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Leases | 9 Months Ended
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Sep. 30, 2024
Leases [Abstract] |
Leases | Leases 65 Grove Street Lease In July 2019, the Company entered into a lease with BRE-BMR Grove LLC for 25,078 square feet of laboratory and office space located at 65 Grove Street, Watertown, Massachusetts, or the Watertown Lease. On September 1, 2022, the Company entered into an amendment to the Watertown Lease, or the Lease Agreement Amendment, to expand the Company’s laboratory and office space located at 65 Grove Street, Watertown, Massachusetts by approximately 7,216 square feet. In connection with the Lease Agreement Amendment, the Company secured a letter of credit for the Watertown Lease from Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as Receiver for Silicon Valley Bridge Bank, N.A. (as successor to Silicon Valley Bank)), or SVB, for $1.6 million as of December 31, 2022. In May 2023, the Company received notice from BRE-BMR Grove LLC that the requirements to reduce the amount of the letter of credit for the Watertown Lease had been met. In connection therewith, in June 2023, the Company secured a letter of credit from JPMorgan Chase Bank, N.A. for $1.4 million, which is recognized as long-term restricted cash as of September 30, 2024 and December 31, 2023, and renews automatically each year. The $1.6 million letter of credit with SVB was released from restriction and returned to the Company on July 17, 2023, and therefore was reclassified into cash and cash equivalents in the consolidated balance sheets. On October 6, 2022, the Company entered into a sublease agreement to sublease 7,216 square feet of space currently rented by the Company at 65 Grove Street, Watertown, Massachusetts. The sublease commenced on October 24, 2022, and the term expired on March 31, 2024. On October 31, 2023, in connection with entering into Amendment No. 1 to the Sobi License as described in Note 13, the Company entered into a sublease agreement with Sobi to sublease approximately 5,600 square feet of space currently rented by the Company at 65 Grove Street, Watertown, Massachusetts for which Sobi paid $1.0 million upfront rental payment. The sublease commenced on November 6, 2023, when the Company, Sobi, and BRE-BMR Grove LLC, executed a Consent to Sublease. The term of the sublease expires on November 5, 2024 with no option to extend the sublease term. As of September 30, 2024 and December 31, 2023, deferred rent of $0.1 million and $0.8 million is included within accrued expenses and other current liabilities in the consolidated balance sheets. Sublease income is included within other income, net in the consolidated statements of operations and comprehensive income (loss). During the year ended December 31, 2023, the Company determined that the right-of-use asset related to the operating lease for approximately 7,216 square feet at 65 Grove Street was partially impaired as of November 30, 2023. As a result, the Company recognized a $0.7 million right-of-use asset impairment charge in the fourth quarter of 2023. Payments made and remaining obligations on the lease liability for the laboratory and office space in Watertown, Massachusetts are subject to potential reimbursement through deductions to CVR distributions as described in Note 5. 704 Quince Orchard Road Leases In connection with the Merger, the Company acquired two operating leases for office and laboratory space in Gaithersburg, Maryland. The leases expire in January 2027 and do not contain any renewal rights. The discount rate of 11.5% was determined based on the Company’s incremental borrowing rate adjusted for the lease term. 7495 New Horizon Way Leases On February 28, 2024, the Company entered into a lease agreement with 7495 RP, LLC, or the Landlord, pursuant to which it agreed to lease from the Landlord the manufacturing space located at 7495 New Horizon Way, Frederick, Maryland, or the Frederick Lease Agreement. The space consists of 19,199 leasable square feet of integrated manufacturing and office space. The lease commenced on May 1, 2024 which was the date the Landlord delivered full possession of the premises to the Company. The Frederick Lease Agreement will terminate approximately 7.2 years following the commencement date. The Company will have one option to extend the term of the Frederick Lease Agreement for a period of five years at a cost of 100% of the then-fair market value, not to exceed 103% of the then-current base rent. Base rent, which was due beginning on July 1, 2024, is $0.9 million annually and is subject to an annual upward adjustment of 3% of the then-current rental rate. In addition, the Company is obligated to pay its share of operating costs and taxes related to the property. The Company paid the first month’s rent of $0.1 million upon execution of the Frederick Lease Agreement. The Company assessed the classification of the lease at the commencement date and concluded it should be accounted for as an operating lease. The Company recorded a lease liability and right-of-use asset of $3.6 million and $3.7 million, respectively, on the commencement date. The Frederick Lease Agreement includes a tenant improvement allowance of up to $0.7 million which was recognized as a reduction in the right-of-use asset and lease liability at the commencement date as the Company was reasonably certain to incur reimbursable costs related to alterations