Leases

12 Months Ended

Dec. 31, 2024

Leases

Leases

8. Leases

South San Francisco Lease and Subleases

As of December 31, 2024, the Company leased approximately 162,000 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”).

In March 2024, the Company entered into a non-cancelable agreement (“March 2024 Sublease”) under which it subleased approximately 8,000 square feet of its South San Francisco office space to an unaffiliated company. The sublease period was for approximately two years expiring in April 2026, and the subtenant has no option to extend the

sublease. Under the terms of the March 2024 Sublease, the Company is entitled to receive an initial monthly base rent of $38,000 with a 3% annual increase after the first year.

In November 2024, the Company entered into an amendment to the March 2024 Sublease (“March 2024 Sublease Amendment”). The March 2024 Sublease Amendment included the following key terms: (i) an addition of approximately 11,000 square feet of laboratory space and (ii) an extension of the sublease period by approximately 2.5 years ending on or around November 2028 with an option to extend the sublease through the SSF Lease expiration in May 2030. For the laboratory space addition, the Company is entitled to receive an initial monthly base rent of $16,250 with approximate 3% annual increases after the first year. Under the terms of the March 2024 Sublease Amendment, the Company is expected to recognize approximately $3.0 million in total sublease income for the combined office and laboratory spaces over the March 2024 Sublease Amendment lease period.

In June 2022, the Company entered into a non-cancelable agreement under which it subleased approximately 78,000 square feet of its South San Francisco office and laboratory space to an unaffiliated company. The sublease term continues through May 2030, consistent with the remaining lease term of the SSF Lease, and the subtenant has no option to extend the sublease. Under the terms of the sublease, the Company is entitled to receive an initial monthly base rent of $0.5 million which will be subject to annual increases of 3%, as well as the subtenant’s proportionate share of the property’s operating expenses. As part of the sublease terms, the subtenant was assigned $6.5 million of the Company’s $8.9 million remaining tenant improvement allowance in June 2022. The assigned tenant improvement allowance was recorded within “Other assets” on the Company’s consolidated balance sheets and is amortized over the SSF Lease term, and the assigned tenant improvement allowance was recorded as a current liability which expired in November 2024. The Company expects to receive a total of $51.7 million in base rent over the sublease term which represents a $13.5 million premium (before sublease execution-related costs) over its proportionate lease payment obligations under the SSF Lease. Under the terms of the SSF Lease, 50% of the sublease premium, equal to approximately $6.7 million, shall be shared with the landlord and 50% shall be retained by the Company.

In July 2021, the Company entered into a non-cancelable agreement under which it subleased approximately 21,000 square feet of its South San Francisco office and laboratory space to another unaffiliated company. Under the terms of the sublease agreement, the sublease term continues through September 2028, and the parties have no option to extend the sublease. Either the Company or the subtenant may terminate the sublease by giving the other party ten days prior written notice. The Company is entitled to receive an initial monthly base rent of $0.1 million, with annual base rent increases of 3% and the subtenant’s proportionate share of the building’s operating expenses. The Company expects to receive a total of $13.1 million over the sublease term which represents a $4.2 million premium (before sublease execution-related costs) over its proportionate lease payment obligations under the SSF Lease. Under the terms of the head SSF Lease, 50% of the sublease premium, equal to $2.1 million, shall be shared with the landlord and 50% shall be retained by the Company.

The Company recognizes the sublease income on a straight-line basis over the term of its three subleases which is reflected as a reduction of R&D expense and selling, general and administrative expenses in the consolidated statements of operations. No lease modification was deemed to have occurred by entering into the sublease agreements because the Company was not released, either fully or in part, from its obligations under the SSF Lease. As of December 31, 2024, the Company has subleased approximately 118,000 square feet of a total 162,000 square feet of its SSF Lease under the three separate subleases described above.

Dublin Lease

In May 2022, the Company entered into an operating lease agreement for approximately 700 square feet of office space in Dublin, Ireland (“Dublin Lease”). The Dublin Lease had an original two-year term which ended in May 2024. In 2024, the Dublin Lease was renewed for another two years ending in May 2026. Under the renewed Dublin Lease, the Company will incur total base rent expense of approximately $0.4 million (or $0.2 million annually) which is recognized on a straight-line basis over the two-year lease term. The Company may terminate the Dublin Lease by providing three months prior written notice.

