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 1.9 years and 1.5 years as of September 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 (ROU 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 ROU asset and lease liability of $4,032. In the third quarter of 2024, the 2023 work order related to GMP manufacturing was amended to reduce the minimum monthly runs through the end of 2024 and the term of the agreement was extended for an additional 18 months through August 2026. The lease was remeasured, resulting in an increase in the ROU asset and lease liability of $6,189. 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.

The Company leases office and lab space which 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. In the third quarter of 2024, the Company extended the terms of its lab and office operating leases. The leases were remeasured, resulting in an increase in the ROU asset and lease liability of $3,133.

The weighted average discount rate for the Company’s operating leases is 11.3% and 9.5% as of September 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 $3,187 and $1,709 for the nine months ended September 30, 2024 and 2023, respectively.