We determine if an arrangement contains a lease at contract inception based on the facts and circumstances in the arrangement. Lease classification, recognition, and measurement are then determined at the lease commencement date. For arrangements that contain a lease we (i) identify lease and non-lease components, (ii) determine the consideration in the contract, (iii) determine whether the lease is an operating or financing lease; and (iv) recognize lease right-of-use assets and liabilities. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term.

The interest rate implicit in lease contracts is typically not readily determinable and as such, we use our incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment. In determining the incremental borrowing rate, we consider (i) our estimated public credit rating, (ii) our observable debt yields, as well as other bonds in the market issued by other companies with similar credit ratings as us, and (iii) adjustments necessary for collateral, lease term, and inflation or foreign currency.

Most leases include options to renew and/or terminate the lease, which can impact the lease term. The exercise of these options is at our discretion and we do not include any of these options within the expected lease term as we are not reasonably certain we will exercise these options. Leases that have a lease term of 12 months or less at commencement date are excluded from this treatment and are recognized on a straight-line basis over the term of the lease.

Fixed, or in substance fixed, lease payments on our operating lease are recognized over the expected term of the lease on a straight-line basis. Variable lease expenses that are not considered fixed, or in substance fixed, are recognized as incurred. Fixed and variable lease expense on our operating lease is recognized within operating expenses on our consolidated statements of operations.

We are party to an operating lease of 98,502 square feet of office and research space in Newton, Massachusetts with a term through September 30, 2025 (the “Newton, MA Lease”). The lease contains a renewal option for an additional five years which was not included in the lease term as its exercise is not reasonably certain. Pursuant to the Newton, MA Lease, we have provided a security deposit in the form of a cash-collateralized letter of credit in the amount of $0.3 million which is classified within long-term restricted cash on the consolidated balance sheets.

The Newton, MA Lease provides for increases in future minimum annual rental payments, as defined in the lease agreement. The operating lease expense for each of the years ended December 31, 2023, 2022 and 2021 were $2.8 million. Variable lease costs pertain to reimbursement of certain landlord expenses and were immaterial for each of the years ended December 31, 2023, 2022 and 2021.

In addition, we are party to certain short-term leases having a term of twelve months or less at the commencement date. We recognize short-term lease expense on a straight-line basis and do not record a related right-of use asset or lease liability for such leases. These costs were immaterial for the years ended December 31, 2023, 2022 and 2021.

We review the carrying values of our lease assets for possible impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. We have not recorded an impairment in any period since inception.

As of December 31, 2023, future minimum lease payments under non-cancellable operating lease agreements for which we have recognized operating lease right-of-use assets and liabilities are as follows (in thousands):


Years ending December 31,	Future Minimum Payments
2024	$	3,817
2025		2,918
Total minimum lease payments		6,735
Less: present value adjustment		(638	)
Operating lease liabilities	$	6,097

As of December 31, 2023, the remaining lease term on the Newton, MA Lease was 1.8 years and the discount rate used to calculate the operating lease liability was 11%.

From time to time we may face legal claims or actions in the normal course of business. There are no outstanding legal claims or actions as of December 31, 2023.