In January 2015, as amended in September 2016, the Company entered into an operating lease for approximately 42,000 square feet of office and laboratory space located at 700 Saginaw Drive, Redwood City, California (the 700 Building), with a term through April 2023. In April 2020, the Company amended the lease to lease an additional 19,000 square feet of office, laboratory and research and development space located at 300 Saginaw Drive, Redwood City, California (the 300 Building), beginning on December 15, 2020 and ending December 31, 2030, and to extend the Company’s existing lease term for the 700 Building until December 31, 2030. The Company has the option to extend the lease term for the 700 Building and the 300 Building together for an additional ten years after December 31, 2030.

The annual base rent for the lease of the 300 Building is $1.2 million until December 31, 2021, after which the annual base rent will increase by approximately 3.5% in each subsequent year of the lease term. The annual base rent for the lease of the 700 Building remains unchanged through April 30, 2023, and increases to $2.8 million for the 12 month period ending April 30, 2024, after which the annual base rent increases by approximately 3.5% in each subsequent year of the lease term.

In connection with the lease amendment, the Company issued a letter of credit for $0.9 million, which is included in restricted cash on the consolidated balance sheet as of March 31, 2021 and December 31, 2020, respectively.

Through March 31, 2021, the landlord has provided the Company with $3.4 million in tenant improvement allowances for the 700 Building, which were recognized as a lease incentive. The lease amendment provides the Company with an additional tenant improvement allowance of $3.2 million to complete the renovation to the 300 Building, which the Company has determined to be lessee owned. This was also recognized as a lease incentive. The lease incentives are being amortized as an offset to rent expense over the lease term in the condensed consolidated statements of operations.

Upon the execution of the lease amendment, which was deemed to be a lease modification, the Company re-evaluated the assumptions used during the adoption of ASC 842 for the lease. The Company determined the amendment consists of two separate contracts under ASC 842. One contract is related to a new right-of-use asset for the 300 Building, which is being accounted for as an operating lease, and the other is related to the modification of the original lease term for the 700 Building. As a result, the Company recorded a right-of-use asset of $6.4 million and a lease liability of $9.0 million for the 300 Building and an increase of $14.8 million to the right-of-use asset and lease liability for the 700 Building upon execution of the lease amendment. The Company is recognizing rent expense for both buildings on a straight-line basis through the remaining extended term of the respective leases.

As part of the Warp Drive acquisition in October 2018, the Company assumed an operating lease for approximately 22,000 square feet of office and laboratory space located in Cambridge, Massachusetts (the Cambridge Lease), which expires in February 2023, with an option to extend the term through February 2028, subject to certain conditions. In March 2019, the Company fully subleased the Cambridge Lease to Casma Therapeutics, Inc. (Casma), a related party, on financial terms substantially the same as the original lease. The sublease term with Casma is through the remainder of the Cambridge Lease term. The sublease by Casma and related sublease payments by Casma to the Company are fully guaranteed by Third Rock Ventures, LLC, a related party. In conjunction with the Cambridge Lease, the Company issued a letter of credit for $0.2 million, which is included in restricted cash on the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020.

The balance sheet classification of the Company’s lease liabilities was as follows:

	March 31,		December 31,
	2021		2020
	(in thousands)
Operating lease liabilities:
Operating lease liability – current	$	3,700	$	3,672
Operating lease liability – noncurrent		28,294		28,992
Total operating lease liabilities		31,994		32,664
Financing lease liabilities:
Accrued expenses and other current liabilities		—		19
Total financing lease liabilities		—		19
Total lease liabilities	$	31,994	$	32,683

For the three months ended March 31, 2021 and 2020, operating lease cost was $0.8 million and $0.4 million, respectively, net of sublease income of $0.6 million and $0.4 million, respectively, and tenant improvement allowance credits of $0.1 million and $0.1 million, respectively. The operating cash flows for operating leases were $0.7 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively. Short-term lease costs were immaterial for the three months ended March 31, 2021 and 2020.

As of March 31, 2021, the maturities of the Company’s operating lease liabilities were as follows (in thousands):



2021 (remaining nine months)	$	3,454
2022		5,144
2023		4,173
2024		4,215
2025		4,363
Thereafter		24,213
Total undiscounted lease payments	$	45,562
Less: Imputed interest		(12,264	)
Less: Tenant improvement allowance		(1,304	)
Total operating lease liabilities	$	31,994

The amounts reflected in the table above include the Company’s lease payments for the Cambridge lease, but do not reflect any offset for the sublease payments the Company is entitled to receive from Casma. The amounts representing the tenant improvement allowance, which are recorded in prepaid expenses and other current assets, are expected to be fully received by the Company within the second quarter of 2021.

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate. The weighted-average discount rate used to determine the operating lease liability was 7.1%. As of March 31, 2021 and December 31, 2020, the weighted-average remaining lease term was 8.9 years and 9.1 years, respectively.

From time to time, the Company may be involved in litigation related to claims that arise in the ordinary course of its business activities. The Company accrues for these matters when it is probable that losses will be incurred and these losses can be reasonably estimated. As of March 31, 2021 and December 31, 2020, respectively, the Company does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable. The Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the fair value of these agreements is minimal.