Cumberland Pharmaceuticals Inc. Annual Report 2014

FY2014 Annual Report · Cumberland Pharmaceuticals Inc.

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Focused.Forward.

2 0 1 4 A n n u a l R e p o r t

Cumberland Pharmaceuticals was founded 15 years ago with a
straightforward mission: to improve the quality of patient care by
addressing poorly met medical needs. Today, we are fulfilling that
mission through a diverse portfolio of prescription products. With a
focus on underserved niche markets, including hospital acute care
and gastroenterology, we continue to expand our reach – growing
existing brands, adding innovative products and forging partnerships
around the globe.

A formulation
for success

During the past year, we strengthened
our position with the acquisition of
Vaprisol®, an intravenous treatment for
hyponatremia used in the critical care
setting, while building demand for our
established products including:

• Acetadote® (acetylcysteine) Injection,
the market leader for treatment of
acetaminophen poisoning;

• Caldolor® (ibuprofen) Injection, the

first injectable treatment for pain and
fever approved in the United States;

• Kristalose® (lactulose) for Oral
Solution, the only prescription
laxative for the treatment of acute
and chronic constipation available in
a powder formulation; and
• Omeclamox®-Pak, the newest
combination brand for treating
Helicobacter pylori infection and
related duodenal ulcer disease.

In addition to our marketed products,
we continue to develop Hepatoren®
(ifetroban) Injection for the treatment
of hepatorenal syndrome, a life-
threatening condition involving kidney
failure for which there is no FDA-
approved pharmaceutical treatment.

As a specialty pharmaceutical company
with proven product development and
commercialization capabilities, our
strategy is straightforward. We aim
to grow our portfolio while sustaining
profitability. Cumberland has overcome
challenges in recent years – emerging
stronger than ever. With a renewed
focus and a solid financial foundation
upon which to build, we will:

• continue to diversify our offerings;
• pursue acquisitions of select
commercial and late-stage
development assets that
complement our infrastructure;
• advance our internal pipeline of
product candidates to develop
promising new medicines; and
• work to maximize the potential of
our established brands through
expanded labeling and strategic

marketing.

Throughout it all, we remain focused on
delivering value to shareholders and,
more importantly, improving the lives of
patients around the world.

For complete information about our
products, please visit our product
websites, which can be accessed
through cumberlandpharma.com.

Corporate Update

To Our Shareholders, Employees & Partners:

Cumberland rebounded strongly during 2014
returning to growth and profitability. We ended the
year with revenues growing 15% to $37 million
and adjusted earnings of $6.3 million or $0.35
per share.

With the addition of our two newest products, our
revenue stream is now more diverse than ever
before. During 2014, we completed the acquisition
of Vaprisol® just a few months after adding
Omeclamox®-Pak to our portfolio. We launched
active promotion of both brands in 2014 and are
encouraged by their initial contributions, as well as
the favorable response we have received from the
medical community.

Meanwhile, Kristalose® grew to be our largest
brand in 2014 following the successful launch of its
new positioning. Acetadote® sales stabilized during
the year and remained an important contributor to
our business as we continued to maintain a majority
market share between shipments of the brand and
our Authorized Generic. Caldolor® continued its
steady growth with additional hospitals stocking the
product every month and increasing pull through
sales in the stocked accounts. International sales
of our products grew during 2014, buoyed by strong
Caldolor sales in South Korea following its launch
there earlier in the year.

Our financial profile remained strong. We ended
the year with $55 million in cash and investments,
and no debt. During 2014 the Company structured a
new senior credit facility for up to $20 million with
SunTrust Bank. We also arranged $2 million in new
funding for our research activities at CET, which
included an investment from our international
partner, China’s Gloria Pharmaceuticals.

We secured and listed new patents for Acetadote
and Caldolor in 2014 and completed our two key
Caldolor pediatric studies. This important new
pediatric data will be the catalyst for an updated
labeling request to the FDA for the brand.

I was pleased with our progress in 2014 and am
confident that our best days are ahead of us. I
would like to acknowledge and thank my colleagues
at Cumberland for all their fine efforts.

Our strategy is to maximize the full potential of our
commercial brands and pursue opportunities to
further expand our portfolio through our business
development efforts and advancement of our
internal pipeline. We are confident that Cumberland
remains in a position to do just that, supported by
our strong financial position. Most importantly,
we remain focused on our mission of advancing
patient care through the delivery of high quality
pharmaceutical products.

With best wishes,

A.J. Kazimi
Chairman and
Chief Executive Officer

JANUARY 2014
Cumberland begins promotion and
distribution of Omeclamox®-Pak
Cumberland’s field sales force
begins promoting Omeclamox-Pak
to gastroenterologists across the
nation.

MARCH 2014
Cumberland announces acquisition
of Vaprisol® from Astellas Pharma
Cumberland acquires all assets
and assumes full responsibility to
market, distribute and manufacture
Vaprisol.

MAY 2014
Cumberland and Gloria
Pharmaceuticals announce
joint research and development
investment
China’s Gloria Pharmaceuticals
and Cumberland together invest $2
million in Cumberland Emerging
Technologies to accelerate the
development of new product
candidates from regional research
centers. CET is majority owned by
Cumberland in partnership with
Vanderbilt University, the state of
Tennessee and Gloria – our new
international partner.

2014

Milestones

MARCH 2014
Caldolor® reduces fever in
pediatric patients
Data from a pediatric study
demonstrates the safety and
efficacy of Caldolor in reducing fever
in hospitalized children. Caldolor
is associated with statistically
significant reduction in temperature
within the first two hours of dosing.

MAY 2014
Cumberland reports return to
profitability
In its first quarter earnings release,
Cumberland reports its return
to profitability through growth in
sales of established brands and the
addition of new product sales.

MAY 2014
Cumberland launches Vaprisol®
promotion
Cumberland launches active sales
and marketing campaign to support
Vaprisol.

OCTOBER 2014
Caldolor® improves recovery in
adult surgery patients
Results from an investigator study
show preoperative intravenous
ibuprofen improved the overall
quality of recovery including
comfort, emotion and pain in
patients undergoing laparoscopic
cholecystectomy (gallbladder
removal) surgery.

CPIX at a Glance

Selected Financial Data

(dollars in thousands except per share data)

2010

2011

2012

2013

2014

Net Revenues
Operating Income (Loss)
Operating Margin
Net Income (Loss)
Diluted Earnings (Loss) per Share
Total Assets
Long-Term Obligations
Shareholders’ Equity

$ 45,876
6,502

$ 51,143
9,849

$ 48,851
8,818

$ 32,027
(3,801)

$ 36,902
3,559

14.2 %

19.3 %

18.1 %

(11.9) %

9.6 %

2,427
0.12
92,054
7,802
77,715

5,628
0.28
95,518
5,438
82,835

5,806
0.30
98,594
4,972
85,566

(2,152)
(0.11)
87,614
776
79,292

2,362
0.14
95,405
903
80,753

Supplemental Financial Measures (1)

Adjusted Earnings (Loss)
Adjusted Margin
Adjusted Diluted Earnings
(Loss) per Share

$ 8,249

$ 11,669

$ 10,356

$ (1,825)

$ 6,310

18.0 %

22.8 %

21.2 %

(5.7) %

17.1 %

0.39

0.57

0.52

(0.10)

0.35

Reconciliation of Net Income (Loss) Attributable to Common Shareholders to
Adjusted Earnings and Adjusted Diluted Earnings Per Share (1)
(Unaudited)

(dollars in thousands except per share data)

2010

2011

2012

2013

2014

Net Income (Loss) Attributable to
Common Shareholders
Less: Net Loss at Subsidiary Attributable
to Noncontrolling Interests
Net Income (Loss)
Adjustments to Net Income (Loss)
Income Tax Expense (Benefit)
Depreciation and Amortization Expense
Share-Based Compensation Expense
Interest Income
Interest Expense
Adjusted Earnings

$ 2,457

$ 5,658

$ 5,842

$ (2,105)

$ 2,424

30
2,427

30
5,628

36
5,806

47
(2,152)

62
2,362

2,851
978
769
(200)
1,424
$ 8,249

4,080
1,040
779
(211)
353
$ 11,669

3,245
902
636
(305)
72
$ 10,356

(1,523)
1,302
675
(230)
103
$ (1,825)

1,381
1,990
761
(251)
67
$ 6,310

Adjusted Diluted Earnings per Share
Diluted Weighted-Average Common
Shares Outstanding:

0.39

0.57

0.52

(0.10)

0.35

21,059

20,572

19,788

18,333

17,900

(1) The supplemental financial measures are Non-GAAP as defined, the reconciliation of these supplemental measures is above.

No.1

Market position of Acetadote®
combined with Cumberland’s
Authorized Generic

1,000+

The number of medical
facilities that have stocked
Caldolor® in the United States

Acetadote®

Caldolor®

Launched in 2004, Acetadote® (acetylcysteine)
Injection was the first injectable treatment for
acetaminophen overdose available in the
United States.

As Cumberland’s first product, it demonstrated
the Company’s ability to successfully develop and
commercialize a drug. Used primarily in emergency
rooms and intensive care units, Acetadote has been
proven to prevent or lessen liver damage from an
overdose of acetaminophen, a common ingredient
in many over-the-counter and prescription
medications. Though safe at recommended doses,
acetaminophen can cause liver damage with
excessive dosing and is a leading cause of drug
poisoning in the U.S. Acetadote has become a
standard of care for treating this potentially life-
threatening condition.

Following expanded labeling for a pediatric
indication in 2006 and additional safety data in
2008, Cumberland received FDA approval on a
new formulation of Acetadote in 2011. Labeling
was updated again in 2013 to revise the product’s
indication and include new dosing guidance for
specific patient populations.

Also in 2013, Cumberland began a new chapter with
the introduction of its Authorized Generic. Despite
new competition, the Company continues to enjoy
a majority share of the market between sales of
the brand and its Authorized Generic. Acetadote
remains an important contributor to Cumberland’s
business.

Caldolor® (ibuprofen) Injection is the first FDA-
approved intravenous treatment for both pain
and fever.

Following clinical studies in more than 900 patients,
Cumberland completed development and secured
regulatory approval of the drug in 2009. Today it is
stocked in more than 1,000 medical facilities around
the country where it is used primarily in adult
patients who are unable to receive oral therapies for
pain relief or fever reduction.

Clinical trials have shown Caldolor to be safe and
effective – significantly reducing fever, pain and
opioid consumption while providing beneficial
anti-inflammatory effects. Because it can be safely
administered prior to, during or after surgical
procedures, Caldolor offers distinct benefits to
physicians treating post-operative pain. In addition
to working peripherally at the site of trauma, it acts
centrally to blunt the perception of pain.

Caldolor saw record growth in 2014 with additional
hospitals stocking the product and increased usage
in facilities where the product is already available.
Marketed by our hospital sales force, we continue to
focus on expanding use and creating demand in key
hospitals where the product is on formulary.

As Caldolor’s reach grows, several new studies
underscore its safety and efficacy in treating both
adult and pediatric patients. In October 2014, an
investigator study showed Caldolor improved the
overall quality of recovery in patients undergoing
laparoscopic cholecystectomy surgery when
administered preoperatively. In addition to
improving comfort, emotion and pain, the drug
reduced fatigue in the early postoperative period
and decreased production of the stress hormones
catecholamines and cortisol.

Results of our pediatric study presented this year
also showed that Caldolor was more effective than
oral or suppository acetaminophen in reducing
fever in hospitalized children.

Martin Cearnal | Senior Vice President,
Marketing & Sales and Chief
Commercial Officer
Cumberland Pharmaceuticals

“Our ability to maintain Acetadote’s position as market leader in the midst of generic competition while
simultaneously growing demand for Caldolor demonstrates our ability to execute on our strategy.
Working from a position of strength, we’ll continue to focus on building these brands.”

77%

The percentage of patients
who preferred Kristalose®
over liquid products

10 Days

Omeclamox®-Pak has
been shown to eradicate
H. pylori in up to 90% of
patients in just 10 days

James L. Herman | Vice President of National Accounts
and Chief Compliance Officer
Cumberland Pharmaceuticals

“Our gastroenterology products have been a significant driver of growth for
the Company. With the addition of Omeclamox-Pak and the repositioning of
Kristalose, we are creating increased demand while while maximizing the
use of our internal resources. We see a bright future for both brands.”

Kristalose®

Omeclamox®-Pak

As the only prescription laxative available in a
powder formulation, Kristalose® (lactulose) for Oral
Solution provides patients with distinct benefits.

A unique, dry powder crystalline formulation
of lactulose used to treat chronic and acute
constipation, Kristalose is the only prescription
laxative available in pre-measured powder packets,
making it easily portable. Kristalose dissolves
quickly in four ounces of water, offering patients a
virtually taste-free, grit-free and essentially calorie-
free alternative to lactulose syrups. A preference
trial shows 77 percent of patients surveyed prefer
the taste, consistency and portability of Kristalose
over similar products in syrup forms.

Since acquiring exclusive U.S. commercial rights to
Kristalose in 2006, Cumberland has marketed the
product to gastroenterologists, internists and other
high prescribers of laxatives. Using the preference
data as a cornerstone of our marketing efforts,
we have made significant gains following our
repositioning of the brand in early 2014. The new
marketing strategy includes an enhanced coupon
program for the product, which allows us to provide
additional support to patients. As a result of these
efforts, Kristalose now ranks as the Company’s top
selling product.

Omeclamox®-Pak is a branded prescription
product that combines three well-known and
widely prescribed medications for the treatment of
Helicobacter pylori (H. pylori) infection and related
duodenal ulcer disease. Packaged together for
patient convenience, Omeclamox-Pak combines
omeprazole, amoxicillin and clarithromycin in a
simple-to-follow 10-day course of therapy that
has been shown to eradicate H. pylori in up to 90
percent of patients.

It is the first FDA-approved triple therapy
combination medication to contain omeprazole
as the proton pump inhibitor, which works to
decrease the amount of acid the stomach produces.
Amoxicillin and clarithromycin are both antibiotic
agents, which allow the stomach to heal by
hindering the growth of H. pylori.

After acquiring rights to the brand through an
agreement with Pernix Therapeutics in October
2013, Cumberland’s field sales force began
promoting the product to the gastroenterology
market alongside Kristalose in January 2014.
Under the terms of the agreement, Cumberland
is responsible for the product’s U.S. marketing
and distribution, as well as promotion to
gastroenterologists, while Pernix promotes the
product to select primary care and other physicians.

In the year since its launch, Omeclamox-Pak has
proven to be an excellent strategic fit as evidenced
by a significant increase in prescriptions among our
target physicians.

1in4Hospital Intensive Care

Unit patients suffer from
hyponatremia

450k

Number of patients in the
U.S. with conditions that can
lead to hepatorenal syndrome

Vaprisol®

Hepatoren®

Cumberland’s newest drug, Vaprisol®, is a
prescription product indicated for the treatment
of hospitalized patients with hyponatremia, a
common electrolyte disturbance in which the
sodium ion concentration in blood plasma is lower
than normal. Hyponatremia can be associated
with a variety of critical care conditions including
congestive heart failure, liver failure, kidney failure,
cancer and pneumonia. Because the symptoms of
hyponatremia can be subtle, it can go unrecognized
and untreated – often resulting in longer hospital
stays or poor outcomes.

As one of only two branded products indicated for
the treatment of hyponatremia, Vaprisol is the first
and only intravenously administered vasopressin
receptor antagonist. It works by reducing excess
water to increase serum sodium concentration and
regulate the water/sodium balance in hospitalized
patients. Because it is used exclusively in hospitals,
the product complements the activities of the
Company’s hospital sales force, which promotes
Acetadote and Caldolor.

Developed and launched commercially by Astellas
Pharma US in 2006, Cumberland announced the
acquisition of Vaprsiol in March 2014. Following the
launch of a promotional campaign to support the
product, our sales force began actively marketing
it in May with many physicians expressing their
interest in seeing support for this product return.

Hepatoren® is being developed as an injectable
formulation to treat patients suffering from
hepatorenal syndrome, a life-threatening condition
involving progressive kidney failure for which there
is no FDA approved pharmaceutical treatment.
Approximately 450,000 patients in the United States
suffer from medical conditions that make them
susceptible to cirrhosis and a subset of these
patients develop hepatorenal syndrome every year.

Cumberland acquired the rights to ifetroban from
Cumberland Emerging Technologies (CET) in early
2011 and began developing it under the brand
name Hepatoren. Ifetroban had previously been
developed by a large pharmaceutical company
through seven Phase II studies targeting significant
cardiovascular indications. That development
program did not meet all of its goals for these
indications, and the product was subsequently
donated to Vanderbilt University. Researchers at
Vanderbilt identified ifetroban as a safe, active, and
potentially valuable compound in treating patients
for several new indications. Vanderbilt partnered
with CET, Cumberland’s majority-owned subsidiary,
to transfer all of the data and manufacturing
associated with this product.

Hepatoren is progressing through clinical
development in patients suffering from life-
threatening liver and kidney failure. We continue to
evaluate the product in a group of leading medical
research centers across the U.S.

Amy Dix Rock, Ph.D. | Senior Director,
Regulatory & Scientific Affairs
Cumberland Pharmaceuticals

“Whether reintroducing a brand to the market or developing a new product candidate, our goal is the
same: to provide innovative solutions that address poorly met medical needs. Both of these products
not only represent significant opportunity for our Company, but also offer promising treatment for
critically ill patients.”

Expanding our Global Presence

Cumberland relies on a carefully selected network of distinguished
partners to bring our products to a growing number of countries around
the world. Partnering exclusively with companies that offer an established
infrastructure and demonstrated success in the registration and distribution
of branded products allows us to focus on what
we do best: acquiring, developing and
commercializing innovative
prescription products.

Canada—
Alveda Pharmaceuticals Inc.
is our commercial partner
for Caldolor®

Tennessee—
Cardinal Health Inc. facility
provides warehousing, shipping
and other distribution support for
our products in the U.S.

Venezuela—
Valmorca is our commercial
partner for Caldolor®

Latin America—
Grifols is our commercial
partner for Caldolor®

Spain & Portugal—
Grifols is our commercial
partner for Caldolor®

Arabian Gulf —
GerminMed is our commercial
partner for Caldolor® and
Acetadote®

India—
Sandor Medicaids Pvt. Ltd. is our
commercial partner for Caldolor®

China—
Harbin Gloria Pharmaceuticals
Co. Ltd is our commercial partner
for Caldolor® and Acetadote®, as
well as an investor in Cumberland
Emerging Technologies

South Korea—
DB Pharm Korea Co. Ltd.
is our commercial partner
for Caldolor®

Indonesia & Pacific Rim—
The SOHO Group is our
commercial partner for Caldolor®

Australia &
New Zealand—
Phebra Pty Ltd. is our commercial
partner for Acetadote®

bioCSL Pty Ltd. is our commercial
partner for Caldolor®

Building a
long-term pipeline

Cumberland is committed to identifying and
nurturing early stage product candidates through
its majority-owned subsidiary, Cumberland
Emerging Technologies (CET). Established
in partnership with Vanderbilt University and
Launch Tennessee, CET bridges the development
gap between the research laboratory and the
commercial marketplace by providing researchers,
universities and entrepreneurs with a commercial
development infrastructure for promising biomedical
technologies.

CET partners with leading academic research
centers throughout the mid-south region of the
United States to evaluate emerging technologies
with high commercial potential. By teaming
with scientists to develop promising candidates,
Cumberland is building a long-term pipeline while
accelerating biomedical innovation. This strategy
paved the way for the Company’s acquisition of
ifetroban, which is currently being developed under
the brand name Hepatoren, from CET in 2011.

In May, Cumberland and China’s Gloria
Pharmaceuticals made a combined $2 million
investment in CET as part of a joint research and
development initiative. The funds will be used to
accelerate development of CET’s pipeline of new
product candidates emerging from Vanderbilt
University and other regional research centers.
Gloria Pharmaceuticals, which also serves as
Cumberland’s commercial partner for Acetadote®
and Caldolor® in China, will have the first opportunity
to negotiate a license to CET products for China
while Cumberland will retain access to CET’s
products for the rest of the world.

CET Life
Sciences
Center

In addition to its partnerships with leading academic research centers,
CET fosters innovation through the CET Life Sciences Center, a business
incubator facility that provides laboratory and office space, equipment
and infrastructure to early-stage biomedical companies. Located in the
heart of downtown Nashville and just minutes away from the Vanderbilt
University medical research facilities, the recently expanded facility offers
a collaborative setting to support other life sciences initiatives.

2014
Financial
Review

CPIX Design 2014 10K cover page.indd 1

3/11/15 1:57 PM

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Index

Page Number

PART I

Item 1: Business

Item 1A: Risk Factors

Item 1B: Unresolved Staff Comments

Item 2: Properties

Item 3: Legal Proceedings

PART II

Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities

Item 6: Selected Financial Data

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of
Operations

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

Item 8: Financial Statements and Supplementary Data

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

Item 9A: Controls and Procedures

Item 9B: Other Information

PART III

PART IV

Item 15: Exhibits, Financial Statement Schedules

SIGNATURES

PART I

Item 1. Business.

THE COMPANY

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 products. Our primary target markets are hospital acute care and gastroenterology. These medical
specialties are characterized by relatively concentrated prescriber bases that we believe can be penetrated effectively
by small, targeted sales forces. Cumberland is dedicated to providing innovative products that improve quality of care
for patients and address unmet or poorly met medical needs. We market and sell our approved products through our
hospital and gastroenterology sales forces in the United States and are establishing a network of international partners
to bring our products to patients in their countries.

Our product portfolio 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 chronic

and acute constipation;

• Omeclamox®-Pak, (omeprazole, clarithromycin, amoxicillin) for the treatment of Helicobacter

pylori (H. pylori) infection and related duodenal ulcer disease;

• Vaprisol® (conivaptan) Injection, to raise serum sodium levels in hospitalized patients with

euvolemic and hypervolemic hyponatremia;

• Hepatoren® (ifetroban) Injection, a Phase II candidate for the treatment of critically ill
hospitalized patients suffering from liver and kidney failure associated with hepatorenal
syndrome ("HRS"); and

• Boxaban™ (ifetroban) oral capsules, a Phase II candidate for the treatment of patients with

aspirin-exacerbated respiratory disease (AERD).

We have both product development and commercial capabilities, and believe we can leverage our existing
infrastructure to support our expected growth. Our management team consists of pharmaceutical industry veterans
experienced in business development, product development, regulatory, manufacturing, sales, marketing and finance.
Our business development team identifies, evaluates and negotiates product acquisition, in-licensing and out-licensing
opportunities. Our product development team develops proprietary product formulations, manages our clinical trials,
prepares all regulatory submissions and manages our medical call center. Our quality and manufacturing professionals
oversee the manufacture and release of our products. Our marketing and sales professionals are responsible for our
commercial activities, and we work closely with our distribution partners to ensure availability and delivery of our
products.

Cumberland's growth strategy involves maximizing the potential of our existing brands while continuing to build
a portfolio of differentiated products. We currently market five products approved for sale in the United States. Through
our international partners, we are working to bring our products to patients in countries outside the U.S. We also look
for opportunities to expand our products into additional patient populations through clinical trials, new indications, and
select investigator-initiated studies. We actively pursue opportunities to acquire additional marketed products as well
as late-stage development product candidates in our target medical specialties. Further, we are supplementing these
activities with the pipeline drug development activities at Cumberland Emerging Technologies ("CET"), our majority-
owned subsidiary. CET partners with universities and other research organizations to identify and develop promising,
early-stage product candidates, which Cumberland has the opportunity to further develop and commercialize.

We were incorporated in 1999 and have been headquartered in Nashville, Tennessee since inception. During 2009,
we completed an initial public offering of our common stock and listing on the NASDAQ exchange. Our website
address is www.cumberlandpharma.com. We make available through our website our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all other press releases, filings and amendments
to those reports as soon as reasonably practicable after their filing with the U.S. Securities and Exchange Commission,
(“SEC”). These filings are also available to the public at www.sec.gov.

PRODUCTS

Our key products include:

Products

Indication

Acetadote®

Caldolor®

Kristalose®

Acetaminophen Poisoning

Pain and Fever

Chronic and Acute Constipation

Status

Marketed

Omeclamox®-Pak

H. pylori infection and related Duodenal Ulcer disease

Marketed

Vaprisol®

Hepatoren®

BoxabanTM

Acetadote

Euvolemic and Hypervolemic Hyponatremia

Hepatorenal Syndrome

Aspirin-Exacerbated Respiratory Disease

Marketed

Phase II

Acetadote is an intravenous formulation of N-acetylcysteine, or ("NAC"), indicated for the treatment of
acetaminophen poisoning. Acetadote, has been available in the United States since Cumberland's 2004 introduction of
the product through our hospital sales force. Acetadote is typically used in hospital emergency departments to prevent
or lessen potential liver damage resulting from an overdose of acetaminophen, a common ingredient in many over-the-
counter and prescription pain relieving and fever-reducing products. Acetaminophen continues to be the leading cause
of poisonings reported by hospital emergency departments in the United States, and Acetadote has become a standard
of care for treating this potentially life-threatening condition.

Acetadote received U.S. Food and Drug Administration ("FDA") approval as an orphan drug, which provided
seven years of marketing exclusivity from the date of approval. In connection with the FDA's approval of Acetadote,
we committed to certain post-marketing activities for the product. Completion of our first Phase IV commitment resulted
in the FDA's 2006 approval of expanded labeling for the product for use in pediatric patients. Completion of our second
Phase IV commitment in 2006 resulted in further revised labeling for the product with FDA approval of additional
safety data in 2008. Completion of our third and final Phase IV commitment in 2010 culminated in the FDA’s approval
of a new formulation for the product. The next generation formulation, contains no ethylene diamine tetracetic acid
("EDTA") or other stabilization agent, chelating agent or preservative. In early 2011, Cumberland introduced this new
Acetadote formulation replacing the original formulation which we no longer manufacture.

Beginning in 2012, the United States Patent and Trademark Office (the "USPTO") issued us a series of patents
associated with our Acetadote product. These patents are discussed in Part I, Item I, "Business - Trademarks and
Patents" of this Form 10-K. On November 8, 2012, we learned that the FDA approved an abbreviated new drug
application (ANDA) filed by InnoPharma, Inc. and referencing Acetadote. That product, with the old formulation
containing EDTA, was subsequently introduced by APP, a division of Fresenius Kabi USA, at the end of 2012. In early
2013, we entered into an agreement with Perrigo Company resulting in the distribution of our Authorized Generic
acetylcysteine injection (the "Authorized Generic") product. Both Acetadote and our Authorized Generic utilize the

new, EDTA-free formulation which accounted for significant market share during 2014. We are seeking additional
claims to protect our intellectual property associated with Acetadote through patent applications relating to Acetadote
which are pending with the USPTO. We intend to vigorously defend and protect our Acetadote product and related
intellectual property rights.

In June 2013, the FDA approved updated labeling for Acetadote revising the product's indication and providing
new dosing guidance for specific patient populations. As a result, dosing guidance is now included for patients weighing
over 100 kg and new language has been added to alert health care providers that in certain clinical situations, therapy
should be extended for some patients.

Caldolor

Caldolor, our intravenous formulation of ibuprofen, was the first injectable product approved in the United States
for the treatment of both pain and fever. We conducted a series of clinical studies in over nine hundred adult patients
to develop the data to support our submission for FDA approval. The FDA approved Caldolor for marketing in the
United States during the middle portion of 2009 following a priority review. The product is indicated for use in adults
for the management of mild to moderate pain, for the management of moderate to severe pain as an adjunct to opioid
analgesics, and for the reduction of fever.

In late 2009, we launched Caldolor and stocked the product at major wholesalers serving hospitals nationwide.
We initially worked to establish a core group of medical facilities approving and purchasing the product and then
focused on building more sales volume and treating a broader range of patients within those stocked facilities. We
promote Caldolor in the United States through our dedicated hospital sales force.

We completed a series of Phase IV studies to gather additional data to support our Caldolor product. Those completed
studies involved another 1,000 patients. The studies included evaluation of the product for the treatment of pediatric
pain and pediatric fever in order to address our Phase IV commitment to the FDA for Caldolor. Also included in these
studies were an evaluation of a shortened infusion time for the product and pre-surgical administration. The data from
these Phase IV studies, including an updated integrated safety database, was submitted to the FDA in early 2015 with
a request for updated labeling for the product. We also continue to pursue and evaluate potential improvements to the
product’s packaging.

Kristalose

Kristalose is a prescription laxative administered orally for the treatment of acute and chronic constipation. An
innovative, dry powder crystalline formulation of lactulose, Kristalose is designed to enhance patient compliance and
acceptance. Kristalose is the only prescription laxative available in pre-measured powder packets. Kristalose dissolves
easily in four ounces of water, offering patients a virtually taste-free, grit-free and essentially calorie-free alternative
to lactulose syrups. We conducted a preference study which indicated that seventy seven percent of patients surveyed
prefer the taste, consistency and portability of Kristalose over similar products in syrup forms.

We acquired exclusive U.S. commercialization rights to Kristalose in 2006, assembled a dedicated field sales force
and re-launched the product in September 2006 as a Cumberland brand. We direct our sales efforts to physicians who
are the most prolific writers of prescription laxatives, including gastroenterologists and internists. Using the preference
data as a cornerstone of our marketing efforts, we have made significant gains following our repositioning of the brand
in early 2014. The new marketing strategy includes an enhanced patient coupon program and expanded managed care
coverage for the product. As a result of these efforts, Kristalose grew to be our top selling product in 2014.

In late 2011, through a series of transactions, we entered into an agreement with Mylan Inc. to acquire certain
assets associated with the Kristalose brand including the Kristalose trademark and the FDA registration. During 2014,
we also entered into a long-term supply agreement and new packaging agreements for the product. By entering into
these transactions, we streamlined the supply chain for the product and are exploring opportunities to further develop
the brand.

Omeclamox-Pak

We launched our promotion and distribution efforts to support Omeclamox-Pak in early 2014. Our field sales
force promotes Omeclamox-Pak to the gastroenterologist segment, which accounts for the largest component of the
prescriber base for this product. Omeclamox-Pak is a branded prescription product used for the treatment of Helicobacter
pylori (H. pylori) infection and duodenal ulcer disease. This innovative product combines three well-known and widely
prescribed medications: omeprazole, clarithromycin, and amoxicillin. Omeclamox-Pak is the first FDA approved triple
therapy combination medication to contain omeprazole as the proton pump inhibitor, which works to decrease the
amount of acid the stomach produces. Clarithromycin and amoxicillin are both antibiotic agents which hinder the
growth of H. pylori. Interaction of these agents allows the stomach lining to heal effectively. The medications are
packaged together on convenient daily dosing cards, making it simple to follow the twice a day dosing before meals.

While there are competing products, Omeclamox-Pak is one of the few actively marketed products for this condition.
In addition, compared to the competing branded products, Omeclamox-Pak combines the lowest pill burden and fewest
days of therapy. Our involvement with Omeclamox-Pak began in October 2013, through an agreement with Pernix
Therapeutics ("Pernix"). Pernix continues to promote the product through its specialty sales force focusing on select
primary care physicians. We are responsible for the marketing, sale and distribution of the product.

Vaprisol

In early 2014, we entered into an agreement with Astellas Pharma US, Inc. ("Astellas") to acquire Vaprisol, including
certain product rights, intellectual property and related assets. Vaprisol is a patented, prescription brand indicated to
raise serum sodium levels in hospitalized patients with euvolemic and hypervolemic hyponatremia. The product was
developed and registered by Astellas and then launched in 2006. It is one of two branded prescription products indicated
for the treatment of hyponatremia, and the only intravenously administered branded treatment.

Hyponatremia, an imbalance of serum sodium to body water, is the most common electrolyte disorder among
hospitalized patients. These electrolyte disturbances occur when the sodium ion concentration in the plasma is lower
than normal and are often associated with a variety of critical care conditions including congestive heart failure, liver
failure, kidney failure and pneumonia. Vaprisol raises serum sodium to appropriate levels and promotes free water
secretion.

We re-launched active promotion of the brand during the middle of 2014 utilizing our hospital sales force, which

also features our Caldolor and Acetadote products.

Hepatoren

In 2011, we entered into an agreement to acquire the rights to ifetroban, a new Phase II product candidate. Our
acquisition of the rights to the ifetroban program includes an extensive clinical database and non-clinical data package
as well as manufacturing processes, know-how and intellectual property. Ifetroban was initially developed by a large
pharmaceutical company for significant cardiovascular indications. They conducted extensive studies for their target
indications and eventually donated the entire program to Vanderbilt University. Researchers at Vanderbilt identified
ifetroban as a potentially valuable compound in treating patients for several niche indications. We acquired the rights
to the ifetroban program from Vanderbilt through CET and intend to develop the product for several potential indications.

We have commenced manufacturing of an intravenous formulation of ifetroban and the FDA has cleared our IND
application for this product candidate. We have initiated clinical development under the brand name Hepatoren
(ifetroban) Injection and are evaluating this candidate for the treatment of critically ill hospitalized patients suffering
from hepatorenal syndrome ("HRS"), a life-threatening condition involving progressive kidney failure for which there
is no U.S. approved pharmaceutical treatment. We would also seek orphan drug status and the associated seven years
of marketing exclusivity for this indication.

Boxaban

We have also completed the manufacturing of an oral formulation of ifetroban and the FDA has cleared an IND
amendment for this product candidate. We have initiated clinical development under the brand name Boxaban (ifetroban)
capsules and are evaluating this candidate for patients suffering from aspirin-exacerbated respiratory disease (AERD)

a condition for which there is no U.S. approved pharmaceutical treatment. Also known as Samter’s Triad, AERD is a
respiratory disease involving chronic asthma and nasal polyposis that is worsened by aspirin or nonsteroidal anti-
inflammatory drugs. Approximately one in twenty asthmatic adults in the U.S. suffer from AERD and awareness of
the disease is growing within the medical community.

