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Revenue Recognition
 9 Months Ended
Sep. 30, 2022
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition
The Company operates as two operating segments (Note 14, "Segment information"). The Company's revenues disaggregated by the major sources were as follows:
Three Months Ended September 30, 2022Three Months Ended September 30, 2021
U.S. GovernmentNon-U.S. Government TotalU.S. GovernmentNon-U.S. Government Total
Product sales, net$33.4 $152.8 $186.2 $129.9 $140.6 $270.5 
CDMO:
Services— 36.2 36.2 — 112.6 112.6 
Leases— 0.2 0.2 (86.0)15.0 (71.0)
Total CDMO$— $36.4 $36.4 $(86.0)$127.6 $41.6 
Contracts and grants16.4 1.0 17.4 16.3 0.6 16.9 
Total revenues$49.8 $190.2 $240.0 $60.2 $268.8 $329.0 
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
U.S.
Government
Non-U.S.
Government
 Total
U.S.
Government
Non-U.S.
Government
 Total
Product sales, net$255.0 $405.5 $660.5 $252.6 $337.0 $589.6 
CDMO:
Services— 90.7 90.7 — 283.7 283.7 
Leases— 4.7 4.7 81.9 50.7 132.6 
Total CDMO$— $95.4 $95.4 $81.9 $334.4 $416.3 
Contracts and grants31.7 2.6 34.3 60.7 2.9 63.6 
Total revenues$286.7 $503.5 $790.2 $395.2 $674.3 $1,069.5 


Termination of manufacturing services agreement with Janssen Pharmaceuticals, Inc.
On July 2, 2020, the Company, through its wholly-owned subsidiary, Emergent Manufacturing Operations Baltimore, LLC, entered into a manufacturing services agreement with Janssen, one of the Janssen Pharmaceutical Companies of Johnson & Johnson, for large-scale drug substance manufacturing of Johnson & Johnson’s investigational SARS-CoV-2 vaccine, Ad26.COV2-S, recombinant based on the AdVac technology (the “Product”).
On June 6, 2022, the Company provided to Janssen a notice (the “Notice”) of material breach of the Agreement for, among other things, failure by Janssen (i) to provide the Company the requisite forecasts of the required quantity of Product to be purchased by Janssen under the Agreement and (ii) to confirm Janssen’s intent to not purchase the requisite minimum quantity of the Product pursuant to the Agreement and instead, wind-down the Agreement ahead of
fulfilling these minimum requirements. Later on June 6, 2022, the Company received from Janssen a purported written notice of termination (the “Janssen Notice”) of the Agreement for asserted material breaches of the Agreement by the Company, including alleged failure by the Company to perform its obligations in compliance with current good manufacturing practices ("cGMP") or other applicable laws and regulations and alleged failure by the Company to supply Janssen with the Product. Janssen alleged that the Company’s breaches were not curable and that, therefore, termination of the Agreement would be effective as of July 6, 2022. The Company disputes Janssen's assertions and allegations, including Janssen's ability to effect termination pursuant to the Janssen Notice. The Company and Janssen disagree on the monetary amounts that are due to the Company as a result of termination by any means. The Company believes the amounts due to the Company include, but are not limited to, compensation for services provided, reimbursement for raw materials purchased and non-cancelable orders, and fees for early termination. Janssen has alleged that no additional amount is due to the Company and that the Company should pay Janssen an unspecified amount as a result of the Company's alleged failure to perform under the Agreement. The Company has not recorded any contingent liabilities related to Janssen's allegations as the Company believes they are without merit and intends to vigorously defend the Company's position during the dispute resolution process including through mediation and/or arbitration.
During the three months ended September 30, 2022, there were no impacts on previously recognized revenue or depreciation related to the conclusion of the Agreement. As of September 30, 2022, the Company has no billed or unbilled net accounts receivable related to the Agreement.
The Company has $131.0 million of raw materials inventory recorded in its condensed consolidated balance sheet as of September 30, 2022, representing materials purchased for the Agreement which Janssen has not reimbursed. The Company evaluated the net realizable value of this inventory as of September 30, 2022, concluding that because the Agreement specifies the Company is entitled to, among other things, reimbursement of raw materials and non-cancelable orders in the event of a contract termination for any reason, the Company is entitled to payment from Janssen for these raw materials. Therefore, this inventory remains an asset on the condensed consolidated balance sheet as of September 30, 2022. Additionally, the Company has an immaterial amount of non-cancelable orders as of September 30, 2022 which have not been received and Janssen has not reimbursed. The Company also recorded approximately $13.6 million to other assets, which relates to termination penalties and certain inventory related items.
