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Product Revenue Reserves and Allowances | 12 Months Ended
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Dec. 31, 2021
Revenue From Contract With Customer [Abstract] |
Product Revenue Reserves and Allowances |
3. | Product Revenue Reserves and Allowances
The Company’s product revenues have been primarily from sales of YUTIQ and DEXYCU in the U.S. Net product revenues by product for the years ended December 31, 2021 and 2020 were as follows (in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
YUTIQ (A) |  | $ | 16,959 |  |  | $ | 13,878 |
DEXYCU (B) |  |  | 18,353 |  |  |  | 6,953 |
Total product sales, net |  | $ | 35,312 |  |  | $ | 20,831 |
| (A) | Included approximately $25 and $205 of revenue recognized from YUTIQ product sales to Ocumension under a supply agreement for the years ended December 31, 2021 and 2020, respectively.
| (B) | Included approximately $283 and $8 of revenue recognized from DEXYCU product sales to Ocumension under a supply agreement for the years ended December 31, 2021 and 2020, respectively.
The following table summarizes activity in each of the product revenue allowance and reserve categories for the years ended December 31, 2021 and 2020 (in thousands):
|  | Chargebacks, Discounts and Fees |  |  | Government and Other Rebates |  |  | Returns |  |  | Total |
Beginning balance at January 1, 2021 |  | $ | 574 |  |  | $ | 535 |  |  | $ | 603 |  |  | $ | 1,712 |
Provision related to sales in the current year |  |  | 7,274 |  |  |  | 5,337 |  |  |  | 785 |  |  |  | 13,396 |
Adjustments related to prior period sales |  |  | (50 | ) |  |  | (22 | ) |  |  | (200 | ) |  |  | (272 | )
Deductions applied and payments made |  |  | (6,645 | ) |  |  | (4,029 | ) |  |  | (809 | ) |  |  | (11,483 | )
Ending balance at December 31, 2021 |  | $ | 1,153 |  |  | $ | 1,821 |  |  | $ | 379 |  |  | $ | 3,353 |
|  | Chargebacks, Discounts and Fees |  |  | Government and Other Rebates |  |  | Returns |  |  | Total |
Beginning balance at January 1, 2020 |  | $ | 1,618 |  |  | $ | 271 |  |  | $ | 352 |  |  | $ | 2,241 |
Provision related to sales in the current year |  |  | 2,141 |  |  |  | 1,056 |  |  |  | 978 |  |  |  | 4,175 |
Adjustments related to prior period sales |  |  | (387 | ) |  |  | — |  |  |  | 50 |  |  |  | (337 | )
Deductions applied and payments made |  |  | (2,798 | ) |  |  | (792 | ) |  |  | (777 | ) |  |  | (4,367 | )
Ending balance at December 31, 2020 |  | $ | 574 |  |  | $ | 535 |  |  | $ | 603 |  |  | $ | 1,712 |
Returns are recorded as a reduction of accounts receivable on the condensed consolidated balance sheets. Chargebacks, discounts and fees and rebates are recorded as a component of accrued expenses on the condensed consolidated balance sheets (see Note 7). License and Collaboration Agreements and Royalty Income Alimera Pursuant to a licensing and development agreement, as amended, Alimera Sciences, Inc. has a worldwide exclusive license to develop, make, market and sell ILUVIEN in return for royalties based on sales and patent fee reimbursements. Total revenue was $54,000 and $1.7 million for the years ended December 31, 2021 and 2020, respectively. In addition to patent fee reimbursements in those periods, the Company recorded royalty income totaled $0 and $1.7 million for the years ended December 31, 2021 and 2020, respectively. SWK Royalty Purchase Agreement On December 17, 2020, the Company entered into a royalty purchase agreement (the “RPA”) with SWK Funding LLC (“SWK”). Under the RPA, the Company sold its right to receive royalty payments on future sales of products subject to the Amended Alimera Agreement for an upfront cash payment of $16.5 million. Except for the rights to the royalties, the Company retains all rights and obligations under the Amended Alimera Agreement, pursuant to which, Alimera owns worldwide rights to the Company’s Durasert technology in ILUVIEN for DME and rights for ILUVIEN (currently marketed by the Company as YUTIQ in the U.S.) for non-infectious posterior uveitis in the EMEA. Alimera has the sole rights to utilize the intellectual property developed under the Amended Alimera Agreement. There has been no intellectual property developed jointly by Alimera and the Company as part of the Amended Alimera Agreement. The Company cannot utilize the intellectual property for the indication licensed to Alimera in order to manufacture and sell ILUVIEN. The Company’s ongoing efforts under the Amended Alimera Agreement will consist of