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Commitments and Contingencies
 9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Lease and other information
The Company has entered into operating leases primarily for office and laboratory space. Lease cost amounts included in the measurement of lease obligations and other information related to non-cancellable operating leases were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
Operating lease costs(1)
$1,032 $1,618 $3,097 $5,278 
(1) The Company had no variable lease costs.
Other information:Operating Leases
Weighted-average remaining lease term (in years)3.1 years
Weighted-average discount rate6.6 %
Nine Months Ended September 30,
Cash paid (in thousands):
20242023
Operating cash flows from operating leases$3,542 $5,668 
As of September 30, 2024, our maturity analysis of annual undiscounted cash flows of the non-cancellable operating leases are as follows (in thousands):
Years Ending December 31,Operating Leases
2024 (remaining 3 months)$1,184 
20254,868 
20265,014 
20272,533 
2028760 
Thereafter318 
Total minimum lease payments14,677 
Less: imputed interest1,462 
Lease obligations$13,215 
Reconciliation of operating lease liabilities as shown within the unaudited condensed consolidated balance sheets (in thousands):
Current portion of lease obligations - Operating leases$4,081 
Long-term lease obligations - Operating leases9,134 
Total operating lease liabilities$13,215 
In July 2023, we announced our plan to consolidate operations from our previous San Carlos facility to our headquarters in Redwood City. On September 1, 2023, the Company entered into an Assignment and Assumption of Lease (the “Assignment Agreement”) with Vaxcyte, Inc. (“Vaxcyte”) to assign to Vaxcyte all of the Company’s right, title and interest in, under and to the San Carlos facility and the Lease Agreement, dated as of January 29, 2021. On September 6, 2023, the Company, Vaxcyte and ARE-San Francisco No. 63, LLC (“ARE”) entered into a Consent to Assignment and First Amendment pursuant to which ARE consented to the Assignment Agreement and the assignment by the Company and the assumption by Vaxcyte of the Company’s interest as tenant in the lease. The effective date of the assignment was October 1, 2023.
As a result of the Assignment Agreement, the Company remeasured the lease obligation for the San Carlos facility to its present value of $3.1 million and wrote off the remaining lease liability of $19.6 million and the corresponding right of use asset balance. Simultaneously, the Company determined that indicators of impairment existed because the lease assignment impacts the utilization of the related right of use assets and leasehold improvements in the San Carlos facility, and therefore performed a recoverability test by estimating future undiscounted net cash flows expected to be generated from the use of these assets. As there were no substantial future cash inflows associated with these assets, the carrying values of these assets were deemed unrecoverable. As a result, during the third quarter of 2023, the Company recognized a non-cash impairment charge of $7.7 million, of which $4.7 million was related to leasehold improvements and $3.0 million for the right of use assets, presented within the asset impairment and other charges line item in the condensed consolidated statements of operations, for the three and nine months ended September 30, 2023.
As part of the plan, the Company entered into agreements to sell certain laboratory equipment previously located in the San Carlos facility through an asset auction and as part of the lease assignment of the San Carlos facility to Vaxcyte. These certain items of laboratory equipment met the assets held for sale criteria and were sold during the fourth quarter of 2023. Using a fair value estimate based of Level 3 inputs in the fair value hierarchy, the Company determined that the carrying value of these assets exceeds fair value less costs to sell, which resulted in a write-down of $1.5 million, presented within the asset impairment and other charges line item in the consolidated statements of operations for the three and nine months ended September 30, 2023.
Other Commitments
We enter into supply and service arrangements in the normal course of business. Supply arrangements are primarily for fixed-price manufacture and supply. Service agreements are primarily for the development of manufacturing processes. Commitments under service agreements are typically subject to cancellation at our discretion which may require payment of certain cancellation fees. The timing of completion of service arrangements is subject to variability in estimates of the time required to complete the work.
The following table provides quantitative data regarding our other commitments. Future minimum payments reflect amounts that we expect to pay including potential obligations under services agreements subject to risk of cancellation by us (in thousands):
Payments Due by Period
Total2024 (Remaining 3 Months)2025 and Thereafter
Facility maintenance agreement$281 $281 $— 
Legal Proceedings
We may be involved in legal actions in the ordinary course of business, including inquiries and proceedings concerning business practices and intellectual property infringement, employee relations and other claims. We will recognize a loss contingency in the condensed consolidated financial statements when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. We will disclose any loss contingencies that do not meet both conditions if there is a reasonable possibility that a material loss may have been incurred. Gain contingencies are not recorded until they are realized. We are not currently a party to any material pending litigation or other material legal proceedings that management believes could have a material adverse effect on our financial statements.
Indemnifications
We are required to recognize a liability for the fair value of any obligations we assume upon the issuance of a guarantee. We have certain agreements with licensors, licensees and collaborators that contain indemnification provisions. In such provisions, we typically agree to indemnify the licensor, licensee and collaborator against certain types of third party claims. The maximum amount of the indemnifications is not limited. We accrue for known indemnification issues when a loss is probable and can be reasonably estimated. There were no accruals for expenses related to indemnification issues for any periods presented.