BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
The Businesss revenues have been derived from the sale of bile acid products, which primarily treat
bile acid disorders and enzyme defects. Revenues are recognized in satisfaction of a single performance obligation when the customer obtains control of the Businesss product, which occurs upon delivery to the customer. The Business receives
payments from its product sales, primarily through third party payers, based on terms that generally are within 30 days of delivery of product to the patient. Contracts do not contain significant financing components based on the typical period of
time between performance of services and collection of consideration.
Deductions from Revenue
Revenues from product sales are recorded at the net sales price, which includes provisions resulting from discounts, rebates and
co-pay assistance that are offered to customers, health care providers, payers and other indirect customers relating to the Businesss sales of its products. These provisions are based on the estimates of
the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale, using the most likely amount method, and are
classified as a reduction of accounts receivable (if the amount is payable to a customer) or as a current liability (if the amount is payable to a party other than a customer). The Business includes these estimated amounts in the transaction price
to the extent it is probable that a significant reversal of cumulative revenue recognized for such transactions will not occur. Where appropriate, these reserves take into consideration the Businesss historical experience, current contractual
and statutory requirements and specific known market events and trends. Overall, these reserves reflect the Businesss best estimates of the amount of consideration to which it is entitled based on the terms of the contract. If actual results
in the future vary from the Businesss provisions, the Business will adjust the estimate, which would affect net product sales and earnings in the period such variances become known. For the year ended December 31, 2022, the Business
recorded a net product sales increase of $0.6 million, related to performance obligations satisfied in previous periods.
Government Rebates:
The Business calculates the rebates that it will be obligated to provide to government programs and deducts these estimated amounts from its gross product sales at the time the revenues are recognized. Allowances for government rebates and discounts
are established based on actual payer information, which is reasonably estimated at the time of delivery, and the government-mandated discounts applicable to government-funded programs. Rebate discounts are included in other current liabilities in
the accompanying combined balance sheet.
Prompt Pay Discounts: The Business offers discounts to certain customers for prompt payments. The
Business accrues for the calculated prompt pay discount based on the gross amount of each invoice for those customers at the time of sale.
Product
Returns: Consistent with industry practice, the Business offers its customers a limited right to return product purchased directly from the Business, which is principally based upon the products expiration date. Generally, shipments are
only made upon a patient prescription thus returns are minimal. For the year ended December 31, 2022, product returns were immaterial.
Co-pay Assistance: The Business offers a co-pay assistance program, which is intended to provide financial assistance to qualified commercially insured patients with
prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is based on an identification of claims and the cost per claim
associated with product that has been recognized as revenue.
NOTE 4. INVENTORY
Inventory, net of reserves, consisted of the following at December 31, 2022 (in thousands):
|
|
|
|
|
|
|
2022 |
|
Raw materials |
|
$ |
1,231 |
|
Finished goods |
|
|
1,168 |
|
|
|
|
|
|
Total inventory |
|
$ |
2,399 |
|
|
|
|
|
|
NOTE 5. INTANGIBLE ASSETS, NET
Amortizable Intangible Assets
Manchester
Pharmaceuticals LLC
In 2014, the Company acquired intangible assets with finite lives related to the Chenodal product rights, trade names, and
customer relationships with fair values of $67.8 million $0.2 million, and $0.4 million, respectively. The useful lives related to the acquired product rights, trade names, and customer relationships are expected to be approximately
16, 1 and, 10 years, respectively. Amortization of product rights, trade names and customer relationships are being recorded in selling, general and administrative expense over their respective lives.
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