Leases

On December 29, 2016, the Company entered into an agreement with BMR-Axiom LP to lease office and laboratory space as its corporate headquarters located at 4550 Towne Centre Court, San Diego, California (the “Lease”) for a period of 10 years commencing on October 30, 2017. The Company has an option to extend the Lease for an additional 5 years at the end of the initial term.

The Company provided a standby letter of credit for $0.9 million in lieu of a security deposit. This amount will decrease to $0.6 million after year two of the lease term and decrease to $0.3 million after year 5 of the lease term. The annual rent under the Lease is subject to escalation during the term. In addition to rent, the Lease requires the Company to pay certain taxes, insurance and operating costs relating to the leased premises. The Lease contains customary default provisions, representations, warranties and covenants. The Lease is classified as an operating lease.

Future minimum lease payments under the Lease as of September 30, 2019 are as follows (in thousands):



2019	$	1,000
2020	4,058
2021	4,174
2022	4,294
2023	4,417
Thereafter	18,134
Total future minimum lease payments	36,077
Less: discount	(6,173		)
Total lease liability	$	29,904

The Company recorded a lease liability for the Lease based on the present value of the Lease payments over the expected Lease term, discounted using the Company’s incremental borrowing rate. The Company recorded a corresponding right-of-use lease asset based on the lease liability, adjusted for incentives received prior to the Lease commencement date. The option to extend the Lease was not recognized as a part of either the Company’s lease liability or right-of-use lease asset. Lease expense for each of the three and nine months ended September 30, 2019 and 2018 was $0.7 million and $2.1 million, respectively. Amortization for the right-of-use lease asset was $0.4 million and $1.0 million for the three and nine months ended September 30, 2019, respectively.