Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Text Block]

(17) Income Taxes

          The components of the income tax provision related to continuing operations are summarized as follows (in thousands):

	Year Ended December 31,
	2011		2010			2009
Current:
Federal	$	—	$	(140	)	$	(2,195	)
State and foreign		205		(197	)		110
Total current		205		(337	)		(2,085	)
Deferred: Federal and State		—		—			—
Income tax provision (benefit)	$	205	$	(337	)	$	(2,085	)

          The following table represents a reconciliation between the reported income taxes and the income taxes that would be computed by applying the federal statutory rate (35%) to income from continuing operations before taxes (in thousands):

	Year Ended December 31,
	2011			2010			2009
Income tax benefit computed at federal statutory rate	$	(7,195	)	$	(1,098	)	$	(20,750	)
Nondeductible expenses		205			2,348			699
Add (deduct) effect of:
Federal research and development tax credits		(1,339	)		(2,662	)		(1,625	)
Tax on earnings of foreign subsidiary		174			826			—
State income taxes, net of federal tax		20			(199	)		71
Effect of change in federal law		—			(140	)		(2,195	)
Increase in beginning of period valuation allowance		8,340			588			21,715
Income tax provision (benefit)	$	205		$	(337	)	$	(2,085	)

          Income tax expense in 2011 was primarily comprised of Canadian withholding tax. No federal income tax expense was incurred in relation to normal operating results due either to current period operating losses or the utilization of deferred tax assets to offset taxes that would otherwise accrue to operating income.

          Federal legislation, the American Recovery and Reinvestment Act of 2009, which allowed the Company to make an election to treat certain unused research and alternative minimum tax credit carryforwards as refundable in lieu of claiming bonus and accelerated depreciation for “eligible qualified property” placed in service through the end of 2009 was extended to 2010. This provided the Company with a $0.1 million benefit in 2010. The balance of the 2010 income tax benefit reflects a reduction of $0.2 million to state taxes payable.

          In November 2009, federal legislation was enacted under which the Company was able to carry back its 2009 alternative minimum tax net operating losses to the five previous years to offset the alternative minimum taxes that were not available for carryback prior to the new legislation. The Company recorded the impact of the carryback, estimated to be approximately $1.7 million, in the fourth quarter of 2009 and received a federal income tax cash refund in the first quarter of 2010. Other legislation in 2009 allowed the Company to make an election to treat certain unused research and alternative minimum tax credit carryforwards as refundable in lieu of claiming bonus and accelerated depreciation for “eligible qualified property” placed in service through the end of 2008. This provided the Company with a $0.5 million benefit in 2009. The balance of the 2009 income tax expense reflects $0.1 million adjustment to state taxes payable.

          The gain on the sale of the specialty pharmaceutical business, although taxable, did not result in a federal income tax liability due to the tax basis the Company had in the divested assets and the net operating loss generated in 2010. The utilization of related deferred tax assets associated with the sale and corresponding reversal of valuation allowances is reflected in the table that follows.

          As of December 31, 2011 and 2010, the tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are as follows (in thousands):

	December 31, 2011			December 31, 2010
Deferred tax assets:
Federal and state net operating loss carryforwards	$	61,213		$	55,510
Research and development credits carryforward		27,647			26,353
Acquired in-process research and development		7,512			8,411
Capital loss carryforwards		3,165			3,165
Share-based compensation		2,554			719
Federal alternative minimum tax credits		1,530			1,530
Accrued compensation		1,035			1,214
Other		3,153			3,395
Total gross deferred tax assets		107,809			100,296
Less valuation allowance		(107,365	)		(97,587	)
		444			2,709
Deferred tax liabilities:
Book basis in excess of tax basis of acquired assets		(443	)		(1,510	)
Undistributed earnings of foreign subsidiary		—			(826	)
Unrealized gain on investment securities		(1	)		(373	)
		(444	)		(2,709	)
Net deferred tax assets	$	—		$	—

          During the year ended December 31, 2010, the Company determined that it would no longer permanently reinvest any of the earnings of its foreign subsidiaries. As a result, the Company recorded a net deferred income tax liability of $0.8 million, with an offsetting valuation allowance, on approximately $2.4 million of accumulated earnings of its foreign subsidiaries. During the year ended December 31, 2011, the Company repatriated its earnings from its foreign subsidiaries due to the closure of the operations. As a result, the Company reduced the net deferred income tax liability of $0.8 million and eliminated the offsetting valuation allowance.

          A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. At December 31, 2011, the Company had federal net operating loss carryforwards of approximately $150.3 million that expire in the years 2020 through 2031 and New Jersey state net operating loss carryforwards of approximately $95.6 million that expire in the years 2012 through 2018. The Company also has federal research and development tax credit carryforwards of approximately $20.8 million for tax reporting purposes that expire in the years 2017 through 2031. In addition, the Company has $6.9 million of state research and development tax credit carryforwards that expire in the years 2015 through 2026. The Company’s ability to use the net operating loss and research and development tax credit carryforwards is subject to certain limitations due to ownership changes, as defined by rules pursuant to Section 382 of the Internal Revenue Code of 1986, as amended.

          As of December 31, 2011, management believes that it is more likely than not that the net deferred tax assets will not be realized, based on assumptions regarding future operations, consideration of tax strategies and the reversal of deferred tax liabilities. As of December 31, 2011 and 2010, the Company had deferred tax assets of $107.8 million and $100.3 million, respectively. The Company has maintained a valuation allowance of $107.4 million and $97.6 million at December 31, 2011 and 2010, respectively.

          The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and Canada. The Company is currently not under examination by the U.S. Internal Revenue Service, however, the tax years 2008 through 2011 remain open to examination. State income tax returns for the states of New Jersey and Indiana are generally subject to examination for a period of 3-4 years after filing of the respective returns. These state income tax returns are not currently under examination. Income tax returns for Canada are generally subject to examination for a period of 3-5 years after filing of the respective return. The Company’s income tax returns are currently not under examination by Revenue Canada.