Quarterly report pursuant to Section 13 or 15(d)

COMMITMENTS AND CONTINGENCIES

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COMMITMENTS AND CONTINGENCIES
 6 Months Ended
Jun. 30, 2021
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Arbitration Proceeding

 

We were 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 were not responsible for payments totaling $28 million (which would otherwise have been due in 2020) plus accrued interest ($6.4 million as of June 30, 2021 based on invoices received from REGENXBIO). REGENXBIO disputed our arbitration claim and 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. On July 13, 2021, the tribunal found in favor of REGENXBIO Inc. in connection with the parties’ arbitration claims and counterclaims. Although the tribunal awarded REGENXBIO $28.0 million plus interest, we believe that prior to the arbitration decision, the two companies had entered into a binding settlement agreement, including $18.0 million payable to REGENXBIO over a two-year period. We intend to seek enforcement of the settlement agreement.

 

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:

 

                             
    For the three months ended June 30,     For the six months ended June 30,  
    2021     2020     2021     2020  
Operating lease cost   $ 434,000     $ 434,000     $ 868,000     $ 868,000  
Variable lease cost   $ 104,000     $ 92,000     $ 239,000     $ 175,000  
Short-term lease cost   $ 5,000     $ 6,000     $ 10,000     $ 24,000  

 

 

The following table presents information about the amount and timing of cash flows arising from operating leases as of June 30, 2021:

 

         
Maturity of lease liabilities:      
2021, remainder   $ 858,000  
2022     1,727,000  
2023     1,741,000  
2024     1,781,000  
2025     1,799,000  
Thereafter     87,000  
Total undiscounted operating lease payments     7,993,000  
Less: imputed interest     1,551,000  
Present value of operating lease liabilities   $ 6,442,000  
         
Balance sheet classification:        
Current portion of lease liability   $ 1,720,000  
Long-term lease liability     4,722,000  
Total operating lease liabilities   $ 6,442,000  
         
Other information:        
Weighted-average remaining lease term for operating leases     55 months  
Weighted-average discount rate for operating leases     9.6 %