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Leases
 3 Months Ended
Mar. 31, 2024
Leases [Abstract]  
Leases Leases
Operating Leases
Our operating leases primarily consist of non-cancellable facilities leases for research, manufacturing, and administrative functions. Our non-cancellable facilities operating leases have original lease periods expiring between 2027 and 2034, and include one or more options to renew for seven years to fourteen years. The monthly payments for our
operating leases escalate over the remaining lease term. Our lease contracts do not contain termination options, residual value guarantees or restrictive covenants.
ABPS Fill-And-Finish Line Lease
The ABPS Services Agreement contains a lease, which commenced in January 2022, related to a dedicated fill-and-finish line for the manufacturing of DAXXIFY® because it has an identified asset that is physically distinct for which we have the right of control as defined under ASC 842. The right of control is conveyed because the embedded lease provides us with both (i) the right to obtain substantially all of the economic benefit from the fill-and-finish line resulting from the exclusivity of the dedicated manufacturing capacity and (ii) the right to direct the use of the fill-and-finish line through our purchase orders to ABPS. Each party has the right to terminate the ABPS Services Agreement without cause, with an 18 month written notice to the other party. The lease is classified as a finance lease in the condensed consolidated balance sheets as of December 31, 2023 before the impact of a statement of work entered into in April 2024 as described below.
In February 2024, we entered into the second amendment to the ABPS Services Agreement, which extended the term of the ABPS Service Agreement through December 31, 2027, and modified our remedies with respect to conforming products and delays. In April 2024, we entered into a statement of work under the ABPS Service Agreement, and our minimum purchase obligation was established to be $25.1 million for the year ending December 31, 2024 pursuant to this statement of work. The minimum purchase obligation is subject to reduction based on ABPS’ actual manufacturing output. Due to the timing of the statement of work entered in April 2024, this lease was temporarily classified as an operating lease on March 31, 2024.
On March 31, 2024, the ABPS fill-and-finish line lease was reclassified from a finance lease to an operating lease on our condensed consolidated balance sheets. However, the lease activities during the three months ended March 31, 2024 were recorded based on finance lease accounting. Our operating and finance lease costs are summarized as follows:
 Three Months Ended March 31,
(in thousands)20242023
Finance lease:
Amortization of finance lease right-of-use asset (1)
$2,116 $2,318 
Interest on finance lease liability30 566 
Variable lease cost (2)
19 374 
Total finance lease costs2,165 3,258 
Operating leases:
Operating lease cost2,773 2,207 
Variable lease cost (3)
646 507 
Total operating lease costs3,419 2,714 
Total lease cost$5,584 $5,972 
(1)Amortization of the finance lease right-of-use asset started to be capitalized into inventories on the condensed consolidated balance sheets in the second quarter of 2023, as a result of the FDA approval of the PAS of the ABPS manufacturing facility.
(2)Variable finance lease cost includes validation, qualification, materials, and other related services which are not included in the lease liabilities and are expensed as incurred.
(3)Variable operating lease cost includes management fees, common area maintenance, property taxes, insurance and parking fees, which are not included in the lease liabilities and are expensed as incurred.
As of March 31, 2024, we have $0.4 million of accounts payable related to the fill-and-finish line lease under the ABPS Service Agreement. Additionally, we have maturities of our lease liabilities as follows:
(in thousands)
ABPS Fill-and-Finish Line Lease
Other Operating Leases
All Operating Leases
Year Ending December 31,
2024 remaining nine months$1,300 $7,063 $8,363 
2025— 10,854 10,854 
2026— 11,185 11,185 
2027— 4,536 4,536 
2028— 4,021 4,021 
2029 and thereafter— 24,565 24,565 
Total lease payments1,300 62,224 63,524 
Less imputed interest(21)(17,564)(17,585)
Present value of lease payments$1,279 $44,660 $45,939 
Our lease contracts do not provide readily determinable implicit rates, as such, we used the estimated incremental borrowing rate based on the information available at the adoption, commencement, or remeasurement date. As of March 31, 2024, weighted-average remaining lease terms and discount rates are as follows:
ABPS Fill-and-Finish Line Lease
Other Operating Leases
All Operating Leases
Weighted-average remaining lease term (years)3.88.07.9
Weighted-average discount rate10.0 %10.0 %10.0 %
On March 31, 2024, the ABPS fill-and-finish line lease was reclassified from a finance lease to an operating lease on our condensed consolidated balance sheets. However, the lease activities during the three months ended March 31, 2024 were recorded based on finance lease accounting. Supplemental cash flow information related to the leases was as follows:
Three Months Ended March 31,
(in thousands)20242023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$2,555 $2,084 
Operating cash flows from finance lease$30 $566 
Financing cash flows from finance lease$4,227 $2,486 
Right-of-use assets obtained in exchange for lease liabilities
Finance lease$1,071 $23,735 
Lease Not Yet Commenced
PCI Supply Agreement
In April 2021, we entered into the PCI Supply Agreement pursuant to which PCI would serve as a non-exclusive manufacturer and supplier of DAXXIFY®. The initial term of the PCI Supply Agreement is dependent upon the date of regulatory submission for the manufacturing of DAXXIFY® and may be terminated by either party in accordance with the terms of the PCI Supply Agreement. The term of the PCI Supply Agreement may also be extended for one additional three-year term upon mutual agreement of the parties.
