7. Leases

The Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of an arrangement. The Company leases office, laboratory space and a dedicated manufacturing suite at WuXi under operating leases that have a weighted average remaining term of 0.8 years and 1.5 years as of June 30, 2024 and December 31, 2023, respectively.

As described further in Note 6, in August 2023, the Company entered into new work orders under the WuXi Agreement for WuXi to serve as one of the Company’s cell processing manufacturing partners for the global clinical development of CABA-201. WuXi converted the Company’s non-dedicated suite to a Dedicated Suite for GMP manufacturing for the Company’s CABA-201 and MuSK-CAART programs, for an initial term of 18 months. The terms of the August 2023 work orders included both fixed costs and contingent variable costs. The lease commenced October 1, 2023, and a right of use asset and lease liability of $953 was initially recorded for the fixed payments. In the first quarter of 2024, the contingency related to the variable costs was resolved and the lease was remeasured, resulting in an increase in the right of use asset and lease liability of $4,032. The Company may terminate the Dedicated Suite lease for convenience with six months’ prior written notice and a $1,080 termination fee if both the CABA-201 and MuSK-CAART work orders are terminated. In August 2024, the 2023 work order related to GMP manufacturing was amended to reduce the minimum monthly runs through the end of 2024, resulting in a reduction to future lease payments of approximately $1,500.

The Company also leases office space under short-term leases that provide for either party to terminate the lease without cause and with 30 days’ notice. The Company’s operating leases include rent escalations and are subject to additional variable charges, including common area maintenance, property taxes and property insurance. Given the variable nature of such costs, they are recognized as expense as incurred. Additionally, some of the Company’s leases are subject to certain fixed fees which the Company has determined to be non-lease components. The Company has elected the practical expedient to account for lease and non-lease components as a single-lease component and has included fixed payments related to non-lease components in calculating the operating lease liability.

The weighted average discount rate for the Company’s operating leases is 10.4% and 9.5% as of June 30, 2024 and December 31, 2023, respectively, representing the Company's incremental borrowing rate at the beginning of each lease. Cash paid for amounts included in the measurement of operating lease liabilities was $2,220 and $1,139 for the six months ended June 30, 2024 and 2023, respectively.