OUR STRATEGY

Continue to build a high-performance sales organization to address our target markets

We believe that our commercial infrastructure can help drive prescription volume and product sales. We currently
utilize two distinct sales teams to address our primary target markets: a hospital sales force for the acute care market
and a field sales force for the gastroenterology market. We believe that active promotion of our products, supported
by non-personal promotional activities developed and implemented by our marketing team, can maximize the
opportunity for our brands.

Further develop our existing products and develop new late stage product candidates

We continue to evaluate our products following FDA approval to determine if further clinical work could expand
the potential market opportunities for our products and help new patient populations. In addition, we may explore
further clinical work that could be used to support our sales and marketing activities and maximize their efforts to
further penetrate existing markets. Our clinical team is also working to develop late stage product candidates that could
further expand our product portfolio if approved by the FDA.

Expand our product portfolio by acquiring rights to additional products and late-stage product candidates

In addition to our product development activities, we are also seeking to acquire products or late-stage development
product candidates to continue to build a portfolio of complementary brands. We focus on under-promoted, FDA-
approved drugs as well as late-stage development products that address poorly met medical needs. We plan to continue
to target product acquisition candidates that are competitively differentiated, have valuable intellectual property or
other protective features, and allow us to leverage our existing infrastructure. The addition of Omeclamox-Pak and
Vaprisol reflects our strategy and commitment to selectively expanding our product portfolio as both brands met our
acquisition criteria. We will also continue to explore opportunities for label expansion to bring our products to new
patient populations.

Expand our global presence through select international partnerships

We have established our own commercial capabilities, including a sales organization to cover the U.S. market for
our products. We are building a network of select international partners to register our products and make them available
to patients in their countries. We will continue to expand our network of international partners and continue to support
our partners’ registration and commercialization efforts in their respective territories.

Develop a pipeline of early-stage products through CET

In order to build our product pipeline, we are supplementing our acquisition and late-stage development activities
with the early-stage drug development activities at CET. CET partners with universities and other research organizations
to develop promising, early-stage product candidates, and Cumberland has the opportunity to negotiate rights to further
develop and commercialize them in the U.S and other markets.

SALES AND MARKETING

Our sales and marketing team has broad industry experience in selling branded pharmaceuticals. Our sales and
marketing professionals manage our dedicated hospital and gastroenterology sales forces, including approximately 50
sales representatives and district managers, direct our national marketing campaigns and maintain key national account
relationships.

Hospital market: We promote Caldolor, Vaprisol and Acetadote through our dedicated hospital sales team.
This team targets key hospitals across the U.S. and is comprised of sales professionals with substantial
experience in the hospital market. Outside market data continues to indicate that the majority of pharmaceutical

promotional spending is directed toward large, outpatient markets on drugs intended for chronic use rather
than short-term, hospital use. We believe the hospital market is under-served and highly concentrated, and
that it can be penetrated effectively by a small, dedicated sales force without large-scale promotional activity.
Our position within the acute care market and existing hospital sales team provided the rationale for adding
Vaprisol as a third acute care product. Our strategy has been to increase the focus of our hospital sales team
on targeted, high priority accounts.

Gastroenterology market: We promote Kristalose and Omeclamox-Pak through a dedicated field sales team
addressing a targeted group of physicians who are responsible for a majority of total retail prescriptions for
both products. Because the market for gastrointestinal diseases is broad in patient scope, yet relatively narrow
in physician base, we believe it provides product opportunities that can be penetrated with a modest sized
sales force. By investing in our sales and marketing activities we believe that we can increase market share
for both products. Our focus on the gastroenterology market and our existing field sales infrastructure provided
us with the rationale to add Omeclamox-Pak. Our field sales force now features both Kristalose and
Omeclamox-Pak during most of their physician calls, expanding our presence in the gastroenterology market.

Our sales and marketing executives conduct ongoing market analysis to evaluate marketing campaigns and
promotional programs. The evaluations include development of product profiles, testing of the profiles against the
needs of the market, determining what additional product information or development work is needed to effectively
market the products and preparing financial forecasts. We utilize professional branding and packaging as well as
promotional items to support our products, including direct mail, sales brochures, journal advertising, educational and
reminder leave-behinds, patient educational pieces and product sampling. We also regularly attend targeted trade shows
to promote broad awareness of our products. Our national accounts group is responsible for key large buyers and related
marketing programs. This group supports sales and marketing efforts by maintaining relationships with our wholesaler
customers as well as with third-party payors such as group purchasing organizations, pharmacy benefit managers,
hospital buying groups, state and federal government purchasers and health insurance companies.

INTERNATIONAL PARTNERSHIPS

We have established our own capabilities to support the commercialization of our products in the U.S. Our international
strategy is to identify and partner with other companies that have the appropriate capabilities to support our products in their
respective countries. We have entered into a series of agreements to establish a network, which is summarized in the table
below, which includes information on the company, licensed product, territory and status:

International Partner

Product(s)

Territory

Phebra Pty Ltd

Acetadote

Australia and New Zealand

Alveda Pharmaceuticals, Inc.

DB Pharm Korea Co., Ltd.

Alliance Pharm PTE Ltd.

bioCSL Pty Ltd

Sandor Medicaids Pvt. Ltd.

GerminMED

PT. SOHO Industri Pharmasi

PT. ETHICA Industri Farmasi

Laboratorios Grifols, S.A.

Caldolor

Vaprisol

Caldolor

Caldolor &
Acetadote

Caldolor

Canada

South Korea

Singapore

Australia and New Zealand

India

Qatar and Arabian Peninsula

Pacific Rim

Indonesia

Spain, Portugal and the majority of South
America

Gloria Pharmaceuticals Co. Ltd.

Caldolor &
Acetadote

China

Status

Marketed
Marketed

Marketed

Distributing

Approved

Registration

Development

Clinigen Healthcare Limited

Laboratorios Valmorca, C.A.

Al-Nabil International Ltd.

Vaprisol

Caldolor

Caldolor &
Acetadote

Most territories outside the U.S. and Singapore

Pending

Venezuela

U.A.E. (Dubai)

Registration

Our international commercialization agreements include a license to one or more Cumberland products for a specific
territory as noted in the table above. We seek partners who have the local infrastructure to support the registration and
commercialization of our products in their territory.

Under the terms of our agreements our partners are responsible for:

Seeking regulatory approvals for the products;

•
• Launching the brand;
• Managing the ongoing marketing, sales and product distribution;
• Addressing the ongoing regulatory requirements in the international territories;
• Remitting any upfront, regulatory and sales milestone payments;
•
• Calculating and paying any royalties, as applicable.

Providing the transfer price for supplies of product; and

Our responsibilities include:

Providing a dossier of relevant information to support product registration;

•
• Maintaining our intellectual property associated with the product;
•
• Manufacturing and providing finished product for sale.

Sharing our marketing strategy, experience and materials for the brand; and

We are currently working to support our existing international partners and to identify other companies to represent

our products in select additional territories.

CLINICAL AND REGULATORY AFFAIRS

We have in-house capabilities for the management of our clinical, professional and regulatory affairs. Our team
develops and manages our clinical trials, prepares regulatory submissions, manages ongoing product-related regulatory
responsibilities and manages our medical information call center. Team members have been responsible for devising
the regulatory and clinical strategies for all our products as well as obtaining FDA approvals for Acetadote and Caldolor.

Clinical development

Our clinical development personnel are responsible for:

•

creating clinical development strategies;

designing, implementing and monitoring our clinical trials; and

creating case report forms and other study-related documents.

Regulatory and quality affairs

Our internal regulatory and quality affairs team is responsible for:

•

preparing and submitting INDs for clearance to begin patient studies;

preparing and submitting NDAs and fulfilling post-approval marketing commitments;

• maintaining investigational and marketing applications through the submission of appropriate reports;

•

submitting supplemental applications for additional label indications, product line extensions and
manufacturing improvements;

evaluating regulatory risk profiles for product acquisition candidates, including compliance with
manufacturing, labeling, distribution and marketing regulations;

• monitoring applicable third-party service providers for quality and compliance with current Good
Manufacturing Practices ("GMPs"), Good Laboratory Practices ("GLPs"), and Good Clinical Practices
("GCPs"), and performing periodic audits of such vendors; and

• maintaining systems for document control, product and process change control, customer complaint

handling, product stability studies and annual drug product reviews.

PROFESSIONAL AND MEDICAL AFFAIRS

Our medical team provides in-house, medical information support for our marketed products. This includes
interacting directly with healthcare professionals to address any product or medical inquiries through our medical
information call center and medical science liaisons. In addition to coordinating the call center, our clinical/regulatory
group generates medical information letters, provides informational memos to our sales forces and assists with ongoing
training for the sales forces.

CLINICAL DEVELOPMENT

Caldolor Safety Summary

Extensive use and worldwide literature support the strong safety profile of oral ibuprofen. Building on the oral
safety profile, we have assembled an integrated intravenous ibuprofen safety database combining data from our clinical
trials as well as previously published study data. We used this data to support our NDA filing and continue to use and
update the data as a part of our ongoing safety evaluation. We continue to use this data in our marketing materials and
to support our sales force in promoting Caldolor.

In clinical trials supporting our proposed indications, the number and percentage of all patients in pivotal studies
who reported treatment emergent adverse events was comparable between IV ibuprofen and placebo treatment groups.
Additionally, there have been no safety related differences between Caldolor and placebo involving side effects
sometimes observed with oral Nonsteroidal Anti-Inflammatory Drugs ("NSAIDs"), such as changes in renal function,
bleeding events or gastrointestinal disorders.

Publication of Caldolor Shortened Infusion Time Studies

In January 2015, Clinical Therapeutics, The International Peer-Reviewed Journal of Drug Therapy, published
two articles with data from two Caldolor (ibuprofen) registry studies. One study entitled, "A Multicenter, Open-Label,

Surgical Surveillance Trial to Evaluate Safety and Efficacy" provided for eligible enrolled patients to receive one of
two dose strengths (400 mg for treatment of fever, 800 mg for treatment of pain) of intravenous ibuprofen for up to a
24-hour dosing period. One hundred fifty patients from thirteen clinical sites were enrolled in this study. Intravenous
ibuprofen reduced fever and pain and the shortened infusion time was well tolerated.

The other registry study entitled "A Multicenter, Open-Label, Surgical Surveillance Trial to Evaluate Safety" was
a Phase IV multi-center, open-label surveillance clinical study to assess the safety of ibuprofen administered
intravenously over five to ten minutes to adult hospitalized patients undergoing surgical procedures. Eligible patients
were enrolled to receive 800 mg of intravenous ibuprofen administered at induction of anesthesia and could continue
Caldolor therapy for up to 24 hours. Three hundred patients from twenty one clinical sites were enrolled in this study.
The shortened infusion time was well tolerated.

Publication of Caldolor Pediatric Pain Study

Data from our Caldolor (ibuprofen) pediatric pain study was published in the May 2014 edition of Pediatric
Anesthesia. The study was a multi-center, randomized, double-blind placebo-controlled, single dose trial of the safety
and efficacy of intravenous ibuprofen for treatment of pain in pediatric patients undergoing tonsillectomy. The objective
of the study was to determine whether administration of Caldolor prior to pediatric tonsillectomy surgery can
significantly decrease the number of doses of narcotic following surgery when compared with placebo.

During the study a total of 161 pediatric patients undergoing tonsillectomy, ranging in age from 6 years to 17 years,
were randomized to receive either a single dose of Caldolor or placebo prior to surgery. Postoperative pain was managed
with intravenous narcotic on an as needed basis based on the visual analog scale (VAS) as well as deemed appropriate
by the recovery room nurses and physicians. The primary endpoint was the number of doses and amount of narcotic
administered following surgery.

The pediatric study indicated that there was a significant reduction in the number of postoperative doses and the
amount of narcotic administered after surgery in the group that was administered Caldolor compared with the placebo
group. There were no differences in the time to the first analgesia request or the number of patients who required
analgesia after surgery. There were no significant differences in the incidence of serious adverse events. The study
concluded that the administration of Caldolor significantly reduced narcotic use in pediatric tonsillectomy patients.

Caldolor Laparoscopic Cholecystectomy Presentation

Data from the Caldolor study reflects that treatment with preoperative intravenous ibuprofen improved overall
quality of recovery in patients undergoing laparoscopic cholecystectomy surgery. These results were presented as a
poster presentation entitled "The Effect of Preoperative Administration of IV Ibuprofen on Stress Response in Patients
Undergoing Laparoscopic Cholecystectomy" in October 2014 at the American Anesthesiology 2014 Annual Meeting
in New Orleans, Louisiana.

The investigator study was completed at the University of Medicine and Dentistry of New Jersey/Rutgers University
and New York Methodist with Alex Bekker, MD, PhD, as the primary investigator. The study concluded that preoperative
intravenous ibuprofen improved the overall quality of recovery including comfort, emotion and pain and reduced fatigue
in the early postoperative period. Further, the study results indicated that preoperative administration of intravenous
ibuprofen decreased the stress hormones catecholamines and cortisol postoperatively after laparoscopic
cholecystectomy.

Caldolor Pediatric Fever Study Presentations

During October 2014, data from our Caldolor pediatric fever study that demonstrated treatment with intravenous
ibuprofen was superior in reducing temperatures in hospitalized, febrile pediatric patients when compared to treatment
with oral or suppository acetaminophen was presented as part of the American Academy of Pediatrics National
Conference & Exhibition in San Diego, California. An abstract presentation entitled “A Multi-Center, Open-Label,
Parallel, Active-Comparator Trial to Determine the Efficacy and Safety of Intravenous Ibuprofen in Pediatric Patients”
was presented by Dr. Corrie Chumpitazi of Texas Children's Hospital, Houston, Texas. The abstract was presented in
the section of Emergency Medicine and again in the section on Pharmacy and Therapeutics.

The study was designed to evaluate the safety and efficacy in IV ibuprofen when compared to oral or suppository
acetaminophen in the treatment of hospitalized, febrile pediatric patients. The study showed that when given intravenous
ibuprofen hospitalized children experienced significant reduction in temperature compared to those receiving
acetaminophen (oral or suppository). Both single and multiple does of IV ibuprofen were well tolerated and no significant
adverse events were noted.

A poster presentation entitled "A Multi-Center, Randomized, Open-label, Parallel, Active-Comparator Trial to
Determine the Efficacy and Safety of Intravenous Ibuprofen in Pediatric children" was also presented twice at this
National Conference. The mission of the American Academy of Pediatrics is to attain optimal physical, mental, and
social health and well-being for all infants, children, adolescents and young adults.

During March 2014, data from our Caldolor pediatric fever study was presented at the Society of Pediatric
Anesthesiology meeting in Ft. Lauderdale, Florida. The presentation entitled “A Multi-Center, Open-Label, Parallel,
Active-Comparator, Multiple Dose Trial to Determine the Efficacy, Safety, and Pharmacokinetics of Intravenous
Ibuprofen in Pediatric Patients” was presented by Dr. Samia N. Khalil, M.D., Department of Anesthesiology, the
University of Texas Medical School at Houston. The meeting was co-sponsored by the Society for Pediatric Anesthesia
and the American Academy of Pediatrics Section on Anesthesiology and Pain Medicine.

The pediatric study met its primary endpoint demonstrating that Caldolor was associated with a statistically
significant reduction in temperature within the first 2 hours of dosing when compared to acetaminophen. Equally
important, no safety concerns were observed during the study. During the study, febrile hospitalized children ranging
in age from less than 1 year to 16 years, were administered Caldolor injection or oral or rectal acetaminophen as a
single or multiple dose therapy for up to five days. One hundred and three patients were enrolled in this multi-center,
randomized, open-label active comparator study. The pediatric patients received either 10 mg/kg intravenous ibuprofen
(not to exceed 400 mg per dose) or 10 mg/kg acetaminophen (not to exceed 650 mg per dose).

Caldolor Continuing Education

We have extended the availability of a web-based, accredited, continuing education seminar featuring the benefits
of preoperative use of Caldolor in the hospital setting. The seminar has been distributed to over 60,000 health providers
with a growing number of participants completing the seminar for continuing education credit.

Hepatoren Study

We continue to evaluate Hepatoren as a treatment for hepatorenal syndrome - a life threatening condition, with a
high mortality rate and no approved treatment in this country. We have an ongoing sixty four patient study to evaluate
the safety, efficacy and pharmacokinetics of Hepatoren for this unmet medical need. The study is stratified based upon
disease type, either Type I or Type II HRS. Enrollment of Type I patients continues at major medical centers with Type
II enrollment completed at the end of 2014.

The study is designed to evaluate escalating dose levels of Hepatoren in Type II patients. Progression to higher
dose levels is reviewed and approved by an independent safety committee. Top line results from the Type II patients
indicate that Hepatoren was overall well tolerated with no safety concerns noted. Furthermore, the patients receiving
the higher dose levels of Hepatoren were more likely to experience increases in urine output, a signal of improved
kidney function, compared to patients who received placebo. Based on these results, we will proceed with clinical
development of this product candidate.

Boxaban Study

We have initiated Phase II clinical study to evaluate Boxaban in patients suffering from aspirin-exacerbated
respiratory disease (AERD). The study is designed to gather initial safety and tolerability data on ifetroban in AERD
patients. It is a multicenter study of sixteen patients with enrollment underway at several U.S. medical centers including
the Scripps Clinic.

BUSINESS DEVELOPMENT

Since inception, we have had an active business development program focused on acquiring rights to marketed
products and product candidates that fit our strategy and target markets. We source business development opportunities

through our international network of advisory firms and individual pharmaceutical industry and medical advisors. A
multi-disciplinary internal management team reviews these opportunities on a regular basis using a list of selection
criteria. We have historically focused on product opportunities that are a strategic fit with our commercial organization,
development expertise and medical focus, employing a variety of transaction structures. Our additions of Omeclamox-
Pak and Vaprisol reflect our business development process and follow our selection criteria.

We intend to continue to build a portfolio of complementary, niche products largely through product acquisitions
and late-stage product development. Our primary targets are under-promoted, FDA-approved drugs with existing brand
recognition and late-stage development product candidates that address unmet or poorly met medical needs in the
hospital acute care and gastroenterology markets. We believe that by focusing mainly on approved or late-stage products,
we can minimize the significant risk, cost and time associated with drug development.

CET Collaboration

Through CET, we collaborate with a select group of academic research institutions located in the mid-south region
of the U.S. Our business development team is responsible for identifying appropriate CET product candidates and
negotiating with our university partners to secure rights to these candidates. Although we believe that these collaborations
may be important to our business in the future, they are not material to our business at this time.

CET currently has five collaboration agreements with Universities to co-develop promising biomedical
technologies, including: Vanderbilt University, Washington University, the University of Virginia, the University of
Tennessee and the University of Mississippi.

These agreements allow us to play an important role in fostering and shaping early-stage biomedical research to
improve patient care and provide CET and Cumberland with access to promising pipeline candidates such as Hepatoren
and Boxaban.

During the third quarter of 2014, we received a grant from the National Institutes of Health through its Small
Business Technology Transfer ("STTR") grant program. The STTR program provides federal funding for innovative
research and development by expanding partnerships between businesses and nonprofit research institutions. The STTR
program provides for formal collaboration between a research institution and a business to ensure that the related science
and technology results in the successful commercialization of the scientific innovations. The STTR grant is in
conjunction with Vanderbilt University School of Medicine.

CET Financing

In 2014, we organized an equity financing to recapitalize and strengthen the financial position of CET. This financing
included an investment of approximately $1.0 million from Harbin Gloria Pharmaceuticals Co., Ltd. (“Gloria”) for
their participation in CET. As a result, Gloria received shares in CET and joined the CET ownership group. As part
of this transaction, Gloria will have the first right to negotiate a license to CET developed products for the Chinese
market. The funds from this new investment are being used to support and accelerate the development of CET product
candidates. CET’s lead product candidate is ifetroban which is being developed by Cumberland under the brand names
Hepatoren and Boxaban.

Prior to April 2014, we owned 85% of CET, with the balance of the enterprise owned by Vanderbilt University
and the Tennessee Technology Development Corporation. In connection with Gloria’s investment in CET, we also
provided an additional investment in CET of $1.0 million in cash and $2.4 million in loan forgiveness. Upon completion
of the additional investment by Gloria and Cumberland in April 2014, we held an 80% ownership in CET.

MANUFACTURING AND DISTRIBUTION

We partner with third parties for certain non-core, capital-intensive functions, including manufacturing and distribution.
Our executives are experienced in these areas and manage these third-party relationships with a focus on quality assurance
and timely delivery.

Manufacturing

Our key manufacturing relationships include:

Caldolor

• During 2013, we entered into agreements with three international manufacturers for the commercial supply of
Caldolor. We have successfully transferred the Caldolor manufacturing process to two of these manufacturers
and these two suppliers have manufactured validation inventory under these agreements.

Acetadote

• During the fourth quarter of 2014, we entered into an agreement with a U.S. based manufacturer to supply our
Acetadote product. We are working to transfer the Acetadote manufacturing process to this supplier under this
new agreement following the conclusion of manufacturing from our original supplier during 2014.

Kristalose

• During 2014, we finalized an agreement for the purchase of Kristalose API with our international supplier.
This written agreement formalized and extended our existing relationship with this raw materials manufacturer.
We also entered into manufacturing relationships with two Kristalose packagers during 2014. Under these
agreements, we provide Kristalose API to these manufactures and they package the API (for both commercial
sale and samples) into 10 gram and 20 gram finished product units for our purchase and distribution. We ended
an agreement with our previous packager during 2014.

Omeclamox-Pak

• Under the agreement we signed with Pernix, they are responsible for providing Omeclamox-Pak inventory.
During 2014, we experienced a temporary shortage of Omeclamox-Pak marketable inventory which was
remedied during the year.

Vaprisol

• As part of the acquisition of Vaprisol, we purchased an existing supply of finished goods and raw material
inventory. In addition, as part of this transaction, we were assigned a commercial supply agreement with the
manufacturer Astellas used to prepare, package, inspect and label Vaprisol.

Distribution

Like many other pharmaceutical companies, we engage a third party contractor with appropriate facilities and logistical
expertise to support our distribution efforts. Since August 2002, Cardinal Health ("Cardinal") has exclusively handled U.S.
product logistics efforts, including warehousing, shipping, customer billing and collections.

We extended our distribution relationship with Cardinal during May 2013, when we entered into the First Amendment
("First Amendment") to the Exclusive Distribution Agreement under which we have operated since August 2010. The
Amendment primarily serves to extend the term of the Agreement through June 30, 2016 and revises the fee schedule under
the Agreement. Under the Amendment, we have also engaged Cardinal to assist with our physician sample orders based on
the Prescription Drug Marketing Act of 1987 (the “PDMA”) for samples shipping. After June 30, 2016, the contract is
automatically renewed on a year-to-year basis that is terminable by either party with ninety days' notice. Under the Amendment
and Agreement, Cardinal agrees to provide various services, including storage, distribution, returns, customer support, and
system access support to us in connection with the distribution of our products under certain guidelines at established fees.

TRADEMARKS AND PATENTS

We own all the trademarks for each of our branded pharmaceutical products as well as for our corporate name and
logo. We have applied for trademark registration for various other names and logos. Over time, we intend to maintain
registrations on trademarks that remain valuable to our business.

We seek to protect our products from competition through a combination of patents, trademarks, trade secrets,
FDA exclusivity and contractual restrictions on disclosure. Proprietary rights, including patents, are an important
element of our business. We seek to protect our proprietary information by requiring our employees, consultants,
contractors and other advisors to execute agreements providing for protection of our confidential information upon
commencement of their employment or engagement. We also require confidentiality agreements from entities that
receive our confidential data or materials.

Acetadote and related litigation

We developed a new formulation of Acetadote (acetylcysteine) Injection as part of a Phase IV commitment in
response to a request by the FDA to evaluate the reduction of EDTA from the product's formulation. In April 2012,
the USPTO issued U.S. Patent number 8,148,356 (the “356 Acetadote Patent”) which is assigned to us. The claims of
the 356 Acetadote Patent encompasses the Acetadote formulation and includes composition of matter claims. Following
its issuance, the 356 Acetadote Patent was listed in the FDA Orange Book. The 356 Acetadote Patent is scheduled to
expire in May 2026, which time period includes a 270-day patent term adjustment granted by the USPTO.

Following the issuance of the 356 Acetadote Patent, we received separate Paragraph IV certification notices from
InnoPharma, Inc. ("InnoPharma"), Paddock Laboratories, LLC (“Paddock”), Mylan Institutional LLC (“Mylan”),
Sagent Agila LLC ("Sagent") and Perrigo Company ("Perrigo") challenging the 356 Acetadote Patent on the basis of
non-infringement and/or invalidity. We responded by filing five separate infringement lawsuits, in the appropriate
United States District Courts, to contest each of the challenges.

On November 12, 2012, we entered into a Settlement Agreement (the “Settlement Agreement”) with Paddock and
Perrigo to resolve the challenges and the pending litigation with those two companies. On November 1, 2013, the
United States District Court filed opinions granting Sagent’s and InnoPharma’s motions to dismiss our suits and we
agreed not to file an appeal or motion to reconsider, thereby resolving the challenges and the pending litigation with
those two companies. The remaining infringement suit with Mylan is pending.

Under the Settlement Agreement, Paddock and Perrigo admit that the 356 Acetadote Patent is valid and enforceable
and that any Paddock or Perrigo generic Acetadote product (with or without EDTA) would infringe upon the 356
Acetadote Patent. In addition, Paddock and Perrigo will not challenge the validity, enforceability, ownership or
patentability of the 356 Acetadote Patent through its expiration currently scheduled for May 2026. On November 12,
2012, in connection with the execution of the Settlement Agreement, we entered into a License and Supply Agreement
with Paddock and Perrigo (the “License and Supply Agreement”). Under the terms of the License and Supply Agreement,
once a third party receives final approval from the FDA for an ANDA to sell a generic Acetadote product and such
third party made such generic version available for purchase in commercial quantities in the United States, we supply
Perrigo with an Authorized Generic version of our Acetadote product.

On May 18, 2012, we also submitted a Citizen Petition to the FDA requesting that the FDA refrain from approving
any applications for acetylcysteine injection that contain EDTA, based in part on the FDA's request that we evaluate
the reduction or removal of EDTA from its original Acetadote formulation. On November 7, 2012, the FDA responded
to the Citizen Petition denying our request and on November 8, 2012, we learned that the FDA approved the ANDA
referencing Acetadote filed by InnoPharma, Inc. We brought suit against the FDA contesting the FDA's decision to
approve the InnoPharma generic on November 13, 2012. On September 30, 2013, the United States District Court
filed an opinion granting a summary judgment in favor of the FDA regarding this suit.

As noted above, during 2012 the FDA approved the ANDA referencing Acetadote filed by InnoPharma, Inc. Upon
this condition, in accordance with the License and Supply agreement with Perrigo, we began to supply Perrigo with
our Authorized Generic. On January 7, 2013, Perrigo announced initial distribution of our Authorized Generic
acetylcysteine injection product.

On March 19, 2013, the USPTO issued U.S. Patent number 8,399,445 (the “445 Acetadote Patent”) which is
assigned to us. The claims of the 445 Acetadote Patent encompass the use of the 200 mg/ml Acetadote formulation to
treat patients with acetaminophen overdose. On April 8, 2013, the 445 Acetadote Patent was listed in the FDA Orange
Book. The 445 Acetadote Patent is scheduled to expire in August 2025. Following the issuance of the 445 Acetadote
Patent we received separate Paragraph IV certification notices from Perrigo, Sagent Pharmaceuticals, Inc., and Mylan
challenging the 445 Acetadote Patent on the basis of non-infringement, unenforceability and/or invalidity.

On June 10, 2013, we became aware of a Paragraph IV certification notice from Akorn, Inc. challenging the 445
Acetadote Patent and the 356 Acetadote Patent on the basis of non-infringement. On July 12, 2013, we filed a lawsuit
for infringement of the 356 Acetadote Patent against Akorn, Inc. in United States District Court.

On February18, 2014, the USPTO issued U.S. Patent number 8,653,061 (the “061 Acetadote Patent”) which is
assigned to the Company. The claims of the 061 Acetadote Patent encompass the use of the 200 mg/ml Acetadote
formulation to treat patients with acetaminophen overdose. Following its issuance, the 061 Acetadote Patent was listed
in the FDA Orange Book. The 061 Acetadote Patent is scheduled to expire in August 2025.

On May 13, 2014, the USPTO issued U.S. Patent number 8,722,738 (the “738 Acetadote Patent”) which is assigned
to Cumberland. The claims of the 738 Acetadote Patent encompass administration methods of acetylcysteine injection,
without specification of the presence or lack of EDTA in the injection. Following its issuance, the 738 Acetadote Patent
was listed in the FDA Orange Book and it is scheduled to expire in April 2032.

On December 11, 2014 and March 3, 2015, the Company became aware of Paragraph IV certification notices from
Aurobindo Pharma Limited and Zydus Pharmaceuticals (USA) Inc., respectively, challenging the 356, 445, 061, and
738 Acetadote Patents on the basis of non-infringement.

We are considering our legal options and intend to continue to vigorously defend and protect our Acetadote product

and related intellectual property rights.

We also have additional patent applications relating to Acetadote which are pending with the USPTO.

Caldolor

We are the owner of U.S. Patent No. 6,727,286, which is directed to ibuprofen solution formulations, methods of
making the same, and methods of using the same, and which expires in 2021. This U.S. patent is associated with our
completed international application No. PCT/US01/42894. We have filed for international patent protection in
association with this PCT application in various countries, some of which have been allowed and some of which remain
pending.

We have an exclusive, worldwide license to clinical data for intravenous ibuprofen from Vanderbilt University, in
consideration for royalty obligations related to Caldolor. During 2014, we obtained additional patents for the brand.
On May 27, 2014, the USPTO issued U.S. Patent number 8,735,452 (the “452 Caldolor Patent”) which is assigned to
us. The claims of the 452 Caldolor Patent encompass methods of treating pain using intravenous ibuprofen. Following
its issuance, the 452 Caldolor Patent was listed in the FDA Orange Book and is scheduled to expire in September 2029.

On October 28, 2014, the USPTO issued U.S. Patent number 8,871,810 (the “810 Caldolor Patent”) which is

assigned to us. The claims of the 810 Caldolor Patent encompass methods of treating pain using intravenous ibuprofen.
Following its issuance, the 810 Caldolor Patent was listed in the FDA Orange Book and is scheduled to expire in
September 2029. We also have additional patent applications related to Caldolor which are pending with the USPTO.

COMPETITION

The pharmaceutical industry is characterized by intense competition and rapid innovation. Our continued success
in developing and commercializing pharmaceutical products will depend, in part, upon our ability to compete against
existing and future products in our target markets. Competitive factors directly affecting our markets include but are
not limited to:

•

product attributes such as efficacy, safety, ease-of-use and cost-effectiveness;

brand awareness and recognition driven by sales, marketing and distribution capabilities;

intellectual property and other exclusivity rights;

availability of resources to build and maintain developmental and commercial capabilities;

•

successful business development activities;

extent of third-party reimbursements; and

establishment of advantageous collaborations to conduct development, manufacturing or commercialization
efforts.

A number of our competitors possess research and development and sales and marketing capabilities as well as
financial resources greater than ours. These competitors, in addition to emerging companies and academic research
institutions, may be developing, or in the future could develop, new technologies that could compete with our current
and future products or render our products obsolete.

Acetadote

Acetadote is our injectable formulation of NAC for the treatment of acetaminophen overdose. NAC is accepted
worldwide as the standard of care for acetaminophen overdose. Our competitors in the acetaminophen overdose market
are those companies selling orally administered NAC including, but not limited to, Geneva Pharmaceuticals, Inc.,
Bedford Laboratories division of Ben Venue Laboratories, Inc., Roxane Laboratories, Inc., InnoPharma Inc. and Hospira
Inc.

In November 2012, InnoPharma Inc. was granted approval by the FDA to distribute their generic form of the old
formulation of Acetadote containing EDTA. In late 2012, we entered into the Settlement Agreement with Paddock and
Perrigo that included the right to distribute our Authorized Generic Acetadote injection product. Our branded Acetadote
now competes with both the EDTA free Authorized Generic Acetadote distributed by Paddock and Perrigo along with
generic Acetadote that contains EDTA.

Caldolor

Caldolor is marketed for the treatment of pain and fever, primarily in a hospital setting. A variety of other products

address the acute pain market:

• Morphine, the most commonly used product for the treatment of acute, post-operative pain, is

manufactured and distributed by several generic pharmaceutical companies;

• Other generic injectable opioids, including fentanyl, meperidine and hydromorphone, address this market;

• Ketorolac (brand name Toradol®), an injectable NSAID, is also manufactured and distributed by several

generic pharmaceutical companies;

• Ofirmev®, an injectable acetaminophen product is marketed by Mallinckrodt plc;

• Exparel®, a bupivacaine delivery platform marketed by Pacira Pharmaceuticals, Inc; and

• Dyloject, an injectable diclofenac product recently FDA approved and manufactured by Hospira, Inc.

We are aware of other product candidates in development to treat acute pain including injectable NSAIDs, novel
opioids, new formulations of existing therapies and extended release anesthetics. We believe non-narcotic analgesics
for the treatment of post-surgical pain are the primary potential competitors to Caldolor.

