Right-of-Use Assets and Liabilities

9 Months Ended

Sep. 30, 2023

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the condensed consolidated balance sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining

the present value of lease payments, which ranges from 3.0% - 7.5%. Lease expense is recognized on a straight-line basis over the lease term. The Company considers options to extend or terminate leases in recognizing ROU assets and lease liabilities when it is reasonably certain that such options will be exercised.

In May 2021, the Company entered into a lease arrangement, which was amended in August 2022, for approximately 160,000 square feet of laboratory and office space, expected to be occupied in 2025. Once occupied, the base rent will range from $7.7 million to $8.8 million annually over a ten-year lease term.

In connection with the signing of the lease and the related amendment, and at the Company’s election to increase the landlord’s contribution to the tenant improvement allowance, the Company initially issued a letter of credit totaling $4.5 million, which was subsequently increased to $5.5 million, collateralized by a certificate of deposit in the same amount, which is presented as restricted cash in the consolidated balance sheets.

The Company has operating leases for its corporate office, laboratories and certain equipment, which expire no later than January 2026. The leases have a weighted average remaining term of 1.6 years.

The components of lease expense were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2023		2022		2023		2022
Operating lease cost	$	0.5	$	0.5	$	1.5	$	1.6

Supplemental cash flow information related to leases was as follows:


	Nine Months Ended September 30,
(dollars in millions)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1.5	$	1.5
Supplemental non-cash information:
Right-of-use assets obtained in exchange for new lease obligations	$	—	$	2.4

Maturities of operating lease liabilities as of September 30, 2023, were as follows:


(dollars in millions)
Remainder of 2023	$	0.4
2024	2.2
2025	0.5
2026	—



Total lease payments	3.1
Less: imputed interest	(0.1)
Total	$	3.0