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Commitments and Contingencies
 9 Months Ended
Sep. 30, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
All consideration paid by the Former Parent in association with the following agreements, certain of which were assigned by the Former Parent to the Company in connection with the Spin-Off, is recorded in the condensed combined financial statements of the Company.
Lease Agreements
The Former Parent’s leases primarily consisted of office space that was attributed to the Company in connection with the Spin-Off. The Company determines if an arrangement is a lease at inception. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Real estate leases for facilities have an average remaining lease term of 4.43 years as of September 30, 2022, for which none include the optional extension. The Company has made an accounting policy election not to record short-term leases (leases with an initial term of 12 months or less) on the balance sheet. The Company currently has two short-term leases with immaterial lease expense.
Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term. Since most of the Company’s leases do not have a readily determinable implicit discount rate, the Company uses the Former Parent’s incremental borrowing rate to calculate the present value of lease payments. The Company does not separate lease components (e.g., payments for rent, real estate taxes and insurance costs) from non-lease components (e.g., common-area maintenance costs) in the event that the agreement contains both. The Company includes both the lease and non-lease components for purposes of calculating the right-of-use asset and related lease liability (if the non-lease components are fixed). The allocated operating lease cost was $159 and $379 for the three and nine months ended September 30, 2022, respectively, and $55 and $208 for the three and nine months ended September 30, 2021, respectively.
Certain of the Company’s lease agreements contain variable lease payments that are adjusted for
actual operating expense true-ups compared with estimated amounts; however, these amounts are immaterial. The Company had no sublease income and there are no sale-leaseback transactions. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table summarizes supplemental cash flow information:
Nine Months Ended
September 30,
20222021
Right-of-use assets obtained in exchange for new operating lease liabilities$2,633 $— 
Operating cash flows paid for operating leases were immaterial for the nine months ended September 30, 2022 and 2021.
Supplemental balance sheet information related to leases is as follows:
In thousands, except remaining lease term and discount rateSeptember 30, 2022December 31, 2021
Assets
Other non-current assets$6,915 $5,222 
Liabilities
Other current liabilities$1,134 $439 
Other non-current liabilities4,070 2,797 
$5,204 $3,236 
Weighted average remaining lease term (in years)
4.435.75
Weighted average discount rate9.45%9.07%
The following table summarizes maturities of operating lease liabilities as of September 30, 2022:
Operating leases
2022 (remaining three months)$378 
20231,526 
20241,476 
20251,132 
20261,147 
Thereafter669 
Total lease payments6,328 
Less: imputed interest(1,124)
Total lease liabilities$5,204 
Cambridge Lease Agreement
In October 2022, the Company entered into a lease agreement in Cambridge, Massachusetts for approximately 27,000 square feet of lab and office space (the "Cambridge Lease"), which will be used for general office, laboratory and research and development purposes. The lease commenced on October 19, 2022, and has a term of 120 months, with an option to extend to 180 months. The following table summarizes the Company's future lease payments for the Cambridge Lease:
Amount
2022 (remaining three months)$401 
20233,403 
20243,505 
20253,610 
20263,718 
Thereafter24,393 
Total lease payments$39,030 
Research Commitments
The Former Parent has entered into agreements with several CROs to provide services in connection with the Company’s preclinical studies and clinical trials. Research commitments entered into by the Former Parent and related to the Company were transferred to the Company upon separation. As of September 30, 2022, the Company had remaining maximum research commitments in excess of one year of approximately $19,750, which are variable based on number of trial participants, and contingent upon the achievement of certain milestones of the clinical trials covered under the agreements. If all related milestones are achieved, the Company expects these amounts to be paid over the next five years.
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in
many cases, unlimited. The Company’s amended and restated memorandum and articles of association also provide for indemnification of directors and officers in specific circumstances. To date, the Company has not incurred any material costs as a result of such indemnification provisions. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its combined financial statements as of September 30, 2022 or December 31, 2021.
License Agreements
The Former Parent entered into license agreements with various parties that are directly attributed to the Company under which it is obligated to make contingent and non-contingent payments (see Note 6). Upon the October 3, 2022 separation from the Former Parent, License agreements entered by the Former Parent and related to the Company were transferred to the Company.
Sixth Street Financing Agreement
In August 2020, the Former Parent and Biohaven Pharmaceuticals, Inc., (together with the Former Parent the "Borrowers"), entered into a financing agreement, as amended, with Sixth Street Specialty Lending, Inc., as administrative agent, and the lenders party thereto (the "Lenders") pursuant to which the Lenders agreed to extend a senior secured credit facility to the Borrowers (as amended, the “Sixth Street Financing Agreement”). The Sixth Street Financing Agreement provided for term loans in an aggregate principal amount up to $750,000, plus any capitalized interest paid in kind, and was accounted for as third-party, long-term debt by the Former Parent.
The Company was a co-obligor, jointly and severally with the Former Parent on its third-party long-term debt obligation under the Sixth Street Financing Agreement. The Former Parent’s third-party debt and related interest expense are not reflected in the combined financial statements because the Company had not agreed to pay a specified amount of the borrowings on the basis of its arrangement with the Former Parent, nor was the Company expected to pay any portion of the Former Parent’s third-party debt, and the borrowings were not specifically identifiable to the Company. On October 3, 2022, an affiliate of Pfizer, on behalf of the Former Parent, repaid in full all of the indebtedness and other obligations and liabilities owed by the Former Parent, including prepayment penalties. In connection with the termination and repayment in full
of the indebtedness and other obligations and liabilities under the Sixth Street Financing Agreement, all related liens and security interests granted by or arising under the Sixth Street Financing Agreement were automatically released and discharged.
Legal Proceedings
From time to time, in the ordinary course of business, the Company is subject to litigation and regulatory examinations as well as information gathering requests, inquiries and investigations. As of September 30, 2022, there were no matters which would have a material impact on the Company’s financial results.