Quarterly report pursuant to Section 13 or 15(d)


3 Months Ended
Mar. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  



Arbitration Proceeding


We are currently engaged in an arbitration proceeding with REGENXBIO regarding the former license agreement between the parties relating to use of the AAV9 capsid in our MPS IIIA, MPS IIIB, CLN1 (which has now been sold to Taysha Gene Therapies), and CLN3 programs. The license terminated on May 2, 2020, and on May 25, 2020, we filed an arbitration claim with the American Arbitration Association (“AAA”) alleging that REGENXBIO materially breached the license agreement prior to termination and seeking, among other things, a declaration that as a result of REGENXBIO’s material breach, we are not responsible for payments totaling $28 million (which would otherwise have been due in 2020) plus accrued interest ($4.9 million as of March 31, 2021). REGENXBIO disputes our arbitration claim and has filed a counterclaim seeking payment of these amounts. An arbitration hearing before a tribunal of three AAA arbitrators was held on March 8 and March 9, 2021. The tribunal has not yet issued its opinion, and based on the post-hearing schedule, an opinion is expected in early third quarter 2021.


Operating Leases


We lease space under operating leases for manufacturing and laboratory facilities and administrative offices in Cleveland, Ohio, as well as administrative offices in New York, New York. We also lease office space in Madrid, Spain as well as certain office equipment under operating leases, which have a non-cancelable lease term of less than one year and, therefore, we have elected the practical expedient to exclude these short-term leases from our right-of-use assets and lease liabilities.


Components of lease cost are as follows:


    2021     2020  
    For the three months ended March 31,  
    2021     2020  
Operating lease cost   $ 434,000     $ 434,000  
Variable lease cost   $ 135,000     $ 83,000  
Short-term lease cost   $ 5,000     $ 18,000  


The following table presents information about the amount and timing of cash flows arising from operating leases as of March 31, 2021:


Maturity of lease liabilities:      
2021, remainder   $ 1,285,000  
2022     1,727,000  
2023     1,741,000  
2024     1,781,000  
2025     1,799,000  
Thereafter     87,000  
Total undiscounted operating lease payments     8,420,000  
Less: imputed interest     1,710,000  
Present value of operating lease liabilities   $ 6,710,000  
Balance sheet classification:        
Current portion of lease liability   $ 1,716,000  
Long-term lease liability     4,994,000  
Total operating lease liabilities   $ 6,710,000  
Other information:        
Weighted-average remaining lease term for operating leases     58 months  
Weighted-average discount rate for operating leases     9.6 %