Royalty Revenues and Accounts Payable

9 Months Ended

Sep. 30, 2018

Royalty Revenues and Accounts Payable [Abstract]

Royalty Revenues and Accounts Payable [Text Block]

(11) Royalty Revenues and Accounts Payable

During the fourth quarter of 2017, Merck corrected an error in their previous adjustment of royalties, noting that they owed the Company an additional net amount of approximately $88,000 and the Company recorded a receivable of that amount. In March 2018, Merck notified the Company that a downward adjustment of approximately $313,000 in royalties was necessary, primarily due to returns from sales in China in the fourth quarter of 2017. Accordingly, in December 2017, the Company accrued a liability to Merck of approximately $313,000 and partially offset that amount by the $88,000 that was due to the Company from Merck. Thus, the Company recorded a net payable to Merck of approximately $225,000 included in accounts payable in the condensed consolidated balance sheet at December 31, 2017.

In January 2018, Merck paid the net $88,000 that was due to the Company from the royalties adjustment it had made. Because this amount was included in March 2018 when Merck calculated and notified the Company of the $313,000 returns adjustment, the $88,000 received in January was recorded as an additional liability due back to Merck. Therefore, at March 31, 2018 the aggregate amount due to Merck was approximately $313,000.

During the three-month period ended June 30, 2018, Merck calculated and notified the Company that Enzon earned $61,000 of royalties, which reduced the aggregate amount due to Merck to approximately $253,000.

During the three-month period ended September 30, 2018, Merck calculated and notified the Company that Merck had an additional downward adjustment of approximately $280,000, the net effect of royalty income of $54,000 and chargebacks of $334,000. Such chargebacks, of which returns from Iraq represented approximately $254,000, resulted, primarily, from product rebates and returns. After accounting for this downward adjustment, the liability to Merck was increased to $533,000 at September 30, 2018.

While it is likely there will be future downward adjustments from Merck based on product returns and rebates, the Company is unable to predict the timing and amounts of any such adjustments.