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Income Taxes | 12 Months Ended
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Dec. 31, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | 15. INCOME TAXES The components of income before provision for income taxes are as follows:
|  | Year Ended December 31, |
|  | 2025 |  |  | 2024 |  |  | 2023 |
Domestic |  | $ | 327,060 |  |  | $ | 37,362 |  |  | $ | 194,034 |
Foreign |  |  | (198 | ) |  |  | 26 |  |  |  | 64 |
Income before provision for income taxes |  | $ | 326,862 |  |  | $ | 37,388 |  |  | $ | 194,098 |
Income tax expense consists of the following:
|  | Year Ended December 31, |
(In thousands) |  | 2025 |  |  | 2024 |  |  | 2023 |
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | 6,578 |  |  | $ | 23,438 |  |  | $ | 7,799 |
State |  |  | 3,477 |  |  |  | 3,175 |  |  |  | 2177 |
Foreign |  |  | 1,795 |  |  |  | — |  |  |  | — |
Total current |  |  | 11,850 |  |  |  | 26,613 |  |  |  | 9,976 |
Deferred |  |  |  |  |  |  |  |  |
Federal |  |  | 42,745 |  |  |  | (12,606 | ) |  |  | 6,594 |
State |  |  | 1,102 |  |  |  | (11 | ) |  |  | (2,194 | )
Total deferred |  |  | 43,847 |  |  |  | (12,617 | ) |  |  | 4,400 |
Total income tax expense, net |  | $ | 55,697 |  |  | $ | 13,996 |  |  | $ | 14,376 |
We adopted ASU 2023-09 on a prospective basis beginning with the year ended December 31, 2025. The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount and rate to our actual global effective amount and rate of the year ended December 31, 2025:
|  | Year Ended December 31, |
|  | 2025 |
(In thousands) |  | $ |  |  | % |
U.S. federal tax at statutory rate |  | $ | 68,682 |  |  |  | 21.0 | %
State and local effects(1) |  |  | 2,739 |  |  |  | 0.9 | %
Foreign tax effects |  |  |  |  |  |
Other - Withholding taxes |  |  | 1,796 |  |  |  | 0.6 | %
Enactment of new tax laws |  |  | — |  |  |  | — | %
Cross-border tax laws |  |  |  |  |  |
Foreign-derived intangible income |  |  | (7,543 | ) |  |  | (2.3 | )%
Tax credits |  |  |  |  |  |
Foreign tax credit |  |  | (1,555 | ) |  |  | (0.5 | )%
Research and development credit |  |  | (324 | ) |  |  | (0.1 | )%
Change in valuation allowance |  |  | (11,726 | ) |  |  | (3.6 | )%
Nontaxable or nondeductible items |  |  | 407 |  |  |  | 0.1 | %
Changes in unrecognized tax benefits |  |  | 3,709 |  |  |  | 1.1 | %
Other adjustments |  |  | (488 | ) |  |  | (0.2 | )%
Effective tax rate |  | $ | 55,697 |  |  |  | 17.0 | %
(1) For tax year 2025, state taxes in Kentucky made up the majority (greater than 50 percent) of the tax effect in this category. As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
(In thousands) |  | $ |  |  | % |  |  | $ |  |  | % |
Expected tax at federal statutory rate |  | $ | 7,846 |  |  |  | 21.0 | % |  | $ | 40,747 |  |  |  | 21.0 | %
State income tax expense, net of federal benefit |  |  | 1,864 |  |  |  | 5.0 | % |  |  | 1,433 |  |  |  | 0.7 | %
Federal and state research credits |  |  | (90 | ) |  |  | (0.2 | )% |  |  | (1,582 | ) |  |  | (0.8 | )%
Section 250 deduction |  |  | (11,767 | ) |  |  | (31.5 | )% |  |  | (15,274 | ) |  |  | (7.9 | )%
Change in valuation allowance |  |  | 18,386 |  |  |  | 49.2 | % |  |  | (12,167 | ) |  |  | (6.2 | )%
Other |  |  | (2,243 | ) |  |  | (6.0 | )% |  |  | 1,219 |  |  |  | 0.6 | %
Total income tax expense, net |  | $ | 13,996 |  |  |  | 37.5 | % |  | $ | 14,376 |  |  |  | 7.4 | %
The following table presents the income taxes paid (net of any refunds received) for the year ended December 31, 2025 in accordance with the new guidance in ASU No. 2023-09:
|  | Year Ended December 31, |
(In thousands) |  | 2025 |
Federal |  | $ | 17,300 |
State and local jurisdiction |  |  | 1,377 |
Foreign |  |  | 436 |
Net cash paid for income taxes |  | $ | 19,113 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and deferred tax liabilities are as follows:
|  | December 31, |
(In thousands) |  | 2025 |  |  | 2024 |
Deferred tax assets |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 172,440 |  |  | $ | 176,989 |
Research and development tax credit carryforwards |  |  | 21,270 |  |  |  | 21,359 |
Unrealized losses on investment, net |  |  | — |  |  |  | 11,481 |
Deferred royalty obligation, net |  |  | 15,654 |  |  |  | 17,452 |
Accruals and reserves |  |  | 2,479 |  |  |  | — |
