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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | 10. INCOME TAXES During the years ended December 31, 2018, 2017 and 2016, the Company recorded a tax provision of $0.1 million, $0.8 million and $0.5 million, respectively. The 2018 tax provision was due to adjustments related to the filing of the Company’s 2017 tax returns with the relevant tax authorities. The 2017 tax provision was due to the Company’s establishment of a valuation allowance against the Company’s U.S. deferred tax assets, as well as income generated under research and management services arrangements between the Company’s U.S. and Singapore entities, which is taxed in the United States. The 2016 tax provision was primarily the result of income generated under research and management services arrangements between the Company’s U.S. and Singapore entities, which is taxed in the United States. During the year ended December 31, 2018, the Company recorded no income tax benefit for the net operating losses incurred in Singapore, the United States, Japan and the United Kingdom, due to uncertainty regarding future taxable income in those jurisdictions. During the year ended December 31, 2017, the Company recorded no income tax benefit for the net operating losses incurred in Singapore and the United Kingdom, due to uncertainty regarding future taxable income in those jurisdictions. During the year ended December 31, 2016, the Company recorded no income tax benefit for the net operating losses incurred in Singapore and Japan, due to uncertainty regarding future taxable income in those jurisdictions. In May 2016, the Company established a wholly-owned subsidiary in Ireland, however no income tax expense or benefit has been recorded during the years ended December 31, 2018, 2017 or 2016. The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and includes significant changes to the U.S. corporate tax system. Effective January 1, 2018, the Tax Act reduced the U.S. federal corporate tax rate from 35% to 21% and transitioned the U.S. federal tax system from a worldwide tax system to a territorial tax system. On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”) that provides additional guidance allowing companies to apply a measurement period of up to twelve months to account for the impacts of the Tax Act in their financial statements. As of December 31, 2018, the Company has finalized its accounting for the impacts of the Tax Act. During the year ended December 31, 2018, the Company recognized a $0.2 million benefit related to the remeasurement of the Company’s deferred tax assets and liabilities, as a result of filing the Company’s 2017 U.S. tax return. This amount was included as a component of the Company’s provision for income taxes and was fully offset by a corresponding amount in the Company’s valuation allowance. The components of the benefit (provision) for income taxes were as follows:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | (in thousands) |
Current benefit (provision) for income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Singapore |  | $ | (4 | ) |  | $ | 199 |  |  | $ | — |
Rest of world |  |  | (65 | ) |  |  | (133 | ) |  |  | (1,180 | )
Total current benefit (provision) for income taxes |  | $ | (69 | ) |  | $ | 66 |  |  | $ | (1,180 | )
Deferred benefit (provision) for income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Singapore |  | $ | — |  |  | $ | (134 | ) |  | $ | 134 |
Rest of world |  |  | — |  |  |  | (774 | ) |  |  | 564 |
Total deferred benefit (provision) for income taxes |  | $ | — |  |  | $ | (908 | ) |  | $ | 698 |
Total benefit (provision) for income taxes |  | $ | (69 | ) |  | $ | (842 | ) |  | $ | (482 | )
A reconciliation of the Singapore statutory income tax rate to the Company’s effective income tax rate is as follows:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Singapore statutory income tax rate |  |  | 17.0 | % |  |  | 17.0 | % |  |  | 17.0 | %
Federal and state tax credits |  |  | 6.6 |  |  |  | 5.7 |  |  |  | 3.1 |
Permanent differences |  |  | (0.3 | ) |  |  | (2.6 | ) |  |  | (0.9 | )
Changes in reserves for uncertain tax positions |  |  | (2.3 | ) |  |  | (3.5 | ) |  |  | (3.6 | )
Foreign rate differential |  |  | 7.8 |  |  |  | 2.8 |  |  |  | (0.1 | )
Tax rate change |  |  | (0.3 | ) |  |  | (0.9 | ) |  |  | — |
Other |  |  | 0.2 |  |  |  | 0.4 |  |  |  | (0.7 | )
Change in deferred tax asset valuation allowance |  |  | (28.7 | ) |  |  | (19.7 | ) |  |  | (15.7 | )
Effective income tax rate |  |  | — |  |  |  | (0.8 | )% |  |  | (0.9 | )%
The components of the Company’s deferred tax assets and liabilities as of December 31, 2018 and 2017 are as follows:
|  | December 31, |
|  | 2018 |  |  | 2017 |
|  | (in thousands) |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 58,661 |  |  | $ | 28,913 |
Federal and state tax credits |  |  | 13,783 |  |  |  | 4,522 |
Accrued expenses |  |  | 4,276 |  |  |  | 1,903 |
Share-based compensation |  |  | 3,811 |  |  |  | 1,921 |
Accumulated amortization |  |  | 18,829 |  |  |  | — |
Other |  |  | 1,267 |  |  |  | 176 |
Total deferred tax assets |  |  | 100,627 |  |  |  | 37,435 |
Valuation allowance |  |  | (99,438 | ) |  |  | (36,069 | )
Net deferred tax assets |  |  | 1,189 |  |  |  | 1,366 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Accumulated depreciation |  |  | (1,155 | ) |  |  | (1,366 | )
Other |  |  | (34 | ) |  |  | — |
Total deferred tax liabilities |  |  | (1,189 | ) |  |  | (1,366 | )
Net deferred tax assets (liabilities) |  | $ | — |  |  | $ | — |
A roll-forward of the valuation allowance for the years ended December 31, 2018 and 2017 is as follows:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |
|  | (in thousands) |
Balance at beginning of year |  | $ | 36,069 |  |  | $ | 15,999 |
Increase in valuation allowance |  |  | 63,337 |  |  |  | 20,595 |
Reversal of valuation allowance |  |  | — |  |  |  | (598 | )
Effect of foreign currency translation |  |  | 32 |  |  |  | 73 |
Balance at end of year |  | $ | 99,438 |  |  | $ | 36,069 |
