Instil Bio, Inc.TIL
Instil Bio, Inc. Leases Disclosure
Commitments and Contingencies
Leases
Company as a Lessee: Operating Lease Obligations
The Company currently leases office spaces and laboratory spaces located in Thousand Oaks, California, Dallas, Texas, and Alderley Park in the United Kingdom. The Company’s leased facilities have original lease terms ranging from 2 to 5 years that predominately require the Company to provide a security deposit, while certain leases provide the right for the Company to renew the lease upon the expiration of the initial lease term, and various leases have scheduled rent increases on an annual basis. The exercise of lease renewal options for the Company’s existing leases is at the Company’s sole discretion, and not included in the measurement of right-of-use asset or lease liability as they are not reasonably certain to be exercised. Certain leases have leasehold improvements and are being amortized over the shorter of the estimated useful life of the improvements or the remaining life of the lease. Such improvements incurred by the Company will revert to the landlord at the expiration of the lease and will be removed from Company’s consolidated balance sheets.
The Company’s lease costs consist of the following (in thousands):
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating lease cost | $ | 1,315 | $ | 2,185 | ||||
| Variable lease cost | 801 | 1,170 | ||||||
| Total lease cost | $ | 2,116 | $ | 3,355 | ||||
The following table summarizes cash flow information related to the Company’s lease obligations (in thousands):
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash paid for operating lease liabilities | $ | 2,279 | $ | 2,308 | ||||
The following table summarizes the Company’s lease assets and liabilities (in thousands):
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating lease right-of-use assets | $ | 934 | $ | 2,387 | ||||
| Current operating lease liabilities | $ | 1,682 | $ | 1,750 | ||||
| Non-current operating lease liabilities | $ | 1,017 | $ | 2,877 | ||||
The following table summarizes other supplemental information related to the Company’s lease obligations:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Weighted-average remaining lease term (in years) | 1.70 | 2.60 | ||||||
| Weighted-average discount rate | 6.75 | % | 6.75 | % | ||||
Future minimum lease payments under operating lease liabilities were (in thousands):
December 31, 2024 | |||||
| 2025 | $ | 1,817 | |||
| 2026 | 1,219 | ||||
| Total future lease payments | 3,036 | ||||
| Less: imputed interest | 337 | ||||
| Total lease liability balance | 2,699 | ||||
| Less: current portion of operating lease liabilities | 1,682 | ||||
| Total operating lease liabilities, non-current | $ | 1,017 | |||
During the years ended December 31, 2024 and 2023, the Company evaluated its remaining right-of-use assets for impairment, as the Plan (as defined below in Note 13) has resulted in a cessation of use for several locations. The Company determined these assets were impaired, and has recognized an impairment loss of $0.8 million and $7.2 million for the years ended December 31, 2024 and 2023, respectively, which are recorded in the line item “restructuring and impairment charges” in the consolidated statements of operations and comprehensive loss.
Company as a Lessor: Tarzana Facility Lease with AstraZeneca
On July 10, 2024, Complex Therapeutics LLC entered into a lease with AstraZeneca Pharmaceuticals LP (“Tenant”) (the “Lease”) pursuant to which the Tenant is leasing the Company’s facility located in Tarzana, California. The Lease has an initial term of approximately 15 years, beginning on July 10, 2024 and ending on July 31, 2039, with Tenant having two consecutive options to extend the term for a five-year period each and a one-time option to terminate the Lease on the tenth anniversary of the commencement of the Lease, which, if exercised, obligates Tenant to pay Complex Therapeutics LLC a termination fee. The initial base rent is $0.6 million per month ($7.5 million annually) and the base rent will escalate by 3% per annum. Tenant is also required to pay certain operating expenses and tax expenses as additional rent. There is rent abatement during the first year of the Lease such that Tenant will pay no rent or reduced rent during this period. Tenant also has a right of first offer to purchase the premises that are subject to the Lease.
The Lease is classified as an operating lease and revenue is recognized on a straight-line basis and will be recorded within the consolidated statements of operations and comprehensive loss in the line item “Other rental income” as this is not a part of the Company’s core operations. Rental income related to the operating lease was as follows (in thousands):
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Rental income | $ | 4,267 | $ | — | ||||
Approximate future straight-lined contractual lease income to be recognized under a non-cancelable operating lease in effect as of December 31, 2024, are as follows (in thousands):
| December 31, 2024 | |||||
| 2025 | $ | 8,968 | |||
| 2026 | 8,968 | ||||
| 2027 | 8,968 | ||||
| 2028 | 8,968 | ||||
| Thereafter | 94,910 | ||||
| Total | $ | 130,782 | |||
Legal Proceedings
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Company does not expect that the resolution of these matters will have a material adverse effect on its financial position, results of operations or cash flows.
