In August 2007, the Company entered into an operating lease, as amended, for office and laboratory space in Watertown, Massachusetts. In November 2017, the Company amended its lease (“2017 Amendment”) to extend the lease term through April 2023. In November 2022, the Company amended the lease to extend the lease term through April 2024. The lease includes certain rent escalations. The lease modification was assessed as of December 31, 2022 and changes to the right of use asset and liability was reflected within the consolidated balance sheet.

The Company maintains a letter of credit of approximately $0.3 million securing its obligations under the operating lease which is unsecured by approximately $0.3 million, which are included as restricted cash in the consolidated balance sheets. Rent expense is recognized on a straight-line basis over the terms of occupancy.

In May 2022, the Company executed a new lease for laboratory and office space. This lease will be recorded on the Company's balance sheet when the Company obtains possession of the underlying asset, which is expected to occur in the fourth quarter of 2023, following completion of construction to prepare the premises for the Company’s intended use. Annual base rent will start at $2.2 million increasing 3% per year through the original non-cancelable term of the lease, which is ten years and two months following the lease commencement date. The Company has the option to extend the lease for one additional 5-year term and is responsible for real estate taxes, maintenance, and other operating expenses applicable to the leased premises.

As of December 31, 2022, the lease was not recorded on the consolidated balance sheet as the facility is under construction. When payments are made by the Company relating to landlord-owned leasehold improvements, they will be recorded to prepaid rent as a component of other non-current assets. Upon control of the space, The Company will reclassify the prepayment to the right-of-use asset, thereby increasing its initial value, but the prepayment will not be included in the measurement of the lease liability. As of December 31, 2022, approximately $2.0 million of prepaid rent was recorded in other assets with a corresponding liability recorded in accrued expenses. The lease will be recorded as a component of the Company’s right-of-use asset and operating lease liabilities when the Company takes possession of the space.

The Company provided a letter of credit in the amount of $1.1 million as a security for the lease, which expires on May 1, 2023, at which point the letter will automatically renew each calendar year up to but not beyond July 31, 2033. The unsecured letter of credit is classified as restricted cash on the consolidated balance sheet.

In addition to the leases discussed above, the Company is party to an April 2020 lease for office equipment that expires in June 2024. The equipment lease is accounted for as an operating lease.

In April 2021, the Company entered into a clinical supply agreement with a CMO for clinical production of the Company’s product candidates at an existing facility and a facility under construction. The Company concluded that this clinical supply agreement contains embedded operating leases as the clean rooms in the existing facility and the new facility are designated for the Company’s exclusive use during the term of the agreement and the clinical supply agreement contains fixed commitments and variable costs related to production and material costs in excess of the fixed commitment specified in the agreement. The Company determined that it did not control the new facility during construction and, thus, the lease did not fall in the scope of “build-to-suit” accounting. The term of the clinical supply agreement is five years and will automatically renew for additional successive terms of one year unless either party gives notice of nonrenewal.

The lease period for the existing facility is less than 12 months and the Company has elected to apply the practical expedient in ASC Topic 842, Leases (“ASC 842”), to not recognize a lease liability or right-of-use asset but instead, recognize lease payments as an expense on a straight-line basis over the lease term and variable lease payments that do not depend on an index or rate, as an expense in the period in which the variable lease costs are incurred based on performance or usage in accordance with the clinical supply agreement. In October 2022, the Company terminated the agreement with the contract manufacturing organization.

The components of lease cost recorded in the Company’s consolidated financial statements were as follows (in thousands):


	Year Ended December 31,
	2022		2021
Lease Cost:
Operating lease cost	$	1,115	$	1,056
Variable lease cost		3,931		4,542
Total lease cost	$	5,046	$	5,598

Variable lease payments include the Company’s allocated share of costs incurred and expenditures made by the landlord in the operation and management of the building and variable lease costs associated with the Company’s CMO embedded lease arrangement. During the year ended December 31, 2022, the Company recorded as research and development expense approximately $3.2 million of operating lease costs related to the CMO embedded lease.

The weighted-average remaining lease term and discount rate related to the Company’s operating leases were as follows:


	As of December 31, 2022
Weighted-average remaining lease term (in years)		1.3
Weighted-average discount rate		8.2	%

Maturity of the Company’s operating lease liabilities in accordance with ASC 842 as of December 31, 2022 were as follows (in thousands):


Year ending December 31,
2023		1,673
2024		694
Total maturities		2,367
Less: Effects of discounting		(151	)
Present value of operating lease liability		2,216
Less: Current portion of operating lease liability		(1,549	)
Total operating lease liability, net of current portion	$	667

Total rent expense under the Company's leases amounted to $1.1 million for the years ended December 31, 2022 and 2021, respectively.