Operating Leases

6 Months Ended

Jun. 30, 2023

The Company’s operating leases are primarily for its corporate headquarters located in South San Francisco, California (“HQ lease”) and for additional office and laboratory space located in Alameda, California (“Alameda lease”). The corporate headquarters lease has an initial term of eight years expiring in 2027, with an option to renew for an additional eight years unless canceled by either party thereafter. The Alameda lease has an initial term of eleven years expiring in 2032, with an option to renew the lease for up to two additional terms of five years. The exercise of these renewal options is not recognized as part of the ROU assets and lease liabilities, as the Company did not conclude, at the commencement date of the leases, that the exercise of renewal options or termination options was reasonably certain. The Alameda lease provides for a tenant improvement allowance of up to $17.5 million for the costs relating to the design, permitting and construction of the improvements, to be disbursed by the landlord no later than December 31, 2023. The Company is deemed to be the accounting owner of the tenant improvements primarily because the Company is the principal in the construction and design of the assets, is responsible for costs overruns and retains substantially all economic benefits from the leasehold improvements over their economic lives. Accordingly, the tenant improvement allowance is considered an incentive and was deducted from the initial measurement of the ROU asset and lease liability. The Company estimated the timing of tenant improvement reimbursements at the lease commencement date and upon receipt of the cash incentives, the Company recognized the cash received as an increase in the lease liability. On August 10, 2023, the Company announced a transaction with GeneFab, a new independent contract manufacturing and synthetic biology biofoundry. As part of the transaction the Company subleased the cGMP facility in Alameda to GeneFab. Refer to Note 13, Subsequent Events, for further details of the GeneFab transaction.

A summary of total lease costs and other information for the period relating to the Company’s operating leases is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease cost	$	1,320	$	1,325	$	2,629	$	2,650
Short-term lease cost	25		27		56		30
Variable lease cost	378		182		622		353
Total lease cost	$	1,723	$	1,534	$	3,307	$	3,033


	Six Months Ended June 30,
	2023		2022
Other information:
Operating cash flows net inflows and (outflows) from operating lease	$	(675)	$	6,740
ROU assets obtained in exchange for operating lease obligations (including remeasurement of ROU and lease liabilities due to changes in the timing of receipt of lease incentives)	$	(30)	$	199
Weighted-average remaining lease term	7.9 years		8.2 years
Weighted-average discount rate	9.1%		9.1%

For the three months ended June 30, 2023 and 2022, the Company received $1.0 million and $5.6 million, respectively, of $17.5 million tenant improvement allowance. For the six months ended June 30, 2023 and 2022, the Company received $2.0 million and $8.1 million, respectively, of the $17.5 million tenant improvement allowance. Through June 30, 2023, the Company received $16.2 million of the tenant improvement allowance inception-to-date.

As of June 30, 2023 and 2022, amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.

Maturities of the Company’s lease liabilities as of June 30, 2023, were as follows (in thousands):


2023, for the remainder of the year	$	3,560
2024	7,254
2025	7,478
2026	7,712
2027	5,769
Thereafter	24,384
Total undiscounted lease payments	56,157
Less imputed interest	(16,750)
Tenant improvement allowance remaining	(1,311)
Total lease liabilities	$	38,096