equal to or exceeding the amount. Additionally, the prepaid rent was included as an adjustment to the right-of-use asset. The discount rate of 14% was determined based on the Company’s incremental borrowing rate adjusted for the lease term, including any reasonably certain renewal periods. Effective May 7, 2024, the Company and the Landlord entered into the first amendment to the Frederick Lease Agreement, or the Frederick Lease Agreement Amendment, providing for the expansion of the premises leased pursuant to the Frederick Lease Agreement by approximately 7,842 square feet. In connection with the expansion of the leased premises, the Company is obligated to pay $0.3 million in additional annual base rent for the first year of the term, which is subject to an annual upward adjustment of 3% of the then-current rental rate, as well as its share of operating costs and taxes. The lease commenced on May 7, 2024 which was the date the Landlord delivered full possession of the premises to the Company and will be coterminous with the Frederick Lease Agreement. The rent commencement date was September 1, 2024. The Company assessed the classification of the lease at the commencement date and concluded it should be accounted for as an operating lease. The Company recorded a lease liability and right-of-use asset each of $1.2 million on the commencement date. The Frederick Lease Agreement Amendment includes a tenant improvement allowance of up to $0.1 million which was recognized as a reduction in the right-of-use asset and lease liability at the commencement date as the Company was reasonably certain to incur reimbursable costs related to alterations equal to or exceeding the amount. The discount rate of 14% was determined based on the Company’s incremental borrowing rate adjusted for the lease term. Effective August 30, 2024, the Company and the Landlord entered into the second amendment to the Frederick Lease Agreement, or the Second Frederick Lease Agreement Amendment, providing for the expansion of the premises leased pursuant to the Frederick Lease Agreement and Frederick Lease Agreement Amendment by approximately 2,009 square feet. In connection with the expansion of the leased premises, the Company is obligated to pay $0.1 million in additional annual base rent for the first year of the term, which is subject to an annual upward adjustment of 3% of the then-current rental rate, as well as its share of operating costs and taxes. The lease commenced on September 1, 2024, which was the date the Landlord delivered full possession of the premises to the Company and will be coterminous with the Frederick Lease Agreement. The rent commencement date was September 1, 2024. The Company assessed the classification of the lease at the commencement date and concluded it should be accounted for as an operating lease. The Company recorded a lease liability and right-of-use asset each of $0.3 million on the commencement date. The discount rate of 14% was determined based on the Company’s incremental borrowing rate adjusted for the lease term. The Company secured a letter of credit from SVB for $0.3 million for the Frederick Lease Agreement, the Frederick Lease Agreement Amendment and the Second Frederick Lease Agreement Amendment, which is recognized as long-term restricted cash as of September 30, 2024 and renews automatically each year. For the three and nine months ended September 30, 2024 and 2023, the components of lease costs were as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Operating lease cost | $ | 1,058 |  |  | $ | 696 |  |  | $ | 2,789 |  |  | $ | 2,088 |
Variable lease cost | 380 |  |  | 271 |  |  | 1,129 |  |  | 683 |
Short-term lease cost | 1 |  |  | 1 |  |  | 5 |  |  | 6 |
Less: Sublease income | (250) |  |  | (250) |  |  | (1,010) |  |  | (756) |
Total lease cost | $ | 1,189 |  |  | $ | 718 |  |  | $ | 2,913 |  |  | $ | 2,021 |
The maturity of the Company’s operating lease liabilities as of September 30, 2024 were as follows (in thousands):
| September 30, |  |
| 2024 |  |
2024 (remainder) | $ | 316 |  |  |
2025 | 4,415 |  |  |
2026 | 4,538 |  |  |
2027 | 4,345 |  |  |
2028 | 2,314 |  |  |
Thereafter | 3,596 |  |  |
Total future minimum lease payments | 19,524 |  |  |
Less: Imputed interest | 4,873 |  |  |
Total operating lease liabilities | $ | 14,651 |  |  |
The supplemental disclosure for the statement of cash flows related to operating leases was as follows (in thousands):
| Nine Months Ended September 30,
| 2024 |  | 2023
Cash paid for amounts included in the measurement of lease liabilities: | $ | 2,548 |  |  | $ | 1,991 |
Other than the initial recording of the right-of-use assets and lease liabilities for the Frederick Lease Agreement, the Frederick Lease Agreement Amendment, and the Second Frederick Lease Agreement Amendment, which were non-cash, the changes in the Company’s right-of-use assets and lease liabilities for the nine months ended September 30, 2024 and 2023 are reflected in the non-cash lease expense and accrued expenses and other liabilities, respectively, in the consolidated statements of cash flows. The following summarizes additional information related to operating leases:
| September 30,
| 2024 |  | 2023
Weighted-average remaining lease term | 4.7 years |  | 4.7 years
Weighted-average discount rate | 11.6 | % |  | 9.7 | %

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/842-20/tableOfContent + Details
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