Note 7 — Restructuring, Impairment and Costs of Terminated Program, and Impairment of Goodwill

In connection with our 2022 and 2023 Restructuring Plans, we report the following costs in restructuring, impairment and costs of terminated program:

Restructuring, impairment and costs of terminated program includes the following (in thousands):


	Three Months Ended March 31,
	2024		2023
Clinical trial expense, other third-party and employee costs for the wind down of the bempegaldesleukin program	$	—	$	1,598
Severance and benefit expense		—		5,483
Impairment of right-of-use assets and property, plant and equipment		—		13,200
Contract termination and other restructuring costs		975		912
Restructuring, impairment and other costs of terminated program	$	975	$	21,193

In prior periods through March 31, 2022, we reported the clinical trial costs, other third-party costs and employee costs related to the bempegaldesleukin program primarily in research and development expense. Beginning in the second quarter of

2022, following our announcement to terminate the program, we began reporting clinical trial, other third-party costs and employee costs for the wind down of the bempegaldesleukin program in restructuring, impairment and costs of terminated program. For the three months ended March 31, 2024, such amounts are immaterial and are included in research and development expense.

Employees affected by the reduction in force under the 2022 and 2023 Restructuring Plans are entitled to receive severance payments and certain Company funded benefits. The restructuring charges are recorded at fair value.

For the 2022 Restructuring Plan, we recognized all expense in 2022 and paid the final liability of $3.3 million in the three months ended March 31, 2023.

For the 2023 Restructuring Plan, we recognized a liability of $5.5 million of severance and benefit expense as of March 31, 2023, reflecting severance and benefits which the employees had vested into and for which payment was probable and reasonably estimable as of March 31, 2023. We recognized $7.9 million in total expense in 2023 for the 2023 Restructuring Plan and paid the final liability of $0.2 million in the three months ended March 31, 2024.

We do not expect to recognize any additional severance and benefits expense for the 2022 and 2023 Restructuring Plans.

The following table provides details regarding the severance and benefit expense for the three months ended March 31, 2024 pursuant to the 2023 Restructuring Plan and a reconciliation of the severance and benefits liability for the three months ended March 31, 2023 pursuant to the 2022 and 2023 Restructuring Plans, which we report within accrued expenses on our Condensed Consolidated Balance Sheet (in thousands):


	Three Months Ended March 31, 2023
	2023 Restructuring Plan			2022 Restructuring Plan			Total
Liability balance as of December 31, 2022	$	—		$	3,299		$	3,299
Expense recognized during the period		5,483			—			5,483
Payments during the period		—			(3,299	)		(3,299	)
Liability balance as of March 31, 2023	$	5,483		$	—		$	5,483

	Three Months Ended March 31, 2024
	2023 Restructuring Plan			2022 Restructuring Plan			Total
Liability balance as of December 31, 2023	$	196		$	—		$	196
Expense recognized during the period		—			—			—
Payments during the period		(196	)		—			(196	)
Liability balance as of March 31, 2024	$	—		$	—		$	—

As a result of our 2022 and 2023 Restructuring Plans, we decided to seek a sublease for all of our leased spaces on Third Street and Mission Bay Blvd. South. Accordingly, we evaluate each space for impairment when management decides to sublease the respective space and at each reporting date thereafter, as facts and circumstances change. The significant assumptions in our impairment analysis relate to sublease income, including the length of time to enter into a sublease, sublease rental payments, free rent periods, tenant improvement allowances and broker commissions. When available, we use sublease negotiations or agreements, but in the absence of such information, we develop our own subjective estimates based on current real estate trends and market conditions. Accordingly, our estimates are subject to significant risk, and the terms of sublease agreements, if any, and the resulting amount and timing of sublease income, if ever realized, may be materially different than our estimates.

As part of our evaluation of each sublease space, we separately compare the estimated undiscounted sublease income, as described above, for each sublease to the net book value of the related long-term assets, which include right-of-use assets and

certain property, plant and equipment, primarily for leasehold improvements (collectively, sublease assets). If such sublease income exceeds the net book value of the sublease assets, we do not record an impairment charge. Otherwise, we record an impairment charge by reducing the net book value of the sublease assets to their estimated fair value, which we determined by discounting the estimated sublease income using the estimated borrowing rate of a market participant subtenant, which we estimated to be 7.9%, for the three months ended March 31, 2023.

During the three months ended March 31, 2023, we recorded an impairment charge for our remaining office and laboratory leased space in our Mission Bay Blvd. South facility which we decided to sublease under the 2023 Restructuring Plan. We also recorded impairment charges for certain excess laboratory equipment which we subsequently sold in 2023.

During the three months ended March 31, 2024, while we continue to seek subleases for our office lease space on Third. St. and our office and laboratory lease space on Mission Bay Blvd. South, we recorded no impairment charges during the three months ended March 31, 2024.

The following is a reconciliation of the impairment charges we recorded for the three months ended March 31, 2023, including the net book values of the sublease assets before the impairment and the fair values of the sublease assets (in thousands):


	Three Months Ended March 31, 2023
	Property, Plant and Equipment			Operating Lease Right-of-Use Assets			Total
Net book value of impaired facilities before write-off	$	5,114		$	28,434		$	33,548
Less: Fair value of impaired facilities — Level 3 of Fair Value Hierarchy		(3,314	)		(18,734	)		(22,048	)
Impairment expense for facilities		1,800			9,700			11,500
Impairment of other property, plant and equipment		1,700			—			1,700
Total impairment of right-of-use assets and property, plant and equipment	$	3,500		$	9,700		$	13,200

We have incurred significant contract termination costs in connection with our 2022 Restructuring Plan. Because we adjust this liability at fair value at each reporting date, we continue to recognize expense as our estimates change until settlement.

The following are reconciliations of the contract termination and other costs for the 2022 Restructuring Plan for the three months ended March 31, 2024 and 2023. We report $3.0 million within accrued expenses and the remaining within other long-term liabilities on our Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023.


	For the Three Months Ended March 31,
	2024			2023
Liability balances as of December 31, 2023 and December 31, 2022, respectively	$	5,542		$	7,710
Expense recognized during the period		975			878
Payments during the period		(928	)		(1,095	)
Liability balances as of March 31, 2024 and March 31, 2023, respectively	$	5,589		$	7,493