Note 5 - Revenue	6 Months Ended
Jun. 30, 2019
Notes to Financial Statements
Revenue [Text Block]	NOTE 5 . Revenue U.S. Government HHS BARDA Contract In September 2015, the Department of Health and Human Services, Office of Biomedical Advanced Research and Development Authority (“HHS BARDA”) awarded the Company a contract to support the advanced development of a more effective and universal influenza vaccine to improve seasonal and pandemic influenza preparedness. On each of May 25 and July 18, 2017, and June 28, 2018, the Company entered into a Modification of Contract with HHS BARDA, the combined effect being to increase the value of the existing $14 million contract by $1.7 million and to extend it through September 30, 2018. The modified contract was a cost-plus-fixed-fee contract, which reimbursed the Company for allowable direct contract costs plus allowable indirect costs and a fixed fee, totaling $15.7 million. The Company recognized revenue of $520,000 and $1,130,000 during the three and six months ended June 30, 2018, respectively. As of December 31, 2018, the cumulative revenue recorded from inception under the HHS BARDA contract represented the maximum billable under the contract as presently modified, with no further change orders envisaged. Billings under the contract were based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. Indirect rates as well as allowable costs are subject to audit by HHS BARDA on an annual basis. Management believes that revenues recognized to date have been recorded in amounts that are expected to be realized upon final audit and settlement. When the final determination of the allowable costs for any year has been made, revenue and billings may be adjusted accordingly in the period that the adjustments are known and collection is probable. Costs relating to contract acquisition are expensed as incurred. The Company does not consider any of the revenue recorded under this contract in any period to be at risk of reversal. Royalty Agreements Aviragen entered into a royalty-bearing research and license agreement with GlaxoSmithKline, plc (“GSK”) in 1990 for the development and commercialization of zanamivir, a neuraminidase inhibitor marketed by GSK under the name Relenza to treat influenza. All of the Company’s Relenza patents have expired, the last remaining intellectual property related to the Relenza patent portfolio, which is solely owned by the Company and exclusively licensed to GSK, having expired in July 2019 in Japan. The royalty revenue related to Relenza recognized in the three months ended June 30, 2019 and 2018 , was $69,000 and $70,000, respectively, and in the six months ended June 30, 2019 , and in the post-Merger period in the six months ended June 30, 2018 , was $764,000 and $411,000, respectively, representing 7% of net sales in Japan. The Company also generates royalty revenue from the sale of Inavir in Japan, pursuant to a collaboration and license agreement that Aviragen entered into with Daiichi Sankyo Company, Limited (“Daiichi Sankyo”) in 2009. In September 2010, laninamivir octanoate was approved for sale by the Japanese Ministry of Health and Welfare for the treatment of influenza in adults and children, which Daiichi Sankyo markets as Inavir. Under the agreement, the Company currently receives a 4% royalty on net sales of Inavir in Japan. The last patent related to Inavir is set to expire in December 2029, at which time royalty revenue will cease. The royalty revenue related to Inavir recognized in the six months ended June 30, 2019 , and in the post-Merger period in the six months ended June 30, 2018, was $2,964,000 and $552,000, respectively, representing 4% of net sales in Japan. No such revenue was recognized in the three months ended June 30, 2019 or 2018 , since the sums receivable, net of withholding tax, of $16,000 and $18,000, respectively, were payable to Healthcare Royalty Partners III, L.P. (“HCRP”) (see Note 6 ). Both the royalty revenue and the non-cash royalty revenue related to the sale of future royalties have been subjected to a 5% withholding tax in Japan, for which $1,000 and $1,000 was included in income tax expense in the three months ended June 30, 2019 and 2018 , respectively, and $237,000 and $29,000 was included in income tax expense in the six months ended June 30, 2019 and 2018 , respectively. The Company’s royalty revenue is seasonal, in line with the flu season. The majority of the Company’s royalty revenue is earned in the first and fourth fiscal quarters.

