d.Research and development costs
Expenditure on drug development activities is capitalized only if all of the following conditions are met:
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it is probable that the asset will create future economic benefits; |
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the development costs can be measured reliably; |
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technical feasibility of completing the intangible asset can be demonstrated; |
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there is the intention to complete the asset and use or sell it; |
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there is the ability to use or sell the asset; and |
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adequate technical, financial, and other resources to complete the development and to use or sell the asset are available. |
These conditions are generally met when a filing is made for regulatory approval for commercial production. Otherwise, costs on research activities are recognized as an expense in the period in which they are incurred.
At this time, the Group does not meet all conditions and therefore development costs are recorded as expense in the period in which the cost is incurred.
The Group’s preclinical studies and clinical trials have been performed utilizing third-party contract research organizations (“CROs”) and other vendors. For preclinical studies, the significant factors used in estimating accruals include the percentage of work completed to date and contract milestones achieved. For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, duration of enrollment, percentage of work completed to date and contract milestones achieved. The Group monitors patient enrollment levels and related activities to the extent possible through internal reviews, correspondence and status meetings and review of contractual terms. Estimates are dependent on the timeliness and accuracy of data provided by the CROs and other vendors. In this event, the Group could record adjustments to research and development expenses in future periods when the actual activity levels become known.