BARDA COVID-19 Development Public-Private Partnership
In 2020, the Company announced the issuance of a task order under its existing Center for Innovation in Advanced Development and Manufacturing ("CIADM") agreement with BARDA for COVID-19 vaccine development and manufacturing (the "BARDA COVID-19 Development Public Private Partnership"). The BARDA COVID-19 Development Public Private Partnership is considered a lease and is accounted for under ASC 842. The initial task order had a contract value of up to $628.2 million and included the reservation of manufacturing capacity and accelerated expansion of fill/finish capacity valued at $542.7 million and $85.5 million, respectively. Subsequently, the task order was expanded to include incremental capital activities which increased the value to $650.8 million. On November 1, 2021, the Company and BARDA mutually agreed to the completion of the Company's CIADM contract and associated task orders, including the BARDA COVID-19 Development Public Private Partnership. The Company did not recognize lease revenues under this arrangement during the three and nine months ended September 30, 2022. During the three and nine months ended September 30, 2021, the Company reversed lease revenues of $86.0 million and recognized lease revenues of $81.9 million, respectively, related to this arrangement.
CDMO operating leases
Certain multi-year CDMO service arrangements with commercial customers include operating leases whereby the customer has the right to direct the use of and obtain substantially all of the economic benefits of specific manufacturing suites operated by the Company. The associated revenue is recognized on a straight-line basis over the term of the lease. The remaining term on the Company's operating lease components approximates 2.5 years. The Company utilizes a cost-plus model to determine the stand-alone selling price of the lease component to allocate contract consideration between the lease and non-lease components. Excluding future amounts related to the Janssen Agreement as discussed above, the Company estimates future operating lease revenues to be $0.2 million in the remainder of 2022, $5.1 million in 2023, $0.9 million in 2024, $0.9 million in 2025 and $2.7 million in years beyond 2025.
Transaction price allocated to remaining performance obligations
As of September 30, 2022, the Company has future contract value on unsatisfied performance obligations of approximately $453.9 million associated with all arrangements entered into by the Company. The Company expects to recognize a majority of the $453.9 million of unsatisfied performance obligations within the next 24 months. The amount and timing of revenue recognition for unsatisfied performance obligations can change. The future revenues associated with unsatisfied performance obligations exclude the value of unexercised option periods in the Company’s revenue arrangements. Often the timing of manufacturing activities changes based on customer needs and resource availability. Government funding appropriations can impact the timing of product deliveries. The success of the Company's development activities that receive development funding support from the USG under development contracts can also impact the timing of revenue recognition.
Contract assets
The Company considers accounts receivable and deferred costs associated with revenue generating contracts, which are not included in inventory or property, plant and equipment and the Company does not currently have a contractual right to bill, to be contract assets. As of September 30, 2022 and December 31, 2021, the Company had $33.9 million and $21.5 million, respectively, of contract assets recorded within accounts receivable, net on the condensed consolidated balance sheets.
Contract liabilities
When performance obligations are not transferred to a customer at the end of a reporting period, cash received associated with amounts allocated to those performance obligations is reflected as contract liabilities on the condensed consolidated balance sheets and is deferred until control of these performance obligations is transferred to the customer. The following table presents the roll forward of the contract liability balances:
December 31, 2021$16.4 
Deferral of revenue30.4 
Revenue recognized(16.5)
September 30, 2022$30.3 
As of September 30, 2022 and December 31, 2021, the current portion of contract liabilities was $24.8 million and $11.7 million, respectively, and was included in other current liabilities on the balance sheet.
Accounts receivable
Accounts receivable, including unbilled accounts receivable contract assets, consist of the following:
September 30, 2022December 31, 2021
Billed, net$119.0 $224.9 
Unbilled72.3 49.8 
Total accounts receivable, net$191.3 $274.7 
As of September 30, 2022 and December 31, 2021, the allowances for doubtful accounts was $0.7 million and $3.2 million, respectively.