continuing to maintain and enforce its patents as well as providing safety data and regulatory support as necessary. None of these obligations require significant efforts on the part of the Company with respect to the generation of sales in the market. The Company will only be required to expend more extensive efforts if litigation were to arise that requires the Company to protect its patents rights pursuant to the terms of the Amended Alimera Agreement. Historically, such a defense has not been required. Similarly, regulatory support and safety data is only provided on an ad-hoc basis depending on the regulatory requests, which has been minimal historically. It remains Alimera’s sole responsibility to manufacture, actively market and promote the products under the Amended Alimera Agreement to generate the sales, which ultimately generate the royalties to be paid to SWK. The Company classified the proceeds received from SWK as deferred revenue, to be recognized as revenue under the units-of-revenue method over the life of the RPA because of the Company’s limited continuing involvement in the Amended Alimera Agreement. SWK has no recourse and the Company assumes no credit risk in event that Alimera fails to make a royalty payment. The Company must only forward all material correspondence from Alimera to SWK, including royalty reports, notices and any other correspondence with respect to royalties to SWK. SWK has the right to audit and inspect the books and records pertaining to net sales and royalties under the Amended Alimera Agreement. Neither the Company nor SWK has the unilateral ability to cancel the transaction. There is no cap or limitation on the royalties to be received by SWK in the future and its return will reflect all royalties paid by Alimera. Because the transaction was structured as a non-cancellable sale, the Company does not have significant continuing involvement in the generation of the cash flows due to SWK and there is no limitation on the rates of return to SWK, the Company recorded the total proceeds of $16.5 million as deferred revenue under royalty sale agreement. The deferred revenue is being recognized as revenue over the life of the RPA under the “units-of-revenue” method. Under this method, amortization for a reporting period is calculated by computing a ratio of the proceeds received from SWK to the payments expected to be made by Alimera to SWK over the term of the Amended Alimera Agreement, and then applying that ratio to the period’s cash payment. The Company recognized $872,000 of royalty revenue related to the RPA for the year ended December 31, 2021, in connection with the royalty payment of $2.8 million for the year ended December 31, 2021, from Alimera to SWK, pursuant to the Amended Alimera Agreement. No revenue was recognized related to the RPA for the year ended December 31, 2020. As of December 31, 2021, the Company has $1.1 million and $14.6 million as current and non-current deferred revenue recognized under royalty sale agreement, respectively. As of December 31, 2020, the Company classified $885,000 and $15.6 million as current and non-current deferred revenue recognized under royalty sale agreement, respectively. OncoSil Medical The Company entered into an exclusive, worldwide royalty-bearing license agreement in December 2012, amended and restated in March 2013, with OncoSil Medical UK Limited (f/k/a Enigma Therapeutics Limited), a wholly-owned subsidiary of OncoSil Medical Ltd (“OncoSil”) for the development of BrachySil, the Company’s previous product candidate for the treatment of pancreatic and other types of cancer. The Company received an upfront fee of $100,000 and is entitled to 8% sales-based royalties, 20% of sublicense consideration and milestone payments based on aggregate product sales. OncoSil is obligated to pay an annual license maintenance fee of $100,000 by the end of each calendar year, the most recent of which was received in December 2021. For each calendar year commencing with 2014, the Company is entitled to receive reimbursement of any patent maintenance costs, sales-based royalties and sub-licensee sales-based royalties earned, but only to the extent such amounts, in the aggregate, exceed the $100,000 annual license maintenance fee. In March 2020, the U.S. Food and Drug Administration granted Breakthrough Device Designation for the OncoSil™ device for treatment of unresectable locally advanced pancreatic cancer (LAPC) in combination with chemotherapy. In April 2020, the British