Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of loss before provision for income taxes were as follows:

	Years Ended December 31,
	2022		2021
Domestic	$	(225,127)	$	(159,632)
Foreign	(19,256)		(22,177)
Loss before provision for income taxes	$	(244,383)	$	(181,809)

The components of the (benefit) expense for income taxes were as follows:

	Years Ended December 31,
	2022		2021
Current expense provision:
U.S. Federal and state	$	2,430	$	2,179
Foreign	292		233
Total current expense provision	2,722		2,412
Deferred expense (benefit) provision:
U.S. Federal and state	11		(159)
Total expense provision	$	2,733	$	2,253

The differences between the Company’s effective tax rate and the statutory tax rate in 2022, 2021, and 2020, are as follows:

	2022		2021		2020
Income tax benefit at federal statutory rate (21% for 2022, 2021 and 2020)	$	(51,321)	$	(38,175)	$	(38,391)
State and local income taxes net of federal tax benefit	(1,816)		(2,288)		(2,544)
Permanent items	(1,608)		(1,343)		774
Rate change	—		—		(82)
Expiration of attribute carryforwards	—		(1,057)		3,774
Research and development tax credits	(9,793)		(5,994)		(4,080)
Foreign rate differential	1,862		1,940		542
Other	(5,485)		1,216		1,456
Change in valuation allowance	70,894		47,954		38,551
Income tax expense	$	2,733	$	2,253	$	—

The Company recognizes the impact of a tax position in its financial statements if it is more likely than not that the position will be sustained on audit based on the technical merits of the position. The Company has concluded that it has an uncertain tax position pertaining to its research and development and orphan drug credit carryforwards. The Company has established these credits based on information and calculations it believes are appropriate and the best estimate of the underlying credit. Any changes to the Company’s unrecognized tax benefits are offset by an adjustment to the valuation allowance and there would be no impact on the Company’s financial statements. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2022		2021
Balance at January 1,	$	9,729	$	8,230
Additions to current period tax positions	4,115		1,499
Balance at December 31,	$	13,844	$	9,729

The Company’s ability to utilize the net operating loss and tax credit carryforwards in the future may be subject to substantial restrictions in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code of 1986, as amended and similar state tax law.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

	2022		2021
Deferred tax assets:
Net federal and state operating losses	$	101,600	$	113,649
Research and development credits	86,321		71,197
Royalty income	115,554		106,007
Stock-based compensation	19,374		14,512
Capitalized R&D	62,794		8,997
Leasing obligations	1,842		1,836
Other	4,354		4,809
Total deferred tax assets	391,839		321,007
Deferred tax liabilities:
Fixed assets	(717)		(607)
Right of use asset	(1,525)		(1,527)
Total deferred tax liabilities	(2,242)		(2,134)
Valuation allowance	(389,608)		(318,714)
Net deferred tax assets (liabilities)	$	(11)	$	159

The majority of the Company’s deferred tax assets relate to net operating loss and research and development carryforwards that can only be realized if the Company is profitable in future periods. It is uncertain whether the Company will realize any tax benefit related to these carryforwards. Accordingly, the Company has provided a valuation allowance against substantially all the net deferred tax assets due to uncertainties as to their ultimate realization. The valuation allowance will remain at the full amount of the deferred tax assets until it is more likely than not that the related tax benefits will be realized. The Company’s valuation allowance increased by $70,894, $47,954, and $38,551 in 2022, 2021, and 2020, respectively.

As of December 31, 2022, the Company had U.S. federal operating loss carryforwards of $408,671, state operating loss carryforwards of $188,341, foreign net operating losses of $47,337, and U.S. research and development and orphan drug credit carryforwards of $100,165, which will expire at various dates from 2023 through 2041. Federal losses, state losses, research and development credit carryforwards began expiring in 2021. The foreign net operating losses have an indefinite carryforward period.

Tax years 2018-2021 remain open to examination by the major taxing jurisdictions to which the Company is subject. Additionally, years prior to 2017 are also open to examination to the extent of loss and credit carryforwards from those years. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as components of its income tax provision. However, there were no provisions or accruals for interest and penalties in 2022, 2021 and 2020.

As of December 31, 2022, the Company has minimal accumulated undistributed earnings generated by our foreign subsidiaries which have already been subject to local and U.S. tax (as part of the global intangible low-taxed income provisions). We intend to indefinitely reinvest these earnings, as well as future earnings from our foreign subsidiaries to fund out international operations. In addition, we expect future U.S. cash generation will be sufficient to meet future U.S cash needs.