Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes [Abstract]

Income Taxes

12.Income Taxes

No provision for federal or state income taxes was recorded during the years ended December 31, 2024, 2023 and 2022, as the Company incurred operating losses and maintains a full valuation allowance against its net deferred tax assets.

A reconciliation of income tax benefit computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is as follows:

	For the Years Ended December 31,
	2024			2023			2022
U.S. federal tax at statutory rate		21.0	%		21.0	%		21.0	%
Foreign rate differential		(12.5	%)		(17.3	%)		(16.9	%)
Change in state tax apportionment		(0.3	%)		1.4	%		(0.1	%)
Stock compensation		(1.3	)%		0.1	%		0.1	%
Return to provision		1.5	%		2.0	%		(2.7	)%
Valuation allowance		(8.0	)%		(7.0	)%		6.3	%
Tax credits		0.2	%		0.0	%		(6.7	%)
Other		(0.6	%)		(0.2	%)		(1.0	%)
Effective tax rate		—	%		—	%		—	%

On October 4, 2023, the Governor of Massachusetts signed into law a bill that included the adoption of a single sales apportionment factor effective on January 1, 2025. As required under ASC 740, the Company has accounted for the deferred tax impacts of this tax law change in the period the tax law was enacted, which has the impact of reducing its state deferred tax assets. The impact of the tax law change is offset by a change in valuation allowance.

Intellectual property rights in different jurisdictions are reflected in the Company’s effective tax rate.

The significant components of the Company’s deferred income tax assets and liabilities after applying the enacted corporate tax rates are as follows:

	As of December 31,
	2024			2023			2022
Deferred income tax assets (liabilities)
R&D credits	$	21,410		$	20,984		$	20,984
Net operating losses and credit carryforwards		67,591			45,313			33,718
Capitalized research and development costs		14,787			17,205			19,085
Stock-based compensation		29,041			28,499			19,781
Warrants		8,713			9,283			8,390
Intangible assets		(5,697	)		(5,787	)		(5,424	)
Other		(7,829	)		(8,086	)		(6,332	)
Valuation allowance		(129,077	)		(108,472	)		(91,263	)
Net deferred income tax asset (liability)	$	(1,061	)	$	(1,061	)	$	(1,061	)

As of December 31, 2024, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $303.6 million and $78.2 million, respectively. The state NOL begins to expire in 2026. Additionally, $303.6 million of the federal NOL can be carried forward indefinitely. The Company has federal R&D credits of $21.4 million which will begin to expire in 2038.

As required by ASC 740, Income Taxes, the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of NOL carryforwards and capitalized research and development costs. As a result of the fact that the Company has incurred tax losses from inception, management has determined that it is more likely than not that the Company will not recognize the benefits of federal and state net deferred tax assets and, as a result, a full valuation allowance has been established against its net deferred tax assets as of December 31, 2024, 2023 and 2022. The Company has offset certain deferred tax liabilities with deferred tax assets that are expected to generate offsetting deductions within the same period. During the years ended December 31, 2024, 2023 and 2022 the valuation allowance increased by $20.6 million, $17.2 million, and $2.1 million. Realization of deferred tax assets is dependent upon the generation of future taxable income.

Under Internal Revenue Code Section 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. The Company has completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company became a “loss corporation” as defined in Section 382. The Company experienced multiple ownership changes occurring in 2005, 2007, 2015, and 2018. The ownership change has and will continue to subject our pre-ownership change net operating loss carryforwards to an annual limitation, which will significantly restrict our ability to use them to offset taxable income in periods following the ownership change. In general, the annual use limitation equals the aggregate value of our stock at the time of the ownership change multiplied by a specified tax-exempt interest rate. As a result of the merger on January 4, 2018, the Company is limited to an approximate $1.7 million annual limitation on our ability to utilize the NOL’s and R&D Credits prior to the ownership change. Due to this limitation, approximately $91.2 million of the $127.1 million pre-merger Federal NOL will expire unutilized as the cumulative limitation amount over a 20-year carryforward period is $35.8 million. Additionally, $4.9 million of federal R&D credits will expire unutilized. As a result, the Company has reduced its deferred tax assets related to the Federal NOL and federal R&D credits by an aggregate of $4.9 million which is offset by the corresponding decrease in the valuation allowance. In conjunction with the acquisition of Renovacor, the Company acquired Renovacor’s federal NOL’s of $46.4 million. The Company has completed a study to assess whether an ownership change has occurred as a result of the transaction. The Company experienced ownership changes occurring in 2021 and 2022. As a result of the ownership changes, the Company is limited on our ability to utilize our Renovacor NOL’s. As a result of the Company’s study, any limitation under IRC Sec. 382 would not result in NOLs expiring unused.

The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which the Company operates or does business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2024 and 2023, the Company has not recorded any uncertain tax positions in its financial statements.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statements of operations. As of December 31, 2024 and 2023, no accrued interest or penalties are included on the related tax liability line in the Consolidated Balance Sheets.