Income taxes

12 Months Ended

Dec. 31, 2025

Income taxes

Income taxes

12. Income taxes

A reconciliation of the federal income tax rate to the Company's effective tax rate for the year ended December 31, 2025 is as follows (amounts in thousands):

	Year Ended
	December 31, 2025
	Amount			Percentage
Federal tax benefit at statutory rate	$	(44,603	)		21.0	%
State tax, net of federal benefit		—			—
Change in valuation allowance		46,139			(21.7	)
Nontaxable or nondeductible items
Share-based compensation		3,402			(1.6	)
Other nondeductible items		379			(0.2	)
Tax credits
Research and development credits		(5,345	)		2.5
Other tax credits
Other		28			—
	$	—			—	%

A reconciliation of the federal income tax rate to the Company’s effective tax rate for the year ended December 31, 2024 is as follows:

	Year Ended
	December 31, 2024
Federal tax benefit at statutory rate		21.0	%
State tax, net of federal benefit		0.5
Research and development credits		2.1
Share-based compensation		(0.7	)
Write-off of IPR&D		—
Change in valuation allowance		(22.8	)
Other		(0.1	)
		—	%

The components of the Company’s deferred taxes are as follows (in thousands):

	December 31,
	2025			2024
Deferred tax assets:
Net operating loss carryforwards	$	62,577		$	29,346
Research and development intangibles		67,842			62,188
Research and development credits		15,366			10,021
Share-based compensation		4,018			2,385
Deferred revenue		—			1,474
Accruals and reserves		2,432			1,236
Lease liability		810			1,026
Other		74			77
Gross deferred tax assets		153,119			107,753
Less: valuation allowance		(152,318	)		(106,720	)
Net deferred tax asset		801			1,033
Deferred tax liability
Depreciation		(176	)		(125	)
Right-of-use asset		(625	)		(908	)
Total deferred tax liabilities		(801	)		(1,033	)
Net deferred taxes	$	—		$	—

The Company had no income tax expense due to the operating losses utilization for the years ended December 31, 2025 and 2024. Management has evaluated the positive and negative evidence bearing upon the realizability of the Company’s net deferred tax assets and has determined that it is more likely than not that the Company will not recognize the benefits of the net deferred tax assets. As a result, the Company has recorded a full valuation allowance at December 31, 2025 and 2024. The valuation allowance increased by $45.6 million and $66.9 million in 2025 and 2024, respectively, due to capitalized IPR&D expense, increase in net operating loss carryforwards and research and development tax credits, and deductible accrued expenses.

As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the "change in valuation allowance" line of the rate reconciliation table above. The following table presents a reconciliation of the total change in the valuation allowance (in thousands):

	December 31,
	2025			2024
Beginning balance	$	(106,720	)	$	(39,827	)
Change charged to income tax expense		(45,598	)		(66,893	)
Ending balance	$	(152,318	)	$	(106,720	)

Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership, including a sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss and other attributes including research and development credit carry forwards which could be used annually to offset future taxable income. Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company is currently in the process of updating their Section 382 study through December 31, 2025 to determine if any additional ownership changes have occurred since the Morphimmune transaction on October 2, 2023. Any additional ownership changes could limit the Company's ability to utilize its net operating loss or research and development credit carryforwards and will be reflected in the carryforward amount once the Section 382 study is completed. The Company has not generated taxable income or a current tax liability and has not utilized its net operating loss or research and development credit carryforwards as of December 31, 2025.

The "One Big Beautiful Bill Act" (OBBBA) enacted on July 4, 2025, introduced notable changes to the U.S. Internal Revenue Code, including immediate expensing of domestic Section 174 costs. Section 174 costs are expenditures which represent research and development costs that are incident to the development or improvement of a product, process, formula, invention, computer software, or technique. As previously required under the Tax Cuts and Jobs Act, the Company capitalized research and development expenditures in the years ended December 31, 2022 through December 31, 2024. With the enactment of OBBBA, the Company began deducting domestic Section 174 costs in 2025.

As of December 31, 2025, the Company had $277.2 million of federal and $97.0 million of state net operating loss carryforwards. If not utilized, the federal and state net operating loss carryforwards expire starting in 2027. Included in the federal net operating loss carryforwards are $260.2 million of net operating losses generated from 2018 to 2025 that will not expire and are limited to offset 80% of the Company’s taxable income for years beginning after December 31, 2020. Certain federal and state net operating loss carryforwards expire at various dates through 2044. As of December 31, 2025, the Company had cumulative $15.3 million of federal and $0.2 million of state R&D tax credits. These tax credit carryforwards will expire at various dates through 2045.

A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows (in thousands):

	December 31,
	2025		2024
Beginning balance	$	56	$	37
Additions for tax positions taken in prior years		—		19
Ending balance	$	56	$	56

If the unrecognized tax benefits for uncertain tax positions as of December 31, 2025 are recognized, there will be no impact to the effective tax rate due to the valuation allowance. The Company recognizes interest and penalties related to the unrecognized tax benefits as a component of income tax expense. As of December 31, 2025, there were no material interest and penalties on uncertain tax benefits.

The Company filed income tax returns in the United States and multiple states. Carryforward attributes generated in all years since inception remain subject to adjustment. The Company is not currently under examination by the Internal Revenue Service or any other jurisdiction for these years.