Other |  |  | 5,942 |  |  |  | 6,832 |
Total deferred tax assets before valuation allowance |  |  | 217,785 |  |  |  | 234,113 |
Valuation allowance |  |  | (176,151 | ) |  |  | (187,635 | )
Total deferred tax assets |  |  | 41,634 |  |  |  | 46,478 |
Deferred tax liabilities |  |  |  |  |  |
Depreciation and amortization |  |  | (32,205 | ) |  |  | (31,626 | )
Unrealized gains on investment, net |  |  | (37,823 | ) |  |  | — |
Inventory fair value adjustment |  |  | (986 | ) |  |  | (2,798 | )
Other |  |  | (2,413 | ) |  |  | — |
Net deferred tax assets (liabilities) |  | $ | (31,793 | ) |  | $ | 12,054 |
We record deferred tax assets if the realization of such assets is more likely than not to occur. Significant management judgment is required in determining whether a valuation allowance against the deferred tax assets is required. We have considered all available evidence, both positive and negative, such as our historical operating results and predictability of future taxable income, in making such determination. We are also required to exercise significant management’s judgment in forecasting future taxable income. Specifically, we evaluate the following criteria when considering a valuation allowance: • the history of tax net operating losses in recent years; • predictability of operating results; • profitability for a sustained period of time; and • level of profitability on a quarterly basis. As of December 31, 2025, we had federal net operating loss carryforwards of approximately $497.7 million, $448.2 of which do not expire. We also had state net operating loss carryforwards of approximately $1,028.9 million, which will expire beginning 2030, and state research tax credits of approximately $33.6 million, which will expire beginning 2033. Utilization of net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code and similar state provisions. Annual limitations may result in expiration of net operating loss and tax credit carryforwards before some or all of such amounts have been utilized. We conducted an Internal Revenue Code of 1986, as amended, Section 382 (“Section 382”) analysis through December 31, 2025 to determine whether an ownership change had occurred since inception. The Section 382 study concluded that it is more likely than not that the Company did not experience an ownership change during the testing period. However, notwithstanding the applicable annual limitations, no portion of the net operating loss or credit carryforwards is expected to expire before becoming available to reduce federal and state income tax liabilities as a result of those identified ownership changes. If we undergo an ownership change, the utilization of the pre-ownership change net operating loss carryforwards or pre-ownership change tax attributes, such as research tax credits, to offset the post-ownership change income may be subject to an annual limitation, pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. Similar rules may apply under state tax laws. As of December 31, 2025, $146.5 million of Entasis’ federal net operating losses and $351.2 million of La Jolla’s federal operating losses from the acquisitions in 2022, both subject to annual limitations, were available for future utilization. Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2025 and 2024, we have accrued interest or penalties of $3.3 million and $0.4 million, respectively Uncertain Tax Positions A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits are as follows:
(In thousands) |  | Amount |
Unrecognized tax benefits as of December 31, 2022 |  | $ | 16,324 |
Net increase in tax portions for 2023 |  |  | 3,119 |
Unrecognized tax benefits as of December 31, 2023 |  |  | 19,443 |
Net increase in tax portions for 2024 |  |  | 41,851 |
Unrecognized tax benefits as of December 31, 2024 |  |  | 61,294 |
Net increase in tax portion for 2025 |  |  | 1,415 |
Unrecognized tax benefits as of December 31, 2025 |  | $ | 62,709 |
We are subject to taxation in the U.S. and various state jurisdictions. The tax years 2006 through 2013, 2015 and forward remain open to examination by the federal and most state tax authorities due to net operating loss and overall credit carryforward positions.

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