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Leases

3 Months Ended

Mar. 31, 2021

3. Leases

The Company leases office space in South Plainfield, New Jersey for its principal office under three noncancelable operating leases through May 2022 and August 2024, in addition to office space in various countries for international employees primarily through workspace providers.

The Company also leases approximately 220,500 square feet of office, manufacturing and laboratory space at a facility located in Hopewell Township, New Jersey (the “Campus”) pursuant to a Lease Agreement (the “Lease”) with Hopewell Campus Owner LLC (the “Landlord”). The rental term of the Lease commenced on July 1, 2020 and has an initial term of fifteen years (the “Initial Term”), with two consecutive ten year renewal periods, each at the Company’s option. The aggregate rent for the Initial Term will be approximately $111.5 million. The rental rate for the renewal periods will be 95% of the Prevailing Market Rate (as defined in the Lease) and determined at the time of the exercise of the renewal. The Company is also responsible for maintaining certain insurance and the payment of proportional taxes, utilities and common area operating expenses. The Lease contains customary events of default, representations, warranties and covenants.

Subject to the terms of the Lease, the Company has a right of first refusal to rent certain other space of the Campus, which would be triggered upon the Landlord’s issuance of a second round proposal or letter of intent to another tenant for such space. The Company also may seek to build a new separate building on the Campus, which may not contain less than 75,000 square feet (the “New Building”). Upon receipt of notice of the Company’s intention to build the New Building, the Landlord may, in its sole discretion, construct and lease the New Building to the Company or enter into a ground lease with the Company permitting the Company to construct the New Building. Rent terms for the New Building would be determined based on the land value, construction and project costs subject to whether the Landlord or Company constructs the New Building.

On March 20, 2020, the Company entered into a lease agreement with COE Bridgewater LLC relating to the lease of office and laboratory space located in Bridgewater, New Jersey. This lease replaced the Company’s existing lease on the property beginning on May 1, 2020 and includes additional rental property of approximately 59,000 square feet.

On June 19, 2020, the Company entered into a commercial manufacturing service agreement for a term of 12.5 years with MassBiologics of the University of Massachusetts Medical School ("MassBio"). The agreement will expire on December 31, 2032 unless the Company terminates it on 24 months prior written notice to MassBio. Pursuant to the terms of the agreement, MassBio agreed to provide the Company with four dedicated rooms for its gene therapy AADC program. The Company concluded that the agreement contains an embedded lease as the Company controls the use of the four dedicated rooms and the equipment therein. As the present value of the facilities exceeds the assessed fair value, the Company determined that it is a finance lease. Given that the embedded finance lease is designed for the production of PTC’s AADC program and would not have an alternate use outside the PTC gene therapy platform without incurring significant costs, the Company determined that the lease should be treated as research and development expense under ASC 730 and accordingly, expensed the present value of all guaranteed future cash payments of $41.4 million during the twelve month period ending December 31, 2020. Additionally, during the three month period ending March 31, 2021, the Company recorded finance lease costs of $0.4 million related to interest on the lease liability.

The Company also leases certain vehicles, lab equipment, and office equipment under operating leases. The Company’s leases have remaining operating lease terms ranging from 0.3 years to 14.3 years and certain of the leases include renewal options to extend the lease for up to 10 years. Rent expense was $5.4 million and $2.4 million for the three month periods ended March 31, 2021 and 2020, respectively.

The components of operating lease expense were as follows:


	Three Months Ended		Three Months Ended
		March 31, 2021		March 31, 2020
Operating Lease Cost
Fixed lease cost	$	4,104	$	2,118
Variable lease cost		1,093		228
Short-term lease cost		164		77
Total operating lease cost	$	5,361	$	2,423

Total operating lease cost is a component of operating expenses on the consolidated statements of operations.

Supplemental balance sheet information related to leases was as follows:


	March 31, 2021		December 31, 2020
Operating lease ROU asset	$	82,382	$	84,410

Operating lease liabilities- current	$	7,333	$	7,465
Operating lease liabilities- noncurrent		77,863		79,499
Total operating lease liability	$	85,196	$	86,964


	March 31, 2021		December 31, 2020
Finance lease liabilities- current	$	1,694	$	1,276
Finance lease liabilities- noncurrent		20,053		23,053
Total finance lease liability	$	21,747	$	24,329

The Company did not enter into any new leases during the three month period ended March 31, 2021. The decrease in the operating lease ROU asset primarily resulted from amortization of existing leases, along with the termination of several car and furniture leases during the period ended March 31, 2021.

Supplemental lease term and discount rate information related to leases was as follows as of March 31, 2021 and December 31, 2020:


	March 31, 2021		December 31, 2020
Weighted-average remaining lease terms - operating leases (years)	11.34		11.49
Weighted-average discount rate - operating leases	8.88	%	8.86	%
Weighted-average remaining lease terms - finance lease (years)	11.75		12.00
Weighted-average discount rate - finance lease	7.80	%	7.80	%

Supplemental cash flow information related to leases was as follows as of March 31, 2021 and 2020:


	Three Months Ended March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,406	$	1,971
Financing cash flows from finance lease		2,224		—
Operating cash flows from finance leases		776		—

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	13	$	22,642
Finance lease		—		—

Future minimum lease payments under non-cancelable leases as of March 31, 2021 were as follows:


	Operating Leases		Finance Lease
2021 (excludes the three months ended March 31, 2021)	$	10,242	$	—
2022		13,240		3,000
2023		12,843		3,000
2024		12,150		3,000
2025 and thereafter		91,994		24,000
Total lease payments		140,469		33,000
Less: Imputed Interest expense		55,273		11,253
Total	$	85,196	$	21,747

In conjunction with the Asset Purchase Agreement by and between the Company and BioElectron Technology Corporation, dated October 1, 2019 (the “Asset Acquisition Agreement”), the Company acquired BioElectron’s lease in Mountainview, California. As substantially all of the fair value of the gross assets acquired was related to vatiquinone, the relative fair value allocated to the right of use asset and corresponding lease liability for the Mountainview lease was determined to be immaterial, and accordingly is not included in the tables above. The future minimum lease payments for the Mountainview lease as of March 31, 2021 are $1.4 million, and $1.4 million for the remainder of 2021 and for 2022, respectively, and $0 thereafter.