Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income (loss) before provision (benefit) for income taxes consists of the following:

	Year Ended December 31,
(in thousands)	2023		2022		2021
U.S.	$	410,326	$	29,012	$	(76,389)
International	617		(2,293)		1,351
Income (loss) before income taxes	$	410,943	$	26,719	$	(75,038)

The Company’s provision (benefit) for income taxes consists of the following:

	Year Ended December 31,
(in thousands)	2023		2022		2021
Current
Federal	$	110,108	$	42,532	$	—
State	29,806		4,302		(8,166)
International	—		(166)		(30)
	139,914		46,668		(8,196)
Deferred
Federal	(45,252)		(39,920)		1,048
State	(10,739)		(8,315)		3,058
International	359		219		331
	(55,632)		(48,016)		4,437
Income tax expense (benefit)	$	84,282	$	(1,348)	$	(3,759)

The reconciliation of income taxes at the U.S. federal statutory rate to the income tax expense (benefit) is as follows:

	Year Ended December 31,
(in thousands)	2023		2022		2021
U.S. statutory rate	$	86,298	$	5,611	$	(15,758)
Permanent items	1,042		2,309		1,764
Sale of RELISTOR licensed intangible asset associated with net sales royalties	(10,817)		—		—
Section 162(m)	307		247		1,028
Uncertain tax positions	(5,045)		(12,629)		(8,952)
Tax credits	(2,118)		(4,085)		(990)
State and local taxes	18,726		67		656
Impact on deferred taxes of change in tax rate	(330)		4,169		3,049
Changes in fair value of contingent assets and liabilities	(1,948)		5,422		15,015
Foreign tax rate differential	128		68		23
Valuation allowance	(4)		(30)		(400)
Stock compensation	(3,941)		(4,612)		(1,164)
Change in indemnification deferred tax asset	1,240		2,343		1,786
Other	744		(228)		184
Income tax expense (benefit)	$	84,282	$	(1,348)	$	(3,759)

The components of deferred income tax assets (liabilities) are as follows:

	December 31,
(in thousands)	2023		2022
Deferred Tax Assets
Federal benefit of state taxes payable	$	263	$	1,739
Reserves, accruals and other	18,923		31,532
Inventory obsolescence	—		919
Capitalized research and development	17,142		79,946
Stock compensation	9,266		—
Intangible assets	25,214		—
Net operating loss carryforwards	80,184		88,014
Lease liability	14,365		—
Deferred tax assets	165,357		202,150
Deferred Tax Liabilities
Reserves, accruals and other	—		(5,354)
Right-of-use asset	(11,543)		—
Intangible assets	—		(80,770)
Amortization of intangibles other than goodwill	—		(385)
Depreciation	—		(1,469)
Deferred tax liability	(11,543)		(87,978)
Less: valuation allowance	(3,616)		(3,525)
	$	150,198	$	110,647
Recorded in the accompanying consolidated balance sheets as:
Noncurrent deferred tax assets, net	$	150,198	$	110,647

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. If the requirement to capitalize Section 174 expenditures is not modified, it may impact our cash tax liability in future years. The increase in worldwide net deferred tax assets is primarily due to the tax capitalization of the Company’s current year research and development expenses that are not currently deductible in 2023 and the decrease in deferred tax liabilities related to the AZEDRA and RELISTOR royalty intangible assets, partially offset by utilization of net operating losses.

The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realizability of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more-likely-than-not realizable, the Company evaluated all available positive and negative evidence. As of December 31, 2023 and 2022, the Company maintains a valuation allowance of $3.6 million and $3.5 million, respectively, primarily related to net deferred tax assets of certain of its foreign subsidiaries.

Utilization of net operating loss carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986 (“IRC Section 382”) and with Section 383 of the Internal Revenue Code of 1986, as well as similar state provisions. These ownership changes may limit the amount of net operating loss carryforwards and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change, as defined by IRC Section 382, results from transactions which impact the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period.

At December 31, 2023, the Company had U.S. federal net operating loss carryforwards of approximately $297.6 million, $157.9 million of which will expire between 2027 and 2037, and $139.6 million of which can be carried forward indefinitely. The Company’s state net operating losses are $12.5 million on a tax-effected basis, which will expire between 2024 and 2040. The Company has state research credit carryforwards of $2.1 million, which will expire between 2026 and 2038. The Company has state investment tax credit carryforwards of $0.8 million which have no expiration date.

The Company’s U.S. federal income tax returns are subject to examination for three years after the filing date of the return. The state and foreign income tax returns are subject to examination for periods varying from three to four years after filing, depending on the specific jurisdiction’s statutes of limitation, and in the case of Sweden, up to six years after the end of the financial year.

A reconciliation of the Company’s changes in uncertain tax positions for 2023 and 2022 is as follows:

(in thousands)	Amount
Balance of uncertain tax positions as of January 1, 2021	$	5,292
Additions related to current year tax positions	—
Reductions related to prior year tax positions	(188)
Settlements	(1,446)
Lapse of statute of limitations	—
Balance of uncertain tax positions as of December 31, 2021	3,658
Additions related to current year tax positions	—
Reductions related to prior year tax positions	(1,180)
Settlements	(306)
Lapse of statute of limitations	(692)
Balance of uncertain tax positions as of December 31, 2022	1,480
Additions related to current year tax positions	3,749
Reductions related to prior year tax positions	(688)
Settlements	(442)
Lapse of statute of limitations	—
Balance of uncertain tax positions as of December 31, 2023	$	4,099

In connection with the Company’s acquisition of the medical imaging business from Bristol-Myers Squibb (“BMS”) in 2008, the Company recorded a liability for uncertain tax positions related to the acquired business and simultaneously entered into an indemnification agreement with BMS for any payments made to settle those uncertain tax positions with the taxing authorities.

In accordance with the Company’s accounting policy, the change in the tax liability, penalties and interest associated with these obligations (net of any offsetting federal or state benefit) is recognized within income tax expense. As these reserves change, adjustments are included in income tax expense while the offsetting adjustment is included in other income. Assuming that the receivable from BMS continues to be considered recoverable by the Company, there will be no effect on net income and no net cash outflows related to these liabilities. Included in other (income) loss for the years ended December 31, 2023, 2022 and 2021, is tax indemnification expense (income), net of $4.9 million, $9.6 million and $7.1 million, respectively.

As of December 31, 2023 and 2022, total liabilities for uncertain tax positions including interest and penalties were $5.4 million and $8.3 million, respectively, consisting of uncertain tax positions of $4.1 million and $1.5 million, respectively, interest accruals of $1.3 million and $6.4 million, respectively, and no penalty accruals as of December 31, 2023 and $0.4 million of penalty accruals as of December 31, 2022. The increase in uncertain tax positions during the year ended December 31, 2023 was primarily related to certain acquired tax attributes. As of December 31, 2023, $1.3 million, $3.2 million, and $0.9 million of these liabilities were recorded in current liabilities, other long-term liabilities, and as a reduction of deferred tax assets, respectively. As of December 31, 2022 these liabilities were included in other long-term liabilities. Included in the 2023, 2022 and 2021 tax provisions are benefits of $5.0 million, $12.6 million and $9.0 million, respectively, relating to reversals of uncertain tax positions recognized upon settlements, effective settlements, or lapses of relevant statutes of limitation, partially offset by interest accruals.