Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXESDuring the years ended December 31, 2022, 2021, and 2020, the Company recorded no income tax benefits for the net operating losses incurred and research and development credits generated due to the uncertainty of realizing a benefit from those items. Additionally during the years ended December 31, 2022, 2021 and 2020, the Company recorded immaterial a tax provisions related to its Austrian subsidiary. Also during the year ended December 31, 2020, the Company recorded a U.S. tax provision related to local withholdings associated with a milestone payment received from a customer in a foreign jurisdiction.

Loss before the provision for income taxes for the years ended December 31, 2022, 2021 and 2020 consisted of the following:

	Year Ended December 31,
(in thousands)	2022		2021		2020
United States	$	(94,742)	$	(89,865)	$	(62,539)
Foreign (Austria)	903		1,186		556
	$	(93,839)	$	(88,679)	$	(61,983)

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

	Year Ended December 31,
	2022		2021		2020
U.S. federal statutory income tax rate	(21.0)	%	(21.0)	%	(21.0)	%
State income taxes, net of federal benefit	(5.5)		(5.4)		(5.9)
Research and development tax credits	(1.0)		(0.9)		(1.1)
Other permanent differences	3.0		3.7		0.9
Change in deferred tax asset valuation allowance	23.2		23.7		27.2
Other	1.3		(0.1)		0.1
Effective income tax rate	—	%	—	%	0.2	%

Net deferred tax assets as of December 31, 2022 and 2021 consisted of the following:

	December 31,
(in thousands)	2022		2021
Net operating loss carryforwards	$	107,296	$	101,863
Research and development tax credit carryforwards	6,694		5,444
Capitalized research and development expenses	16,004		1,760
Lease liabilities	1,016		1,243
Other	3,604		3,372
Total deferred tax assets	134,614		113,682
Valuation allowance	(133,112)		(111,835)
Deferred tax assets, net of valuation allowance	$	1,502	$	1,847
Right of use assets	1,502		1,847
Total deferred tax liabilities	$	1,502	$	1,847
Total deferred tax assets, net	$	—	$	—

As of December 31, 2022, the Company had U.S. federal and state net operating loss carryforwards of $342.9 million and $336.5 million, respectively, which may be available to offset future taxable income and begin to expire in 2031 and 2035, respectively. The Company has federal net operating losses $288.8 million, which do not expire, and $54.1 million of federal net operating losses generated prior to 2018 that will expire at various dates through 2037. In addition, as of December 31, 2022, the Company had foreign net operating loss carryforward of $61.2 million, which do not expire but are generally limited in their usage to an annual deduction equal to 75% of taxable income. As of December 31, 2022, the Company also had U.S. federal and state research and development tax credit carryforwards of $5.2 million and $1.9 million, respectively, which may be available to offset future tax liabilities and each begin to expire in 2032 and 2030, respectively.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Under the Act, research and experimental

expenditures incurred for tax years beginning after December 31, 2021 must be capitalized and amortized ratably over five or fifteen years for tax purposes, depending on where the research activities are conducted, in accordance with Section 174 of the Internal Review Code (“Section 174 Expenditures”). For the year ended December 31, 2022, the Company capitalized $59.0 million and received $5.3 million of amortization deductions related to such Section 174 Expenditures, which on a tax-effected basis represent $14.7 million of the deferred tax assets shown in “Capitalized research and development costs” in the table above. The Company has elected to treat global intangible low-taxed income (“GILTI”) as a period cost, so the capitalization of research and experimental costs in GILTI increases the Company’s provision for income taxes. If the requirement to capitalize Section 174 expenditures is not modified, it may also impact our effective tax rate and our cash tax liability in future years.

As of December 31, 2022, uncertain tax position reserves recorded were $0.2 million for U.S. federal and state research and development tax credits.

The following table summarizes the Company’s reserve for uncertain tax positions for the three years ended December 31, 2022:

(in millions)	Reserve for Uncertain Tax Position
Balance as of December 31, 2020	$	0.3
Settlement of unrecognized tax benefit	(0.1)
Balance as of December 31, 2021	0.2
Balance as of December 31, 2022	$	0.2

Utilization of the U.S. net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 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 carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the U.S. net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

Each period, the Company evaluates the positive and negative evidence bearing upon its ability to realize its federal, state and foreign deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2022, 2021 and 2020.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2022, 2021 and 2020 related primarily to the increases in net operating loss carryforwards and research and development tax credit carryforwards and were as follows:

	Year Ended December 31,
(in thousands)	2022		2021		2020
Valuation allowance, beginning of year	$	(111,835)	$	(92,197)	$	(73,410)
Increases recorded to income tax provision	(21,277)		(19,638)		(18,787)
Valuation allowance, end of year	$	(133,112)	$	(111,835)	$	(92,197)

The Company’s U.S. federal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2019 through December 31, 2021. There are currently no pending income tax examinations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state tax authorities to the extent utilized in a future period. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.