Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

18. Income Taxes

Income (loss) from continuing operations before provision for income taxes for the Company’s domestic and international operations was as follows (in thousands):

	Year Ended December 31,
	2024		2023			2022
United States	$	30,518	$	(10,377	)	$	(87,400	)
Foreign		—		—			—
Income (loss) before provision for income taxes	$	30,518	$	(10,377	)	$	(87,400	)

As of December 31, 2024, the Company has concluded that it is more likely than not that the Company may not realize the benefit of its deferred tax assets due to its history of losses. The net deferred tax assets have been fully reserved. The provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2024			2023			2022
Current
U.S. federal	$	—		$	—		$	—
U.S. state		2,750			1,555			—
Non-U.S.		165			—			—
Total current		2,915			1,555			—
Deferred
U.S. federal		15,302			(190	)		(5,606	)
U.S. state		(11,428	)		7,002			(4,334	)
Total deferred		3,874			6,812			(9,940	)
Valuation allowance		(3,859	)		(6,806	)		9,940
Net deferred		15			6			—
Total	$	2,930		$	1,561		$	—

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established when uncertainty exists as to whether all or a portion of the net deferred tax assets will be realized. Components of the net deferred tax assets are approximately as follows (in thousands):

	December 31,
	2024			2023
Deferred tax assets:
Net operating loss carryforwards	$	480,008		$	506,641
Research and development credits		75,730			77,007
Capitalized research costs		26,872			14,225
Milestone rights		804			1,006
Accrued expenses		4,302			3,760
Loss on purchase commitment		22,413			22,806
Non-qualified stock option expense		3,364			3,559
Capitalized patent costs		4,798			6,720
Other		4,973			3,405
Lease liability		3,578			1,280
Interest expense limitation		—			2,782
Depreciation		21,638			21,134
Deferred product revenue and costs		11,347			346
Sale of future royalties		38,059			34,848
Total deferred tax assets		697,886			699,519
Valuation allowance		(694,369	)		(698,228	)
Net deferred tax assets	$	3,517		$	1,291
Deferred tax liabilities:
Right of use asset	$	(3,334	)	$	(1,121	)
Other prepaids		(204	)		(176	)
Total deferred tax liabilities		(3,538	)		(1,297	)
Net deferred tax assets	$	(21	)	$	(6	)

The Company’s effective tax rate differs from the statutory federal income tax rate as follows:

	Year Ended December 31,
	2024			2023			2022
Federal tax benefit rate		21.0	%		21.0	%		21.0	%
State tax expense (net of federal benefit)		7.1	%		-11.8	%		0.0	%
Permanent items		5.2	%		-2.8	%		-0.1	%
Officers compensation		5.6	%		-35.3	%		-1.1	%
Debt settlement		7.2	%		0.0	%		0.0	%
Stock based compensation		0.0	%		-5.6	%		0.4	%
Tax attribute expirations		1.6	%		0.4	%		-13.2	%
Valuation allowance		-42.2	%		9.1	%		-7.2	%
Other deferred adjustments		4.1	%		10.0	%		0.2	%
Effective income tax rate		9.6	%		-15.0	%		0.0	%

As of December 31, 2024 and 2023, management assessed the realizability of deferred tax assets. Management evaluated the need for an amount of any valuation allowance for deferred tax assets on a jurisdictional basis. This evaluation utilizes the framework contained in ASC 740, Income Taxes, wherein management analyzes all positive and negative evidence available at the balance sheet date to determine whether all or some portion of our deferred tax assets will not be realized. Under this guidance, a valuation allowance must be established for deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized.

In concluding on the evaluation, management placed significant emphasis on guidance in ASC 740, which states that “...a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome.” Based upon available evidence as of December 31, 2024, it was concluded on a more-likely-than-not basis that all deferred tax assets were not realizable. Accordingly, a valuation allowance of $694.4 million has been recorded to offset these deferred tax assets. During the years ended December 31, 2024 and 2023, the valuation allowance decreased by $3.9 million and $6.8 million, respectively.

A reconciliation of beginning and ending amounts of the Company's valuation allowance for deferred tax assets was as follows (in thousands):

	Year Ended December 31,
	2024			2023			2022
Valuation Allowance for Deferred Tax Assets
Beginning of Year	$	698,228		$	705,034		$	695,094
Additions (deductions) charged to expenses		(3,859	)		(6,806	)		9,940
End of Year	$	694,369		$	698,228		$	705,034

As of December 31, 2024, the Company had federal and state net operating loss carryforwards of approximately $1.9 billion and $1.3 billion available, respectively, to reduce future taxable income. $492.9 million of the federal losses do not expire and the remaining federal losses have started expiring, beginning in 2026 through various future dates.

Pursuant to IRC Sections 382 and 383, annual use of the Company’s federal and California net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. As a result of the Company's initial public offering, an ownership change within the meaning of IRC Section 382 occurred in August 2004. As a result, federal net operating loss and credit carryforwards of approximately $105.8 million are subject to an annual use limitation of approximately $13.0 million. The annual limitation is cumulative and therefore, if not fully utilized in a year can be utilized in future years in addition to the Section 382 limitation for those years. All of these attributes are now available for use for the tax year ended December 31, 2024 under Section 382. We have completed a Section 382 analysis beginning from the date of our initial public offering through December 31, 2024, to determine whether additional limitations may be placed on the net operating loss carryforwards and other tax attributes, and no additional changes in ownership that met Section 382 study ownership change threshold has been identified through December 31, 2024. There is a risk that changes in ownership may occur in tax years after December 31, 2024. If a change in ownership were to occur, our net operating loss carryforwards and other tax attributes could be further limited or restricted. If limited, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, related to the Company’s operations in the U.S. will not impact the Company’s effective tax rate.

As of December 31, 2024, the Company had $53.7 million of U.S. federal research and development credits which expire beginning in 2025, and $22.1 million of state research and development credits.

The Company files U.S. federal and state income tax returns in jurisdictions with varying statutes of limitations. In the normal course of business the Company is subject to examination by taxing authorities throughout the country. These audits could include examining the timing and amount of deductions, the allocation of income among various tax jurisdictions and compliance with federal, state, and local tax laws. The Company's tax years since 2021 and 2020 remain subject to examination by federal and state tax authorities.

A reconciliation of beginning and ending amounts of unrecognized tax benefits was as follows (in thousands):

	Year Ended December 31,
	2024		2023		2022
Unrecognized Tax Benefit
Beginning of Year	$	268,902	$	268,902	$	268,902
Gross increases for tax positions of prior years		—		—		—
Gross decreases for tax positions of prior years		—		—		—
Gross increases for tax positions of current year		—		—		—
Settlements		—		—		—
Lapse of statute of limitations		—		—		—
End of Year	$	268,902	$	268,902	$	268,902

The Company has assessed its position with regards to uncertainty in tax positions and has not recognized a liability for unrecognized tax benefits. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2024, 2023 and 2022, the Company did not recognize any interest and/or penalties.

In June 2024, California enacted Senate Bills 167 and 175 ("SB 167" and "SB 175"). SB 167 suspends the use of net operating losses ("NOLs") and limits the use of business credits to $5.0 million for the 2024-2026 tax years. Under SB 175, the NOL suspension and credit limitations will not apply for the 2025 and 2026 tax years if certain budget goals are met. Although the Company does not expect this legislation to have a material effect on its results of operations or cash flows, management continues to evaluate any potential impact.