In addition to the injectable analgesic products above, many companies are developing analgesics for specific
indications such as migraine and neuropathic pain, oral extended-release forms of existing narcotic and non-narcotic
products, and products with new methods of delivery such as transdermal. We are not aware of any approved injectable
products indicated for the treatment of fever in the U.S. other than Caldolor and Ofirmev. There are, however, numerous
drugs available to physicians to reduce fevers in hospital settings via oral administration to the patient, including
ibuprofen, acetaminophen, and aspirin. These drugs are manufactured by numerous pharmaceutical companies.

Kristalose

Kristalose is a dry powder crystalline prescription formulation of lactulose indicated for the treatment of
constipation. The U.S. constipation therapy market includes various prescription and over the counter, or OTC, products.
The prescription products which we believe are our primary competitors are:

• Amitiza® , an oral product indicated for the treatment of chronic idiopathic constipation in adults, and is

marketed by Sucampo Pharmaceuticals Inc. and Takeda Pharmaceutical Company Limited.

• Linzess®, an oral product indicated for the treatment of irritable bowel syndrome with constipation and
chronic idiopathic constipation. It is marketed by Forest Laboratories, Inc. and Ironwood Pharmaceuticals,
Inc; and

• Liquid lactulose products are marketed by a number of pharmaceutical companies.

There are several hundred OTC products used to treat constipation marketed by numerous pharmaceutical and
consumer health companies. MiraLax (polyethylene glycol 3350), previously a prescription product, was indicated for
the treatment of constipation and manufactured and marketed by Braintree Laboratories, Inc. Under an agreement with
Braintree, Schering-Plough introduced MiraLax as an OTC product in February 2007.

Omeclamox-Pak

Omeclamox-Pak is a branded prescription product used for the treatment of Helicobacter pylori (H. pylori) infection
and duodenal ulcer disease. It combines three well-known and widely prescribed medications packaged together for
patient convenience: omeprazole, clarithromycin, and amoxicillin. The three individual components of Omeclamox-
Pak are also available through three separate prescriptions. While there are several competitor products, Omeclamox-
Pak is one of the few actively marketed products for this condition. In addition, compared to the branded competing
products, Omeclamox-Pak has the lowest pill burden, fewest days of therapy and the lowest cost. The prescription
combination products, indicated for treatment of H. pylori, which we believe are our primary competitors are:

•

PrevPac®, an oral product marketed by Takeda Pharmaceutical Company. There are also approved generic
versions of PrevPac;

Pylera®, an oral product marketed by Actavis Pharma, Inc. and Forest Laboratories, Inc.; and

• Helidac®, an oral product marketed by Prometheus Therapeutics.

Vaprisol

Vaprisol is a patented, prescription brand indicated to raise serum sodium levels in hospitalized patients with
euvolemic and hypervolemic hyponatremia. The product was developed and registered by Astellas and then launched
in 2006. It is one of two branded prescription products indicated for the treatment of hyponatremia, and the first and
only intravenously administered branded treatment. The other competing product is Samsca, an oral product marketed
by Otsuka Pharmaceutical Company.

GOVERNMENT REGULATION

Governmental authorities in the U.S. and other countries extensively regulate the research, development, testing,
manufacturing, distribution, marketing and sale of pharmaceutical products. In the U.S., the FDA under the Federal
Food, Drug, and Cosmetic Act, ("FDCA"), the Public Health Service Act, and other federal statutes and regulations,
subjects pharmaceutical products to rigorous review. Failure to comply with applicable U.S. requirements may subject
a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs or
biologics license applications, ("BLAs"), warning letters, product recalls, product seizures, total or partial suspension
of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

We, our manufacturers and clinical research organizations may also be subject to regulations under other federal,
state and local laws, including the Occupational Safety and Health Act, the Resource Conservation and Recovery Act,
the Clean Air Act and import, export and customs regulations as well as the laws and regulations of other countries.

FDA Approval Process

The FDA is a regulatory agency within the Department of Health and Human Services. A key responsibility is to
regulate the safety and effectiveness of drugs sold in the United States. The FDA divides that responsibility into two
phases: pre-approval (premarket) and post approval (post market). The FDA reviews manufacturers' applications to
market drugs in the United States; a drug may not be sold unless it has FDA approval. The agency continues its oversight
of drug safety and effectiveness as long as the drug is on the market.

To market a prescription drug in the United States, a manufacturer needs FDA approval. To get that approval, the
manufacturer must demonstrate the drug's safety and effectiveness according to criteria specified in law and agency
regulations, ensure that its manufacturing plant passes FDA inspection, and obtain FDA approval for the drug's labeling,
a term that includes all written material about the drug, including, for example, packaging, prescribing information for
physicians, promotional materials and patient brochures.

The progression to drug approval begins before FDA involvement. First, basic scientists work in the laboratory
and with animals; second, a drug or biotechnology company develops a prototype drug. That company must seek and
receive FDA approval, by way of an IND application, to test the product with human subjects. Those tests, called
clinical trials, are carried out sequentially in Phase I, II, and III studies, which involve increasing numbers of subjects.
The manufacturer then compiles the resulting data and analysis in a NDA. The FDA reviews the NDA with three major
concerns: (1) safety and effectiveness in the drug's proposed use; (2) appropriateness of the proposed labeling; and (3)
adequacy of manufacturing methods to assure the drug's identity, strength, quality, and purity.

The FDCA and associated regulations detail the requirements at each step. The FDA uses a few special mechanisms
to expedite drug development and the review process when a drug might address an unmet need or a serious disease
or condition. Those mechanisms include accelerated approval, animal efficacy approval, fast track applications, and
priority review.

The sponsor of the drug typically conducts human clinical trials in three sequential phases, but the phases may
overlap. Phase I clinical trials are generally conducted in a small number of healthy volunteers, primarily to collect and
assess pharmacokinetics and safety data at one or more dosages prior to proceeding into patients. In Phase II clinical
trials, the sponsor evaluates the early efficacy of the product in short term trials on the targeted indication and identifies
possible adverse effects and safety risks in a patient population. Phase III clinical trials typically involve testing for
patients in long term trials examining safety and clinical efficacy in an expanded population at geographically-dispersed
test sites.

The FDA requires that clinical trials be conducted in accordance with the FDA's GCP requirements. The FDA may
order the partial, temporary or permanent discontinuation of a clinical trial at any time or impose other sanctions if it
believes that the clinical trial is not being conducted in accordance with FDA requirements or presents an unacceptable
risk to the clinical trial patients. The institutional review board ("IRB"), or ethics committee (outside of the U.S.), of
each clinical site generally must approve the clinical trial design and patient informed consent and may also require
the clinical trial at that site to be halted, either temporarily or permanently, for failure to comply with the IRB's
requirements, or may impose other conditions.

The results of the nonclinical and clinical trials, together with detailed information on the manufacture and
composition of the product and proposed labeling, are submitted to the FDA in the form of an NDA for marketing
approval. The NDA undergoes a 60 day validation review period before it is accepted for filing. If the NDA is found
to be incomplete it will not be accepted. Once the NDA is validated and accepted for filing, the FDA begins an in-
depth review of the NDA. Under policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA
(currently PDUFA V - effective October 1, 2012), the FDA has 10 months in which to complete its initial review of a
standard NDA and respond to the applicant. The review process and the PDUFA goal date may be extended by two
months to address deficiencies, or by three months if the FDA requests or the NDA sponsor otherwise provides additional
information or clarification regarding information already provided in the submission at any time during the review
clock period. If the FDA's evaluations of the NDA and the clinical and manufacturing procedures and facilities are
favorable, the FDA will issue an approval letter. If not, a Complete Response letter will be sent informing applicants
of changes that must be made before the application can be approved, with no implication regarding whether the
application will ultimately be approved. An approval letter authorizes commercial marketing of the drug for the

proposed indication(s) under study. The General Accounting Office ("GAO") reported that standard NDAs showed a
steadier increase with the percentage of first-cycle approval letters rising from 43% for FY 2000 applications to 69%
for FY 2010 applications. The percentage of priority NDAs receiving an approval letter at the end of the first review
cycle fluctuated from FY 2000 through FY 2010, ranging between 47% and 80% during this time. The time and cost
of completing these steps and obtaining FDA approval can vary dramatically depending on the drug. However, to
complete these steps for a novel drug can take many years and cost millions of dollars.

Section 505(b) (2) New Drug Applications

An NDA may be submitted under different methods, a 505(b)(1), 505(b)(2) or 505(j). Section 505(b) provides for
the submission of an NDA to support the approval of a drug. Upon approval, a drug may be marketed only for the FDA-
approved indication(s) in the approved dosage form. Further clinical trials may be necessary to gain approval for the
use of the product for any additional indications or dosage forms. The FDA also requires post market safety surveillance
reporting to monitor the side effects of the drug, which may result in withdrawal of approval after marketing begins.

Section 505(b)(1) or the 'full' NDA is used for new chemical entities ("NCEs") and requires full clinical and
nonclinical development of a compound. Marketing exclusivity assigned to a 505(b)(1) approval is five years. A 505
(b)(2) NDA permits the submission of an NDA where at least some of the information required for approval comes
from studies not conducted by or for the applicant using previously reported safety and efficacy data, and for which
the applicant has not obtained a right of reference. Generally new studies are required to provide data on the proposed
change. Some examples of products that may be allowed to follow a 505(b)(2) path to approval are drugs which have
a new dosage form, strength, route of administration, formulation or indication or combination drugs. Marketing
exclusivity for a 505(b)(2) submission is three years. Any marketing exclusivity is independent of patent exclusivity.

We successfully secured FDA approvals for Acetadote in January 2004 and for Caldolor in June 2009 pursuant to

the 505(b)(2) pathway.

Special protocol assessment process

The special protocol assessment, or SPA, process is designed to assess whether a planned protocol is adequate to
meet scientific and regulatory requirements identified by the sponsor. Three types of protocols related to PDUFA
products are eligible for this special protocol assessment under the PDUFA goals: (1) animal carcinogenicity protocols,
(2) final product stability protocols, and (3) clinical protocols for phase III trials whose data will form the primary basis
for an efficacy claim if the trials had been the subject of discussion at an end-of-phase 2/pre-phase 3 meeting with the
review division, or in some cases, if the division agrees to such a review because the division is aware of the
developmental context in which the protocol is being reviewed and the questions are being answered. The clinical
protocols for phase III trials can relate to efficacy claims that will be part of an original NDA or BLA or that will be
part of an efficacy supplement to an approved NDA or BLA.

New section 505(b)(4)(B) of the Modernization Act directs FDA to meet with sponsors, provided certain conditions
are met, for the purpose of reaching agreement on the design and size of clinical trials intended to form the primary
basis of an efficacy claim in a marketing application submitted under section 505(b) of the Act or section 351 of the
Public Health Service Act (42 U.S.C. 262).3. Such marketing applications include NDAs, BLAs, and efficacy
supplements to approved NDAs and BLAs. Under new sections 505(b)(4)(B) and (C) of the Act, if a sponsor makes a
reasonable written request to meet with the FDA for the purpose of reaching agreement on the design and size of a
clinical trial, the FDA will meet with the sponsor. If an agreement is reached, the FDA will reduce the agreement to
writing and make it part of the administrative record. An agreement may not be changed by the sponsor or FDA after
the trial begins, except (1) with the written agreement of the sponsor and FDA, or (2) if the director of the FDA reviewing
division determines that "a substantial scientific issue essential to determining the safety or effectiveness of the drug"
was identified after the testing began (section 505(b)(4)(C) of the Act). If a sponsor and the FDA meet regarding the
design and size of a clinical trial under section 505(b)(4)(B) of the Act and the parties cannot agree that the trial design
is adequate to meet the goals of the sponsor, the FDA will clearly state the reasons for the disagreement in a letter to
the sponsor. However, the absence of an articulated disagreement on a particular issue should not be assumed to represent
an agreement reached on that issue. Final determinations by the FDA with respect to a product candidate, including as
to the scope of its “labeling”, are made after a complete review of the applicable NDA and are based on the entire data
in the application.

On June 14, 2004, we submitted a request for SPA of our Caldolor Phase III clinical study. During a meeting with
the FDA on September 29, 2004, the FDA confirmed that the efficacy data from our study of post-operative pain with
a positive outcome was considered sufficient to support a 505(b)(2) application for the pain indication.

Orphan drug designation

The Orphan Drug Act of 1983, ("Orphan Drug Act"), encourages manufacturers to seek approval of products
intended to treat “rare diseases and conditions” with a prevalence of fewer than 200,000 patients in the U.S. or for
which there is no reasonable expectation of recovering the development costs for the product. For products that receive
orphan drug designation by the FDA, the Orphan Drug Act provides tax credits for clinical research, FDA assistance
with protocol design, eligibility for FDA grants to fund clinical studies, waiver of the FDA application fee, and a period
of seven years of marketing exclusivity for the product following FDA marketing approval. Acetadote received Orphan
Drug designation in October 2001 and in 2004 the FDA approved the product to prevent or lessen hepatic injury after
ingestion of a potentially hepatotoxic quantity of acetaminophen. Acetadote was entitled to marketing exclusivity until
January 2011 for the treatment of this approved indication.

Section 505(j) abbreviated new drug applications

An ANDA is a type of NDA where approval of a generic drug is based on demonstrating comparability to an
innovator drug product (the RLD or Reference Listed Drug). Applications are "abbreviated" because they generally
don't include preclinical and clinical data to establish safety and effectiveness. Generics must demonstrate that the
product is bioequivalent (i.e., performs in the same manner and is comparable to the 'innovator' product in active
ingredient, dosage form, strength, route of administration, labeling, quality, performance characteristics and intended
use). Abbreviated applications may be submitted for drug products that are the same as a listed drug and must be
identical in active ingredient(s), form, strength, route of administration, and identical in conditions of use (non-exclusive
uses). Products are declared suitable based on a suitability petition to the FDA. If the petition is approved, the Sponsor
may then submit the ANDA.

The Hatch-Waxman Act

The Drug Price Competition and Patent Term Restoration Act, informally known as the "Hatch-Waxman Act", is
a 1984 United States federal law which established the modern system of generic drugs. Hatch-Waxman amended the
Federal Food, Drug, and Cosmetic Act. Section 505(j) 21 U.S.C. 355(j) sets forth the process by which would-be
marketers of generic drugs can file ANDAs to seek FDA approval of the generic. Section 505(j)(2)(A)(vii)(IV), the so-
called Paragraph IV, allows 180 day exclusivity to companies that are the "first-to-file" an ANDA against holders of
patents for branded counterparts.

Hatch-Waxman Amendments grant generic manufacturers the ability to mount a validity challenge without
incurring the cost of entry or risking enormous damages flowing from any possible infringement. Hatch-Waxman
essentially redistributes the relative risk assessments and explains the flow of settlement funds and their magnitude.
Hatch-Waxman gives generics considerable leverage in patent litigation.

Health care legislation

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act, or PPACA.
On March 30, 2010, the Health Care and Education Reconciliation Act of 2010, or HCERA, was enacted into law,
which modified the revenue provisions of the PPACA. The PPACA as amended by the HCERA constitutes the healthcare
reform legislation. The following highlights certain provisions of the legislation that may affect us.

Pharmaceutical Industry Fee: Beginning in calendar-year 2011, an annual fee was imposed on pharmaceutical
manufacturers and importers that sell branded prescription drugs to specified government programs (e.g., Medicare
Part D, Medicare Part B, Medicaid, Department of Veterans Affairs programs, Department of Defense programs
and TRICARE). The annual fee is allocated to companies based on their previous calendar-year market share using
sales data that the government agencies that purchase the pharmaceuticals will provide to the Treasury Department.
Although we participate in governmental programs that subject us to this fee, our sales volume in such programs
is less than $10 million, with the first $5 million of sales being exempt from the fee. This fee has not had a material
impact and is not expected to have a material impact on our results of operations.

Physician Payments Sunshine Act: The Affordable Care Act also includes provisions known as the Physician
Payments Sunshine Act, or Sunshine Act, which require manufacturers of pharmaceuticals and medical devices
covered under Medicare and Medicaid to record any transfers of value to physicians and teaching hospitals and to
report this data to the Centers for Medicare and Medicaid Services, or CMS for aggregation and subsequent public
disclosure. Under the Sunshine Act, beginning August 1, 2013, we have collected data regarding reportable transfers
of value and have reported such data to CMS. Failure to report appropriate data may result in civil or criminal fines
and/or penalties. In addition to the Federal Sunshine Act, similar reporting requirements have also been enacted
on the state level requiring transparency of interactions with health care professionals.

Medicaid Rebate Rate: We currently provide rebates for products sold to Medicaid beneficiaries.

Post Approval Activities

Once a drug is on the U.S. market (following FDA approval of the NDA), the FDA continues to address drug
production, distribution, and use. FDA activities are based on ensuring drug safety and effectiveness, and address
product integrity, labeling, reporting of research and adverse events, surveillance, drug studies, risk management,
information dissemination, off-label use, and direct-to-consumer advertising.

If we amend the NDA for an FDA approved product, such as adding safety or efficacy labeling claims, promoting
those new claims, making certain manufacturing changes or product enhancements we will need FDA review and
approval before the change can be implemented. While physicians may use products for indications that have not been
approved by the FDA, we may not label or promote the product for an indication that has not been approved. Securing
FDA approval for new indications, product enhancements, and manufacturing and labeling changes may require us to
conduct additional clinical trials under FDA's IND regulations. Even if such studies are conducted, they are still subject
to the same requirements and timelines as an original NDA.

The FDA continuously gathers information about possible adverse reactions to the products it has approved for
use. The FDA requires all manufacturers to report adverse events. It also provides a procedure for consumers and
physicians to voluntarily report their concerns about drugs. The agency collects those reports through MedWatch and
uses its Adverse Event Reporting System (AERS) to store and analyze them. Because some events may occur after the
use of a drug for reasons unrelated to the product, the FDA reviews the events to assess which ones may indicate a
problem with that particular drug. They then use information gleaned from the surveillance data to determine a course
of action. They might recommend a change in drug labeling to alert users to a potential problem, or, perhaps, to require
the manufacturer to study the observed association between the drug and the adverse event.

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal
laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws
include anti-kickback statutes and false claims statutes. The federal health care program anti-kickback statute prohibits,
among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return
for purchasing, leasing, ordering or arranging for the purchase, lease or order of any health care item or service
reimbursable under Medicare, Medicaid or other federally financed health care programs. This statute has been
interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers
and formulary managers on the other. Violations of the anti-kickback statute are punishable by imprisonment, criminal
fines, civil monetary penalties and exclusion from participation in federal health care programs.

Federal False Claims Act

The Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false
claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have
a false claim paid. Recently, several pharmaceutical and other health care companies have been prosecuted under these
laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to
set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the
expectation that the customers would bill federal programs for the product.

ICH - International Committee on Harmonization

Outside of the U.S., our ability to market our products will depend on receiving marketing authorizations from the
appropriate regulatory authorities. The International Committee on Harmonization (ICH) provides a set of standards
that most Regulatory Authorities adhere to (e.g. U.S., Europe, and Japan) allowing greater harmonization in the
interpretation and application of technical guidelines and requirements for pharmaceutical product registration, thereby
reducing or obviating duplication of testing carried out during the research and development of new human medicines.
Regulatory harmonization offers many direct benefits to both regulatory authorities and the pharmaceutical industry
with beneficial impact for the protection of public health.

ENVIRONMENTAL MATTERS

We are subject to federal, state and local environmental laws and regulations and we believe that our operations
comply with such regulations. We anticipate that the effects of compliance with federal, state and local laws and
regulations relating to the discharge of materials into the environment will not have any material effect on our capital
expenditures, earnings or competitive position.

SEASONALITY

There are no significant seasonal aspects to our business.

BACKLOG

Due to the relatively short lead-time required to fill orders for our products, backlog of orders is not considered

material to our business.

EMPLOYEES

As of December 31, 2014, we had 85 full-time employees. We believe that our future will depend in part on our
continued ability to attract, hire, and retain qualified personnel, including hospital and field sales personnel in particular.

Item 1A. Risk Factors.

You should carefully consider the risk factors described below and throughout this report, which could materially
affect our business. There are also risks that are not presently known or not presently material, as well as the other
information set forth in this report that could materially affect our business. In addition, in our periodic filings with
the SEC, press releases and other statements, we discuss estimates and projections regarding our future performance
and business outlook. By their nature, such “forward-looking statements” involve known and unknown risks,
uncertainties and other factors that in some cases are out of our control. For a further discussion of forward-looking
statements, please refer to the section entitled “Special Note Regarding Forward-Looking Statements.” These factors
could cause our actual results to differ materially from our historical results or our present expectations and projections.
These risk factors and uncertainties include, but are not limited to the following:

RISKS RELATED TO OUR BUSINESS

An adverse development regarding our products could have a material and adverse impact on our future revenues and
profitability.

A number of factors may impact the effectiveness of our marketing and sales activities and the demand for our products,

including:

• Changes in intellectual property protection available for our products or competing treatments;

• Any unfavorable publicity concerning us, our products, or the markets for these products such as information
concerning product contamination or other safety issues in any of our product markets, whether or not directly
involving our products;

•

Perception by physicians and other members of the healthcare community of the safety or efficacy of our
products or competing products;

• Regulatory developments related to our marketing and promotional practices or the manufacture or continued

use of our products;

• The prices of our products relative to other drugs or competing treatments;

• The impact of current or additional generic competitors;

• The availability and level of third-party reimbursement for sales of our products; and

• The continued availability of adequate supplies of our products to meet demand.

If demand for our products weaken, our revenues and profitability will likely decline. Known adverse effects of our
marketed products are documented in product labeling, including the product package inserts, medical information disclosed
to medical professionals and all marketing-related materials. At this time, no unforeseen or serious adverse effects outside
of those specified in current product labeling have been directly attributed to our approved products.

We currently market and sell five products: Acetadote, Caldolor, Kristalose, Vaprisol and Omeclamox-Pak. A product
contamination or other safety or regulatory issues, such as a failure to meet certain FDA reporting requirements involving
our products could negatively impact us and possibly lead to a product recall. In addition, changes impacting any of our
products in areas such as competition, lack of market acceptance or demand, government regulation, intellectual property,
reimbursement and manufacturing could have an adverse impact on our future revenues and profitability.

The FDA has requested prescribers and manufacturers of prescription combination products that contain acetaminophen
to limit the amount of acetaminophen to no more than 325 milligrams (mg) in each tablet or capsule. The FDA requested
this action to protect consumers from the risk of severe liver damage which can result from excess acetaminophen. This
category of prescription drugs combines acetaminophen with another ingredient intended to treat pain (most often an opioid),
and these products are commonly prescribed to consumers for pain, such as pain from acute injuries, post-operative pain, or
pain following dental procedures.

The FDA also requires manufacturers to appropriately label all prescription combination acetaminophen products to
warn of the potential risk for severe liver injury. The actions the FDA is taking for prescription acetaminophen combination
products do not affect over-the-counter acetaminophen products. The FDA's regulation of acetaminophen in prescription
combination products and over-the-counter products may reduce the number of acetaminophen overdoses which could result
in a lower demand for Acetadote. If the demand for Acetadote decreases, it could have an adverse impact on our future
revenues and profitability.

Caldolor was approved by the FDA in June 2009, and we started commercializing Caldolor in the United States in
September 2009. The commercial success of Caldolor is dependent on many third-parties, including physicians, pharmacists,
hospital pharmacy and therapeutics committees, or P&T committees, suppliers and distributors, all of whom we have little
or no control over. We expect Caldolor to continue to be administered primarily to hospital and surgery center patients who
are unable to receive oral therapies for the treatment of pain or fever. Before we can distribute Caldolor to any new hospital
customers, Caldolor must be approved for addition to the hospitals’ formulary lists by their P&T committees. A hospital’s
P&T committee generally governs all matters pertaining to the use of medications within the institution, including review
of medication formulary data and recommendations of drugs to the medical staff. We cannot guarantee that we will be
successful in getting the approvals we need from enough P&T committees to be able to optimize hospital sales of Caldolor.
Even if we obtain hospital approval for Caldolor, we must still convince individuals hospital physicians to prescribe Caldolor
repeatedly. The commercial success of Caldolor also depends on our ability to coordinate supply, distribution, marketing,
sales and education efforts. As with our other products, if Caldolor is not accepted in the marketplace, it could have an
adverse impact on our future revenues and profitability.

If any manufacturer we rely upon fails to produce our products in the amounts we require on a timely basis, or fails to
comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may be unable to meet demand
for our products and may lose potential revenues.

We do not manufacture any of our products, and we do not currently plan to develop any capacity to do so. Our dependence
upon third parties for the manufacture of products could adversely affect our profit margins or our ability to develop and
deliver products on a timely and competitive basis. If for any reason we are unable to obtain or retain third-party manufacturers
on commercially acceptable terms, we may not be able to sell our products as planned. Furthermore, if we encounter delays
or difficulties with contract manufacturers in producing our products, the distribution, marketing and subsequent sales of
these products could be adversely affected.

Caldolor: Caldolor has historically been manufactured at Hospira Australia Pty. Ltd.’s facility in Australia and Bayer’s
facility in Kansas. During 2013, we entered into agreements with three international manufacturers for the commercial supply

of Caldolor. We have successfully transfered the Caldolor manufacturing process to two of these manufacturers and these
two suppliers have manufactured validation inventory under these agreements. If the new international manufacturers of
Caldolor are unable to produce marketable inventory in sufficient quantities, in the agreed upon time period, we could suffer
an inability to meet demand for our product.

Acetadote: Acetadote was previously manufactured and packaged by two entities: at Bayer’s facility in Kansas through
January 2014 and in Ireland by Mylan through April 2014. During the fourth quarter of 2014, we entered into an agreement
with a U.S. based manufacturer to supply our Acetadote product. We are working to transfer the Acetadote manufacturing
process to this supplier under this new agreement. If the new manufacturer of Acetadote is unable to produce marketable
inventory in sufficient quantities, in the agreed upon time period, we could suffer an inability to meet demand for our product.

Kristalose: The active pharmaceutical ingredient for Kristalose is manufactured at a single facility in Italy. If this facility
is damaged or destroyed, or if local conditions result in a work stoppage, we could suffer an inability to meet demand for
our product. Kristalose is manufactured through a complex process. It would be particularly difficult to find a new
manufacturer of Kristalose on an expedited basis. As a result of these factors, our ability to manufacture Kristalose may be
substantially impaired if the manufacturer is unable or unwilling to supply sufficient quantities of the product.

Omeclamox-Pak: Under the agreement we signed with Pernix, they are responsible for providing Omeclamox-Pak
inventory. Pernix obtains the marketable inventory from a supplier who developed and registered Omeclamox-Pak. During
2014, we experienced a temporary shortage of Omeclamox-Pak marketable inventory and were unable to meet demand for
our product. If we are unable to obtain marketable inventory in the future we could suffer an inability to meet demand for
our product.

Vaprisol: As part of the acquisition of Vaprisol from Astellas, we purchased an existing supply of finished goods and
raw materials inventory. In addition, as part of this transaction, we were assigned a commercial supply agreement with the
manufacturer Astellas used to prepare, package, inspect and label Vaprisol. If the manufacturer of Vaprisol is unable to
produce additional marketable inventory in sufficient quantities, in the agreed upon time period, we could suffer an inability
to meet demand for our product.

In addition, all manufacturers of our products and product candidates must comply with current good manufacturing
practices, ("GMPs"), enforced by the FDA through its facilities inspection program. These requirements include quality
control, quality assurance and the maintenance of records and documentation. Manufacturers of our products may be unable
to comply with GMP requirements and with other FDA, state and foreign regulatory requirements.

We have no control over our manufacturers’ compliance with these regulations and standards. If our third-party

manufacturers do not comply with these requirements, we could be subject to:

•

Fines and civil penalties;

Suspension of production or distribution;

Suspension or delay in product approval;

product seizure or recall; and

• withdrawal of product approval.

We are dependent on a variety of other third parties. If these third parties fail to perform as we expect, our operations
could be disrupted and our financial results could suffer.

We have a relatively small internal infrastructure. We rely on a variety of third parties, in addition to our manufacturers,

to help us operate our business. Other third parties on which we rely include:

• Cardinal Health Specialty Pharmaceutical Services, a logistics and fulfillment company and business unit of

Cardinal, which bills for, collects, warehouses and ships our marketed products; and

• Vanderbilt University, Gloria and the Tennessee Technology Development Corporation, co-owners with us of
CET, and the universities that collaborate with us in connection with CET's research and development programs.

If these third parties do not continue to provide services to us, or collaborate with us, we might not be able to obtain
others who can serve these functions. This could disrupt our business operations, increase our operating expenses or otherwise
adversely affect our operating results.

Competitive pressures could reduce our revenues and profits.

The pharmaceutical industry is intensely competitive. Our strategy is to target differentiated products in specialized
markets. However, this strategy does not relieve us from competitive pressures and can entail distinct competitive risks.
Certain of our competitors do not aggressively promote their products in our markets. An increase in promotional activity
in our markets could result in large shifts in market share, adversely impacting us.

Our competitors may sell or develop drugs that are more effective and useful or less costly than ours, and they may be
more successful in manufacturing and marketing their products. Many of our competitors have significantly greater financial
and marketing resources than we do. Additional competitors may enter our markets.

The pharmaceutical industry is characterized by constant and significant investment in new product development, which
can result in rapid technological change. The introduction of new products could substantially reduce our market share or
render our products obsolete. The selling prices of pharmaceutical products tend to decline as competition increases, through
new product introduction or otherwise, which could reduce our revenues and profitability.

Governmental and private healthcare payors emphasize substitution of branded pharmaceuticals with less expensive
generic equivalents. An increase in the sales of generic pharmaceutical products could result in a decrease in revenues of our
branded pharmaceuticals.

Any attempt by us to expand the potential market for any of our products is subject to limitations.

Expansion of the market for our products may be subject to certain limitations. In the past, these limitations have included
FDA required Phase IV commitments. We may also experience delays associated with future required Phase IV clinical
studies potentially resulting from, among other factors, difficulty enrolling patients. Such delays could impact our ability to
explore opportunities for label expansion and limit our ability to bring our products to new patient populations.

In addition, we have only obtained regulatory approval to market our products in the United States. Not all foreign
jurisdictions may represent attractive opportunities for our products due to pricing, competitive, regulatory or other factors.
In certain foreign jurisdictions, we have licensed the right to market some of our products to third parties. These third parties
are responsible for seeking regulatory approval for the products in their respective jurisdictions. We have no control over
these third parties and cannot be sure that marketing approval for our products will be obtained outside the United States.

Our future growth depends on our ability to identify and acquire rights to products. If we do not successfully identify and
acquire rights to products, our growth opportunities may be limited.

We acquired rights to Caldolor, Acetadote, Omeclamox-Pak, Vaprisol, Kristalose and Hepatoren. Our business strategy
is to continue to acquire rights to FDA-approved products as well as pharmaceutical product candidates in the late stages of
development. We do not plan to conduct basic research or pre-clinical product development, except to the extent of our
investment in CET. As compared to large multi-national pharmaceutical companies, we have limited resources to acquire
third-party products, businesses and technologies and integrate them into our current infrastructure. Many acquisition
opportunities involve competition among several potential purchasers including large multi-national pharmaceutical
companies and other competitors that have access to greater financial resources than we do. With future acquisitions, we
may face financial and operational risks and uncertainties. We may not be able to engage in future product acquisitions, and
those we do complete may not be beneficial to us in the long term.

Furthermore, other products in development may encounter unforeseen issues during their clinical trials. Any unforeseen

issues or lack of FDA approval will negatively affect marketing and development plans for those products.

Our future growth depends on our ability to successfully integrate acquired product brands into our operations. If we do
not successfully integrate acquired product brands into our operations, our growth opportunities may be limited.

We recently added two marketed products to our portfolio of brands. We added Omeclamox-Pak in the fourth quarter
of 2013 and Vaprisol during the first quarter of 2014. We successfully launched our promotional efforts to support both
brands during 2014. If we are unable to continue to build on our initial success with these brands or we are unable to
successfully integrate the marketing, sale and distribution of any other potential products into our current infrastructure or
if they require significantly greater resources than originally anticipated, we may face financial and operational risks and
uncertainties. If we are unable to successfully integrate any acquired brands, both current and future, these product acquisitions
may not be beneficial to us in the long term.

Our Hepatoren product candidate has not been approved for sale and may never be successfully commercialized.

We anticipate that a portion of our future revenue growth will come from sales of our Hepatoren product candidate.
Hepatoren (ifetroban) is a drug used to treat hepatorenal syndrome ("HRS"). However, Hepatoren has not been approved by
the FDA for marketing, and it is still subject to risks associated with its development.

The FDA has cleared our IND for this product candidate as we evaluate Hepatoren as a treatment for HRS, a life
threatening condition with no approved treatment in this country. We have an on-going sixty-four patient study to evaluate
the safety, efficacy and pharmacokinetics of Hepatoren for this unmet medical need. The study is designed to evaluate
escalating dose levels of Hepatoren. Enrollment is underway at major medical centers across the U.S. We have commenced
manufacturing and have filed patent applications to protect intellectual property related to the new indication. Delays in the
enrollment and completion of the clinical study could significantly delay commercial launch and affect our product
development costs. Moreover, results from the clinical study may not be favorable.

Even if Hepatoren is eventually successfully developed and approved by the FDA, it may never gain significant
acceptance in the marketplace and therefore never generate substantial revenue or profits for us. Physicians may determine
that existing drugs are adequate to address patients' needs. The extent to which Hepatoren will be reimbursed by the U.S.
government or third-party payors is also currently unknown.

As a result of the foregoing and other factors, we do not know the extent to which Hepatoren will contribute to our future

growth.

If we are unable to maintain, train and build an effective sales and marketing infrastructure, we will not be able to
commercialize and grow our products and product candidates successfully.

