The Company provides research and development services to third parties based on both Company and third party owned intellectual property. Such services are performed on a “best efforts” basis without a guarantee of technological or commercial success. For some research programs, Affimed has entered into collaborations with other companies that provide the Company with funding or other resources such as access to technologies. From time to time, the Company also licenses its intellectual property to third parties who use it to develop product candidates.
Collaboration and license agreements are evaluated to determine whether they involve multiple elements that can be considered separate units of accounting. To date, the Company has not licensed or sold its intellectual property without continuing involvement by providing the related research and development services. Accordingly, the results under the Company’s collaboration and license agreements have not qualified as separate units of accounting.
Revenue from collaborative or other research service agreements is recognized according to the stage of completion.
Milestone payments are contingent upon the achievement of contractually stipulated targets. The achievement of these targets or milestones depends largely on meeting specific requirements laid out in the respective agreement. Consideration that is contingent upon achievement of a milestone is recognized in its entirety as revenue in the period in which the milestone is achieved, but only if the consideration earned from the achievement of a milestone meets all the criteria for the milestone to be considered substantive at the inception of the agreement. For a milestone to be considered substantive, the consideration earned by achieving the milestone must (i) be commensurate with the Company’s performance to achieve the milestone, (ii) relate solely to past performance, and (iii) be reasonable relative to all results and payment terms subject to the respective agreement.
Non-refundable upfront research funding that generally has no stand-alone value to the customer and requires continuing involvement in the form of research and development services or other efforts by the Company is recognized as revenue ratably over the term of the service agreement which is the period of performance.