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Revenue recognition | 9 Months Ended
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Sep. 30, 2023
Revenue from Contract with Customer [Abstract] |
Revenue recognition | Revenue recognition We generate the majority of our revenues through product sales to our customers. We also generate revenues through CDMO services and suite reservations for and to third parties and contracts and grants revenue. The Company recognizes revenue when the Company's customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services by analyzing 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. Beginning in the third quarter of 2023, the Company launched NARCAN® OTC, which was approved by the FDA as an over-the-counter emergency treatment of opioid overdose, broadening our customer base and sales channels to retail pharmacies and digital commerce websites. The Company's Nasal Naloxone Products are now sold commercially over-the-counter at retail pharmacies and digital commerce websites as well as through physician-directed or standing order prescriptions at retail pharmacies, health departments, local law enforcement agencies, community-based organizations, substance abuse centers and other federal agencies. The Company's NARCAN® OTC customer contracts are fixed price contracts. The Company invoices and records revenue when the pharmacies and wholesalers receive product from the third-party logistics warehouse used by the Company, which is the point at which control is transferred to the customer. Revenues for NARCAN® OTC are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. Estimates of variable consideration includes allowance for returns, specialty distributor fees, wholesaler fees and prompt payment discounts. Revenues from NARCAN® OTC are recognized to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with such variable consideration is subsequently resolved. The Company considers several factors in the estimation process for the allowance for returns of NARCAN® OTC, including inventory levels within the distribution channel, product shelf life and historical return activity, including activity for product sold for which the return period has passed, as well as other relevant factors. Because returned product cannot be resold, there is no corresponding asset for product returns. The Company's revenues disaggregated by operating segment and major sources for the three and nine months ended September 30, 2023 and 2022 were as follows:
| Three Months Ended September 30, 2023 |  | Three Months Ended September 30, 2022
| USG |  | Non-USG |  | Total |  | USG |  | Non-USG |  | Total
Product sales, net | $ | 103.0 |  |  | $ | 146.8 |  |  | $ | 249.8 |  |  | $ | 33.4 |  |  | $ | 152.8 |  |  | $ | 186.2 |
CDMO: |  |  |  |  |  |  |  |  |  |  |
Services | — |  |  | 13.2 |  |  | 13.2 |  |  | — |  |  | 36.1 |  |  | 36.1 |
Leases | — |  |  | 1.0 |  |  | 1.0 |  |  | — |  |  | 0.2 |  |  | 0.2 |
Total CDMO | $ | — |  |  | $ | 14.2 |  |  | $ | 14.2 |  |  | $ | — |  |  | $ | 36.3 |  |  | $ | 36.3 |
Contracts and grants | 5.1 |  |  | 1.4 |  |  | 6.5 |  |  | 16.4 |  |  | 1.0 |  |  | 17.4 |
Total revenues | $ | 108.1 |  |  | $ | 162.4 |  |  | $ | 270.5 |  |  | $ | 49.8 |  |  | $ | 190.1 |  |  | $ | 239.9 |
| Nine Months Ended September 30, 2023 |  | Nine Months Ended September 30, 2022
| USG |  | Non-USG |  | Total |  | USG |  | Non-USG |  | Total
Product sales, net | $ | 279.6 |  |  | $ | 415.8 |  |  | $ | 695.4 |  |  | $ | 255.0 |  |  | $ | 405.5 |  |  | $ | 660.5 |
CDMO: |  |  |  |  |  |  |  |  |  |  |
Services | — |  |  | 52.2 |  |  | 52.2 |  |  | — |  |  | 87.8 |  |  | 87.8 |
Leases | — |  |  | 5.5 |  |  | 5.5 |  |  | — |  |  | 4.7 |  |  | 4.7 |
Total CDMO | $ | — |  |  | $ | 57.7 |  |  | $ | 57.7 |  |  | $ | — |  |  | $ | 92.5 |  |  | $ | 92.5 |
Contracts and grants | 14.6 |  |  | 5.0 |  |  | 19.6 |  |  | 31.7 |  |  | 2.6 |  |  | 34.3 |
Total revenues | $ | 294.2 |  |  | $ | 478.5 |  |  | $ | 772.7 |  |  | $ | 286.7 |  |  | $ | 500.6 |  |  | $ | 787.3 |
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 weighted average remaining term on the Company's operating lease components approximates 5.3 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. The Company estimates future operating lease revenues to be $0.2 million in the remainder of 2023, $0.9 million in 2024, $0.9 million in 2025, $0.9 million in 2026, $0.9 million in 2027 and $0.9 million in years beyon d 2027. Transaction price allocated to remaining performance obligations As of September 30, 2023, the Company has future contract value on unsatisfied performance obligations of approximately $408.6 million associated with all arrangements entered into by the Company. The Company expects to recognize $400.3 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 that the Company does not currently have a contractual right to bill, to be contract assets. As of September 30, 2023 and December 31, 2022, the Company had $38.4 million an d $34.8 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:
