Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

12. Income Taxes

During the years ended December 31, 2023, 2022 and 2021, the Company did not record an income tax benefit for net operating losses incurred in each year due to the uncertainty of realizing a benefit from those items.

Loss before income taxes is allocated as follows:

	Year Ended December 31,
(In thousands)	2023		2022		2021
U.S. operations	$	(88,848)	$	(86,908)	$	(90,865)
Foreign operations		—		—		—
Loss before income taxes	$	(88,848)	$	(86,908)	$	(90,865)

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,
	2023		2022		2021
Federal statutory income tax rate	(21.0)	%	(21.0)	%	(21.0)	%
State taxes, net of federal benefit	(1.7)		(2.3)		(7.7)
Impact of state rate changes	17.7		—		—
Research and development tax credits	(5.9)		(4.3)		(3.0)
Excess equity compensation tax benefit, net of officer limitation	0.6		0.2		(3.9)
Revaluation of contingent consideration	(6.3)		1.1		5.6
Non-deductible royalty payments	4.3		—		—
Change in deferred tax asset valuation allowance	11.7		26.3		30.0
Other	0.2		—		—
Effective income tax rate	(0.4)	%	—	%	—	%

Deferred tax liabilities, net consisted of the following:

		December 31,
(In thousands)	2023		2022
Deferred tax assets:
Net operating loss carryforwards	$	119,155	$	120,554
Capitalized start-up costs		3,812		5,506
Research and development tax credit carryforwards		20,505		15,233
Section 174 research and development capitalization		30,984		19,639
Capitalized research and development expense		2,359		5,448
Stock‑based compensation expense		18,055		19,432
Accrued compensation		1,219		1,146
Lease liabilities		774		558
Other		407		534
Total deferred tax assets		197,270		188,050
Deferred tax liabilities:
Property and equipment		(187)		(137)
Intangible asset		—		(1,576)
Right-to-use assets		(853)		(651)
Other		(1,106)		(1,365)
Total deferred tax liabilities		(2,146)		(3,729)
Valuation allowance		(195,124)		(184,688)
Deferred tax liabilities, net	$	—	$	(367)

As of December 31, 2023, the Company had federal and state net operating loss (“NOL”) carryforwards of $464.8 million and $395.3 million, respectively, which will begin to expire in 2032. As of December 31, 2023, the Company also had federal research and development tax credit carryforwards of $20.4 million which will begin to expire in 2032, and state research and development tax credit carryforwards of $0.1 million which will begin to expire in 2022. Utilization of the NOLs and research and development tax credit carryforwards in the United States may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that may 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 stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has completed an analysis under Section 382 for NOLs generated from July 13, 2012 through December 31, 2023.  Although the Company has experienced Section 382 ownership changes since 2012, the Company concluded that it should have sufficient ability to utilize NOLs accumulated during the periods tested. The Company has not yet determined if a Section 382 ownership change has occurred after December 31, 2023. In addition, the Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership, some of which may be outside of the Company’s control.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. The Company considered its history of cumulative net losses incurred since inception, its lack of substantial revenue generated to date, and its forecasted future operating losses and 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, 2023 and 2022. The Company evaluates positive and negative evidence of its ability to realize deferred tax assets at each reporting period.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2023, 2022 and 2021, which related primarily to the increases in NOLs, capitalized research and development costs, and research and development tax credit carryforwards, were as follows:

		Year Ended December 31,
(In thousands)		2023		2022		2021
Valuation allowance at beginning of year	$	(184,688)	$	(161,824)	$	(134,559)
Decreases recorded as benefit to income tax provision		—		—		—
Increases recorded to income tax provision		(10,436)		(22,864)		(27,265)
Valuation allowance as of end of year	$	(195,124)	$	(184,688)	$	(161,824)

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates.  In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income tax examinations. The Company’s tax years are still open under statute from 2021 to the present. All open years may be examined to the extent that tax credit or NOLs are used in future periods. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company has not recorded any amounts for unrecognized tax benefits as of December 31, 2023 and 2022.