Leases

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

Leases

11. Leases

Suite Retention Agreements

In September 2019, the Company entered into a suite retention and development agreement with Curia Massachusetts, Inc. (“Curia”), formerly known as Albany Molecular Research, Inc., under which a series of cleanroom suites were built at Curia’s manufacturing facility in accordance with the Company’s objectives (“Curia Agreement”). The Curia Agreement continues for five years after the build-out is completed, and the Company has the right to extend for an additional three years. The Company has determined this is a lease under ASU No. 2016-02, Leases (Topic 842) (“ASC 842”). Under the Curia Agreement, the Company will finance $6.0 million of the costs of the build-out (“Build-Out Costs”). If Build-Out Costs exceed $6.0 million, the Company and Curia will share overage costs equally, up to $11.0 million, and the Company will be responsible for any amounts exceeding $11.0 million. The Company had paid $12.8 million towards the Build-Out Costs prior to the lease commencement date which had been recorded within other long-term assets as prepaid rent as these represented payments for lessor owned assets. The Company anticipates making additional payments of $5.6 million related to the final Build-Out Costs, of which $3.2 million was paid as of June 30, 2021. These costs are included within the right-of-use (“ROU”) assets and lease liabilities recorded at the lease commencement date. Upon the build-out completion date of August 31, 2020 (“Curia Lease Commencement”), the Company determined that it gained control of the space, in accordance with ASC 842, which resulted in the recording of ROU assets and related lease liabilities of approximately $66.6 million and $53.8 million, respectively, with the difference being due to the elimination of previously recorded prepaid rent. Due to an increase in the final Build-Out Costs, the Company recorded an increase of $1.4 million to ROU assets and lease liabilities as of June 30, 2021. As of August 31, 2020, the Company began paying monthly fees of $1.0 million, which are subject to a 3% increase on January 1 of each calendar year following the first anniversary of the build-out completion. The option to extend the lease for an additional three years was not included in the lease liability as of June 30, 2021 as the Company is not reasonably certain it will exercise this option.

In October 2020, the Company entered into a suite retention agreement (the “Biomere Suite Retention Agreement”) with Biomedical Research Models, Inc. (“Biomere”) under which the Company will lease two exclusive procedure rooms and one housing and maintenance room in Biomere’s Worcester, Massachusetts facility. The lease term is 13 months and commenced on December 1, 2020 (the “Biomere Lease Commencement”). The Company can terminate the Biomere Suite Retention Agreement for convenience, and without penalty, with 60 days’ written notice. The Biomere Suite Retention Agreement does not contain any lease incentives or renewal options. Upon the Biomere Lease Commencement, the Company determined that it gained control of the space, in accordance with ASC 842, which resulted in the recording of an ROU asset and lease liability of $0.3 million. As of the Biomere Lease Commencement, the Company began paying monthly fees of less than $0.1 million.

Real Estate Lease

In June 2017, the Company entered into an operating lease for office and laboratory space at its headquarters in Lexington, Massachusetts. The Company occupies approximately 59,000 square feet of space under a 10-year lease agreement expiring in April 2028. The Company occupied this property in March 2018. Monthly lease payments include base rent charges of $0.2 million, which are subject to a 3% annual increase each year. In June 2017, in connection with this lease agreement, the Company issued a letter of credit collateralized by cash deposits of $1.0 million, which are classified as restricted cash on the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020.

Equipment Lease

In March 2018, the Company entered into an operating lease for communications equipment for use at its office and laboratory space in Lexington, Massachusetts. The term of the lease is five years, expiring in March 2023.

The Company excludes leases with an initial term of one year or less in the recognized ROU asset and lease liabilities. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of ASC 842, lease and non-lease components are combined into a single lease component. The Company’s leases have remaining lease terms of up to seven years, excluding two five-year options to extend the real estate lease after the expiration of the initial term. The Company believes the Lexington real estate lease, together with the anticipated relocation to a space in Waltham, Massachusetts as described below, will be sufficient to meet its needs for the foreseeable future and that suitable additional space will be available as and when needed.

