Leases

3 Months Ended

Mar. 31, 2020

The Company accounts for its leases in accordance with ASC Topic 842, Leases (ASC 842).

480 Arsenal Way Lease

The Company has a non‑cancellable operating lease for its laboratory and office space located at 480 Arsenal Way, Watertown, Massachusetts ("Headquarters Lease"). As part of the Headquarters Lease agreement, the landlord provided the Company a tenant improvement allowance of up to $0.7 million, which the Company fully utilized during 2012. The leasehold improvements are capitalized as a component of property and equipment. In connection with the Headquarters Lease, the Company secured a letter of credit for $0.3 million which renews automatically each year and is classified in restricted cash. In August 2016, the Company signed an amendment to the Headquarters Lease, which extended the term through March 31, 2020. In March 2020, the Company signed a new amendment to extend the lease term one additional month to April 30, 2020. The right-of-use asset and lease liability were remeasured and recorded based on the change in the lease term in which the net impact was immaterial.

75 North Beacon Street Lease

In October 2017, the Company entered into a lease for approximately 5,100 square feet of additional office space located at 75 North Beacon Street, Watertown, Massachusetts (the “75 North Beacon Lease”) for a term through March 31, 2020. On January 11, 2019, the Company vacated 75 North Beacon Street, Watertown, MA and consolidated all employees at its corporate headquarters at 480 Arsenal Way, Watertown, MA. The right-of-use asset with carrying amount of $0.2 million attributable to the 75 North Beacon Lease was written down to zero during the first quarter of 2019.

65 Grove Street Lease

In July 2019, the Company entered into a lease for 25,078 square feet of laboratory and office space located at 65 Grove Street, Watertown, Massachusetts (the “New Headquarters Lease”). The Company estimates that it will incur $0.8 million in non-reimbursable construction costs. None of these costs were incurred as of March 31, 2020. The lease began in March 2020, consistent with when the Company took control of the office space and the lease term is 8 years. The discount rate of 8.9% was determined based on the Company’s incremental borrowing rate adjusted for the lease term including any reasonably certain renewal periods. Rent payments will begin in May 2020, and the base rent for the first year is $0.2 million per month. In connection with the New Headquarters Lease, the Company secured a letter of credit from Silicon Valley Bank for $1.4 million which renews automatically each year. The Company recorded the right-of-use asset and operating lease liabilities of $11.8 million during the three months ended March 31, 2020 as control of the premises was transferred to the Company.

Moscow, Russia Lease

The Company has a month‑to‑month facility agreement for its Moscow, Russia office. Rent expense is recognized as incurred.

Summary of All Lease Costs Recognized Under ASC 842

Rent expense for the three months ended March 31, 2020 and 2019 was $0.6 million, $0.5 million, respectively.

For the three months ended March 31, 2020 and 2019 the components of lease costs were as follows (in thousands):



	March 31,		March 31,
	2020		2019
Operating lease expense	$	472	$	341
Variable lease expense	199		203
Short-term lease expense	2		8
Total lease expense	$	673	$	552

The maturity of the Company's operating lease liabilities as of March 31, 2020 and December 31, 2019 were as follows (in thousands):



	March 31,		December 31,
Operating leases:	2020		2019
2020 (remainder)	$	1,943	$	375
2021	1,811		—
2022	1,865		—
2023	1,921		—
2024	1,979		—
Thereafter	7,027		—
Total future minimum lease payments	$	16,546	$	375
Less imputed interest	4,681		3
Total operating lease liabilities	$	11,865	$	372
Included in the condensed consolidated balance sheet:
Current operating lease liabilities	$	1,425	$	372
Non-current operating lease liabilities	10,440		—
Total operating lease liabilities	$	11,865	$	372

The following information represents supplemental disclosure for the statement of cash flows related to operating leases (in thousands):



	March 31,		March 31,
Operating leases:	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	487	$	363

Other than the initial recording of the right of use asset and lease liability for the New Headquarters Lease, which is non-cash, the changes in the Company’s right-of-use asset and lease liability for the three months ended March 31, 2020 and 2019 are reflected in the non-cash lease expense and accrued expenses and other liabilities, respectively, in the consolidated statements of cash flows.

The following summarizes additional information related to operating leases:



	March 31,		December 31,
Operating leases:	2020		2019
Weighted-average remaining lease term	8.0 years		0.3 years
Weighted-average discount rate	8.9	%	10.0	%