Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

(10) Income Taxes

        Differences between the actual tax provision (benefit) and the tax provision (benefit) computed using the United States federal income tax rate is as follows:

	Years ended December 31,
	2011			2010			2009
	(in thousands)
Provision (benefit) at statutory rate	$	(16,109	)	$	(12,739	)	$	26,890
State taxes, net of federal benefit		(2,379	)		(1,967	)		5,576
State tax rate change		84			196			2,129
State net operating loss expiration		2,867			3,820			1,292
Stock-based compensation		373			791			2,251
Tax credits		(1,537	)		(1,686	)		(1,886	)
Other		259			(78	)		96
(Decrease) increase in valuation allowance		16,442			11,663			(36,348	)
Income tax provision (benefit)	$	—		$	—		$	—

        The effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31 are presented below:

	2011			2010
	(in thousands)
Deferred tax assets:
Federal and state net operating loss carryforwards	$	123,463		$	106,585
Federal and state research and experimentation credits		16,796			15,250
Deferred revenue		—			2,652
Depreciation and amortization		2,776			2,769
Deferred compensation		5,077			4,641
Other		667			441
Deferred tax assets		148,779			132,338
Less valuation allowance		(148,779	)		(132,338	)
Net deferred tax assets	$	—		$	—

        The total valuation allowance increased by approximately $16.4 million and $11.7 million in the years ended December 31, 2011 and 2010, respectively, and decreased by approximately $36.3 million in the year ended December 31, 2009.

        The Company has established valuation allowances against its deferred tax assets because management believes that, after considering all of the available objective evidence, both historical and prospective, the realization of the deferred tax assets does not meet the "more likely than not" criteria. The Company evaluates the need for a valuation allowance on a quarterly basis.

        For tax years through 2011 the Company performed analyses to determine if there were changes in ownership, as defined by Section 382 of the Internal Revenue Code that would limit its ability to utilize certain net operating loss and tax credit carryforwards. The Company determined that it experienced an ownership change, as defined by Section 382, in connection with its acquisition of Principia Associates, Inc. on September 20, 2002, but did not experience a change in ownership upon the effectiveness of the Company's IPO, or any other equity offerings to date. As a result, the utilization of the Company's federal tax net operating loss carryforwards generated prior to the ownership change is limited. As of December 31, 2011, the Company has net operating loss carryforwards for U.S. federal tax purposes of approximately $339.0 million, after excluding net operating losses that have expired unused as a result of Section 382 limitations, with the remainder expiring in varying amounts through 2031 unless utilized. At December 31, 2011, the Company has state net operating loss carryforwards of approximately $155.2 million, which will expire through 2031 unless utilized. The utilization of these net operating loss carryforwards may be further limited if the Company experiences future ownership changes as defined in Section 382 of the Internal Revenue Code. Approximately $53.2 million of state net operating loss carryforwards expired in 2011.

        At December 31, 2011, the Company had approximately $13.2 million and $5.5 million, respectively, in federal and state research and development credits which expire through 2031 and 2026, respectively.

        The Company is currently open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions for the tax years ended 2008 through 2011. Carryforward tax attributes generated in years past may still be adjusted upon future examination if they have or will be used in a future period. The Company is currently not under examination by the Internal Revenue Service or any other jurisdictions for any tax years.

        The Company does not consider any of its tax positions to be uncertain and accordingly there are no tax reserves for the years ended December 31, 2011, 2010, and 2009. The Company will recognize interest expense and penalties related to uncertain tax positions in income tax expense.