As we grow, we may not be able to secure sales personnel or organizations that are adequate in number or expertise to
successfully market and sell our products. This risk would be accentuated if we acquire products in areas outside of hospital
acute care and gastroenterology since our sales forces specialize in these areas. If we are unable to expand our sales and
marketing capability, train our sales force effectively or provide any other capabilities necessary to commercialize our products
and product candidates, we will need to contract with third parties to market and sell our products. We must train our employees
on proper regulatory compliance, including, but not limited to, “fair balance” promotion of our products and anti-kickback
laws. If we are unable to establish and maintain compliant and adequate sales and marketing capabilities, we may not be
able to increase our product revenue, may generate increased expenses and may experience regulatory compliance issues.

If governmental or third-party payors do not provide adequate reimbursement for our products, our revenue and prospects
for profitability may be limited.

Our financial success depends, in part, on the availability of adequate reimbursement from third-party healthcare payors.
Such third-party payors include governmental health programs such as Medicare and Medicaid, managed care providers and
private health insurers. Third-party payors are increasingly challenging the pricing of medical products and services, while
governments continue to propose and pass legislation designed to reduce the cost of healthcare. Adoption of such legislation
could further limit reimbursement for pharmaceuticals.

In March 2010, the U.S. government passed into law the Patient Protection and Affordable Care Act, ("PPACA") along
with the Health Care and Education Reconciliation Act of 2010, ("HCERA"), which modified the revenue provisions of the
PPACA. The PPACA, as amended by the HCERA, constitutes the healthcare reform legislation. The legislation calls for an
increase in certain Medicare drug rebates paid by pharmaceutical manufacturers and an industry fee imposed on
pharmaceutical manufacturers according to the individual manufacturer’s relative percentage of total industry sales to
specified government programs. At this time no assurances can be given that these measures, or any other measures included
in the Healthcare Reform Act, will not have an adverse effect on our revenues in the future. Furthermore, future cost control
initiatives, legislation and regulations could decrease the price that we receive for any products, which would limit our
revenue and profitability.

Also, reimbursement practices of third-party payors might preclude us from achieving market acceptance for our products
or maintaining price levels sufficient to realize an appropriate return on our investment in product acquisition and development.
If we cannot obtain adequate reimbursement levels, our business, financial condition and results of operations would be
materially and adversely affected.

Our employees have been trained to submit accurate and correct pricing information to payors. If, despite the training,
our employees provide incorrect or fraudulent information, then we will be subject to various administrative and judicial
investigations and litigation.

“Formulary” practices of third-party payors could adversely affect our competitive position.

Many managed healthcare organizations are now controlling the pharmaceutical products included on their formulary
lists. Having products listed on these formulary lists creates competition among pharmaceutical companies which, in turn,
has created a trend of downward pricing pressure in our industry. In addition, many managed care organizations are pursuing
various ways to reduce pharmaceutical costs and are considering formulary contracts primarily with those pharmaceutical
companies that can offer a full line of products for a given therapy sector or disease state. Our products might not be included
on the formulary lists of managed care organizations, and downward pricing pressure in our industry generally could
negatively impact our operations.

Continued consolidation of distributor networks in the pharmaceutical industry as well as increases in retailer
concentration may limit our ability to profitably sell our products.

We sell most of our products to large pharmaceutical wholesalers, who in turn sell to hospitals, surgery centers and retail
pharmacies. The distribution network for pharmaceutical products has become increasingly consolidated in recent years.
Further consolidation or financial difficulties could also cause our customers to reduce the amounts of our products that they
purchase, which would materially and adversely impact our business, financial condition and results of operations.

Our CET joint initiative may not result in our gaining access to commercially viable products.

Our CET joint initiative with Vanderbilt University, Gloria and Tennessee Technology Development Corporation is
designed to help us investigate, in a cost-effective manner, early-stage products and technologies. However, we may never
gain access to commercially viable products from CET for a variety of reasons, including:

• CET investigates early-stage products, which have the greatest risk of failure prior to FDA approval and

commercialization;

•

In some programs, we do not have pre-set rights to product candidates developed by CET. We would need to
agree with CET and its collaborators on the terms of any product licensed to, or acquired by, us;

• We rely principally on government grants to fund CET’s research and development programs. If these grants
were no longer available, we or our co-owners might be unable or unwilling to fund CET operations at current
levels or at all;

• We may become involved in disputes with our co-owners regarding CET policy or operations, such as how
best to deploy CET assets or which product opportunities to pursue. Disagreement could disrupt or halt product
development; and

• CET may disagree with one of the various universities with which CET is collaborating on research. A

disagreement could disrupt or halt product development.

We depend on our key personnel, the loss of whom would adversely affect our operations. If we fail to attract and retain
the talent required for our business, our business will be materially harmed.

We are a relatively small company, and we depend to a great extent on principal members of our management, scientific
staff, and sales representatives and managers. If we lose the services of any key personnel, in particular, A.J. Kazimi, our
Chief Executive Officer, or other members of senior management it could have a material adverse effect on our business
prospects. Mr. Kazimi, plays a key role in several operational and strategic decisions such that any loss of his services due
to death or disability would adversely impact our day-to-day operations. We currently have a key man life insurance policy
covering the life of Mr. Kazimi. We have entered into agreements with each of our employees that contain restrictive covenants
relating to non-competition and non-solicitation of our customers and suppliers for one year after termination of employment.
Nevertheless, each of our officers and key employees may terminate his or her employment at any time without notice and
without cause or good reason, and so as a practical matter these agreements do not guarantee the continued service of these
employees. Our success depends on our ability to attract and retain highly qualified scientific, technical, sales and managerial
personnel and research partners. Competition among pharmaceutical companies for qualified employees is intense, and we
may not be able to retain existing personnel or attract and retain qualified staff in the future. If we experience difficulties in
hiring and retaining personnel in key positions, we could suffer from delays in product development, loss of customers and
sales and diversion of management resources, which could adversely affect operating results.

The size of our organization and our potential growth may lead to difficulties in managing operations.

As of December 31, 2014, we had 85 full-time employees. We may need to continue to expand our managerial, operational,
financial and other resources in order to increase our marketing efforts with regard to our currently marketed products,

continue our business development and product development activities and commercialize our product candidates. We have
experienced, and may continue to experience, growth and increased expenses in the scope of our operations in connection
with the continued marketing and development of our products. Our financial performance will depend, in part, on our ability
to manage any such growth and expenses of the current organization effectively.

We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial
liability for a product or product candidate and may have to limit its commercialization.

We face an inherent risk of product liability lawsuits related to the testing of our product candidates and the commercial
sale of our products. An individual may bring a liability claim against us if one of our product candidates or products causes,
or appears to have caused, an injury. If we cannot successfully defend ourselves against the product liability claim, we may
incur substantial liabilities. Liability claims may result in:

• Decreased demand for our products;

•

Injury to our reputation;

• Withdrawal of clinical trial participants;

•

Significant litigation costs;

Substantial monetary awards to or costly settlement with patients;

Product recalls;

• Loss of revenue; and

• The inability to commercialize our product candidates.

We are highly dependent upon medical and patient perceptions of us and the safety and quality of our products. We
could be adversely affected if we or our products are subject to negative publicity. We could also be adversely affected if
any of our products or any similar products sold by other companies prove to be, or are asserted to be, harmful to patients.
Also, because of our dependence upon medical and patient perceptions, any adverse publicity associated with illness or other
adverse effects resulting from the use or misuse of our products or any similar products sold by other companies could have
a material adverse impact on our results of operations.

We have product liability insurance that covers our clinical trials, the marketing and sale of our products up to a $10 million
annual aggregate limit, subject to specified deductibles. Our current or future insurance coverage may prove insufficient to
cover any liability claims brought against us.

Because of the increasing costs of insurance coverage, we may not be able to maintain insurance coverage at a reasonable

cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise.

Regulatory approval for any approved product is limited by the FDA to those specific indications and conditions for which
clinical safety and efficacy have been demonstrated.

Any regulatory approval is limited to those specific diseases and indications for which a product is deemed to be safe
and effective by the FDA. In addition to the FDA approval required for new formulations, any new indication for an approved
product also requires FDA approval. If we are not able to obtain FDA approval for any desired future indications for our
products, our ability to effectively market and sell our products may be reduced and our business may be adversely affected.

While physicians may choose to prescribe drugs for uses that are not described in the product’s labeling and for uses
that differ from those tested in clinical studies and approved by the regulatory authorities, our ability to promote the products
is limited to those indications that are specifically approved by the FDA. These “off-label” uses are common across medical
specialties and may constitute an appropriate treatment for some patients in varied circumstances. Regulatory authorities in
the U.S. generally do not regulate the behavior of physicians in their choice of treatments. Regulatory authorities do, however,
restrict communications by pharmaceutical companies on the subject of off-label use. If our promotional activities fail to
comply with these regulations or guidelines, we may be subject to warnings from, or enforcement action by, these authorities.
In addition, our failure to follow FDA rules and guidelines relating to promotion and advertising may cause the FDA to
suspend or withdraw an approved product from the market, require a recall or payment of fines, or could result in disgorgement
of money, operating restrictions, injunctions or criminal prosecution, any of which could harm our business.

Our business and operations would suffer in the event of system failures or adverse events at our corporate headquarters.

Despite the implementation of security measures, our internal computer systems, including those at our corporate
headquarters, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. In the event that our corporate headquarters and/or our computer systems are
disabled or materially damaged, it would have a substantial and material negative effect on our operations. Furthermore, any
system failure, accident or security breach that causes interruptions in our operations could result in a material disruption of
our drug development programs. To the extent that any disruption or security breach results in a loss or damage to our data
or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liability and the further
development of our products or product candidates may be delayed.

RISKS RELATING TO GOVERNMENT REGULATION

We are subject to stringent government regulation. All of our products face regulatory challenges.

Virtually all aspects of our business activities are regulated by government agencies. The manufacturing, processing,
formulation, packaging, labeling, distribution, promotion and sampling, advertising of our products, and disposal of
waste products arising from such activities are subject to governmental regulation. These activities are regulated by
one or more of the FDA, the Federal Trade Commission, ("FTC"), the Consumer Product Safety Commission, the
U.S. Department of Agriculture and the U.S. Environmental Protection Agency, ("EPA"), as well as by comparable
agencies in foreign countries. These activities are also regulated by various agencies of the states and localities in which
our products are sold. For more information, see “Business—Government Regulation".

Like all pharmaceutical manufacturers, we are subject to regulation by the FDA under the FDCA. All new drugs
must be the subject of an FDA-approved new drug application, ("NDA"), before they may be marketed in the United
States. The FDA has the authority to withdraw existing NDA approvals and to review the regulatory status of products
marketed under the enforcement policy. The FDA may require an approved NDA for any drug product marketed under
the enforcement policy if new information reveals questions about the drug’s safety and effectiveness. All drugs must
be manufactured in conformity with GMP, and drug products subject to an approved NDA must be manufactured,
processed, packaged, held and labeled in accordance with information contained in the NDA. Since we rely on third
parties to manufacture our products, GMP requirements directly affect our third party manufacturers and indirectly
affect us. The manufacturing facilities of our third-party manufacturers are continually subject to inspection by such
governmental agencies, and manufacturing operations could be interrupted or halted in any such facilities if such
inspections prove unsatisfactory. Our third-party manufacturers are subject to periodic inspection by the FDA to assure
such compliance.

Pharmaceutical products must be distributed, sampled and promoted in accordance with FDA requirements. We
must train our employees on proper regulatory compliance, including, but not limited to, “fair balance” promotion of
our products and anti-kickback laws. The FDA also regulates the advertising of prescription drugs. The FDA has the
authority to request post-approval commitments that can be time-consuming and expensive.

Under the FDCA, the federal government has extensive enforcement powers over the activities of pharmaceutical
manufacturers to ensure compliance with FDA regulations. Those powers include, but are not limited to, the authority
to initiate court action to seize unapproved or non-complying products, to enjoin non-complying activities, to halt
manufacturing operations that are not in compliance with GMP, and to seek civil monetary and criminal penalties. The
initiation of any of these enforcement activities, including the restriction or prohibition on sales of our products, could
materially and adversely affect our business, financial condition and results of operations.

Any change in the FDA’s enforcement policy could have a material adverse effect on our business, financial

condition and results of operations.

We cannot determine what effect changes in regulations or statutes or legal interpretation, when and if promulgated
or enacted, may have on our business in the future. Such changes, or new legislation, could have a material adverse
effect on our business, financial condition and results of operations.

Proposed legislation may permit re-importation of drugs from other countries into the U.S., including foreign
countries where the drugs are sold at lower prices than in the U.S., which could materially and adversely affect our
operating results and our overall financial condition.

In previous years, legislation has been introduced in Congress that, if enacted, would permit more widespread re-
importation of drugs from foreign countries into the U.S., which may include re-importation from foreign countries
where the drugs are sold at lower prices than in the U.S. Such legislation, or similar regulatory changes, if enacted,

could decrease the price we receive for any approved products which, in turn, could materially and adversely affect
our operating results and our overall financial condition.

We must comply with the Foreign Corrupt Practices Act.

We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies
from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some of our competitors, are not subject to these prohibitions. If our competitors
engage in these practices, they may receive preferential treatment from personnel of some companies, giving our
competitors an advantage in securing business from government officials who might give them priority in obtaining
new licenses, which would put us at a disadvantage. We have established formal policies or procedures for prohibiting
or monitoring this conduct, but we cannot assure you that our employees or other agents will not engage in such conduct
for which we might be held responsible. If our employees or other agents are found to have engaged in such practices,
we could suffer severe penalties.

We must comply with the Physician Payment Sunshine Act.

We are required to comply with the United States Physician Payment Sunshine Act, which requires manufacturers
of drugs, medical devices and biologicals that participate in U.S. federal healthcare programs to report certain payments
and items of value given to physicians and teaching hospitals. Manufacturers are required to report this information
annually to The Centers for Medicare & Medicaid Services (CMS). Cumberland has implemented a series of policies
and procedures for every employee involved in the data collection process, and has systems in place to capture the data,
which is verified by an outside firm that specializes in reporting the payments. Cumberland has also established a
redundant system to ensure that data was reported completely, in the correct format, and on time. Despite these policies,
procedures and systems, we cannot assure you that we will collect and report all data accurately. If we fail to accurately
report this information, we could suffer severe penalties.

RISKS RELATING TO INTELLECTUAL PROPERTY

Our strategy to secure and extend marketing exclusivity or patent rights may provide only limited or no protection
from competition.

We seek to secure and extend marketing exclusivity for our products through a variety of means, including FDA
exclusivity and patent rights. Additional barriers for competitors seeking to enter the market include the time and cost
associated with the development, regulatory approval and manufacturing of a similar product formulation.

Acetadote is indicated to prevent or lessen hepatic (liver) injury when administered intravenously within eight to
ten hours after ingesting quantities of acetaminophen that are potentially toxic to the liver. As discussed in Part I,
Item 1, Business - Trademarks, Patents and Proprietary Rights, of this Form 10-K, during April 2012, the United States
Patent and Trademark Office (the “USPTO”) issued U.S. Patent number 8,148,356 (the “356 Acetadote Patent”) which
is assigned to us. The claims of the 356 Acetadote Patent encompass the new Acetadote formulation and include
composition of matter claims. Following its issuance, the 356 Acetadote Patent was listed in the FDA Orange Book.
The 356 Acetadote Patent is scheduled to expire in May 2026, which time period includes a 270-day patent term
adjustment granted by the USPTO.

Following the issuance of the 356 Acetadote Patent, we received separate Paragraph IV certification notices from
InnoPharma, Inc., Paddock Laboratories, LLC ("Paddock") and Mylan Institutional LLC challenging the 356 Acetadote
Patent on the basis of non-infringement and/or invalidity. On May 17, 2012, we responded to the Paragraph IV
certification notices by filing three separate lawsuits for infringement of the 356 Acetadote Patent. The first lawsuit
was filed against Mylan Institutional LLC and Mylan Inc. ("Mylan") in the United States District Court for the Northern
District of Illinois, Eastern Division. The second lawsuit was filed against InnoPharma, Inc. in the United States District
Court for the District of Delaware. The third lawsuit was also filed in the United States District Court for the District
of Delaware against Paddock and Perrigo Company ("Perrigo"). On May 20, 2012, we received a Paragraph IV
certification notice from Sagent Agila LLC challenging the 356 Acetadote Patent. On June 26, 2012, we filed a lawsuit
for infringement of the 356 Acetadote Patent against Sagent Agila LLC and Sagent Pharmaceuticals, Inc. ("Sagent")
in the United States District Court for the District of Delaware. On July 9, 2012, we received a Paragraph IV certification

notice from Perrigo. On August 9, 2012, we filed a lawsuit for infringement of the 356 Acetadote Patent against Perrigo
in the United States District Court for the Northern District of Illinois, Eastern Division.

On November 12, 2012, we entered into a Settlement Agreement (the “Settlement Agreement”) with Paddock and
Perrigo to resolve the challenges and the pending litigation with each of Paddock and Perrigo involving the 356 Acetadote
Patent. Under the Settlement Agreement, Paddock and Perrigo admit that the 356 Acetadote Patent is valid and
enforceable and that any Paddock or Perrigo generic Acetadote product (with or without EDTA) would infringe upon
the 356 Acetadote Patent. In addition, Paddock and Perrigo will not challenge the validity, enforceability, ownership
or patentability of the 356 Acetadote Patent through its expiration currently scheduled for May 2026. On November
12, 2012, in connection with the execution of the Settlement Agreement, we entered into a License and Supply Agreement
with Paddock and Perrigo (the “License and Supply Agreement”). Under the terms of the License and Supply Agreement,
if a third party receives final approval from the FDA for an ANDA to sell a generic Acetadote product and such third
party has made such generic version available for purchase in commercial quantities in the United States, we will supply
Perrigo with an Authorized Generic version of our Acetadote product.

On May 18, 2012, we also submitted a Citizen Petition to the FDA requesting that the FDA refrain from approving
any applications for acetylcysteine injection that contain EDTA, based in part on the FDA's request that we evaluate
the reduction or removal of EDTA from its original Acetadote formulation. On November 7, 2012, the FDA responded
to the Citizen Petition denying our request and stating that ANDAs referencing Acetadote that contain EDTA may be
accepted and approved provided they meet all applicable requirements. We believe this response contradicts the FDA's
request to evaluate the reduction or removal of EDTA. On November 8, 2012, we learned that the FDA approved the
ANDA referencing Acetadote filed by InnoPharma, Inc. On November 13, 2012, we brought suit against the FDA in
the United States District Court for the District of Columbia alleging that the FDA's denial of our Citizen Petition and
acceptance for review and approval of any InnoPharma, Inc. product containing EDTA was arbitrary and in violation
of law.

We found during the resulting legal proceedings that the FDA initially concluded that the original Acetadote
formulation was withdrawn for safety reasons and no generic versions should be approved. The FDA later reversed its
position based on the possibility of drug shortages and the presence of EDTA in other formulations. At the same time,
the FDA noted that exclusively marketing a non-EDTA containing product would be preferable because it would
eliminate the potential risk of EDTA.

On January 7, 2013, Perrigo announced initial distribution of our Authorized Generic acetylcysteine injection

product.

On March 19, 2013, the USPTO issued U.S. Patent number 8,399,445 (the “445 Acetadote Patent”) which is also
assigned to us. The claims of the 445 Acetadote Patent encompass the use of the 200 mg/ml Acetadote formulation to
treat patients with acetaminophen overdose. On April 8, 2013, the 445 Acetadote Patent was listed in the FDA Orange
Book. The 445 Acetadote Patent is scheduled to expire in August 2025. Following the issuance of the 445 Acetadote
Patent we have received separate Paragraph IV certification notices from Perrigo, Sagent, and Mylan challenging the
445 Acetadote Patent on the basis of non-infringement, unenforceability and/or invalidity.

On June 10, 2013, we announced that the FDA approved updated labeling for Acetadote. The new labeling revises

the product's indication and offers new dosing guidance for specific patient populations.

On September 30, 2013, the United States District Court for the District of Columbia filed an opinion granting a
Summary Judgment in favor of the FDA regarding Cumberland’s November 13, 2012 suit. On November 1, 2013, the
United States District Court for the District of Delaware filed opinions granting Sagent’s and InnoPharma’s motions
to dismiss our May 2012 and June 2012 suits.

On February18, 2014, the USPTO issued U.S. Patent number 8,653,061 (the “061 Acetadote Patent”) which is
assigned to us. The claims of the 061 Acetadote Patent encompass the use of the 200 mg/ml Acetadote formulation to

treat patients with acetaminophen overdose. Following its issuance, the 061 Acetadote Patent was listed in the FDA
Orange Book. The 061 Acetadote Patent is scheduled to expire in August 2025.

On May 13, 2014, the USPTO issued U.S. Patent number 8,722,738 (the “738 Acetadote Patent”) which is assigned
to us. The claims of the 738 Acetadote Patent encompass administration methods of acetylcysteine injection, without
specification of the presence or lack of EDTA in the injection. Following its issuance, the 738 Acetadote Patent was
listed in the FDA Orange Book and it is scheduled to expire in April 2032.

On December 11, 2014 and March 3, 2015, we became aware of Paragraph IV certification notices from Aurobindo
Pharma Limited and Zydus Pharmaceuticals (USA) Inc., respectively, challenging the 356, 445, 061, and 738 Acetadote
Patents on the basis of non-infringement.

By statute, where the Paragraph IV certification is to a patent timely listed before an Abbreviated New Drug
Application (“ANDA”) is filed, a company has 45 days to institute a patent infringement lawsuit during which period
the FDA may not approve another application. In addition, such a lawsuit for patent infringement filed within such 45-
day period may stay, or bar, the FDA from approving another product application for two and a half years or until a
district court decision that is adverse to the asserted patents, whichever is earlier.

We also have additional patent applications relating to Acetadote which are pending with the USPTO and may or
may not be issued. We intend to continue to vigorously defend and protect our Acetadote product and related intellectual
property rights. If we are unsuccessful in protecting our Acetadote intellectual property rights, our competitors may be
able to introduce products into the marketplace that reduce the sales and market share of our Acetadote product which
may require us to take measures such as reducing prices or increasing our marketing expense, any of which may result
in a material adverse effect to our financial condition and results of operations.

We have U.S. patents and related international patents which include composition of matter claims that encompass
the Caldolor formulation, including methods of treating pain using intravenous ibuprofen and claims directed to
ibuprofen solution formulations, methods of making the same, and methods of using the same, and which are related
to our formulation and manufacture of Caldolor. Additionally, the active ingredient in Caldolor, ibuprofen, is in the
public domain, and a competitor could try to develop, test and seek FDA approval for a sufficiently distinct formulation
for another ibuprofen product that competes with Caldolor. The U.S. patents are listed in the FDA Orange Book, with
one expiring in November 2021 and two others expiring in September 2029.

We have numerous U.S. patents and related international patents for Vaprisol. These patents were acquired in our
February 2014 acquisition of certain product rights, intellectual property and related assets of Vaprisol from Astellas.

While we consider patent protection when evaluating product acquisition opportunities, any products we acquire
in the future may not have significant patent protection. Neither the USPTO nor the courts have a consistent policy
regarding the breadth of claims allowed or the degree of protection afforded under many pharmaceutical patents. Patent
applications in the U.S. and many foreign jurisdictions are typically not published until 18 months following the filing
date of the first related application, and in some cases not at all. In addition, publication of discoveries in scientific
literature often lags significantly behind actual discoveries. Therefore, neither we nor our licensors can be certain that
we or they were the first to make the inventions claimed in our issued patents or pending patent applications, or that
we or they were the first to file for protection of the inventions set forth in these patent applications. In addition, changes
in either patent laws or in interpretations of patent laws in the U.S. and other countries may diminish the value of our
intellectual property or narrow the scope of our patent protection. Furthermore, our competitors may independently
develop similar technologies or duplicate technology developed by us in a manner that does not infringe our patents
or other intellectual property. As a result of these factors, our patent rights may not provide any commercially valuable
protection from competing products.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our
technology and products could be adversely affected.

In addition to patents, we rely upon trade secrets, unpatented proprietary know-how and continuing technological
innovation where we do not believe patent protection is appropriate or attainable. For example, the manufacturing
process for Kristalose involves substantial trade secrets and proprietary know-how. We have entered into confidentiality
agreements with certain key employees and consultants pursuant to which such employees and consultants must assign

to us any inventions relating to our business if made by them while they are our employees, as well as certain
confidentiality agreements relating to the acquisition of rights to products. Confidentiality agreements can be breached,
though, and we might not have adequate remedies for any breach. Also, others could acquire or independently develop
similar technology.

We may depend on certain licensors for the maintenance and enforcement of intellectual property rights and have
limited, if any, control over the amount or timing of resources that our licensors devote on our behalf.

When we license products, we often depend on our licensors to protect the proprietary rights covering those
products. We have limited, if any, control over the amount or timing of resources that our licensors devote on our behalf
or the priority they place on maintaining patent or other rights and prosecuting patent applications to our advantage.
While any such licensor is expected to be contractually obligated to diligently pursue its patent applications and allow
us the opportunity to consult, review and comment on patent office communications, we cannot be sure that it will
perform as required. If a licensor does not perform and if we do not assume the maintenance of the licensed patents in
sufficient time to make required payments or filings with the appropriate governmental agencies, we risk losing the
benefit of all or some of those patent rights.

If the use of our technology conflicts with the intellectual property rights of third parties, we may incur substantial
liabilities, and we may be unable to commercialize products based on this technology in a profitable manner or at
all.

If our products conflict with the intellectual property rights of others, they could bring legal action against us or
our licensors, licensees, manufacturers, customers or collaborators. If we were found to be infringing a patent or other
intellectual property rights held by a third party, we could be forced to seek a license to use the patented or otherwise
protected technology. We might not be able to obtain such a license on terms acceptable to us or at all. If legal action
involving an alleged infringement or misappropriation were to be brought against us or our licensors, we would incur
substantial costs in defending the action. If such a dispute were to be resolved against us, we could be subject to
significant damages, and the manufacturing or sale of one or more of our products could be enjoined.

We may be involved in lawsuits to protect or enforce our patents or the patents of our collaborators or licensors,
which could be costly and time consuming.

We have been involved in lawsuits for infringement of the Acetadote Patents as previously described. Because of
their nature, these lawsuits can be costly and time-consuming, and we only experience limited benefits and patent
protection. A significant adverse ruling in any such lawsuit could put the Acetadote Patents at risk of being invalidated
or interpreted narrowly and could compromise the issuance of our existing patent applications.

Competitors may infringe on our other patents or the patents of our collaborators or licensors. To counter
infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-
consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is
unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents
do not cover the technology in question. An adverse result in any litigation or defense proceeding could put one or
more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of
not issuing.

Interference proceedings brought by the USPTO may be necessary to determine the priority of inventions with
respect to our patent applications or those of our collaborators or licensors. Litigation or interference proceedings may
fail and, even if successful, may result in substantial costs and distraction of our management. We may not be able,
alone or with our collaborators and licensors, to prevent misappropriation of our proprietary rights, particularly in
countries where the laws may not protect such rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property
litigation, some of our confidential information could be disclosed during this type of litigation. In addition, there could
be public announcements of the results of hearings, motions or other interim proceedings or developments.

If we breach any of the agreements under which we license rights to our products and product candidates from
others, we could lose the ability to continue commercialization of our products and development and
commercialization of our product candidates.

We have exclusive licenses for the marketing and sale of certain products and may acquire additional licenses.
Such licenses may terminate prior to expiration if we breach our obligations under the license agreement related to
these pharmaceutical products. For example, the licenses may terminate if we fail to meet specified quality control
standards, including GMP with respect to the products, or commit a material breach of other terms and conditions of
the licenses. Such early termination could have a material adverse effect on our business, financial condition and results
of operations.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their
former employers.

As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously
employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors.
Although no claims against us are currently pending, we may be subject to claims that we or these employees have
inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.
Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims,
litigation could result in substantial costs and be a distraction to management.

RISKS RELATED TO OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our operating results are likely to fluctuate from period to period.

We are a relatively new company seeking to capture significant growth. As we execute our business strategy of
adding new products, like Vaprisol and Omeclamox-Pak, increasing market share in Caldolor and Kristalose and striving
to maintain market share in our Acetadote product, we anticipate that there may be fluctuations in our future operating
results. We may not be able to maintain or improve our current levels of revenue or income. Potential causes of future
fluctuations in our operating results may include:

• New product launches, which could increase revenues but also increase sales and marketing expenses;

• Acquisition activity and other charges (such as for inventory expiration);

•

Increases in research and development expenses resulting from the acquisition of a product candidate that
requires significant additional studies and development;

• Changes in the competitive, regulatory or reimbursement environment, which could drive down revenues

or drive up sales and marketing or compliance costs; and

• Unexpected product liability or intellectual property claims and lawsuits.

See also “Management’s discussion and analysis of financial condition and results of operations—Liquidity and
capital resources.” Fluctuation in operating results, particularly if not anticipated by investors and other members of
the financial community, could add to volatility in our stock price.

Our focus on acquisitions as a growth strategy has created intangible assets whose amortization could negatively
affect our results of operations.

Our total assets include intangible assets related to our acquisitions. As of December 31, 2014, intangible assets
relating to product and data acquisitions represented approximately 23% of our total assets. We may never realize the
value of these assets. U.S. Generally Accepted Accounting Principles ("GAAP") require that we evaluate on a regular
basis whether events and circumstances have occurred that indicate that all or a portion of the carrying amount of the
asset may no longer be recoverable, in which case we would write down the value of the asset and take a corresponding
charge to earnings. Any determination requiring the write-off of a significant portion of unamortized intangible assets
would adversely affect our results of operations.

We may need additional funding and may be unable to raise capital when needed, which could force us to delay,
reduce or eliminate our product development or commercialization and marketing efforts.

We may need to raise additional funds in order to meet the capital requirements of running our business and
acquiring and developing new pharmaceutical products. If we require additional funding, we may seek to sell common
stock or other equity or equity-linked securities, which could result in dilution to our shareholders. We may also seek
to raise capital through a debt financing, which would result in ongoing debt-service payments and increased interest
expense. Any financings would also likely involve operational and financial restrictions being imposed on us. We might
also seek to sell assets or rights in one or more commercial products or product development programs. Additional
capital might not be available to us when we need it. We are unable to predict the impact of global credit market trends,
and if economic conditions deteriorate, our business, results of operations and ability to raise needed capital could be
materially and adversely affected. If we are unable to raise additional capital when needed due to the reasons listed
above and lack of creditworthiness, bank failures, or price decline in market investments, we could be forced to scale
back our operations to conserve cash.

If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to
fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating
results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial
information and have a negative effect on the market price for shares of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports and mitigate the risk of fraud.
We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under
the supervision of, our principal executive officer and principal financial officer, and affected by our board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with GAAP.

We cannot assure you that we will not, in the future, identify areas requiring improvement in our internal control
over financial reporting. We cannot assure you that the measures we will take to improve these controls will be successful
or that we will implement and maintain adequate controls over our financial processes and reporting in the future as
we continue to expand. If we are unable to establish appropriate internal financial reporting controls and procedures,
it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm
our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported
financial information and have a negative effect on the market price for shares of our common stock.

In addition, we maintain a system of internal controls and provide training to employees designed to provide
reasonable assurance that unlawful and fraudulent activity, including misappropriation of assets, fraudulent financial
reporting, and unauthorized access to sensitive or confidential data is either prevented or timely detected. However, in
the event that our employees engage in such fraudulent behavior, we could suffer material adverse consequences.

Changes in, or interpretations of, accounting principles and tax laws could have a significant impact on our

financial position and results of operations.

We prepare our consolidated financial statements in accordance with GAAP. These principles are subject to
interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change
in these principles can have a significant effect on our reported results and may even retroactively affect previously
reported transactions.

For example, in recent years, the U.S.-based Financial Accounting Standards Board, ("FASB"), has worked together
with the International Accounting Standards Board, ("IASB"), on several projects to further align accounting principles
and facilitate more comparable financial reporting between companies who are required to follow GAAP under SEC
regulations and those who are required to follow International Financial Reporting Standards, ("IFRS"), outside of the
U.S. These efforts by the FASB and IASB may result in different accounting principles under GAAP that may result
in materially different financial results for us in areas including, but not limited to, principles for revenue recognition
and lease accounting.

RISKS RELATED TO OWNING OUR STOCK

The market price of our common stock may fluctuate substantially.

The price for the shares of our common stock sold in our initial public offering was determined by negotiation
between the representatives of the underwriters and us. This price may not have reflected the market price of our
common stock following our initial public offering. Through March 3, 2015, the closing price of our common stock
since our initial public offering has ranged from a low of $4.03 to a high of $17.05 per share. Moreover, the market
price of our common stock might decline below current levels. In addition, the market price of our common stock is
likely to be highly volatile and may fluctuate substantially. Sales of a substantial number of shares of our common
stock in the public market or the perception that these sales may occur could cause the market price of our common
stock to decline.

The realization of any of the risks described in these “Risk Factors” could have a dramatic and material adverse
impact on the market price of our common stock. In addition, securities class action litigation has often been instituted
against companies whose securities have experienced periods of volatility in market price. Any such securities litigation
brought against us could result in substantial costs and a diversion of management’s attention and resources, which
could negatively impact our business, operating results and financial condition. Sales of a substantial number of shares
of our common stock in the public market or the perception that these sales may occur could cause the market price of
our common stock to decline.

Unstable market conditions may have serious adverse consequences on our business.