Debt
In June 2022, the Company’s wholly owned subsidiary, Complex Therapeutics Mezzanine LLC, and the Company’s wholly owned subsidiary, Complex Therapeutics LLC, entered into a mortgage construction loan and mezzanine construction loan (together, the “Construction Loan Agreements”) secured by its Tarzana, California land and building. The initial principal amount of the Construction Loan Agreements was $52.1 million, with additional future principal of up to $32.9 million to fund ongoing construction costs. Construction had been completed, and on July 10, 2024, Complex Therapeutics LLC entered into the Lease. The Construction Loan Agreements were guaranteed by the Company and secured by the Property, and bears interest at the one-month Secured Overnight Financing Rate, plus 5.25% per annum. The Company discontinued capitalizing interest in June 2023 as the building was substantially complete at such time. During the year ended December 31, 2024, the Company refinanced the outstanding principal amount under the Construction Loan Agreements and treated it as a loan extinguishment for accounting purposes and recorded the $0.4 million of unamortized debt issuance costs associated with the Construction Loan Agreement as a loss on debt extinguishment recognized in other expense, net in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2024. On December 20, 2024, Complex Therapeutics LLC, entered into a Term Loan Agreement (the “Loan”) and related loan documents with Midland National Life Insurance Company (the “Lender”), pursuant to which Lender loaned Complex Therapeutics LLC a term loan in the principal amount of $85.6 million to refinance loans secured by the facility in Tarzana, California owned by Complex Therapeutics LLC. Substantially all of the Loan proceeds were used to repay in full the loans related to the construction and development of the Tarzana facility made pursuant to the Construction Loan Agreements. As of December 31, 2024, the outstanding principal amount under the Loan was $85.6 million and unamortized debt issuance costs were $1.4 million.
The Loan has a term of two years with a one-year extension option. The extension option is subject to certain conditions being met, including: (a) no potential default or event of default, (b) payment of a 0.35% extension fee and the costs and expenses of Lender incurred in connection with the extension, (c) replenishing of all reserve funds as reasonably determined by Lender, and (d) compliance with minimum debt yield and debt service coverage ratio requirements. The Loan bears interest at a fixed rate of 6.35% per annum, with interest-only payments during the term of the Loan and the principal balance due in full at maturity.
The Loan may be prepaid in whole but not in part. If the Loan is prepaid on or prior to the 12-month anniversary of the Closing Date, a prepayment fee is required (other than in connection with a casualty or condemnation event) to make Lender whole for the interest it would have otherwise earned on the Loan during the first 12 months. There is no prepayment fee due if the Loan is prepaid after the 12-month anniversary of the Closing Date.
The net carrying amount of the liability component of the debt was as follows (in thousands):
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Principal amount | $ | 85,600 | $ | 82,837 | ||||
| Unamortized debt issuance cost | (1,413) | (1,410) | ||||||
| Net carrying amount | $ | 84,187 | $ | 81,427 | ||||
The following table sets forth the interest expense recognized related to the debt (in thousands):
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Contractual interest expense | $ | 7,997 | $ | 4,214 | ||||
| Amortization of debt issuance cost | 995 | 995 | ||||||
| Total interest expense related to the Debt | $ | 8,992 | $ | 5,209 | ||||
Indemnifications
The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently has directors’ and officers’ insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid. No liability associated with such indemnifications was recorded as of December 31, 2024 and 2023.
Other Commitments
In the normal course of business, the Company enters into contracts and various purchase agreements commitments with third-party vendors for clinical research services, products and other services from third parties for operating purposes. These agreements generally provide for termination or cancellation, other than for costs already incurred. As of December 31, 2024 and 2023, the Company had $0.1 million and zero outstanding liabilities, respectively, in commitments for employee benefits as part of the Plan. As of December 31, 2024 and 2023, the Company had $1.9 million and $3.1 million, respectively, in commitments for contract terminations as part of the Plan. (see Note 13).
The Company entered into an agreement in 2023 with a third-party collaborator related to the development of the Company’s CoStAR-TIL technology. Milestone payments of $2.6 million and $0.3 million were made during the year ended December 31, 2024 and 2023, respectively, and were recorded within research and development expense in the consolidated statements of operations and comprehensive lossAbout Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.