Revenue

6 Months Ended

Jun. 30, 2020

Revenue From Contract With Customer [Abstract]

Revenue

3. Revenue

Product Revenue Reserves and Allowances

The Company’s product revenues have been primarily from sales of YUTIQ and DEXYCU in the U.S., which it began shipping to its customers in February 2019 and March 2019, respectively.

Net product revenues by product for each of the three and six months ended June 30, 2020 and 2019, respectively, were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
YUTIQ	$	2,879	$	6,705	$	6,454	$	7,248
DEXYCU		827		—		1,939		684
Total product sales, net	$	3,706	$	6,705	$	8,393	$	7,932

The following table summarizes activity in each of the product revenue allowance and reserve categories for the six months ended June 30, 2020 and 2019, respectively (in thousands):

	Chargebacks, Discounts			Government and Other
	and Fees			Rebates			Returns			Total
Beginning balance at January 1, 2020	$	1,618		$	271		$	352		$	2,241
Provision related to sales in the current year		864			247			436			1,547
Adjustments related to prior period sales		(387	)					50			(337	)
Deductions applied and payments made		(1,185	)		(400	)		(324	)		(1,909	)
Ending balance at June 30, 2020	$	910		$	118		$	514		$	1,542
	Chargebacks, Discounts			Government and Other
	and Fees			Rebates			Returns			Total
Beginning balance at January 1, 2019	$	—		$	—		$	—		$	—
Provision related to sales in the current year		877			76			187			1,140
Adjustments related to prior period sales		—			—			—			—
Deductions applied and payments made		(89	)		—			—			(89	)
Ending balance at June 30, 2019	$	788		$	76		$	187		$	1,051

Returns are recorded as a reduction of accounts receivable on the condensed consolidated balance sheets. Chargebacks, discounts and fees and rebates are recorded as a component of accrued expenses on the condensed consolidated balance sheets (See Note 6).

License and Collaboration Agreements and Royalty Income

Alimera

Pursuant to a licensing and development agreement, as amended, Alimera Sciences, Inc. has a worldwide exclusive license to make and sell ILUVIEN in return for royalties based on sales and patent fee reimbursements. Royalties income was $381,000 and $500,000 for the three months ended June 30, 2020 and 2019, respectively, and $1.2 million and $1.0 million for the six months ended June 30, 2020 and 2019, respectively.

Total revenue was $386,000 and $505,000 for the three months ended June 30, 2020 and 2019, respectively, and $1.2 million and $1.1 million for the six months ended June 30, 2020 and 2019, respectively.

Ocumension Therapeutics

In November 2018, the Company entered into an exclusive license agreement with Ocumension Therapeutics (“Ocumension”) for the development and commercialization of its three-year micro insert using the Durasert technology for the treatment of chronic non-infectious uveitis affecting the posterior segment of the eye (YUTIQ in the U.S.) in Mainland China, Hong Kong, Macau and Taiwan. The Company received a one-time upfront payment of $1.75 million from Ocumension and is eligible to receive up to (i) $7.25 million upon the achievement by Ocumension of certain prescribed development and regulatory milestones, and (ii) $3.0 million commercial sales-based milestones. In addition, the Company is entitled to receive mid-single digit sales-based royalties. Ocumension has also received a special approval by the Hainan Province People's Government to market this product for chronic, non-infectious posterior segment uveitis in the Hainan Bo Ao Lecheng International Medical Tourism Pilot Zone (“Hainan Pilot Zone”). In March 2019, the Company entered into a Memorandum of Understanding (“MOU”), pursuant to which, the Company will supply product for the clinical trials and Hainan Pilot Zone use. Paralleling to Ocumension’s normal registration process of the product with the Chinese Regulatory Authorities, the MOU modified the Company’s entitlement to the development and regulatory milestones of up to $7.25 million under the license agreement to product supply milestones or development milestones, whichever comes first, totaling up to $7.25 million. In August 2019, the Company began shipping this product to Ocumension.

The Company was required to provide a fixed number of hours of technical assistance support to Ocumension at no cost, which support has been completed and no future performance obligation exists. Ocumension is responsible for all development, regulatory and commercial costs, including any additional technical assistance requested. Ocumension has a first right of negotiation for an additional exclusive license to the Company’s shorter-duration line extension candidate for this indication.

In August 2019, the Company received a $1.0 million development milestone payment from Ocumension

triggered by the approval of its Investigational New Drug (“IND”) in China for this program. The IND allows the importation of finished product into China for use in a clinical trial to support regulatory filing.

In January 2020, the Company entered into an exclusive license agreement with Ocumension for the development and commercialization in Mainland China, Hong Kong, Macau and Taiwan of DEXYCU for the treatment of post-operative inflammation following ocular surgery. Pursuant to the terms of the license agreement, the Company received upfront payments of $2.0 million from Ocumension in February 2020 and will be eligible to receive up to (i) $6.0 million upon the achievement by Ocumension of certain prescribed development and regulatory milestones, and (ii) $6.0 million commercial sales-based milestones. In addition, the Company is entitled to receive mid-single digit sales-based royalties. In exchange, Ocumension will receive exclusive rights to develop and commercialize DEXYCU in Mainland China, Hong Kong, Macau and Taiwan, at its own cost and expense with the Company supplying product for clinical trials and commercial sale. In addition, Ocumension will receive a fixed number of hours of technical assistance support from the Company at no cost.

Other than a fixed number of hours of technical assistance support to be provided at no cost by the Company, Ocumension is responsible for all development, regulatory and commercial costs, including any additional technical assistance requested. During the three and six months ended June 30, 2020, the Company recognized $30,000 and approximately $2.0 million of license and collaboration revenue, respectively. As of June 30, 2020 and December 31, 2019, no deferred revenue was recorded for this agreement, respectively.

The Company recorded sales-based royalty expense of $0 and $400,000, respectively, during the three and six months ended June 30,  2020, with respect to partnering income in connection with the Icon acquisition in March 2018.

 Research Collaborations

The Company from time to time enters into funded agreements to evaluate the potential use of its technology for sustained release of third-party drug candidates in the treatment of various diseases or conditions. Consideration received is generally recognized as revenue over the term of the research collaborations (including feasibility study agreements). Revenue recognition for consideration, if any, related to a license option right is assessed based on the terms of any such future license agreement or is otherwise recognized at the completion of the research collaborations (including feasibility study agreements).  Revenue under research collaborations (including feasibility study agreements) was $0 for each of the three months ended June 30, 2020 and 2019, respectively, and $0 and $15,000 for the six months ended June 30, 2020 and 2019, respectively. At June 30, 2020 and December 31, 2019, $0 and $15,000 deferred revenue was recorded for the research collaborations (including feasibility study agreements), respectively.