Leases

9 Months Ended

Sep. 30, 2023

New Lease

On September 28, 2023, the Company entered into a lease agreement for a premise consisting of approximately 100,904 square feet located at Oyster Point Blvd, South San Francisco, California (the "Oyster Point Lease"), which the Company intends to use as laboratory and office space. The lease term of approximately seven years will start upon the Landlord’s substantial completion of tenant improvements, and may be extended for a period of eight years at then prevailing market rates for a comparable property. Future lease payments are approximately $43.7 million and are expected to start in the third quarter of 2024. Additionally, the Company is required to provide a letter of credit to the Landlord in the amount of $1.4 million in connection with the Oyster Point Lease. The Company has not recognized a right-of-use asset ("ROU") or aggregate lease liability as of September 30, 2023 for this lease as the Company did not control the underlying assets at any time as of September 30, 2023.

Existing leases

In conjunction with the Oyster Point Lease, we modified the lease term of our existing lease to end upon the start date of the Oyster Point Lease. As a result of this modification, we reduced our lease liability and our right-of-use asset by $1.8 million as of September 30, 2023. Additionally, we paid a refundable security deposit of approximately $0.4 million at inception of the lease term which has been reclassified from other non-current assets to other current assets in the condensed balance sheet at September 30, 2023.

Operating lease ROU assets and liabilities on our condensed balance sheets represent the present value of our remaining lease payments over the remaining lease terms. We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our leases are not readily determinable. Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the date of adoption of Topic 842 or the date of lease modification. The undiscounted future non-cancellable lease payments of the Company's operating lease liabilities as of September 30, 2023 were as follows (in thousands):


	Operating Lease
2023 (remainder of the year)	$	569
2024	1,624
Total undiscounted lease payments	$	2,193
Less: Present value discount	(132)
Total current operating lease liabilities	$	2,061
Total non-current operating lease liabilities	$	—
Weighted-average remaining lease term	9.3 months
Weighted-average incremental borrowing rate	13.3		%

Variable lease costs comprise primarily of the Company's proportionate share of operating expenses, property taxes, and insurance. Short-term lease expense and variable lease payments recorded in operating expenses were immaterial for the three and nine months ended September 30, 2023 and 2022. Lease expenses for the three and nine months ended September 30, 2023 and 2022 are as follows (in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease costs	$	698	$	655	$	2,142	$	1,783
Other variable costs	130		131		620		407
Total expense	$	828	$	786	$	2,762	$	2,190

Cash paid for amounts included in the measurement of operating lease liabilities was $2.6 million and $1.9 million for the nine months ended September 30, 2023 and 2022, respectively.