Leases

3 Months Ended

Dec. 31, 2022

LEASES

On November 19, 2021, the Company entered into a new 15-year lease for approximately 144,000 square feet of office and research and development laboratory space under construction in San Diego, California. This facility will replace the Company’s current office and research facility sublease located in San Diego, California. The increased capacity of this new facility compared to the Company’s current research facility in San Diego will accommodate increased personnel for its expanding pipeline of current and future drug candidates. The estimated rent commencement date for the new lease is in April 2023 after construction and leasehold improvements have been completed. The lease payments, which begin on the rent commencement date, will be approximately $119.0 million over the initial 15-year term. The Company also estimates payments for operating expenses to be approximately $3.0 million for the first year of the lease, and these payments will continue throughout the initial 15-year term. The Company expects to pay approximately $31.0 million for leasehold improvements, net of tenant improvement allowances. Pursuant to the lease, within twelve months of the expiration of the initial 15-year term, the Company has the option to extend the lease for up to one additional ten-year term, with certain annual increases in base rent.

Other Significant Leases

Pasadena, California: The Company leases office space located at 177 Colorado Blvd for its corporate headquarters from 177 Colorado Owner, LLC. The lease began on September 30, 2019 and expires on April 30, 2027. The lease contains an option to renew for one term of five years. On October 23, 2020, the Company entered into a lease expansion to add an additional approximately 24,000 square feet of office with a lease expiration date of April 30, 2027.

San Diego, California: The Company subleased space from Halozyme, Inc. for additional research and development facility in San Diego, California. The term of this sublease commenced on April 1, 2020 and ended on January 14, 2023. On December 23, 2022, the Company entered into a new six-month lease agreement with 11404 & 11408 Sorrento Valley Owner (DE) LLC, effective January 15, 2023. The lease will end on July 15, 2023.

Madison, Wisconsin: The Company leases space for office and laboratory facilities, which expires on September 30, 2031. The lease contains options to renew for two terms of five years. After accounting for additional rental square feet added pursuant to amendments to the lease agreement in 2019 and 2020, the Company currently leases a total of 111,000 square feet.

The components of lease assets and liabilities along with their classification on the Company’s consolidated balance sheets were as follows:


Lease Assets and Liabilities	Classification	December 31, 2022		September 30, 2022
		(in thousands)

Operating lease assets	Right-of-use assets	$	41,655	$	58,291

Current operating lease liabilities	Lease liabilities	2,664		2,776
Non-current operating lease liabilities	Lease liabilities, net of current portion	79,470		78,800


		Three Months Ended December 31,
Lease Cost	Classification	2022		2021
		(in thousands)

Operating lease cost	Research and development	$	2,069	$	878
	General and administrative expense	533		420

Variable lease cost	Research and development	210		158
	General and administrative expense	—		—

Total		$	2,812	$	1,456

Variable lease cost primarily related to operating expenses associated with the Company’s operating leases. There was $0.1 million and $0 short-term lease cost during the three months ended December 31, 2022, and 2021, respectively.

The following table presents payments of operating lease liabilities on an undiscounted basis as of December 31,

2022:


Year	Amounts
	(in thousands)
2023 (remainder of fiscal year)	$	4,470
2024	8,094
2025	11,800
2026	12,138
2027	11,297
2028 and thereafter	102,813
Total	$	150,612
Less imputed interest	(68,478)
Total operating lease liabilities (includes current portion)	$	82,134

Supplemental cash flow and other information related to leases was as follows:


	Three Months Ended December 31,
	2022			2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (in thousands)	$	1,331		$	1,023

Weighted-average remaining lease term (in years)	6.9			7.8
Weighted-average discount rate	8.5		%	8.5		%