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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

14. Income Taxes

The components of loss from continuing operations before provision for income taxes are as follows (in thousands):

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

 

2021

 

United States

$

(48,495

)

 

$

(82,815

)

 

$

(314,673

)

Foreign

 

(478,001

)

 

 

(568,688

)

 

 

(431,329

)

Total

$

(526,496

)

 

$

(651,503

)

 

$

(746,002

)

Provision for income taxes for the years ended December 31, 2023, 2022, and 2021 are as follows (in thousands):

 

 

Year Ended December 31, 2023

 

 

Year Ended December 31, 2022

 

 

Year Ended December 31, 2021

 

Current income tax expense:

 

 

 

 

 

 

 

 

U.S. Federal

$

—

 

 

$

—

 

 

$

—

 

U.S. State and Local

 

1,869

 

 

 

520

 

 

 

205

 

Foreign

 

263

 

 

 

149

 

 

 

147

 

Total current income tax expense

 

2,132

 

 

 

669

 

 

 

352

 

Deferred income tax expense:

 

 

 

 

 

 

 

 

U.S. Federal

 

—

 

 

 

—

 

 

 

—

 

U.S. State and Local

 

—

 

 

 

—

 

 

 

—

 

Foreign

 

—

 

 

 

—

 

 

 

—

 

Total deferred income tax expense

 

—

 

 

 

—

 

 

 

—

 

Total tax expense

$

2,132

 

 

$

669

 

 

$

352

 

A reconciliation between the U.S. federal statutory tax rate and the Company's effective tax rate is summarized as follows (in thousands):

 

 

Year Ended December

 

 

2023

 

 

2022

 

 

2021

 

 

Amount

 

 

Percentage of income before income taxes

 

 

Amount

 

 

Percentage of income before income taxes

 

 

Amount

 

 

Percentage of income before income taxes

 

Statutory U.S. federal income tax

$

(110,564

)

 

 

21.0

%

 

$

(136,816

)

 

 

21.0

%

 

$

(156,660

)

 

 

21.0

%

Foreign tax rate differential

 

42,100

 

 

 

(8.0

)

 

 

50,219

 

 

 

(7.7

)

 

 

38,677

 

 

 

(5.2

)

State income taxes, net of federal benefit

 

(13,438

)

 

 

2.6

 

 

 

9,051

 

 

 

(1.4

)

 

 

(14,145

)

 

 

1.9

 

Change in valuation allowances

 

119,592

 

 

 

(23.2

)

 

 

94,668

 

 

 

(14.5

)

 

 

133,668

 

 

 

(17.9

)

Tax credits

 

(11,566

)

 

 

2.2

 

 

 

(19,966

)

 

 

3.0

 

 

 

(20,005

)

 

 

2.6

 

Share Based Compensation

 

(26,881

)

 

 

5.1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Change in state apportionment

 

—

 

 

 

—

 

 

 

(35

)

 

 

—

 

 

 

—

 

 

 

—

 

Loss on debt conversion

 

—

 

 

 

—

 

 

 

6,626

 

 

 

(1.0

)

 

 

19,548

 

 

 

(2.6

)

Permanent and other

 

2,889

 

 

 

(0.1

)

 

 

(3,078

)

 

 

0.5

 

 

 

(731

)

 

 

0.1

 

   Effective income tax provision

$

2,132

 

 

 

(0.4

)

 

$

669

 

 

 

(0.1

)

 

$

352

 

 

 

(0.1

)

The Company’s effective income tax rate for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased primarily as a result of operations in state jurisdictions.

The Company accounts for income taxes in accordance with ASC Topic 740. Deferred income tax assets and liabilities are determined based upon temporary differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

 

The following table presents the principal components of the Company’s deferred tax assets and liabilities (in thousands):

 

 

December 31,

 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

Intangible assets

$

192,444

 

 

$

187,839

 

Share-based compensation

 

31,712

 

 

 

29,673

 

Net operating loss carryforwards

 

329,135

 

 

 

228,985

 

Research and development credits

 

67,667

 

 

 

57,419

 

Orphan drug credits

 

34,023

 

 

 

30,160

 

Development derivative liability

 

75,190

 

 

 

79,374

 

Convertible debt

 

5,582

 

 

 

6,850

 

Fixed Assets

 

18

 

 

 

—

 

Lease liability

 

2,888

 

 

 

4,304

 

Accruals

 

17,401

 

 

 

16,272

 

Total deferred tax assets

 

756,060

 

 

 

640,876

 

Deferred tax liabilities:

 

 

 

 

 

Fixed assets

 

—

 

 

 

(91

)

Right-of-use asset

 

(2,672

)

 

 

(4,032

)

481(a) adjustment

 

—

 

 

 

(233

)

Total deferred tax liabilities

 

(2,672

)

 

 

(4,356

)

Net deferred tax assets before allowance:

 

753,388

 

 

 

636,520

 

Less valuation allowance

 

(753,388

)

 

 

(636,520

)

Net deferred tax assets

$

—

 

 

$

—

 

 

The Tax Cuts and Jobs Act (TCJA) requires taxpayers to capitalize and amortize research and development (R&D) expenditures under section 174 for tax years beginning after December 31, 2021. This rule became effective for the Company on January 1, 2022 and resulted in the capitalization of R&D costs of approximately $42.3 million and $47.6 million for tax year ending December 31, 2023 and 2022, respectively. The Company will amortize these costs for tax purposes over 5 years if the R&D was performed in the U.S. and over 15 years if the R&D was performed outside the U.S.

 

ASC Topic 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, the Company has recorded full valuation allowances against its domestic and foreign deferred tax assets on December 31, 2023, because management has determined that is it more likely than not that these assets will not be realized. The valuation allowance increased by $116.9 million from December 31, 2022 to December 31, 2023, primarily due to increases in operating losses and research and development tax credits.

On December 31, 2023, the Company had approximately $494.1 million, $524.0 million and $1,663.3 million of federal, state and foreign net operating loss carryforward, respectively. On December 31, 2022, the Company had approximately $312.8 million, $395.4 million and $1,204.7 million of federal, state and foreign net operating loss carryforward, respectively. The Company also had federal and state research and development tax credit carryforwards $85.7 million and $20.2 million, respectively of as of December 31, 2023. Federal net operating loss carryforward in the amount of $449.8 million may be carried forward indefinitely. The remaining federal and state net operating loss, research and development tax credit carryforwards begin to expire in 2025. The Company’s foreign net operating loss carryforwards will begin to expire in 2027.

Under the provisions of the Internal Revenue Code (“IRC”), the net operating loss (“NOL”), and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the IRC, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed several financings since its inception that it believes may have resulted in a change in control as defined by Sections 382 and 383 of the IRC.

 

The Company does not have any unrecognized tax benefits during any periods presented and does not expect this to significantly change in the next twelve months. There were no interest and penalties recorded in the statement of operations during any period and no amounts accrued for interest and penalties on December 31, 2023 or 2022.

The Company and its subsidiaries file income tax returns in the United States, as well as various state and foreign jurisdictions. Generally, the tax years 2020 through 2022 remain open and subject to examination by the major taxing jurisdictions to which the Company is subject. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, or state or foreign tax authorities, to the extent utilized in a future period.