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Leases
 12 Months Ended
Dec. 31, 2023
Leases [Abstract]  
Leases Leases
The Company leases certain office and laboratory space. Additionally, the Company entered into CMO and CTO agreements which have been determined to contain an embedded lease.
Operating lease commitments
60 Binney Street lease & sublease
In October 2021, the Company entered into a consent to assignment and amendment to its lease agreement for its 60 Binney Street lease (the "Assignment"). The Assignment transfers the Company's interest in the lease to 2seventy bio and releases the Company from its obligation to maintain the $13.8 million collateralized letter of credit required under the original 60 Binney Street lease. Although the lease was legally transferred to 2seventy bio, the lessor required that the Company remain secondarily liable as a guarantor for payment obligations accruing under the 60 Binney Street lease from the date of Assignment until the later of (i) the date that the Company has completely vacated the premises and (ii) the date that 2seventy bio has reached a market capitalization of $900 million. Upon Separation, the lease assignment was accounted for as the termination of the original lease and the Company de-recognized the right-of-use asset and lease liability related to the 60 Binney Street lease and recognized the fair value of the guarantee pursuant to ASC 405, Liabilities. The fair value of the guarantee was not material.
Concurrent with the Assignment of the 60 Binney Street lease, the Company entered into a sublease agreement with 2seventy bio for office, laboratory and storage space located at 60 Binney Street (the "60 Binney Street Sublease") while it constructs and outfits its new office and laboratory space. The lease was modified in July 2022 to reflect the decreased use of the office and lab space. Under the terms of the 60 Binney Street Sublease, the Company leased 72,988 square feet for $1.0 million per month in base rent for the period beginning from the Assignment through March 2022 and 58,004 square feet for $0.8 million per month in base rent for the period from April 2022 through June 2022. Under the terms of the modification, beginning in July 2022, the Company is required to pay $0.6 million monthly until no later than December 2023. The Company also pays monthly fees for use of the facilities and support personnel, calculated based on its pro-rata share of operating costs during the term of the 60 Binney Street Sublease. The Company accounted for the 60 Binney Street Sublease as a new lease under ASC 842, and in November 2021, recognized a right-of-use asset and lease liability related to the 60 Binney Street Sublease. The Company terminated the 60 Binney Street Sublease in August 2023 and derecognized the right-of-use asset and lease liability.
50 Binney Street sublease & sub-sublease
In April 2019, the Company entered into a sublease agreement for office space located at 50 Binney Street in Cambridge, Massachusetts (the “50 Binney Street Sublease”) to supplement the Company’s then-current corporate headquarters located at 60 Binney Street in Cambridge, Massachusetts. Under the terms of the 50 Binney Street Sublease, the Company leases 267,278 square feet of office space for $99.95 per square foot, or $26.7 million per year in base rent subject to certain operating expenses, taxes and annual rent increases of approximately 3%. The lease commenced in April 2022 and lease payments began in July 2022. The lease term will end on December 31, 2030, unless other specific circumstances specified in the 50 Binney Street Sublease occur. Upon signing the 50 Binney Street Sublease, the Company executed a $40.1 million cash-collateralized letter of credit, which may be reduced in the future subject to the terms of the 50 Binney Street Sublease and certain reduction
requirements specified therein. The $40.1 million of cash collateralizing the letter of credit is classified as restricted cash and other non-current assets on the Company’s consolidated balance sheets.
In December 2021, the Company entered into a sub-sublease agreement (the "Sub-Sublease") with Meta Platforms, Inc. (“Meta”). Under the terms of the Sub-Sublease, the Company is subleasing the entirety of the 50 Binney Street premises which it has rights to under the 50 Binney Street Sublease. The Company is sub-subleasing the premises for $29.4 million in the first year (inclusive of parking costs) with 3% annual increases in each subsequent year. Meta received access to 50 Binney Street at the lease commencement date, which is the same point that the Company received access under the 50 Binney Street Sublease. The Company remains liable under the 50 Binney Street Sublease, including for the maintenance of the $40.1 million collateralized letter of credit. The Company recognizes monthly sublease income of $2.6 million in other income, net for the sub-subleased space.
Assembly Row lease
In November 2021, the Company entered into a lease agreement with Assembly Row 5B, LLC ("Landlord") for office space located at 455 Grand Union Boulevard in Somerville, Massachusetts to serve as the Company's future corporate headquarters. Under the terms of the arrangement, the Company leases approximately 61,180 square feet starting at an annual rate of $45 per square foot, subject to annual increases of 2.5%, plus operating expenses and taxes. In addition, the Company is eligible to receive a tenant work allowance of $160 per rentable square foot of the premises. The lease commenced on March 1, 2022, the date on which the Landlord tendered possession of the premises to the Company with any tenant work required to be performed by the Landlord substantially completed. Since the lease commencement date, the Company has recognized rent expense of $0.3 million monthly.