Standards Institute (BSI) grants European CE marking for the OncoSil™ System and designates OncoSil™ a breakthrough device for the treatment of locally advanced pancreatic cancer (LAPC) in combination with chemotherapy. As of December 31, 2021, OncoSil has received regulatory approval in the EU, United Kingdom, Switzerland, Singapore, Malaysia, Hong Kong, New Zealand, Turkey, and Israel. The Company has no consequential performance obligations under the OncoSil license agreement. For the years ended December 31, 2021 and 2020, revenue of $100,000 and $100,000 was recorded for this agreement, respectively. Ocumension Therapeutics In November 2018, the Company entered into an exclusive license agreement with Ocumension Therapeutics (“Ocumension”) for the development and commercialization of its three-year micro insert using the Durasert technology for the treatment of chronic non-infectious uveitis affecting the posterior segment of the eye (YUTIQ in the U.S.) in Mainland China, Hong Kong, Macau and Taiwan. The Company received a one-time upfront payment of $1.75 million from Ocumension and is eligible to receive up to (i) $7.25 million upon the achievement by Ocumension of certain prescribed development and regulatory milestones, and (ii) $3.0 million commercial sales-based milestones. In addition, the Company is entitled to receive mid-single digit sales-based royalties. Ocumension has also received a special approval by the Hainan Province People’s Government to market this product for chronic, non-infectious posterior segment uveitis in the Hainan Bo Ao Lecheng International Medical Tourism Pilot Zone (“Hainan Pilot Zone”). In March 2019, the Company entered into a Memorandum of Understanding (“2019 MOU”), pursuant to which, the Company will supply product for the clinical trials and Hainan Pilot Zone use. Paralleling to Ocumension’s normal registration process of the product with the Chinese Regulatory Authorities, the 2019 MOU modified the Company’s entitlement to the development and regulatory milestones of up to $7.25 million under the license agreement to product supply milestones or development milestones, whichever comes first, totaling up to $7.25 million. In August 2019, the Company began shipping this product to Ocumension. The Company was required to provide a fixed number of hours of technical assistance support to Ocumension at no cost, which support has been completed and no future performance obligation exists. Ocumension is responsible for all development, regulatory and commercial costs, including any additional technical assistance requested. Ocumension has a first right of negotiation for an additional exclusive license to the Company’s shorter-duration line extension candidate for this indication. In August 2019, the Company received a $1.0 million development milestone payment from Ocumension triggered by the approval of its Investigational New Drug (“IND”) in China for this program. The IND allows the importation of finished product into China for use in a clinical trial to support regulatory filing. In January 2020, the Company entered into an exclusive license agreement with Ocumension for the development and commercialization in Mainland China, Hong Kong, Macau and Taiwan of DEXYCU for the treatment of post-operative inflammation following ocular surgery. Pursuant to the terms of the license agreement, the Company received upfront payments of $2.0 million from Ocumension in February 2020 and will be eligible to receive up to (i) $6.0 million upon the achievement by Ocumension of certain prescribed development and regulatory milestones, and (ii) $6.0 million commercial sales-based milestones. In addition, the Company is entitled to receive mid-single digit sales-based royalties. In exchange, Ocumension will receive exclusive rights to develop and commercialize DEXYCU in Mainland China, Hong Kong, Macau and Taiwan, at its own cost and expense with the Company supplying product for clinical trials and commercial sale. In addition, Ocumension will receive a fixed number of hours of technical assistance support from the Company at no cost. In August 2020, the Company entered into a Memorandum of Understanding (“2020 MOU”), pursuant to which, the Company received a one-time non-refundable payment of $9.5 million (the “Accelerated Milestone Payment”) from Ocumension as a full and final payment of the combined remaining development, regulatory and sales milestone payments under the Company’s license agreements with Ocumension for the