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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | 14. Inco me Taxes The Company derives its income only from the United States. The components of the provision for income taxes are as follows (in thousands):
|  | Years Ended December 31, |
|  | 2024 |  |  | 2023 |
Current: |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |
State |  |  | 224 |  |  |  | 3,892 |
Total current |  |  | 224 |  |  |  | 3,892 |
Deferred: |  |  |  |  |  |
Federal |  |  | — |  |  |  | — |
State |  |  | — |  |  |  | — |
Total deferred |  |  | — |  |  |  | — |
Provision for income taxes |  | $ | 224 |  |  | $ | 3,892 |
A reconciliation of the Company’s effective tax rate to the statutory U.S. federal rate is as follows:
|  | Years Ended December 31, |
|  | 2024 |  |  | 2023 |
U.S. federal taxes at statutory rate |  |  | 21.0 | % |  |  | 21.0 | %
State tax, net of federal benefit |  |  | 19.0 |  |  |  | (478.7 | )
Stock compensation |  |  | 4.6 |  |  |  | 47.2 |
Tax credits |  |  | (2.7 | ) |  |  | 242.7 |
Change in valuation allowance |  |  | (41.6 | ) |  |  | 283.2 |
162(m) limitation |  |  | 0.1 |  |  |  | 1.2 |
Other |  |  | 0.3 |  |  |  | 0.5 |
Total |  |  | 0.7 | % |  |  | 117.1 | %
The types of temporary differences that give rise to significant portions of the Company’s deferred income tax assets and liabilities are set out below (in thousands):
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Net operating loss carryforwards |  | $ | 62,544 |  |  | $ | 56,767 |
Research and development credits |  |  | 23,871 |  |  |  | 22,149 |
Lease liability |  |  | 2,194 |  |  |  | 3,501 |
Intangible assets |  |  | 6,456 |  |  |  | 4,400 |
Deferred revenue |  |  | 22,111 |  |  |  | 47,286 |
Accrued liabilities |  |  | 981 |  |  |  | 2,425 |
Stock-based compensation |  |  | 8,770 |  |  |  | 9,600 |
Sec 174 capitalized research and development costs |  |  | 37,249 |  |  |  | 32,630 |
Other |  |  | 41 |  |  |  | 55 |
Total gross deferred income tax assets |  |  | 164,217 |  |  |  | 178,813 |
Less: valuation allowance |  |  | (162,110 | ) |  |  | (175,454 | )
Deferred tax assets, net of valuation allowance |  |  | 2,107 |  |  |  | 3,359 |
Fixed assets |  |  | (1 | ) |  |  | (105 | )
Right-of-use assets |  |  | (1,903 | ) |  |  | (3,061 | )
Prepaid expenses |  |  | (203 | ) |  |  | (193 | )
Deferred tax liabilities |  |  | (2,107 | ) |  |  | (3,359 | )
Net deferred income tax liabilities |  | $ | — |  |  | $ | — |
The Company has established a valuation allowance against all of its net deferred tax assets. Management considered all available evidence, both positive and negative, including but not limited to our historical operating results, income or loss in recent periods, cumulative losses in recent years, forecasted earnings, future taxable income, and significant risk and uncertainty related to forecasts, and concluded the deferred tax assets are not more likely than not to be realized. The net change in the total valuation allowance for the years ended December 31, 2024 and 2023 was a decrease of $13.4 million and an increase of $9.4 million, respectively. The Company had net operating loss carryforwards for federal and state income tax purposes of approximately $294.3 million and $36.7 million, respectively, as of December 31, 2024, available to reduce future taxable income. Of the federal net operating loss carryforwards, $65.6 million will begin to expire in 2034, if not utilized and $228.7 million will carried forward indefinitely. The state net operating loss carryforwards will begin to expire in 2032, if not utilized. The Company also has federal and state research and development tax credit carryforwards of $26.0 million and $14.5 million, respectively, as of December 31, 2024 available to reduce future income taxes. The federal research and development tax credits will begin to expire in 2031 if not utilized. The state research and development tax credits will carryforward indefinitely. I nternal Revenue Code section 382 (“IRC Section 382”) places a limitation (the “Section 382 Limitation”) on the amount of taxable income that can be offset by net operating loss (“NOL”) carryforwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. California has similar rules. The Company has performed an IRC Section 382 analysis and determined there was an ownership change in 2017 that resulted in 382 limitations. When an ownership change occurs, IRC Section 382 limits the use of NOLs and credits in subsequent periods based on the annual 382 limitations. The annual 382 limitations may limit the full use of available tax attributes in one year but the identified ownership changes may not result in expiration of tax attributes for use prior to expiration of their respective carryforward periods. Accordingly, none of the tax attributes have been reduced but limited the full use in 2018. The Company has determined that, while an ownership change has occurred, the applicable limits would not impair the value or anticipated use of the Company’s federal and state net operating losses. Although realization is not assured, management believes it is more likely than not that any limitation under IRC Section 382 will not impair the realizability of the deferred income tax assets related to federal and state net operating loss carryforwards. The Company reviewed its stock ownership for the year ended December 31, 2024 and concluded no ownership changes occurred in current year which would result in a reduction of its net operating loss or in its research and development credits expiring unused. If the additional ownership change occurs, the utilization of net operating loss and credit carryforwards could be significantly reduced. A reconciliation of the beginning and ending unrecognized tax benefit amount is as follows (in thousands):
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Balance at the beginning of the year |  | $ | 19,377 |  |  | $ | 9,269 |
Additions based on tax positions related to current year |  |  | 617 |  |  |  | 527 |
Adjustment based on tax positions related to prior years |  |  | - |  |  |  | 9,581 |
Balance at end of the year |  | $ | 19,994 |  |  | $ | 19,377 |
Of the unrecognized tax benefits as of each of December 31, 2024 and 2023, approximately $2.3 mill ion, would affect the Company’s effective tax rate if recognized. Penalties and interest of $1.0 million and $0.8 million, respectively, have been accrued for as of December 31, 2024. The Company files income taxes in the U.S. federal jurisdiction, the state of California and various other U.S. states. The state of California contested the Company’s tax position on revenue apportionment for upfront and milestone payments resulting from the Company’s collaboration and licensing agreements for the years 2017 and 2018. In September 2023, the Company received Notice of Proposed Assessment (“NOPA”) from the Franchise Tax Board. The Company recorded an uncertain tax position of $4.1 million in long term liabilities for the proposed tax assessment, penalties and interest through December 31, 2024. Additional utilization of carryforward attributes and indirect federal tax effects of the assessment would result in a reduction in deferred tax assets of $5.1 million. The Company filed a protest to contest the proposed assessment in November 2023. Due to the ongoing nature of the examination and discussions with the state of California, the Company is unable to estimate a date by which this matter will be resolved.

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