Table
of Contents
63
Revenues from Collaborative and Other
Relationships
Other revenues
from collaborative and other
relationships include revenues earned under our 50%
share of the co-promotion profits or losses of
ZINBRYTA in the U.S. with AbbVie and revenues from
our technical development and manufacturing
services agreements with Samsung Bioepis. Prior to
the spin-off of our hemophilia business, other
revenues from collaborative and other relationships
also included revenues earned under our
manufacturing services agreement with Sobi on
shipments of ELOCTA and ALPROLIX to Sobi and
royalties from Sobi on
sales of ELOCTA and ALPROLIX
in their territory, which included substantially all of
Europe, Russia and certain markets in Northern Africa
and the Middle East. Bioverativ assumed all of our
rights and obligations under our agreement with Sobi
on February 1, 2017.
For 2017 compared to 2016, the decrease in
other revenues from collaborative and other
relationships was primarily due to the impact of the
spin-off of our hemophilia business on February 1,
2017, partially offset by higher revenues earned
under our manufacturing services agreement with
Samsung Bioepis.
For 2016 compared to 2015, the decrease in
other revenues from collaborative and other
relationships was primarily due to a net overall loss in
the collaboration with AbbVie of $21.9 million within
the U.S. and lower revenues earned under our
manufacturing services agreement with Samsung
Bioepis, partially offset by an increase in ELOCTA
shipments made under our manufacturing services
agreement with Sobi.
For additional information on our collaborative
and other relationships, please read Note 20,
Collaborative and Other Relationships, to our
consolidated financial statements included in this
report.
Other Royalty and Corporate Revenues
We receive royalties
from net sales on products
related to patents that we have out-licensed and we
record other corporate revenues primarily from
amounts earned under contract manufacturing
agreements.
For 2017 compared to 2016, the increase in
royalty and other corporate
revenues was primarily
due to an increase in sales of the underlying products
from which we receive royalties and higher contract
manufacturing revenues related to the volume of
shipments of drug substance production provided to
our strategic partners, including Bioverativ.
For 2016 compared to 2015, the increase in
royalty and other corporate revenues was primarily
due to higher contract manufacturing revenues related
to drug substance manufacturing provided to a
strategic partner.
Table of Contents
64
Reserves for Discounts and Allowances
Revenues from product sales are recorded net
of reserves established for applicable discounts and
allowances, including those associated with the
implementation of pricing actions in certain
international markets where we operate.
These reserves are based on estimates of the
amounts earned or to be claimed on the related sales
and are classified as reductions of accounts
receivable (if the amount is payable to our customer)
or a liability (if the amount
is payable to a party other
than our customer). Our estimates take into
consideration our historical experience, current
contractual and statutory requirements, specific
known market events and trends, industry data and
forecasted customer buying and payment patterns.
Actual amounts may ultimately differ from our
estimates. If actual results vary, we adjust these
estimates, which will have an effect on earnings in the
period of adjustment.
Reserves for discounts, contractual adjustments
and returns that reduced
gross product revenues are
summarized as follows:
For the years ended December 31, 2017, 2016
and 2015, reserves for discounts and allowances as
a percentage of gross product revenues were 22.0%,
21.3% and 19.3%, respectively.
Discounts
Discounts include trade term discounts and
wholesaler incentives.
For 2017 compared to 2016, the decrease in
discounts was primarily driven by the impact from the
spin-off of our hemophilia business on February 1,
2017, partially offset by an increase in rest of world
product revenues, due in part to an increase in
biosimilar revenues, as well as an increase in gross
selling prices.
For 2016 compared to 2015, the increase in
discounts was primarily driven by increases in gross
selling price, contractual
discount rates and volume
related to our hemophilia products.
Contractual Adjustments
Contractual adjustments primarily relate to
Medicaid and managed care rebates, co-payment
assistance (copay), VA and PHS discounts, specialty
pharmacy program fees and other government rebates
or applicable allowances.
For 2017 compared to 2016, the increase in
contractual adjustments
was primarily due to higher
managed care rebates and Medicaid and other
governmental rebates and allowances in the U.S., due
in part to an increase in gross selling prices and the
launch of SPINRAZA in the U.S. in the fourth quarter
of 2016, partially offset by the impact from the spin-
off of our hemophilia business on February 1, 2017.
For 2016 compared to 2015, the increase in
contractual adjustments was primarily due to higher
Medicaid and other governmental rebates and
allowances in the U.S. and managed care rebates,
due in part to an increase in gross selling prices.
Returns
Product return reserves are established for
returns made by wholesalers. In accordance with
contractual terms, wholesalers are permitted to return
product for reasons such as damaged or expired
product. The majority of wholesaler returns are due to
product expiration. Provisions for product returns are
recorded in the period the related revenue is
recognized, resulting in a reduction to product sales.
For 2017 compared to 2016, return provisions
were relatively consistent.
For 2016 compared to 2015, return reserves
decreased primarily due to
a reduction in return rates
based on recent experiences of returned products.
For additional information on our reserves,
please read Note 5, Reserves for Discounts and
Allowances, to our consolidated financial statements
included in this report.