Income Taxes

12 Months Ended

Jun. 30, 2012

Income Taxes

Income Taxes

F.    Income Taxes

        The difference between the Company's expected tax benefit, as computed by applying the U.S. federal corporate tax rate of 34% to loss before the benefit for income taxes, and actual tax is reconciled in the following chart (in thousands):

	Year Ended June 30,
	2012			2011			2010
Loss before income tax expense	$	(73,319	)	$	(58,274	)	$	(51,177	)
Expected tax benefit at 34%	$	(24,928	)	$	(19,813	)	$	(17,400	)
Permanent differences		1,469			—			—
State tax benefit net of federal benefit		(4,204	)		(1,815	)		(2,002	)
Increase in valuation allowance, net		26,574			16,410			11,991
Expired loss and credit carryforwards		1,089			5,610			6,858
Other		—			(392	)		288
Benefit for income taxes	$	—		$	—		$	(265	)

        At June 30, 2012, the Company has net operating loss carryforwards of approximately $265.7 million available to reduce federal taxable income, if any, that expire in 2013 through 2032 and $156.4 million available to reduce state taxable income, if any, that expire in fiscal 2013 through fiscal 2032. Included in the federal and state carryforwards is $14.3 million and $13.0 million, respectively, related to deductions from the exercise of stock options and the related tax benefit will result in an increase in additional paid-in capital if and when realized through a reduction of taxes paid in cash. The Company also has federal and state research tax credits of approximately $12.2 million available to offset federal and state income taxes, which expire beginning in fiscal 2013. Due to the degree of uncertainty related to the ultimate use of the loss carryforwards and tax credits, the Company has established a valuation allowance to fully reserve these tax benefits.

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets as of June 30, 2012 and 2011 are as follows (in thousands):

	June 30,
	2012			2011
Net operating loss carryforwards	$	98,601		$	82,533
Research and development tax credit carryforwards		10,393			9,590
Property and other intangible assets		1,486			807
Deferred revenue		28,325			21,168
Stock-based compensation		3,302			2,308
Deferred lease incentive		5,100			3,363
Other liabilities		512			2,676
Total deferred tax assets	$	147,719		$	122,445
Valuation allowance		(147,719	)		(122,445	)
Net deferred tax assets	$	—		$	—

        The valuation allowance increased by $25.3 million during 2012 due primarily to the greater net loss recognized during the year compared to last and deferred revenue timing differences, partially offset by the expiration of net operating loss carryforwards.

        Utilization of the NOL and R&D credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future as provided by Section 382 of the Internal Revenue Code of 1986, as well as similar state and foreign provisions. These ownership changes may limit the amount of NOL and R&D credit carry forwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. Since the Company's formation, it has raised capital through the issuance of capital stock on several occasions (both pre and post initial public offering) which, combined with the purchasing shareholders' subsequent disposition of those shares, may have resulted in a change of control, as defined by Section 382, or could result in a change of control in the future upon subsequent disposition. The Company has not currently completed a study to assess whether a change of control has occurred or whether there have been multiple changes of control since its formation due to the significant complexity and cost associated with such study and the possibility that there could be additional changes in control in the future. If the Company has experienced a change of control at any time since its formation, utilization of its NOL or R&D credit carry forwards would be subject to an annual limitation under Section 382 which is determined by first multiplying the value of the Company's stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the NOL or R&D credit carry forwards before utilization. Further, until a study is completed and any limitation known, no amounts are being presented as an uncertain tax position. The Company does not expect to have any taxable income for at least the next several years.

        Interest and penalties related to the settlement of uncertain tax positions, if any, will be reflected in income tax expense. The Company did not recognize any interest and penalties associated with unrecognized tax benefits in the accompanying consolidated financial statements. The Company does not expect any material changes to the unrecognized benefits within 12 months of the reporting date. Due to existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate. The Company's loss carryforwards are subject to adjustment by state and federal taxing authorities, commencing when those losses are utilized to reduce taxable income.

        Included in other (expense) income, net for the fiscal year ended June 30, 2011 is $1.2 million of federal grant funding the Company was awarded under the Patient Protection and Affordable Care Act of 2010 to develop new anticancer therapies.