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LEASES | 6 Months Ended
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Jun. 30, 2023
LEASES [Abstract] |
LEASES |
6) | LEASES
The Company currently has operating leases for office and laboratory space in New York, New York, Cambridge, Massachusetts and Somerville, Massachusetts, which expire in 2026, 2028, and 2033, respectively. During the second quarter of 2022, the Company determined to consolidate its research and development efforts in Cambridge, Massachusetts and sublease its San Diego lab and office space. As a result, the Company recognized an impairment charge of approximately $0.8 million on the San Diego Lease ROU asset for the three and six months ended June 30, 2022. In November 2022, the Company entered into a lease termination agreement, effective January 31, 2023, and, as of June 30, 2023, there was no lease liability or ROU asset balances remaining for the San Diego lease. In October 2022, the Company entered into the Sublease with E.R. Squibb & Sons, L.L.C., a subsidiary of Bristol-Myers Squibb Company (“Sublessor”), for office, laboratory and research and development space (the “Premises”). The Premises consist of approximately 45,500 square feet on the ninth floor of a building currently under construction located in Somerville, Massachusetts. The lease expires in November 2033 and is subject to a five-year extension. Payments of the Sublease rent commence on the date that is the earlier of (i) the date that the Company commences business operations from the Premises and (ii) the one-year anniversary of the date that Sublessor obtained the primary landlord’s consent for the Sublease, which was November 29, 2022. The Company will pay base rent of approximately $0.5 million per month during the first year of the term, which will increase 3% per year thereafter. The Company will also make monthly payments for parking, which is based on market rates that can change from time-to-time, as well as pay its share of traditional lease expenses, including certain taxes, operating expenses and utilities. Pursuant to the Sublease, the Company paid the Sublessor a security deposit in the form of a letter of credit in the amount of approximately $4.1 million. Provided there are no events of default by the Company under the Sublease, the letter of credit will be reduced on an incremental basis throughout the Term. The Sublessor has agreed to provide the Company with a tenant improvement allowance (“TIA”) of $190 per rentable square foot, or $8.6 million. Tenant improvements to the Premises in excess of this amount, if any, will be at the Company’s own cost. It is anticipated that the construction will be substantially complete by the end of 2023. The Company obtained access and control of the Premises on June 21, 2023, and as such, the Company determined that the commencement date for accounting purposes was June 21, 2023. The Company also performed an analysis on the accounting ownership of the tenant improvement assets and determined that such assets were Sublessor/Lessor owned. As a result, TIA payments made by the Sublessor to the Company for the tenant improvement assets are considered a reimbursement rather than a lease incentive and not included as part of the consideration of the contract. Amounts paid by the Company for Sublessor/Lessor owned assets that are in excess of the TIA are considered non-cash lease payments and are added to the consideration in the contract. The Company measured the lease liability and corresponding ROU asset for the Somerville Sublease as of June 21, 2023, which includes lease payments the Company must make over the ten-year lease term. The Company did not include the option to extend the lease for an additional five years in the initial measurement because the Company was not reasonably certain as of June 21, 2023 that it would exercise its right to extend the lease term. As a result, the Company recorded a lease liability of $34.2 million, which includes $0.6 million for the incremental amount above the TIA that the Company expects to pay for Sublessor/Lessor owned assets, and a corresponding ROU asset of $34.4 million as of June 30, 2023. As of June 30, 2023, the Company has recorded approximately $0.3 million as an other receivable for amounts submitted for reimbursement under the TIA for Sublessor/Lessor owned assets and approximately $0.7 million recorded in other current assets for amounts paid by the Company but not yet submitted for reimbursement of Sublessor/Lessor owned assets. For the six months ended June 30, 2023 and 2022, the net operating lease expenses were as follows (in thousands):
|  | Three months ended June 30, |  |  | Six months ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Operating lease expense |  | $ | 67 |  |  | $ | 146 |  |  | $ | 135 |  |  | $ | 333 |
Sublease income |  |  | (21 | ) |  |  | (21 | ) |  |  | (42 | ) |  |  | (42 | )
Variable lease expense |  |  | 7 |  |  |  | 51 |  |  |  | 12 |  |  |  | 53 |
Total lease expense |  | $ | 53 |  |  | $ | 176 |  |  | $ | 105 |  |  | $ | 344 |
The above table does not include lease expense related to the Somerville Sublease from the June 21, 2023 commencement date through June 30 2023 because such amount was immaterial. The Company will begin recognizing lease expense for the Somerville Sublease on July 1, 2023. The tables below show the beginning balances of the operating ROU assets and lease liabilities as of January 1, 2023 and the ending balances as of June 30, 2023, including the changes during the period (in thousands).
|  | Operating Lease ROU Assets |
Operating lease ROU assets at January 1, 2023 |  | $ | 1,030 |
Recognition of ROU asset for Somerville Sublease |  |  | 34,410 |
Amortization of operating lease ROU assets |  |  | (83 | )
Operating lease ROU assets at June 30, 2023 |  | $ | 35,357 |
|  | Operating Lease Liabilities |
Operating lease liabilities at January 1, 2023 |  | $ | 1,182 |
Recognition of lease liability for Somerville Sublease |  |  | 34,169 |
Principal payments on operating lease liabilties |  |  | (215 | )
Operating lease liabilities at June 30, 2023 |  |  | 35,136 |
Less non-current portion |  |  | 34,963 |
Current portion at June 30, 2023 |  | $ | 173 |
As of June 30, 2023, the Company’s operating leases had a weighted-average remaining life of 10.3 years with a weighted-average discount rate of 12.6%. The maturities of the operating lease liabilities are as follows (in thousands):
|  | As of June 30, 2023 |
2023 |  | $ | 1,064 |
2024 |  |  | 5,931 |
2025 |  |  | 6,065 |
2026 |  |  | 6,227 |
2027 |  |  | 6,298 |
Thereafter |  |  | 40,224 |
Total payments |  |  | 65,809 |
Less imputed interest |  |  | (30,673 | )
Total operating lease liabilities |  | $ | 35,136 |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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