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Leases

9 Months Ended

Sep. 30, 2019

7. Leases

The Company leases approximately 170,000 square feet of office and laboratory space in two buildings in South San Francisco, California, under a non-cancelable operating lease that ends in May 2030 (“SSF Lease”) and includes a tenant improvement allowance with a remaining balance of $15.7 million, as of September 30, 2019, that expires in May 2022. The Company’s Irish subsidiary leases approximately 6,100 square feet of office space in Dublin, Ireland under a lease that expires in April 2027 (“Dublin Lease”). In addition, the Company leases equipment for clinical research studies with an estimated lease period ending in September 2020.

The SSF Lease contains two options to extend the term of the lease for successive periods of five years each, and the Dublin Lease contains a lease termination option in April 2024 at the Company’s discretion. The two options to extend the SSF Lease and the option to terminate the Dublin Lease were not recognized in the determination of the Company’s right-of-use assets and lease liabilities below.

The Company has evaluated its leases and determined that they were all operating leases. The present values of the remaining lease payments and corresponding right-of-use assets were as follows, and the difference between the right-of-use assets and lease liabilities amounts was due to deferred rent payments that are payable in future periods.


(In thousands)	Classification	September 30, 2019
Assets
Operating lease assets	Operating lease assets	$	46,755

Liabilities
Current:
Operating lease liabilities	Operating lease liabilities	$	6,833
Non-current:
Operating lease liabilities	Long-term operating lease liabilities		48,620
Total operating lease liabilities		$	55,453

Lease expense was included within operating expenses in the condensed consolidated statements of operations as follows:


		Three Months		Nine Months
		Ended		Ended
(In thousands)	Classification	September 30, 2019		September 30, 2019
Operating lease expense	Selling, general and administrative expenses	$	2,512	$	7,431
Operating lease expense	Research and development expenses		238		715
Total operating lease expense ⁽¹⁾		$	2,750	$	8,146

(1)	Includes short-term leases which were immaterial.

As of September 30, 2019, the maturities of the Company’s lease liabilities were as follows:


(In thousands)
Three months ending December 31, 2019	$	2,201
Years ending December 31:
2020		7,242
2021		9,481
2022		9,746
2023		10,024
Thereafter		70,172
Total operating lease payments	$	108,866
Less: Estimated tenant improvement allowance		(15,721)
Less: Imputed interest		(37,692)
Present value of operating lease liabilities	$	55,453

Cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 30, 2019 was $2.1 million and $6.0 million, respectively, and is included in net cash used in operating activities in the condensed consolidated statements of cash flows. As of September 30, 2019, the weighted-average remaining lease term was 10.4 years, and the weighted-average discount rate used to determine the lease liabilities was 8.65%. The Company’s discount rate was primarily derived from the 9.0% interest rate on its Non-Recourse 2033 Notes issued in November 2018 and did not involve any significant assumptions.