Section B - Case 2: BioGenix

Scenario: BioGenix is a biotechnology firm developing a new gene therapy, 'GeneX'. During the year ended 31 December 20X5, BioGenix incurred the following costs:

• $2,000,000 on the research phase (Jan-Jun).
• $3,000,000 on the development phase (Jul-Dec), incurred evenly over the 6 months.
  BioGenix management confirmed that the project met all IAS 38 capitalization criteria on 1 October 20X5.

BioGenix also holds a patent for a different drug. On 1 January 20X5, BioGenix licensed this patent to PharmaCo. PharmaCo paid an upfront, non-refundable fee of $5,000,000 for the right to use the patent for 5 years. BioGenix has no further performance obligations. The contract also includes a $2,000,000 milestone payment if PharmaCo achieves $50m in sales in 20X5. By 31 December 20X5, PharmaCo's sales were $30m, and BioGenix determined it is highly probable the milestone will not be met.

Finally, BioGenix has a Cash Generating Unit (CGU) that was impairment tested. Carrying amounts: Goodwill $1m, Patent $4m, Equipment $5m. Recoverable amount of the CGU is $7m.

Question: How much of the 'GeneX' costs should be capitalized as an intangible asset for the year ended 31 December 20X5?