ENANTA PHARMACEUTICALS INC Leases Disclosure

12. Leases

The Company has two real estate leases for properties located in Watertown, Massachusetts. The first lease, for office and laboratory space at 4 Kingsbury Avenue and the second lease, is for office space located at 400 Talcott Avenue.

Lease payments for the Company's real estate leases include fixed lease payments that escalate over the terms of the leases and require the Company to pay certain operating expenses based on actual costs incurred. Operating expenses that are not fixed in nature are expensed in the period incurred and included in variable lease costs. The leases do not include any restrictions or covenants that had to be accounted for under the lease guidance.

In May 2022, the Company entered into its lease agreement for 4 Kingsbury Avenue with its existing landlord, adjacent to its 400 Talcott Avenue premises. Construction of the facility shell was completed by the landlord and the Company gained access to the building to construct tenant improvements during the three months ended March 31, 2024. The estimated minimum lease payments for the 4 Kingsbury Avenue facility total $76,470 over the ten-year term. The lease also contains a tenant improvement allowance of $15,205. The Company recorded a right-of-use asset of $32,499 and lease liability of $31,939 upon commencement of the lease during the year ended September 30, 2024. The Company moved its lab operations from 500 Arsenal Street into the newly constructed 4 Kingsbury Avenue facility in November 2024.

In conjunction with the new lease agreement at 4 Kingsbury Avenue, the Company amended its 500 Arsenal Street lease to shorten the term of the lease from September 2027 to November 2024. The Company remeasured the lease term and remaining lease payments for the 500 Arsenal Street facility during the year ended September 30, 2024 when the Company gained access to the 4 Kingsbury Avenue facility. The Company recorded an adjustment to the right-of-use asset and lease liability for 500 Arsenal Street of $9,322 during the year ended September 30, 2024 and vacated the facility in November 2024.

The Company leases units of equipment over eighteen-month lease periods commencing upon shipment of each unit. The lease agreements contain options to terminate the leases early or to extend the leases for successive six-month periods, however these options were not included in the right-of-use assets and lease liability as they were not reasonably certain of being exercised. The equipment leases require the Company to pay for certain consumable and peripheral equipment supplies based on actual costs incurred. As these costs are not fixed in nature, they are expensed in the period incurred and included in variable lease costs.

As the Company’s leases do not provide an implicit rate, the Company utilized its incremental borrowing rate based on information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.

The Company is required to maintain security deposits of $92 in connection with the real estate lease of 400 Talcott Avenue, which is included in other long-term assets on the Company's consolidated balance sheets. In addition, the Company is required to maintain a letter of credit in connection with the real estate lease of 4 Kingsbury Avenue, collateralized by money market accounts of $3,360, which amounts are classified as long-term restricted cash on the consolidated balance sheets.