15. Commitments and Contingencies Leases The Company leases approximately 65,167 square feet of office and lab space in Cambridge, Massachusetts under a lease which was most recently amended in April 2018, collectively the Cambridge Lease. Under the Third Amendment to the Cambridge Lease, or the Third Amendment, executed in July 2016, total monthly lease payments under the initial base rent were approximately $242,000 and are subject to annual rent escalations. In addition to such annual rent escalations, base rent payments for a portion of said premises commenced on January 1, 2017 in the monthly amount of approximately $22,000. The Fourth Amendment to the Cambridge Lease, executed in May 2017, provided additional storage space to the Company and did not impact rent payments. In April 2018, the Company entered into a Fifth Amendment to the Cambridge Lease, or the Fifth Amendment, for an additional 19,805 square feet of office space on the 12 th floor. Monthly lease payments for the existing 45,362 square feet of office and lab space, under the Third Amendment, remain unchanged. The new space leased by the Company was delivered in September 2018 and additional monthly lease payments of approximately $135,000 commenced in February 2019 and are subject to annual rent escalations, commencing in September 2019. Additionally, as a result of the Merger, the Company now has a lease for 27,300 square feet of office space in Boston, Massachusetts, or the Boston Lease, which expires in February 2023. The total monthly lease payments under the base rent are approximately $136,000 and are subject to annual rent escalations. The term of the Cambridge Lease with respect to the office space expires on September 11, 2026, with one five year extension option available. The term of the Cambridge Lease with respect to the lab space expires on November 30, 2021, with an extension option for one additional period of two years. The term of the Boston Lease office space expires on February 28, 2023, with an extension option for one additional five year extension option available. The renewal options in the Companys real estate leases were not included in the calculation of the operating lease assets and operating lease liabilities as the renewal is not reasonably certain. The lease agreements do not contain residual value guarantees. Operating lease costs for the three and six months ended June 30, 2019 were $1.6 million and $3.3 million, respectively, and cash paid for amounts included in the measurement of operating lease liabilities for the three and six months ended June 30, 2019 were $1.7 million and $3.4 million, respectively. We have not entered into any material short-term leases or financing leases as of June 30, 2019. The total security deposit in connection with the Cambridge Lease is $1.6 million as of June 30, 2019. Additionally, the Company recorded $0.8 million for the security deposit under the Boston Lease. Both the Cambridge Lease and the Boston Lease have their security deposits in the form of a letter of credit, all of which are included in prepaid expenses and other current assets and in other assets in the Companys consolidated balance sheets as of June 30, 2019. As of June 30, 2019, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter are as follows: Operating Leases (in thousands) Remaining 2019 $ 3,026 2020 7,008 2021 7,064 2022 6,735 2023 5,347 Thereafter 13,934 Total $ 43,114 In arriving at the operating lease liabilities as of June 30, 2019, we applied incremental borrowing rates ranging from 5.91% to 6.94% over remaining lease terms ranging from 2.91 years to 7.69 years. As of June 30, 2019, the following represents the difference between the remaining undiscounted minimum rental commitments under non-cancelable leases and the operating lease liabilities: Operating Leases (in thousands) Total Undiscounted minimum rental commitments $ 43,114 Present value adjustment using incremental borrowing rate (8,265 ) Operating lease liabilities $ 34,849 At December 31, 2018, the Companys future minimum payments required under these leases are as follows: Operating Lease (in thousands) 2019 $ 6,777 2020 7,008 2021 7,064 2022 6,735 2023 5,347 Thereafter 13,934 Total $ 46,865 Manufacturing Agreements As part of the Merger, the Company retained Keryxs commercial supply agreements with BioVectra and Siegfried Evionnaz SA, or Siegfried, to supply commercial drug substance for Auryxia. Pursuant to the BioVectra Manufacture and Supply Agreement and the Product Manufacture and Supply and Facility Construction Agreement, collectively the BioVectra Agreement, the Company has agreed to purchase a minimum quantity of drug substance of Auryxia at predetermined prices. The price per kilogram will decrease with an increase in quantity above the minimum purchase quantity. In addition, the BioVectra Agreement contained contingent milestone payments for capital developments in connection with construction of an expansion of the site of the BioVectra production facility for the manufacture of drug substance for Auryxia. These milestone payments were achieved by BioVectra and fully recorded prior to the Merger. These milestone payments are recorded in other assets and amortized into drug substance as inventory is released to the Company. The term of the BioVectra Agreement expires in late 2026, after which, it automatically renews for specified terms until terminated. The Company may terminate the BioVectra Agreement prior to the expiration of the contract term, which could result in early termination fee. As of June 30, 2019, the Company is required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $141.0 million through the end of the contract term. As part of purchase accounting, the Company identified an executory contract in the BioVectra Agreement, which includes future firm purchase commitments. This executory contract was deemed to have an off-market element related to the amount of purchase commitments that exceed the current forecast. As a result, the Company recorded a liability of $29.5 million in purchase accounting, as of the acquisition date for the preliminary fair value of the off-market element. Through June 30, 2019, the Company recorded $0.4 million in accretion expense related to the present value discount associated with this liability. Pursuant to the Siegfried Master Manufacturing Services and Supply Agreement, or the Siegfried Agreement, the Company has agreed to purchase a minimum quantity of drug substance of Auryxia at predetermined prices. The price per kilogram will decrease with an increase in quantity above the minimum purchase quantity. The term of the Siegfried Agreement expires on December 31, 2021, after which, it automatically renews for one-year terms until terminated. The Siegfried Agreement provides for certain termination rights prior to December 31, 2021 for the Company. As of June 30, 2019, the Company is required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $75.3 million through the year ending December 31, 2021. Other Third Party Contracts Under the Companys agreement with IQVIA, formerly known as Quintiles IMS, to provide contract research organization services for the PRO 2 TECT and INNO 2 VATE programs, the total remaining contract costs as of June 30, 2019 were approximately $111.8 million. The estimated period of substantive performance for the committed work with IQVIA is through the end of 2020. The Company also contracts with various other organizations to conduct research and development activities with remaining contract costs to the Company of approximately $55.5 million at June 30, 2019. The scope of the services under these research and development contracts can be modified and the contracts cancelled by the Company upon written notice. In some instances, the contracts may be cancelled by the third party upon written notice.