Revenue |
6 Months Ended |
|---|---|
Jun. 30, 2024 | |
| Revenue from Contract with Customer [Abstract] | |
| Revenue | Revenue
The Company’s license and supply agreement for Millipred®, an oral prednisolone indicated across a wide variety of inflammatory conditions, ended on September 30, 2023, and therefore there was no net product revenue for the six months ended June 30, 2024. Avalo considered Millipred® a non-core asset. Historically, the Company sold Millipred® in the United States primarily through wholesale distributors, who accounted for substantially all of the Company’s net product revenues and trade receivables. For the six months ended June 30, 2023, the Company recognized net product revenue of $1.1 million.
The Company will continue to monitor estimates for commercial liabilities for Millipred®, 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 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 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 and requires the retention amount to remain at $1.0 million as of June 1, 2024 pursuant to a reconciliation due on such date. In the second quarter of 2022, Avalo fully reserved the 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 June 30, 2024, the total receivable balance was approximately $1.0 million and remains fully reserved. We will continue to reassess its collectability each reporting period. As Aytu incurs returns and other commercial liabilities on Avalo’s behalf, the receivable reserve is relieved, creating an offset to cost of product sales. Additionally, at certain points of time, the transition service agreement requires Avalo to pay up to the $1.0 million stated retention amount to provide Aytu with a balance against returns paid on Avalo’s behalf. Additional amounts owed increase the receivable and corresponding receivable reserve through an increase to cost of product sales.
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