Operating Leases—In December 2017, the Company entered into a noncancelable operating lease for approximately 67,000 square feet of research and development, manufacturing and general office space in Bedford, Massachusetts. Prior to a subsequent amendment described below, the lease was set to expire in February 2027 with an option for an additional five-year term. Rent became due under the lease in two phases; rent on the first 46,000 square feet started in September 2018 and rent on the remaining 21,000 square feet started in March 2019. The initial annual base rent was $39.50 per square foot and increases by three percent annually. The Company is obligated to pay, on a pro-rata basis, real estate taxes and operating costs related to the premises. The lease agreement allowed for a tenant improvement allowance not to exceed $10.9 million, which the Company received in full, to be applied to the total cost of tenant improvements to the leased premises. The unamortized balance of the tenant improvement allowance was included in deferred rent incentives and recorded as a reduction to operating right-of-use asset upon adoption of the new leasing standards.

In November 2021, the Company entered into an amendment of its December 2017 lease agreement (the “Lease Amendment”) for its corporate headquarters in Bedford, Massachusetts. The Lease Amendment increased the space under lease by approximately 23,011 square feet (the "Expansion Premises") and extended the expiration date of the existing premises under the lease from February 2027 to June 2030. The payment term with respect to the Expansion Premises commenced on May 1, 2022, and continues for a period of ten years and five months. The term of the Expansion Premises and the existing premises are not coterminous. Annual base rent for the existing premise under the Lease Amendment is approximately $4.7 million beginning on March 1, 2027, and increases by three percent annually; annual base rent for the Expansion Premises is approximately $1.4 million per year and increases by three percent annually. The Lease Amendment allows for tenant improvement allowances not to exceed $6.3 million in the aggregate. The Lease Amendment was accounted for as a lease modification and the right-of-use asset and operating lease liability for the existing premises were remeasured at the modification date, which resulted in an increase of $10.9 million to both the right-of-use asset and operating lease liabilities. In February 2022, the Company revised its assumption for when it expected to utilize the tenant improvement allowances. This change in assumption was accounted for as a lease modification and the right-of-use asset and operating lease liability for the existing premises were remeasured at the modification date, which resulted in an increase of $0.2 million to both the right-of-use asset and operating lease liabilities.

In March 2022, in accordance with its transaction with OXB (US) LLC, the Company assigned all of its right, title and interest in, to and under its corporate headquarters lease to OXB (US) LLC and entered into a sublease agreement whereby OXB (US) LLC subleased certain premises in its facility to Homology. However, as the Company remained jointly and severally liable for the payment of rent under this lease, the Company was not released from being the primary obligor and therefore the related right-of-use asset and lease liability were not derecognized and remained on the Company’s balance sheet.

In September 2022, the Company concluded that 100% of the tenant improvement allowances would be utilized by OXB (US) LLC. This change in assumption was accounted for as a lease modification and the right-of-use asset and operating lease liability for the existing premises were remeasured at the modification date, which resulted in an increase of $6.1 million to both the right-of-use asset and operating lease liabilities.

On September 25, 2023, the Company signed and executed a release letter with its lessor related to its corporate headquarters lease. The lessor agreed to release the Company of all obligations under the lease effective October 1, 2023 (the "Release Date") in exchange for a $0.1 million cash payment. On October 1, 2023, the Company derecognized the right-of-use asset and operating lease liability and recorded the difference as a gain of $8.8 million within other income on the consolidated statements of operations. Because the Company’s sublease agreement with OXB (US) LLC remains in effect after termination of the head lease, the Company recorded a new right-of-use asset and an operating lease liability of $1.6 million, which equals the present value of the future sublease payments owed to OXB (US) LLC for the remaining term of the sublease. The Company's sublease expires on December 31, 2024.

During the fourth quarter of fiscal year 2023, the Company significantly reduced active use of its corporate headquarters, with the plan to fully abandon the space in the first quarter of fiscal year 2024. Accordingly, the Company shortened the remaining useful of its right-of-use asset to equal the time remaining until the planned abandonment date. This had no impact on the operating lease liability.

Prior to being released from obligation under the lease, the Company was acting as sublessor to OXB (US) LLC for accounting purposes. For the years ended December 31, 2023 and 2022, the Company received $2.3 million and $2.0 million, respectively, in sublease payments from OXB (US) LLC, which was recorded as a reduction to lease cost.

The following table summarizes operating lease costs and variable lease costs, as well as sublease income:


	For the Year ended December 31,
	2023			2022
	(in thousands)
Operating lease costs	$	4,273		$	3,913
Variable lease costs		1,771			2,142
Sublease income		(2,312	)		(1,979	)
Net lease cost	$	3,732		$	4,076

The maturities of the Company's operating lease liabilities and minimum lease payments as of December 31, 2023 were as follows:


For the Years Ending December 31,	Amount (in thousands)
2024	$	1,380
Total undiscounted lease payments	$	1,380
Less: imputed interest		(62	)
Present value of operating lease liabilities	$	1,318

The following table summarizes the lease term and discount rate as of December 31, 2023:


	December 31, 2023
Weighted-average remaining lease term (years)
Operating leases		1.0
Weighted-average discount rate
Operating leases		10.5	%

The following table summarizes the supplemental cash flow information related to the Company's operating leases:


	For the Year ended December 31,
	2023		2022
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	3,653	$	3,326
Increase in lease liabilities and right-of-use assets due to lease remeasurements	$	—	$	6,262

Legal Proceedings—On March 25, 2022, the Company and certain of its executives were named as defendants in a putative securities class action lawsuit filed in the United States District Court for the Central District of California; Pizzuto v. Homology Medicines, Inc., No. 2:22–CV–01968 (C.D. Cal 2022). The complaint alleges that the Company failed to disclose certain information regarding efficacy and safety in connection with a Phase I/II HMI-102 clinical trial, and seeks damages in an unspecified amount. The case is in its early stages. The Company believes the claims alleged lack merit and has filed a motion to transfer venue (filed September 2, 2022) and a motion to dismiss (filed October 17, 2022). On April 18, 2023, the court granted the motion to transfer, finding that venue was not proper in the Central District of California and transferring the case to the District of Massachusetts. Following the transfer, the case number changed to 1:23-cv-10858-AK (D. Mass.). On May 9, 2023, the Massachusetts court issued an order permitting the parties to submit updated briefs in connection with the motion to dismiss, which were submitted on June 8, 2023, July 13, 2023, and August 3, 2023. On March 4, 2024, the Massachusetts court held oral argument on the Company’s motion to dismiss, which remains pending. As the outcome is not presently determinable, any loss is neither probable nor reasonably estimable.

On February 22, 2024, a purported stockholder of the Company, Kevin Welsh, filed a putative class action complaint against the Company and its directors related to the Company’s proposed Merger with Q32, alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended. Welsh v. Homology Medicines, Inc., No. 1:24-cv-00242 (D. Del.). The complaint alleges that the Company and its directors filed a proxy statement containing material omissions regarding financial forecasts and their respective analysis, and seeks damages in an unspecified amount. The case is in its early stages. The Company believes the claims alleged lack merit. As the outcome is not presently determinable, any loss is neither probable nor reasonably estimable.