Commitments and Contingencies Lease Obligations In May 2018, the Company entered into an amendment to its operating lease for its former corporate headquarters in South San Francisco (the "Headquarters Lease Amendment") to relocate and expand its headquarters to 148,020 rentable square feet in a building in South San Francisco, California (the "New Premises"). The Headquarters Lease Amendment has a contractual term of ten years from the legal commencement date, which was April 1, 2019 when the building was ready for occupancy. For accounting purposes, the lease commencement date was determined to be August 1, 2018, which was the date at which the Company was deemed to have obtained control over the property. The Company has an option to extend the lease term for a period of ten years by giving the landlord written notice of the election to exercise the option at least nine months, but not more than twelve months, prior to the expiration of the Headquarters Lease Amendment lease term. The Company did not believe this renewal was reasonably certain at lease inception. The Headquarters Lease Amendment provides for monthly base rent amounts escalating over the term of the lease. In addition, the Headquarters Lease Amendment provided a tenant improvement allowance ("TIA") of up to $25.9 million, which was fully utilized, of which $4.4 million will be repaid to the landlord in the form of additional monthly rent. This is recorded as leasehold improvement assets and an offset to the lease ROU asset on the condensed consolidated balance sheet as of June 30, 2019. The Company is also required to pay the operating expenses for the New Premises, such as taxes and insurance, which are treated as variable lease payments. As of June 30, 2019, the carrying value of the ROU asset was $34.6 million. The related current and non-current liabilities as of June 30, 2019 were $2.0 million and $70.9 million, respectively. The current and non-current lease liabilities are included in Other current liabilities and Operating lease liability, less current portion, respectively, in the Condensed Consolidated Balance Sheet. Management was required to exercise judgment in applying the requirements of ASC 842, including the determination as to whether certain contracts contain a lease and for the Headquarters Lease Amendment, the discount rate used to determine the measurement of the lease liability. The discount rate used was 9.0%, which was managements estimate of the Companys incremental borrowing rate since the rate implicit in the lease was not known. To estimate the Companys incremental borrowing rate, management considered observable debt yields of comparable market instruments, as well as benchmarks within the Headquarters Lease Amendment that may be indicative of the rate implicit in the lease. Total operating lease costs, including variable and short term lease costs, were $2.5 million and $4.8 million for the three and six months ended June 30, 2019, respectively. Rent expense excluding amortization of leasehold improvements was $0.6 million and $1.3 million for the three and six months ended June 30, 2018, respectively. Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date. As of June 30, 2019, the weighted average remaining lease term is 9.8 years and the weighted average discount rate used to determine the operating lease liability was 9.0%. Cash paid for amounts included in the measurement of lease liabilities for the six months ended June 30, 2019 was $1.9 million and was included in Net cash used in operating activities in our condensed consolidated statements of cash flows. The following table reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded in the condensed consolidated balance sheet as of June 30, 2019 (in thousands): Year Ended December 31: 2019 (six months) $ 3,642 2020 9,767 2021 10,386 2022 10,726 2023 11,078 2024 and later 65,494 Total undiscounted lease payments 111,093 Present value adjustment (38,217) Net operating lease liabilities $ 72,876 In October 2018, the Company entered into a sublease agreement ("Sublease Agreement") to sublease approximately 36,835 rentable square feet of space in its New Premises. The Sublease Agreement has a term of five years from the commencement date of April 12, 2019 and provides for the Company to receive monthly base rent amounts escalating over the term of the lease. The Company also passes through a portion of the operating expenses for the New Premises to the sublessee, such as taxes and insurance, which are treated as variable sublease income. Total sublease income for the three and six months ended June 30, 2019, including rent and variable costs, was $0.8 million. There was no sublease income for the three and six months ended June 30, 2018. The following table details the future undiscounted cash inflows relating to the Company's sublease as of June 30, 2019 (in thousands): Year Ended December 31: 2019 (six months) $ 1,392 2020 2,842 2021 2,925 2022 3,009 2023 3,096 2024 and later 876 Total undiscounted sublease receipts $ 14,140 Indemnification In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to vendors, lessors, business partners, board members, officers, and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company, negligence or willful misconduct of the Company, violations of law by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Companys balance sheet, statements of comprehensive loss, or statements of cash flows. Commitments Effective September 2017, the Company entered into a Development and Manufacturing Services Agreement as amended (DMSA) with Lonza Sales AG (Lonza) for the development and manufacture of biologic products. Under the DMSA, the Company will execute purchase orders based on project plans authorizing Lonza to provide development and manufacturing services with respect to certain of the Company's antibody and enzyme products, and will pay for the services provided and batches delivered in accordance with the DMSA and project plan. Unless earlier terminated, the DMSA will expire on September 6, 2022. As of June 30, 2019 and December 31, 2018, the Company had non-cancellable purchase orders for biological product development and manufacturing costs totaling $25.1 million and $24.7 million respectively. The activities under these purchase orders are expected to be completed by November 2024. As of June 30, 2019 and December 31, 2018, the Company had total non-refundable purchase commitments of $10.3 million and $14.0 million, respectively, under the DMSA. During the three months ended June 30, 2019 and 2018, the Company incurred costs of $3.1 million and $1.1 million, respectively, and made payments of $3.9 million and $0.6 million, respectively, for the development and manufacturing services rendered under the DMSA. During the six months ended June 30, 2019 and 2018, the Company incurred costs of $6.7 million and $1.2 million, respectively, and made payments of $6.5 million and $0.7 million, respectively, for the development and manufacturing services rendered under the DMSA.