Revenue |
9 Months Ended |
|---|---|
Sep. 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. 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. The Company continues 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 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, with a $0.5 million quarterly minimum payment contingent on Avalo achieving certain net profit thresholds 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 reconciled to actual results, which might 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 from June 1, 2024 until December 1, 2024, which resulted in the recognition of $0.4 million as an accrued expense and other current liability as of September 30, 2024. The Company assesses the collectability of the receivable, which was $0.9 million as of September 30, 2024, at each reporting period pursuant to ASC 326: Current Expected Credit Loss Standard. In the second quarter of 2022, the Company expected a full credit loss on the receivable and therefore fully reserved the receivable. Avalo considered, amongst other factors, 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 those financial statements were issued. In September 2024, Aytu publicly disclosed in its Annual Report on Form 10-K for the year ended June 30, 2024, that it had alleviated the previously disclosed substantial doubt about its ability to continue as a going concern. As of September 30, 2024, the Company expects to collect the total receivable balance and therefore recognized the amount within other receivables on the unaudited condensed consolidated balance sheet and reversed the reserve as a benefit to cost of product sales.
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