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LEASES

12 Months Ended

Dec. 31, 2022

14. LEASES

Operating Lease Arrangements

In March 2018, the Company entered into an operating lease for its corporate headquarters (the “Stoughton Lease”) pursuant to which the Company leases approximately 50,678 of rentable square feet of space, in Stoughton, Massachusetts. The Stoughton Lease commenced in August 2018 when the Company took possession of the space. After the initial four-month free rent period following possession of the space, the operating lease will continue for a term of 10 years. The Company has the right to extend the term of the Stoughton Lease for two additional five-year terms, provided that written notice is provided to the landlord no later than 12 months prior to the expiration of the then current Stoughton Lease term. The Company did not believe the exercise of the extension to be reasonably certain as of the lease commencement date and therefore, did not include the extension as part of its recognized lease asset and lease liability. The annual base rent is $1,214, or $23.95 per rentable square foot, and will increase annually by 2.5% to 3.1% over the subsequent years.

In January 2016, the Company entered a non-cancellable contract with the contract manufacturing organization (“CMO”) of Xtampza ER. The contract term continued through December 2022 and was automatically renewed for successive two-year terms as neither party gave written notice of termination two-years in advance. Pursuant to the terms of the agreement, since 2016 the CMO has reserved 3,267 square feet of existing manufacturing space for a dedicated manufacturing suite for Xtampza ER, which was put into service in the year ended December 31, 2020. As the Company can direct the use of the dedicated manufacturing suite and obtain substantially all the economic benefits of the dedicated space, the Company determined that the arrangement was an embedded operating lease. The Company expects the lease term to continue at least through December 2026 and separated the agreement’s lease and non-lease components in determining the operating lease assets and liabilities. The Company determined its best estimate of stand-alone prices for each of the lease and nonlease components by considering observable information including gross margins expected to be recovered from the Company’s service provider and terms of similar lease contracts.

In connection with the BDSI Acquisition, the Company acquired an operating lease for the former headquarters of BDSI pursuant to which the Company leases 11,628 of rentable square feet of space in Raleigh, North Carolina (the “BDSI Lease”). The BDSI Lease continues through July 2023. The Company does not expect to renew or extend the lease beyond its contractual expiration in July 2023.

As of December 31, 2022, the Company had operating lease assets of $6,861 and operating lease liabilities of $8,224 primarily related to operating lease agreements for its corporate headquarters.

Short-Term Lease Arrangements

In December 2018, the Company began entering into 12-month, non-cancelable vehicle leases for its field-based employees. Each vehicle lease is executed separately and expires at varying times with automatic renewal options that are cancelable at any time. The rent expense for these leases is recognized on a straight-line basis over the lease term in the period in which it is incurred.

Variable Lease Costs

Variable lease costs primarily include utilities, property taxes, and other operating costs that are passed on from the lessor.

The components of lease cost for the years ended December 31, 2022, 2021, and 2020 are as follows:


	Years Ended December 31,
	2022		2021		2020
Lease Cost
Operating lease cost	$	1,805	$	1,305	$	1,305
Short-term lease cost		993		1,492		1,312
Variable lease cost		331		292		331
Total lease cost	$	3,129	$	3,089	$	2,948

The lease term and discount rate for operating leases for the years ended December 31, 2022 and 2021 are as follows:

Other information related to operating leases for the years ended December 31, 2022, 2021, and 2020 is as follows:


	Years Ended December 31,
Other Information:	2022		2021		2020
Cash paid for amounts included in the measurement of operating leases liabilities	$	1,568	$	1,286	$	1,249
Leased assets obtained in exchange for new operating lease liabilities		—		—		—

The Company’s aggregate future minimum lease payments for its operating leases, including embedded operating lease arrangements, as of December 31, 2022, are as follows:


2023	$	1,585
2024		1,398
2025		1,436
2026		1,474
2027		1,489
Thereafter		2,697
Total minimum lease payments	$	10,079
Less: Present value discount		1,855
Present value of lease liabilities	$	8,224

Years Ended December 31,

Lease Term and Discount Rate:

Weighted-average remaining lease term — operating leases (years)

Weighted-average discount rate — operating leases