v3.23.2
Product Revenue
 6 Months Ended
Jun. 30, 2023
Revenue from Contract with Customer [Abstract]  
Product Revenue Product Revenue
We sell PYRUKYND®, our wholly owned product, to a limited number of specialty distributors and specialty pharmacy providers, or collectively, the Customers. The Customers subsequently resell PYRUKYND® to pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of PYRUKYND®.
The performance obligation related to the sale of PYRUKYND® is satisfied and revenue is recognized when the Customer obtains control of the product, which occurs at a point in time, typically upon delivery to the Customer.
Product revenue, net, were as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2023202220232022
Product revenue, net$6,712 $3,082 $12,321 $3,914 
Reserves for Variable Consideration
Revenues from product sales are recorded at the net sales price, or transaction price, which includes estimates of variable consideration for which reserves are established and result from contractual adjustments, government rebates, returns and other allowances that are offered within the contracts with our Customers, healthcare providers, payors and other indirect customers relating to the sale of our products.
Contractual Adjustments
We generally provide Customers with discounts, including prompt pay discounts, and allowances that are explicitly stated in the contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we receive sales order management, data and distribution services from certain Customers.
Chargebacks and discounts represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are estimated using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated channel mix and are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue.
Government Rebates
Government rebates include Medicare, TriCare, and Medicaid rebates, which we estimate using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program.
Returns / Replacement
We estimate the amount of product sales that may be returned by Customers or replaced by Agios and record this estimate as a reduction of revenue in the period the related product revenue is recognized. We currently estimate product return and replacement liabilities using the expected value method, based on available industry data, including our visibility into the inventory remaining in the distribution channel.
The following table summarizes balances and activity in each of the product revenue allowance and reserve categories for the six months ended June 30, 2023:
(In thousands)Contractual AdjustmentsGovernment RebatesReturns/ ReplacementTotal
Balance at December 31, 2022$65 $573 $133 $771 
Current provisions relating to sales in the current year631 1,065 2,064 3,760 
Adjustments relating to prior years— (7)— (7)
Payments/returns relating to sales in the current year(479)(325)(1,958)(2,762)
Payments/returns relating to sales in the prior years(49)(306)(48)(403)
Balance at June 30, 2023$168 $1,000 $191 $1,359 
Total revenue-related reserves above, included in our condensed consolidated balance sheets, are summarized as follows:
(In thousands)June 30, 2023December 31, 2022
Reduction of accounts receivable$162 $60 
Component of accrued expenses 1,197 711 
Total revenue-related reserves$1,359 $771 
The following table presents changes in our contract assets during the six months ended June 30, 2023:
(In thousands)December 31, 2022AdditionsDeductionsJune 30, 2023
Contract assets(1)
Accounts receivable, net$2,206 $16,074 $(16,029)$2,251 
(1) Additions to contract assets relate to amounts billed to Customers for product sales and deductions to contract assets primarily relate to collection of receivables during the reporting period.