Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

    The Company utilizes the liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is established against deferred tax assets when, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company's policy is to record interest and penalties on uncertain tax positions as income tax expense.

    Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A reconciliation of the statutory U.S. federal rate to the Company's effective tax rate is as follows:

	Years ended December 31,
	2022		2021		2020
Percent of pre-tax income:
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	7.3	%	8.1	%	14.8	%
Permanent items	1.8	%	0.7	%	0.2	%
Impact of state rate changes	—	%	(3.8)	%	0.1	%
Research and development credit	3.7	%	3.3	%	3.1	%
Change in valuation allowance	(33.8)	%	(29.3)	%	(34.8)	%
Effective income tax rate	—	%	—	%	4.4	%

The components of income tax benefit are as follows:

	Years ended December 31,
	2022		2021		2020
Current:
Federal	$	—	$	—	$	—
State	—		—		(3,695)
Deferred:
Federal	—		—		—
State	—		—		—
Income tax benefit	$	—	$	—	$	(3,695)

Significant components of the Company's deferred tax assets (liabilities) for 2022 and 2021 consist of the following:

	As of December 31,
	2022		2021
Deferred tax assets (liabilities)
License and technology payments	$	4,335	$	5,356
Share-based compensation	25,677		21,614
Capitalized R&D	27,527		—
Unrecognized losses from securities	65		—
Accrued expenses	483		320
Right-of-use asset	(335)		(430)
Lease obligation	340		444
Depreciation	(23)		1
Federal and state net operating loss carryforwards	190,163		165,401
Research and development credits	20,931		13,742
Other	35		20
Deferred income tax assets	269,198		206,468
Valuation allowance	(269,198)		(206,468)
Net deferred tax assets	$	—	$	—

The Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible.

The Company incurred tax losses in 2022 and 2021. The Company has carried forward its federal and state tax losses due to the inability of carryback claims. Federal NOLs incurred prior to 2018 will begin to expire in 2034 if not utilized. Post 2017 Federal NOLs have an unlimited life. The state NOLs are expected to begin to expire in 2025. Due to the Company's history of losses and lack of other positive evidence to support taxable income, the Company has recorded a valuation allowance against those remaining deferred tax assets that are not expected to be realized. In October 2022, the Company was approved to receive approximately $12.5 million through the State of New Jersey's Technology Business Tax Certificate Transfer Program (the "Program") which allows qualified technology and biotechnology businesses in New Jersey to sell unused amounts of NOLs and defined research and development tax credits. As of December 31, 2022, the Company has not received any funds from the Program. As of December 31, 2022, the Company has federal NOL carryforwards of approximately $658.2 million. Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, use of the Company’s federal

and state net operating loss and research and development income tax credit carryforwards may be limited in the event of a cumulative change in ownership of more than 50.0% within a three-year period. In October 2021, the Company experienced an ownership change as defined in IRC Section 382. The Company does not anticipate the limitations imposed by IRC Sections 382 and 383 to have a material impact on its ability to utilize net operating losses and credits in future years.

For the years ended December 31, 2022 and 2021, the Company recorded no benefit from income taxes. For the year ended December 31, 2020, the Company recorded an income tax benefit of $3.7 million primarily to reflect the settlements of local tax audits.

On March 27, 2020, in response to the COVID-19 pandemic, the U.S. Congress enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The CARES Act provides numerous tax provisions and other stimulus measures, including the immediate refund of minimum tax credits. In April 2021, the Company received the remaining balance, approximately $1.8 million, of its minimum tax credits refund.

With respect to the remaining deferred tax assets, except for the AMT credits previously discussed above, there was no change in the amount of assets realizable at December 31, 2022.

Pursuant to ASC 740-10, Accounting for Uncertainty in Income Taxes, the Company routinely evaluates the likelihood of success if challenged on income tax positions claimed on its income tax returns. During the year ended December 31, 2022, there was no change in the Company's uncertain tax liability.

The Company's position with respect to uncertain tax positions is set forth below:

Opening balance	$	6,723
Gross amount of increases in unrecognized tax benefits during the period - current year provisions	—
Gross amount of increases in unrecognized tax benefits during the period - prior year provisions	—
Gross amount of decreases in unrecognized tax benefits during the period - other	—
Decreases due to settlement with tax authorities during the period	—
Reduction of unrecognized tax benefits due to expiration of the state of limitations during the period	—
Closing Balance	$	6,723

The Company will continue to evaluate its ability to realize its deferred tax assets on a periodic basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of product candidates currently under development. Any additional changes to the valuation allowance recorded on deferred tax assets in the future would impact the Company’s income taxes.

The Company is currently subject to audit by the U.S. Internal Revenue Service, or IRS, for the years 2019 through 2021, and state tax jurisdictions for the years 2018 through 2021. However, the IRS or state tax authorities may still examine and adjust an NOL or R&D credit arising from a closed year to the extent it is utilized in a year that remains subject to audit. The Company’s previously filed income tax returns are not presently under audit by the IRS or state tax authorities.