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Income taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes The loss from operations before tax (expense) benefit consisted of the following for the years ended December 31, 2017, 2016, and 2015:
|  | 2017 |  | 2016 |  | 2015
Domestic |  | (54,588 | ) |  | (61,446 | ) |  | (50,944 | )
Foreign |  | (23,077 | ) |  | (80,095 | ) |  | (119,018 | )
Total |  | (77,665 | ) |  | (141,541 | ) |  | (169,962 | )
The Income Tax Provision consisted of the following for the years ended December 31, 2017, 2016 and 2015:
|  | 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |  |  |  |
U.S. Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
U.S. State and Local |  | (6 | ) |  | (2 | ) |  | (2 | )
Foreign |  | (1,131 | ) |  | (766 | ) |  | (483 | )
Deferred: |  |  |  |  |  |
U.S. Federal |  | (198 | ) |  | 199 |  |  | — |
U.S. State and Local |  | — |  |  | — |  |  | — |
Foreign |  | — |  |  | — |  |  | — |
Total tax expense |  | $ | (1,335 | ) |  | $ | (569 | ) |  | $ | (485 | )
A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:
|  | December 31,
|  | 2017 |  | 2016 |  | 2015
Federal income tax at statutory rate |  | 34.00 | % |  | 34.00 | % |  | 34.00 | %
State income tax (benefit), net of federal benefit |  | (1.01 | ) |  | 3.05 |  |  | (0.43 | )
Permanent differences |  | (8.48 | ) |  | (3.70 | ) |  | (6.61 | )
Research and development |  | 19.53 |  |  | 16.66 |  |  | 19.50 |
(Increase) decrease to valuation allowance |  | 29.10 |  |  | (30.72 | ) |  | (20.87 | )
Change in deferred tax assets |  | (64.12 | ) |  | — |  |  | — |
Foreign tax rate differential |  | (10.33 | ) |  | (19.84 | ) |  | (24.06 | )
Benefit (expense) allocated from other comprehensive income |  | (0.26 | ) |  | 0.14 |  |  | — |
Other |  | (0.15 | ) |  | 0.01 |  |  | (1.82 | )
Effective income tax rate |  | (1.72 | )% |  | (0.40 | )% |  | (0.29 | )%
The significant components of the Company’s deferred tax assets and liabilities at December 31, 2017 and 2016 are as follows:
|  | 2017 |  | 2016
Deferred tax assets: |  |  |  |  |  |
Accrued Expense |  | $ | 625 |  |  | $ | 849 |
Amortization |  | 2,116 |  |  | 46 |
Depreciation |  | 1,749 |  |  | 2,968 |
Federal tax credits |  | 80,961 |  |  | 74,475 |
State tax credits |  | 7,148 |  |  | 4,996 |
Federal net operating losses |  | 61,068 |  |  | 80,061 |
State net operating losses |  | 11,884 |  |  | 9,672 |
Capitalized research and development costs |  | 3,332 |  |  | 7,248 |
Other |  | 18,815 |  |  | 22,125 |
Total gross deferred tax assets |  | 187,698 |  |  | 202,440 |
Less valuation allowance |  | (177,631 | ) |  | (183,015 | )
Total deferred tax assets, net of valuation allowance |  | $ | 10,067 |  |  | $ | 19,425 |
Deferred tax liabilities: |  |  |  |  |  |
Convertible debt |  | $ | (9,927 | ) |  | $ | (19,190 | )
OCI unrealized gains |  | $ | (140 | ) |  | $ | (235 | )
Total gross deferred tax assets |  | (10,067 | ) |  | (19,425 | )
Net deferred tax assets (liabilities) |  | $ | — |  |  | $ | — |
At December 31, 2017 and 2016, the Company recorded a full valuation allowance against its net deferred tax assets of approximately $177.6 million and $183.0 million, respectively. The change in the valuation allowance during the years ended December 31, 2017 and 2016 was approximately $5.4 million and $43.4 million, respectively. A full valuation allowance has been recorded since, in the judgment of management, these assets are not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences and carryforwards become deductible or are utilized. As of December 31, 2017, the Company has approximately $290.8 million and $167.1 million of federal and state net operating loss carryforwards, respectively. As of December 31, 2017, research and development credit carryforwards for federal and state purposes are approximately $13.2 million and $8.7 million, respectively. In addition, the Orphan Drug Credit Carryover available as of December 31, 2017 is approximately $67.8 million. As a result of the adoption of ASU 2016-09, the Company will no longer exclude $50.4 million tax benefits that arose directly from equity compensation in excess of compensation recognized for financial reporting in its U.S. federal and U.S. state net operating loss carryforwards. There was no net impact on the Company’s opening accumulated deficit upon application of this guidance using the modified retrospective transition method as the total cumulative-effect adjustment for previously deferred excess tax benefits was offset by a related change in the valuation allowance. The federal net operating loss carryforwards begin to expire in 2021, while the federal credit carryforwards begin to expire in 2019. State net operating loss carryforwards begin to expire in 2030, and the state credit carryforwards began to expire in 2016. Sections 382 and 383 of the Internal Revenue Code of 1986 subject the future utilization of net operating losses and certain other tax attributes, such as research and development tax credits, to an annual limitation in the event of certain ownership changes, as defined. The Company has undergone an ownership change and has determined that a “change in ownership” as defined by IRC Section 382 of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, did occur in June of 2013. Accordingly, about $231.5 million of the Company’s NOL carryforwards are limited and the Company can only use $16.7 million for the first five years from the ownership change and $5.7 million per year going forward. Therefore, $169.2 million of the NOL’s will be freed up over the next 20 years and $62.3 million are expected to expire unused which are not included in the deferred tax assets listed above. In summary, there are $290.8 million of NOLs available, out of which $169.2 million are limited by IRC Section 382. At December 31, 2017, there is $196.7 million available for immediate use and an additional $11.2 million will free up in 2018. The income tax expense and benefit for the years ended December 31, 2017 and 2016 differed from the amounts computed by applying the U.S. federal income tax rate of 34% to loss before tax expense and benefit as a result of foreign taxes, nondeductible expenses, tax credits generated, true up of net operating loss carryforwards, and decrease in the Company’s valuation allowance. The Company applies the elements of FASB ASC 740-10 regarding accounting for uncertainty in income taxes. This clarifies the accounting for uncertainty in income taxes recognized in financial statements and required impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. As of December 31, 2017 the Company did not have any unrecognized tax benefits and has not accrued any interest or penalties through 2017. The Company does not expect to have any unrecognized tax benefits within the next twelve months. The Company’s policy is to recognize interest and penalties related to tax matters within the income tax provision. Tax years beginning in 2013 are generally subject to examination by taxing authorities, although net operating losses from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used. The Company continues to be under examination from the United States Internal Revenue Service for tax year 2014. The Company has entered into a consent to extend the time to access tax with the IRS. For all years through December 31, 2017, the Company generated research credits but has not conducted a study to document the qualified activities. This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards and the valuation allowance. U.S. federal income taxes have not been provided on undistributed earnings of the Company’s international subsidiaries as it is the Company’s intention to reinvest any earnings into the respective subsidiaries. It is not practicable to estimate the amount of tax that might be payable if some or all of such earnings were to be repatriated, and the amount of foreign tax credits that would be available to reduce or eliminate the resulting U.S. income tax liability. As of December 31, 2017 and December 31, 2016 there are no undistributed earnings. On December 22, 2017, the U.S. government enacted the 2017 Tax Cuts and Jobs Act (the 2017 Tax Act), which significantly revises U.S. tax law by, among other provisions, lowering the U.S. federal statutory income tax rate to 21%, imposing a mandatory one-time transition tax on previously deferred foreign earnings, and eliminating or reducing certain income tax deductions. As a result of the reduction in the U.S. corporate income tax rate, the Company revalued its ending net deferred tax assets as of December 31, 2017 which resulted in a provisional benefit of $46.1 million. However, this adjustment was offset by a related change in the valuation allowance. The 2017 Tax Act also imposed a tax for a one-time deemed repatriation of post-1986 unremitted foreign E&P through the year ended December 31, 2017. The Company did not record any provisional tax expense related to the deemed repatriation as it does not have any undistributed foreign earnings. The Global Intangible Low-tax Income (GILTI) provisions of the 2017 Tax Act require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company expects that it will be subject to incremental U.S. tax on GILTI income beginning in 2018. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2017. ASC 740, Income Taxes requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted. However, due to the complexity and significance of the 2017 Tax Act’s provisions, the SEC issued SAB 118, which allows companies to record the tax effects of the 2017 Tax Act on a provisional basis based on a reasonable estimate, and then, if necessary, subsequently adjust such amounts during a limited measurement period as more information becomes available. The measurement period ends when a company has obtained, prepared, and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year from enactment. The 2017 Tax Act did not have a material impact on the Company’s financial statements since its deferred temporary differences are fully offset by a valuation allowance and the Company does not have any significant off shore earnings from which to record the mandatory transition tax. However, given the significant complexity of the 2017 Tax Act, anticipated guidance from the U.S. Treasury about implementing the 2017 Tax Act, and the potential for additional guidance from the SEC or the FASB related to the 2017 Tax Act, these estimates may be adjusted during the measurement period. The provisional amounts disclosed in the Company’s footnotes were based on the its present interpretations of the 2017 Tax Act and current available information, including assumptions and expectations about future events, such as its projected financial performance, and are subject to further refinement as additional information becomes available (including the Company’s actual full fiscal 2018 results of operations, as well as potential new or interpretative guidance issued by the FASB or the Internal Revenue Service and other tax agencies) and further analyses are completed. The Company continues to analyze the changes in certain income tax deductions, assess calculations of earnings and profits in certain foreign subsidiaries, including if those earnings which are held in cash or other assets and gather additional data to compute the full impacts on the Company’s deferred and current tax assets and liabilities.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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