Revenue |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Revenue from Contract with Customer [Abstract] | |
| Revenue | Revenue
Avalo generated its product revenue from sales of Millipred®, an oral prednisolone indicated across a wide variety of inflammatory conditions, which is considered a prescription drug. Avalo’s license and supply agreement for Millipred® expired on September 30, 2023. The Company sold its prescription drug in the United States primarily through wholesale distributors. Wholesale distributors accounted for substantially all of the Company’s net product revenues and trade receivables. For the three months ended September 30, 2023, the Company’s two largest customers accounted for approximately 72% and 28% of the Company’s total net product revenues. For the nine months ended September 30, 2023, the Company’s two largest customers accounted for approximately 58% and 42% of the Company’s total net product revenues. Net revenue from sales of prescription drugs was $0.2 million and $0.4 million for the three months ended September 30, 2023 and 2022, respectively, and $1.4 million and $2.6 million for the nine months ended September 30, 2023 and 2022, respectively.
The Company does not expect future gross revenue related to the Millipred® product given the product’s license and supply agreement expired on September 30, 2023. However, the Company will continue to monitor estimates for commercial liabilities, such as sales returns. As additional information becomes available, the Company could recognize expense (or a benefit) for differences between actuals or updated estimates to the reserves previously recognized.
Pursuant the Millipred® license and supply agreement, Avalo was required to pay the supplier fifty percent of the net profit of the Millipred® product following each calendar quarter, subject to a $0.5 million quarterly minimum payment dependent on Avalo reaching certain net profit amounts as stipulated in the agreement. The profit share commenced on July 1, 2021 and ended on September 30, 2023. Within twenty-five months of September 30, 2023, the net profit share is subject to a reconciliation process where estimated deductions to arrive at net profit will be trued up to actuals and could result in Avalo owing additional amounts to Teva or vice versa.
Aytu BioScience, Inc. (“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 transition service agreements, which included managing the third-party logistics provider. As a result, 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. The transition services agreement allows Aytu to withhold up to $1.0 million until December of 2024. In the second quarter of 2022, Avalo fully reserved the $1.0 million receivable as a result of Aytu’s conclusion within its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 that substantial doubt existed with respect to its ability to continue as a going concern within one year after the date those financial statements were issued. As of September 30, 2023, the total receivable balance was approximately $0.9 million. The receivable remains fully reserved given Aytu’s conclusion in its most recent publicly disclosed financial statements that substantial doubt exists with respect to its ability to continue as a going concern within one year after the date of financial statements were issued, which is prior to December of 2024. We will continue to re-assess its collectability each reporting period.
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