The components of lease cost were as follows (dollar amounts in thousands):

	Six Months Ended June 30,
	2021			2020
Lease cost
Operating lease cost	$	9,597		$	1,346
Total lease cost	$	9,597		$	1,346
Other information
Operating cash flows from operating leases	$	9,593		$	1,320
Operating lease liabilities arising from obtaining right-of-use assets		1,376			—
Weighted-average remaining lease term		5 years			8 years
Weighted-average discount rate		12.0	%		17.5	%

Maturities of operating lease liabilities are as follows (in thousands):

	June 30, 2021			December 31, 2020
2021	$	9,971		$	18,067
2022		15,178			15,178
2023		15,591			15,591
2024		16,050			16,050
2025		12,029			12,029
2026 and thereafter		7,134			7,134
Total future minimum lease payments		75,953			84,049
Less: imputed interest		(18,097	)		(21,363	)
Present value of lease liabilities	$	57,856		$	62,686

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate which are the rates incurred to borrow on a collateralized basis over a term equal to the lease payments in a similar economic environment in determining the present value of lease payments. The Company used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date and for all subsequent leases the Company used an appropriate incremental borrowing rate upon commencement date.

In October 2020, the Company entered into a suite retention agreement with Azzur Cleanrooms-on-Demand – Burlington, LLC (“Azzur”) under which it will lease two exclusive cleanroom suites in Azzur’s Burlington, Massachusetts facility (the “Azzur Agreement”). The lease term is 24 months and commenced on August 1, 2021, with the option to extend the term with three months’ notice prior to the termination date. Upon commencement, the Company will pay monthly fees of $0.4 million, which are subject to a 4% increase on July 1, 2022. As of June 30, 2021, the Company’s commitment under this agreement is $8.8 million through June 2023. The Company can terminate the Azzur Agreement for convenience, and without penalty, with three months’ written notice. The Azzur Agreement does not contain any lease incentives or renewal options. The Company has determined this is a lease under ASC 842. As of June 30, 2021, the Company has determined that it does not have control of the space, as defined in ASC 842, during the build-out and as such, this Azzur Agreement was not included in the ROU assets or lease liabilities on the Company’s condensed consolidated balance sheet.

On November 3, 2020 (the “Lease Commencement Date”), the Company entered into a ten-year lease agreement for approximately 138,444 square feet of office and laboratory space located at 200 West Street in Waltham, Massachusetts (the “Waltham Lease Agreement”). The Waltham Lease Agreement includes an extension option of one period of 10 years. The Waltham Lease Agreement includes a work agreement to perform a build-out arrangement, with a construction period from March 2021 to December 2021. Under the Waltham Lease Agreement, the Company has improvement allowances of $26.3 million, plus an additional tenant allowance of up to $15 per square foot, should the Company elect to use those. In April 2021, the Company entered into a contract with the Richmond Group for $36.8 million for the build-out of this office and laboratory space. The Company expects to spend between $10.5 million and $12.5 million on the construction of lessor assets, which represents the cost of the project that exceeds the tenant allowances. The Company has paid $2.3 million towards the construction of lessor assets, which is included in other long-term assets in the condensed consolidated balance sheet as of June 30, 2021. Initial base rent, which commences 12 months after the Lease Commencement Date, shall be $5.7 million for the first year and approximately $8.0 million for the second year and thereafter shall be subject to a 3% annual increase. In December 2020, in connection with this Waltham Lease Agreement, the Company issued a letter of credit collateralized by cash deposits of $3.9 million, which are classified as restricted cash on the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020. The Company has determined this is a lease under ASC 842. As of June 30, 2021, the Company has determined that it does not have control of the space, as defined in ASC 842, during the build-out and as such, this Waltham Lease Agreement was not included in the ROU assets or lease liabilities on the Company’s condensed consolidated balance sheet.