10. Restructuring, Impairment and Costs of Suspended Programs

Severance and Benefit Expense

Employees affected by the reduction in force under the 2025 Restructuring are entitled to receive severance payments and certain Company funded benefits. The restructuring charges are recorded at fair value.

With respect to the reduction in force announced in January 2025, the Company recognized severance and benefit expense in full for employees who had no requirements for future service when the reduction in force was approved by the Board. The Company recognized severance and benefit expense for employees who were required to render services to receive their severance and benefits ratably over the service period. The service period began on the communication date in January 2025 and was completed for most employees by April 1, 2025. The Company recognized $4.0 million in total severance and benefit expense during six months ended June 30, 2025, which was paid in April 2025. No severance and benefit expense for the reduction in force announced in January 2025 was recognized in the three months ended June 30, 2025.

With respect to the reduction in force announced in March 2025, the Company recognized $66,000 and $12.6 million in severance and benefit expense during the three and six months ended June 30, 2025, of which $4.9 million was accrued in accrued restructuring costs on the condensed balance sheet as of June 30, 2025. The Company recognizes severance and benefits ratably over the service period for remaining employees who are required to render services beyond the minimum retention period to receive their severance and benefits. For the remaining employees, the severance and benefit expense was recognized as of the communication date. The service period began on the communication date in March 2025 and is expected to be completed for all employees by November 2025. In the second half of 2025, the Company expects to recognize an additional $0.9 million for severance and benefit expense for the reduction in force announced in March 2025.

Impairment of Long-Lived Assets

During the six months ended June 30, 2025, the Company’s decision in January 2025 to suspend the development of various programs was a triggering event that indicated the carrying value of long-lived assets, including its property and equipment, may not be recoverable. As part of its impairment analysis, the Company first assessed which long-lived assets have identifiable cash flows that are largely independent of the cash flows of other groups of assets and concluded that each class of long-lived assets represents an individual asset group, with the exception of leasehold improvements and furniture and fixtures which were determined to be in one asset group with the right-of-use asset for the Company's facility operating lease.

The Company concluded that all of its long-lived assets met the definition of “held for sale” as of June 30, 2025, and impaired the carrying amount to their fair value of zero, with the exception of $0.5 million of assets that it expects to sell in the third quarter (see Note 4). As a result of this analysis, the Company recorded an impairment charge for its remaining long-lived assets of $2.2 million and $10.2 million, in restructuring, impairment and costs of suspended programs in the condensed statement of operations for the three and six months ended June 30, 2025.

Contract Termination and Other Costs

Certain of the Company’s contracts primarily with contract development and manufacturing organizations include penalties for early termination of the contract. The Company also paid a penalty of $35.8 million in connection with the termination and assignment of the San Carlos lease (see Note 5). In connection with the 2025 Restructuring, the Company recorded $34.9 million and $56.6 million in contract termination and other restructuring costs during the three and six months ended June 30, 2025. Of these costs, $50.9 million was paid as of June 30, 2025, and $4.7 million was recorded as a liability as of June 30, 2025 in accrued restructuring costs on the condensed balance sheet. The Company will remeasure the liability to fair value as management’s estimates change until settlement.

As of the issuance date of these condensed financial statements, there is uncertainty regarding the timing of completion of all exit and disposal activities in connection with the 2025 Restructuring. The Company’s management targets to complete the activities by the end of 2025.