Our general business strategy may be adversely affected by unpredictable and unstable market conditions. While
we believe we have adequate capital resources to meet current working capital and capital expenditure requirements,
a radical economic downturn or increase in our expenses could require additional financing on less than attractive rates
or on terms that are dilutive to existing shareholders. Failure to secure any necessary financing in a timely manner and
on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price
and could require us to delay or abandon clinical developments plans. There is a risk that one or more of our current
service providers, manufacturers and other partners may encounter difficult economic circumstances, which would
directly affect our ability to attain our operating goals on schedule and on budget.

We are experiencing increased costs and regulatory risk as a result of operating as a public company, and our
management will be required to devote additional time to new compliance initiatives.

We have and will continue to incur increased costs as a result of operating as a public company, and our management
is required to devote additional time to new compliance initiatives. As a public company, we have and will continue
to incur legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-
Oxley Act of 2002, or Sarbanes-Oxley Act, Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,
and other rules and regulations subsequently implemented by the SEC and NASDAQ, have imposed various
requirements on public companies, including the establishment and maintenance of effective disclosure and financial
controls and changes in corporate governance practices. These rules and regulations have and will continue to increase
our legal and financial compliance costs and will render some activities more time-consuming and costly. Despite the
internal controls and procedures put in place to maintain compliance with securities laws and regulations, our employees
may still fail to comply with all SEC disclosure and reporting requirements. Such failure could lead to administrative
and civil penalties, criminal penalties, and private litigation with shareholders. The consequences could have a material
effect on our ability to effectively market our products and operate our business.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial
reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and
testing of our internal controls over financial reporting to allow management and our independent registered public
accounting firm to report on the effectiveness of our internal controls over financial reporting. Our testing, or the
subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls
over financial reporting that are deemed to be material weaknesses.

Our compliance with Section 404 of the Sarbanes-Oxley Act requires that we incur substantial accounting expense
and expend significant management efforts. Moreover, if we are not able to comply with the requirements of Section 404

of the Sarbanes-Oxley Act in a timely manner, or if we or our independent registered public accounting firm identifies
deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market
price of our stock could decline and we could be subject to sanctions or investigations by NASDAQ, the SEC or other
regulatory authorities, which would require additional financial and management resources.

Some provisions of our third amended and restated charter, bylaws and Tennessee law may inhibit potential
acquisition bids that you may consider favorable.

Our corporate documents contain provisions that may enable our board of directors to resist a change in control
of our company even if a change in control were to be considered favorable by you and other shareholders. These
provisions include:

• The authorization of undesignated preferred stock, the terms of which may be established and shares of

which may be issued without shareholder approval;

• Advance notice procedures required for shareholders to nominate candidates for election as directors or

to bring matters before an annual meeting of shareholders;

• Limitations on persons authorized to call a special meeting of shareholders;

• A staggered board of directors;

• A restriction prohibiting shareholders from removing directors without cause;

• A requirement that vacancies in directorships are to be filled by a majority of the directors then in office

and the number of directors is to be fixed by the board of directors; and

• No cumulative voting.

These and other provisions contained in our third amended and restated charter and bylaws could delay or discourage
transactions involving an actual or potential change in control of us or our management, including transactions in which
our shareholders might otherwise receive a premium for their shares over then current prices, and may limit the ability
of shareholders to remove our current management or approve transactions that our shareholders may deem to be in
their best interests and, therefore, could adversely affect the price of our common stock.

In addition, we are subject to control share acquisitions provisions and affiliated transaction provisions of the
Tennessee Business Corporation Act, the applications of which may have the effect of delaying or preventing a merger,
takeover or other change in control of us and therefore could discourage attempts to acquire our company.

We have never paid cash dividends on our capital stock, and we do not anticipate paying any cash dividends in the
foreseeable future.

We have never paid cash dividends on our capital stock. We do not anticipate paying cash dividends to our
shareholders in the foreseeable future. The availability of funds for distributions to shareholders will depend substantially
on our earnings. Even if we become able to pay dividends in the future, we expect that we would retain such earnings
to enhance capital and/or reduce long-term debt.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this Annual Report on Form 10-K that are not historical factual statements are “forward-looking
statements.” Forward-looking statements include, among other things, statements regarding our intent, belief or
expectations, and can be identified by the use of terminology such as “may,” “will,” “expect,” “believe,” “intend,”
“plan,” “estimate,” “should,” “seek,” “anticipate” and other comparable terms or the negative thereof. In addition, we,
through our senior management, from time to time make forward-looking oral and written public statements concerning
our expected future operations and other developments. While forward-looking statements reflect our good-faith beliefs
and best judgment based upon current information, they are not guarantees of future performance and are subject to
known and unknown risks and uncertainties, including those mentioned in Item 1A, “Risk Factors,” Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this

Form 10-K. Actual results may differ materially from the expectations contained in the forward-looking statements as
a result of various factors. Such factors include, but are not limited to:

• The possible or assumed future results of operations, including the accuracy of our estimates regarding

expenses, future revenues, capital requirements and needs for additional financing;

• Changes in national or regional economic conditions, including changes in interest rates and the availability

and the cost of capital to us;

• Our competitive position and competitors, including the size and growth potential of the markets for our

products and product candidates;

• The success, cost and timing of our product development activities and clinical trials; and our ability to

successfully commercialize our product candidates;

• The performance of our third-party suppliers and manufacturers; and the retention of key scientific and

management personnel;

• Our expectations regarding our ability to provide intellectual property protection for our product

candidates; and

• Changes in reimbursement available to us, including changes in Medicare and Medicaid payment levels
and availability of third-party insurance coverage and the effects of future legislation or regulations.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

As of December 31, 2014, we leased approximately 25,500 square feet of office space in Nashville, Tennessee for
our corporate headquarters. The lease expires in October 2016. Of the 25,500 square feet of leased office space, we
have subleased to others approximately 9,900 square feet. We believe these facilities are adequate to meet our current
needs for office space. We currently do not plan to purchase or lease facilities for manufacturing, packaging or
warehousing, as such services are provided to us by third-party contract groups.

Under an agreement amended in July 2012 and expiring in April 2018, CET leases approximately14,200 square
feet of office and wet laboratory space in Nashville, Tennessee. CET uses this space to operate the CET Life Sciences
Center for product development work to be carried out in collaboration with universities, research institutions and
entrepreneurs. The CET Life Sciences Center provides laboratory and office space, equipment and infrastructure to
early-stage life sciences companies and university spin-outs.

Item 3. Legal Proceedings.

On April 14, 2014, we filed with the American Arbitration Association a request for arbitration with Mylan Inc.,

Mylan Institutional LLC, Mylan Pharma Group Limited, and Mylan Teoranta (collectively, “Mylan”). We are
seeking to arbitrate claims against Mylan in connection with our Alliance Agreement dated January 15, 2002, and
Manufacturing and Supply Agreement as amended April 25, 2011, which require that Mylan and its affiliates
manufacture and supply acetylcysteine drug product, including Acetadote, for us exclusively until April 2016. We
have asserted in the request for arbitration claims against Mylan for breach of contract, breach of implied covenant
of good faith and fair dealing, and unjust enrichment and seek monetary damages or to enjoin Mylan and its
affiliates from selling or supplying acetylcysteine drug product to another entity or person until April 2016.

Also see the discussion of legal proceedings contained in Part I, Item 1, Business - Trademarks and Patents, of

this Form 10-K, which is incorporated herein by reference.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.

Market Information

Our common stock, no par value, has been traded on the Nasdaq Global Select Market since August 11, 2009 under
the symbol “CPIX.” As of March 3, 2015, we had 79 shareholders of record of our common stock. This excludes
shareholders whose shares are held by brokers and other institutions on behalf of shareholders. The closing price of
our common stock on the Nasdaq Global Select Market on March 3, 2015 was $6.40 per share. The following table
sets forth the high and low trading sales prices for our common stock as reported on the Nasdaq Global Select Market
for the full quarterly periods during 2013 and 2014:

Fiscal year ended December 31, 2014:

First quarter

Second quarter

Third quarter

Fourth quarter

Fiscal year ended December 31, 2013:

First quarter

Second quarter

Third quarter

Fourth quarter

High

Low

$5.19

4.59

5.20

6.20

5.10

5.37

5.85

5.41

$4.33

4.20

4.42

4.50

4.03

4.52

4.33

4.53

Dividend Policy

We have not declared or paid any cash dividends on our common stock nor do we anticipate paying dividends for
the foreseeable future. We currently intend to retain any future earnings for use in the operation of our business and to
fund future growth. The payment of dividends by us on our common stock is limited by our loan agreement. Any future
decision to declare or pay dividends will be at the sole discretion of our Board of Directors.

Performance Graph

The stock performance graph below illustrates a comparison of the total cumulative stockholder return on our
common stock since December 31, 2009 to the Nasdaq Composite and a composite of ten Nasdaq Pharmaceutical and
Specialty Pharmaceutical Stocks which most closely compare to our Company. The graph assumes an initial investment
of $100 on December 31, 2009, and that all dividends were reinvested.

Purchases of Equity Securities

On May 13, 2010, we announced a share repurchase program to purchase up to $10 million of our common stock
pursuant to Rule 10b-18 of the Securities Act. In January 2011, April 2012, January 2013 and January 2015, our Board
of Directors replaced the prior authorizations with $10 million authorizations for repurchases of our outstanding
common stock. We repurchased 881,810 shares, 1,008,105 shares and 1,268,809 shares of common stock for
approximately $4.3 million, $4.8 million and $8.1 million during the years ended December 31, 2014, 2013 and 2012,
respectively.

The following table summarizes the activity, by month, during the fourth quarter of 2014:

Period

Total Number
of Shares (or
Units)
Purchased

October

November

December

Total

63,654

156,753 (1)

84,425

304,832

Total Number of
Shares (or
Units)
Purchased as
Part of Publicly
Announced
Plans or
Programs

63,654

156,753

84,425

Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs

$2,550,521

1,745,033

1,286,849

Average
Price Paid
per Share
(or Unit)

$4.92

5.14

5.43

(1) Of this amount, 10,000 shares were repurchased directly in a private purchase at the then-current fair market value of

common stock.

Item 6. Selected Financial Data.

The selected consolidated financial data set forth below should be read in conjunction with the audited consolidated
financial statements and related notes and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” and other financial information appearing elsewhere in this Form 10-K. The historical results are not necessarily
indicative of the results to be expected for any future periods.

Statement of income data:

2014

Years Ended December 31,

2011
2012
2013
(in thousands, except per share data)

2010

Net revenues

Costs and expenses

Operating income (loss)

Net income (loss) attributable to
common shareholders

Earnings (loss) per share – basic

Earnings (loss) per share – diluted

36,902

32,027

48,851

51,143

45,876

33,343

3,559

35,829
(3,801)

40,033

8,818

41,293

9,849

39,375

6,502

2,424

0.14

(2,105)
(0.11) $
(0.11) $

5,842

0.30

5,658

0.28

2,457

0.12

Balance sheet data:

2014

2013

As of December 31,

2012
(in thousands)

2011

2010

Cash and cash equivalents

39,866

40,869

54,349

70,599

65,894

Marketable securities
Working capital

Total assets

Total long-term debt and other long-term
obligations (including current portion)

Retained earnings

Total equity

14,841

57,065

95,405

1,032

18,818

80,753

14,020

61,134

87,614

869

16,395

79,292

16,686

79,177

98,594

5,042

18,499

85,566

—

80,708

95,518

5,485

12,657

82,835

—

71,811

92,054

7,802

6,999

77,715

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial position and results of operations should be read together
with our audited consolidated financial statements and related notes appearing elsewhere in this Form 10-K. This
discussion and analysis may contain forward-looking statements that involve risks and uncertainties – please refer to
the section entitled, “Special Note Regarding Forward-Looking Statements,” Contained in Part I, Item 1A, “Risk
Factors,” of this Form 10-K. You should review the “Risk Factors” section of this Form 10-K for a discussion of
important factors that could cause actual results to differ materially from the results described in or implied by the
forward-looking statements described in the following discussion and analysis.

EXECUTIVE SUMMARY

We are a growing specialty pharmaceutical company focused on the acquisition, development and
commercialization of branded prescription products. Our primary target markets are hospital acute care and
gastroenterology. These markets are characterized by relatively concentrated prescriber bases that we believe can be
penetrated effectively by small, targeted sales forces. Cumberland is dedicated to providing innovative products that
improve quality of care for patients and address unmet or poorly met medical needs

Our product portfolio includes Acetadote® (acetylcysteine) Injection for the treatment of acetaminophen poisoning,
Caldolor® (ibuprofen) Injection for the treatment for pain and fever, Kristalose® (lactulose) for Oral Solution, a
prescription laxative, Omeclamox®-Pak, (omeprazole, clarithromycin, amoxicillin) for the treatment of Helicobacter
pylori (H. pylori) infection and related duodenal ulcer disease, Vaprisol® (conivaptan) Injection, to raise serum sodium
levels in hospitalized patients with euvolemic and hypervolemic hyponatremia, Hepatoren (ifetroban) Injection, a Phase
II candidate for the treatment of critically ill hospitalized patients suffering from hepatorenal syndrome ("HRS") and
Boxaban™ (ifetroban) oral capsules, a Phase II candidate for the treatment of patients with aspirin-exacerbated
respiratory disease (AERD).

We market and sell our approved products through our hospital and field sales forces in the United States, which

together comprised approximately 50 sales representatives and managers as of December 31, 2014.

The following is a summary of our 2014 highlights and recent developments. For more information, please see

Part I, Item I, Business, of this Form 10-K.

• We restored profitability through a more diversified revenue stream and continued cost management.

•

In 2013, we added Omeclamox-Pak, a branded prescription product used for the treatment of Helicobacter
pylori (H. pylori) infection and duodenal ulcer disease. We launched our promotion and distribution
efforts to support Omeclamox-Pak in early 2014.

In February 2014, we entered into an agreement with Astellas to acquire Vaprisol including certain product
rights, intellectual property and related assets. Vaprisol is the only intravenously administered branded
prescription product indicated for the treatment of hyponatremia. We re-launched active promotion of
the brand during the middle of 2014 utilizing our hospital sales force.

• We launched a new Kristalose positioning program which resulted in it becoming our largest selling brand
in 2014. This positioning included a preference study which indicated that patients prefer the taste,
consistency and portability of Kristalose over similar products in syrup forms. We combined the preference

study with an enhanced patient coupon program and expanded managed care coverage to position
Kristalose.

• We continued our international expansion during 2014 with our Caldolor product launch in Korea.

• We continued to provide poster presentations and obtain meaningful publications of our Caldolor studies.
These presentations and publications highlight the efficacy of Caldolor in treating pain and fever as well
as the safety and efficacy of a shortened infusion time of intravenous ibuprofen.

• We obtained our third and fourth U.S. patents for Acetadote during 2014. The claims of the 061 Acetadote
Patent encompass the use of the 200 mg/ml Acetadote formulation to treat patients with acetaminophen
overdose. The claims of the 738 Acetadote Patent encompass administration methods of acetylcysteine
injection, without specification of the presence or lack of EDTA in the injection. We are continuing to
seek additional claims to protect our intellectual property associated with Acetadote.

• During 2014, we obtained additional patents for Caldolor. The claims of the 452 Caldolor Patent and the
810 Caldolor Patent encompass methods of treating pain using intravenous ibuprofen and are scheduled
to expire in September 2029. We also have additional patent applications related to Caldolor which are
pending with the USPTO.

• We successfully transferred the Caldolor manufacturing process to two manufacturers and these suppliers
have manufactured validation inventory. We finalized a Kristalose API purchase agreement that
formalized and extended our existing relationship with this raw materials manufacturer. We also entered
into manufacturing relationships with two Kristalose packagers during 2014.

• We have also completed the manufacturing of an oral formulation of ifetroban and the FDA has cleared
an IND amendment for this product candidate. We have initiated clinical development under the brand
name Boxaban (ifetroban) capsules and are evaluating this candidate for patients suffering from aspirin-
exacerbated respiratory disease (AERD) a condition for which there is no U.S. approved pharmaceutical
treatment.

• We secured a new senior credit facility for up to $20 million with SunTrust Bank and arranged for $2

million in new funding for CET that included an investment from Gloria.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

Accounting Estimates and Judgments

The preparation of the consolidated financial statements in conformity with GAAP 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 are not determined
from other sources. Actual results could differ from these estimates. These estimates, judgments and assumptions are
most critical with respect to our accounting for revenue recognition, marketable securities, inventory, intangible assets,
research and development accounting, provision for income taxes and share-based payment.

Revenue Recognition

We recognize revenue in accordance with the SEC’s Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition
in Financial Statements, as amended by SAB No. 104 (together, SAB 101), and Topic 605-15 of the Accounting
Standards Codification.

Our revenue is derived primarily from the product sales of Acetadote, Vaprisol, Caldolor, Omeclamox-Pak and
Kristalose. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee
is fixed and determinable and collectibility is probable. Delivery is considered to have occurred upon either shipment
of the product or arrival at its destination based on the shipping terms of the transaction. When these conditions are
satisfied, we recognize gross product revenue, which is the price we charge generally to our wholesalers for a particular

product. Other revenue, which is a component of net revenues, includes upfront payments under licensing agreements
along with grant and rental income. Other income was 0.6% percent of net revenues in 2014, 2.9% in 2013, and 1.9%
in 2012.

Our net product revenue reflects the reduction of gross product revenue at the time of initial sales recognition for
estimated accounts receivable allowances for chargebacks, cash discounts and damaged product as well as provisions
for sales related accruals of rebates, product returns and administrative fees and fee for services. Our financial statements
reflect accounts receivable allowances of $0.4 million and $0.6 million at December 31, 2014 and 2013, respectively
for chargebacks, discounts and allowances for product damaged in shipment.

The following table reflects our sales-related accrual activity for the periods indicated below:

2014

2013

2012

Balance, January 1

Current provision

Current provision for prior period sales

Actual product returns and credits issued

Balance, December 31

2,437,140

3,371,863

3,216,622

14,972,112

—
(12,174,452)
5,234,800

4,181,403

—
(5,116,126)
2,437,140

6,000,830
(367,060)
(5,478,529)
3,371,863

The allowances for chargebacks, discounts, and damaged products and sales related accruals for rebates and product
returns are determined on a product-by-product basis and are established by management as our best estimate at the
time of sale based on each product’s historical experience, adjusted to reflect known changes in the factors that impact
such allowances and accruals. Additionally, these allowances and accruals are established based on the following:

• The contractual terms with customers;

• Analysis of historical levels of discounts, returns, chargebacks and rebates;

• Communications with customers;

•

Purchased information about the rate of prescriptions being written and the level of inventory remaining
in the distribution channel, if known; and

• Expectations about the market for each product, including any anticipated introduction of competitive

products.

The allowances for chargebacks and accruals for rebates and product returns are the most significant estimates
used in the recognition of our revenue from product sales. Of the accounts receivable allowances and our sales related
accruals, our accrual for fee for services and product returns represents the majority of the balance. Sales related accrued
liabilities for rebates, product returns, service fees, and administrative fees totaled $5.2 million, $2.4 million and $3.4
million as of December 31, 2014, 2013 and 2012, respectively. Of these amounts, our estimated liability for fee for
services represented $0.9 million, $0.5 million and $1.1 million, respectively, while our accrual for product returns
totaled $2.1 million, $1.6 million and $1.8 million, respectively. If the actual amount of cash discounts, chargebacks,
rebates, and product returns differs from the amounts estimated by management, material differences may result from
the amount of our revenue recognized from product sales. A change in our rebate estimate of one percentage point
would have impacted net sales by approximately $0.3 million in the year ended December 31, 2014 and $0.1 million
in each of the two years ended December 31, 2013. A change in our product return estimate of one percentage point
would have impacted net sales by $0.5 million, $0.3 million and $0.6 million for the years ended December 31, 2014,
2013 and 2012, respectively.

Fair Value of Marketable Securities

We invest in variable rate demand notes and a portfolio of government-backed securities (including U.S. Treasuries,
government-sponsored enterprise debentures and government-sponsored adjustable rate mortgage-backed securities),
in order to maximize our return on cash. We classify these investments as trading securities, and mark the investments

to fair value at the end of each reporting period, with the adjustment being recognized in the statement of income as a
component of interest income. These investments are generally valued using observable market prices by third-party
pricing services, or are derived from such services' pricing models. The level of management judgment required in
establishing fair value of financial instruments for which there is a quoted price in an active market is minimal. Similarly
there is little subjectivity or judgment required for instruments valued using valuation models that are standard across
the industry and where all parameter inputs are quoted in active markets. Inputs to the models may include, but are not
limited to, reported trades, executable bid and ask prices, broker/dealer quotations, prices or yields of securities with
similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic
events. The pricing services may use a matrix approach, which considers information regarding securities with similar
characteristics to determine the valuation for a security.

Inventories

We record amounts for estimated obsolescence or unmarketable inventory in an amount equal to the difference
between the cost of inventory and the estimated market value based upon assumptions about remaining shelf life, future
demand and market conditions. The estimated inventory obsolescence amounts are calculated based upon specific
review of the inventory expiration dates and the quantity on-hand at December 31, 2014 in comparison to our expected
inventory usage. The amount of actual inventory obsolescence and unmarketable inventory could differ (either higher
or lower) in the near term from the estimated amounts. Changes in our estimates would be recorded in the income
statement in the period of the change.

Income Taxes

We provide for deferred taxes using the asset and liability approach. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carry-forwards
and differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. Our principal differences are related to the timing of deductibility of certain items such as depreciation,
amortization and expense for options issued to nonemployees. Deferred tax assets and liabilities are measured using
management’s estimate of tax rates expected to apply to taxable income in the years in which management believes
those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in our results of operations in the period that includes the enactment date.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment.

The tax benefit associated with the exercise of nonqualified stock options is recognized when the benefit is used
to offset income taxes payable. As of December 31, 2014, we have unrecognized federal net operating loss carryforwards
associated with the exercise of nonqualified options of $44.2 million. In addition to these unrecognized federal net
operating loss carryforwards, as of December 31, 2014, we have recognized federal Orphan Drug and Research and
Development tax credits of $1.1 million that expire between 2021 and 2033.

Share-Based Payments

We recognize compensation expense for all share-based payments based on the fair value of the award on the date

of grant. In addition, incremental compensation expense is recognized upon the modification of equity awards.

During 2011, we began issuing restricted stock awards at no cost in lieu of stock options to employees, directors
and consultants. Compensation expense for restricted stock granted to employees and directors is generally equal to
the fair market value of the underlying common stock on the date of grant. If a sufficient disincentive for nonperformance
does not exist at the date of grant, the compensation cost is remeasured at each reporting date at the then-current fair
market value of the underlying common stock until the award vests.

In the second quarter of 2012, we implemented an Option Exchange Program (the “Exchange Program”) whereby
certain outstanding stock options could be exchanged for shares of restricted stock. The Exchange Program was designed

to provide a value-for-value exchange of equity instruments. The fair value of each exchanged option was determined
on the date the Exchange Program commenced using the Black-Scholes option fair value model. As there was no public
market for our common stock prior to our initial public offering and, therefore, a lack of company-specific historical
or implied volatility data, we determined the share-price volatility based on an analysis of certain publicly-traded
companies that we consider to be our peers. The comparable peer companies used for our estimated volatility included
publicly-traded companies with operations which we believe to be similar to ours. We estimated the expected life of
employee share options based on the simplified method allowed by SAB No. 107, as amended by SAB No. 110. Under
this approach, the expected term is presumed to be the average between the weighted-average vesting period and the
contractual term. The expected term for options granted to non-employees is generally the contractual term of the
option. The risk-free interest rate is based on the U.S. Treasury Note, Stripped Principal, on the date of grant with a
term substantially equal to the corresponding option’s expected term. We have never declared or paid any cash dividends
nor do we plan to pay cash dividends in the foreseeable future.

The following assumptions were used in calculating the fair value of options exchanged in 2012 as part of the

Exchange Program.

Dividend yield

Expected term (years)

Expected volatility

Risk-free interest rate

Research and Development

2012

Exchange Program

—

1.3 - 7.3

37% - 78%

0.23% - 1.50%

We accrue for and expense research and development costs based on estimates of work performed, patient
enrollment or fixed-fee-for-services. As work is performed and/or invoices are received, we adjust our estimates and
accruals. To date, our accruals have not differed materially from our estimates. Total research and development costs
are a function of studies being conducted and will increase or decrease based on the level of activity in any particular
year.

Intangible Assets

Intangible assets include product rights, license agreements and other identifiable intangible assets. We assess the
impairment of identifiable intangible assets whenever events or changes in circumstances indicate the carrying value
may not be recoverable. In determining the recoverability of our intangible assets, we make assumptions regarding
estimated future cash flows and other factors. If the estimated undiscounted future cash flows do not exceed the carrying
value of the intangible assets, we must determine the fair value of the intangible assets. If the fair value of the intangible
assets is less than the carrying value, an impairment loss will be recognized in an amount equal to the difference. Fair
value is determined through various valuation techniques including quoted market prices, third-party independent
appraisals and discounted cash flow models, as considered necessary.

RESULTS OF OPERATIONS

Year ended December 31, 2014 compared to year ended December 31, 2013

The following table presents the statements of operations for the years ended December 31, 2014 and 2013:

Net revenues

Costs and expenses:

Cost of products sold

Selling and marketing

Research and development

General and administrative

Amortization

Total costs and expenses

Operating income (loss)

Interest income

Interest expense

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss)

2014

Years ended December 31,
2013

Change

36,901,871

32,027,462

4,874,409

5,053,165

14,902,202

3,389,419

8,401,560

1,596,689

33,343,035

3,558,836

251,447
(67,074)
3,743,209
(1,380,744)
2,362,465

5,439,422

14,387,745

5,615,501

9,489,976

896,156

35,828,800
(3,801,338)
230,291
(103,422)
(3,674,469)
1,523,051
(2,151,418) $

(386,257)
514,457
(2,226,082)
(1,088,416)
700,533
(2,485,765)
7,360,174

21,156

36,348

7,417,678
(2,903,795)
4,513,883

Net revenues. Net revenues for the year ended December 31, 2014 were approximately $36.9 million compared
to $32.0 million for the year ended December 31, 2013, representing an increase of $4.9 million or 15.2%. The following
table summarizes net revenues by product for the years presented:

Years ended December 31,

2014

2013

Change

Products:

Acetadote

Omeclamox-Pak

Kristalose

Vaprisol
Caldolor

Other

11,906,232

18,846,753

4,111,916

14,932,271

3,011,997

2,721,346

218,109

1,045,815

9,118,475

—

2,089,655

926,764

Total net product revenues

36,901,871

32,027,462

(6,940,521)
3,066,101

5,813,796

3,011,997

631,691
(708,655)
4,874,409

Net product revenues. The revenue increase was driven primarily by increases in Kristalose product revenue of
$5.8 million, Omeclamox-Pak revenue of $3.1 million and Vaprisol revenue of $3.0 million. A decrease in branded
Acetadote product revenue of $3.5 million and a decrease in Authorized Generic Acetadote product revenue of $3.4
million partially offset this overall revenue increase.

Kristalose revenue increased 63.8% over the prior year primarily due to new positioning for the product. We
increased the price of Kristalose during the first quarter of 2014 to bring Kristalose more in line with the other marketed
branded prescription products in its class. Concurrent with the price increase, we increased our patient focused initiatives
to enhance patient affordability and increase demand.

The increase in revenue was also attributable to a 30.2% increase in Caldolor through our growth in international
and domestic sales. The addition of Vaprisol in early 2014 and the benefit of a full year of Omeclamox-Pak compared
to a partial year of sales for the brand during 2013 also contributed to the revenue increase.

The year over year decrease in Acetadote net revenue was primarily due to decreased sales volume of the branded
Acetadote and Authorized Generic product largely as a result of generic competition. Acetadote product revenue for
2014 included $5.8 million in sales of the Authorized Generic product compared to prior year sales of $9.2 million.

Other revenue. Other revenue was $0.2 million in 2014 compared to $0.9 million in 2013. The decrease was
primarily the result $0.6 million of upfront payments we received during 2013 in connection with out-licensing
agreements with international commercial partners.

Cost of products sold. As a percentage of net revenues, cost of products sold decreased to 13.7% during 2014,
compared to 17.0% in the prior year. The decrease in costs of sales as a percentage of net revenue was partially
attributable to a change in the product sales mix and an increase in our sales prices. The comparative decrease is also
attributable to the recognition of $0.9 million in inventory write-downs during 2013 for potentially obsolete inventory.

Selling and marketing. Selling and marketing expense for 2014 was $14.9 million, compared to $14.4 million for
the prior year, representing an increase of $0.5 million. The increase was the result of increased sales, including a $0.4
million increase in Omeclamox-Pak product royalties and increased distribution costs of products and product samples.
We continue to evaluate our selling and marketing costs and efforts under our commercial strategy, including the
incremental costs of promoting our recently added products.

Research and development. Research and development costs in 2014 were $3.4 million, compared to $5.6 million
last year, representing a decrease of approximately $2.2 million, or 39.6%. This change was a result of decreased
product development and clinical study costs during 2014 following the conclusion of clinical studies related to Caldolor
during 2013.

General and administrative. General and administrative expense for 2014 totaled approximately $8.4 million,
compared to $9.5 million in 2013. The $1.1 million decrease was attributable to decreases in salary, wages and benefits,
travel costs, legal expenses and consulting fees. We continue to realign the organization to support the current mix of
brands.

Amortization. Amortization expense is the ratable use of our capitalized intangible assets including product and
license rights, patents, trademarks and patent defense costs. Amortization expense for 2014 was $1.6 million compared
to $0.9 million last year, representing an increase of $0.7 million. The increase in amortization was attributable to
additional product and license rights, capitalized patents and patent defense costs.

Income tax (expense) benefit. Income tax expense for the year ended December 31, 2014 totaled approximately
$1.4 million, representing a $2.9 million increase in expense over the prior year income tax benefit of $1.5 million.
The primary reason for the increase was the result of pretax income in 2014 compared to a pretax loss last year. As a
percentage of income before income taxes, income tax expense was 36.9% for 2014 compared to a benefit percentage
of 41.4% for 2013. The tax expense for 2014 was positively impacted by the extension of the U.S. research and
development tax credit for 2014, along with the reduction in our state tax expense during 2014. The tax benefit for
2013 was positively impacted by the reinstatement of the U.S. research and development tax credit during 2013.

Year ended December 31, 2013 compared to year ended December 31, 2012

Net revenues. Net revenues in 2013 decreased approximately $16.8 million compared to 2012. The decline in net
product revenues was primarily attributable to decreases in Acetadote product revenue of $18.7 million. This decrease
was partially offset by an increase in Caldolor product revenue of $1.1 million and revenue of $1.0 million generated
from Omeclamox-Pak.

The increase in Caldolor revenue was primarily due to increased volume associated with continued success in
penetrating our target market. We have continued to focus more of our sales and marketing resources to driving pull-
through use of Caldolor in facilities stocking the product.

The decrease in Acetadote net revenue was a result of decreased sales volume of the branded Acetadote product
largely as a result of generic competition during 2013. Our Acetadote product revenue also included $9.2 million in
sales of our Authorized Generic in 2013 and $0.3 million in 2012.

Other revenue. We recognized $0.9 million of other revenue in both 2013 and 2012, primarily as the result of
upfront payments we received in connection with out-licensing agreements with international commercial partners.

Cost of products sold. As a percentage of net revenues, cost of products sold increased to 17.0% in 2013 compared
to 10.3% in 2012. The increase in costs of sales as a percentage of revenue was attributable to a change in the sales
mix along with the recognition of $0.9 million of inventory write-downs during 2013 for potentially obsolete inventory.

Selling and marketing. Selling and marketing expense for 2013 totaled $14.4 million, compared to $20.3 million
for 2012. The $5.9 million decrease was driven primarily by decreased salaries, benefits and other selling expenses of
$4.4 million along with $1.1 million in decreased travel, convention and promotion expense. These reductions were
primarily a result of our new commercial strategy and sales force realignment that went into effect during the fourth
quarter of 2012.

Research and development. Research and development costs for 2013 were $5.6 million, compared to $5.1 million
in 2012, representing an increase of $0.5 million, or 10.2%. The increase was a result of increased product development
and study costs in 2013 compared to 2012.

General and administrative. General and administrative expense totaled $9.5 million in 2013, representing an
increase of $0.4 million, or 4.8%, over 2012. The increase was primarily due to several small cost increases including
CET rent, stock-based compensation and retirement expense.

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 2013 totaled $0.9 million, representing
an increase of approximately $0.4 million compared to 2012. The increase was primarily due to increased capitalized
patents and capitalized patent defense costs.

Income taxes. The income tax benefit for 2013 was $1.5 million, representing a decrease in tax expense of $4.8
million from the $3.2 million of income tax expense in 2012. As a percentage of loss before income taxes, the income
tax benefit was 41.4% for 2013 compared to expense of 35.8% of income before income taxes for 2012. The tax rate
for 2013 was positively impacted by the reinstatement of the U.S. research and development tax credit during 2013.
The tax rate percentage in 2012 was primarily due to the recognition of a deferred tax benefit associated with the
exchange of certain incentive stock options.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash flows provided by our operations, our availability under our line of credit and
the cash proceeds from our initial public offering of common stock that was completed in August 2009. For the years ended
December 31, 2014, 2013 and 2012, we generated $6.7 million, $0.7 million and $7.1 million in cash flow from operations,
respectively. We believe that our internally generated cash flows and amounts available under our line of credit will be
adequate to service existing debt, finance internal growth and fund capital expenditures.

