Kodiak Sciences Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 98 Ursu r s Facility i In August 2020, the Company and its wholly owned subs u idiary Kodiak Sciences GmbH entered into a manufact f ur t ing agreement with Lonza Ltd (“Lonza”) for the clinical and commercial suppl u y of the Company’s antibody biopolymer conjugate drug r subs u tance which included a custom-built manufac f turing facility. The manufac f turing agreement has an initial term of 8 years, and the Company has the right to extend the term up to a total of 16 years. The Company and Lonza each have the ability to terminate this agreement upon the occurrence of certain events. In April 2021, the agreement was amended to provide for greater manufac f turing flexibility, to define a comprehensive mandate as an antibody biopolymer conjugates manufact f ur t ing facility to be used for the Company’s antibody biopolymer conjugates pipeline, at clinical as well as commercial scales, across a broad capacity range under the tight quality controls required for ophthalmology and retinal medicines, and to allow for future process and equipment changes as needed. The Company concluded that this agreement contained an embedded lease as the custom-built manufac f turing suite would be dedicated for the Company’s use. On January 31, 2023, the custom-built manufact f ur t ing suite was commissioned as a cGMP facility. The consideration was allocated to lease and non-lease components as this agreement contained a signific f ant service component (manufac f turing services). Under ASC 842, the Company classified the lease portion as an operating lease and recorded a right-of-use asset and lease liabi a lity on the lease commencement date. The Company determined that the renewal options were not reasonabl a y certain at lease inception. Fixed assets of $81.7 million, in leasehold improvements and machinery r and equipment, were placed in service and capitalized as of January 31, 2023. In October 2023, payment was made for the remaining $26.8 million of these fixed assets. The maturities of the operating lease liabi a lities, including the Ursus Facility lease, as of December 31, 2023 were as follows (in thousands): Year ending December 31, As of December 31, 2023 2024 $ 14,788 2025 16,318 2026 16,567 2027 9,838 2028 8,636 Thereafter 38,807 Total undiscounted lease payments 104,954 Less: imputed interest (23,322) Total operating lease liabi a lities $ 81,632 The minimum lease payments above do not include any related common area maintenance charges or real estate taxes. The operating lease expenses for the years ended December 31, 2023, 2022 and 2021 were $13.2 million, $12.8 million and $12.8 million, respectively. Variable lease expenses, including common area maintenance charges and real estate taxes, for the years ended December 31, 2023, 2022 and 2021 were $3.6 million, $3.1 million and $1.7 million, respectively. The weighted-average remaining lease terms and weighted-average discount rates were as follows: December 31, 2023 December 31, 2022 Weighted-average remaining lease term (in years) 7.5 8.4 Weighted-average discount rate 6.8% 6.8% Manufac f turing i Agreements The Company has entered into service and equipment purchase agreements in the normal course of business with various providers, pursuant to which such providers agreed to perform activities in connection with the manufact f ur t ing process of certain materials. These agreements, and any related amendments, state that planned activities and purchases that are included in the signed work orders are, in some cases, binding and, hence, obligate the Company to pay the full price of the work order upon satisfac f tory delivery r of products and services or obligate the Company to the binding amount regardless of whether such planned activities are in fact performed. Per the terms of the agreements, the Company has the option to cancel signed orders at any time upon written notice, which may or may not be subj u ect to payment of a cancellation fee. The level of cancellation fees may be dependent on the timing of the written notice in relation to the commencement date of the work, with the maximum cancellation amount dependent on the agreement or the work order.