Hood Park lease
In October 2022, the Company entered into a sublease with Finch Therapeutics, Inc. ("Finch") for office and laboratory space at Finch’s corporate headquarters located at 100 Hood Park Drive, Charlestown, Massachusetts. Under the terms of the arrangement, the Company leases 42,261 square feet for $55 per square foot, subject to annual increases of 3.0%, plus operating expenses and taxes. This sublease commenced December 15, 2022, the date on which the landlord tendered possession of the premises to the Company and is expected to terminate on December 14, 2025. Since the lease commencement date, the Company has recognized substantially all of the monthly $0.2 million costs as rent expense.
Finance lease commitments - Embedded leases
The Company has six embedded CMO and CTO arrangements. The details are noted below.
Drug Product Manufacturing
Embedded Lease No. 1:
In June 2016, the Company entered into a manufacturing agreement for the future commercial production of the Company’s ZYNTEGLO and SKYSONA drug products with a CMO. Under this 12-year agreement, the CMO will complete the design, construction, validation and process validation of the leased suites prior to anticipated commercial launch of the product candidates. From 2016 through March 2018, while the suites were under construction, the Company paid a total of $12.0 million in contractual milestone payments. Construction was completed in March 2018, and beginning in April 2018, the Company paid $5.1 million per year, in fixed suite reservation fees as well as certain fixed labor, raw materials, testing and shipping costs for manufacturing services. The Company may terminate this agreement at any time upon payment of a one-time termination fee and up to 24 months of slot fees and 12 months of labor fees. The Company concluded that this agreement contains an embedded lease as the suites are designated for the Company’s exclusive use during the agreement's term, that it was not the deemed owner during construction, and the lease was not a capital lease under ASC 840-10, Leases - Overall. As a result, the Company initially accounted for the agreement as an operating lease under ASC 840 and recognized straight-line rent expense over the non-cancellable term of the embedded lease. As part of the Company's adoption of ASC 842, effective January 1, 2019, the Company carried forward the existing lease classification under ASC 840. The lease was modified and reclassified as a finance lease as of March 2019. In September 2023, the agreement was amended to change the fee structure in the arrangement from a fixed suite reservation fee to a fixed slot manufacturing fee. In addition, separate from the suite and existing equipment, the Company also has a forward starting embedded equipment lease that has not yet commenced. As the CMO is required to provide operational equipment throughout the contract term, the forward starting lease was established to account for the equipment that the CMO is obligated to lease to the Company in the future once the current equipment reaches its useful life and the lease expires. This forward starting lease is expected to commence in 2025 with an initial lease term of
three years and has fixed commitments of approximately $54.5 million. The Company has prepaid approximately $3.7 million, which is accounted for as prepaid asset on the Company's balance sheet that would adjust the right-of-use asset when the forward starting embedded equipment lease commences in 2025.
Embedded Lease No. 2:
In November 2016, the Company entered into an agreement for clinical and commercial production of the Company’s ZYNTEGLO, SKYSONA, and LYFGENIA drug products with a CMO at an existing facility. The Company concluded that this agreement contains an embedded operating lease as the clean rooms are designated for the Company’s exclusive use during the agreement's term. The term of the agreement is five years with subsequent three-year renewals at the mutual option of each party. The Company recognized a right-of-use asset and lease liability and were recognizing rent expense on a straight-line basis throughout the estimated remaining term of the embedded lease upon effective date of ASC 842. In January 2019, the Company amended this agreement along with the execution of new work orders and additional contracts for the delivery of non-lease services from the CMO, resulting in a lease modification under ASC 842. Under the terms of the amended agreement, the Company is required to pay annual maintenance and production fees of up to €16.5 million, depending on its production needs, and may terminate this agreement with twelve months’ notice and a one-time termination fee. The amendment also provides for an option to reserve an additional clean room for a one-time option fee and annual maintenance fees. In connection with the lease modification, in April 2019, the Company reconsidered the lease classification and accounted for this embedded lease as a finance lease under ASC 842. In September 2021, the Company reassessed the term of this lease due to the planned orderly wind down of its operations in Europe, resulting in a reduction to the right-of-use asset and related lease liability to reflect the shortened expected term of the agreement. In November 2021, the Company exercised its right to terminate the lease agreement, effective in November 2022 and was required to pay a one-time termination fee of €1.0 million upon termination. That termination payment was made in December 2021. The Company also paid for services rendered through the date of termination based on work completed and expenses incurred prior to the date of termination.
Embedded Lease No. 3:
During July 2020, the Company amended an existing CMO arrangement to reserve additional manufacturing capacity for LYFGENIA. The Company concluded that this amendment contains an embedded lease as a controlled environment room at the facility is designated for the Company's exclusive use during the term of the agreement, with the option to sublease the space if the Company provides notice that it will not utilize it for a specified duration of time. Under the amended agreement, the Company is required to pay up to $5.4 million per year in maintenance fees in addition to the cost of any services provided and may terminate this agreement with eighteen months' notice. The term of the agreement is five years with the option to extend. when the additional manufacturing capacity became available that served as lease commencement in March 2021, the Company classified the embedded lease as a finance lease.
