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Companies incur significant research and development (R&D) expenses in order to remain competitive through innovation. The SEC staff has focused on the quality of disclosures related to R&D costs charged to expense, asking frequently to disaggregate R&D costs by each major product/project category.
Comment examples
Guidance references
  • Please provide us a breakdown of your R&D expenses incurred for each year presented by product candidate or project. To the extent that you do not track costs by project, please explain how your R&D costs are managed and how they are reported within the organization. To the extent that you can distinguish your R&D costs by discovery, preclinical and clinical development categories and/or therapeutic class or by the type of cost, please provide us with this information.
  • We note in your disclosure that you “have no historically allocated resources specifically to individual clinical programs.” This appears to conflict with the breakdowns of research and development expenses by product candidate. Please revise your disclosure to provide a breakout of your periodic research and development expenses by major development program or product candidate. Otherwise, tell us and disclose when and why you stopped tracking by product candidate.
  • We note that you have multiple drug candidates in varying stages of development and clinical testing and that research and development is a significant aspect of your business. Please provide more detail for your research and development expenses for each period presented, including but not limited to by product candidate as well as by the nature of the expenses. To the extent that you do not track expenses by product candidate, please disclose as such.
  • You state that compensation of your research and development personnel are included as a component of salaries and wages in the consolidated statements of operations. Your disclosure appears to conflict with your accounting policy and ASC 730-10-25-2b. Please clarify for us how your accounting policy complies with ASC 730-10-25 and revise as necessary. In addition, please revise your Management's Discussion and Analysis to separately discuss the reasons for significant changes in research and development expenses in the statements of operations.

PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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