|3 Months Ended|
Mar. 31, 2021
Victoria, British Columbia
During the fourth quarter of 2020, the Company entered into facility and furniture leases for its head office located in Victoria, British Columbia for a total space of 13,206 square feet of office space for the facility lease. The lease terms commenced on January 1, 2021 for the facility and furniture leases. As of March 31, 2021, the Company had $0.4 million right-of-use assets (ROU asset) and $0.4 million lease liabilities related to the leases. The Company recognized operating lease costs that are included in selling, general and administrative expense in the condensed consolidated statement of operations. The incremental borrowing rate applied to the lease liabilities was 4.08% based on financial position, geographical region and terms of leases.
During August 2020, the Company signed a lease for commercial office space in Victoria, British Columbia. The lease term is expected to begin in 2022. The present value of the minimum lease payments for this lease are $3.3 million. As of March 31, 2021, there has been no accounting recognition associated with this lease, as the Company has not been granted access to the building.
Rockville, Maryland Lease
During March 2020, the Company entered into a lease for its commercial office in Rockville, Maryland. The lease has a remaining term of approximately 11 years and has an option to extend for two five-year periods after the 11 years has elapsed and an option to terminate after seven years. As of March 31, 2021, the Company had a right-of-use asset of $5.4 million and lease liability of $8.5 million included in the condensed consolidated balance sheets. As of December 31, 2020, the Company had a right of use asset of $5.5 million and lease liability of $8.4 million included in the condensed consolidated balance sheets. During 2020, the Company received reimbursements for tenant leasehold improvements by the landlord in the amount of $2.3 million for the Maryland lease. The Company recorded these leasehold improvement incentives as additions to the lease liability and construction in progress. The lease term commenced on March 12, 2020. When measuring the lease liability, the Company discounted lease payments using its incremental borrowing rate at March 12, 2020. The incremental borrowing rate applied to the lease liability on March 12, 2020 was 5.2% based on the financial position of the Company, geographical region and term of lease.
Edmonton, Alberta Canada
During the fourth quarter of 2020, the Company entered into an agreement to lease premises in Edmonton, Alberta, commencing on October 1, 2020 and ending September 30, 2021. The lease agreement is considered a short-term lease as the term is twelve months. The Company recognizes short-term leases on a straight-line basis and did not record a related lease asset or liability for the Edmonton lease. The Company recognized short-term rent expense for this lease, which is included in selling, general and administrative expense in the condensed consolidated statement of operations.
The following table provides supplemental balance sheet information related to the operating lease ROU asset and lease liabilities:
Beginning January 1, 2021 the Company began to incur variable lease costs under the existing Victoria and Rockville leases. These costs include operation and maintenance costs for the three-month periods ended March 31, 2021. The following provides a summary of the components of leasing costs and rent for the three-month periods ended March 31, 2021 and March 31, 2020.
The following table represents the weighted-average remaining lease term and discount rate as of March 31, 2021:
The following table provides a summary of lease liability maturities for the next five years and thereafter:
On December 15, 2020, the Company entered into a collaborative agreement with Lonza to build a dedicated manufacturing facility within Lonza’s existing small molecule facility in Visp, Switzerland. The dedicated facility (also referred to as "monoplant") will be equipped with state-of-the-art manufacturing equipment to provide cost and production efficiency for the manufacture of voclosporin, while expanding existing capacity and providing supply security to meet future commercial demand.
Upon completion of the monoplant, the Company will have the right to maintain unobstructed use of the monoplant by paying a quarterly fixed facility fee. The first capital expenditure payment was made in February 2021 of $11.8 million which was treated as an upfront lease payment and recorded under other non-current assets on the condensed consolidated balance sheets. The second payment is not due until the facility fulfills the required operational qualifications which is estimated to be the beginning of 2023.The Company expects to account for the arrangement as a finance lease under ASC 842. The present value of the minimum lease payments total approximately $91.0 million, beginning April 2023 and expiring in 2030, and are not included in the above table.
The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef