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Revenues

6 Months Ended

Jun. 28, 2019

Revenue from Contract with Customer [Abstract]

Revenues by disaggregated category were as follows (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Product revenues:
Gross product revenues	$	240,418		$	172,646		$	464,168		$	332,082
Discounts and allowances	(46,743		)	(26,810		)	(90,912		)	(51,974		)
Net product revenues	193,675			145,836			373,256			280,108
Collaboration revenues:
License revenues⁽¹⁾	36,393			31,908			60,902			100,938
Research and development services revenues⁽²⁾	10,898			6,805			22,826			16,904
Other collaboration revenues⁽³⁾	(691		)	1,559			(1,222		)	1,877
Total collaboration revenues	46,600			40,272			82,506			119,719
Total revenues	$	240,275		$	186,108		$	455,762		$	399,827

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(1)	License revenues included the recognition of the portion of milestones allocated to the transfer of intellectual property licenses for which it had become probable in the current period that the milestone would be achieved and a significant revenue reversal would not occur, as well as royalty revenues from Ipsen Pharma SAS (Ipsen), Genentech and Daiichi Sankyo.


(2)	Research and development services revenues included the recognition of deferred revenue for the portion of upfront and milestone payments that have been allocated to research and development services performance obligations, as well as development cost reimbursements earned on our collaboration agreements.


(3)	Other collaboration revenues included the profit on the U.S. commercialization of COTELLIC from Genentech and revenues on product supply services provided to Ipsen and Takeda Pharmaceutical Company Ltd. (Takeda), which were partially offset by the 3% royalty we are required to pay GlaxoSmithKline (GSK) on the net sales by Ipsen of any product incorporating cabozantinib.

Net product revenues, License revenues and Research and development services revenues were recorded in accordance with Topic 606 for all periods presented. Net product revenues and License revenues related to goods and intellectual property licenses transferred at a point in time and Research and development services revenues related to services performed over time. Other collaboration revenues, which included the profit on the U.S. commercialization of COTELLIC and net losses on product supply services, were recorded in accordance with Topic 808 for all periods presented.

Net product revenues disaggregated by product were as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
CABOMETYX	$	189,015	$	141,121	$	364,905	$	270,055
COMETRIQ	4,660		4,715		8,351		10,053
Net product revenues	$	193,675	$	145,836	$	373,256	$	280,108

Total revenues disaggregated by significant customer were as follows (dollars in thousands):



	Three Months Ended June 30,
	2019				2018
	Dollars		Percent of total		Dollars		Percent of total
Caremark L.L.C.	$	37,237	15	%	$	26,421	14	%
Affiliates of McKesson Corporation	31,284		13	%	23,321		13	%
Affiliates of AmerisourceBergen Corporation	23,366		10	%	17,028		9	%
Ipsen	22,249		9	%	34,043		18	%
Accredo Health, Incorporated	18,688		8	%	19,714		11	%
Diplomat Specialty Pharmacy	15,318		6	%	18,475		10	%
Others, individually less than 10% of Total revenues for all periods presented	92,133		39	%	47,106		25	%
Total revenues	$	240,275	100	%	$	186,108	100	%



	Six Months Ended June 30,
	2019				2018
	Dollars		Percent of total		Dollars		Percent of total
Caremark L.L.C.	$	69,935	15	%	$	52,809	13	%
Affiliates of McKesson Corporation	56,595		12	%	44,652		11	%
Affiliates of AmerisourceBergen Corporation	45,268		10	%	32,763		8	%
Ipsen	44,117		10	%	87,852		22	%
Accredo Health, Incorporated	41,183		9	%	38,000		10	%
Diplomat Specialty Pharmacy	27,557		6	%	38,622		10	%
Others, individually less than 10% of Total revenues for all periods presented	171,107		38	%	105,129		26	%
Total revenues	$	455,762	100	%	$	399,827	100	%

Total revenues disaggregated by geographic region were as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
U.S.	$	196,347	$	150,079	$	378,473	$	287,072
Europe	22,249		34,043		44,117		87,852
Japan	21,679		1,986		33,172		24,903
Total revenues	$	240,275	$	186,108	$	455,762	$	399,827

Net product revenues are attributed to geographic region based on the ship-to location. Collaboration revenues are attributed to geographic region based on the location of our collaboration partners’ headquarters.

Product Sales Discounts and Allowances

The activities and ending reserve balances for each significant category of discounts and allowances (which constitute variable consideration) were as follows (in thousands):



	Chargebacks and Discounts for Prompt Payment			Other Customer Credits/Fees and Co-pay Assistance			Rebates			Total
Balance at December 31, 2018	$	2,322		$	3,038		$	11,916		$	17,276
Provision related to sales made in:
Current period	58,862			7,695			24,681			91,238
Prior periods	(102		)	(106		)	(118		)	(326		)
Payments and customer credits issued	(57,367		)	(7,673		)	(22,160		)	(87,200		)
Balance at June 30, 2019	$	3,715		$	2,954		$	14,319		$	20,988

Chargebacks and discounts for prompt payment are recorded as a reduction of trade receivables and the remaining reserve balances are classified as Other current liabilities in the accompanying Condensed Consolidated Balance Sheets.

Contract Assets and Liabilities

We receive payments from our licensees based on billing schedules established in each contract. Amounts are recorded as accounts receivable when our right to consideration is unconditional. Upfront and milestone payments may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements and are recorded as deferred revenue upon receipt or when due. We may also recognize revenue in advance of the contractual billing schedule and such amounts are recorded as unbilled collaboration revenue when recognized. Changes in our contract assets and liabilities under Topic 606 were as follows (in thousands):



	Contract Assets: Unbilled Collaboration Revenue						Contract Liabilities: Deferred Revenue
	Current Portion			Long-term Portion			Current Portion			Long-term Portion
Balance at December 31, 2018	$	—		$	—		$	—		$	15,897
Increases as a result of a change in transaction price and recognition of revenues as services are performed	3,097			1,450			—			—
Transfer to receivables from contract assets recognized at the beginning of the period	(947		)	—			—			—
Increases as a result of the deferral of milestones achieved in period, excluding amounts recognized as revenue	—			—			715			5,788
Revenue recognized that was included in the contract liability balance at the beginning of the period	—			—			(1,847		)	—
Other adjustments ⁽¹⁾	(2,150		)	(1,450		)	1,453			(5,053		)
Balance at June 30, 2019	$	—		$	—		$	321		$	16,632

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(1)	Includes reclassification of deferred revenue from long-term to current and adjustments made due to netting of contract assets and liabilities by collaboration agreement.

During the three and six months ended June 30, 2019, we recognized $36.1 million and $61.4 million, respectively, in revenues under Topic 606 for performance obligations satisfied in previous periods as compared to $32.2 million and $103.8 million during the same periods in 2018. Such revenues primarily related to milestone and royalty payments allocated to our license performance obligations of our collaborations with Ipsen, Takeda and Daiichi Sankyo.