|  | Contract Liabilities
Balance at December 31, 2022 |  | $ | 31.7 |
Balance at September 30, 2023 |  | $ | 27.9 |
Revenue recognized in the period from amounts included in contract liability at the beginning of the period: |  | $ | (7.3) |
As of September 30, 2023 and December 31, 2022, the current portion of contract liabilities was $22.9 million and $26.4 million, respectively, and was included in "Other current liabilities" on the Condensed Consolidated Balance Sheets. Accounts receivable and allowance for expected credit losses Accounts receivable, including unbilled accounts receivable contract assets, consist of the following:
|  | September 30, 2023 |  | December 31, 2022
|  |  |  | (As Restated)
Accounts receivable: |  |  |  |
Billed |  | $ | 156.6 |  |  | $ | 102.7 |
Unbilled |  | 61.0 |  |  | 57.2 |
Allowance for expected credit losses |  | (1.1) |  |  | (0.7) |
Accounts receivable, net |  | $ | 216.5 |  |  | $ | 159.2 |
We maintain an allowance for expected credit losses, which represents the estimated aggregate amount of credit risk arising from the inability or unwillingness of specific customers to pay our fees or disputes that may affect our ability to fully collect our billed accounts receivable. We estimate the current-period provision for expected credit losses on a specific identification basis and we consider factors such as the age of the receivables balance, knowledge of the specific customers' circumstances and historical collection experience for similar customers. Accounts receivable, net of the allowance for expected credit losses, represents the amount we expect to collect. Our actual experience may vary from our estimates. At each reporting date, we adjust the allowance for expected credit losses to reflect our current estimate. 2022 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 the Janssen 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 Janssen 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 Janssen Agreement and (ii) to confirm Janssen’s intent to not purchase the requisite minimum quantity of the Product pursuant to the Janssen Agreement and instead, wind-down the Janssen 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 Janssen Agreement for asserted material breaches of the Janssen 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 Janssen 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 Janssen 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 through arbitration. During the three months ended September 30, 2023, there were no impacts on previously recognized revenue or depreciation related to the conclusion of the Janssen Agreement. As of September 30, 2023, the Company has no billed or unbilled net accounts receivable related to the Janssen Agreement. Beginning in the fourth quarter of 2022, because the arbitration process is expected to extend longer than one year, the Company reclassified amounts related to the Janssen Agreement from "Inventories, net" and from "Prepaid expenses and other current assets" to "Other assets", resulting in $152.7 million in long-term assets related to the Janssen Agreement on the Condensed Consolidated Balance Sheet as of December 31, 2022. The long-term asset balance within "Other Assets" related to the Janssen Agreement as of September 30, 2023 was $153.8 million. These assets include termination penalties, certain inventory related items and raw materials inventory representing materials purchased for the Janssen Agreement which Janssen has not reimbursed. The Company evaluated the net realizable value of the inventory as of September 30, 2023, concluding that because the Janssen 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. Additionally, the Company has $5.0 million of non-cancelable orders as of September 30, 2023 which have not been received and Janssen has not reimbursed.

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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 -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 9 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-9 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 10 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-10 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-15 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Subparagraph (b)(2) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-13 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 606 -Publisher FASB -URI https://asc.fasb.org//606/tableOfContent + Details
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