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Income taxes | 12 Months Ended
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Dec. 31, 2018
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, 2018, 2017, and 2016:
|  | 2018 |  | 2017 |  | 2016
Domestic |  | (68,461 | ) |  | (54,588 | ) |  | (61,446 | )
Foreign |  | (59,649 | ) |  | (23,077 | ) |  | (80,095 | )
Total |  | (128,110 | ) |  | (77,665 | ) |  | (141,541 | )
The Income Tax Provision consisted of the following for the years ended December 31, 2018, 2017 and 2016:
|  | 2018 |  | 2017 |  | 2016
Current: |  |  |  |  |  |  |  |
U.S. Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
U.S. State and Local |  | (38 | ) |  | (6 | ) |  | (2 | )
Foreign |  | (669 | ) |  | (1,131 | ) |  | (766 | )
Deferred: |  |  |  |  |  |
U.S. Federal |  | — |  |  | (198 | ) |  | 199 |
U.S. State and Local |  | — |  |  | — |  |  | — |
Foreign |  | 736 |  |  | — |  |  | — |
Total tax benefit (expense) |  | $ | 29 |  |  | $ | (1,335 | ) |  | $ | (569 | )
A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:
|  | December 31,
|  | 2018 |  | 2017 |  | 2016
Federal income tax provision at statutory rate |  | 21.00 | % |  | 34.00 | % |  | 34.00 | %
State income tax provision, net of federal benefit |  | 0.05 |  |  | (1.01 | ) |  | 3.05 |
Permanent differences |  | (6.41 | ) |  | (8.48 | ) |  | (3.70 | )
Research and development |  | 6.49 |  |  | 19.53 |  |  | 16.66 |
Change in valuation allowances |  | 2.20 |  |  | 29.10 |  |  | (30.72 | )
Change in deferred tax assets |  | (14.22 | ) |  | (64.12 | ) |  | — |
Foreign tax rate differential |  | (9.10 | ) |  | (10.33 | ) |  | (19.84 | )
Benefit allocated from other comprehensive income |  | — |  |  | (0.26 | ) |  | 0.14 |
Other |  | 0.01 |  |  | (0.15 | ) |  | 0.01 |
Effective income tax rate |  | 0.02 | % |  | (1.72 | )% |  | (0.40 | )%
Accounting for income taxes under U.S. GAAP requires that individual tax-paying entities of the company offset all deferred tax liabilities and assets within each particular tax jurisdiction and present them as a noncurrent deferred tax liability or asset. Amounts in different tax jurisdictions cannot be offset against each other. The noncurrent deferred income tax asset is recorded within deposits and other assets on the balance sheet. The amount of deferred income taxes are as follows:
|  | 2018 |  | 2017
Assets: |  |  |  |
Noncurrent deferred income taxes |  | $ | 736 |  |  | $ | — |
Liabilities: |  |  |  |
Noncurrent deferred income taxes |  | (122,032 | ) |  | — |
Deferred income taxes - net |  | $ | (121,296 | ) |  | $ | — |
The significant components of the Company’s deferred tax assets and liabilities at December 31, 2018 and 2017 are as follows:
|  | 2018 |  | 2017
Deferred tax assets: |  |  |  |  |  |
Accrued expense |  | $ | 714 |  |  | $ | 625 |
Amortization |  | 5,148 |  |  | 2,116 |
Depreciation |  | 1,601 |  |  | 1,749 |
Federal tax credits |  | 89,070 |  |  | 80,961 |
State tax credits |  | 5,473 |  |  | 7,148 |
Federal net operating losses |  | 62,159 |  |  | 61,068 |
State net operating losses |  | 165 |  |  | 11,884 |
Foreign net operating losses |  | 736 |  |  | — |
Capitalized research and development costs |  | 2,093 |  |  | 3,332 |
Share based compensation and other |  | 21,411 |  |  | 18,815 |
Total gross deferred tax assets |  | 188,570 |  |  | 187,698 |
Less valuation allowance |  | (180,481 | ) |  | (177,631 | )
Total deferred tax assets, net of valuation allowance |  | $ | 8,089 |  |  | $ | 10,067 |
Deferred tax liabilities: |  |  |  |  |  |
Convertible debt |  | $ | (7,353 | ) |  | $ | (9,927 | )
OCI unrealized (gains)/losses |  | — |  |  | (140 | )
Indefinite lived intangible |  | (122,032 | ) |  | — |
Total gross deferred tax liabilities |  | (129,385 | ) |  | (10,067 | )
Net deferred tax assets (liabilities) |  | $ | (121,296 | ) |  | $ | — |
At December 31, 2018 and 2017, the Company recorded valuation allowance against its net deferred tax assets of approximately $180.5 million and $177.6 million, respectively. The change in the valuation allowance during the years ended December 31, 2018 and 2017 was approximately $2.8 million and $5.4 million, respectively. A 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, 2018, the Company incurred approximately $296.0 million, $202.4 million, $5.9 million of federal, state, and foreign net operating loss carryforwards, respectively. As a result of the adoption of ASU 2016-09, the Company no longer excludes 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. During 2018, the Company acquired IPR&D as part of the acquisition of Agilis. This asset is currently considered an indefinite-lived intangible with no related book amortization and tested for impairment, annually. As the IPR&D has no tax basis and is an indefinite-lived intangible, the deferred tax liability created at the time of acquisition is not considered positive evidence of future income and is presented as a deferred tax liability in the balance sheet. As of December 31, 2018, research and development credit carryforwards for federal and state purposes are approximately $15.2 million and $6.6 million, respectively. In addition, the Orphan Drug Credit Carryover available as of December 31, 2018 is approximately $74.0 million. As a result of U.S. tax reform legislation, federal net operating losses generated in 2018 carryforward indefinitely, however, the Company has federal net operating losses that pre-date U.S. tax reform legislation which begin to expire in 2021 and federal credit carryforwards that 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 $296.0 million of NOLs available, out of which $231.5 million are limited by IRC Section 382. At December 31, 2018, there is $194.5 million available for immediate use and an additional $5.7 million will free up in 2019. The income tax expense for the years ended December 31, 2018 and 2017 differed from the amounts computed by applying the U.S. federal income tax rate of 21% and 34% respectively, to loss before tax expense as a result of foreign taxes, nondeductible expenses, tax credits generated, true up of net operating loss carryforwards, and increase 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, 2018 the Company did not have any unrecognized tax benefits and has not accrued any interest or penalties through 2018. 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 2014 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 concluded the examination from the United States Internal Revenue Service for tax year 2014 noting adjustments to the U.S. federal net operating loss carryforwards and research and development credit carryforwards. No other examinations are in process. For all years through December 31, 2016, 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. As a result of U.S. tax reform legislation, distributions of profits from non-U.S. subsidiaries are not expected to cause a significant incremental U.S. tax impact in the future. However, distributions may be subject to non-U.S. withholding taxes if profits are distributed from certain jurisdictions. U.S. federal income taxes have not been provided on undistributed earnings of our international subsidiaries as it is our 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 due to the legal structure and complexity of U.S. and local tax laws. As of December 31, 2018 and December 31, 2017 there are no undistributed earnings. We have completed our accounting for the income tax effects of U.S. tax reform legislation and included measurement period adjustments in 2018. 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 which was offset by an associated change in the valuation allowance.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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