Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

A reconciliation of income tax expense computed at the U.S. federal statutory income tax rate to the Company’s income tax expense is as follows (in thousands):

	Years Ended December 31,
	2024			2023
Tax computed at the federal statutory rate	$	(14,653	)	$	(25,927	)
State income taxes, net of federal tax benefit		(49	)		(8	)
Nondeductible executive compensation		369			99
Stock-based compensation		294			1,326
Research and development and orphan drug credits		(3,789	)		(6,205	)
Uncertain tax positions		947			1,551
Other, net		(132	)		228
Valuation allowance		17,013			28,936
Income tax expense	$	—		$	—

The Company’s net deferred tax assets (liabilities) are as follows (in thousands):

	Years Ended December 31,
	2024			2023
Deferred tax assets:
Net operating loss carryforwards	$	33,799		$	25,034
Liability to licensor		4,159			4,159
Goodwill		2,683			2,938
Lease liability		176			517
Accrued compensation		556			746
Research credit carryforwards		13,221			10,379
Section 174 cost capitalization		36,951			31,220
Section 59(e) cost capitalization		7,350			8,400
Stock-based compensation		3,938			2,790
Other		5			4
Gross deferred tax assets		102,838			86,187
Less: valuation allowance		(102,655	)		(85,642	)
Total deferred tax assets		183			545
Deferred tax liabilities:
Fixed assets		(75	)		(231	)
Operating lease right-of-use asset		(108	)		(314	)
Total deferred tax liabilities		(183	)		(545	)
Net deferred tax assets	$	—		$	—

A valuation allowance of approximately $102.7 million as of December 31, 2024 has been established to offset the deferred tax assets as the Company has determined that it is not more likely than not that these assets will be realized. The valuation allowance increased by approximately $17.0 million during 2024.

At December 31, 2024, the Company had federal and state net operating loss carryforwards of approximately $160.6 million and $42.0 million, respectively. The federal and approximately $41.5 million of state net operating losses can be carried forward indefinitely, subject to an 80% limitation against taxable income. The remaining state net operating losses of approximately $0.4 million will begin to expire in 2042, unless previously utilized.

At December 31, 2024, the Company had federal and California research and development credit carryforwards of approximately $10.1 million and $3.3 million, respectively. The federal credit carryforwards will begin to expire in 2040, unless previously utilized. The California credits will carry forward indefinitely.

At December 31, 2024, the Company also had federal orphan drug credit carryforwards of approximately $4.9 million. The orphan drug credit carryforwards will begin to expire in 2041, unless previously utilized.

Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company's net operating loss carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an ownership change analysis pursuant to IRC Section 382. If ownership changes within the meaning of IRC Section 382 are identified as having occurred, the amount of remaining tax attribute carryforwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, the Company's deferred tax assets associated with such tax attributes could be significantly reduced upon realization of an ownership change within the meaning of IRC Section 382.

Under the FASB's accounting guidance related to income tax positions, among other things, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, the guidance provides further clarification on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. The Company regularly evaluates the likelihood of recognizing the benefit for income tax positions taken in various federal and state filings by considering all relevant facts, circumstances, and information available.

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

	Years Ended December 31,
	2024		2023
Unrecognized tax benefits - beginning	$	3,602	$	1,968
Gross increases - tax positions in prior period		—		161
Gross increase – current-period tax positions		980		1,473
Unrecognized tax benefits - ending	$	4,582	$	3,602

As of December 31, 2024, the Company had gross unrecognized tax benefits of approximately $4.6 million, none of which would affect the Company’s effective tax rate due to the existence of the valuation allowance. The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on the Company’s balance sheet and has not recognized interest or penalties in the statements of operations and comprehensive income for the year ended December 31, 2024. The Company does not anticipate a significant change to its liability for unrecognized tax benefits within the next twelve months.

The Company is subject to taxation in the United States and various state jurisdictions. The Company is subject to examination by tax authorities in those jurisdictions since 2021 and 2020, respectively, and forward. However, to the extent allowed by law, the taxing authorities may have the right to examine periods where NOLs and research and development credits were generated and carried forward, and make adjustments to the amount of the NOL and research credits carryforward amount. The Company is not currently under examination by any jurisdiction.