Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Leases

The Company subleases certain office and laboratory space under a non-cancelable operating lease expiring in January 2025 for the initial leased space and for the expansion space leased pursuant to an amendment to the lease agreement entered into in August 2018. The sublease agreement included options to extend for the entire premises through October 2028. The options to extend must be exercised prior to the termination of the original lease agreement. The period covered by the options was not included in the non-cancellable lease term as it was not determined to be reasonably certain to be executed. In February 2022, the Company exercised its renewal option to extend the term of the expansion space until January 2025. The lease is subject to charges for common area maintenance and other costs, and base rent is subject to an annual 3% increase each subsequent year. Costs determined to be variable and not based on an index or rate were not included in the measurement of the operating lease liabilities.

In November 2019, the Company entered into an additional non-cancelable lease agreement for certain office and laboratory space (the “Permanent Space”) in San Diego, California, commencing on May 1, 2020 and expired on December 31, 2021. The lease agreement included a lease for temporary space commencing on January 1, 2020 and expired on the commencement date of the lease of the Permanent Space. The monthly base rent for the permanent and temporary space was $63,425 and $28,745, respectively. The lease was subject to charges for common area maintenance and other costs, and base rent is subject to an annual 3% increase each subsequent year.

In June 2020, the Company entered into a sublease agreement for the Permanent Space with a third party. The sublease commenced on July 1, 2020 and expired on December 31, 2021. The sublessee paid the monthly base rent of $63,425, subject to an annual 3% increase, and was obligated to pay for common area maintenance and other costs. The sublessee received a 6 months base rent abatement. The Company determined that there was no impairment on the original right-of-use asset and continued to account for the Permanent Space as it did before the commencement of the sublease. The Company recognized no sublease income for the three months ended March 31, 2022 and $0.3 million sublease income for the three months ended March 31, 2021.

In July 2020, the Company entered into a lease assignment agreement, whereby it became the assignee to a lease for certain office and laboratory space in Ann Arbor, Michigan. On August 4, 2021, the Company entered into a lease assignment agreement, whereby it assigned the lease to another assignee. The Company derecognized the related operating lease obligation and right-of-use asset of $1.7 million.

Monthly rent expense is recognized on a straight-line basis over the term of the leases. The operating leases are included in the condensed consolidated balance sheet at the present value of the lease payments at a weighted average discount rate of 7% using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment as the leases do not provide an implicit rate. The weighted average remaining lease term was 2.0 years.

Lease costs were comprised of the following (in thousands):


	Three months ended March 31,
	2022		2021
Operating lease cost	$	761	$	1,038
Short-term lease cost	10		9
Total lease cost	$	771	$	1,047

Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended March 31, 2022 and 2021 was $0.8 million and $1.1 million, respectively.

Gross future minimum annual rental commitments as of March 31, 2022, were as follows (in thousands):


	Undiscounted Rent Payments
Year ending December 31
2022 (remaining 9 months)	$	2,421
2023	3,319
2024	3,419
2025	144
Total undiscounted rent payments	$	9,303

Present value discount	(836)
Present value of lease payments	$	8,467
Current portion of operating lease liabilities (included as a component of accrued expenses and other current liabilities)	2,761
Noncurrent operating lease liabilities	5,706
Total operating lease liability	$	8,467

For the three months ended March 31, 2022 and 2021 the Company recorded approximately $0.9 million and $1.0 million, respectively, in rent expense.

Litigation

Kuhne vs. Gossamer Bio, Inc., et. al.

On April 3, 2020, Scott Kuhne, individually and on behalf of all others similarly situated, filed a putative class action lawsuit against the Company, certain of its executive officers and directors, and the underwriters of its IPO in the United States District Court for the Southern District of California (Case No. 3:20-cv-00649-DMS-DEB). The second amended complaint was filed on November 20, 2020. The complaint was filed on behalf of all investors who purchased the Company's securities pursuant to or traceable to the Company's February 8, 2019 IPO. The complaint alleged that the Company, certain of its executive officers and directors, and the underwriters of its IPO made false and/or misleading statements and failed to disclose material adverse facts about its business, operations and prospects in violation of Sections 11 and 15 of the Securities Act of 1933, as amended. The plaintiff sought damages, interest, costs, attorneys’ fees, and other unspecified equitable relief. The Company moved to dismiss the complaint on January 19, 2021. On April 19, 2021, the Court granted the Company's motion to dismiss in substantial part without leave to amend, and denied the motion to dismiss as to single claim. On October 29, 2021, the parties informed the Court that they had reached a settlement in principle, and the Court vacated all deadlines. The parties entered a settlement agreement on February 1, 2022. Pursuant to the agreement, the Company has agreed to pay approximately $2.4 million, in exchange for customary releases and settlement terms. The lead plaintiff filed a motion for preliminary approval of the settlement and authorization of dissemination of notice to the class on February 2, 2022. The Court entered an order preliminarily approving the settlement on March 14, 2022, and scheduled the final settlement approval hearing for June 24, 2022. In accordance with the authoritative guidance on the evaluation of loss contingencies, the Company recorded a $2.4 million litigation charge related to this matter in the third quarter of 2021, which was included as a component of General and Administrative expense in the condensed consolidated statements of operations and comprehensive loss for the three months ended September 30, 2021.