8. Income Taxes

The Company is subject to U.S. federal and state income taxes. The statute of limitations for tax audit is generally open for the years 2008 and later. However, except in 2009, the Company has incurred net operating losses since inception. Such loss carryforwards would be subject to audit in any tax year in which those losses are utilized, notwithstanding the year of origin. The Company's policy is to recognize interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company has recorded no such expense. The Company obtained additional loss carryforwards from the Merger. As of December 31, 2011 and 2010, the Company has recorded no reserves for unrecognized income tax benefits. The Company does not anticipate any material changes in the amount of unrecognized tax positions over the next twelve months.

The net deferred tax assets of approximately $110 million and $94 million at December 31, 2011 and 2010, respectively, arise primarily due to net operating loss carryforwards for income tax purposes. Due to the Company's anticipated future losses, these amounts have been entirely offset by increasing the valuation allowance $16.4 million to $110 million at December 31, 2011.

At December 31, 2011 and 2010, the Company had net operating loss carryforwards for income tax purposes of approximately $330 million and $310 million, respectively, expiring in various years beginning in 2012. Utilization of these carryforwards will likely be significantly limited due to changes in the ownership of the Company's common stock.

The Company does not believe there are any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will increase or decrease significantly within the next twelve months. As of December 31, 2011, the Company has not accrued interest or penalties related to uncertain tax positions. The Company has never been audited by the Internal Revenue Service, and the tax returns for the years ended December 31, 2008 through December 31, 2011 are still subject to examination by major tax jurisdictions.

Deferred tax assets (liabilities) consist of the following at December 31:

	2011			2010
Deferred tax assets	(in thousands)

General business credits		10,324			7,708
AMT credit		418			418
Other		1,791			3,064
NOL carryforwards		120,473			112,721

Total deferred tax assets		133,006			123,911

Deferred tax liabilities

In-process research and development		(22,093	)		(29,609	)
Other		(170	)		(377	)

Total deferred tax liabilities		(22,263	)		(29,986	)

Tax deferred asset		110,743			93,925
Valuation allowance		(110,743	)		(93,925	)
Net deferred tax asset		-			-

The differences between the U.S. federal statutory tax rate and the Company's effective tax rate are as follows:

	2011			2010			2009
Statutory federal tax rate		34	%		34	%		34	%
Permanent items		(4	)%		(9	)%		0	%
State income taxes net of federal benefit		4	%		1	%		4	%
Research and development credit		5	%		0	%		0	%
Expired net operating loss carryforwards		(10	)%		0	%		0	%
Alternative minimum tax		0	%		1	%		0	%
Change in valuation allowance		(28	)%		(28	)%		(38	)%
Other		(1	)%		0	%		0	%

Total Expense		0	%		(1	)%		0	%