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Revenue Recognition | 9 Months Ended
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Sep. 30, 2018
Revenue Recognition [Abstract] |
Revenue Recognition | 2. Revenue recognition In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU No. 2014-09"). ASU No. 2014-09 (known as ASC 606) supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, as well as most industry-specific guidance, and significantly enhances comparability of revenue recognition practices across entities and industries by providing a principles-based, comprehensive framework for addressing revenue recognition issues. In order for a provider of promised goods or services to recognize as revenue the consideration that it expects to receive in exchange for the promised goods or services, the provider should apply the following five steps: (1) identify the contract with a customer(s); (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU No. 2014-09 also specifies the accounting for some costs to obtain or fulfill a contract with a customer and provides enhanced disclosure requirements. The Company adopted the requirements of the new standard as of January 1, 2018 using the modified retrospective method. The modified retrospective method requires companies to recognize the cumulative effect of initially applying the new standard as an adjustment to opening retained earnings. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC 606. For contracts with multiple performance obligations, the Company allocates the contract's transaction price to each performance obligation on a relative standalone selling price basis using the Company's best estimate of the standalone selling price of each distinct product or service in the contract. The primary method used to estimate standalone selling price is the price observed in standalone sales to customers, however when prices in standalone sales are not available the Company may use third-party pricing for similar products or services or estimate the standalone selling price. Allocation of the transaction price is determined at the contracts' inception. Once the performance obligations in the contract have been identified, the Company estimates the transaction price of the contract. The estimate includes amounts that are fixed as well as those that can vary based on expected outcomes of the activities or contractual terms. The Company's variable consideration primarily includes consideration transferred under its development contracts with the U.S. government as consideration received can vary based on developmental progression of the product candidate(s). When a contract's transaction price includes variable consideration, the Company evaluates the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, the Company includes the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration estimates are updated at each reporting date. There were no constraints or material changes to the Company's variable consideration estimates as of or during the nine months ended September 30, 2018. To indicate the transfer of control for the Company's product sales and contract manufacturing services, it must have a present right to payment, legal title must have passed to the customer, and the customer must have the significant risks and rewards of ownership. Revenue for long-term development contracts is generally recognized based upon the cost-to-cost measure of progress, provided that the Company meets the criteria associated with transferring control of the good or service over time. The Company derives revenues primarily from the sale of its marketed medical countermeasures ("MCMs") products and contract revenues associated with development of its MCMs. The primary customer for the Company's MCM products and the primary source of funding for the development of the Company's MCM product candidate portfolio is the U.S. government. The Company's contracts for the sale of its MCM products generally have single performance obligation. Certain product sales contracts with the U.S. government include multiple performance obligations, which generally include the marketed product, stability testing associated with that product, expiry extensions and plasma collection. The Company's development contracts for its MCM product candidates generally are cost plus fixed fee arrangements, which the Company treats a single performance obligation with variable consideration. The U.S. government contracts for the sale and development of the Company's MCM products and product candidates are normally multi-year contracts. In addition, the Company performs contract manufacturing services for third parties, which includes pharmaceutical product process development, manufacturing and filling services for injectable and other sterile products, inclusive of process design, technical transfer, manufacturing validations, laboratory analytical development support, aseptic filling, lyophilization, final packaging and accelerated and ongoing stability studies. These contracts generally include a single performance obligation with a duration that is less than one-year. The Company finalized the review of its portfolio of revenue contracts that were not complete as of the adoption date and made its determination of its revenue streams as well as completed extensive contract specific reviews to determine the impact of the new standard on its historical and prospective revenue recognition. Because many of the Company's contracts with customers have unique contract terms, the Company reviewed all of its non-standard agreements in order to determine the effect of adoption. The Company determined its Centers for Innovation in