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Revenue from Contracts with Customers | 6 Months Ended
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Jun. 30, 2019
Revenue from Contracts with Customers |
Revenue from Contracts with Customers | 3. Revenue from Contracts with Customers ​ The Company’s only source of revenue to date has been generated by sales of the Company’s products, which are primarily sold to distributors (“customers”), which in turn sell the product to pharmacies for the treatment of patients. ​ Revenue Recognition ​ In accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. ​ Performance Obligations ​ The Company determined that performance obligations are satisfied and revenue is recognized when a customer takes control of the Company’s product, which occurs at a point in time. This generally occurs upon delivery of the products to customers, at which point the Company recognizes revenue and records accounts receivable, which represents the Company’s only contract asset. Payment is typically received 30 to 60 days after satisfaction of the Company’s performance obligations and generally does not have an effect on contract asset and contract liability balances. Under the practical expedients permitted by the rules of the adoption, the Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the assets is one year or less. ​ Transaction Price and Variable Consideration ​ Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer (“transaction price”). The transaction price for product sales includes variable consideration related to chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns. The Company estimates the amount of variable consideration that should be included in the transaction price under the expected value method. These estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. These provisions reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained and is included in net sales only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. In general, performance obligations do not include any estimated amounts of variable consideration that are constrained. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. ​ The following table summarizes activity in each of the Company’s product revenue provision and allowance categories for the six months ended June 30, 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ | ​ |  | Trade
​ | ​ | Rebates and | ​ | Product | ​ | Allowances and
​ | ​ | Incentives (1) | ​ | Returns (2) | ​ | Chargebacks (3)
Balance at December 31, 2018 | ​ | $ | 129,318 | ​ | $ | 15,465 | ​ | $ | 14,841
Provision related to current period sales | ​ | ​ | 128,509 | ​ | ​ | 9,150 | ​ | ​ | 31,988
Changes in estimate related to prior period sales | ​ | ​ | (3,017) | ​ | ​ | — | ​ | ​ | —
Credits/payments made | ​ | ​ | (119,659) | ​ | ​ | (1,502) | ​ | ​ | (32,673)
Balance at June 30, 2019 | ​ | $ | 135,151 | ​ | $ | 23,113 | ​ | $ | 14,156
​
​ ​ |  |  |
| (1) |  | Rebates and incentives includes managed care rebates, government rebates, co-pay program incentives, and sales incentives and allowances. Provisions for rebates and discounts are deducted from gross revenues at the time revenues are recognized and are included in accrued rebates, returns and discounts in the Company’s Condensed Consolidated Balance Sheets. ​
| (2) |  | Provisions for product returns are deducted from gross revenues at the time revenues are recognized and are included in accrued rebates, returns and discounts in the Company’s Condensed Consolidated Balance Sheets.
|  | ​ |  |
| (3) | ​ |  | Trade allowances and chargebacks include fees for distribution service fees, prompt pay discounts, and chargebacks. Trade allowances and chargebacks are deducted from gross revenue at the time revenues are recognized and are recorded as a reduction to accounts receivable in the Company’s Condensed Consolidated Balance Sheets.
​ As of June 30, 2019, the Company did not have any transaction price allocated to remaining performance obligations and any costs to obtain contracts with customers, including pre-contract costs and set up costs, were immaterial. ​ Disaggregation of Revenue ​ Product revenues, net consisted of the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Three months ended June 30, | ​ | Six months ended June 30,
​ | 2019 | ​ | 2018 | ​ | 2019 | ​ | 2018
Xtampza ER | $ | 26,018 |  | $ | 18,116 | ​ | $ | 51,152 | ​ | $ | 33,911
Nucynta Products |  | 49,022 | ​ |  | 54,945 | ​ |  | 98,404 | ​ |  | 102,899
Total product revenues, net | $ | 75,040 | ​ | $ | 73,061 | ​ | $ | 149,556 | ​ | $ | 136,810
​

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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