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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Leases We lease our facilities in Emeryville, California and Düsseldorf, Germany. We lease and sublease certain manufacturing and office space with lease terms ranging from 3 to 12 years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include options to renew or extend the lease for two successive five-year terms. These optional periods have not been considered in the determination of the right-of-use assets or lease liabilities associated with these leases as we did not consider the exercise of these options to be reasonably certain. Sublease Termination and New Sublease On February 22, 2024, our third-party subtenant obtained the approval of a voluntary petition for relief under Chapter 11 of the United States Code. As a consequence, the sublease agreement with that third-party for the subleased premises (approximately 75,662 square feet of office/laboratory space located at 5959 Horton Street, Emeryville, California) was terminated effective March 7, 2024. Simultaneously, on March 7, 2024, we entered into a new sublease agreement with a different third-party under similar conditions and for the same premises. Rent from the new sublease agreement is subject to scheduled annual increases, and the subtenant is responsible for certain operating expenses and taxes throughout the life of the sublease. The new sublease term expires on March 31, 2031, unless earlier terminated, concurrent with the term of our lease. The subtenant has no option to extend the sublease term. As a result of the termination of the existing sublease agreement, we recognized a net loss of approximately $3.5 million during the three months ended March 31, 2024 and nine months ended September 30, 2024, comprising primarily of a $4.8 million write-off of the accrued rent asset balance as of March 7, 2024, partially offset by the collection of a termination payment of $1.3 million. Sublease income for the three and nine months ended September 30, 2024 was $2.2 million and $2.8 million, respectively. Sublease income for the three and nine months ended September 30, 2023 was $2.0 million and $5.6 million, respectively. Both the net loss on sublease termination and the sublease income are included net in “Sublease income” within “Other income (expense)” in our condensed consolidated statements of operations. Rent received from the new subtenant in excess of rent paid to the landlord shall be shared by paying the landlord 50% of the excess rent. The excess rent is considered a variable lease payment and the total estimated payments are being recognized as additional rent expense on a straight-line basis. Our lease expense comprises of the following (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Operating lease expense | $ | 1,437 |  |  | $ | 1,392 |  |  | $ | 4,349 |  |  | $ | 4,172 |
Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2024 and 2023 was $5.7 million and $5.3 million, respectively, and were included in change in lease liabilities in our condensed consolidated statement of cash flows. The balance sheet classification of our operating lease liabilities was as follows (in thousands):
| September 30, 2024 |  | December 31, 2023
Operating lease liabilities: |  |  |
Current portion of lease liabilities (included in other current liabilities) | $ | 4,423 |  |  | $ | 4,496 |
Long-term portion of lease liabilities | 26,607 |  |  | 29,720 |
Total operating lease liabilities | $ | 31,030 |  |  | $ | 34,216 |
As of September 30, 2024, the maturities of our sublease income and operating lease liabilities were as follows (in thousands):
Years ending December 31, | Sublease Income |  | Operating Lease Liabilities
2024 (remaining) | $ | 1,480 |  |  | $ | 1,911 |
2025 | 6,127 |  |  | 6,987 |
2026 | 6,342 |  |  | 6,128 |
2027 | 6,564 |  |  | 6,059 |
2028 | 6,794 |  |  | 6,222 |
Thereafter | 16,191 |  |  | 15,083 |
Total | $ | 43,498 |  |  | 42,390 |
Less: |  |  |
Present value adjustment |  |  | (11,360) |
Total |  |  | $ | 31,030 |
The weighted average remaining lease term and the weighted average discount rate used to determine the operating lease liabilities were as follows:
| September 30, 2024 |  | December 31, 2023
Weighted average remaining lease term | 6.2 years |  | 6.7 years
Weighted average discount rate | 10.1 | % |  | 10.1 | %