In 2012, we began investing a portion of our cash reserves in variable rate demand notes and a portfolio of government-
backed securities (including U.S. Treasuries, government-sponsored enterprise debentures and government-sponsored
adjustable rate, mortgage-backed securities). The variable rate demand notes, or VRDNs, are generally issued by municipal
governments and are backed by a financial institution letter of credit. We hold a put right on the VRDNs, which allows us
to liquidate the investments relatively quickly (less than one week). The government-backed securities have an active
secondary market that generally provides for liquidity in less than one week. At December 31, 2014 and 2013, we had
approximately $14.8 million and $14.0 million invested in marketable securities, respectively.

The following table summarizes our liquidity and working capital as of the years ended December 31:

Cash and cash equivalents

Marketable securities

Total cash, cash equivalents and marketable securities

Working capital (current assets less current liabilities)

Current ratio (multiple of current assets to current liabilities)

2014

2013

39,866,037

14,841,418

54,707,455

57,065,489

5.2

40,869,457

14,019,761

54,889,218

61,133,945

9.1

Revolving line of credit availability

12,000,000

10,000,000

The following table summarizes our net changes in cash and cash equivalents for the years ended December 31:

2014

2013

2012

Cash provided by (used in):

Operating activities
Investing activities

Financing activities

Net (decrease) increase in cash and
cash equivalents

6,693,431
(6,034,440)

(1,662,411)

746,126
(5,071,939)
(9,154,111)

7,135,182
(19,177,141)
(4,207,806)

(1,003,420) $

(13,479,924) $

(16,249,765)

The net decrease in cash and cash equivalents for 2014 was mainly attributable to cash used in our investing activities.
Cash provided by operating activities was $6.7 million. Cash used in investing activities included a $2.0 million up-front
payment for the acquisition of Vaprisol, a $3.1 million increase in intangible assets, and a net investment in marketable
securities of $0.8 million. Our financing activities included the repurchase of shares of our common stock totaling $4.3
million partially offset by the $1.0 million investment Gloria made in CET. During 2014, we recognized approximately $1.7
million of excess tax benefits. The excess tax benefit represents the income taxes that would have been paid if not for the
tax deductions created upon the exercise of nonqualified stock options. As noted above, we continue to repurchase shares
of our common stock, as discussed in Part II, Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities, of this Form 10-K.

The net use of cash and cash equivalents for the year ended December 31, 2013 was partly attributable to net investing
and repayment of financing activities during the year. Net investing activities which used cash included $0.1 million in
purchases of equipment and investment in intangible assets of $7.5 million. The investment in intangible assets includes
our $4.0 million investment in Omeclamox-Pak. The cash used in investing activities was offset by our decrease of $2.5
million in net investment in marketable securities, with the decrease primarily in our VRDN's. We also repaid the outstanding
balance of our revolving line of credit of $4.4 million during 2013. While net cash provided by operating activities was $0.7
million, the net loss of $2.2 million contributed to the net decrease in cash equivalents.

The net decrease in cash and cash equivalents of $16.2 million for the year ended December 31, 2012 was primarily
due to the previously noted investment of our cash reserves in government and government-backed securities which are
reflected as a net use of cash in investing activities of $16.6 million. Our cash flows from operating activities were primarily
due to the $5.8 million in net income for the year supplemented by cash inflows from our receivables. In addition, our
financing activities included the repurchase of common stock of $8.1 million in connection with our share repurchase program.
During 2012, we recognized approximately $3.8 million of excess tax benefits. The excess tax benefit represents the income
taxes that would have been paid if not for the tax deductions created upon the exercise of nonqualified stock options.

New Debt Agreement

On June 26, 2014, we entered into a Revolving Credit Loan Agreement (“Loan Agreement”) with SunTrust Bank. The
new agreement replaced the August 2011 Fifth Amended and Restated Loan Agreement with our previous primary lender
which was to expire on December 31, 2014. There are no borrowings under the Loan Agreement at December 31, 2014.
The Loan Agreement provides for an aggregate principal amount of up to $20 million and it has a three year term expiring
on June 26, 2017. The initial revolving line of credit is up to $12 million, an increase from the $10 million under the previous
agreement. We have the ability to increase the borrowing amount up to $20 million, upon the satisfaction of certain conditions.
Our interest rate is based on LIBOR plus an interest rate spread. There is no LIBOR minimum and the LIBOR pricing

provides for an interest rate spread of 1.0% to 2.85%. In addition, a fee of 0.25% per year is charged on the unused line of
credit. Interest and the unused line fee are payable quarterly. Borrowings under the line of credit are collateralized by
substantially all of our assets. Under the Loan Agreement, we are subject to certain financial covenants, including, but not
limited to, maintaining an EBIT to Interest Expense Ratio and a Funded Debt Ratio, determined on a quarterly basis. We
were in compliance with all covenants at December 31, 2014.

Previous Debt Agreement

The August 2011 Fifth Amended and Restated Loan Agreement carried an interest rate of the LIBOR Daily Floating
Rate plus an applicable margin, as defined by the agreement (2.17% at December 31, 2013). Interest and an unused line of
credit fee (0.25% per annum) were payable quarterly. There were no borrowings outstanding on the credit facility at
December 31, 2013 or at any time during 2014.

Under the previous agreement, we were subject to certain financial covenants including, but not limited to, maintaining
a leverage ratio and interest coverage ratio, as defined in the Agreement. In March 2014 and May 2014, the previous
Agreement was amended for certain provisions related to the aggregate ownership of the Company's common stock over
30% and certain other financial covenants. As a result of these amendments we were in compliance with all covenants.

The Company incurred no early termination penalties upon termination of the previous Agreement and incurred less
than $0.1 million in deferred financing costs related to the new Loan Agreement, which will be amortized to interest expense
using the effective interest method over the term of the Loan Agreement.

Minimum Product Purchase Requirements

Our manufacturing and supply agreement with one manufacturer, which expired in 2014, contained a minimum annual
purchase obligation. Our normal inventory purchasing levels were above the required minimum amounts, and as of
December 31, 2014, we had met our purchase obligations under the agreement.

Contractual cash obligations

The following table summarizes our contractual cash obligations as of December 31, 2014:

Contractual obligations(1)

Total (2)

2015

2016

2017

2018

2019

Payments Due by Year

Amounts reflected in the
balance sheet:

Line of credit

Estimated interest on
debt (3)

Other cash obligations not
reflected on the balance
sheet:

Operating leases
Purchase obligations (4)

Total (1)

— $

75,000

30,000

15,000

—

2,305,725

1,052,662

941,247

232,964

78,852

—

$ 2,380,725

$ 1,082,662

971,247

247,964

78,852

—

(1) The table of contractual obligations excludes amounts due under the Kristalose purchase agreement as these amounts cannot be
determined until sales of the product have occurred. As consideration for the purchase of certain Kristalose assets in November
2011, we agreed to pay the seller a percentage of net sales for a seven-year period beginning November 15, 2011. Payments are
due quarterly, in arrears.

(2) The sum of the individual amounts may not agree due to rounding.

(3) Represents the estimated unused line of credit payments based on a zero balance outstanding on December 31, 2014. Interest
and unused line of credit payments are due and payable quarterly in arrears. Estimated interest for the line of credit is based on
the assumption of a consistent zero outstanding balance.

(4) Represents minimum purchase obligations under our manufacturing agreements.

OFF-BALANCE SHEET ARRANGEMENTS

During 2014, 2013 and 2012, we did not engage in any off-balance sheet arrangements.

RECENTLY ISSUED BUT NOT YET ADOPTED ACCOUNTING PRONOUNCEMENTS

In April 2014, the Financial Accounting Standards Board (the "FASB") issued amended guidance in the form of
a FASB Accounting Standards Update on "Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity". The new guidance restricts the presentation of discontinued operations to business
circumstances when the disposal of business operations represents a strategic shift that has or will have a major effect
on an entity's operations and financial results. The guidance becomes effective on January 1, 2015. Adoption is on a
prospective basis.

In May 2014, the FASB issued amended guidance in the form of a FASB Accounting Standards Update on, "Revenue
from Contracts with Customers". The core principle of the new guidance is to recognize revenues when promised
goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects
to be entitled for those goods or services. The new guidance defines a five step process to achieve this core principle
and, in doing so, additional judgments and estimates may be required within the revenue recognition process. The new
standard will replace most of the existing revenue recognition standards in U.S. GAAP when it becomes effective on
January 1, 2017. Early adoption is not permitted. The new standard can be applied retrospectively to each prior reporting
period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial
application. The Company is assessing the potential impact of the new standard on financial reporting and has not yet
selected a transition method by which we will adopt the standard in 2017.

There are no other recently issued but not yet adopted accounting pronouncements that would materially impact

our financial condition or results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We are exposed to market risk related to changes in interest rates on our cash on deposit in highly-liquid money
market accounts and revolving credit facility. We do not utilize derivative financial instruments or other market risk-
sensitive instruments to manage exposure to interest rate changes. The main objective of our cash investment activities
is to preserve principal while maximizing interest income through low-risk investments. Our investment policy focuses
on principal preservation and liquidity.

We believe that our interest rate risk related to our cash and cash equivalents is not material. The risk related to
interest rates for these accounts would produce less income than expected if market interest rates fall. Based on current
interest rates, we do not believe we are exposed to significant downside risk related to a change in interest on our money
market accounts.

In the first quarter of 2012, we analyzed our return on our investments and determined investing in variable rate
demand notes and a portfolio of government backed securities (including U.S. Treasuries, government sponsored
enterprise debentures and government sponsored adjustable rate mortgage backed securities), would yield a higher
return with minimal additional risk. The variable rate demand notes, or VRDNs, are generally issued by municipal
governments and are backed by a financial institution letter of credit. We hold a put right on the VRDN's, which allows
us to liquidate the investment relatively quickly (less than one week). The government backed securities have an active
secondary market that generally provides for liquidity in less than one week. The risk related to interest rates for these
accounts will produce less income than expected if market interest rates fall. Based on the $14.8 million in marketable
securities outstanding at December 31, 2014, a 1% decrease in the fair value of the securities would result in a reduction
in pretax net income of $0.1 million.

Based on current interest rates, we do not believe we are exposed to significant downside risk related to change

in interest on our investment accounts.

The interest rate risk related to borrowings under our line of credit is based on LIBOR plus an interest rate spread.
There is no LIBOR minimum and the LIBOR pricing provides for an interest rate spread of 1.0% to 2.85%. As of
December 31, 2014, no borrowings were outstanding under our line of credit.

Exchange Rate Risk

While we operate primarily in the U.S., we are exposed to foreign currency risk. A portion of our research and

development is performed abroad.

Currently, we do not utilize financial instruments to hedge exposure to foreign currency fluctuations. We believe
our exposure to foreign currency fluctuation is minimal as our purchases in foreign currency have a maximum exposure
of 90 days based on invoice terms with a portion of the exposure being limited to 30 days based on the due date of the
invoice. Foreign currency exchange losses were immaterial for 2014, 2013 and 2012. Neither a five percent increase
nor decrease from current exchange rates would have had a material effect on our operating results or financial condition.

Item 8. Financial Statements and Supplementary Data.

See consolidated financial statements, including the reports of the independent registered public accounting firm,

starting on page F-1, which is incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and
operation of our disclosure controls and procedures as of December 31, 2014. Based on that evaluation, they have
concluded that our disclosure controls and procedures were effective as of December 31, 2014 to ensure that material
information relating to us and our consolidated subsidiaries is made known to officers within these entities in order to
allow for timely decisions regarding required disclosure.

Management’s report on internal control over financial reporting and the related attestation report of KPMG LLP,
our independent registered public accounting firm, are included on page F-1 and F-3, respectively, of this annual report
on Form 10-K, and incorporated herein by reference.

During our fourth quarter of 2014, there were no changes in our internal control over financial reporting (as defined

in Rule 13a-15(f) or 15d-15(f)).

Item 9B. Other Information.

None.

PART III

The information called for by Part III of Form 10-K (Item 10 – Directors, Executive Officers and Corporate
Governance, Item 11 – Executive Compensation, Item 12 – Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters, Item 13 – Certain Relationships and Related Transactions, and Director
Independence, Item 14 – Principal Accounting Fees and Services), is incorporated by reference from our proxy statement
related to our 2015 annual meeting of shareholders, which is expected to be filed with the SEC on or around March 10,
2015.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) Documents filed as part of this report:

(1) Financial Statements

Management’s Report on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm – Consolidated
Financial Statements

Report of Independent Registered Public Accounting Firm – Internal Control
over Financial Reporting

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Cash Flows

Consolidated Statements of Equity

Notes to the Consolidated Financial Statements

(2) Financial Statement Schedule

Valuation and Qualifying Accounts

(b) Exhibits

Page Number

F-1

F-2

F-3

F-4

F-5

F-6

F-7

F-8

F-33

Exhibit
Number

Description

3.1

3.2

4.1

4.2

4.3

4.4

4.5#

4.6.1#

4.6.2#

4.7#

4.8

4.9

4.10

10.1†

Third Amended and Restated Charter of Cumberland Pharmaceuticals Inc., incorporated herein
by reference to the corresponding exhibit to Amendment No. 19 of the Registrant’s Registration
Statement on Form S-1 (File No. 333-142535) as filed with the SEC on July 17, 2009

Second Amended and Restated Bylaws of Cumberland Pharmaceuticals Inc., incorporated herein
by reference to the corresponding exhibit to Amendment No. 19 of the Registrant’s Registration
Statement on Form S-1 (File No. 333-142535) as filed with the SEC on July 17, 2009

Specimen Common Stock Certificate of Cumberland Pharmaceuticals Inc., incorporated herein
by reference to the corresponding exhibit to Amendment No. 5 of the Registrant’s Registration
Statement on Form S-1 (File No. 333-142535) as filed with the SEC on August 6, 2007

Warrant to Purchase Common Stock of Cumberland Pharmaceuticals Inc., issued to Bank of
America, N.A. on October 21, 2003, incorporated herein by reference to the corresponding exhibit
to the Registrant’s Registration Statement on Form S-1 (File No. 333-142535) as filed with the
SEC on May 1, 2007

Stock Purchase Warrant, issued to S.C.O.U.T. Healthcare Fund L.P. on April 15, 2004,
incorporated herein by reference to the corresponding exhibit to Amendment No. 1 of the
Registrant’s Registration Statement on Form S-1 (File No. 333-142535) as filed with the SEC
on June 22, 2007

Warrant to Purchase Common Stock of Cumberland Pharmaceuticals Inc., issued to Bank of
America, N.A. on April 6, 2006, incorporated herein by reference to the corresponding exhibit
to the Registrant’s Registration Statement on Form S-1 (File No. 333-142535) as filed with the
SEC on May 1, 2007

Form of Option Agreement under 1999 Stock Option Plan of Cumberland Pharmaceuticals Inc.,
incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration
Statement on Form S-1 (File No. 333-142535) as filed with the SEC on May 1, 2007

Form of Incentive Stock Option Agreement under the Amended and Restated 2007 Long-Term
Incentive Compensation Plan of Cumberland Pharmaceuticals Inc. incorporated herein by
reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K (File No.
001-33637) as filed with the SEC on March 12, 2013

Form of Non-Statutory Stock Option Agreement under the Amended and Restated 2007 Long-
Term Incentive Compensation Plan of Cumberland Pharmaceuticals Inc. incorporated herein
by reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K
(File No. 001-33637) as filed with the SEC on March 12, 2013

Form of Non-Statutory Stock Option Agreement under the Amended and Restated 2007
Directors’ Compensation Plan of Cumberland Pharmaceuticals Inc. incorporated herein by
reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K (File No.
001-33637) as filed with the SEC on March 12, 2013

Warrant to Purchase Common Stock of Cumberland Pharmaceuticals Inc., issued to Bank of
America, N.A. on July 22, 2009, incorporated herein by reference to the corresponding exhibit
to the Registrant’s Annual Report on Form 10-K (File No. 001-33637) as filed with the SEC
on March 19, 2010

Form of Senior Indenture, incorporated herein by reference to the corresponding exhibit to
Registrant's Registration Statement Form S-3 (File No. 333-184091) as filed with the SEC on
September 25, 2012.

Form of Subordinated Indenture, incorporated herein by reference to the corresponding
exhibit to Registrant's Registration Statement Form S-3 (File No. 333-184091) as filed with
the SEC on September 25, 2012

Manufacturing and Supply Agreement for N-Acetylcysteine, dated January 15, 2002, by and
between Bioniche Life Sciences, Inc. and Cumberland Pharmaceuticals Inc., incorporated herein
by reference to the corresponding exhibit to Amendment No. 5 of the Registrant’s Registration
Statement on Form S-1 (File No. 333-142535) as filed with the SEC on August 6, 2007

Exhibit
Number
10.2

10.3†

10.3.1†

10.3.2†

10.7†

10.7.1†

10.8†

10.10†

10.11#

10 .12#

10.13#

10.14#

10.15#

Description
Novation Agreement, dated January 27, 2006, by and among Bioniche Life Sciences, Inc.,
Bioniche Pharma Group Ltd., and Cumberland Pharmaceuticals Inc., incorporated herein by
reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-1
(File No. 333-142535) as filed with the SEC on May 1, 2007

First Amendment to Manufacturing and Supply Agreement for N-Acetylcysteine, dated
November 16, 2006, by and between Bioniche Teoranta and Cumberland Pharmaceuticals Inc.,
incorporated herein by reference to the corresponding exhibit to Amendment No. 3 of the
Registrant’s Registration Statement on Form S-1 (File No. 333-142535) as filed with the SEC
on July 11, 2007

Second Amendment to Manufacturing and Supply Agreement for N-Acetylcysteine, dated March
25, 2008, by and between Bioniche Teoranta and Cumberland Pharmaceuticals Inc., incorporated
herein by reference to the corresponding exhibit to Amendment No. 10 of the Registrant’s
Registration Statement on Form S-1 (File No. 333-142535) as filed with the SEC on May 21,
2008

Third Amendment to Manufacturing and Supply Agreement for N-Acetylcysteine, effective April
25, 2011, by and between Bioniche Teoranta and Cumberland Pharmaceuticals Inc., incorporated
herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-
K (File No. 001-33637) as filed with the SEC on June 24, 2011

Exclusive Distribution Agreement, effective as of July 1, 2010, by and between Cardinal Health
105, Inc. and Cumberland Pharmaceuticals Inc., incorporated herein by reference to the
corresponding exhibit of the Registrant’s Current Report on Form 8-K (File No. 001-33637) as
filed with the SEC on August 13, 2010

First Amendment to Exclusive Distribution Agreement, dated March 31, 2013, by and between
Cardinal Health 105, Inc. and Cumberland Pharmaceuticals Inc., incorporated herein by reference
to the corresponding exhibit of the Registrant's Current Report of Form 8-K (File No. 001-33637)
as filed with the SEC on June 3, 2013

Strategic Alliance Agreement, dated July 21, 2000, by and between F.H. Faulding & Co. Limited
and Cumberland Pharmaceuticals Inc., including notification of assignment from F.H. Faulding
& Co. Limited to Mayne Pharma Pty Ltd., dated April 16, 2002, incorporated herein by reference
to the corresponding exhibit to Amendment No. 4 of the Registrant’s Registration Statement on
Form S-1 (File No. 333-142535) as filed with the SEC on July 23, 2007

License Agreement, dated May 28, 1999, by and between Vanderbilt University and Cumberland
Pharmaceuticals Inc., incorporated herein by reference to the corresponding exhibit to
Amendment No. 3 of the Registrant’s Registration Statement on Form S-1 (File No. 333-142535)
as filed with the SEC on July 11, 2007

Employment Agreement dated March 4, 2015, effective as of January 1, 2015, by and between
A.J. Kazimi and Cumberland Pharmaceuticals Inc.

Employment Agreement dated March 4, 2015, effective as of January 1, 2015, by and between
Martin E. Cearnal and Cumberland Pharmaceuticals Inc.

Employment Agreement dated March 4, 2015, effective as of January 1, 2015, by and between
Leo Pavliv and Cumberland Pharmaceuticals Inc.

Employment Agreement dated March 4, 2015, effective as of January 1, 2015, by and between
Rick S. Greene and Cumberland Pharmaceuticals Inc.

Employment Agreement dated March 4, 2015, effective as of January 1, 2015, by and between
James L. Herman and Cumberland Pharmaceuticals Inc.

Exhibit
Number

10.17#

10.18#

10.19#

10.20

10.21†

10.21.1†

10.21.2†

10.23†

10.24

10.24.1

10.24.2†

Description

1999 Stock Option Plan of Cumberland Pharmaceuticals Inc., incorporated herein by reference
to the corresponding exhibit to the Registrant’s Registration Statement on Form S-1 (File No.
333-142535) as filed with the SEC on May 1, 2007

Amended and Restated 2007 Long-Term Incentive Compensation Plan of Cumberland
Pharmaceuticals Inc., incorporated herein by reference to Appendix A of the Registrant’s
Schedule 14A as filed with the SEC on March 12, 2012 and approved by the Registrant's
shareholders on April 17, 2012

Amended and Restated 2007 Directors’ Incentive Plan of Cumberland Pharmaceuticals Inc.,
incorporated herein by reference to Appendix B of the Registrant's Schedule 14A as filed with
the SEC on March 12, 2012 and approved by the Registrant's shareholders on April 17, 2012

Form of Indemnification Agreement between Cumberland Pharmaceuticals Inc. and all members
of its Board of Directors, incorporated herein by reference to the corresponding exhibit to the
Registrant’s Registration Statement on Form S-1 (File No. 333-142535) as filed with the SEC
on May 1, 2007

Lease Agreement, dated September 10, 2005, by and between Nashville Hines Development,
LLC and Cumberland Pharmaceuticals Inc., incorporated herein by reference to the
corresponding exhibit to Amendment No. 3 of the Registrant’s Registration Statement on Form
S-1 (File No. 333-142535) as filed with the SEC on July 11, 2007

First Amendment to Office Lease Agreement, dated April 25, 2008, by and between 2525 West
End, LLC (successor in interest to Nashville Hines Development LLC) and Cumberland
Pharmaceuticals Inc., incorporated herein by reference to the corresponding exhibit to
Amendment No. 10 of the Registrant’s Registration Statement on Form S-1 (File No. 333-142535)
as filed with the SEC on May 21, 2008

Second Amendment to Office Lease Agreement, dated March 2, 2010, by and between 2525
West End, LLC (successor in interest to Nashville Hines Development LLC) and Cumberland
Pharmaceuticals Inc., incorporated herein by reference to the corresponding exhibit to the
Registrant’s Quarterly Report on Form 10-Q (File No. 001-33637) as filed with the SEC on May
17, 2010

Amended and Restated Lease Agreement, dated November 11, 2004, by and between The
Gateway to Nashville LLC and Cumberland Emerging Technologies, Inc., incorporated herein
by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-1
(File No. 333-142535) as filed with the SEC on May 1, 2007

First Amendment to Amended and Restated Lease Agreement, dated August 23, 2005, by and
between The Gateway to Nashville LLC and Cumberland Emerging Technologies, Inc.,
incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration
Statement on Form S-1 (File No. 333-142535) as filed with the SEC on May 1, 2007

Second Amendment to Amended and Restated Lease Agreement, dated January 9, 2006, by and
between The Gateway to Nashville LLC and Cumberland Emerging Technologies, Inc.,
incorporated herein by reference to the corresponding exhibit to Amendment No. 10 of the
Registrant’s Registration Statement on Form S-1 (File No. 333-142535) as filed with the SEC
on May 21, 2008

Third Amendment to Amended and Restated Lease Agreement, dated July 3, 2012, by and
between The Gateway to Nashville LLC and Cumberland Emerging Technologies, Inc.,
incorporated herein by reference to the corresponding exhibit to the Registrant's Quarterly
Report on Form 10-Q (File No. 001-33637) as filed with the SEC on August 9, 2012

Exhibit
Number

10.25†

10.28†

10.29†

10.30#

10.31†

10.32†

10.33

23.1

31.1

31.2

32.1

Description

Omeclamox-Pak® Promotion Agreement, dated October 1, 2013, by and between Cumberland
Pharmaceuticals Inc. and Pernix Therapeutics, LLC incorporated herein by reference to the
corresponding exhibit to the Registrant's Annual Report on Form 10-K (File No. 001-33637) as
filed with the SEC on March 11, 2014

Asset Purchase and Royalty Agreement for Kristalose dated November 15, 2011 by and between
Mylan Inc. and Cumberland Pharmaceuticals Inc., incorporated herein by reference to the
corresponding exhibit of the Registrant’s Current Report on Form 8-K (File No. 001-33637) as
filed with the SEC on November 22, 2011

Packaging Agreement effective November 1, 2011 by and among Mylan Institutional Inc., Mylan
Pharmaceuticals Inc. and Cumberland Pharmaceuticals Inc. incorporated herein by reference to
the corresponding exhibit to the Registrant’s Annual Report on Form 10-K (File No. 001-33637)
as filed with the SEC on March 7, 2012

Supplemental Executive Retirement and Savings Plan, incorporated herein by reference to the
corresponding exhibit to the Registrant's Current Report on Form 8-K (File No. 001-33637) as
filed with the SEC on May 24, 2012

Settlement Agreement, dated November 9, 2012, by and between Cumberland Pharmaceuticals
Inc., Paddock Laboratories, LLC and Perrigo Company incorporated herein by reference to the
corresponding exhibit to the Registrant’s Annual Report on Form 10-K (File No. 001-33637) as
filed with the SEC on March 12, 2013

License and Supply Agreement, dated November 9, 2012, by and between Cumberland
Pharmaceuticals Inc., Paddock Laboratories, LLC and Perrigo Company incorporated herein by
reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K (File No.
001-33637) as filed with the SEC on March 12, 2013

Revolving Credit Loan Agreement, dated June 26, 2014, by and between Cumberland
Pharmaceuticals inc. and SunTrust Bank incorporated herein by reference to the corresponding
exhibit to the Registrant's Quarterly Report on Form 10-Q (File No. 001-33637) as filed with
the SEC on August 8, 2014

Subsidiaries of Cumberland Pharmaceuticals Inc., incorporated herein by reference to the
corresponding exhibit to the Registrant’s Registration Statement on Form S-1 (File No.
333-142535) as filed with the SEC on May 1, 2007

Consent of KPMG LLP

Certification of Chief Executive Officer Pursuant to Rule 13-14(a) of the Securities Exchange
Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer Pursuant to Rule 13-14(a) of the Securities Exchange
Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†

††

Indicates a management contract or compensatory plan.

Confidential treatment has been granted for portions of this exhibit. These portions have been
omitted from the Registration Statement and submitted separately to the Securities and Exchange
Commission.

Confidential treatment has been requested for portions of this exhibit. These portions have been
omitted from the Registration Statement and submitted separately to the Securities and Exchange
Commission.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 9, 2015.

SIGNATURES

Cumberland Pharmaceuticals, Inc.

/s/ A. J. Kazimi

By: A. J. Kazimi

Chief Executive Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the

following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ A. J. Kazimi
A. J. Kazimi

/s/ Rick S. Greene
Rick S. Greene

/s/ Thomas R. Lawrence
Thomas R. Lawrence

/s/ Martin E. Cearnal
Martin E. Cearnal

/s/ Gordon R. Bernard
Gordon R. Bernard

/s/ Jonathan I. Griggs
Jonathan I. Griggs

/s/ James R. Jones
James R. Jones

/s/ Joey A. Jacobs
Joey A. Jacobs

March 9, 2015

Chairman and CEO
(Principal Executive Officer and
Director)

Vice President and CFO
(Principal Financial and
Accounting Officer

Director

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Cumberland Pharmaceuticals Inc. and its subsidiaries (the "Company") is responsible for
establishing and maintaining adequate internal control over financial reporting. Cumberland Pharmaceuticals Inc.’s
internal control system was designed to provide reasonable assurance to the Company’s management and board of
directors regarding the preparation and fair presentation of published financial statements. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation.

Cumberland Pharmaceuticals Inc.’s management assessed the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2014. In making this assessment, it used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).

Based on its assessment, management has concluded that, as of December 31, 2014, the Company’s internal control

over financial reporting was effective based on those criteria.

Cumberland Pharmaceuticals Inc.’s independent registered public accounting firm has issued an audit report on
the effectiveness of Cumberland Pharmaceuticals Inc.’s internal control over financial reporting. This report appears
on page F-3 of this annual report on Form 10-K.

/s/ A. J. Kazimi
A. J. Kazimi
Chief Executive Officer
March 9, 2015

/s/ Rick S. Greene
Rick S. Greene
Chief Financial Officer
March 9, 2015

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Cumberland Pharmaceuticals Inc.:

We have audited the accompanying consolidated balance sheets of Cumberland Pharmaceuticals Inc. and
subsidiaries (the Company) as of December 31, 2014 and 2013, and the related consolidated statements of operations
and comprehensive (loss) income, equity, and cash flows for each of the years in the three-year period ended
December 31, 2014. In connection with our audits of the consolidated financial statements, we have also audited the
financial statement Schedule II - Valuation and Qualifying Accounts for each of the years in the three-year period ended
December 31, 2014. These consolidated financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Cumberland Pharmaceuticals Inc. and subsidiaries as of December 31, 2014 and 2013, and the
results of their operations and their cash flows for each of the years in the
period ended December 31, 2014,
in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth herein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company's internal control over financial reporting as of December 31, 2014, based on criteria established
in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated March 9, 2015 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP
Nashville, Tennessee
March 9, 2015

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Cumberland Pharmaceuticals Inc.:

We have audited Cumberland Pharmaceuticals Inc.'s (the Company) internal control over financial reporting as of
December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in the accompanying Management's Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial
reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have
a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of Cumberland Pharmaceuticals Inc. and subsidiaries as of December 31, 2014
and 2013, and the related consolidated statements of operations and comprehensive (loss) income, equity, and cash
flows for each of the years in the three-year period ended December 31, 2014, and our report dated March 9, 2015
expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP
Nashville, Tennessee
March 9, 2015

F-3

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2014 and 2013

ASSETS

Current assets:

Cash and cash equivalents
Marketable securities

Accounts receivable, net of allowances

Inventories

Prepaid and other current assets

Deferred tax assets

Total current assets
Property and equipment, net

Intangible assets, net

Deferred tax assets

Other assets

Total assets

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

Other current liabilities

Total current liabilities

Revolving line of credit

Other long-term liabilities

Total liabilities

Commitments and contingencies

Equity:

Shareholders’ equity:

2014

2013

39,866,037
14,841,418

5,504,728

5,600,319

1,351,324

3,651,145

70,814,971
651,030

21,568,541

578,592

1,791,980

40,869,457
14,019,761

4,530,424

5,722,882

825,675

2,711,516

68,679,715
880,647

15,498,819

1,208,891

1,345,666

95,405,114

87,613,738

3,242,713

10,506,769

13,749,482

—

902,841

14,652,323

2,035,853

5,509,917

7,545,770

—

776,125

8,321,895

Common stock – no par value; 100,000,000 shares authorized;
17,118,993 and 17,985,503 shares issued and outstanding as of
December 31, 2014 and 2013, respectively

Retained earnings

Total shareholders’ equity

Noncontrolling interests

Total equity

Total liabilities and equity

61,942,410

18,818,263

80,760,673
(7,882)
80,752,791

63,073,941

16,394,540

79,468,481
(176,638)
79,291,843

95,405,114

87,613,738

See accompanying notes to consolidated financial statements.

F-4

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income (Loss)

Years ended December 31, 2014, 2013 and 2012

2014

2013

2012

Revenues:

Net product revenue

Other revenue

Net revenues

Costs and expenses:

Cost of products sold

Selling and marketing

Research and development

General and administrative
Amortization

Total costs and expenses

Operating income (loss)

Interest income

Interest expense

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss)

Net loss at subsidiary attributable to noncontrolling
interests

Net income (loss) attributable to common
shareholders

Earnings (loss) per share attributable to common
shareholders:

Basic

Diluted

Weighted-average common shares outstanding:

Basic

Diluted

Comprehensive income (loss) attributable to
common shareholders

Net loss at subsidiary attributable to
noncontrolling interests

Total comprehensive income (loss)

36,683,762

31,100,698

47,944,031

218,109

926,764

907,206

36,901,871

32,027,462

48,851,237

5,053,165

14,902,202

3,389,419

8,401,560
1,596,689

33,343,035

3,558,836

251,447
(67,074)
3,743,209
(1,380,744)
2,362,465

5,439,422

14,387,745

5,615,501

9,489,976
896,156

35,828,800
(3,801,338)
230,291
(103,422)
(3,674,469)
1,523,051
(2,151,418)

5,046,179

20,329,493

5,095,172

9,055,959
506,332

40,033,135

8,818,102

304,865
(71,985)
9,050,982
(3,244,776)
5,806,206

61,258

46,804

36,286

2,423,723

(2,104,614) $

5,842,492

0.14

(0.11) $
(0.11) $

0.30

17,617,765

17,899,632

18,332,997

19,564,625

19,787,537

2,423,723

(2,104,614) $

5,842,492

61,258

2,362,465

46,804
(2,151,418) $

36,286
5,806,206

See accompanying notes to consolidated financial statements.

