Company: CNTB
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001835268-25-000014
Chunk: 241

Company: Connect Biopharma Holdings Ltd
Filing Date: 2025-03-31
Form: 10-K
Item: Item 7
Chunk 241
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 results of operations.

We believe the following critical accounting estimates describe the most significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Our license and collaboration revenues have been generated through a collaborative development, manufacturing and commercialization agreement. The terms of the agreement include the license of intellectual property and associated know-how and the provision of other goods and services. Payments to us under a collaborative agreement typically include one or more for the following: non-refundable, upfront license fees; manufacturing supply services; milestone payments; and royalties on future product sales. We utilize key assumptions that require judgement to determine the stand-alone selling price for each performance obligation identified in the agreement, which may include revenue forecasts, expected development timelines, discount rates, probabilities of technical and regulatory success and costs for manufacturing clinical supplies. To date, our estimates have not differed materially from actual values. Because the amount of revenue recognized for each performance obligation is determined based upon its relative stand-alone price, changes in the estimated fair value of the stand-alone selling price for each performance obligation may result in a significant change to our revenue, which could materially affect our results of operations or financial position.

Accrued Research and Development Expenses

We estimate certain costs and expenses and accrue for these liabilities as part of our process of preparing financial statements. Examples of areas in which subjective judgments may be required include, among other things, costs associated with services provided by contract organizations for preclinical development, manufacturing of our Product Candidates and clinical trials. We accrue for costs incurred as the services are being provided by monitoring the status of the trial or services provided, and the invoices received from our external service providers. In the case of clinical trials, a portion of the estimated cost normally relates to the projected cost to treat a patient in the trials, and this cost is recognized based on the number of patients enrolled in the trial. Other indirect costs are generally recognized on a straight-line basis over the estimated period of the study. As actual costs become known to us, we adjust our accruals. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed. To date, our estimates have not differed materially from the actual costs incurred. However, subsequent changes in estimates may result in a material change in our accruals, which could also materially affect our balance sheet and results of operations.

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