treatment of chronic non-infectious uveitis affecting the posterior segment of the eye and for the treatment of post-operative inflammation following ocular surgery, respectively. Upon payment of the Accelerated Milestone Payment, the remaining $11.75 million in combined remaining development and sales milestone payments under the Company’s original license agreement with Ocumension upon the achievement by Ocumension of (i) remaining development and regulatory milestones of $6.25 million and commercial sales-based milestones of $3.0 million for the development and commercialization of its three-year micro insert using the Durasert technology for the treatment of chronic non-infectious uveitis affecting the posterior segment of the eye; and (ii) $6.0 million upon the achievement by Ocumension of certain prescribed development and regulatory milestones, and $6.0 million commercial sales-based milestones for the development and commercialization in Mainland China, Hong Kong, Macau and Taiwan of DEXYCU for the treatment of post-operative inflammation following ocular surgery, totaling up to $21.25 million, were permanently extinguished and will no longer be due and owed to the Company. In exchange, Ocumension also received exclusive rights to develop and commercialize YUTIQ and DEXYCU products under its own brand names in South Korea and other jurisdictions across Southeast Asia in Brunei, Burma (Myanmar), Cambodia, Timor-Leste, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam, at its own cost and expense with the Company supplying product for clinical trials and commercial sale. The Company continues to be entitled to royalties on future product sales by Ocumension. In April 2021, Ocumension announced its filing of a New Drug Application (“NDA”) for YUTIQ under Ocumension’s distinct name to Chinese regulatory authorities and it is under review. Ocumension has been granted approval to have its NDA submission reviewed based on the U.S. NDA data and the real world data Ocumension has collected from marketing the product in Hainan Pilot Zone. In September 2021, Ocumension announced its receipt of approval from Chinese regulatory authorities for DEXYCU under Ocumension’s distinct name to conduct a Phase 3 clinical trial in China. Other than a fixed number of hours of technical assistance support to be provided at no cost by the Company, Ocumension is responsible for all development, regulatory and commercial costs, including any additional technical assistance requested. All technical assistance was provided during 2020. The Chief Executive Officer of Ocumension became a director of the Company starting December 31, 2020, pursuant to a Share Purchase Agreement pursuant to which the Company sold to Ocumension 3,010,722 shares of common stock, at which time, Ocumension became a related party of the Company. During the years ended December 31, 2021 and 2020, in addition to $308,000 and $213,000 of revenue from product sales, respectively, the Company recognized approximately $543,000 and $11.5 million of license and collaboration revenue, respectively, including $499,000 and $0 of revenue related to additional technical assistance, respectively. As of December 31, 2021 and 2020, no deferred revenue was recorded for this agreement, respectively. The Company recognized sales-based royalty expense of $0 and $1.3 million during the year ended December 31, 2021 and 2020, related to the earn-out payment equal to 20% of DEXYCU share of the Accelerated Milestone Payment received in August 2020 and upfront payment received in February 2020 from Ocumension, as the payment of the partnering income in connection with the Icon acquisition in March 2018. Research Collaborations The Company from time to time enters into funded agreements to evaluate the potential use of its technology systems for sustained release of third-party drug candidates. Consideration received is generally recognized as revenue over the term of the research collaborations. Revenue recognition for consideration, if any, related to a license option right is assessed based on the terms of any such future license agreement or is otherwise recognized at the completion of the research collaborations. Revenues under research collaborations totaled $60,000 and $255,000 for the years ended December 31, 2021 and 2020, respectively. At December 31, 2021 and 2020, $0 and $60,000 deferred revenue was recorded for the research collaborations, respectively.

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