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Commitments and Contingencies | 3 Months Ended
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Mar. 31, 2020
Commitments And Contingencies Disclosure [Abstract] |
Commitments and Contingencies |
7. | Commitments and Contingencies
Leases On March 1, 2018, the Company entered into a long-term lease agreement for approximately 19,275 square feet of office space in Jersey City, New Jersey, that the Company identified as an operating lease under ASC 840 (the “Lease”). The lease term is eleven years from August 1, 2018, the commencement date, with total lease payments of $7.3 million over the lease term. The Company has the option to renew for two consecutive five-year periods from the end of the first term and the Company is not reasonably certain that the option to renew the Lease will be exercised. Under the Lease, the Company furnished a security deposit in the form of a standby letter of credit in the amount of $0.3 million, which was reduced by fifty-five thousand dollars on the first anniversary of the commencement date. The security deposit will continue to be reduced by fifty-five thousand dollars every two years on the commencement date anniversary for eight years. The security deposit is classified as restricted cash in the accompanying unaudited condensed consolidated balance sheets. The consideration in the Lease allocated to the single lease component includes the fixed payments for the right to use the office space as well as common area maintenance. The Lease also contains costs associated with certain expense escalation, property taxes, insurance, parking, and utilities which are all considered variable payments and are excluded from the operating lease liability. The incremental borrowing rate utilized approximated the prevailing market interest rate the Company would incur to borrow a similar amount equal to the total Lease payments on a collateralized basis over the term of the Lease. The following table summarizes certain quantitative information associated with the amounts recognized in the unaudited condensed consolidated financial statements for the Lease (dollars in thousands):
|  | Three Months Ended March 31, 2020 |
Operating lease cost |  | $ | 166 |
Variable lease cost |  |  | 21 |
Total operating lease expense |  | $ | 187 |
Cash paid for amounts included in the measurement of operating lease liability |  | $ | 167 |
Remaining Lease term (years) |  | 9.34 |
Discount rate |  |  | 15 | %
Future minimum lease payments for the Lease as of March 31, 2020 are as follows (in thousands):
|  | March 31, 2020 |
2020 |  | $ | 340 |
2021 |  |  | 517 |
2022 |  |  | 527 |
2023 |  |  | 715 |
2024 |  |  | 730 |
Thereafter |  |  | 3,533 |
Total |  | $ | 6,362 |
The presentation of the operating lease liability and right-of-use asset as of March 31, 2020 are as follows (in thousands):
|  | March 31, 2020 |
Present value of future minimum lease payments |  | $ | 3,312 |
Operating lease liability, current portion |  | $ | 40 |
Operating lease liability, long-term portion |  |  | 3,272 |
Total operating lease liability |  | $ | 3,312 |
Difference between future minimum lease payments and discounted cash flows |  | $ | 3,050 |
Operating lease right-of-use asset |  | $ | 3,143 |
License Arrangement with Potential Future Expenditures As of March 31, 2020, the Company had a license arrangement with Merck Sharp & Dohme Corp., or Merck, that involves potential future expenditures. Under the license arrangement, the Company exclusively licensed from Merck its rights to ibrexafungerp in the field of human health. Ibrexafungerp is the Company’s lead product candidate. Pursuant to the terms of the license agreement, Merck is eligible to receive milestone payments from the Company that could total $19.0 million upon occurrence of specific events, including initiation of a Phase 3 clinical study, new drug application, and marketing approvals in each of the U.S., major European markets and Japan. In addition, Merck is eligible to receive tiered royalties from the Company based on a percentage of worldwide net sales of ibrexafungerp. The aggregate royalty percentages are mid- to high-single digits. In December 2014, the Company and Merck entered into an amendment to the license agreement that deferred the remittance of a milestone payment due to Merck, such that no amount would be due upon initiation of the first Phase 2 clinical trial of a product containing the ibrexafungerp compound (the “Deferred Milestone”). The amendment also increased, in an amount equal to the Deferred Milestone, the milestone payment that would be due upon initiation of the first Phase 3 clinical trial of a product containing the ibrexafungerp compound. In December 2016 and January 2018, the Company entered into second and third amendments, respectively, to the license agreement with Merck which clarified what would constitute the initiation of a Phase 3 clinical trial for the purpose of milestone payment. Except as described above, all other terms and provisions of the license agreement remain in full force and effect. In January 2019, a milestone payment became due to Merck as a result of the initiation of the VANISH Phase 3 VVC program and was paid in March 2019. The milestone payment was recognized in the unaudited condensed consolidated statement of operations in research and development expense for the three months ended March 31, 2019 and is included in cash used in operating activities on the statement of cash flows. Clinical Development Arrangements The Company has entered into, and expects to continue to enter into, contracts in the normal course of business with various third parties who support its clinical trials, preclinical research studies, and other services related to its development activities. The scope of the services under these agreements can generally be modified at any time, and the agreement can be terminated by either party after a period of notice and receipt of written notice.

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