Revenue |
12 Months Ended |
|---|---|
Dec. 31, 2022 | |
| Revenue from Contract with Customer [Abstract] | |
| Revenue | Revenue License and Other Revenue
In July 2022, Avalo entered into a license agreement with Apollo AP43 Limited, a wholly owned subsidiary of Apollo Therapeutics Group Limited (collectively, “Apollo”) pursuant to which the Company granted Apollo a worldwide, exclusive license to research, develop, manufacture and commercialize AVTX-007, an anti-IL-18 monoclonal antibody (the “Apollo License Agreement”). Pursuant to the Apollo License Agreement, the Company received an upfront payment of $14.5 million, which was recognized as license and other revenue for the year ended December 31, 2022.
Additionally, the portion of the ES Transaction (as defined in Note 5) related to AVTX-611 represents a contract modification which resulted in the Company recognizing $0.2 million of license and other revenue for the year ended December 31, 2022.
Product Revenue, net
Avalo generates substantially all of its product revenue from sales of Millipred®, an oral prednisolone indicated across a wide variety of inflammatory conditions, which is considered a prescription drug. The Company sells its prescription drug in the United States primarily through wholesale distributors. Wholesale distributors account for substantially all of the Company’s net product revenues and trade receivables. For the year ended December 31, 2022, the Company’s two largest customers accounted for approximately 68% and 32% of the Company’s total net product revenues. For the year ended December 31, 2021, the Company’s three largest customers accounted for approximately 63%, 21%, and 16% of the Company’s total net product revenues. Net revenue from sales of prescription drugs was $3.4 million and $4.8 million for the years ended December 31, 2022 and 2021, respectively.
The Company has a license and supply agreement for the Millipred® product with a wholly owned subsidiary of Teva Pharmaceutical Industries Ltd. (“Teva”), which expires on September 30, 2023. Avalo is required to pay Teva fifty percent of the net profit of the Millipred® product following each calendar quarter, subject to a $0.5 million quarterly minimum payment, which commenced on July 1, 2021. For the years ended December 31, 2022 and 2021, the Company recognized $1.9 million and $1.0 million, respectively, in cost of product sales related to the royalty. Dr. Sol Barer served as the Chairman of the Company’s board of directors until June 2021 and at the time of the agreement with Teva as, and currently serves as, the Chairman of Teva’s board of directors.
Aytu, to which the Company sold its rights, title, and interests in assets relating to certain commercialized products in 2019 (the “Aytu Transaction”), managed Millipred® commercial operations until August 31, 2021 pursuant to a transition services agreement, which included managing the third-party logistics provider and providing accounting reporting services. Aytu collected cash on behalf of Avalo for revenue generated by sales of Millipred® from the second quarter of 2020 through the third quarter of 2021 and is obligated to transfer the cash generated by such sales to Avalo. In the third quarter of 2021, Avalo finalized its trade and distribution channel to allow it to control third party distribution and began managing Millipred® commercial operations at that time. The transition services agreement allows Aytu to withhold cash of $2.0 million until September 30, 2022 and $1.0 million until December 2024.
As of December 31, 2022, the total receivable balance, which represents revenue generated by sales of Millipred® during the time Aytu was managing its commercial operations partially offset by minimal commercial operation liabilities Aytu paid on our behalf, was estimated to be approximately $1.8 million, $0.8 million of which was currently due pursuant to the transition services agreement. Avalo received $0.4 million of the $0.8 million current receivable in January 2023.
In the second quarter of 2022, Avalo fully reserved the $1.0 million due in December 2024 as a result of Aytu’s conclusion within its Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, that substantial doubt existed with respect to its ability to continue as a going concern within one year after the date of financial statements were issued. This conclusion has remained unchanged within Aytu’s most recent publicly disclosed financial statements. We will continue to re-assess collectability each reporting period.
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