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Leases
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases

4.

Leases

 

Operating Leases

 

In August 2015, the Company entered into an operating lease agreement with U.S. REIF Central Plaza Massachusetts, LLC (the “Landlord”) with respect to its corporate headquarters located at 675 Massachusetts Avenue, Cambridge, Massachusetts (the “Original Lease”).The term of the Original Lease commenced in January 2016 and was scheduled to expire in December 2020. Under the terms of the Original Lease, the Company provided a security deposit of $0.2 million to the Landlord, which is included in long-term assets in the accompanying condensed consolidated balance sheets. The Original Lease provided for annual rent escalations as well as tenant incentives in the amount of $0.7 million, of which $0.3 million would be reimbursed to the Landlord over the initial term of the Original Lease. In determining its ROU assets as of January 1, 2019, the Company reduced the amount of ROU assets by $0.2 million, which was the remaining balance of lease incentives received from the Landlord as of that date. The lease does not include any restrictions or covenants that had to be accounted for under the lease guidance.

 

On January 17, 2018, the Company entered into an amendment to the Original Lease (the “Amendment”). The Amendment makes certain modifications to the Original Lease, including (i) the addition of approximately 7,800 square feet of office space in the same building (the “Expansion Premises”) and (ii) an extension of the expiration date of the Original Lease to seven years following the delivery date of the Expansion Premises (the “Lease Term”), which occurred on December 22, 2018.

 

Under the Amendment, the Company has two consecutive options to extend the Lease Term for an additional period of five years (the “Option Terms”), subject to certain conditions, upon notice to the Landlord. These renewal options were not included in the calculation of the operating lease assets and operating lease liabilities, as the renewal is not reasonably certain. The Amendment provides for annual base rent for the Expansion Premises of approximately $0.5 million in the first year of the Lease Term, which increases on an annual basis to approximately $0.6 million in the final year of the Lease Term, and annual base rent during the Option Terms to be calculated based on the Landlord’s good faith determination of 100% of the fair market rate for such Option Terms. The Company is also obligated to pay the Landlord certain costs, taxes and operating expenses, subject to certain exclusions. The Amendment also provides for $0.4 million from the Landlord for leasehold improvements on the Expansion Premises. In determining its ROU assets as of January 1, 2019, the Company reduced the amount of ROU assets by $0.4 million, which was the remaining balance of lease incentives received from the Landlord as of that date. The lease does not include any restrictions or covenants that had to be accounted for under the lease guidance.

 

In July 2016, the Company entered into an agreement to lease laboratory space through November 30, 2019 from a sublessor, which required annual lease payments of $0.3 million, subject to certain escalations.

 

For the three and nine months ended September 30, 2019, the components of operating lease expense were as follows (in thousands):

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

Operating lease expense

 

Statement of Operations Location

 

September 30, 2019

 

 

September 30, 2019

 

Fixed operating lease expense

 

Research and development expense

 

 

151

 

 

 

447

 

 

 

General and administrative expense

 

 

222

 

 

 

558

 

 

 

 

 

 

 

 

 

 

 

 

Variable operating lease expense

 

Research and development expense

 

 

14

 

 

 

41

 

 

 

General and administrative expense

 

 

77

 

 

 

173

 

 

 

 

 

 

 

 

 

 

 

 

Total operating lease expense

 

 

 

$

464

 

 

$

1,219

 

 

Supplemental cash flow information related to the Company’s operating leases for the nine months ended September 30, 2019, was as follows (in thousands):

 

 

 

September 30, 2019

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

Operating cash flows from operating leases

 

$

1,006

 

 

Embedded Finance Leases

 

As part of our agreement with Meiji Seika Pharma Co. Ltd. (“Meiji”), the Company paid Meiji approximately $1.6 million during the three months ended December 31, 2018, related to fixed assets which will be used in manufacturing related activities at Meiji. The Company determined this equipment to be an embedded finance lease and has been capitalized as property and equipment in the condensed consolidated balance sheet as of September 30, 2019 and December 31, 2018. As this equipment was fully paid in 2018, there is no corresponding lease liability as of September 30, 2019.

 

The following table presents the lease balances within the condensed consolidated balance sheet, weighted average remaining lease term, and the weighted average discount rates related to the Company’s operating and finance leases as of September 30, 2019 (in thousands, except for the weighted average remaining lease term and the weighted average discount rate):

 

Lease Assets and Liabilities

 

Classification

 

September 30, 2019

 

Assets

 

 

 

 

 

 

Operating

 

Operating lease right of use assets

 

$

3,944

 

Financing

 

Property and equipment, net

 

 

1,267

 

Total leased assets

 

 

 

$

5,211

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current

 

 

 

 

 

 

Operating

 

Operating lease liabilities

 

$

442

 

Non-Current

 

 

 

 

 

 

Operating

 

Non-current operating lease liabilities

 

 

4,162

 

Total lease liabilities

 

 

 

$

4,604

 

 

 

 

 

 

 

 

Weighted average remaining lease term

 

 

 

6 years

 

Weighted average discount rate

 

 

 

 

11

%

 

The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2019 (in thousands):

 

Years Ending December 31,

 

 

 

 

2019 (remainder)

 

$

228

 

2020

 

 

928

 

2021

 

 

943

 

2022

 

 

1,061

 

2023

 

 

1,076

 

2024

 

 

1,092

 

Thereafter

 

 

1,108

 

Total future minimum lease payments

 

 

6,436

 

Less imputed interest

 

 

(1,832

)

Total operating lease liabilities

 

$

4,604

 

 

The following table summarizes the future minimum payments due for the Company’s operating leases under the prior lease guidance for each of the next five years and total thereafter as of December 31, 2018 (in thousands):

 

Years Ending December 31,

 

 

 

 

2019

 

$

1,361

 

2020

 

 

1,054

 

2021

 

 

995

 

2022

 

 

1,107

 

2023

 

 

1,123

 

Thereafter

 

 

2,246

 

 

 

$

7,886

 

 

Rent expense during the three and nine months ended September 30, 2018 was $0.2 million and $0.6 million, respectively.