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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Lexicon recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized differently in the financial statements and tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax bases of liabilities and assets using enacted tax rates and laws in effect in the years in which the differences are expected to reverse. Deferred tax assets are evaluated for realization based on a more-likely-than-not criteria in determining if a valuation allowance should be provided. The components of Lexicon’s deferred tax assets (liabilities) at December 31, 2019 and 2018 are as follows:
| As of December 31, |  |
| 2019 |  | 2018
| (in thousands) |  |
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 193,270 |  |  | $ | 206,789 |
Research and development tax credits | 46,306 |  |  | 47,087 |
Orphan drug credits | 24,524 |  |  | 24,524 |
Capitalized research and development | 58,596 |  |  | 71,047 |
Stock-based compensation | 5,340 |  |  | 4,641 |
Deferred revenue | — |  |  | 5,458 |
Interest | — |  |  | 3,625 |
Other | 5,533 |  |  | 6,044 |
Total deferred tax assets | 333,569 |  |  | 369,215 |
Deferred tax liabilities: |  |  |
Deferred tax liability related to acquisition of Symphony Icon | (4,140) |  |  | (10,525) |
Other | (3) |  |  | (2) |
Total deferred tax liabilities | (4,143) |  |  | (10,527) |
Less: valuation allowance | (329,426) |  |  | (364,702) |
Net deferred tax liabilities | $ | — |  |  | $ | (6,014) |
Deferred tax assets associated with net operating losses (NOLs), deferred revenue and interest decreased in 2019 due to the Termination Agreement (as defined in Note 13) with Sanofi. Refer to Note 13, Collaboration and License Agreements, for additional information. The $4.1 million deferred tax liability relates to the tax impact of future amortization or possible impairments associated with intangible assets acquired with Symphony Icon, which are not deductible for tax purposes. A reconciliation of the statutory tax rate to the effective tax rate for the years ended December 31, 2019, 2018 and 2017 consists of the following:
| Year Ended December 31, |  |  |  |
| 2019 |  | 2018 |  | 2017
| (in thousands) |  |  |  |
Expected income tax expense (benefit) at 21%, 21% and 35%, respectively | $ | 26,065 |  |  | $ | (25,315) |  |  | $ | (47,479) |
State income taxes, net of federal benefit | 445 |  |  | (809) |  |  | (2,324) |
Equity compensation | 1,688 |  |  | 1,059 |  |  | 1,447 |
Research and development credit | — |  |  | (978) |  |  | (1,993) |
Orphan drug credit | — |  |  | — |  |  | (189) |
Deferred true-up | — |  |  | — |  |  | (5,316) |
Tax rate change | — |  |  | — |  |  | 169,464 |
Symphony Icon fair value adjustment | — |  |  | — |  |  | 735 |
Change in valuation allowance | (35,276) |  |  | 25,928 |  |  | (126,634) |
Other (1) | 1,064 |  |  | 115 |  |  | (372) |
Income tax benefit | $ | (6,014) |  |  | $ | — |  |  | $ | (12,661) |
(1) Other is primarily comprised of expiring Research and Development credits for the year ended December 31, 2019. At December 31, 2019, Lexicon had both federal and state NOL carryforwards of approximately $879.7 million and $83.0 million, respectively. In 2019, federal NOLs decreased by $62.2 million primarily due to utilization against taxable income. The state NOL carryforwards decreased due to a legislative change from pre-apportionment to post-apportionment reporting in New Jersey. The federal and state NOL carryforwards will begin to expire in 2022. The Company’s R&D tax credit carryforwards of approximately $46.3 million begin to expire in 2020. The orphan drug credit relates to a credit that is calculated as a percentage of expenditures for development of XERMELO, which has received Orphan Drug designation from the FDA. Utilization of the NOL, R&D credit and orphan drug credit carryforwards may be subject to a significant annual limitation due to ownership changes that have occurred previously or could occur in the future provided by Section 382 of the Internal Revenue Code. Although NOLs were utilized in 2019, based on the federal tax law limits and the Company's cumulative loss position, Lexicon concluded it was appropriate to establish a full valuation allowance for its net deferred tax assets until an appropriate level of profitability is sustained. During the year ended December 31, 2019, the valuation allowance decreased $35.3 million, primarily due to the Company’s utilization of NOLs and decreases to deferred revenue and interest deferred tax assets. Lexicon recorded an income tax benefit of $6.0 million in the year ended December 31, 2019 despite reporting pretax income for the year. The result reflects the impact of the impairment of intangible assets associated with Symphony Icon and the benefit from the utilization of federal NOLs for which a tax benefit had not previously been recognized, partially offset by nondeductible expenses. There were no income tax benefits in the year ended December 31, 2018. Income tax benefits of $12.7 million were recorded for the year ended December 31, 2017. Of the $12.7 million tax benefits, $8.7 million is the release of a valuation allowance as a result of the ability to estimate the reversal of the deferred tax liability related to the intangible associated with XERMELO and $4.0 million was recorded to remeasure the deferred tax liability associated with the remaining indefinite-lived intangible asset associated with Symphony Icon at the newly enacted U.S. corporate income tax rate. As of December 31, 2019 and 2018, the Company did not have any unrecognized tax benefits. The Company is primarily subject to U.S. federal and New Jersey and Texas state income taxes. The tax years 1995 to current remain open to examination by U.S. federal authorities and 2004 to current remain open to examination by state authorities. The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2019 and 2018, the Company had no accruals for interest or penalties related to income tax matters.

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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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