arrangements that an entity determines are within the scope of IFRS 15, the entity performs the following five steps: (i) identify
the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price;
(iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the
entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that
the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
At contract inception, once the contract is determined to be within the scope of IFRS 15, the Company assesses the goods or services
promised within each contract and determines those that are performance obligations, and assesses whether each promised good or
service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective
performance obligation when (or as) the performance obligation is satisfied.
Our revenues have experienced fluctuations
over the past three years as a result of securing new collaboration agreements, the timing of milestone achievement and the size
of each milestone payment. We expect that any revenue we generate from our two collaboration agreements with Genentech, our collaboration
agreements with each of Janssen, Life Molecular Imaging, Biogen and Essex, research and development grants, and any other current
or future collaboration partners will fluctuate from year to year as a result of the timing and amount of milestones and other
Research and Development Expenses
Research and development costs are expensed
as incurred and consist of salaries and benefits, lab supplies, materials, intellectual property and facility costs, as well as
fees paid to other nonemployees and entities that conduct certain research and development activities on our behalf. Amounts incurred
in connection with collaboration and license agreements are also included in research and development expense. Payments made prior
to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
Clinical trial costs are a component of
research and development expenses. We accrue and expense clinical trial activities performed by third parties based upon actual
work completed in accordance with agreements established with clinical research organizations and clinical sites. We determine
the actual costs through monitoring patient enrollment and discussions with internal personnel and external service providers as
to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.
Manufacturing start-up costs are a component
of research and development expenses. Additionally, manufacturing costs incurred after regulatory approval but in connection with
significant changes and/or enhancements to the approved manufacturing process are recorded as research and development expenses.
We accrue and expense manufacturing activities performed by third parties based upon actual work completed in accordance with agreements
established with contract manufacturers.
Our investment in research and development
activities, including the clinical development of our product candidates has historically been and is projected to be more than
75% of our total annual operating costs. Research and development expenses represent costs incurred to conduct research, such as
the discovery and development of our product candidates, as well as development of new product candidates from our SupraAntigen
and Morphomer platforms as well as the development of product candidates pursuant to our collaboration agreements with Genentech,
Janssen, Life Molecular Imaging, Biogen and Essex. We recognize all research and development costs as they are incurred. Clinical
study costs, contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is
performed. At present, our research activities comprise three major areas:
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We expect our research and development
expenses to increase substantially in the future and expect to fund a broader number of projects, which will impact our research
strategy in four key ways:
(i) we expect to undertake later-stage
research and development of our product candidates and, if approved, to take some of those product candidates into commercialization;