NOTE

Revenue

U.S. Government HHS BARDA Contract

September

2015,

the Department of Health and Human Services, Office of Biomedical Advanced Research and Development Authority (“HHS BARDA”) awarded the Company a contract to support the advanced development of a more effective and universal influenza vaccine to improve seasonal and pandemic influenza preparedness. On each of

May

and

July 18, 2017,

and

June 28, 2018,

the Company entered into a Modification of Contract with HHS BARDA, the combined effect being to increase the value of the existing

$14

million contract by

$1.7

million and to extend it through

September 30, 2018.

The modified contract was a cost-plus-fixed-fee contract, which reimbursed the Company for allowable direct contract costs plus allowable indirect costs and a fixed fee, totaling

$15.7

million. The Company recognized revenue of

$520,000

and

$1,130,000

during the

three

and

six

months ended

June 30,

2018,

respectively. As of

December 31, 2018,

the cumulative revenue recorded from inception under the HHS BARDA contract represented the maximum billable under the contract as presently modified, with

further change orders envisaged.

Billings under the contract were based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. Indirect rates as well as allowable costs are subject to audit by HHS BARDA on an annual basis. Management believes that revenues recognized to date have been recorded in amounts that are expected to be realized upon final audit and settlement. When the final determination of the allowable costs for any year has been made, revenue and billings

may

be adjusted accordingly in the period that the adjustments are known and collection is probable. Costs relating to contract acquisition are expensed as incurred. The Company does

not

consider any of the revenue recorded under this contract in any period to be at risk of reversal.

Royalty Agreements

Aviragen entered into a royalty-bearing research and license agreement with GlaxoSmithKline, plc (“GSK”) in

1990

for the development and commercialization of zanamivir, a neuraminidase inhibitor marketed by GSK under the name Relenza

to treat influenza. All of the Company’s Relenza patents have expired, the last remaining intellectual property related to the Relenza patent portfolio, which is solely owned by the Company and exclusively licensed to GSK, having expired in

July 2019

in Japan. The royalty revenue related to Relenza recognized in the

three

months ended

June 30,

2019

and

2018

, was

$69,000

and

$70,000,

respectively, and in the

six

months ended

June 30,

2019

, and in the post-Merger period in the

six

months ended

June 30,

2018

, was

$764,000

and

$411,000,

respectively, representing

of net sales in Japan.

The Company also generates royalty revenue from the sale of Inavir in Japan, pursuant to a collaboration and license agreement that Aviragen entered into with Daiichi Sankyo Company, Limited (“Daiichi Sankyo”) in

2009.

September 2010,

laninamivir octanoate was approved for sale by the Japanese Ministry of Health and Welfare for the treatment of influenza in adults and children, which Daiichi Sankyo markets as Inavir. Under the agreement, the Company currently receives a

royalty on net sales of Inavir in Japan. The last patent related to Inavir is set to expire in

December 2029,

at which time royalty revenue will cease. The royalty revenue related to Inavir

recognized in the

six

months ended

June 30,

2019

, and in the post-Merger period in the

six

months ended

June 30,

2018,

was

$2,964,000

and

$552,000,

respectively, representing

of net sales in Japan.

such revenue was recognized in the

three

months ended

June 30,

2019

2018

, since the sums receivable, net of withholding tax, of

$16,000

and

$18,000,

respectively, were payable to Healthcare Royalty Partners III, L.P. (“HCRP”) (see Note

). Both the royalty revenue and the non-cash royalty revenue related to the sale of future royalties have been subjected to a

withholding tax in Japan, for which

$1,000

and

$1,000

was included in income tax expense in the

three

months ended

June 30,

2019

and

2018

, respectively, and

$237,000

and

$29,000

was included in income tax expense in the

six

months ended

June 30,

2019

and

2018

, respectively.

The Company’s royalty revenue is seasonal, in line with the flu season. The majority of the Company’s royalty revenue is earned in the

first

and

fourth

fiscal quarters.