v3.20.2
Note 4 - Revenue from Contracts with Customers
 9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

4. Revenue from Contracts with Customers

 

The following table summarizes revenue from contracts with customers for the three and nine months ended September 30, 2020 and 2019 into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors (in thousands):

 

  

Three months ended
September 30, 2020

  

 

Nine months ended
September 30, 2020

 

Product sales:

        

DSUVIA

 $935  $1,092 

Zalviso

  352   772 

Total product sales

  1,287   1,864 
         

Contract and collaboration revenue:

        

Non-cash royalty revenue related to Royalty Monetization (Note 7)

 $60  $181 

Royalty revenue

  21   61 

Other revenue

  —   2,572 

Total revenues from contract and other collaboration

  81   2,814 

Total revenue

 $1,368  $4,678 

 

 

  

Three months ended
September 30, 2019

  

 

Nine months ended
September 30, 2019

 

Product sales:

        

DSUVIA

 $116  $218 

Zalviso

  443   1,235 

Total product sales

  559   1,453 
         

Contract and collaboration revenue:

        

Non-cash royalty revenue related to Royalty Monetization (Note 7)

 $36  $239 

Royalty revenue

  12   79 

Other revenue

  1   43 

Total revenues from contract and other collaboration

  49   361 

Total revenue

 $608  $1,814 

 

For additional details on the Company’s accounting policy regarding revenue recognition, refer to Note 1 “Organization and Summary of Significant Accounting Policies - Revenue from Contracts with Customers” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, and Note 1 “Organization and Summary of Significant Accounting Policies – Significant Accounting Policies” in this Quarterly Report on Form 10-Q.

 

Product Sales

 

The Company’s commercial launch of DSUVIA in the United States occurred in the first quarter of 2019. Zalviso has been sold in Europe by the Company’s collaboration partner, Grünenthal. Grünenthal has exercised its right to terminate the Amended Agreements, effective November 13, 2020.

 

Contract and Other Collaboration

 

Amended License Agreement

 

Under the Amended License Agreement with Grünenthal, the Company is eligible to receive approximately $194.5 million in additional milestone payments, based upon successful regulatory and product development efforts ($28.5 million) and net sales target achievements ($166.0 million). Grünenthal will also make tiered royalty and supply and trademark fee payments in the mid-teens up to the mid-twenties percent range, depending on the level of sales achieved, on net sales of Zalviso. A portion of the tiered royalty payment, exclusive of the supply and trademark fee payments, will be paid to PDL BioPharma, Inc. or PDL, in connection with the Royalty Monetization. On August 31, 2020, PDL announced it sold its royalty interest for Zalviso to SWK Funding, LLC. For additional information on the Royalty Monetization, see Note 7 “Liability Related to Sale of Future Royalties”.

 

Amended MSA

 

Under the terms of the Amended MSA with Grünenthal, the Company will manufacture and supply the Product for use in the Field for the Territory exclusively for Grünenthal. The Product will be supplied at prices approximating the Company’s manufacturing cost, subject to certain caps, as defined in the MSA Amendment. The MSA Amendment requires the Company to use commercially reasonable efforts to enter stand-by contracts with third parties providing significant supply and manufacturing services and, under certain specified conditions, permits Grünenthal to use a third-party back-up manufacturer to manufacture the Product for Grünenthal’s commercial sale in the Territory.

 

As mentioned above, Grünenthal has exercised its right to terminate the Amended Agreements, effective November 13, 2020. In May 2020, upon notification of early termination by Grünenthal, the Company recognized approximately $2.6 million of deferred revenue for the future significant and incremental discount on Zalviso manufacturing services which are no longer a performance obligation.

 

Contract Liability

 

At September 30, 2020, approximately $0.2 million of deferred revenue, all of which represented the current portion, was attributable to the significant and incremental discount on Zalviso manufacturing services for Grünenthal under the Amended Agreements. This deferred revenue is being recognized on a straight-line basis over the period such discount is made available to Grünenthal, which will continue until the last shipment of Zalviso product is made to Grünenthal.

 

The following table presents changes in the Company’s contract liability for the nine months ended September 30, 2020 (in thousands):

 

  

Balance at

Beginning

of the Period

  

Additions

  

Deductions

  

Balance at

the end

of the Period

 

Contract liability:

                

Deferred revenue – Amended Agreements

 $3,148  $—  $(2,952) $196 

Deferred revenue – Other

  96   —   (96)  — 

Deferred revenue

 $3,244  $—  $(3,048) $196 

 

For the three and nine months ended September 30, 2020 and 2019, the Company recognized the following revenue from performance obligations satisfied or eliminated under the Amended Agreements (in thousands):

 

  

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

 
  

2020

  

2019

  

2020

  

2019

 

Amounts included in contract liabilities at the beginning of the period:

                

Performance obligations satisfied

 $147  $79  $380  $237 

Performance obligations eliminated upon termination

  —   —   2,572   — 

New activities in the period from performance obligations satisfied:

                

Performance obligations satisfied

  205   365   392   1,041 

Total revenue from performance obligations satisfied or eliminated

 $352  $444  $3,344  $1,278