F-5

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2014, 2013 and 2012

Cash flows from operating activities:

Net income (loss)
Adjustments to reconcile net income (loss) to net cash flows
provided by operating activities:

Depreciation and amortization expense
Deferred tax benefit
Share-based compensation
Excess tax benefit derived from exercise of stock options

Noncash interest expense
Noncash investment (gains) losses
Net changes in assets and liabilities affecting operating activities,
net of effect of business combination:

Accounts receivable
Inventories
Prepaid, other current assets and other assets
Accounts payable and other accrued liabilities
Other long-term liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Additions to property and equipment
Cash paid for acquisitions
Additions to intangible assets
Proceeds from sale of marketable securities
Purchases of marketable securities

Net cash used in investing activities

Cash flows from financing activities:

Net (repayments) borrowings on line of credit
Repurchase of common shares

Exercise of stock options
Sale of subsidiary shares to noncontrolling interest
Excess tax benefit derived from exercise of stock options

Net cash used in financing activities
Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year

Supplemental disclosure of cash flow information:
Net cash paid (refunded) during the year for:

Interest
Income taxes

Noncash investing and financing activities:

2014

2013

2012

2,362,465

(2,151,418) $

5,806,206

1,989,564
(309,330)
761,663
(1,653,028)
38,634
(52,040)

(974,304)
1,532,563
(1,011,365)
3,846,482
162,127
6,693,431

(163,258)
(2,000,000)
(3,101,565)
3,437,645
(4,207,262)
(6,034,440)

—
(4,315,444)
—
1,000,005
1,653,028
(1,662,411)
(1,003,420)
40,869,457
39,866,037

28,440
17,077

1,301,835
(1,579,918)
674,955
(48,024)
24,075
178,822

1,486,777
495,473
117,021
58,855
187,673
746,126

(97,412)
—
(7,462,080)
6,859,061
(4,371,508)
(5,071,939)

(4,359,951)
(4,800,908)
(41,276)
—
48,024
(9,154,111)
(13,479,924)
54,349,381
40,869,457

79,347
(129,509)

901,649
(829,846)
636,528
(3,760,766)
24,075
(45,814)

1,065,689
(443,661)
(648,941)
4,373,276
56,787
7,135,182

(464,893)
—
(2,071,926)
5,220,480
(21,860,802)
(19,177,141)

(500,000)
(8,086,594)
618,022
—
3,760,766
(4,207,806)
(16,249,765)
70,599,146
54,349,381

47,910
112,381

Change in unpaid invoices for purchases of intangibles

(1,574,847)

543,905

888,141

See accompanying notes to consolidated financial statements.

F-6

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Statements of Equity

Years ended December 31, 2014, 2013 and 2012

Cumberland Pharmaceuticals Inc.
Shareholders

Common stock

Amount

Retained
earnings

Non-
controlling
interest

Total equity

Balance, December 31, 2011

20,020,535

70,272,155

12,656,662

Net income

5,842,492

(93,548)
(36,286)

Share-based compensation

20,199

632,818

Exercise of options and
related tax benefit

Repurchase of common
shares

Balance, December 31, 2012

Net loss

165,182

4,378,788

(1,268,809)
18,937,107

(8,086,594)
67,197,167

Share-based compensation

19,743

670,934

Exercise of options and
related tax benefit

Repurchase of common
shares

Balance, December 31, 2013

Net income

36,758

6,748

(1,008,105)

17,985,503

(4,800,908)
63,073,941

Share-based compensation

15,300

760,894

18,499,154
(2,104,614)

(129,834)
(46,804)

16,394,540

2,423,723

(176,638)
(61,258)

82,835,269

5,806,206

632,818

4,378,788

(8,086,594)
85,566,487
(2,151,418)
670,934

6,748

(4,800,908)
79,291,843

2,362,465

760,894

1,653,028

Exercise of options and
related tax benefit

Sale of subsidiary shares to
noncontrolling interest

Repurchase of common
shares

—

(881,810)

Balance, December 31, 2014

17,118,993

1,653,028

769,991

—

230,014

1,000,005

(4,315,444)
$ 61,942,410

$ 18,818,263

(4,315,444)
(7,882) $ 80,752,791

See accompanying notes to consolidated financial statements.

F-7

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) Organization

Cumberland Pharmaceuticals Inc. and its subsidiaries (the "Company," "Cumberland," or in certain context
"our" or "we") is a specialty pharmaceutical company focused on the acquisition, development and
commercialization of branded prescription products. The Company's primary target markets are hospital acute
care and gastroenterology. These medical specialties are characterized by relatively concentrated prescriber bases
that the Company believes can be penetrated effectively by small, targeted sales forces. Cumberland is dedicated
to providing innovative products that improve quality of care for patients and address unmet or poorly met medical
needs.

Cumberland focuses its resources on maximizing the commercial potential of it's products, as well as
developing new product candidates, and has both internal development and commercial capabilities. The
Company’s products are manufactured by third parties, which are overseen by Cumberland’s quality control and
manufacturing professionals. The Company works closely with its third-party distribution partner to make its
products available in the United States.

In order to create access to a pipeline of early-stage product candidates, the Company formed a subsidiary,
Cumberland Emerging Technologies, Inc. ("CET"), which assists universities and other research organizations to
help bring biomedical projects from the laboratory to the marketplace. The Company’s ownership in CET is 80%.
In 2014, the Company organized an equity financing to recapitalize and strengthen the financial position of CET.
This financing included an investment of approximately $1.0 million from Harbin Gloria Pharmaceuticals Co.,
Ltd. (“Gloria”) for their participation in CET. As a result, Gloria received shares in CET and joined the CET
ownership group. As noted above, the ownership interests of CET includes Gloria and Cumberland, while the
remaining interest is owned by Vanderbilt University and the Tennessee Technology Development Corporation.
The operating results of CET are allocated to noncontrolling interests in the consolidated statements of operations
were approximately $61,258, $46,804 and $36,286 for the years ended December 31, 2014, 2013 and 2012,
respectively.

Effective January 1, 2007, the Company formed a wholly-owned subsidiary, Cumberland Pharma Sales Corp.

("CPSC"). CPSC is the subsidiary that employs the Company's hospital and field sales forces.

(2) Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements of the Company are stated in U.S. dollars and are prepared using U.S.
generally accepted accounting principles. These financial statements include the accounts of the Company and its
wholly and majority-owned subsidiaries. All significant intercompany transactions and accounts have been
eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting
principles requires management of the Company to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the period. Actual results could differ from those
estimates under different assumptions and conditions. The Company's most significant estimates include: (1) its
allowances for chargebacks and accruals for rebates and product returns and (2) the allowances for obsolescent
or unmarketable inventory.

F-8

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Segment Reporting

The Company has one operating segment which is specialty pharmaceutical products. Management has chosen
to organize the Company based on the type of products sold. Operating segments are identified as components of
an enterprise about which separate discrete financial information is evaluated by the chief operating decision maker,
or decision-making group, in making decisions regarding resource allocation and assessing performance. The
Company, which uses consolidated financial information in determining how to allocate resources and assess
performance, evaluated that our specialty pharmaceutical products compete in similar economic markets and similar
circumstances. Substantially all of the Company’s assets are located in the United States. Total revenues are
primarily attributable to U.S. customers. Net revenues from customers outside the United States were
approximately $0.6 million, $0.8 million and $0.7 million for the years ended December 31, 2014, 2013 and 2012,
respectively.

Fair Value of Financial Instruments

Fair value of financial assets and liabilities is the price the Company would receive to sell an asset or pay to
transfer a liability in an orderly transaction with a market participant at the measurement date. The Company's
fair value measurements follow the appropriate rules as well as the fair value hierarchy that prioritizes the
information used to develop the measurements. It applies whenever other guidance requires (or permits) assets
or liabilities to be measured at fair value and gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3
measurements).

A summary of the fair value hierarchy that prioritizes observable and unobservable inputs used to measure

fair value into three broad levels is described below:

Level 1 - Quoted prices for identical instruments in active markets.

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active; and model-derived valuations whose
inputs are observable or whose significant value drivers are observable.

Level 3 - Significant inputs to the valuation model are unobservable.

We maintain policies and procedures to value instruments using the best and most relevant data available. The
following section describes the valuation methodologies we use to measure different financial instruments at fair
value on a recurring basis.

The Company’s financial instruments include cash and cash equivalents, marketable securities, accounts
receivable, accounts payable, accrued liabilities, and a revolving line of credit. The carrying values for cash and
cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due
to their short-term nature. The revolving line of credit has a variable interest rate, which approximates the current
market rate.

The Company's fair values of marketable securities are determined based on valuations provided by a third-
party pricing service, as derived from such services' pricing models, and are considered either Level 1 or Level 2
measurements, depending on the nature of the investment. The Company has no marketable securities in which
the fair value is determined based on Level 3. The level of management judgment required in evaluating fair value
for Level 1 investments is minimal. Similarly, there is little subjectivity or judgment required for Level 2 investments
valued using valuation models that are standard across the industry and whose parameter inputs are quoted in active
markets. Inputs to the models may include, but are not limited to, reported trades, executable bid and ask prices,
broker/dealer quotations, prices or yields of securities with similar characteristics, benchmark curves or information
pertaining to the issuer, as well as industry and economic events. Based on the information available, the Company

F-9

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

believes that the valuations provided by the third-party pricing service, as derived from such services' pricing
models, are representative of prices that would be received to sell the assets at the measurement date (exit prices).

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

As of December 31, 2014 and 2013, cash equivalents consist primarily of money market funds.

Marketable Securities

The Company invests in marketable debt securities in order to maximize its return on cash. Marketable
securities consist of U.S. Treasury notes and bonds, U.S. Government Agency notes and bonds and bank-guaranteed,
variable rate demand notes (VRDN). At the time of purchase, the Company classifies marketable securities as
either trading securities or available-for-sale securities, depending on the intent at that time. As of December 31,
2014 and 2013, marketable securities were comprised solely of trading securities. Trading securities are carried
at fair value with unrealized gains and losses recognized as a component of interest income in the consolidated
statements of operations.

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount. The Company records allowances for amounts
that could become uncollectible in the future based on historical experience, including amounts related to
chargebacks, cash discounts and credits for damaged product. The Company reviews each customer balance to
assess collectibility.

The majority of the Company’s products are distributed through independent pharmaceutical wholesalers.
Net product revenues and accounts receivable take into account the sale of the product at the wholesale acquisition
cost, and an accrual is recorded to reflect the difference between the wholesale acquisition cost and the estimated
average end-user contract price. This accrual is calculated on a product-specific basis and is based on the estimated
number of outstanding units sold to wholesalers that will ultimately be sold in end-user contracts. When the
wholesaler sells the product to the end-user at the agreed upon end-user contract price, the wholesaler charges the
Company for the difference between the wholesale acquisition price and the end-user contract price and this
chargeback is offset against the initial accrual balance.

Cash discounts are reductions to invoiced amounts offered to customers for payment within a specified period

of time from the date of the invoice.

At the time a transaction is recognized as a sale, the Company records a reduction in revenues for an estimate
of damaged product in the shipment. The Company’s estimate of the allowance for damaged product is based
upon historical experience of claims made for damaged product.

Inventories

The Company works closely with third parties to manufacture and package finished goods for sale. Based on
the customer relationship with the manufacturer or packager, the Company will either take title to finished goods
at the time of shipment or at the time of arrival from the manufacturer. The Company then warehouses such goods
until distribution and sale. Inventories are stated at the lower of cost or market with cost determined using the
first-in, first-out method.

The Company continually evaluates inventories for potential losses due to excess, obsolete or slow-moving
inventory by comparing sales history and sales projections to the inventory on hand. When evidence indicates the
carrying value of a product may not be recoverable, a charge is recorded to reduce the inventory to its current net
realizable value.

F-10

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Prepaid and Other Current Assets

Prepaid and other current assets consist of the current portion of unamortized deferred financing costs, prepaid
insurance premiums, prepaid consulting services and annual fees paid to the U.S. Food and Drug Administration
("FDA"). The Company expenses all prepaid amounts as used or over the period of benefit primarily on a straight-
line basis, as applicable.

Property and Equipment

Property and equipment, including leasehold improvements, are stated at cost. Depreciation is recognized
using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized
over the shorter of the initial lease term plus renewal options, if reasonably assured, or the remaining useful life
of the asset. Upon retirement or disposal of assets, any gain or loss is reflected as a component of operating income
in the consolidated statement of operations. Improvements that extend an asset’s useful life are capitalized. Repairs
and maintenance costs are expensed as incurred.

Intangible Assets

The Company’s intangible assets consist of capitalized costs related to product and license rights, patents and

trademarks.

The cost of acquiring product and license rights are capitalized at fair value at the date of acquisition for
products that are approved by the FDA for commercial use. These costs are amortized ratably over the estimated
economic life of the product. The economic life is estimated based upon the term of the license agreement, patent
life or market exclusivity of the product and based on management's assessment of future sales and profitability
of the product. This estimate is evaluated on a regular basis during the amortization period and adjusted if
appropriate. If there are any changes made to the useful life of the product and license rights, the costs associated
with such a change, if any, will be capitalized and amortized over the revised useful life.

Capitalized patent costs consist of outside legal costs associated with obtaining and protecting patents on
products that have been approved for marketing by the FDA. If it becomes probable that a patent will not be issued
or a patent has been declared invalid, related costs associated with the patent application are expensed at the time
such determination is made. All costs associated with obtaining patents for products that have not been approved
for marketing by the FDA are expensed as incurred.

Amortization expense is recognized ratably over the following periods:

Product rights
License rights
Patents

Estimated economic life
Term of license agreement
Life of patent

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment and intangible assets subject to amortization, are reviewed
for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be
recoverable. If events or circumstances arise that require a long-lived asset to be tested for potential impairment,
the Company first compares undiscounted cash flows expected to be generated by the asset to its carrying value.
If the carrying amount of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment
charge is recognized to the extent that the carrying value exceeds the fair value. Fair value is determined through
various valuation techniques including quoted market prices, third-party independent appraisals and discounted
cash flow models.

F-11

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Assets to be disposed of, if any, are separately presented in the consolidated balance sheet and reported at the
lower of the carrying amount or fair value less costs to sell, and no further depreciation or amortization is recorded
on the asset upon classification as held-for-sale. The assets and liabilities of a disposal group classified as held-
for-sale, if any, are presented separately in the appropriate asset and liability sections of the consolidated balance
sheet. The Company recorded no impairment charges during 2014, 2013 and 2012.

Revenue Recognition

Revenue is realizable and earned when all of the following criteria are met: persuasive evidence of an
arrangement exists; delivery has occurred or services have been rendered; the seller’s price to the buyer is fixed
and determinable; and collectibility of the related receivable is reasonably assured. Delivery is considered to have
occurred upon either shipment of the product or arrival at its destination, depending upon the shipping terms of
the transaction.

Product Revenues

The Company’s net product revenue reflects the reduction from gross product revenue for estimated allowances
for chargebacks, discounts and damaged goods, and reflects sales related accruals for rebates, product returns,
certain administrative and service fees.

As discussed above, the allowances against accounts receivable for chargebacks, discounts and damaged goods
are determined on a product-by-product basis, and established by management as the Company’s best estimate at
the time of sale based on each product’s historical experience adjusted to reflect known changes in the factors that
impact such allowances. These allowances are established based on the contractual terms with direct and indirect
customers and analyses of historical levels of chargebacks, discounts and credits claimed for damaged product.

Other organizations, such as managed care providers, pharmacy benefit management companies and
government agencies, may receive rebates from the Company based on either negotiated contracts to carry the
Company’s products or reimbursements for filled prescriptions. These entities are considered indirect customers
of the Company. In addition, the Company may provide rebates to end-user customers. In conjunction with
recognizing a sale to a wholesaler, sales revenues are reduced and accrued liabilities are increased by the Company’s
estimate of the rebate that may be claimed.

Consistent with industry practice, the Company maintains a return policy that allows customers to return
product within a specified period prior to and subsequent to the expiration date. The Company’s estimate of the
provision for returns is based upon historical experience. Any changes in the assumptions used to estimate the
provision for returns are recognized in the period those assumptions changed.

The Company has agreements with certain key wholesalers that include a fee for service costs. These costs

are netted against product revenues.

Other Revenues

Other revenues primarily consist of income from grant funding programs, licensing agreements, leases and
contract services. Revenue related to grants is recognized when all conditions related to such grants have been
met. All other revenue is recognized when earned.

The Company is a party to several licensing arrangements with customers that purchase product from the
Company. Under these licensing arrangements, the third-party licensee may have access to the Company's FDA
registration file. Licensing arrangements typically include an up-front payment for gaining access to the FDA
registration file, royalties and milestone payments upon the achievement of specific sales levels. The amounts
received for access to the FDA registration file are evaluated and based on the evaluation, the resulting revenue is
either recognized upfront or recognized over the term of the arrangement. Royalties and milestones are recognized
as revenue when earned. For substantive milestones, the Company uses the milestone method of recognizing

F-12

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

revenue if it is commensurate with either the performance to achieve the milestone or the enhancement of the value
of the delivered item, it relates solely to past performance and it is reasonable relative to other milestones.

Cost of Products Sold

Cost of products sold consists principally of the cost to acquire each unit of product sold, including in-bound
freight expense. Cost of products sold also includes expenses associated with the write-down of slow-moving or
expired product.

Selling and Marketing Expense

Selling and marketing expense consists primarily of expenses relating to the advertising, promotion,

distribution and sale of products, including royalty expense, salaries and related costs.

Distribution Costs

Distribution costs are expensed as incurred and totaled $1.0 million in 2014 and $0.9 million in both 2013
and 2012. They are included as a component of selling and marketing expenses in the consolidated statements of
operations.

Advertising Costs

Advertising costs are expensed as incurred. These costs were $2.5 million, $2.1 million and $3.0 million in
2014, 2013 and 2012, respectively, and are included as a component of selling and marketing expenses in the
consolidated statements of operations.

Research and Development

Research and development costs are expensed in the period incurred. Research and development costs are
comprised mainly of clinical trial expenses, salaries, wages and other related costs such as materials and supplies.
Development expense includes activities performed by third-party providers participating in the Company’s clinical
studies. The Company accounts for these costs based on estimates of work performed, patients enrolled or fixed
fees for services.

Income Taxes

The Company provides for deferred taxes using the asset and liability approach. Under this method, deferred
tax assets and liabilities are recognized for future tax consequences attributable to operating loss and tax credit
carryforwards, as well as differences between the carrying amounts of existing assets and liabilities and their
respective tax bases. The Company’s principal differences are related to the timing of deductibility of certain items,
such as inventory, depreciation, amortization and expense for nonqualified stock options. Deferred tax assets and
liabilities are measured using enacted statutory tax rates that are expected to apply to taxable income in the years
such temporary differences are anticipated to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period of enactment. The Company only recognizes income
tax benefits associated with an income tax position in which it is “more likely than not” that the position would
be sustained upon examination by the taxing authorities.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment.

The tax benefit associated with the exercise of nonqualified stock options is recognized when the benefit is

used to offset income taxes payable.

F-13

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The Company’s accounting policy with respect to interest and penalties arising from income tax settlements

is to recognize them as part of the provision for income taxes.

Comprehensive Income (Loss)

Total comprehensive income (loss) was comprised solely of net income (loss) for all periods presented.

Earnings (Loss) per Share

Basic earnings per share is calculated by dividing net income attributable to common shareholders by the
weighted-average number of shares outstanding. Except where the result would be antidilutive to income from
continuing operations, diluted earnings per share is calculated by assuming the vesting of unvested restricted stock
and the exercise of stock options and warrants, unrecognized compensation costs, as well as the related income
tax benefits.

Share-Based Payments

The Company recognizes compensation cost for all share-based payments issued, modified, repurchased or
canceled. The cost of stock options is measured based on the grant-date fair value using the Black-Scholes option-
pricing model, and the expense is recognized over the employee’s requisite service period. Depending on the nature
of the vesting provisions, restricted stock awards are measured using either the fair value on the grant date or the
fair value of common stock on the date the vesting provisions lapse. Prior to the lapse for those equity grants not
valued on the grant date, the fair value is measured on the last day of the reporting period.

Collaborative Agreements

The Company is a party to several collaborative arrangements with certain research institutions to identify
and pursue promising pre-clinical pharmaceutical product candidates. The Company has determined these
collaborative agreements do not meet the criteria for accounting under Accounting Standards Codification 808,
Collaborative Agreements. The agreements do not specifically designate each party's rights and obligations to each
other under the collaborative arrangements. Except for patent defense costs, expenses incurred by one party are
not required to be reimbursed by the other party. The funding for these programs is generally provided through
private sector investments or federal Small Business Administration ("SBIR/STTR") grant programs. Expenses
incurred under these collaborative agreements are included in research and development expenses in the
consolidated statements of operations. Funding received from private sector investments and grants are recorded
as net revenues in the consolidated statements of operations.

Recent Accounting Guidance

In April 2014, the Financial Accounting Standards Board (the "FASB") issued amended guidance in the form
of a FASB Accounting Standards Update on "Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity". The new guidance restricts the presentation of discontinued operations to business
circumstances when the disposal of business operations represents a strategic shift that has or will have a major
effect on an entity's operations and financial results. The guidance becomes effective on January 1, 2015. Adoption
is on a prospective basis.

In May 2014, the FASB issued amended guidance in the form of a FASB Accounting Standards Update on,
"Revenue from Contracts with Customers". The core principle of the new guidance is to recognize revenues when
promised goods or services are transferred to customers in an amount that reflects the consideration to which an
entity expects to be entitled for those goods or services. The new guidance defines a five step process to achieve
this core principle and, in doing so, additional judgments and estimates may be required within the revenue
recognition process. The new standard will replace most of the existing revenue recognition standards in U.S.
GAAP when it becomes effective on January 1, 2017. Early adoption is not permitted. The new standard can be
applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of

F-14

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

the change recognized at the date of the initial application. The Company is assessing the potential impact of the
new standard on financial reporting and has not yet selected a transition method by which we will adopt the standard
in 2017.

(3) New Products

Vaprisol

On February 28, 2014, the Company acquired certain product rights, intellectual property and related assets
of Vaprisol from Astellas Pharma US, Inc. ("Astellas"). Vaprisol is a patented, prescription brand indicated to raise
serum sodium levels in hospitalized patients with euvolemic and hypervolemic hyponatremia. The product was
developed and registered by Astellas and then launched in 2006. It is one of two branded prescription products
indicated for the treatment of hyponatremia. The Company provided an upfront payment of $2.0 million to Astellas
at closing. There is an additional milestone payment due forty-five days after the first anniversary date of the
closing of the transaction of up to $2.0 million, dependent upon Cumberland achieving certain first year sales
levels for the product. Cumberland's acquisition of Vaprisol is accounted for as a business combination and the
products sales are included in the results of operations subsequent to the acquisition date.

The following table summarizes the preliminary allocation of the fair values of the assets acquired and liabilities

assumed as of the acquisition date for Vaprisol:

Intellectual property intangible assets
Inventories

Acquired contingent liabilities

Contingent consideration obligation

Total net assets acquired

2,990,000

1,410,000
(400,000)
(2,000,000)
2,000,000

The contingent consideration obligation represents the additional milestone payment discussed above.
Cumberland prepared the valuations of the contingent consideration obligation and the intangible assets utilizing
significant unobservable inputs. As a result, the valuations are classified as Level 3 fair value measurements. The
Company continues to evaluate the assets acquired and liabilities assumed during the measurement period. Vaprisol
contributed $3.0 million in net revenues during 2014. The pro-forma effects of the acquisition on the condensed
consolidated financial statements were not deemed material for disclosure purposes.

Omeclamox-Pak

On October 28, 2013, the Company entered into an agreement with Pernix Therapeutics ("Pernix") to distribute
and promote Omeclamox-Pak. Omeclamox-Pak is a branded prescription product that combines omeprazole,
amoxicillin and clarithromycin for the treatment of Helicobacter pylori (H. pylori) infection and duodenal ulcer
disease. Under the terms of the agreement, the Company promotes the product to gastroenterologists across the
United States and Pernix promotes the product through its specialty sales force focusing on select primary care
physicians. The companies cooperate in the marketing and other activities needed to support the commercialization
of the brand. The Company paid an upfront payment of $4.0 million to Pernix on October 29, 2013. The agreement
calls for additional milestones at the first and second anniversary dates of the execution of the agreement totaling
$4.0 million in the aggregate. Cumberland was not required to make the first milestone payment of $1.0 million
to Pernix as all the criteria for that payment were not met. Royalty payments ranging from 15% to 20% based on
tiered levels of gross profits are paid by Cumberland to Pernix. The Company also makes royalty payments to
Pernix to reflect their ongoing sales promotional efforts.

F-15

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The $4.0 million upfront payment that the Company paid to Pernix on October 29, 2013 is included in product
and license rights and will be amortized over the remaining expected useful life of the acquired asset, currently
the life of the agreement, which ends in June 2032. Omeclamox-Pak contributed $4.1 million in net revenues
during 2014 and $1.0 million during 2013.

(4) Revenues

Product Revenues

The Company’s net product revenues consisted of the following for the years ended December 31:

Products:

Acetadote

Omeclamox-Pak

Kristalose

Vaprisol

Caldolor

2014

2013

2012

11,906,232

18,846,753

37,522,180

4,111,916

14,932,271

3,011,997

2,721,346

1,045,815

9,118,475

—

2,089,655

—

9,429,741

—

992,110

Total net product revenues

36,683,762

31,100,698

47,944,031

As discussed in Note 3, the Company acquired rights to two new products, Omeclamox-Pak and Vaprisol,
and both contributed to Cumberland's net revenue during 2014. On October 28, 2013, Cumberland entered into
an agreement with Pernix to distribute and promote Omeclamox-Pak. Under the terms of the agreement, effective
October 1, 2013, the Company began to record the revenue of this product and effective January 2014 Cumberland
began distributing Omeclamox-Pak and promoting it to gastroenterologists across the United States. On February
28, 2014, Cumberland entered into an agreement with Astellas to acquire Vaprisol including certain product rights,
intellectual property and related assets. The Company began selling Vaprisol in March 2014 and launched
promotional efforts for the brand in May 2014.

As part of the November 12, 2012, Settlement Agreement with Paddock and Perrigo, the Company supplies
Perrigo with an Authorized Generic ("Authorized Generic") version of the Company's Acetadote product. The
Company's revenue generated by sales of its Authorized Generic distributed by Perrigo is included in the Acetadote
product revenue presented above. The Company's share of Authorized Generic revenue was $5.8 million, $9.2
million and $0.3 million during 2014, 2013 and 2012, respectively.

In December 2011, the Company discontinued sales of the 400mg Caldolor offering domestically and focused
on the 800mg Caldolor offering. During 2014, Cumberland had total sales of $0.5 million of its 400mg Caldolor
offering outside the United States.

The allowances in accounts receivable for chargebacks, cash discounts and damaged goods were $0.4 million
at December 31, 2014 and $0.6 million at December 31, 2013, and the accruals for rebates, product returns and
certain administrative and service fees included in other current liabilities were $5.2 million and $2.4 million,
respectively, at December 31, 2014 and 2013.

Other Revenues

During 2013, the Company entered into six new agreements with international partners for commercialization
of certain of the Company's products into additional international territories and amended its agreement with Gloria,
a Chinese pharmaceutical company, to extend its territory. As a result of the new and amended agreements, the
Company recognized approximately $0.6 million of non-refundable up-front payments as other revenue in the
consolidated statement of operations during 2013.

The agreements entered into during 2013 provide that each of the partners are responsible for seeking regulatory
approvals for the products, and following approvals, will handle ongoing distribution and sales in the respective
international territories. The Company maintains responsibility for the intellectual property and product

F-16

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

formulations. Under the licensing agreements, the Company is entitled to receive additional milestone payments
upon the partners' achievement of defined regulatory approvals and sales milestones. The Company will recognize
revenue for these substantive milestones using the milestone method. The agreements provide for up to $0.6 million
in milestone payments related to regulatory approvals and up to $4.0 million in milestone payments related to total
and annual product sales. As of December 31, 2014, the Company has not recognized any revenues related to
milestones associated with the new agreements. The Company is also entitled to receive royalties on future sales
of the products under the agreements.

In 2012, the Company entered into an exclusive licensing agreement for Acetadote and Caldolor with Harbin
Gloria. In connection with the agreement, the Company has certain protective rights, including the right to review
and approve all documents submitted to the Chinese State Drug Administration. During 2012, the Company
received nonrefundable, up-front payments totaling approximately $0.7 million in exchange for the transfer of
certain intellectual property, including its product dossiers, and recognized these payments as other revenue in the
consolidated statement of operations when the intellectual property was provided to the licensee. The licensing
agreement provides for the Company to receive additional milestone payments of $0.7 million when the licensee
receives notice from the regulatory authority granting approval to conduct clinical trials, or stating that no clinical
trials are necessary. The Company is also entitled to receive milestone payments of $1.1 million upon receiving
regulatory approval for each of Acetadote and Caldolor in China. The Company will recognize revenue for these
substantive milestones using the milestone method. As of December 31, 2014, no revenue has been recognized
related to milestones associated with Harbin Gloria.

Other revenues during 2014, 2013 and 2012 also includes revenue generated by CET through grant funding
from federal Small Business grant programs, and lease income generated by CET’s Life Sciences Center and
contract services. The Life Sciences Center is a research center that provides scientists with access to flexible lab
space and other resources to develop biomedical products. Grant revenue from SBIR/STTR programs totaled
approximately $0.1 million for each of the years ended December 31, 2014, 2013 and 2012.

(5) Inventories

The Company's inventories consisted of the following as of December 31:

Raw materials and work in process

Finished goods

Total inventories

2014

2013

2,571,465

3,028,854

5,600,319

2,025,020

3,697,862

5,722,882

Caldolor inventory represented the majority of net inventory on hand at December 31, 2014 and 2013, and
had varying original expiration dates that began in the second quarter of 2014 and extend through January 2016.
During 2013, the Company provided stability data to the FDA supporting that the Caldolor product expiration
dates may be extended by up to a year. In January 2014, the FDA notified the Company that it had approved its
request to extend the original shelf life of the Caldolor 800mg vials from five to six years.

At December 31, 2014 and 2013, the Company has recognized and maintained cumulative charges for potential
obsolescence and discontinuance losses, primarily for Caldolor, of approximately $3.2 million and $3.5 million,
respectively.

In connection with the acquisition of certain product right assets related to the Kristalose brand as discussed
in Note 7, the Company is responsible for purchasing the active pharmaceutical ingredient for Kristalose and
maintains this raw material inventory at its third-party manufacturer. As the ingredients are consumed in production,
the value of the ingredients is transferred from raw materials to finished goods.

F-17

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(6) Property and Equipment

Property and equipment consisted of the following at December 31:

Computer equipment

Office equipment

Furniture and fixtures

Leasehold improvements
Total property and
equipment, gross

Less: accumulated depreciation
and amortization

Total property and
equipment, net

Range of
useful lives

3 – 5 years

3 – 15 years

5 – 15 years

3 – 15 years, or
remaining lease term

2014

2013

792,268

171,649

703,187

754,088

132,999

616,759

1,223,453

2,890,557

2,727,299

(2,239,527)

(1,846,652)

651,030

880,647

Depreciation expense, including amortization expense related to leasehold improvements, was $0.4 million
during 2014, 2013 and 2012. Depreciation expense is included in general and administrative expense in the
consolidated statements of operations.

(7) Intangible Assets

Intangible assets consisted of the following at December 31:

Product and license rights

Less: accumulated amortization

Total product and license rights

Patents
Less: accumulated amortization

Total patents

Trademarks

Less: accumulated amortization

Total trademarks

Total intangible assets

2014

2013

16,477,749
(2,225,949)
14,251,800

8,194,264
(877,523)
7,316,741

9,020
(9,020)
—

12,139,031
(1,096,238)
11,042,793

4,866,570
(410,544)
4,456,026

9,020
(9,020)
—

21,568,541

15,498,819

On February 28, 2014, the Company acquired the rights of the branded prescription product Vaprisol from
Astellas (discussed more fully in Note 3). The intangible asset is valued at $3.0 million and is included in product
and license rights. The asset will be amortized over the remaining expected useful life of the acquired asset,
currently the life of the agreement, which ends in February 2022.

During 2013, the Company entered into an agreement with Pernix to distribute and promote the branded
prescription product Omeclamox-Pak. The $4.0 million upfront payment the Company paid to Pernix Therapeutics

F-18

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

on October 29, 2013 (discussed more fully in Note 3) is included in product and license rights and will be amortized
over the remaining expected useful life of the acquired asset, currently the life of the agreement, which ends in
June 2032.

In 2011, the Company acquired the Kristalose trademark and FDA registration from Mylan Inc. The agreement
requires the Company to make future quarterly payments over a seven-year period equal to a percentage of Kristalose
net sales. The payments are being treated as consideration for the assets acquired and are being capitalized and
amortized over the remaining expected useful life of the acquired asset, currently the remaining term of the 15
year agreement. During 2014 and 2013, the Company paid $1.3 million and $0.8 million, respectively, to Mylan
Inc. in Kristalose payments.

During 2014 and 2013, the Company recorded an additional $3.3 million and $2.1 million, respectively, in
intangible assets for capitalized patent costs, including amounts incurred in the protection of the Company's
intellectual property. These costs will be amortized over the remaining expected useful life of the associated
patents.

Amortization expense related to product and license rights, trademarks and patents was $1.6 million, $0.9
million and $0.5 million during 2014, 2013 and 2012, respectively. The expected amortization expense for the
Company's current balance of intangible assets are as follows:

Year ending December 31:

2015
2016
2017
2018
2019 and thereafter

(8) Other Current Liabilities

Other current liabilities consisted of the following at December 31:

1,949,396
1,949,396
1,949,396
1,949,396
13,770,957
21,568,541

2014

2013

Rebates, product returns, administrative fees
and service fees

5,234,800

1,154,093

2,360,960

198,000

1,558,916

2,437,140

1,110,726

—

1,236,000

726,051

10,506,769

5,509,917

Employee wages and benefits

Acquisition related accruals

Accrued inventory purchases

Other

Total other current liabilities

(9) Debt

New Debt Agreement

On June 26, 2014, the Company entered into a Revolving Credit Loan Agreement (“Loan Agreement”) with
SunTrust Bank. The new agreement replaced the August 2011 Fifth Amended and Restated Loan Agreement with
a previous lender which was to expire on December 31, 2014. There were no borrowings under the Loan Agreement
at December 31, 2014. The Loan Agreement provides for an aggregate principal amount of up to $20.0 million,

F-19

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

and it has a three year term expiring on June 26, 2017. The initial revolving line of credit is up to $12.0 million,
an increase from the $10.0 million under the previous agreement. The Company has the ability to increase the
borrowing amount up to $20.0 million, upon the satisfaction of certain conditions, as defined in the Loan Agreement.