The PCI Supply Agreement contains a lease related to a dedicated fill-and-finish line and closely related assets for the manufacturing of DAXXIFY® because it has identified assets that are physically distinct for which we will have the right of control as defined under ASC 842. The right of control is conveyed because the embedded lease will provide us with both (i) the right to obtain substantially all of the economic benefit from the fill-and-finish line resulting from the exclusivity implied from the dedicated manufacturing capacity and (ii) the right to direct the use of the fill-and-finish line.
The embedded lease had not yet commenced as of March 31, 2024. The accounting commencement and recognition of the right-of-use lease assets and lease liabilities related to the embedded lease will take place when we have substantively obtained the right of control. The embedded lease is preliminarily classified as a finance lease.
Pursuant to the PCI Supply Agreement, we are responsible for certain costs associated with the design, equipment procurement and validation, and facilities-related costs, monthly payments and minimum purchase obligations throughout the initial term of the PCI Supply Agreement. As of March 31, 2024, we have made prepayments of $35.8 million to PCI which is recorded within “Finance lease prepaid expense” in the condensed consolidated balance sheets. Based on our best estimate as of March 31, 2024, our remaining minimum commitment under the PCI Supply Agreement is $13.8 million for 2024, $14.4 million for 2025, $18.8 million for 2026, $25.2 million for 2027, $29.1 million for 2028, and $134.5 million for 2029 and thereafter in aggregate.
Leases Leases
Operating Leases
Our operating leases primarily consist of non-cancellable facilities leases for research, manufacturing, and administrative functions. Our non-cancellable facilities operating leases have original lease periods expiring between 2027 and 2034, and include one or more options to renew for seven years to fourteen years. The monthly payments for our
operating leases escalate over the remaining lease term. Our lease contracts do not contain termination options, residual value guarantees or restrictive covenants.
ABPS Fill-And-Finish Line Lease
The ABPS Services Agreement contains a lease, which commenced in January 2022, related to a dedicated fill-and-finish line for the manufacturing of DAXXIFY® because it has an identified asset that is physically distinct for which we have the right of control as defined under ASC 842. The right of control is conveyed because the embedded lease provides us with both (i) the right to obtain substantially all of the economic benefit from the fill-and-finish line resulting from the exclusivity of the dedicated manufacturing capacity and (ii) the right to direct the use of the fill-and-finish line through our purchase orders to ABPS. Each party has the right to terminate the ABPS Services Agreement without cause, with an 18 month written notice to the other party. The lease is classified as a finance lease in the condensed consolidated balance sheets as of December 31, 2023 before the impact of a statement of work entered into in April 2024 as described below.
In February 2024, we entered into the second amendment to the ABPS Services Agreement, which extended the term of the ABPS Service Agreement through December 31, 2027, and modified our remedies with respect to conforming products and delays. In April 2024, we entered into a statement of work under the ABPS Service Agreement, and our minimum purchase obligation was established to be $25.1 million for the year ending December 31, 2024 pursuant to this statement of work. The minimum purchase obligation is subject to reduction based on ABPS’ actual manufacturing output. Due to the timing of the statement of work entered in April 2024, this lease was temporarily classified as an operating lease on March 31, 2024.
