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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of loss before provision for income taxes were as follows (in thousands):
Years Ended December 31,
202420232022
Domestic$(62,515)$(206,674)$(225,127)
Foreign(24,439)(19,555)(19,256)
Loss before provision for income taxes$(86,954)$(226,229)$(244,383)
The components of the (benefit) expense for income taxes were as follows (in thousands):
Years Ended December 31,
202420232022
Current expense (benefit) provision:
U.S. Federal and state$1,118 $(45)$2,430 
Foreign1,163 1,037 292 
Total current expense provision2,281 992 2,722 
Deferred expense (benefit) provision:
U.S. Federal and state79 (120)11 
Foreign(433)(562)— 
Total deferred expense provision(354)(682)11 
Total expense provision$1,927 $310 $2,733 
The differences between the Company’s effective tax rate and the statutory tax rate in 2024, 2023, and 2022 were as follows (in thousands):
Years Ended December 31,
202420232022
Income tax benefit at federal statutory rate (21% for 2024, 2023 and 2022)
$(18,260)$(47,328)$(51,321)
State and local income taxes net of federal tax benefit1,393 (3,477)(1,816)
Permanent items3,716 3,015 (1,608)
Research and development tax credits(1,413)(3,301)(9,793)
Foreign rate differential2,353 2,255 1,862 
Other2,496 1,656 (5,485)
Change in valuation allowance11,642 47,490 70,894 
Income tax expense$1,927 $310 $2,733 
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. If recognized, none of these tax benefits would affect the effective tax rate due to the valuation allowance.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
20242023
Balance at January 1,$14,362 $13,844 
Additions to current period tax positions353 825 
Reductions to prior period tax provisions— (307)
Balance at December 31,$14,715 $14,362 
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 IRC and similar state tax law.
Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
December 31,
20242023
Deferred tax assets:
Net federal and state operating losses$105,865 $108,753 
Research and development credits87,287 88,390 
Royalty income117,570 122,391 
Stock-based compensation34,486 26,113 
Capitalized R&D82,476 75,081 
Leasing obligations2,806 3,076 
Other22,693 17,515 
Total deferred tax assets453,183 441,319 
Deferred tax liabilities:
Fixed assets(797)(678)
Right of use asset(2,620)(2,872)
Total deferred tax liabilities(3,417)(3,550)
Valuation allowance(448,740)(437,098)
Net deferred tax assets$1,026 $671 
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 $11,642, $47,490, and $70,894 in 2024, 2023, and 2022, respectively.
As of December 31, 2024, the Company had U.S. federal operating loss carryforwards of $403,528, state operating loss carryforwards of $177,492, foreign net operating losses of $93,275, and U.S. research and development and orphan drug credit carryforwards of $102,001, which will expire at various dates from 2025 through 2044. Federal losses, state losses, and research and development credit carryforwards began expiring in 2021. The foreign net operating losses have an indefinite carryforward period.
Tax years 2021-2024 remain open to examination by the major taxing jurisdictions to which the Company is subject. Additionally, years prior to 2021 are also open to examination for 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 2024, 2023, and 2022.
As of December 31, 2024, the Company has minimal accumulated undistributed earnings generated by its foreign subsidiaries which have already been subject to local and U.S. tax as part of the global intangible low-taxed income provisions. The Company intends to indefinitely reinvest these earnings, as well as future earnings from its foreign subsidiaries, to fund its international operations. In addition, the Company expects future U.S. cash generation will be sufficient to meet future U.S. cash needs.