REVENUE RECOGNITION

Our major sources of revenue during the reporting periods were product revenues from Makena (including both our branded and unbranded products), Feraheme and Intrarosa.

Product Revenue and Allowances and Accruals

The following table provides information about disaggregated revenue by products for the three months ended March 31, 2019 and 2018 (in thousands):



	Three Months Ended March 31,
	2019		2018
Product sales, net
Makena	$	31,257	$	89,983
Feraheme	40,015		25,135
Intrarosa	4,414		2,165
MuGard	43		65
Total product revenues	$	75,729	$	117,348

Total gross product sales were offset by product sales allowances and accruals for the three months ended March 31, 2019 and 2018 as follows (in thousands):



	Three Months Ended March 31,
	2019		2018
Gross product sales	$	211,718	$	239,870
Provision for product sales allowances and accruals:
Contractual adjustments	108,884		86,144
Governmental rebates	27,105		36,378
Total	135,989		122,522
Product sales, net	$	75,729	$	117,348

The following table summarizes the product revenue allowance and accrual activity for the three months ended March 31, 2019 (in thousands):



	Contractual			Governmental
	Adjustments			Rebates			Total
Balance at December 31, 2018	$	57,199		$	29,114		$	86,313
Provisions related to current period sales	107,388			18,502			125,890
Adjustments related to prior period sales	1,540			8,603			10,143
Payments/returns relating to current period sales	(65,839		)	—			(65,839		)
Payments/returns relating to prior period sales	(27,275		)	(14,292		)	(41,567		)
Balance at March 31, 2019	$	73,013		$	41,927		$	114,940

We receive payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional.

During the three months ended March 31, 2019, we recorded an adjustment of $8.6 million related to Medicaid rebates received during the quarter that related to prior period sales. We concluded that this adjustment represented a change in estimate during the first quarter of 2019 due to higher Medicaid utilization than anticipated.

Variable Consideration

Under ASC 606, we are required to make estimates of the net sales price, including estimates of variable consideration (such as rebates, chargebacks, discounts, copay assistance and other deductions), and recognize the estimated amount as revenue, when we transfer control of the product to our customers. In addition, we estimate variable consideration related to our share of net distributable profits from our authorized generic partner. We estimate variable consideration for our product revenues using an “expected value” method. No amounts recognized as part of our product revenues were constrained as of March 31, 2019.

Collaboration Revenue

During the three months ended March 31, 2019, in conjunction with the Perosphere transaction, we assumed responsibility for a clinical trial collaboration agreement with a global pharmaceutical company. This agreement provides for milestone payments to us, provided we meet certain clinical obligations in connection with our ciraparantag program. We also acquired $6.4 million of deferred revenue related to this agreement, which represents the fair value of upfront milestone payments received by Perosphere under this agreement prior to acquisition. We may receive additional milestone payments throughout the remainder of the development program of up to a total of $34.8 million based on completion of certain research and development activities.

In accordance with ASC 808, we considered the nature and contractual terms of the arrangement and the nature of our business operations to determine the classification of payments under this agreement and concluded that the global pharmaceutical company meets the definition of a customer, as they do not share in any potential reward from the research and development activities. As a result, this agreement is accounted for under ASC 606. We determined that the promises to perform various research and development activities related to our ciraparantag program are not distinct because they are all necessary and highly interdependent with one another for the purpose of pursuing regulatory approval of ciraparantag. As such, these promises are combined into a single performance obligation, which is the submission for regulatory approval of ciraparantag in the U.S. and the European Union.

In order to evaluate the appropriate transaction price, we considered that the remaining $34.8 million of potential milestone payments relate to activities which cannot progress until FDA clearance is received for a device needed to conduct the future clinical trials. As a result, these amounts were excluded from the transaction price and fully constrained based on the probability of achievement, which is outside of our control. Therefore, as of March 31, 2019, the transaction price at acquisition is limited to the $6.4 million of deferred revenue acquired. We will reevaluate the transaction price, including all constrained amounts, at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust its estimate of the transaction price.

We will recognize revenue from the $6.4 million of acquired deferred revenue and any future milestone payments received or considered probable based on an input method in the form of research effort relative to expected research effort at the completion of the performance obligation. This is based on the relative costs of the research and development activities incurred and expected to be incurred in the future to satisfy the performance obligation, which is estimated to be completed over approximately 2.3 years. The estimated period of performance to satisfy the performance obligation and project cost is reviewed quarterly and adjusted, as needed, to reflect our current expectations regarding the costs and timing of the deliverable.

We did not recognize revenue under this agreement during the three months ended March 31, 2019. Deferred revenue related to the agreement amounted to $6.4 million, of which $2.1 million is included in current liabilities. No milestone payments were received during the three months ended March 31, 2019.