In February 2021, the Company amended the CMO arrangement to reserve additional manufacturing capacity. The Company concluded that this amended agreement contains an embedded lease as a controlled environment room at the facility is designated for the Company's exclusive use during the agreement's term. Under the amended agreement, the Company must pay $4.2 million per year in maintenance fees and per-batch fees for the cost of any services provided. Either party may terminate this agreement with eighteen months’ notice at any time or with eight months’ notice after defined milestones in the agreement have been met. The term of the agreement is five years, with the option to extend. The lease commenced in November 2021 when the suites became available, and upon commencement the Company classified the embedded lease as a finance lease. The lease has been subsequently modified based on changes in the delivery of non-lease component services, which have been combined with lease components under our accounting policy.
In August 2022, the Company amended another arrangement with this CMO to reserve additional controlled environmental rooms. The Company concluded that this amended agreement contains an embedded finance lease as the controlled environment room at the facility is designated for the Company's exclusive use during the agreement's term. Under the amended agreement, an existing deposit of $10.8 million was applied towards the monthly lease payments through September 2023. The term of the agreement was 14 months with an option to extend. The Company exercised the option to extend through December 31, 2023.
Drug Substance Manufacturing
Embedded Lease No. 4:
In November 2017, the Company entered a commercial manufacturing services agreement with a CMO to establish commercial production of the Company's suspension vector. The Company concluded this agreement contained an embedded
finance lease when production commenced in the new facility in 2019 as the Company has dedicated suite space and reserved production capacity at a rate that allows the Company to take more than substantially all the capacity of certain manufacturing space and equipment within the facility. Under the agreement, the Company must pay capacity reservation fees, minimum purchase commitment fees, and milestone fees for achievement of certain activities. In addition, the Company prepaid approximately €13.5 million between 2018 and 2019 towards certain milestone payments and in exchange for production credits. As of December 31, 2021, those credits have been fully used by the Company. The Company modified the lease to extend its term in October 2022, April 2023, and finally in October 2023, which extended the lease term to end in March 2024 in addition to changes in the delivery of non-lease component services, which have been combined with lease components under our accounting policy.
Embedded Lease No. 5:
In January 2018, the Company entered a clinical and commercial supply agreement with a CMO to manufacture ZYNTEGLO and SKYSONA vector products. The Company concluded this agreement contained an embedded finance lease. The Company and the CMO originally agreed to wind down manufacturing activities in December 2021. In December 2022, the Company reestablished this manufacturing agreement and concluded the revised arrangement contains an embedded finance lease as the Company is using the entire capacity of a manufacturing suite at the facility. The term of the agreement is three years and requires the Company to pay suite reservation fees of $13.5 million in 2023 and $18.0 million per year in 2024 and 2025, in addition to the cost of any services provided.
Quality Testing
Embedded Lease No. 6:
In 2018, the Company entered a 2-year master contract services agreement (MCSA) with a CTO to provide clinical development services (other than manufacturing services). The original MCSA expired in June 2020 but was reinstated through December 2024 under the amendment of the MCSA effective April 2021. The Company concluded this agreement contained an embedded finance lease as the Company had certain lab suites implicitly dedicated to it for various clinical testing procedures. The Company is required to pay the fixed price outlined in each of the various service contracts covering quality, stability, and other services. The lease has been subsequently modified based on changes in the delivery of non-lease component services, which have been combined with lease components under our accounting policy.
Summary of all lease costs recognized under ASC 842
The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating and finance leases for the years ended December 31, 2023 and 2022 (in thousands):
For the year ended December 31,
20232022
(As Restated)
Finance leases
Interest expense
$16,350 $6,324 
Amortization expense
24,653 3,886 
Total fixed finance lease cost
$41,003 $10,210 
Operating leases
Fixed lease cost
43,272 36,122 
Total fixed operating lease cost
43,272 36,122 
Variable lease cost
22,960 28,161 
Short-term lease cost
238 143 
Total lease cost$107,473 $74,636 
Operating sublease income
$41,165 $29,369 
Cash paid in the measurement of lease liabilities
Operating cash flows used for operating leases
$28,887 $14,072 
Operating cash flows used for finance leases
12,924 1,551 
Financing cash flows for finance leases
54,367 36,734 
Other information
Weighted average remaining lease term - finance leases (in years)
1.6 years2.4 years
Weighted average discount rate - finance leases
13.93 %12.52 %
Weighted average remaining lease term - operating leases (in years)
7.0 years7.8 years
Weighted average discount rate - operating leases
7.01 %7.05 %
For finance leases embedded in CMO arrangements, interest expense is recognized using the effective interest method, applying the Company's incremental borrowing rate as required by ASC 842, and amortization expense is recognized on a straight-line basis over the shorter of the life of the asset or the term of the lease. Rather than amortizing the finance lease right-of-use assets that did not have alternative future use, those amounts were recognized as research and development expense at lease commencement or lease modification and were $21.2 million and $11.2 million for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2023, future minimum commitments under ASC 842 under the Company’s leases were as follows (in thousands):
Operating Leases
Financing Leases
Remaining Lease Payments
202434,918 93,531 
202537,084 34,995 
202635,719 2,519 
202736,742 2,519 
202837,795 1,031 
2029 and thereafter
81,986 — 
Total264,244 134,595 
Less: Imputed Interest(56,355)(12,158)
Present Value of Lease Liabilities$207,889 $122,437