5 million.

Then there is Caldolor. On June 11, Cumberland received FDA approval for Caldolor, an intravenous formulation of ibuprofen, the first injectable form of the drug available in the United States. The company is now preparing for the commercial launch of that product.

According to IMS Health, the U.S. market for injectable analgesics, or pain relievers, exceeded $332 million in 2008. This market is dominated by generic opioids such as morphine and meperidine, which are associated with a variety of side effects, and the non-steroidal anti-inflammatory drug ketorolac, which has a poor safety profile. Caldolor, then, represents a potentially safer alternative to ketorolac, so far the only non-opioid injectable pain relief drug available in the US. Given that ketorolac had 7 percent of the market in 2008, Caldolor could be a major opportunity for Cumberland.

For the years 2006, 2007 and 2008, Cumberland's net revenue was $17.8 million, $28.1 million and $35.1 million, respectively, and net income was $4.4 million, $4.0 million and $4.8 million, respectively. Sales for the quarter ended on March 31, 2009 were $9.4 million, up 13.2 percent from a year earlier, with a profit of $1.2 million, down from the $1.4 million recorded a year earlier.

Cumberland expects to net about $75.2 million from the offering, which will be used for potential acquisitions, additions to the company's sales force and the launch of Caldolor. It believes it can increase market share for Kristalose and Acedote, both of which, it claims, have strong growth potential. It also sees sees a significant product opportunity in Caldolor as it can provide an alternative to injectable pain relievers.

This IPO has been expected for a while, and Cumberland is a small and relative safe profitable company that markets already licensed drugs or ones just approved. Still, it was priced below estimates, indicating investors' hesitance. While it isn't likely there will be a sudden rush of IPOs, perhaps this first is yet another sign the pharma market is poised to get out of its doldrums.
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