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Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies

Commitments and Contingencies

11. Commitments and Contingencies

Operating Leases

620 Memorial Lease

In March 2015, the Company entered into a 5-year lease of office and laboratory space for its corporate headquarters (the “Lease”) at 620 Memorial Drive in Cambridge, Massachusetts. The Lease was amended in February 2018, to add an additional space (the “Expansion Space”) at the current location and to extend the Lease term (the “Amended Lease”). The Amended Lease covers approximately 20,751 square feet and expires in September 2023. Annual rent payments, including the Expansion Space, increase from $1.4 million to $1.7 million over the term of the Amended Lease. Variable lease payments include the Company’s allocated share of costs incurred and expenditures made by the landlord in the operation and management of the building. The Company has the option to extend the term of the Amended Lease for one additional term of 5 years commencing after the Amended Lease expires.

On October 5, 2020, the Company entered into a Sublease Agreement (the “Sublease”) with Orna Therapeutics, Inc. (the “Subtenant”) to sublease the space covered by the Amended Lease at 620 Memorial Drive, Cambridge, Massachusetts. The Sublease term commences on February 1, 2021 and ends on August 31, 2023, unless terminated earlier. The Sublease provides for initial annual base rent of approximately $1.9 million. The Subtenant is obligated to pay for certain costs, taxes and operating expenses, subject to certain exclusions. The Sublease is subordinate to that certain Indenture of Lease, dated March 5, 2015, by and between 620 Memorial Leasehold LLC and Scholar Rock, Inc., as amended.

301 Binney Lease

In November 2019, the Company entered into a lease of office and laboratory space at 301 Binney Street in Cambridge, Massachusetts to be used as its new corporate headquarters. The expiration date of the lease is in August 2025 and the Company has the option to extend the term by two years. The base rent is $6.9 million per year, subject to an increase of 3.5%, and the Company was subject to a free-rent period through mid-August 2020. Variable lease payments include the Company’s allocated share of costs incurred and expenditures made by the landlord in the operation and management of the building. Under this lease, the Company will receive lease incentives of $14.1 million in the form of an allowance for tenant improvements related to the design and build out of the space. In connection with the lease, the Company has secured a letter of credit for $2.3 million which renews automatically each year. The lease commencement date, for accounting purposes, was reached in September 2020.

Other information related to the Company’s leases (excluding the Company’s sublease) is as follows (in thousands, except lease term and discount rate):


		For Year Ended
		December 31,
		2020
Lease Cost:
Operating lease cost		$	3,229
Variable lease cost			1,027
Total lease cost		$	4,256


	For Year Ended
	December 31,
	2020
Other information:
Operating cash flows used for operating leases ⁽¹⁾	$	2,111
Weighted average remaining lease term		4.4 years
Weighted average incremental borrowing rate		7.5	%

⁽¹⁾Operating cash flows used for operating leases are presented net of certain tenant improvement reimbursements received related to the construction of the Company’s office and laboratory space at 301 Binney Street.

The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of December 31, 2020 (in thousands):


Year Ending December 31,
2021⁽¹⁾		$	7,657
2022			9,196
2023			9,070
2024			8,064
2025			4,498
Total lease payments			38,485
Less imputed interest			(6,026)
Total operating lease liabilities		$	32,459

⁽¹⁾Cash flows for operating lease liabilities in 2021 are presented net of tenant improvement allowances expected to be received related to the construction of the Company’s office and laboratory space at 301 Binney Street.

The Company recorded approximately $3.2 million and $1.4 million in rent expense for the years ended December 31, 2020 and 2019, respectively.

Specifica Antibody Library

On December 20, 2019 (the “Effective Date”), the Company entered into a Library Development and Transfer Agreement with Specifica Inc. (“Specifica”), whereby Specifica is responsible for developing and delivering a customized antibody display library (the “Library”) for the Company to use to identify antibodies for further research, development, and commercialization. As of December 31, 2020 the Company has paid $1.2 million of the total $3.7 million in fees expected to be paid through 2023 related to the Library.

Legal Proceedings

The Company, from time to time, may be party to litigation arising in the ordinary course of its business. The Company was not subject to any material legal proceedings during the years ended December 31, 2020 and 2019.