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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 in each reporting period, commenting frequently on the disaggregation of 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.
  • You state that you do not allocate R&D costs by product candidate. However, it appears that you do track such costs by other classifications, such as payroll and other personnel expenses, laboratory supplies, and fees paid to third parties to conduct R&D activities on your behalf. Please revise to disclose the costs incurred by the types of costs classified as R&D for each period presented.
  • 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.

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