PRODUCT REVENUE, NET

6 Months Ended

Jun. 30, 2023

PRODUCT REVENUE, NET

PRODUCT REVENUE, NET

NOTE 4—PRODUCT REVENUE, NET

The Company’s product revenue, net was generated from sales of DANYELZA and totaled $20,751,000 and $9,797,000 for the three months ended June 30, 2023 and 2022, respectively. The geographic breakout for the product revenue, net between the United States and other countries for the three months ended June 30, 2023, were $15,851,000 and $4,900,000, respectively. The geographic breakout for the product revenue, net between in the United States and other countries for the three months ended June 30, 2022, was $9,021,000 and $776,000, respectively. The Company’s product revenue, net from other countries for the three months ended June 30, 2023, included $3,535,000 of product revenue and related royalties for the commercial launch inventory stocking order from the Company’s distribution partner, SciClone, which launched commercial sales in China during the three months ended June 30, 2023. The product revenue, net from SciClone reflected an initial inventory stocking and the Company does not anticipate recurring product revenue, net at this level each quarter.

The Company’s product revenue, net was generated from sales of DANYELZA and totaled $41,002,000 and $20,283,000 for the six months ended June 30, 2023 and 2022, respectively. The geographic breakout for the product revenue, net between the United States and other countries for the six months ended June 30, 2023, were $32,685,000 and $8,317,000, respectively. The geographic breakout for the product revenue, net between the United States and other countries for the six months ended June 30, 2022 was $18,453,000 and $1,830,000, respectively. The Company’s product revenue, net from other countries for the six months ended June 30, 2023, included $3,535,000 of product revenue and related royalties for the commercial launch inventory stocking order from the Company’s distribution partner, SciClone, which launched commercial sales in China during the six months ended June 30, 2023. The Company’s revenue from other countries for the six months ended June 30, 2023, also includes $2,516,000 of product revenue from the Company’s distribution partner, WEP, in connection with the Company’s early access program for DANYELZA in Europe. Please refer to below for further discussion regarding the WEP distribution agreement. The product revenue, net from WEP and SciClone in the six months ended June 30, 2023, reflected initial inventory stockings and the Company does not anticipate recurring product revenue, net from each distribution partner at these levels each quarter.

Revenue from product sales is recorded net of applicable provisions for rebates, chargebacks, discounts, distribution-related fees and other sales-related deductions. Accruals for chargebacks and discounts are recorded as a direct reduction to accounts receivable. Accruals for rebates, distribution-related fees without contractual right of offset and other sales-related deductions are recorded within accrued liabilities. As of June 30, 2023, the Company had recorded accounts receivable allowances of approximately $476,000 and accrued liabilities of approximately $4,739,000 related to product sales during the six months ended June 30, 2023. As of December 31, 2022, the Company had recorded accounts receivable allowances of approximately $508,000 and accrued liabilities of $2,474,000 related to product sales.

An analysis of the change in reserves for discounts and allowances is summarized as follows:

			Contractual
			Allowances and
	Discounts		Government Rebates		Returns		Total
	(in thousands)
Balance December 31, 2022	$	33	$	2,905	$	44	$	2,982
Current provisions relating to sales in current year		120		5,897		242		6,259
Payments/credits relating to sales in current year		(113)		(3,693)		(220)		(4,026)
Balance June 30, 2023	$	40	$	5,109	$	66	$	5,215

The vast majority of the Company’s product sales were in the United States with additional sales in China, Europe and Israel through sublicenses and distribution agreements. The Company had product sales to certain customers that accounted for more than 10% of total product revenue, net, for the three and six months ended June 30, 2023, and June 30, 2022. McKesson, SciClone, AmerisourceBergen and Cardinal Health accounted for 46%, 20%, 18% and 12% respectively, of the Company’s product revenue, net, for the three months ended June 30, 2023. McKesson, AmerisourceBergen and Cardinal Health accounted for 71%, 10% and 11%, respectively, of the Company’s product revenue, net, for the three months ended June 30, 2022. McKesson, AmerisourceBergen, Cardinal Health and SciClone accounted for 44%, 23%, 12% and 12%, respectively, of the Company’s product revenue, net, for the six months ended June 30, 2023. McKesson, AmerisourceBergen and Cardinal Health accounted for 64%, 17% and 11%, respectively, of the Company’s product revenue, net, for the six months ended June 30, 2022. The Company recognized royalty revenue from their distribution partners of $2,620,000 and $738,000 in the three months ended June 30, 2023 and 2022, respectively, and $3,387,000 and $1,354,000 in the six months ended June 30, 2023 and 2022, respectively.

Under the Company’s distribution agreement with WEP, the Company is entitled to receive all payments based on the net product sales and pays WEP a service fee in exchange for its services, whereby the service fee represents a percentage of gross selling price and is included within product revenue, net on the Consolidated Statements of Net Loss and Comprehensive Loss. There was no product revenue, net from WEP in the three months ended June 30, 2023. The product revenue recognized for the six months ended June 30, 2023, was $2,516,000. There was no product revenue, net from WEP in the three and six months ended June 30, 2022. As of June 30, 2023, the Company has recorded on its Consolidated Balance Sheets accounts receivable of approximately $2,307,000, and accrued liabilities, for allowances, of $133,000 related to product sales to the distribution partner during the six months ended June 30, 2023.