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LEASES

6 Months Ended

Jun. 30, 2024

8) LEASES

The Company currently has operating leases for office and laboratory space in the borough of Manhattan in New York, New York, and Cambridge, Massachusetts, which expire in 2026 and 2028, respectively.

In addition, in October 2022, the Company entered into a sublease with a subsidiary of Bristol-Myers Squibb Company, as sublessor (“Sublessor”), for office, laboratory and research and development space of approximately 45,500 square feet in Somerville, Massachusetts. The sublease provides for base rental payments of approximately $0.5 million per month as well as monthly payments for parking and the Company’s share of traditional lease expenses, including certain taxes, operating expenses and utilities. The Company paid the Sublessor a security deposit in the form of a letter of credit in the amount of approximately $4.1 million.

The Sublessor provided the Company with a tenant improvement allowance (“TIA”) of $190 per rentable square foot, or $8.6 million. As of June 30, 2024, the Company received the entire $8.6 million TIA. The Company incurred out-of-pocket tenant improvements costs of approximately $1.6 million, which were in excess of the $8.6 million TIA.

On May 3, 2024, the Company received a notice from the Sublessor regarding past due rent payments of approximately $2.3 million, including amounts related to property taxes and common area maintenance costs, that the Company did not pay for the months of February, March, April and May 2024. Failure to pay the past due rent payments in full, plus approximately $70,000 in late fees and interest, within five business days from the date of the notice constitutes an event of default under the sublease.

The Company also did not pay the rent for June, July or August 2024, and as of August 1, 2024, owed approximately $4.0 million in the aggregate in past due rent. On August 5, 2024, the Sublessor drew down on the letter of credit for the full $4.1 million to cover the approximately $4.0 million of past due rent payments, plus interest and penalties.

On August 9, 2024, the Company and Sublessor entered into a sublease termination agreement, effective August 31, 2024. The sublease was originally scheduled to expire in 2033. See Note 17 for more information on the sublease termination agreement.

For the three and six months ended June 30, 2024 and 2023, the net operating lease expenses were as follows (in thousands):

NET OPERATING LEASE EXPENSE

	2024			2023			2024			2023
	Three months ended June 30,						Six months ended June 30,
	2024			2023			2024			2023
Operating lease expense	$	1,633		$	67		$	3,269		$	135
Sublease income		(21	)		(21	)		(42	)		(42	)
Variable lease expense		332			7			663			12
Total lease expense	$	1,944		$	53		$	3,890		$	105

The tables below show the beginning balances of the operating ROU assets and lease liabilities as of January 1, 2024 and the ending balances as of June 30, 2024, including the changes during the period (in thousands).

	Operating Lease ROU Assets

Operating lease ROU assets at January 1, 2024	$	32,781
Adjustment to ROU asset for remeasurement of Somerville Sublease liability		4,245
Amortization of operating lease ROU assets		(1,036	)
Operating lease ROU assets at June 30, 2024	$	35,990

	Operating Lease Liabilities
Operating lease liabilities at January 1, 2024	$	35,070
Adjustment to lease liability due to remeasurement of Somerville Sublease		4,245
Accretion of interest for Somerville Sublease		1,787
Principal payments on operating lease liabilities		(792	)
Operating lease liabilities at June 30, 2024		40,310
Less non-current portion		36,044
Current portion at June 30, 2024	$	4,266

As of June 30, 2024, the Company’s operating leases had a weighted-average remaining life of 9.3 years with a weighted-average discount rate of 11.07%. The maturities of the operating lease liabilities are as follows (in thousands):

	As of June 30, 2024
2024	$	5,305
2025		6,075
2026		6,238
2027		6,308
2028		6,406
Thereafter		33,879
Total payments		64,211
Less imputed interest		(23,901	)
Total operating lease liabilities	$	40,310