The interest rate on the Loan Agreement is based on LIBOR plus an interest rate spread. There is no LIBOR
minimum and the LIBOR pricing provides for an interest rate spread of 1.0% to 2.85%. In addition, a fee of 0.25%
per year is charged on the unused line of credit. Interest expense and the unused line fee are payable quarterly.
Borrowings under the line of credit are collateralized by substantially all of our assets.

Under the Loan Agreement, the Company is subject to certain financial covenants, including, but not limited
to, maintaining an EBIT to Interest Expense Ratio and a Funded Debt Ratio, determined on a quarterly basis. The
Company was in compliance with all covenants at December 31, 2014.

The Company incurred no early termination penalties upon termination of the previous Agreement and incurred
less than $0.1 million in deferred financing costs related to the Loan Agreement, which will be amortized to interest
expense using the effective interest method over the term of the Loan Agreement.

Previous Debt Agreement

The August 2011 Fifth Amended and Restated Loan Agreement carried an interest rate of the LIBOR Daily
Floating Rate plus an applicable margin, as defined by the agreement (2.17%at December 31, 2013). Interest and
an unused line of credit fee (0.25% per annum) were payable quarterly. There were no borrowings outstanding on
the credit facility at December 31, 2013 or at any time during 2014.

Under the previous agreement, the Company was subject to certain financial covenants including, but not
limited to, maintaining a leverage ratio and interest coverage ratio, as defined in the agreement. In March 2014
and May 2014, the previous agreement was amended for certain provisions related to the aggregate ownership of
the Company's common stock over 30% and certain other financial covenants. As a result of the amendments, the
Company was in compliance with all covenants.

(10) Shareholders’ Equity

(a) Initial Public Offering

On August 10, 2009, the Company completed its initial public offering of 5,000,000 shares of common stock
at a price of $17.00 per share, raising gross proceeds of $85.0 million. After deducting underwriting discounts of
approximately $6.0 million and offering costs incurred of approximately $4.2 million, the net proceeds to the
Company were approximately $74.8 million. Contemporaneously with the offering, each outstanding share of
preferred stock was automatically converted into two shares of common stock.

(b) Preferred Stock

The Company is authorized to issue 20,000,000 shares of preferred stock. The Board of Directors is authorized
to divide these shares into classes or series, and to fix and determine the relative rights, preferences, qualifications
and limitations of the shares of any class or series so established. At December 31, 2014 and 2013, there was no
preferred stock outstanding.

During 2014, 2013 and 2012, the Company issued 15,300 shares, 19,743 shares and 20,199 shares of common

stock, respectively, as a result of restricted shares vesting as well as other common share issuances.

In the second quarter of 2012, the Company implemented an Option Exchange Program (the "Exchange
Program") whereby certain outstanding stock options could be exchanged for shares of restricted stock. The
Exchange Program expired on May 21, 2012, at which time 424,475 outstanding options were exchanged for

F-20

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

147,828 shares of restricted stock. The restriction period on the restricted stock lapses from one to four years after
issuance. The Exchange Program was designed to provide a value-for-value exchange of equity instruments. The
fair value of each exchanged option was determined on the date the Exchange Program commenced using the
Black-Scholes option pricing model, and the following assumptions:

Dividend yield

Expected term (years)

Expected volatility

Risk-free interest rate

Range of Assumptions

—
1.3 - 7.3

37% - 78%

0.23% - 1.50%

The Exchange Program resulted in no incremental compensation expense during 2012. The remaining
unrecognized compensation costs for the exchanged options on the date of the exchange was approximately $0.3
million, and will be recognized over the restriction period.

The payment of dividends is restricted by the Agreement with the Company’s primary lender.

(d) Warrants

In connection with the issuance of shares of common stock to a related party in 2004, the Company issued
warrants to purchase 40,000 shares of common stock at $6.00 per share at any time within 10 years of issuance.
All of these warrants expired during 2014.

In 2006, the Company signed a new line of credit agreement along with a term loan agreement with a financial
institution. In conjunction with these agreements, the Company issued warrants to purchase up to 3,958 shares of
common stock at $9.00 per share that expire in April 2016. All of these warrants were outstanding and exercisable
as of December 31, 2014 and 2013.

In connection with the amendment to the debt agreements in 2009, the Company issued warrants to purchase
up to 7,500 shares of common stock at $17.00 per share that expire in July 2019. All of these warrants were
outstanding and exercisable as of December 31, 2014 and 2013.

(e) Share Repurchases

On May 13, 2010, the Company announced a share repurchase program to purchase up to $10 million of its
common stock pursuant to Rule 10b-18 of the Securities Act. In January 2011, April 2012, January 2013 and
January 2015, the Company's Board of Directors replaced the prior authorizations with new $10 million
authorizations for repurchases of the Company's outstanding common stock. The Company repurchased 881,810
shares, 1,008,105 shares and 1,268,809 shares of common stock for approximately $4.3 million, $4.8 million and
$8.1 million during the years ended December 31, 2014, 2013 and 2012, respectively.

(f) Cumberland Emerging Technologies

In April 2014, the Company received approximately $1.0 million from Gloria for its participation in CET. As
a result, Gloria received shares in CET and will have the first right to negotiate a license to CET developed products
for the Chinese market. Prior to April 2014, Cumberland owned 85% of CET, with the balance of the enterprise
being owned by Vanderbilt University and the Tennessee Technology Development Corporation. In connection
with Gloria’s investment in CET, the Company also provided an additional investment in CET. Cumberland
contributed $1.0 million in cash and provided $2.4 million in loan foregiveness to CET in exchange for newly
issued shares. Upon completion of the additional investment by Gloria and Cumberland in April 2014, the
Company’s ownership in CET is 80%. As CET is a consolidated subsidiary, the Company reports the operating
results of CET and allocates the noncontrolling interests to the non-majority partners.

F-21

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(11) Earnings Per Share

The following table shows the computation of the numerator and the denominator used to calculate diluted

earnings per share for the years ended December 31:

Numerator:

Net income (loss) attributable to
common shareholders

Denominator:

Weighted-average shares
outstanding – basic

Dilutive effect of restricted stock and
stock options

Weighted-average shares
outstanding – diluted

2014

2013

2012

2,423,723

(2,104,614) $

5,842,492

17,617,765

18,332,997

19,564,625

281,867

—

222,912

17,899,632

18,332,997

19,787,537

The Company's anti-dilutive restricted shares and stock options outstanding were as follows for the years

ended December 31:

Anti-dilutive shares

194,237

407,954

687,430

2014

2013

2012

F-22

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(12) Income Taxes

The components of the Company's net deferred tax assets at December 31 are as follows:

Deferred Tax Assets

Net operating loss and tax credits

Property and equipment and intangibles

Allowance for accounts receivable

Reserve for expired product

Inventory

Deferred charges

Cumulative compensation costs incurred on deductible
equity awards

Total deferred tax assets

Deferred Tax Liabilities

Intangible assets

Net deferred tax assets, before valuation allowance

Less: deferred tax asset valuation allowance

Net deferred tax assets

2014

2013

2,205,260

2,144,460

300,301

172,008

817,736

1,412,477

1,504,835

1,676,729

8,089,346

214,478

235,446

600,406

1,495,895

666,236

1,378,690

6,735,611

(3,707,535)
4,381,811
(152,074)
4,229,737

(2,683,587)
4,052,024
(131,617)
3,920,407

The following table summarizes the amount and year of expiration of the Company's federal and state net

operating loss carryforwards as of December 31, 2014:

Years of expiration

Federal

State

2015

2016 - 2017

2018 - 2024

2029

2033 and 2034

Total federal and state net operating loss
carryforwards

— $

—

44,197,129

1,984,927

46,182,056

83,179

421,643

47,289,732

—

2,633,987

50,428,541

The Company has total recognized carryforward tax assets of $0.2 million for foreign tax credits and AMT
carryforwards. In addition, the Company has recognized as of December 31, 2014 federal Orphan Drug and Research
and Development tax credits of 1.1 million that expire between 2021 and 2034.

The Company has unrecognized net operating loss carryforwards generated from the exercise of nonqualified
options of approximately $44.2 million. These benefits occurred as a result of the actual tax benefit realized upon
an employee's exercise exceeding the cumulative book compensation charge associated with the awards and will
be recognized in the year in which they are able to reduce current income taxes payable. Accordingly, deferred tax
assets are not recognized for these net operating loss carryforwards or credit carryforwards resulting from the exercise
of nonqualified options. The Company's utilization of these net operating loss carryforwards and a net operating
loss in 2013 resulted in minimal income taxes paid in each of the years 2009 through 2014. The Company expects
to pay minimal income taxes in 2015 through utilization of these net operating loss carryforwards. The Company
has $50.4 million of state net operating loss carryforwards. This amount includes $45.0 million from the exercise
of nonqualified options during 2009. The state net operating loss carryforwards above include approximately $3.2
million that is subject to a valuation allowance at December 31, 2014.

F-23

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Income tax (expense) benefit includes the following components for the years ended December 31:

2014

2013

2012

Current:

Federal

State and other

Total current income tax expense

(1,440,010) $

(250,064)

(1,690,074)

(45,287) $
(11,580)
(56,867)

(3,185,743)
(820,669)
(4,006,412)

Deferred:

Federal

State

Total deferred income tax benefit

213,552

95,778

309,330

1,426,701

153,217

1,579,918

Total income tax expense

(1,380,744) $

1,523,051

677,190

84,446

761,636
(3,244,776)

Deferred income tax is comprised of the following components for the years ended December 31:

Deferred tax (expense) benefit,
excluding items below

Inventory

Operating loss carryforwards

Tax credit carryforwards

Valuation allowance due to changes in
net deferred tax asset balances

Deductible equity awards

Allowance for accounts receivable

Deferred charges

Reserve for expired product

Intangible assets

Deferred income tax benefit
(expense)

2014

2013

2012

85,844

60,739

(83,418)

17,424

43,398

(20,457)

298,039

(63,438)

838,556

217,330

(1,023,948)

310,477

788,342

196,631

(23,299)
127,308

161,084

83,755
(106,554)
(18,565)

(11,562)
179,755

25,552

108,699

(15,291)
667,171
(18,615)
19,339
(29,032)
(164,380)

309,330

1,579,918

761,636

The valuation allowance at December 31, 2014 and 2013 is primarily related to state tax benefits at CET that

will likely not be realized.

F-24

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The Company’s effective income tax rate for 2014, 2013 and 2012 reconciles with the federal statutory tax rate

as follows:

Federal tax expense at statutory rate

State income tax expense (net of federal
income tax benefit)

Permanent differences associated with
general business credits

Permanent differences associated with
stock options

Other permanent differences

Other

Net income tax expense

2014

2013

2012

34 %

5 %

(1)%

— %

1 %

(2)%

37 %

34 %

4 %

5 %

— %

(1)%

42 %

34 %

4 %

— %

(5)%

3 %

— %

36 %

The Company’s 2009 federal tax return was selected for examination during 2012, and this examination was
completed during the year with no significant findings or adjustments. Federal tax years that remain open to
examination are 2010 through 2014. Due to a 2009 net operating loss carryback, federal tax years 2006 through
2008 remain open to the extent of net operating losses utilized in those years. State tax years that remain open to
examination are 2008 to 2014. The Company has no unrecognized tax benefits in 2014, 2013 and 2012.

Excluding the alternative minimum tax (AMT) tax credits, the Company will need to generate future taxable
income in order to realize its deferred tax assets. Based upon the level of taxable income over the last three years
and projections for future taxable income over the periods in which the deferred tax assets are deductible, management
believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of
the existing valuation allowances at December 31, 2014. The amount of the deferred tax assets considered realizable,
however, could be reduced in the future periods if estimates of future taxable income during the carryforward period
are reduced.

(13) Stock-Based Compensation Plans

The Company has grants outstanding under three equity compensation plans, with two available for future grants
of equity compensation awards to employees, consultants and directors. All of the equity plans were approved by
shareholders. The 2007 Long-Term Incentive Compensation Plan (the 2007 Plan) and the 2007 Directors’ Incentive Plan
(the "Directors’ Plan") superseded the 1999 Stock Option Plan. The 2007 Plan and the Directors’ Plan provide for the
issuance of stock options, stock appreciation rights and restricted stock. Vesting is determined on a grant-by-grant basis
in accordance with the terms of the plans and the related grant agreements. The Company has reserved 2.4 million shares
of common stock for issuance under the 2007 Plan and 250,000 shares for issuance under the Directors’ Plan.

The exercise price of stock options is generally 100% of the fair market value of the underlying common stock on
the grant date. The exercise price of incentive stock options granted to a shareholder who owns more than 10% of the
total combined voting power of all classes of stock must be at least 110% of the fair market value of the underlying
common stock on the grant date. The maximum contractual term of stock options is ten years from the date of grant,
except for incentive stock options granted to 10% shareholders, which are five years.

During 2011, the Company began issuing shares of restricted stock with no exercise price to employees and directors.
Restricted stock issued to employees generally cliff-vests on the fourth anniversary of the date of grant. Restricted stock
issued to directors vests on the one year anniversary of the date of grant.

Stock compensation expense is presented as a component of general and administrative expense in the consolidated
statements of operations. Stock compensation expense recorded as a component of equity consisted of the following for
the years ended December 31:

F-25

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

2014

2013

2012

Share-based compensation - employees

Share-based compensation -
nonemployees

Total share-based compensation

660,963

614,818

555,898

99,931

56,116

760,894

670,934

76,920

632,818

At December 31, 2014, there was approximately $1.6 million of unrecognized compensation cost related to share-
based payments, which is expected to be recognized over a weighted-average period of 2.3 years. This amount relates
primarily to unrecognized compensation cost for employees.

Stock Options

Stock option activity for 2014 and 2013 was as follows:

Weighted-
average
exercise price
per share

Weighted-
average
remaining
contractual
term (years)

Aggregate
intrinsic
value

Number of
shares

Outstanding, December 31, 2012

666,871

Options granted

Options exercised

Options forfeited or expired

Outstanding, December 31, 2013

Options granted

Options exercised

Options forfeited or expired

Outstanding, December 31, 2014

Exercisable at December 31, 2014

—

(171,100)

(139,275)

356,496

—

(198,140)

158,356

5.93

—

3.50

6.25

6.96

—

6.46

7.62

1.4

132,348

1.0

360

0.4

2,320

The Company did not grant any stock options during 2014, 2013 and 2012, and no options were exercised during

2014. Information related to the stock option plans during 2014, 2013 and 2012 was as follows:

2014

2013

2012

Intrinsic value of options exercised

Weighted-average fair value of
options exercised

— $

212,444

— $

0.12

495,480

1.00

F-26

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Restricted Stock Awards

As previously noted, the Company began issuing restricted stock to employees and directors in 2011 under the

provisions of the 2007 Plan and the Directors’ Plan. Restricted stock activity was as follows:

Nonvested, December 31, 2012

Shares granted
Shares vested
Shares forfeited

Nonvested, December 31, 2013

Shares granted
Shares vested
Shares forfeited

Nonvested, December 31, 2014

Number
of shares

Weighted-
average
grant-date
fair value

383,530
195,925
(17,193)
(41,678)
520,584
219,734
(11,300)
(36,181)
692,837

4.99
4.78
3.58
3.97
5.05
4.68
4.78
5.41
4.92

The fair value of restricted stock granted was based on the closing market price of the Company’s common stock

on the date of grant.

(14) Employee Benefit Plans

The Company sponsors an employee benefit plan that was established on January 1, 2006, the Cumberland
Pharmaceuticals 401(k) Plan (the Plan), under Section 401(k) of the Internal Revenue Code of 1986, as amended,
for the benefit of all employees over the age of 21, having been employed by the Company for at least six months.
The Plan provides that participants may contribute up to the maximum amount of their compensation as set forth
by the Internal Revenue Service each year. Employee contributions are invested in various investment funds based
upon elections made by the employees. During 2014, 2013 and 2012, the Company contributed approximately
$50,000 in each year to the Plan as an employer match of participant contributions.

In 2012 and 2013, the Company established non-qualified unfunded deferred compensation plans that allow
participants to defer receipt of a portion of their compensation. The liability under the plans was $0.6 million and
$0.3 million as of December 31, 2014 and 2013, respectively. The Company had assets consisting of company-
owned life insurance contracts generally designated to pay benefits of the deferred compensation plans of $1.7
million and $1.3 million as of December 31, 2014 and 2013, respectively.

F-27

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(15) Leases

The Company is obligated under long-term real estate leases for corporate office space expiring in October
2016. In addition, the research lab space at CET, under an agreement amended in July 2012, is leased through
2018, with an option to extend the lease through April 2028. The Company also subleases a portion of the space
under these leases. Rent expense is recognized over the expected term of the lease, including renewal option periods,
if applicable, on a straight-line basis. Rent expense for 2014, 2013 and 2012 was approximately $1.0 million, $0.9
million and $0.9 million, respectively, and sublease income was approximately $0.5 million, $0.5 million and $0.5
million. Cumulative future minimum sublease income under noncancelable operating subleases totals
approximately $0.3 million and will be paid through the lease ending in October 2016. Future minimum lease
payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) are
as follows:

Year ending December 31:

2015
2016
2017
2018
2019 and thereafter

Total future minimum lease payments

(16) Fair Value of Financial Instruments

1,052,662
941,247
232,964
78,852
—
2,305,725

The Company owns marketable securities that are solely classified as trading securities as of December 31,
2014. There were no transfers of assets between levels within the fair value hierarchy. The following table
summarizes the fair value of these marketable securities by level within the fair value hierarchy:

U.S. Treasury notes and
bonds

U.S. Agency issued mortgage-
backed securities - variable
rate

U.S. Agency notes and bonds
- fixed rate

December 31, 2014

December 31, 2013

Level 1

Level 2

Total

Level 1

Level 2

Total

$1,338,010

— $ 1,338,010

$2,829,809

— $ 2,829,809

— 4,003,375

4,003,375

— 3,049,754

3,049,754

— 3,251,336

3,251,336

— 1,496,700

1,496,700

SBA loan pools - variable rate

— 1,413,697

1,413,697

— 1,748,498

1,748,498

Municipal bonds - VRDN

4,835,000

— 4,835,000

4,895,000

— 4,895,000

Total fair value of
marketable securities

$6,173,010

$8,668,408

$14,841,418

$7,724,809

$6,294,952

$14,019,761

The fair values of all other financial instruments outstanding as of December 31, 2014 and 2013 approximate
their carrying values. There were no changes to the valuation techniques for the Level 2 marketable securities
during 2014 or 2013.

F-28

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(17) Market Concentrations

The Company currently focuses on acquiring, developing, and commercializing branded prescription products
for the acute care and gastroenterology markets. The Company’s principal financial instruments subject to potential
concentration of credit risk are accounts receivable, which are unsecured, and cash equivalents. The Company’s
cash equivalents consist primarily of money market funds. Certain bank deposits may at times be in excess of the
Federal Deposit Insurance Corporation insurance limits.

The Company’s primary customers are wholesale pharmaceutical distributors in the U.S. Total gross revenues
by customer for each customer representing 10% or more of consolidated gross revenues are summarized below
for the years ended December 31:

Customer 1
Customer 2
Customer 3
Customer 4

2014

21%
27%
34%
11%

2013

19%
23%
23%
24%

2012

35%
30%
28%
1%

The Company’s accounts receivable, net of allowances, due from these four customers at December 31, 2014

and 2013 was 91.1% and 85.3%, respectively.

(18) Manufacturing and Supply Agreements

The Company utilizes one or two primary suppliers to manufacture each of its products and product candidates.
Although there are a limited number of manufacturers of pharmaceutical products, the Company believes it could
utilize other suppliers to manufacture its prescription products on comparable terms. A change in suppliers,
problems with its third-party manufacturing operations or related production capacity, or contract disputes with
suppliers could cause a delay in manufacturing or shipment of finished goods and possible loss of sales, which
could adversely affect operating results.

(19) Employment Agreements

The Company has entered into employment agreements with all its full-time employees. Each employment
agreement provides for a salary for services performed, a potential annual bonus and, if applicable, a grant of
restricted common shares pursuant to a restricted stock agreement.

(20) Commitments and Contingencies

Commitments

In connection with the acquisition of certain Kristalose assets during 2011, the Company is required to make
quarterly payments based on a percentage of Kristalose net sales through November 2018. The payments are being
treated as consideration for the assets acquired, and are being capitalized and amortized over the remaining expected
useful life of the acquired asset, currently the term of the agreement, 15 years.

In connection with its licensing agreements for Caldolor, the Company is required to pay royalties based on
Caldolor net sales over the life of the contracts. Royalty expense is recognized as a component of selling and
marketing expense in the period that revenue is recognized.

As discussed in Note 3, in connection with the agreement with Pernix to promote Omeclamox-Pak, the
Company will make monthly royalty payments based on tiered levels of gross profits. These costs will be period
expenses of the Company. There is also the possibility of an additional milestone payment due at the second
anniversary date of the execution of the agreement totaling $3.0 million. In the event this milestone payment is

F-29

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

made the Company will capitalize the payment and amortize it over the remaining expected useful life of the
acquired asset, currently the life of the agreement, which ends in June 2032.

As discussed in Note 3, as part of the consideration for the acquisition of Vaprisol from Astellas, there is an
additional milestone payment due forty-five days after the first anniversary date of the closing of the transaction
of up to $2.0 million, dependent upon Cumberland achieving certain first year sales levels for the product.
Cumberland has included this contingent consideration obligation in its liabilities assumed as part of the Vaprisol
acquisition.

Legal Matters

In April 2012, the United States Patent and Trademark Office (the “USPTO”) issued U.S. Patent number
8,148,356 (the “356 Acetadote Patent”) to the Company. The claims of the 356 Acetadote Patent encompasses the
Acetadote formulation and includes composition of matter claims. Following its issuance, the 356 Acetadote Patent
was listed in the FDA Orange Book. The 356 Acetadote Patent is scheduled to expire in May 2026, which time
period includes a 270-day patent term adjustment granted by the USPTO.

Following the issuance of the 356 Acetadote Patent, the Company received separate Paragraph IV certification
notices from InnoPharma, Inc. ("InnoPharma"), Paddock Laboratories, LLC (“Paddock”), Mylan Institutional LLC
(“Mylan”), Sagent Agila LLC ("Sagent") and Perrigo Company ("Perrigo") challenging the 356 Acetadote Patent
on the basis of non-infringement and/or invalidity. The Company responded by filing five separate infringement
lawsuits, in the appropriate United States District Courts, to contest each of the challenges.

On November 12, 2012, the Company entered into a Settlement Agreement (the “Settlement Agreement”)
with Paddock and Perrigo to resolve the challenges and the pending litigation with those two companies. On
November 1, 2013, the United States District Court filed opinions granting Sagent’s and InnoPharma’s motions
to dismiss the Company's suits. In November the Company agreed not to file an appeal or motion to reconsider
and thereby resolving the challenges and the pending litigation with those two companies. The remaining
infringement suit with Mylan is pending.

Under the Settlement Agreement, Paddock and Perrigo admit that the 356 Acetadote Patent is valid and
enforceable and that any Paddock or Perrigo generic Acetadote product (with or without EDTA) would infringe
upon the 356 Acetadote Patent. In addition, Paddock and Perrigo will not challenge the validity, enforceability,
ownership or patentability of the 356 Acetadote Patent through its expiration currently scheduled for May 2026.
On November 12, 2012, in connection with the execution of the Settlement Agreement, Cumberland entered into
a License and Supply Agreement with Paddock and Perrigo (the “License and Supply Agreement”). Under the
terms of the License and Supply Agreement, once a third party receives final approval from the FDA for an ANDA
to sell a generic Acetadote product and such third party made such generic version available for purchase in
commercial quantities in the United States, the Company supply's Perrigo with an Authorized Generic version of
our Acetadote product (the “Authorized Generic”).

On May 18, 2012, Cumberland also submitted a Citizen Petition to the FDA requesting that the FDA refrain
from approving any applications for acetylcysteine injection that contain EDTA, based in part on the FDA's request
that the Company evaluate the reduction or removal of EDTA from its original Acetadote formulation. On November
7, 2012, the FDA responded to the Citizen Petition denying our request and on November 8, 2012, the Company
learned that the FDA approved the ANDA referencing Acetadote filed by InnoPharma, Inc. We brought suit against
the FDA contesting the FDA's decision to approve the InnoPharma generic on November 13, 2012. On September
30, 2013, the United States District Court filed an opinion granting a summary judgment in favor of the FDA
regarding this suit.

F-30

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Perrigo with our Authorized Generic. On January 7, 2013, Perrigo announced initial distribution of our Authorized
Generic acetylcysteine injection product.

On March 19, 2013, the USPTO issued U.S. Patent number 8,399,445 (the “445 Acetadote Patent”) which is
assigned to us. The claims of the 445 Acetadote Patent encompass the use of the 200 mg/ml Acetadote formulation
to treat patients with acetaminophen overdose. On April 8, 2013, the 445 Acetadote Patent was listed in the FDA
Orange Book. The 445 Acetadote Patent is scheduled to expire in August 2025. Following the issuance of the 445
Acetadote Patent we received separate Paragraph IV certification notices from Perrigo, Sagent Pharmaceuticals,
Inc., and Mylan Institutional LLC challenging the 445 Acetadote Patent on the basis of non-infringement,
unenforceability and/or invalidity.

On June 10, 2013, we became aware of a Paragraph IV certification notice from Akorn, Inc. challenging the
445 Acetadote Patent and the 356 Acetadote Patent on the basis of non-infringement. On July 12, 2013, we filed
a lawsuit for infringement of the 356 Acetadote Patent against Akorn, Inc. in United States District Court.

On February18, 2014, the USPTO issued U.S. Patent number 8,653,061 (the “061 Acetadote Patent”) which
is assigned to the Company. The claims of the 061 Acetadote Patent encompass the use of the 200 mg/ml Acetadote
formulation to treat patients with acetaminophen overdose. Following its issuance, the 061 Acetadote Patent was
listed in the FDA Orange Book. The 061 Acetadote Patent is scheduled to expire in August 2025.

On May 13, 2014, the USPTO issued U.S. Patent number 8,722,738 (the “738 Acetadote Patent”) which is
assigned to Cumberland. The claims of the 738 Acetadote Patent encompass administration methods of
acetylcysteine injection, without specification of the presence or lack of EDTA in the injection. Following its
issuance, the 738 Acetadote Patent was listed in the FDA Orange Book and it is scheduled to expire in April 2032.

On December 11, 2014 and March 3, 2015, the Company became aware of Paragraph IV certification notices
from Aurobindo Pharma Limited and Zydus Pharmaceuticals (USA) Inc., respectively, challenging the 356, 445,
061, and 738 Acetadote Patents on the basis of non-infringement.

The Company continues to consider its legal options and intends to continue to vigorously defend and protect

its Acetadote product and related intellectual property rights.

The Company is a party to various other legal proceedings in the ordinary course of its business. In the opinion
of management, the liability associated with these matters, other than the issue concerning the Company's Acetadote
patents discussed above, will not have a material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.

F-31

(21) Quarterly Financial Information (Unaudited)

The following table sets forth the unaudited operating results for each fiscal quarter of 2014 and 2013:

2014:

Net revenues

Operating income

Net income attributable to
common shareholders

Earnings per share attributable
to common shareholders (1)

Basic

Diluted

2013:

Net revenues

Operating income (loss)

Net income (loss) attributable
to common shareholders

Earnings (loss) per share
attributable to common
shareholders (1)

Basic

Diluted

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total

$ 8,093,244

$ 9,750,168

$ 9,729,047

$ 9,329,412

$ 36,901,871

408,051

1,215,609

989,038

946,138

3,558,836

286,320

722,570

745,920

668,913

2,423,723

0.02

0.04

0.14

$ 10,258,132

$ 7,081,088

$ 6,528,575

$ 8,159,667

$ 32,027,462

1,326,051

(1,140,544)

(1,514,768)

(2,472,077)

(3,801,338)

854,709

(639,018)

(819,942)

(1,500,363)

(2,104,614)

0.05

(0.03) $

(0.04) $

(0.08) $

(0.11)

(1) Due to the nature of interim earnings per share calculations, the sum of the quarterly earnings per share amounts may

not equal the reported earnings per share for the full year.

22) Subsequent event

Boxaban

During February 2015, the Company announced that is has completed the manufacture of an oral

formulation of ifetroban and the FDA has cleared an IND amendment for this product candidate. Cumberland
has initiated clinical development under the brand name Boxaban (ifetroban) capsules and is evaluating this
candidate for patients suffering from aspirin-exacerbated respiratory disease (AERD) a condition for which
there is no U.S. approved pharmaceutical treatment. Also known as Samter’s Triad, AERD is a respiratory
disease involving chronic asthma and nasal polyposis that is worsened by aspirin or nonsteroidal anti-
inflammatory drugs. Approximately one in twenty asthmatic adults in the U.S. suffer from AERD and
awareness of the disease is growing within the medical community.

F-32

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Valuation and Qualifying Accounts

Years ended December 31, 2014, 2013 and 2012

Schedule II

Description

Balance at
beginning of
period

Charged to
costs and
expenses

Charged to
other
accounts

Deductions

Balance at
end of period

Allowance for uncollectible
amounts, cash discounts,
chargebacks, and credits issued
for damaged products:

For the years ended
December 31:

2012

2013

2014

235,580

$ 2,069,470

188,587

593,116

2,498,170

5,166,568

— $ (2,116,463) (1) $
—

(2,093,641) (1)
(5,321,327) (1)

—

188,587

593,116

438,357

Valuation allowance for
deferred tax assets:

For the years ended
December 31:

2012

2013

2014

94,459

13,859

— $

108,318

131,617

23,299

20,457

—

108,318

131,617

152,074

(1) Composed of actual returns and credits for chargebacks and cash discounts.

F-33

Consent of Independent Registered Public Accounting Firm

Exhibit 23.1

The Board of Directors
Cumberland Pharmaceuticals Inc.:

We consent to the incorporation by reference in the registration statement No. 333-164376 on Form S-8 and No. 333-184091 on
Form S-3 of Cumberland Pharmaceuticals Inc. of our reports dated March 9, 2015, with respect to the consolidated balance sheets
of Cumberland Pharmaceuticals Inc. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements
of operations and comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended
December 31, 2014, the related financial statement schedule, and the effectiveness of internal control over financial reporting as
of December 31, 2014, which reports appear in the December 31, 2014 annual report on Form 10-K of Cumberland Pharmaceuticals
Inc.

/s/ KPMG LLP

Nashville, Tennessee
March 9, 2015

THIS PAGE INTENTIONALLY LEFT BLANK

Officers and Directors

Board of Directors

A.J. Kazimi
Chairman
Cumberland Pharmaceuticals

Dr. Gordon R. Bernard
Associate Vice-Chancellor for Research
Vanderbilt University

Joey A. Jacobs
Chairman & CEO
Acadia Healthcare Co. Inc.

James R. Jones
Former Managing Partner
KPMG LLP-Nashville

Martin E. Cearnal
Senior Vice President and Chief Commercial Officer
Cumberland Pharmaceuticals

Thomas R. Lawrence
Chairman
Aetos Technologies Inc.

Jonathan I. Griggs
Former Vice President
Human Resources
Warner Lambert Corporation

Management Team

A.J. Kazimi
Chief Executive Officer

Martin E. Cearnal
Senior Vice President,
Marketing & Sales and Chief Commercial Officer

Kelly Menzel
Director, Hospital Sales

Cindy B. Patton
Director, Sales & Marketing

Leo Pavliv, R.Ph.
Senior Vice President,
Operations and Chief Development Officer

Barry L. Lee
Product Director

Rick S. Greene
Vice President,
Finance & Accounting and Chief Financial Officer

James L. Herman
Vice President,
National Accounts and Chief Compliance Officer

Amy D. Rock, Ph.D.
Senior Director,
Regulatory & Scientific Affairs

Arthur P. Wheeler, M.D.
Director, Medical Affairs

Todd M. Anthony
Director, Sales Training & Development

Tan Cheow Choon
Director, International Business

Michael P. Bonner
Director, Financial &Tax Reporting

John M. Lane
Director, Corporate Development and Treasurer

Corporate Information

Stock Listing
NASDAQ Global Select
Market Ticker Symbol: CPIX

Annual Meeting
9:30a.m. Central Time
Tuesday, April 28, 2015
Cumberland Headquarters
2525 West End, Suite 950
Nashville, Tennessee 37203

Independent Registered
Public Accounting Firm
KPMG LLP
401 Commerce Street, Suite 1000
Nashville, Tennessee 37219
(615) 244-1602

Transfer Agent and Registrar
Continental Stock Transfer & Trust
Company
17 Battery Place
New York, New York 10004
(800) 509-5586
(212) 509-4000
cstmail@continentalstock.com

Corporate Headquarters
Cumberland Pharmaceuticals Inc.
2525 West End Avenue, Suite 950
Nashville, Tennessee 37203
Phone: (615) 255-0068
Toll Free: (877) 484-2700
Fax: (615) 255-0094
www.cumberlandpharma.com

Forward-Looking Statement
This annual report includes
forward-looking statements
regarding expected future results
of the Company. A variety of factors
could cause actual results to differ
materially from expected results.
Please see the risk factors more
fully described in our Annual
Report on Form 10-K for the year
ended December 31, 2014, which
is filed with the U.S. Securities and
Exchange Commission.