Revenue |
12 Months Ended |
|---|---|
Dec. 31, 2023 | |
| Revenue from Contract with Customer [Abstract] | |
| Revenue | Revenue License and Other Revenue
On October 27, 2023, the Company closed the transaction under the asset purchase agreement (the “Purchase Agreement”) to sell its rights, title and interest in, assets relating to AVTX-801, AVTX-802 and AVTX-803 (collectively, the “800 Series”) to AUG Therapeutics, LLC (“AUG”). The Purchase Agreement was entered into on September 11, 2023. Pursuant to the Purchase Agreement, the Company received an upfront payment of $0.2 million. Additionally, AUG assumed aggregate liabilities of $0.4 million, which included certain liabilities incurred prior to the date of the Purchase Agreement, costs due and payable between the date of the Purchase Agreement and the closing date, and obligations under 800 Series contracts assumed by AUG. Avalo recognized $0.5 million as license and other revenue for the year ended December 31, 2023. Avalo is also entitled to a contingent milestone payment of 20% of certain payments, if any, granted to AUG upon any sale of any priority review voucher related to the 800 Series compounds granted to AUG by the FDA, net of any selling costs, or $15.0 million for each compound (for a potential aggregate of $45.0 million) if the first FDA approval is for an indication other than a Rare Pediatric Disease (as defined in the Purchase Agreement). The Company has not recognized any revenue related to the milestones as of December 31, 2023.
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 represented 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 generated its product revenue from sales of Millipred®, which we consider a non-core asset. Millipred® is an oral prednisolone indicated across a wide variety of inflammatory conditions, which is considered a prescription drug. The Company’s license and supply agreement for Millipred® ended 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 year ended December 31, 2023, the Company’s only two customers accounted for approximately 58% and 42% of the Company’s total net product revenues. For the year ended December 31, 2022, the Company’s only two customers accounted for approximately 68% and 32% of the Company’s total net product revenues. Net revenue from sales of prescription drugs was $1.4 million and $3.4 million for the years ended December 31, 2023 and 2022, respectively.
The Company does not expect future gross revenue related to the Millipred® product given the expiration of the product’s license and supply agreement 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 to 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 the supplier or vice versa, which would be recognized in cost of product sales.
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 a transition services agreement, which included managing the third-party logistics provider and providing accounting reporting services. 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 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 December 31, 2023, the total receivable balance was approximately $0.7 million. The receivable remains fully reserved as of December 31, 2023. We will continue to re-assess its collectability each reporting period.
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