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Leases

12 Months Ended

Dec. 31, 2022

6. Leases

The Company leases office space in South Plainfield, New Jersey for its principal office under two noncancelable operating leases through August 2024, in addition to office and laboratory space in Bridgewater, New Jersey and 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.

In May 2022, the Company entered into a Lease Agreement (the “Warren Lease”) with Warren CC Acquisitions, LLC (the “Warren Landlord”) relating to the lease of two entire buildings comprised of approximately 360,000 square feet of shell condition, modifiable space (the “Warren Premises”) at a facility located in Warren, New Jersey. The rental term of the Warren Lease commenced on June 1, 2022 (the “Commencement Date”), with an initial term of seventeen years (the “Warren Initial Term”), followed by three consecutive five-year renewal periods at the Company’s option. The aggregate base rent for the Warren Initial Term will be approximately $163.0 million; provided, however, that if the Company is not subject to an Event of Default (as defined in the Warren Lease), the Company will be entitled to a base rent abatement over the first three years of the Warren Initial Term of approximately $18.6 million, reducing the Company’s total base rent obligation to $144.4 million. The rental rate for the renewal periods will be at the Fair Market Rental Value (as defined in the Warren Lease) and determined at the time of the exercise of the renewal. Beginning in the second lease year, the Company is also responsible for the payment of all taxes and operating expenses for the Warren Premises. As a result, the Company recorded an operating lease ROU asset of $28.9 million and an operating lease ROU liability of $28.9 million as of the Commencement Date.

The Company plans on developing the Warren Premises into office and laboratory space. The Company is entitled to an allowance of approximately $36.2 million to be provided by the Warren Landlord to be used towards such improvements. The Landlord is providing the allowance to cover those assets that are real property improvements, such as structural components, roofs, flooring, etc., whose useful lives are typically longer in nature. Upon the first issuance of a temporary certificate of occupancy for the Warren Premises, the Company will receive $5.0 million from the Landlord, which the Company has committed to fund into the construction account. The Company evaluated the leasehold improvements under ASC 842 and determined that the Company will be the owner of the improvements, and therefore the $36.2 million allowance and $5.0 million due from the Landlord were treated as lease incentives at the commencement of the lease and included in the calculation of the lease ROU asset and lease ROU liability, effectively reducing both at

Commencement Date. In connection with the execution of the Warren Lease, the Company also committed to fund a construction account with $3.6 million to go towards the Company’s improvements of the Warren Premises. Subject to the terms of the Warren Lease, the Company has a right of first offer to purchase the Warren Premises if the Warren Landlord receives a bona fide third party offer to purchase the Warren Premises or the Warren Landlord decides to sell the Warren Premises.

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 Company determined that the agreement was a finance lease, for which the Company recorded a finance lease ROU asset for $41.4 million and corresponding finance lease liability for $41.4 million at the onset of the lease agreement. Given that the leased asset 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. Accordingly, the full $41.4 million relating to the finance lease ROU asset was written off and expensed to research and development during the year ended December 31, 2020. As of December 31, 2022, the balance of the finance lease liabilities-current and finance lease liabilities-non-current are $3.0 million and $18.7 million, respectively, and are directly related to the Company’s MassBio agreement. As of December 31, 2021, the balance of the finance lease liabilities-current and finance lease liabilities non-current were $3.0 million and $20.1 million, respectively. Additionally, during the years ended December 31, 2022 and December 31, 2021, the Company recorded finance lease costs of $1.6 million and $1.7 million, respectively, related to interest on the lease liability.

The Company also leases certain vehicles, lab equipment, and office equipment under operating leases. The Company’s operating leases have remaining lease terms ranging from 1.2 years to 16.4 years and certain leases include renewal options to extend the lease for up to 15 years. Rent expense was approximately $25.2 million, $21.4 million, and $15.3 million for the years ended December 31, 2022, 2021 and 2020.

The components of lease expense were as follows:


	Year Ended December 31, 2022		Year Ended December 31, 2021		Year Ended December 31, 2020
Operating Lease Cost
Fixed lease cost	$	19,804	$	16,411	$	12,368
Variable lease cost		4,557		4,361		2,448
Short-term lease cost		808		656		450
Total operating lease cost	$	25,169	$	21,428	$	15,266

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

Supplemental lease term and discount rate information related to leases was as follows:


	December 31, 2022		December 31, 2021
Weighted-average remaining lease terms - operating leases (years)	11.61		10.87
Weighted-average discount rate - operating leases	8.61	%	8.91	%
Weighted-average remaining lease terms - finance lease (years)	10.01		11.00
Weighted-average discount rate - finance lease	7.80	%	7.80	%

Supplemental cash flow information related to leases was as follows:


	Year Ended December 31,
	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	14,736	$	13,683	$	8,462
Financing cash flows from finance lease		1,276		2,224		17,829
Operating cash flows from finance leases		1,724		776		171

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	35,817	$	645	$	76,811
Finance lease		—		—		41,382

Future minimum lease payments under non-cancelable leases as of December 31, 2022 were as follows:


	Operating Leases		Finance Lease
2023	$	15,373	$	3,000
2024		18,456		3,000
2025		20,431		3,000
2026		19,985		3,000
2027 and thereafter		193,792		18,000
Total lease payments		268,037		30,000
Less: Imputed Interest expense		157,807		8,325
Total	$	110,230	$	21,675