Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company has reported pretax operating losses for all periods presented. The Company has not reflected any benefit for corresponding tax net operating loss carryforwards in the accompanying consolidated financial statements. The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

The components of the Company’s losses before income taxes were as follows (in thousands):

	Year Ended December 31,
	2023		2022		2021
Domestic	$	(142,348)	$	(161,813)	$	(120,858)
Foreign	(27)		(854)		523
Total	$	(142,375)	$	(162,667)	$	(120,335)

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

	Year Ended December 31,
	2023		2022		2021
U.S. federal tax at statutory rate	21.0	%	21.0	%	21.0	%
Foreign tax rate differential	—		0.1		—
State, net of federal benefit	0.6		—		—
Stock-based compensation (recovery)	(1.2)		(1.3)		1.3
Change in valuation allowance	(22.8)		(19.9)		(21.8)
Other	2.4		0.1		(0.5)
Total	—	%	—	%	—	%

The components of the net deferred tax assets are as follows (in thousands):

	December 31,
	2023		2022
Deferred tax assets:
Net operating loss carryforwards	$	85,315	$	77,563
Capitalized R&D Section 174	44,456		31,964
Stock-based compensation	6,865		4,739
Research and development credit	7,156		2,918
Lease liability	—		1,132
Other temporary differences	282		435
Total gross deferred tax assets	144,074		118,751
Deferred tax liabilities:
Depreciation and amortization	(521)		(779)
ROU asset	—		(440)
Non-qualified stock options with 83(b) election	—		(15)
Total gross deferred tax liabilities	(521)		(1,234)
Net deferred tax assets before valuation allowance	143,553		117,517
Deferred tax asset valuation allowance	(143,553)		(117,517)
Net deferred tax assets	$	—	$	—

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not more-likely-than-not to be realized and, accordingly, has provided a valuation allowance.

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $26.0 million and $22.8 million during the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, the Company had approximately $382.3 million in federal net operating loss carryforwards to reduce future taxable income. Of this amount, $329.8 million was generated after December 31, 2017 and can be carried forward indefinitely. The federal net operating loss carryforwards generated prior to January 1, 2018 are subject to a 20-year carryforward period and will begin to expire after 2032. The utilization of the federal net operating loss carryforwards generated in fiscal year 2018 and onwards is limited to 80% of the federal taxable income. The Company also had approximately $592.5 million in state net operating loss carryforwards to reduce future taxable income, which will begin to expire after 2028, if not utilized.

In accordance with the 2017 Tax Act, research and experimental, or R&E, expenses under Internal Revenue Code Section 174 are capitalized beginning in 2022. R&E expenses are required to be amortized over a period of five years for domestic expenses and 15 years for foreign expenses.

The Company had approximately $10.3 million and $3.1 million in federal R&D tax credits for the years ended December 31, 2023 and 2022, respectively. In addition, the Company had approximately $5.7 million and $4.0 million in state R&D tax credits for the years ended December 31, 2023 and 2022, respectively. The federal research credits will begin to expire in the years 2028 through 2035, if not utilized. The state R&D credits have no expiration date and can be carried forward indefinitely.

The Company had no foreign net operating loss carryforwards for each of the years ended December 31, 2023 and 2022.

Utilization of the Company’s net operating losses and R&D tax credits may be subject to a substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and R&D tax credits before utilization. The Company has not completed an ownership change analysis pursuant to IRC Section

382 as of December 31, 2023. If ownership changes within the meaning of IRC Section 382 are identified as having occurred, the amount of remaining net operating loss carryforwards available to offset future taxable income and income tax expense in future years may be significantly restricted.

A reconciliation of the Company’s unrecognized tax benefits is as follows (in thousands):

	December 31,
	2023		2022		2021
Balance at beginning of year	$	38,697	$	25,870	$	10,346
Additions based on tax positions related to prior year	1,699		49		4,447
Additions based on tax positions related to current year	13,820		12,778		11,077
Balance at end of year	$	54,216	$	38,697	$	25,870

The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized. The Company has elected to include interest and penalties as a component of tax expense. During the years ended December 31, 2023 and 2022, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months.

The Company files U.S. federal, state and foreign income tax returns with varying statutes of limitations. The tax years from inception in 2008 to December 31, 2023 remain subject to examination.