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Commitment and Contingencies
 6 Months Ended
Jun. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Operating and Finance Leases
Supplemental lease expense related to leases for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Operating lease cost$519 $259 $1,045 $518 
Finance lease cost
Amortization of finance leases17 8 27 14 
Interest on finance lease liabilities4 3 7 5 
Variable lease cost285 56 614 110 
Short-term lease cost13 19 35 42 
Total lease cost$838 $345 $1,728 $689 
The following table summarizes the maturity of the Company’s operating and finance lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating and finance lease liabilities recognized on the Company’s condensed consolidated balance sheet as of June 30, 2024 (in thousands):
Maturity of operating lease liabilities
2024 (remaining)$1,956 
20253,987 
20263,695 
20273,239 
20283,294 
2029613 
Total lease payments$16,784 
Less: interest(3,104)
Total operating lease liabilities$13,680 
Maturity of finance lease liabilities
2024 (remaining)$30 
202560 
202621 
20276 
Total lease payments$117 
Less: interest(12)
Total finance lease liabilities$105 
Supplemental balance sheet information related to leases as of June 30, 2024 was as follows (in thousands):
Leases
Operating right-of-use assets$3,381 
Operating lease liabilities, current2,765 
Operating lease liabilities, non-current10,915 
Total operating lease liabilities$13,680 
Finance right-of-use assets$96 
Finance lease liabilities, current52 
Finance lease liabilities, non-current53 
Total finance lease liabilities$105 
Other information
Cash paid for amounts included in measurement of operating lease liabilities (in thousands)$1,925
Cash paid for amounts included in measurement of finance lease liabilities (in thousands)$33
Weighted-average remaining lease term - operating leases (in years)4.41
Weighted-average remaining lease term - finance lease (in years)2.09
Weighted-average discount rate - operating leases9.73 %
Weighted-average discount rate - finance lease11.05 %
Lease CVR
As of June 30, 2024, approximately $1.3 million was recorded as a component of the contingent value rights liability on the Company’s condensed consolidated balance sheet consisting of lease commitments that were probable and estimable at the Closing. The commitments relate to Neoleukin’s sublease agreement, effective October 31, 2023, for one of its properties with an unrelated third party for the remainder of the lease term.
The following table summarizes the maturity of the Company’s Lease CVR as of June 30, 2024 (in thousands):
Maturity of Lease CVR
2024 (remaining)$234 
2025605 
2026414 
Total lease CVR payments$1,253 
Intellectual Property CVR
Under the CVR Agreement, each CVR holder is eligible to receive 100% of the net proceeds, if any, derived from any consideration paid as a result of the disposition of Neoleukin’s pre-merger legacy assets pursuant any agreements entered into before the Closing, and 80% of net proceeds, if any, derived from any consideration paid as a result of the disposition of Neoleukin’s pre-merger legacy assets pursuant any agreements entered into within one year after the Closing (the “Intellectual Property CVR”). Contingent consideration liabilities related to the CVR Agreement will only be recorded if the liabilities are probable and estimable as of the balance sheet date.
December 2023 CVR Licensing Agreement
Prior to the Closing, Neoleukin entered into a licensing agreement on December 13, 2023 with an unrelated third party to develop and commercialize certain legacy Neoleukin assets (the “December 2023 CVR Licensing Agreement”). As discussed and defined within the Reverse Merger and Pre-Closing Financing section of Note 1, Organization and Description of Business, the terms of the CVR Agreement include that CVR holders are eligible to receive the Intellectual Property CVR. In June 2024, an upfront payment of $0.2 million was received by the Company. Since the December 2023 CVR Licensing Agreement was entered into before the Closing, the CVR holders are eligible to receive 100% of the net proceeds derived from the December 2023 CVR Licensing Agreement. Accordingly, an upfront payment of $0.2 million was recorded as licensing revenue within the condensed consolidated statements of operations and a $0.2 million contingent consideration liability was recorded related to the Intellectual Property CVR within the condensed consolidated balance sheet. The December 2023 CVR Licensing Agreement contains development, regulatory and commercialization milestones totaling up to approximately $13.4 million, as well as royalty payments. However, as of June 30, 2024, no other development and sales milestones were achieved nor deemed probable of achievement under the December 2023 CVR Licensing Agreement.