Commitments As of September 30, 2024 and December 31, 2023, our material non-cancelable purchase and other commitments for the supply of HEPLISAV-B totaled $34.0 million and $43.4 million, respectively. On September 7, 2023 (the “Effective Date”), we entered into an agreement (the “Avecia Supply Agreement”) with Nitto Denko Avecia Inc. (“Avecia”) for the manufacture and supply of our CpG 1018 adjuvant using a specific production process. Under the Avecia Supply Agreement, Avecia has agreed to produce and supply to us quantities of CpG 1018 adjuvant ordered by us after the Effective Date. Subject to certain conditions in the Avecia Supply Agreement, we are obligated to purchase all of our annual volume requirements of CpG 1018 adjuvant from Avecia up to a specified production capacity. We may alternatively order CpG 1018 adjuvant produced using a different production process pursuant to the existing supply agreement between us and Avecia dated October 1, 2012 (the “2012 Agreement”). As of September 30, 2024 and December 31, 2023, our material non-cancelable purchase and other commitments for HEPLISAV-B supply included minimum commitments for the supply of CpG 1018 adjuvant under the Avecia Supply Agreement, totaling $0.7 million and $7.4 million, respectively. These amounts are expected to be fulfilled within the next 12 months from September 30, 2024. In addition to the non-cancelable commitments included above, we have entered into contractual arrangements that obligate us to make payments to the contractual counterparties upon the occurrence of future events. In addition, in the normal course of operations, we have entered into license and other agreements and intend to continue to seek additional rights relating to compounds or technologies in connection with our discovery, manufacturing and development programs. Under the terms of the agreements, we may be required to pay future up-front fees, milestones and royalties on net sales of products originating from the licensed technologies, if any, or other payments contingent upon the occurrence of future events that cannot reasonably be estimated. We also rely on and have entered into agreements with research institutions, contract research organizations and clinical investigators as well as clinical material manufacturers. These agreements are terminable by us upon written notice. Generally, we are liable only for actual effort expended by the organizations at any point in time during the contract through the notice period. As of September 30, 2024, the aggregate principal amount of our convertible senior notes ("Convertible Notes") was $225.5 million, excluding debt discount of $1.9 million (see Note 7). During 2004, we established a letter of credit with Deutsche Bank as security for our Düsseldorf lease in the amount of €0.2 million (Euros). The letter of credit remained outstanding through September 30, 2024 and was collateralized by a certificate of deposit for €0.2 million, which has been included in restricted cash in the condensed consolidated balance sheets as of September 30, 2024. In conjunction with our agreement with Symphony Dynamo, Inc. and Symphony Dynamo Holdings LLC (“Holdings”) in November 2009, we agreed to make contingent cash payments to Holdings equal to 50% of the first $50 million from any upfront, pre-commercialization milestone or similar payments received by us from any agreement with any third party with respect to the development and/or commercialization of cancer and hepatitis C therapies originally licensed to Symphony Dynamo, Inc., including our immune-oncology compound, SD-101. In July 2020, we sold assets related to SD-101 to Surefire Medical, Inc. d/b/a TriSalus Life Sciences (“TriSalus”). We paid $2.5 million to Holdings in August 2020. In each of September 2021, May 2022 and September 2023, we received $1.0 million from TriSalus because it met pre-commercialization milestones. We recorded the proceeds as gain on sale of assets in our condensed consolidated statements of operations. We paid Holdings $0.5 million in each of September 2021, May 2022 and October 2023. We included the payments in selling, general and administrative expenses in our condensed consolidated statements of operations. No liability has been recorded under this agreement as of September 30, 2024. Contingencies From time to time, we may be involved in claims, suits, and proceedings arising from the ordinary course of our business, including actions with respect to intellectual property claims, commercial claims, and other matters. Such claims, suits, and proceedings are inherently uncertain and their results cannot be predicted with certainty. Regardless of the outcome, such legal proceedings can have an adverse impact on us because of legal costs, diversion of management resources, and other factors. In addition, it is possible that a resolution of one or more such proceedings could result in substantial damages, fines, penalties or orders requiring a change in our business practices, which could in the future materially and adversely affect our financial position, results of operations, or cash flows in a particular period.

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