Leases

6 Months Ended

Jun. 30, 2020

Leases

Leases

5. Leases

The Company adopted FASB ASC 842, Leases, or ASC 842, on January 1, 2019. ASC 842 allows the Company to elect a package of practical expedients, which include: (i) an entity need not reassess whether any expired or existing contracts are or contain leases; (ii) an entity need not reassess the lease classification for any expired or existing leases; and (iii) an entity need not reassess any initial direct costs for any existing leases. Another practical expedient allows the Company to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease and to purchase the underlying asset. The Company elected to utilize this package of practical expedients and elected not to use the hindsight methodology in its implementation of ASC 842.

The Company determined that it held one significant operating lease as of January 1, 2019, consisting of 20,062 square feet of office and laboratory space in Waltham, Massachusetts that expires in December 2022 pursuant to a May 2015 lease with AstraZeneca, or the AZ lease, as amended in February 2018. During the three months ended June 30, 2020 and 2019, the Company recorded lease expense of $0.2 million related to this lease. During the six months ended June 30, 2020 and 2019, the Company recorded lease expense of $0.3 million related to this lease. The Company has two additional operating leases that are included in its lease accounting which are not considered significant.

In calculating the present value of future lease payments, the Company utilized its incremental borrowing rate based on the remaining lease term at the date of adoption. The AZ lease contains a renewal option that can extend the lease for three years. Because the Company is not reasonably certain to exercise this renewal option, the option is not considered in determining the lease term, and associated potential additional payments are excluded from lease payments. The Company elected to account for each lease component and its associated non-lease components as a single lease component and has allocated all of the contract consideration across lease components only. The Company has existing net leases in which the non-lease components (e.g., common area maintenance) are paid separately from rent based on actual costs incurred and therefore are not included in the operating lease right-of-use assets and lease liabilities and are reflected as an expense in the period incurred.

The following table summarizes the presentation of the Company’s operating leases in its consolidated balance sheets (in thousands):

	As of		As of
	June 30, 2020		December 31, 2019
Assets
Operating lease right-of-use assets	$	1,387	$	1,620
Liabilities
Operating lease liabilities, current	$	577	$	506
Operating lease liabilities, net of current portion		1,020		1,321
Total operating lease liabilities	$	1,597	$	1,827

The operating lease right-of-use assets and operating lease liabilities balances relate primarily to amounts associated with the AZ lease. Future minimum lease payments under non-cancelable leases as of June 30, 2020, were as detailed below (in thousands):

Fiscal Year	As of June 30, 2020
2020 (remaining 6 months)	$	348
2021		717
2022		737
2023		1
Total undiscounted lease payments		1,803
Less: imputed interest		(206)
Total operating lease liabilities	$	1,597

As of June 30, 2020, the weighted average remaining lease term was 2.5 years and the weighted-average incremental borrowing rate used to determine the operating lease right-of-use assets was 9.1%.