April 2024 CVR Licensing Agreement
In April 2024, the Company entered into a licensing and intellectual property assignment agreement with another unrelated third party to develop and commercialize certain legacy Neoleukin assets (the “April 2024 CVR Licensing Agreement”). In April 2024, the Company received a one-time upfront payment of approximately $0.8 million and reimbursement of $10,000 for patent expenses under the April 2024 CVR Licensing Agreement. Since the April 2024 CVR Licensing Agreement was entered into within one year after the Closing, the CVR holders are eligible to receive 80% of the net proceeds derived from the April 2024 CVR Licensing Agreement. Accordingly, the Company has recorded $0.8 million as licensing revenue within the condensed consolidated statements of operations and $0.6 million (80% of the upfront payment) as a contingent consideration liability related to the Intellectual Property CVR within the condensed consolidated statements of operations. The April 2024 CVR Licensing Agreement contains development, regulatory and commercialization milestones totaling up to approximately $11.0 million, as well as royalty payments. However, as of June 30, 2024, no other development and sales milestones were achieved nor deemed probable of achievement under the April 2024 CVR Licensing Agreement.
The December 2023 CVR Licensing Agreement and April 2024 CVR Licensing Agreement collectively account for the total Intellectual Property CVR. As of June 30, 2024, approximately $0.5 million was recorded as a component of the contingent value rights liability arising from the Intellectual Property CVR on the Company's condensed balance sheet, which total amount was offset by approximately $0.3 million due to deductions permitted under the Merger Agreement.
Sales Tax CVR
Prior to the Closing, Neoleukin entered into an agreement with an unrelated third party for refund analysis services of Washington state sales tax. As discussed and defined within the Contingent Value Rights section of Note 3, Summary of Significant Accounting Policies, the terms of the CVR Agreement include that CVR holders are eligible to receive net proceeds derived from an anticipated sales tax refund from Washington state relating to tax returns filed by Neoleukin prior to Closing. As of June 30, 2024, it was deemed probable that the Company will receive proceeds from Washington state for the sales tax refund and will remit the proceeds to the CVR holders. As of June 30, 2024, $0.3 million is accrued as a component of the contingent value rights liability arising from the Sales Tax CVR in the condensed consolidated balance sheet.
The following table summarizes the components of the contingent value rights liability in the condensed consolidated balance sheet as of June 30, 2024 and December 31, 2023 (in thousands):
June 30, 2024December 31, 2023
Current Non-Current Current Non-Current
Lease CVR$536 $717 $281 $1,006 
Intellectual Property CVR520 — — — 
Sales Tax CVR332 — — — 
Total CVR liability$1,388 $717 $281 $1,006 
As per the CVR Agreement, the total amount owed to CVR holders, after deductions permitted under the Merger Agreement, must be at least $0.5 million to trigger a CVR payment prior to the end of the CVR term. The first CVR payment to CVR holders is approximately $0.5 million and is due on August 14, 2024.
All other payments under the CVR Agreement were not considered probable and estimable as of June 30, 2024 and therefore no additional contingent consideration liability has been recorded.The Company will evaluate the probable and estimable range of outcomes under the CVR Agreement at each reporting period until the end of the CVR term and adjust the amounts accrued for as necessary.
Employment Agreements
The Company has employment and consulting agreements with key personnel providing for compensation and severance in certain circumstances, as defined in the respective employment agreements.
Other Research and Development Arrangements
As of June 30, 2024, the Company had standing agreements with consultants, contractors or service providers that generally be terminated by the Company with 30 to 60 days written notice, unless otherwise indicated.
Litigation and Legal Proceedings
The Company is subject to litigation and other claims that arise in the ordinary course of business. While the ultimate result of outstanding legal matters cannot presently be determined, the Company does not expect that the ultimate disposition will have a material effect on its results of financial condition, results of operations or cash flows. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond the Company’s control. As such, there can be no assurance that the final outcome of any particular legal matter will not have a material adverse effect on the Company’s financial condition results of operations or cash flows.