Leases

9 Months Ended

Sep. 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 premises 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 is being used as a single unified Company headquarters. The lease term of approximately seven years started in the second quarter of 2024 when the Landlord substantially completed tenant improvements and may be extended for a period of eight years at the 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 is classified as restricted cash as of September 30, 2024.

Though the Oyster Point Lease is 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. Upon commencement of the second lease component during the quarter ended June 30, 2024, the Company recognized an aggregate right-of-use asset ("ROU") and lease liability of $29.8 million.

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


	Operating Lease
2024 (remainder of the year)	$	527
2025	3,548
2026	4,406
2027	5,898
2028	7,468
2029 and thereafter	20,822
Total undiscounted lease payments	$	42,669
Less: Present value discount	(12,595)
Total operating lease liabilities current	$	322
Total operating lease liabilities non-current	$	29,752

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


	Nine Months Ended September 30,
	2024	2023
Weighted-average remaining lease term (in years)	6.7	0.9
Weighted-average discount rate	9.3%	13.3%

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 nine months ended September 30, 2024 and 2023. Lease expenses for each of the three and nine months ended September 30, 2024 and 2023 are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Operating lease costs	$	1,531	$	698	$	4,252	$	2,142
Other variable costs	480		130		917		620
Total expense	$	2,011	$	828	$	5,169	$	2,762