Advanced Development and Manufacturing ("CIADM") contract with the ​​Biomedical Advanced Research and Development Authority ("BARDA") will have a material change in revenue recognition under the new guidance. Under ASC 606 at January 1, 2018, the Company determined that there was one performance obligation to provide ongoing manufacturing capability to the U.S. government and would recognize the consideration received in the base period on a straight-line basis over a 24-year period as the capability being created during the base period of the contract is being provided to the customer over both the base period contract term as well as 17 additional option periods. In addition, the Company determined the CIADM contract includes a significant financing component which is included in the transaction price. The Company calculated the financing component using an interest rate the Company had on its other debt obligations at inception of the contract. Prior to the adoption of ASC 606, the Company recognized revenue under the CIADM contract on a straight-line basis, based upon its estimate of the total payments to be received under the contract. The Company analyzed the estimated payments to be received on a quarterly basis to determine if an adjustment to revenue was required. As a result of the adoption of ASC 606, as of January 1, 2018, there was an increase in the deferred revenue liability of $42.4 million and an increase in deferred tax assets of $9.9 million with an offsetting reduction to retained earnings of $32.5 million. In September 2018, the Company modified the CIADM contract under which one of the modifications reduced the 17 additional option periods to seven with the contract now scheduled to expire in June 2027. The Company determined the modification will be accounted for prospectively as a termination of the existing contract and the creation of a new contract. The Company considers accounts receivables and deferred costs associated with revenue generating contracts, that are not included in inventory or property, plant and equipment, as contract assets. As of September 30, 2018 and December 31, 2017, the Company had $77.0 million and $143.7 million, respectively, in contract assets associated with accounts receivable, which is included in accounts receivable on the Company's condensed consolidated balance sheets. As of September 30, 2018 and December 31, 2017, the Company had contract assets associated with deferred costs of $4.0 million and $2.9 million, respectively, which is included in prepaid expenses and other current assets on the Company's condensed consolidated balance sheets. When performance obligations are not transferred to a customer at the end of a reporting period, the amount allocated to those performance obligations are deferred until control of these performance obligations is transferred to the customer. The following table presents the rollforward of the contract liabilities, which is included in the Company's current and long-term deferred revenue line items in the condensed consolidated balance sheets:
(in thousands) |  |  |
Balance at December 31, 2017 |  | $ | 30,491 |
Adoption of new accounting standard (ASC 606) |  |  | 42,379 |
Balance at January 1, 2018 |  |  | 72,870 |
Deferral of revenue |  |  | 18,384 |
Recognition of revenue included in beginning of year contract liability |  |  | (15,121 | )
Balance at September 30, 2018 |  | $ | 76,133 |
We operate in one business segment. Therefore, results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting. For the three and nine months ended September 30, 2018, there was a nominal difference between revenues recognized under ASC 606 and revenues recognized based on the prior revenue recognition guidance for the same period. For the three and nine months ended September 30, 2018, the Company's revenues disaggregated by the major sources was as follows:
(in thousands) |  | Three Months Ended September 30, 2018 |  |  | Nine Months Ended September 30, 2018 |
|  | U.S |  |  | Non-U.S. |  |  |  |  |  | U.S |  |  | Non-U.S. |  |  |  |
|  | Government |  |  | Government |  |  | Total |  |  | Government |  |  | Government |  |  | Total |
Product sales |  | $ | 127,332 |  |  | $ | 5,937 |  |  | $ | 133,269 |  |  | $ | 363,254 |  |  | $ | 25,861 |  |  | $ | 389,115 |
Contract manufacturing |  |  | - |  |  |  | 22,172 |  |  |  | 22,172 |  |  |  | - |  |  |  | 71,963 |  |  |  | 71,963 |
Contracts and grants |  |  | 16,656 |  |  |  | 1,556 |  |  |  | 18,212 |  |  |  | 46,711 |  |  |  | 3,878 |  |  |  | 50,589 |
Total revenues |  | $ | 143,988 |  |  | $ | 29,665 |  |  | $ | 173,653 |  |  | $ | 409,965 |  |  | $ | 101,702 |  |  | $ | 511,667 |
As of September 30, 2018, the Company had expected future revenues associated with performance obligations that have not been satisfied of approximately $599 million. The Company expects to recognize a majority of these revenues within the next 24 months, with the remainder recognized thereafter. However, the amount and timing of revenue recognition for unsatisfied performance obligations can materially change due to timing of funding appropriations from the U.S. government and the overall success of the Company's development activities associated with its MCM product candidates that are then receiving development funding support from the government under development contracts. In addition, the amount of future revenues associated with unsatisfied performance obligations excludes the value associated with unexercised option periods in the Company's contracts (which are not performance obligations as of September 30, 2018).

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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