Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

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
Federal statutory income tax rate		21.0		%		21.0		%
State income taxes, net of federal benefit		8.3				6.5
Tax credits generated		5.7				6.6
Change in deferred tax asset valuation allowance		(38.7	)			(35.1	)
Stock-based compensation		3.5				1.1
Other		0.2				(0.1	)
Effective income tax rate		—		%		—		%

During the years ended December 31, 2023 and 2022, the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits generated in each year, due to its uncertainty of realizing a benefit from those items.

All of the Company’s operating losses since inception have been generated in the United States.

Net deferred tax assets consisted of the following (in thousands):

	December 31,
	2023			2022
Deferred tax assets:
Net operating loss carryforwards	$	35,050		$	24,829
Capitalized research and development		46,240			16,839
Research and development tax credit carryforwards		15,053			7,465
Stock-based compensation		3,617			1,634
Other		930			1,345
Total deferred tax assets		100,890			52,112
Valuation allowance		(100,890	)		(52,107	)
Net deferred tax assets		—			5
Deferred tax liabilities
Other		—			(5	)
Total deferred tax liabilities		—			(5	)
Net deferred tax assets	$	—		$	—

As of December 31, 2023, the Company had U.S. federal and state net operating loss carryforwards of $123.7 million and $144.0 million, respectively, which may be available to offset future taxable income. The federal net operating losses include $1.1 million which expire in 2037 and $122.6 million which carryforward indefinitely, but may only be used to offset 80% of annual taxable income. The state net operating losses expire at various dates beginning in 2037. As of December 31, 2023, the Company also had federal and state research and development tax credit carryforwards of $12.0 million and $3.7 million, respectively, which may be available to offset future tax liabilities and expire at various dates beginning in 2033.

Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986 (“IRC”), and corresponding provisions of state law, 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 or tax liabilities. 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 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 net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the 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 that would generate revenue from product sales and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2023 and 2022. Management reevaluates the positive and negative evidence at each reporting period.

The valuation allowance increased during the years ended December 31, 2023 and 2022 primarily as a result of increases in research and development costs capitalized under Section 174 of the IRC, research and development tax credit and net operating loss carryforwards. The changes in the valuation allowance were as follows (in thousands):

	Year Ended December 31,
	2023		2022
Valuation allowance as of beginning of year	$	52,107	$	23,400
Increases recorded to income tax provision		48,783		28,707
Valuation allowance as of end of year	$	100,890	$	52,107

As of December 31, 2023 and 2022, the Company had not recorded any amounts for unrecognized tax benefits. The Company files income tax returns in the U.S. and Massachusetts, 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 tax examinations. The Company is open to future tax examination under statute from 2020 to the present.