Leases

6 Months Ended

Jun. 30, 2022

Leases

Leases

8. Leases

Dublin Lease

In April 2017, the Company leased approximately 6,100 square feet of office space in Dublin, Ireland, under a non-cancelable operating lease that expires in April 2027 (“Dublin Lease”). In May 2022, the Company entered into an agreement under which it assigned the Dublin Lease (“Lease Assignment”) to an unaffiliated company. The Company determined that the Lease Assignment would be accounted for as a lease modification under ASC 842, Leases. As a result of the lease modification, the Company reduced the value of its operating lease assets and liabilities in the consolidated balance sheets by $1.4 million and $1.5 million, respectively. Under the Lease Assignment, the Company sold furniture and equipment located in the Dublin office to the unaffiliated company and recognized a net loss of $0.1 million from the sale.

Following the completion of the Lease Assignment, in May 2022, the Company entered into a new operating lease agreement for approximately 700 square feet of office space in Dublin, Ireland, effective June 2022. The lease has a two year term ending in May 2024, and the Company may terminate the lease by providing three months prior written notice. Under the new lease, the Company will incur total base rent expense of approximately $0.4 million which is recognized on straight-line basis over the two year lease term.

South San Francisco Sublease

In June 2022, the Company entered into a non-cancelable agreement under which it subleased approximately 78,000 square feet of its South San Francisco office and laboratory space to an unaffiliated company. The sublease term continues through May 2030, consistent with the expiration of the Company’s head lease, and the subtenant has no option to extend the sublease. Under the terms of the sublease, the Company is entitled to receive an initial monthly base rent of $0.5 million which will be subject to annual increases of 3%, as well as the subtenant’s proportionate share of the property’s operating expenses. The Company expects to receive a total of $51.8 million in base rent over the sublease term which represents a $13.6 million premium over its proportionate lease payment obligations under the head lease. Under the terms of the head lease, 50% of the sublease premium, equal to $6.8 million, shall be shared with the landlord and 50% shall be retained by the Company. The Company recognizes the sublease income on a straight-line basis over the term of the sublease which is reflected as a reduction of R&D expense and selling, general and administrative expenses in the consolidated statements of operations. No lease modification was deemed to have occurred by entering into the sublease agreement because the Company was not released, either fully or in part, from its obligations under the head lease.

Sublease income related to this sublease agreement, including base rent and certain sublease transaction cost reimbursements from the landlord, was $0.3 million for the three and six months ended June 30, 2022. The following table summarizes the future undiscounted cash inflows relating to the sublease agreement as of June 30, 2022:

(In thousands)
Year ending December 31:
2022	$	3,562
2023		6,509
2024		6,509
2025		6,509
2026		6,509
Thereafter		22,241
Total operating sublease receipts	$	51,839