The Company has evaluated its existing 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 was primarily due to office-related deferred rent payments that are payable in future periods and tenant improvement reimbursements.

(In thousands)	Classification	December 31, 2024		December 31, 2023
Assets
Operating lease assets	Operating lease assets	$	28,354	$	36,287
Liabilities
Current:
Operating lease liabilities	Operating lease liabilities	$	10,712	$	3,923
Non-current:
Operating lease liabilities	Long-term operating lease liabilities		39,108		45,236
Total operating lease liabilities		$	49,820	$	49,159

Lease expense and sublease income were included within operating expenses in the consolidated statements of operations as follows:

		Year Ended		Year Ended
(In thousands)	Classification	December 31, 2024		December 31, 2023
Operating lease expense (1)	Selling, general and administrative expense	$	8,518	$	8,548
		Year Ended		Year Ended
(In thousands)	Classification	December 31, 2024		December 31, 2023
Operating sublease income	Selling, general and administrative expense	$	8,739	$	8,361

(1) Represents operating lease expense before sublease income. Excludes short-term leases which were not material and office lease service-related charges.

Supplemental information related to leases for the periods reported was as follows:

	Year Ended			Year Ended
(In thousands, except weighted average amounts)	December 31, 2024			December 31, 2023
Operating cash flows related to operating leases	$	10,892		$	9,966
Weighted average remaining lease term		5.4 years			6.4 years
Weighted average discount rate		8.65	%		8.64	%

The Company determined that an implicit interest rate of its leases was not determinable and, therefore, used an incremental borrowing rate of 8.65% to determine the present value of its lease liabilities.

As of December 31, 2024, the maturities of the Company’s lease liabilities were as follows:

(In thousands)
Year ending December 31:
2025	$	11,218
2026		11,414
2027		11,682
2028		11,739
2029		11,839
Thereafter		4,998
Total operating lease payments	$	62,890
Less: Imputed interest		(13,070)
Present value of operating lease liabilities	$	49,820

As of December 31, 2024, the undiscounted cash flows to be received related to the Company’s subleases were as follows:

(In thousands)
Year ending December 31:
2025	$	8,827
2026		9,107
2027		9,377
2028		9,013
2029		7,092
Thereafter		2,998
Total operating sublease receipts	$	46,414

Impairment of Long-Lived Assets

The Company evaluates the carrying value of its long-lived asset groups, which includes operating lease assets and leasehold improvements, for impairment when indicators exist that the carrying amounts of an asset may not be fully recoverable. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset or asset group are less than its carrying amount. Impairment, if any, is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

The Company determined that the ceased occupancy and sublease marketing of office and laboratory space were indicators of impairment as of March 31, 2024, June 30, 2024, and September 30, 2024. The Company identified three asset groups for the purposes of its long-lived impairment assessment which were comprised of (i) vivarium laboratory asset group; (ii) general laboratory asset group; and (iii) entity-wide asset group. The vacant office space, which the Company determined it may reoccupy in the future, was considered part of the entity-wide asset group.

The Company recognized an impairment charge of $4.5 million for the vivarium laboratory asset group and the general laboratory asset group during the year ended December 31, 2024 based on the discounted cash flow method to estimate the fair values of the two asset groups which represented Level 3 non-recurring fair value measurements. The estimated fair value of the vivarium laboratory space was based on the terms of the draft March 2024 Sublease Amendment which involved estimates including the expected sublease rental income of $0.6 million, an annual discount rate of 9.7%, and other variable lease-related expenses. The estimated fair value of the general laboratory space was based on the Company’s estimates and assumptions including, but not limited to, expected sublease rental income of $0.8 million, an annual discount rate of 9.7%, and other variable lease-related expenses expected to be incurred during the subtenant search period. The impairment charge is presented in the Company’s consolidated statements of operations within “Impairment of long-lived assets”.

The Company’s estimates and assumptions used to determine the estimated fair values of the above two asset groups were subject to risks, uncertainties, and changes in circumstances that may result in adjustments and material changes to the estimated fair values in future periods.