Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

The Company is subject to U.S. federal and various state corporate income taxes as well as taxes in foreign jurisdictions for the foreign parent and where foreign subsidiaries have been established.

Net (loss) income before taxes

For the years ended December 31, 2023, 2022 and 2021, the (loss) income before provision for income taxes consist of the following (in thousands):

	Years Ended December 31,
	2023			2022			2021
Domestic	$	30,357		$	1,321		$	4,569
Foreign		(181,079	)		(651,821	)		374,962
Total	$	(150,722	)	$	(650,500	)	$	379,531

The benefit from (provision for) income taxes consist of the following (in thousands):

	Years Ended December 31,
	2023			2022			2021
Current income taxes:
Federal	$	(2,318	)	$	(444	)	$	(80	)
State		(994	)		(241	)		(42	)
Foreign		—			—			0
Total current income taxes		(3,312	)		(685	)		(122	)
Deferred income taxes:
Federal	$	424			1,010			(1,748	)
State		—			—			—
Foreign		—			—			—
Total deferred income taxes		424			1,010			(1,748	)
Total income tax benefit (provision)	$	(2,888	)	$	325		$	(1,870	)

A reconciliation of income tax expense computed at the statutory corporate income tax rate to the effective income tax rate for the years ended December 31, 2023, 2022 and 2021 is as follows:

	Years Ended December 31,
	2023			2022			2021
Income tax expense at statutory rate		11.9	%		11.9	%		11.9	%
State income tax, net of federal benefit		2.3	%		1.2	%		(1.0	)%
Nondeductible expenses		(0.2	)%		(0.2	)%		0.7	%
Foreign rate differential		(2.1	)%		(0.1	)%		0.6	%
Statutory to US GAAP permanent differences		0.0	%		0.0	%		0.0	%
Stock-based compensation		(4.0	)%		(0.2	%)		(2.5	)%
Impact of deferred rate change		0.1	%		(0.1	)%		0.0	%
Research credits		8.2	%		3.3	%		(4.2	)%
Change in valuation allowance		(17.2	)%		(15.8	)%		(5.0	)%
Other Rate Items		(0.9	)%		0.0	%		0.0	%
Effective income tax rate		(1.9	%)		—			0.5	%

The federal statutory rate reflects the Switzerland mixed company service rate.

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets are comprised of the following (in thousands):

	Years Ended December 31,
	2023			2022
Deferred tax assets:
Net operating loss carryforwards	$	133,384		$	118,432
Accruals and reserves		4,485			4,782
Operating lease liabilities		65,177			66,436
Other deferred tax assets		15,987			10,154
Stock-based compensation		18,346			18,034
Research credit		70,404			63,416
Total deferred tax assets		307,783			281,254
Less valuation allowance		(227,615	)		(198,279	)
Net deferred tax assets		80,168			82,975
Deferred tax liabilities:
Depreciation		(38,725	)		(41,206	)
Operating lease assets		(42,058	)		(42,678	)
Intangible assets		(4	)		(18	)
Other deferred tax liabilities		—			(209	)
Total deferred tax liabilities		(80,787	)		(84,111	)
Long term deferred taxes	$	(619	)	$	(1,136	)

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s history of worldwide operating losses, the Company has concluded that it is more-likely-than-not that the benefit of its U.S. and non-U.S. deferred tax assets will not be realized. Accordingly, as of December 31, 2023 and 2022, the Company has provided a full valuation allowance against its net deferred tax assets in Switzerland and the United Kingdom. The Company has also provided a valuation allowance against the U.S. deferred tax assets that cannot be realized by existing deferred tax liabilities based upon when they are scheduled to reverse. The valuation allowance increased by $29.3 million during 2023, which is primarily attributable to increase in net operating loss carryforwards as a result of current year net loss.

As of December 31, 2023, the Company had no available U.S. federal net operating loss carryforwards. As of December 31, 2023, the Company had available non-U.S. net operating loss carryforwards of $2,223.3 million of which $1,115.6 million relate to Switzerland, $1,115.6 million relate to the Canton of Zug, and $2.1 million relate to the Company’s wholly-owned subsidiary in the United Kingdom. The net operating losses generated in Switzerland and the Canton of Zug begin to expire in 2027 and the net operating losses generated in the United Kingdom can be carried forward indefinitely.

As of December 31, 2023, the Company had U.S. domestic federal research and development credit carryforwards of $28.2 million that begin to expire in 2040 for federal purposes, which are net of uncertain tax positions of $18.1 million. As of December 31, 2023, the Company had U.S. domestic federal orphan drug credit carryforwards of $27.0 million which begin to expire in 2040 for federal purposes, which are net of uncertain tax positions of $11.5 million. As of December 31, 2023, the Company had U.S. domestic state research and development credit carryforwards of $19.3 million which begin to expire in 2035, which are net of uncertain tax positions of $12.8 million.

ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statement by prescribing the minimum recognition threshold and measurement of a tax position taken or expected to be taken in a tax return.

As of December 31, 2023, the Company had gross unrecognized tax benefits of $44.1 million of which $40.1 million would favorably impact the effective tax rate if recognized. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2023, 2022 and 2021, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s consolidated statements of operations and comprehensive loss.

The aggregate changes in gross unrecognized tax benefits were as follows (in thousands):

	Years Ended December 31,
	2023			2022		2021
Balance at beginning of year	$	34,536		$	21,395	$	11,967
Increases for tax positions taken during current period		9,703			10,439		9,911
Increases for tax positions taken in prior periods		—			2,702		—
Decreases for tax positions taken during current period		—			—		—
Decreases for tax positions taken in prior periods		(91	)		—		(483	)
Balance at end of year	$	44,148		$	34,536	$	21,395

The Company files income tax returns in the U.S. federal jurisdiction, Massachusetts, California and certain non-U.S. jurisdictions. The Company is subject to U.S. federal, Massachusetts, California and non-U.S. income tax examinations by authorities for tax years ending after December 31, 2019. Research credits generated in prior tax years that are closed for examination may still be adjusted upon future examination if they have or will be used in a future period. The Company is subject to income tax examinations by authorities in its non-U.S. jurisdictions for all years.