13. Commitments and contingencies
Research and development contracts and contract research organizations agreements
The Company utilizes contract manufacturing organizations (“CMOs”) for the development and production of clinical materials and contract research organizations (“CROs”) to perform services related to its clinical trials. Pursuant to the agreements with these CMOs and CROs, the Company has either the right to terminate the agreements without penalties or under certain penalty conditions. As of March 31, 2025, the Company has $300 of commitments to CMOs and $110 of commitments to CROs for the next twelve months.
Legal proceedings and disputes
In the ordinary course of business, the Company is at times subject to various legal proceedings and disputes. The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal contingencies may be adjusted to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of loss is not estimable, the Company does not accrue legal contingencies. While the outcome of legal proceedings is inherently uncertain, based on information currently available, management believes that it has established appropriate legal reserves. No reserves or liabilities have been accrued as at March 31, 2025.
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.