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Commitments and Contingencies | 3 Months Ended
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Mar. 31, 2021
Commitments And Contingencies Disclosure [Abstract] |
Commitments and Contingencies |
6. | 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 842 (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, 2021 |  |  | Three Months Ended March 31, 2020 |
Operating lease cost |  | $ | 166 |  |  | $ | 166 |
Variable lease cost |  |  | (2 | ) |  |  | 21 |
Total operating lease expense |  | $ | 164 |  |  | $ | 187 |
Cash paid for amounts included in the measurement of operating lease liability |  | $ | 170 |  |  | $ | 167 |
|  | March 31, 2021 |  |  | March 31, 2020 |
Remaining Lease term (years) |  | 8.34 |  |  |  | 9.34 |
Discount rate |  |  | 15 | % |  |  | 15 | %
Future minimum lease payments for the Lease as of March 31, 2021 are as follows (in thousands):
|  | March 31, 2021 |
2021 |  | $ | 347 |
2022 |  |  | 527 |
2023 |  |  | 715 |
2024 |  |  | 730 |
2025 |  |  | 744 |
Thereafter |  |  | 2,789 |
Total |  | $ | 5,852 |
The presentations of the operating lease liability as of March 31, 2021 are as follows (in thousands):
|  | March 31, 2021 |
Present value of future minimum lease payments |  | $ | 3,272 |
Operating lease liability, current portion |  | $ | 57 |
Operating lease liability, long-term portion |  |  | 3,215 |
Total operating lease liability |  | $ | 3,272 |
Difference between future minimum lease payments and discounted cash flows |  | $ | 2,580 |
License Arrangement with Potential Future Expenditures As of March 31, 2021, the Company had a license arrangement with Merck Sharp & Dohme Corp., or Merck, as amended, that involves potential future expenditures. Under the license arrangement, executed in May 2013, the Company exclusively licensed from Merck its rights to ibrexafungerp in the field of human health. In January 2014, Merck assigned the patents related to ibrexafungerp that it had exclusively licensed to the Company. Ibrexafungerp is the Company's lead product candidate. Pursuant to the terms of the license agreement, Merck was originally 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 royalties 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 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. 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. On December 2, 2020, the Company entered into a fourth amendment to the license agreement with Merck. The amendment eliminates two cash milestone payments that the Company would have paid to Merck upon the first filing of an NDA, triggered by the FDA acceptance for filing of the Company’s NDA for ibrexafungerp for the treatment of VVC, and first marketing approval in the U.S., anticipated in June 2021 for the Company’s NDA for ibrexafungerp for the treatment of VVC. Such cash milestone payments would have been creditable against future royalties owed to Merck on net sales of ibrexafungerp. With the amendment, these milestones will not be paid in cash and, accordingly, credits will not accrue. Pursuant to the amendment, the Company will also forfeit the credits against future royalties that it had accrued from a prior milestone payment already paid to Merck. All other key terms of the license agreement are unchanged. 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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