On March 31, 2024, the ABPS fill-and-finish line lease was reclassified from a finance lease to an operating lease on our condensed consolidated balance sheets. However, the lease activities during the three months ended March 31, 2024 were recorded based on finance lease accounting. Our operating and finance lease costs are summarized as follows:
 Three Months Ended March 31,
(in thousands)20242023
Finance lease:
Amortization of finance lease right-of-use asset (1)
$2,116 $2,318 
Interest on finance lease liability30 566 
Variable lease cost (2)
19 374 
Total finance lease costs2,165 3,258 
Operating leases:
Operating lease cost2,773 2,207 
Variable lease cost (3)
646 507 
Total operating lease costs3,419 2,714 
Total lease cost$5,584 $5,972 
(1)Amortization of the finance lease right-of-use asset started to be capitalized into inventories on the condensed consolidated balance sheets in the second quarter of 2023, as a result of the FDA approval of the PAS of the ABPS manufacturing facility.
(2)Variable finance lease cost includes validation, qualification, materials, and other related services which are not included in the lease liabilities and are expensed as incurred.
(3)Variable operating lease cost includes management fees, common area maintenance, property taxes, insurance and parking fees, which are not included in the lease liabilities and are expensed as incurred.
As of March 31, 2024, we have $0.4 million of accounts payable related to the fill-and-finish line lease under the ABPS Service Agreement. Additionally, we have maturities of our lease liabilities as follows:
(in thousands)
ABPS Fill-and-Finish Line Lease
Other Operating Leases
All Operating Leases
Year Ending December 31,
2024 remaining nine months$1,300 $7,063 $8,363 
2025— 10,854 10,854 
2026— 11,185 11,185 
2027— 4,536 4,536 
2028— 4,021 4,021 
2029 and thereafter— 24,565 24,565 
Total lease payments1,300 62,224 63,524 
Less imputed interest(21)(17,564)(17,585)
Present value of lease payments$1,279 $44,660 $45,939 
Our lease contracts do not provide readily determinable implicit rates, as such, we used the estimated incremental borrowing rate based on the information available at the adoption, commencement, or remeasurement date. As of March 31, 2024, weighted-average remaining lease terms and discount rates are as follows:
ABPS Fill-and-Finish Line Lease
Other Operating Leases
All Operating Leases
Weighted-average remaining lease term (years)3.88.07.9
Weighted-average discount rate10.0 %10.0 %10.0 %
On March 31, 2024, the ABPS fill-and-finish line lease was reclassified from a finance lease to an operating lease on our condensed consolidated balance sheets. However, the lease activities during the three months ended March 31, 2024 were recorded based on finance lease accounting. Supplemental cash flow information related to the leases was as follows:
Three Months Ended March 31,
(in thousands)20242023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$2,555 $2,084 
Operating cash flows from finance lease$30 $566 
Financing cash flows from finance lease$4,227 $2,486 
Right-of-use assets obtained in exchange for lease liabilities
Finance lease$1,071 $23,735 
Lease Not Yet Commenced
PCI Supply Agreement
In April 2021, we entered into the PCI Supply Agreement pursuant to which PCI would serve as a non-exclusive manufacturer and supplier of DAXXIFY®. The initial term of the PCI Supply Agreement is dependent upon the date of regulatory submission for the manufacturing of DAXXIFY® and may be terminated by either party in accordance with the terms of the PCI Supply Agreement. The term of the PCI Supply Agreement may also be extended for one additional three-year term upon mutual agreement of the parties.
The PCI Supply Agreement contains a lease related to a dedicated fill-and-finish line and closely related assets for the manufacturing of DAXXIFY® because it has identified assets that are physically distinct for which we will have the right of control as defined under ASC 842. The right of control is conveyed because the embedded lease will provide us with both (i) the right to obtain substantially all of the economic benefit from the fill-and-finish line resulting from the exclusivity implied from the dedicated manufacturing capacity and (ii) the right to direct the use of the fill-and-finish line.
The embedded lease had not yet commenced as of March 31, 2024. The accounting commencement and recognition of the right-of-use lease assets and lease liabilities related to the embedded lease will take place when we have substantively obtained the right of control. The embedded lease is preliminarily classified as a finance lease.
Pursuant to the PCI Supply Agreement, we are responsible for certain costs associated with the design, equipment procurement and validation, and facilities-related costs, monthly payments and minimum purchase obligations throughout the initial term of the PCI Supply Agreement. As of March 31, 2024, we have made prepayments of $35.8 million to PCI which is recorded within “Finance lease prepaid expense” in the condensed consolidated balance sheets. Based on our best estimate as of March 31, 2024, our remaining minimum commitment under the PCI Supply Agreement is $13.8 million for 2024, $14.4 million for 2025, $18.8 million for 2026, $25.2 million for 2027, $29.1 million for 2028, and $134.5 million for 2029 and thereafter in aggregate.