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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

No provision for income taxes was recorded for the years ended December 31, 2024, December 31, 2023 and December 31, 2022. The Company has incurred net operating losses only in the United States since its inception. The Company has not reflected any benefit of such net operating loss carryforwards in the financial statements.

The provision for income taxes differs from the amount expected by applying the federal statutory rate to the loss before taxes as follows:

 

 

 

Year Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Federal statutory income tax rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State income taxes

 

 

1.5

%

 

 

1.3

%

 

 

1.9

%

Change in valuation allowance

 

 

(25.1

%)

 

 

(29.1

%)

 

 

(23.4

%)

Stock-based compensation

 

 

1.1

%

 

 

0.7

%

 

 

(1.2

%)

Research tax credits

 

 

2.7

%

 

 

8.3

%

 

 

4.4

%

Other permanent differences

 

 

(0.0

%)

 

 

(0.1

%)

 

 

(0.1

%)

Section 162(m) limitation

 

 

(1.2

%)

 

 

(2.1

%)

 

 

(2.6

%)

Provision for income taxes

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

The tax effects of temporary differences and carryforwards of the deferred tax assets are presented below (in thousands):

 

 

 

As of December 31,

 

 

 

2024

 

 

2023

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

37,524

 

 

$

34,717

 

Research and development credit carryforwards

 

 

30,868

 

 

 

19,997

 

Lease liability

 

 

4,074

 

 

 

610

 

Intangible assets

 

 

18,365

 

 

 

1,096

 

Stock-based compensation

 

 

7,401

 

 

 

2,593

 

Accruals and reserves

 

 

1,468

 

 

 

1,257

 

Capitalized research & development expenditures

 

 

69,271

 

 

 

36,267

 

Gross deferred tax assets

 

 

168,971

 

 

 

96,537

 

Less: Valuation allowance

 

 

(164,876

)

 

 

(95,888

)

Deferred tax assets, net of valuation allowance

 

 

4,095

 

 

 

649

 

Deferred tax liabilities:

 

 

 

 

 

 

Right-of-use assets

 

 

(3,990

)

 

 

(477

)

Property and equipment

 

 

(105

)

 

 

(172

)

Net deferred tax assets

 

$

—

 

 

$

—

 

 

The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance increased by $69.0 million, $32.1 million and $14.2 million during 2024, 2023, and 2022, respectively.

The Company had net operating loss carryforwards of $147.5 million and $135.3 million available to reduce future taxable income, if any, for federal income tax purposes as of December 31, 2024 and December 31, 2023, respectively. The Company had net operating loss carryforwards of $93.5 million and $89.6 million available to reduce future taxable income, if any, for state income tax purposes. If not utilized, the federal carryforwards of $11.6 million and the state carryforwards of $93.5 million will begin to expire in 2037 and 2036, respectively. The federal net operating loss carryforwards of $135.9 million arising after December 31, 2017 do not expire.

The Company also had federal and state research and development credit carryforwards of $19.8 million and $10.8 million as of December 31, 2024 and $12.0 million and $6.4 million as of December 31, 2023, respectively. The Company had Orphan Drug Credits (“ODC”), related to the orphan drug designation of darovasertib in 2022, of $8.1 million and $6.3 million as of December 31, 2024 and December 31, 2023, respectively. The federal credits will expire starting in 2037 if not utilized, and the state research credit can be carried forward indefinitely.

The Tax Reform Act of 1986 limits the use of net operating loss carryforwards in certain situations where changes occur in the stock ownership of a company. The annual limitation may result in the expiration of net operating losses and credits before utilization. The Company performed a Section 382 analysis through December 31, 2024. The Company has not experienced ownership changes in the current year. Subsequent ownership changes may affect the limitation in future years.

Related to unrecognized tax benefits noted below, the Company accrued no penalties or interest during the years ended December 31, 2024, December 31, 2023 and December 31, 2022. The Company does not expect its unrecognized tax benefit balance to change materially over the next 12 months.

 

The Company had $5.9 million and $3.8 million of unrecognized tax benefits as of December 31, 2024 and December 31, 2023, respectively.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands).

 

Balance as of January 1, 2023

 

$

1,962

 

Increase related to prior year tax positions

 

 

372

 

Increase related to current year tax positions

 

 

1,488

 

Balance as of December 31, 2023

 

$

3,822

 

Decrease related to prior year tax positions

 

 

(185

)

Increase related to current year tax positions

 

 

2,290

 

Balance as of December 31, 2024

 

$

5,927

 

 

The Company files income tax returns in the U.S. federal jurisdiction and in the states of Arizona, California, New Jersey, North Carolina, Pennsylvania, Texas, Utah and Wisconsin. For jurisdictions in which tax filings have been filed, all tax years remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating losses or credits.

 

The Company is under audit in California for tax years 2020-2021.