Leases

3 Months Ended

Mar. 31, 2024

The Company leases certain office and laboratory space, primarily located in Somerville, Massachusetts. Additionally, the Company has embedded leases through its agreements with CMOs and a contract testing organization ("CTO") in both the United States and internationally. Except as described below, there have been no material changes in lease obligations from those disclosed in Note 11 to the consolidated financial statements included in the Company's 2023 Annual Report on Form 10-K.

Embedded leases

Periodically, throughout the three months ended March 31, 2024, the Company amended several of its embedded contract manufacturing leases, some of which were accounted for as lease modifications under ASC 842. The lease modifications primarily relate to the execution of new statements of work with the vendors or the extension of contractual terms.

As it relates to embedded leases related to drug product manufacturing and quality testing, the Company increased its finance lease right-of-use assets in the amount of $28.3 million.

As it relates to embedded leases related to drug substance manufacturing, the Company decreased its finance lease right-of-use assets in the amount of $3.8 million.

The following paragraphs describe the significant lease modifications to the Company’s embedded contract manufacturing leases.

Embedded Leases – Drug Substance Manufacturing

In March 2024, the Company extended its embedded lease for the manufacturing of vector and is obligated under the defined production schedule through May 2024.

Embedded Leases – Drug Product Manufacturing

In January 2024, the Company amended its lease agreement with a CMO to expand into two additional controlled environment rooms, both designated for the Company's exclusive use during the term of the agreement. Pursuant to the amended agreement, the Company is obligated to pay a monthly fixed fee for each additional space in addition to fees based on committed production levels through the remaining lease term, which ends in February 2025. The fixed portion of the fee is included as part of the Company’s lease liability.

Embedded Leases – Quality Testing

In January 2024, the Company entered into a Reserved Capacity Agreement with a CTO that provides clinical development services. The Reserved Capacity Agreement amended the Company’s existing master contract services agreement with the CTO and provides for legally binding minimum purchase commitments with step decreases throughout its three-year contract term in six-month increments. The Company included the “firm” legally binding portion of the forecast through 2026 as part of its fixed minimum lease liability.

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 three months ended March 31, 2024 and 2023 (in thousands):


	For the three months ended March 31,
	2024			2023
				(As Restated)
Finance leases
Interest expense	$	4,347		$	4,267
Amortization expense	14,328			5,216
Total fixed finance lease cost	$	18,675		$	9,483
Operating leases
Fixed lease cost	9,486			11,470
Total fixed operating lease cost	9,486			11,470
Variable lease cost	6,043			6,862
Short-term lease cost	76			52
Total lease cost	$	34,280		$	27,867

Operating sublease income	$	10,346		$	10,108

Cash paid in the measurement of lease liabilities
Operating cash flows used for operating leases	2,844			6,361
Operating cash flows used for finance leases	1,411			3,352
Financing cash flows for finance leases	22,210			15,280
Other information
Weighted average remaining lease term - finance leases	1.42 years			2.30 years
Weighted average discount rate - finance leases	14.45		%	15.13		%
Weighted average remaining lease term - operating leases	6.75 years			7.59 years
Weighted average discount rate - operating leases	7.00		%	7.04		%

As of March 31, 2024, future minimum commitments under ASC 842 under the Company’s leases were as follows (in thousands):


	Operating Leases		Financing Leases
Remaining Lease Payments
Remainder of 2024	28,492		102,277
2025	37,084		41,270
2026	35,719		3,422
2027	36,742		2,548
2028	37,795		1,043
2029 and thereafter	81,986		—
Total	257,818		150,560
Less: Imputed Interest	(52,772)		(10,259)
Present Value of Lease Liabilities	$	205,046	$	140,301