Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

16.Income Taxes

The components of loss before income taxes are as follows (in thousands):

	Year Ended			Year Ended
	December 31,			December 31,
	2023			2022
U.S. operations	$	(70,812	)	$	(102,354	)
Non-U.S. operations		100			100
Loss before income taxes	$	(70,712	)	$	(102,254	)

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:

	December 31,				December 31,
	2023				2022
Federal statutory income tax rate		21.0		%		21.0		%
State income taxes, net of federal benefit		7.5				5.8
Non-U.S. income tax rate differential		—				—
Change in fair value of derivative		—				—
Change in federal tax rate		—				—
Research and development tax credits		1.3				1.0
Permanent items		(0.5	)			(1.5	)
Changes in valuation allowance		(30.4	)			(25.5	)
Other, net		1.0				(0.8	)
Effective income tax rate		(0.1	)	%		—		%

The significant components of deferred income taxes are as follows (in thousands):

	December 31,		December 31,
	2023		2022
Deferred tax assets:
Net operating loss carryforwards	$	82,599	$	88,584
Capitalized R&D		23,652		12,226
Deferred revenue		16,196		4,033
Lease liability		1,635		1,793
Stock-based compensation		11,720		9,461
Tax credits		8,473		6,916
Other		3,515		3,433
Total deferred tax assets		147,790		126,446
Deferred tax liabilities:
Right-of-use assets		1,361		1,650
Total deferred tax liabilities		1,361		1,650
Deferred tax assets, net		146,429		124,796
Valuation allowance		146,429		124,796
Total deferred tax liability	$	—	$	—

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to amortize them over five or fifteen years pursuant to IRC Section 174. During 2023, the Company capitalized $57.2 million of research and development expenditures.

The valuation allowance generally reflects limitations on the Company’s ability to use the tax attributes and reduces the value of such attributes to the more-likely-than-not realizable amount. Management assessed the available positive and negative evidence to estimate if sufficient taxable income will be generated to use the existing net deferred tax assets. Based on a weighting of the objectively verifiable negative evidence in the form of cumulative operating losses over the three-year period ended December 31, 2020, management believes that it is not more likely than not that the deferred tax assets will be realized and, accordingly, a full valuation allowance has been established. The valuation allowance increased $21.6 million and $26.1 million for the years ended December 31, 2023 and 2022, respectively, with such increases attributed to the re-measurement of the net deferred tax assets at the year-end dates.

The Company has tax net operating loss and tax credit carry forwards in its individual tax jurisdictions. Including approximately $49.3 million related to our 2018 acquisition of Icon Bioscience, Inc. at December 31, 2023, the Company had U.S. federal net operating loss carry forwards of approximately $296.5 million. The net operating losses consist of $151.8 million, which expire at various dates between calendar years 2023 and 2039. The utilization of certain of these loss and tax credit carry forwards may be limited by Sections 382 and 383 of the Internal Revenue Code as a result of historical or future changes in the Company’s ownership. At December 31, 2023, the Company had state net operating loss carry forwards of approximately $254.7 million, which expire between 2033 and 2040, as well as U.S. federal and state research and development tax credit carry forwards of approximately $8.9 million, which expire at various dates between calendar years 2023 and 2040. In addition, at December 31, 2023, the Company had net operating loss carry forwards in the UK of £20.9 million (approximately $25.3 million), which are not subject to any expiration dates.

The Company’s U.S. federal income tax returns for calendar years 2014 through 2022 remain subject to examination by the Internal Revenue Service. The Company’s UK tax returns for fiscal years 2006 through 2021 remain subject to examination.

Through December 31, 2023, the Company had no unrecognized tax benefits in its consolidated statements of comprehensive loss and no unrecognized tax benefits in its consolidated balance sheets as of December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, the Company had no accrued penalties or interest related to uncertain tax positions.