Quarterly report pursuant to Section 13 or 15(d)

Operating Leases

v3.23.1
Operating Leases
3 Months Ended
Mar. 31, 2023
Leases [Abstract]  
Operating Leases

8. Operating Leases

As of March 31, 2023, the current and non-current portions of the total liability for operating leases was $3.1 million and $1.4 million, respectively. As of March 31, 2023, the weighted average remaining lease term on the operating leases is 17 months. The weighted average incremental borrowing rate used to determine the operating lease liabilities included on the condensed balance sheet was 8.6%.

Facility leases

On January 27, 2021, the Company entered into a new lease agreement for office and lab space in South San Francisco, California that included two office suites. The lease terms for the two office suites commenced during July and August 2021, respectively. The term of the lease is 44 months for the first office suite and 43 months for the second office suite with an option to extend the term for an additional two years on the same terms and conditions. This option to extend the lease term was not determined to be reasonably certain and therefore has not been included in the Company’s calculation of the associated operating lease liability under ASC 842. The corresponding right-of-use assets and lease liabilities related to the two office suites were recorded on the Company’s balance sheet upon the lease commencement date, which was the date the Company was deemed to have obtained control of the premises.

On November 10, 2021, the Company entered into a sublease agreement for office and lab space located in Brisbane, California. The sublease expires on December 6, 2023. The corresponding right-of-use assets and lease liabilities related to the sublease were recorded on the Company’s balance sheet upon the lease commencement date, which was the date the Company was deemed to have obtained control of the premises.

As of March 31, 2023, the Company had operating lease right-of-use assets of $3.5 million and operating lease liabilities of $3.8 million related to the office suite leases recorded on its condensed balance sheet.

Embedded leases

On May 10, 2021 and August 30, 2021, the Company and LCGM entered into the LCGM MSA and SOW #3, respectively, for the exclusive use of a manufacturing suite at the LCGM facility. Pursuant to the terms of SOW #3, LCGM agreed to provide the Company with certain dedicated space for the clinical manufacturing, release testing, and product release in the Company’s Phase 1/2 CEDAR clinical trial to treat sickle cell disease. The Company concluded that the agreement contains an embedded lease as the Company controls the use of a dedicated manufacturing suite and the equipment therein. The agreement includes fixed lease payments of $5.6 million from inception of lease through April 30, 2023, the expiration date of SOW #3.

The Company and Explora BioLabs, Inc. (“Explora”) entered into a License Service Agreement and Master Services Agreement (together, the “Explora Agreements”) on November 17, 2021 and December 16, 2021, respectively. Pursuant to the terms of the Explora Agreements, Explora agreed to provide a certain dedicated space to perform in vitro or in vivo studies, obtain or house research animals, and provide scientific or technical consultation to the Company. The Company concluded that the agreement contains an embedded lease as the Company controls the use of a dedicated manufacturing suite and the equipment therein. The Explora Agreements contain fixed lease payments of $0.7 million from inception of lease through November 2023.

As of March 31, 2023, the Company had operating lease right-of-use assets of $0.5 million and operating lease liabilities of $0.7 million related to the embedded leases recorded on its condensed balance sheet.

Operating Lease Obligations

As of March 31, 2023, the future minimum lease payments for the Company’s operating leases for each of the years ending December 31 were as follows (in thousands):

 

 

 

Amount

 

2023 (Remaining nine months)

 

$

 

2,974

 

2024

 

 

 

1,468

 

2025

 

 

 

375

 

Thereafter

 

 

 

 

Total undiscounted lease payments

 

 

 

4,817

 

Present value adjustment

 

 

 

(276

)

Total net lease liabilities

 

$

 

4,541

 

Lease expense was $1.7 million and $1.7 million for the three months ended March 31, 2023 and 2022, respectively.

Under the terms of the remaining lease agreements, the Company is also responsible for certain variable lease payments that are not included in the measurement of the lease liability. Variable lease payments for operating leases were $0.4 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively, including non-lease components such as common area maintenance fees, taxes, and insurance.

The following information represents supplemental disclosure for the statement of cash flows related to the operating leases (in thousands):

 

March 31, 2023

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

Operating cash flows under operating leases

$

 

1,745