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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | 16. Income Taxes Loss from continuing operations before provision for income tax for the Company’s domestic and international operations was as follows (in thousands):
|  | December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
US |  | $ | (84,207 | ) |  | $ | (113,679 | ) |  | $ | 129,361 |
Foreign |  |  | (2,528 | ) |  |  | (3,603 | ) |  |  | (3,697 | )
Loss before provision for income taxes |  | $ | (86,735 | ) |  | $ | (117,282 | ) |  | $ | 125,664 |
At December 31, 2018, the Company has concluded that it is more likely than not that the Company may not realize the benefit of its deferred tax assets due to its history of losses. The provision for income taxes for the years ended December 31, 2018 and 2017 was $0.2 million and $0.1 million, respectively. There was no provision for income tax recorded for the year ended December 31, 2016. The provision for income taxes relates only to foreign withholding taxes for the years ended December 31, 2018 and 2017 because the Company has incurred operating losses since inception. Accordingly, the net deferred tax assets have been fully reserved. The provision for income taxes consists of the following (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | — |  |  | $ | — |  |  | $ | — |
U.S. state |  |  | — |  |  |  | — |  |  |  | — |
Non-U.S. |  |  | 240 |  |  |  | 51 |  |  |  | — |
Total current |  |  | 240 |  |  |  | 51 |  |  |  | — |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  |  | (9,164 | ) |  |  | 244,801 |  |  |  | (43,814 | )
U.S. state |  |  | (1,903 | ) |  |  | 15,398 |  |  |  | (4,311 | )
Non-U.S. |  |  | — |  |  |  | — |  |  |  | — |
Total deferred |  |  | (11,067 | ) |  |  | 260,199 |  |  |  | (48,125 | )
Valuation allowance |  |  | 11,067 |  |  |  | (260,199 | ) |  |  | 48,125 |
Total |  | $ | 240 |  |  | $ | 51 |  |  | $ | — |
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established when uncertainty exists as to whether all or a portion of the net deferred tax assets will be realized. Components of the net deferred tax assets as of December 31, 2018 and 2017, are as follows (in thousands):
|  | December 31, |
|  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 524,377 |  |  | $ | 507,235 |
Research and development credits |  |  | 81,583 |  |  |  | 83,461 |
Capitalized research |  |  | 557 |  |  |  | 1,016 |
Milestone Rights |  |  | 3,521 |  |  |  | 1,908 |
Accrued expenses |  |  | 1,156 |  |  |  | 211 |
Loss on purchase commitment |  |  | 23,194 |  |  |  | 23,654 |
Non-qualified stock option expense |  |  | 2,551 |  |  |  | 7,004 |
Capitalized patent costs |  |  | 5,090 |  |  |  | 5,194 |
Other |  |  | 669 |  |  |  | 795 |
Depreciation |  |  | 22,560 |  |  |  | 23,820 |
Deferred Product Revenue & Costs |  |  | 107 |  |  |  |  |
Total net deferred tax assets |  |  | 665,365 |  |  |  | 654,298 |
Valuation allowance |  |  | (665,365 | ) |  |  | (654,298 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
The Company’s effective income tax rate differs from the statutory federal income tax rate as follows for the years ended December 31, 2018, 2017 and 2016:
|  | December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Federal tax benefit rate |  |  | 21.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Permanent items |  |  | 1.0 |  |  |  | 6.2 |  |  |  | (1.9 | )
Intercompany transfer of intellectual property |  |  | — |  |  |  | — |  |  |  | 0.9 |
Tax law changes |  |  | (0.7 | ) |  |  | (265 | ) |  |  | — |
Stock based compensation |  |  | (6.5 | ) |  |  | (5.0 | ) |  |  | — |
Tax attribute expirations |  |  | (1.6 | ) |  |  | (2.8 | ) |  |  | — |
Foreign withholding tax |  |  | (0.3 | ) |  |  | — |  |  |  | — |
Valuation allowance |  |  | (13.2 | ) |  |  | 231.6 |  |  |  | (34.0 | )
Effective income tax rate |  |  | -0.3 | % |  |  | — | % |  |  | — | %
As of December 31, 2018 and 2017, management assessed the realizability of deferred tax assets. Management evaluated the need for an amount of any valuation allowance for deferred tax assets on a jurisdictional basis. This evaluation utilizes the framework contained in ASC 740, Income Taxes, wherein management analyzes all positive and negative evidence available at the balance sheet date to determine whether all or some portion of the Company’s deferred tax assets will not be realized. Under this guidance, a valuation allowance must be established for deferred tax assets when it is more likely than not (a probability level of more than 50 percent) that the Company may not realize the benefit of its deferred tax assets. In assessing the realization of the Company’s deferred tax assets, the Company considers all available evidence, both positive and negative. In concluding on the evaluation, management placed significant emphasis on guidance in ASC 740, which states that “a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome.” Based upon available evidence, it was concluded on a more-likely-than-not basis that all deferred tax assets were not realizable as of December 31, 2018. Accordingly, a valuation allowance of $665.4 million has been recorded to offset this deferred tax asset. During the years ended December 31, 2018 and 2017, the change in the valuation allowance was $11.1 million and $(260.2) million, respectively. The Company adopted Topic 606, on January 1, 2018. Under Topic 606, the Company recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company expects to be entitled in exchange for those goods or services. Upon adoption, no change in retained earnings was recorded related to income taxes as the Company maintains a full valuation allowance. An adjustment of $0.4 million was recorded as a deferred tax liability and a corresponding reduction to the valuation allowance. See above for more information about the non-income tax impact of adoption of the new revenue guidance. At December 31, 2018, the Company had federal and state net operating loss carryforwards of approximately $2.1 billion and $2.4 billion available, respectively, to reduce future taxable income. $77.0 million of the federal losses do not expire and the remaining federal and state losses have started expiring, beginning in the current year through various future dates. Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s federal and California net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. As a result of the Company's initial public offering, an ownership change within the meaning of Internal Revenue Code Section 382 occurred in August 2004. As a result, federal net operating loss and credit carryforwards of approximately $216.0 million are subject to an annual use limitation of approximately $13.0 million. The annual limitation is cumulative and therefore, if not fully utilized in a year can be utilized in future years in addition to the Section 382 limitation for those years. There is a risk that changes in ownership have occurred since Company's initial public offering. If a change in ownership were to have occurred after the initial public offering, net operating loss carryforwards and other tax attributes could be further limited or restricted. If limited, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, related to the Company’s operations in the U.S. will not impact the Company’s effective tax rate. At December 31, 2018, the Company had $54.2 million of U.S. federal research and development credits which expire beginning in 2024, and $27.4 million of state research and development credits which for California do not expire and expire through various future dates for Connecticut and New Jersey. The Company files U.S. federal and state income tax returns in jurisdictions with varying statutes of limitations. In the normal course of business the Company is subject to examination by taxing authorities throughout the country. These audits could include examining the timing and amount of deductions, the allocation of income among various tax jurisdictions and compliance with federal, state and local laws. The Company’s tax years since 2015 remain subject to examination by federal, state and foreign tax authorities. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2018, the interest and penalties recognized were not material. During the years ended December 31, 2017 and 2016 the Company recognized and accrued an insignificant amount of interest or penalties related to unrecognized tax benefits. The Company considers its undistributed earnings of foreign subsidiaries to be permanently reinvested in foreign operations and has not provided for U.S. income taxes on such earnings. As of December 31, 2018 the Company had no undistributed earnings from its foreign subsidiaries. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code of 1986, as amended. The changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017, and expanded limits on employee remuneration. In 2017, the Company recorded provisional amounts for certain enactment-date effects of the Act by applying the guidance in SAB 118 because it had not yet completed our enactment-date accounting for these effects. In 2018 and 2017, the Company did not record tax expense related to the enactment-date effects of the Act as the Company maintained a full valuation allowance and the Company estimated a deficit in post-1986 earnings and profits from its foreign subsidiaries. The impact of this Act was a decrease of deferred tax assets of $301.0 million, offset by a decrease in a valuation allowance of $301.0 million, resulting in no additional income tax expense or benefit. The Company applied the guidance in SAB 118 when accounting for the enactment-date effects of the Act in 2017. At December 31, 2017, the Company had not completed its accounting for all of the enactment-date income tax effects of the Act under ASC 740, Income Taxes, for the following aspects: remeasurement of deferred tax assets and liabilities, one-time transition tax, and tax on global intangible low-taxed income. As of December 31, 2018, the Company had completed the accounting for all of the enactment-date income tax effects of the Act. As further discussed below, during 2018, the Company did not recognize adjustments to the provisional amounts recorded at December 31, 2017 as all changes were off-set by the valuation allowance. The one-time transition tax is based on the total post-1986 earnings and profits, the tax on which we previously deferred from US income taxes under US law. The Company had estimated a deficit in post 1986 earnings and profits with no income tax expense recorded. Upon further analyses of the Act and notices and regulations issued and proposed by the US Department of the Treasury and the Internal Revenue Service, the Company finalized the calculations of the transition tax liability during 2018. The provisional amount did not change; therefore, there was no adjustment to tax expense or valuation allowance. As of December 31, 2017, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future (which was generally 21%), by recording a provisional amount of $301.0 million, which was fully offset by a valuation allowance of the same amount. Upon further analysis of certain aspects of the Act and refinement of the calculations during the year ended December 31, 2018, the Company found no other adjustments were necessary. The Act subjects a US shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred.

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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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