Commitments and Contingencies

6 Months Ended

Jun. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 10. Commitments and contingencies

Purchase commitments

The Company has contractual arrangements with research and development organizations and suppliers; however, these contracts are generally cancelable on 30-60 days’ notice and the obligations under these contracts are largely based on services performed. The Company may also enter into contracts in the normal course of business with clinical research organizations for clinical trials, with contract manufacturing organizations for clinical supplies and with other vendors for preclinical studies, supplies and other services and products for operating purposes. These contracts generally provide for termination on notice. As of June 30, 2024 and December 31, 2023, there were no amounts accrued related to termination charges.

The Company has entered into a Biologics Master Services Agreement (the "WuXi Agreement") with WuXi Biologics (Hong Kong) Limited ("WuXi"). The WuXi Agreement provides the terms and conditions under which WuXi will coordinate the Company’s biologics development and manufacturing services. Pursuant to the WuXi Agreement, the Company may be required to pay WuXi a royalty percentage or a one-time milestone payment on global net sales of third-party manufactured products at the Company’s election. The royalty or one-time milestone payment is only payable if the Company does not use WuXi as the manufacturer in part, or in totality. As of June 30, 2024 and December 31, 2023, there are no minimum commitments under the WuXi Agreement. Additionally, as of June 30, 2024 and December 31, 2023, there are no royalties or milestones payable.

Operating leases

The Company’s operating leases are as follows:

•An April 2016 lease for 1,577 square meters of office and laboratory space in Gosselies, Belgium, which commenced in May 2016 and terminated in December 2021. In January 2021, the Company entered into an amendment to extend the lease, effective February 2021 with a termination date of January 2030, and increase the office and laboratory space by 201 square meters. There is no option within the lease agreement to extend the termination date. In October 2021, the Company entered into an amendment to increase the office and laboratory space by 453 square meters. In May 2023, the Company entered into another amendment to again increase the office and laboratory space by an additional 453 square meters for a total of 2,684 square meters. The amendment resulted in an additional $0.9 million of both right-of-use assets and liabilities.

•A November 2021 lease for 9,068 square feet of office space in Watertown, Massachusetts, which commenced in November 2021 and terminates in February 2027. The lease is subject to fixed-rate rent escalations. There is no option within the lease agreement to extend the termination date.

•A July 2023 lease for 859 square meters of laboratory space in Gosselies, Belgium, for which the Company took occupancy in March 2024 and will terminate in December 2028. This lease does not contain any variable lease payments. There is no option within the lease agreement to terminate nor to extend the lease prior to the termination date.

•Various car leases that the Company enters into from time to time. The life of each car lease ranges from 48 to 60 months.

The Company identified and assessed the following estimates in recognizing the operating lease right of use assets and corresponding liabilities.

Expected lease term: The expected lease term includes non-cancelable lease periods and, when applicable, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option, as well as periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.

Incremental borrowing rate: As the discount rates in the Company’s lease are not implicit, management estimated the incremental borrowing rate based on the rate of interest the Company would have to pay to borrow a similar amount on a collateralized basis over a similar term.

Lease and non-lease components: The Company is required to pay fees for operating expenses in addition to monthly base rent for certain operating leases ("non-lease components"). The Company has not elected the practical expedient which allows non-lease components to be combined with lease components for all asset classes. Variable non-lease components are not included within the lease right-of-use asset and lease liability on the condensed consolidated balance sheet, and instead are reflected as expense in the period they are paid.

Rent expense was $0.4 million and $0.8 million for the three and six months ended June 30, 2024, respectively. Rent expense was $0.3 million and $0.6 million for the three and six months ended June 30, 2023, respectively.

The following table summarizes lease terms and discount rate:

	June 30, 2024			December 31, 2023
Weighted-average remaining lease term (years)		4.2			4.6
Weighted-average discount rate		4.74	%		4.75	%

The following table summarizes the cash flow and other information:

	Three months ended June 30,				Six months ended June 30,
(in thousands)	2024		2023		2024		2023
Operating lease liabilities arising from obtaining right-of-use assets (non-cash)	$	73	$	981	$	235	$	1,059
Operating cash flows used in operating leases	$	421	$	278	$	768	$	549

As of June 30, 2024, the Company had the following future minimum lease payments under non-cancelable operating leases for the remainder of 2024 and the future years thereafter (in thousands):

Year ending December 31:
2024	$	754
2025		1,503
2026		1,467
2027		968
2028		786
Thereafter		580
Total lease payments		6,058
Less: interest		(542	)
Total lease liability	$	5,516
Lease liabilities, current	$	1,277
Lease liabilities, net of current portion	$	4,239

In November 2021, the Company provided a letter of credit for $142 thousand to secure its obligation under its lease in Watertown, Massachusetts. The Company maintains that amount of cash on hand (restricted) to fund any necessary draws on the letter of credit. In addition, as of June 30, 2024 and December 31, 2023, the Company had $160 thousand and $131 thousand on hand, respectively, serving as a guarantee for its lease obligation in Belgium. These amounts have been classified as restricted cash in the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023.