Leases

6 Months Ended

Jun. 30, 2024

New Operating Lease

On September 28, 2023, the Company entered into a lease agreement with HCP BTC, LLC, a Delaware limited liability company (“the Landlord”) for a premise consisting of approximately 100,904 square feet of office and laboratory space located at Oyster Point Blvd, South San Francisco, California (the “Oyster Point Lease”), which the Company intends to use as single unified Company headquarters. The lease term of approximately seven years will start upon the Landlord’s substantial completion of tenant improvements, and may be extended for a period of eight years at then prevailing market rates for a comparable property. Future lease payments are approximately $43.4 million which represent the non-cancellable periods of the lease. We excluded extension options that are not reasonably certain to be exercised from our lease terms. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease term. Additionally, the Company provided a letter of credit to the Landlord in the amount of $1.4 million in connection with the Oyster Point Lease, which has been recognized as restricted cash as of June 30, 2024.

Though the Oyster Point Lease will be accounted for as a single contract, the office space was occupied in March 2024 while the laboratory space was occupied in June 2024. Accordingly, the Company measured and allocated consideration to each lease component. The Company has recognized a right-of-use asset ("ROU") or aggregate lease liability of $29.8 million as of June 30, 2024, weighted average discount of 9.30%, the Company's estimated incremental borrowing rate during the three and six months ended June 30, 2024.

The undiscounted future non-cancellable lease payments of the Company's operating lease liability as of June 30, 2024 were as follows (in thousands):


	Operating Lease
2024 (remainder of the year)	$	1,305
2025	3,548
2026	4,406
2027	5,898
2028	7,468
2029 and thereafter	20,822
Total undiscounted lease payments	$	43,447
Less: Present value discount	(13,291)
Total operating lease liabilities current	$	98
Total operating lease liabilities non-current	$	30,058

The weighted-average remaining lease terms and discount rates related to the Company's operating leases were as follows:


	Six Months Ended June 30,
	2024	2023
Weighted-average remaining lease term (in years)	6.9	1.1
Weighted-average discount rate	9.3%	13.5%

Variable lease costs comprise primarily of the Company's proportionate share of operating expenses, property taxes, and insurance. Short-term lease expense and variable lease payments recorded in operating expenses were immaterial for the three and six months ended June 30, 2024 and 2023. Lease expenses for each of the three and six months ended June 30, 2024 and 2023 are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Operating lease costs	$	1,625	$	674	$	2,597	$	1,444
Other variable costs	280		228		445		471
Total expense	$	1,905	$	902	$	3,042	$	1,915