As of December 31, 2018, the Company had federal net operating loss carryforwards in the United States of $82.6 million, $80.6 million of which may be available to offset future income tax liabilities indefinitely, while $2.0 million of carryforwards that were in existence as of December 31, 2017 may offset future income tax liabilities up through 2037. As of December 31, 2018 and 2017, the Company has U.S. federal research and development tax credit carryforwards of approximately $6.2 million and $2.8 million, respectively, available to offset future U.S. federal income taxes. As of December 31, 2018 and 2017, the Company has state research and development tax credit carryforwards of approximately $1.8 million and $1.1 million, respectively, available to offset future state income taxes. The U.S. federal and state research and development tax credits will begin to expire in 2031. As of December 31, 2018, the Company had a U.S. orphan drug credit carryforward of $5.0 million, which will begin to expire in 2037. As of December 31, 2018 and 2017, the Company has net operating loss carryforwards in Japan of $2.9 million and $4.1 million, respectively, which may be available to offset future income tax liabilities and begin to expire in 2023. As of December 31, 2018 and 2017, the Company has net operating loss carryforwards in Singapore of $161.3 million and $149.2 million, respectively, which may be available to offset future income tax liabilities and can be carried forward indefinitely. As of December 31, 2018 and 2017, the Company has net operating loss carryforwards in the United Kingdom of $46.4 million and $10.5 million, which may be available to offset future income tax liabilities and can be carried forward indefinitely. The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets. As of December 31, 2018, management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets in all jurisdictions. Accordingly, a full valuation allowance has been established against those deferred tax assets as of December 31, 2018. The valuation allowance increased by approximately $63.3 million in 2018, $20.1 million in 2017 and $8.5 million in 2016 primarily as a result of operating losses generated with no corresponding financial statement benefit. Additionally, as discussed in Note 2, the Company adopted ASU 2016-16 which resulted in an increase to the Company’s deferred tax assets, which was offset by a valuation allowance. The Company may release this valuation allowance when management determines that it is more-likely-than-not that the deferred tax assets will be realized. Any release of valuation allowance will be recorded as a tax benefit either increasing net income or decreasing net loss. The Company’s reserves related to taxes and its accounting for uncertain tax positions are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more-likely-than-not to be realized following resolution of any potential contingencies present related to the tax benefit. A summary of activity in the Company’s unrecognized tax benefits is as follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | (in thousands) |
Unrecognized tax benefit at the beginning of the year |  | $ | 6,207 |  |  | $ | 2,343 |  |  | $ | 1,280 |
Tax positions related to prior years |  |  | 430 |  |  |  | — |  |  |  | (1,066 | )
Tax positions related to the current year |  |  | 3,582 |  |  |  | 3,864 |  |  |  | 2,129 |
Unrecognized tax benefit at the end of the year |  | $ | 10,219 |  |  | $ | 6,207 |  |  | $ | 2,343 |
As of December 31, 2018, 2017 and 2016, the total amount of gross unrecognized tax benefits, which excludes interest and penalties, was $10.2 million, $6.2 million and $2.3 million, respectively. At December 31, 2018, $5.8 million of the net unrecognized tax benefits would affect the Company’s annual effective tax rate if recognized. The Company does not expect to record any material reductions in the measurement of its unrecognized tax benefits within the next twelve months. The Company’s policy is to record interest and penalties related to uncertain tax positions as part of its income tax provision. As of December 31, 2018 and 2017, the Company had recorded less than $0.1 million of interest or penalties related to uncertain tax positions. The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by various tax authorities in the United States, Japan, Singapore and the United Kingdom. There are currently no pending income tax examinations. Tax years from 2012 to the present are still open to examination in the United States, from 2008 to the present in Japan, from 2012 to the present in Singapore and from 2017 to the present in the United Kingdom. To the extent that the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the tax authorities to the extent utilized in a future period. As of December 31, 2018 and 2017, $53.0 million and $48.8 million, respectively, of cash was held by the subsidiaries outside of Singapore. The Company does not provide for Singapore income tax or foreign withholding taxes on foreign unrepatriated earnings, as the Company intends to permanently reinvest undistributed earnings in its foreign subsidiaries. If the Company decides to change this assertion in the future to repatriate any additional foreign earnings, the Company may be required to accrue and pay taxes. Because of the complexity of Singapore and foreign tax rules applicable to the distribution of earnings from foreign subsidiaries to Singapore, the determination of the unrecognized deferred tax liability on these earnings is not practicable. Utilization of the net operating loss carryforwards and research and development tax credit carryforwards in the United States may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the shares of a corporation by more than 50% over a three-year period. In 2018, the Company completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since its formation. The results of this study indicated that the Company experienced ownership changes as defined by Section 382 of the Code. Based on the results of the study, management has determined that the limitations will not have a material impact on the Company’s ability to utilize its net operating losses and research and development credit carryforwards to offset future tax liabilities. Should an ownership change have occurred after December 31, 2018 or occur in the future, the Company’s ability to utilize its net operating losses and research and development tax credit carryforwards may be limited.

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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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