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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For the years ended December 31, 2017, 2016 and 2015 there was no provision for income taxes due to taxable losses generated, fully offset by a valuation allowance. The significant components of the Company's deferred income tax assets (liabilities) were as follows (in thousands):
| December 31,
| 2017 |  | 2016
Deferred income tax assets: |  |  |
Federal U.S. net operating loss carryforward | $ | 50,346 |  |  | $ | 75,377 |
State net operating loss carryforward | 7,551 |  |  | 6,583 |
Research and development credit, net | 21,284 |  |  | 12,829 |
Orphan drug credit, net | 21,708 |  |  | 19,855 |
Deferred rent | 3,385 |  |  | 2,497 |
Deferred revenue | 2,982 |  |  | 5,098 |
Depreciation | 155 |  |  | 2,926 |
Other | 5,847 |  |  | 5,085 |
Gross deferred income tax assets | 113,258 |  |  | 130,250 |
Valuation allowance | (112,453 | ) |  | (128,844 | )
Net deferred income tax assets | 805 |  |  | 1,406 |
Deferred income tax liabilities: |  |  |  |  |
Prepaid expenditures | (805 | ) |  | (1,406 | )
Gross deferred income tax liabilities | (805 | ) |  | (1,406 | )
Net deferred income tax asset/(liability) | $ | — |  |  | $ | — |
The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. In assessing the likelihood of realization, management considers (i) future reversals of existing taxable temporary differences; (ii) future taxable income exclusive of reversing temporary difference and carryforwards; (iii) taxable income in prior carryback years if carryback is permitted under applicable tax law; and (iv) tax planning strategies. The Company's net deferred income tax asset is not more likely than not to be utilized due to the lack of sufficient sources of future taxable income and cumulative book losses which have resulted over the years. The net decrease in the valuation allowance in 2017 is primarily as a result of the legislation enacted in 2017, which lowers the statutory corporate tax rate from 35% to 21%,, which decreased the net deferred tax asset. As of December 31, 2017, the Company has U.S. federal and state NOL carryforwards of approximately $239.7 million that will expire in various years beginning in 2025 through 2037. In addition, the Company has U.S. federal tax credits of $42.8 million which will expire in various years beginning in 2025 through 2037. The use of the Company's U.S. federal NOL and tax credit carryforwards in future years are restricted due to changes in the Company's ownership and tax attributes acquired through the Company's acquisitions. As of December 31, 2017, $13.5 million of the Company's U.S. Federal NOLs are limited for use over the years 2018 – 2028 in which a range of such amounts could be utilized on an annual basis of $0.2 million to $1.4 million. The remaining $226.2 million of NOLs is not limited and can be offset against future taxable income, subject to certain limitations for newly enacted tax legislation. The Company adopted ASU 2016-09 as of January 1, 2017. Accordingly, the Company recognized the previously unrecognized excess tax benefits of approximately $18.6 million ($6.5 million tax effected) recorded as deferred tax assets with a corresponding offsetting full valuation allowance at the beginning of 2017 without any tax impact. Further, despite the NOL and tax credit carryforwards, the Company may have a future tax liability due to recent changes in tax legislation or state tax requirements in which net operating losses do not exist. The Company is still quantifying the impact of these changes. The reconciliation of the reported estimated income tax benefit to the amount that would result by applying the U.S. federal statutory tax rate to the net income is as follows (in thousands):
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
United States federal tax at statutory rate | $ | (6,869 | ) |  | $ | (20,489 | ) |  | $ | (7,049 | )
State taxes (net of federal benefit) | (735 | ) |  | (3,116 | ) |  | (897 | )
Deferred income tax adjustments | 607 |  |  | 173 |  |  | 661 |
Deferred state blended rate adjustments | (485 | ) |  | (32 | ) |  | (493 | )
Deferred federal rate change reduction in corporate rate | 39,447 |  |  | — |  |  | — |
Research credit, net | (8,455 | ) |  | (2,551 | ) |  | (3,296 | )
Orphan drug credit, net | (1,853 | ) |  | (571 | ) |  | (106 | )
Other permanent items | 276 |  |  | 145 |  |  | (25 | )
Equity-based compensation | 2,067 |  |  | 1,997 |  |  | 1,102 |
Change in valuation allowance | (24,000 | ) |  | 24,444 |  |  | 10,103 |
Income tax expense/(benefit) | $ | — |  |  | $ | — |  |  | $ | — |
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Beginning balance | $ | 2,465 |  |  | $ | 2,425 |  |  | $ | 2,047 |
Increases for current year tax positions | 569 |  |  | 308 |  |  | 357 |
Increases/(decreases) for prior year tax positions | 361 |  |  | (268 | ) |  | 21 |
Ending balance | $ | 3,395 |  |  | $ | 2,465 |  |  | $ | 2,425 |
As of December 31, 2017 and 2016, of the total gross unrecognized tax benefits, approximately $3.4 million and $2.4 million would favorably impact the Company's effective income tax rate, respectively. Although, due to the Company's determination that the deferred income tax asset would not more likely than not be realized, a valuation allowance would be recorded, therefore, zero net impact would result within the Company's effective income tax rate. The Company's uncertain income tax position liability has been recorded to deferred income taxes to offset the tax attribute carryforward amounts. For the years ended December 31, 2017, 2016 and 2015, the Company has not recognized any interest or penalties related to the uncertain income tax positions due to the fact such position is related to tax attribute carryforwards which have not yet been utilized. The Company does not expect its unrecognized income tax position to significantly decrease within the next twelve months. The Company's U.S. Federal and state income tax returns from 2001 forward remain open to examination due to the carryover of unused net operating losses and tax credits. As more fully described in Note 2 to the consolidated financial statements, the Tax Act was signed into law making significant changes to the Internal Revenue Code on December 22, 2017. Under ASC 740-10-25-47, the effects of the new legislation are to be recognized in the period of enactment. As such, recognition of the tax impact of the Tax Act is required in the interim and annual periods that include December 22, 2017. As a result, the Company has revalued the deferred tax asset as of December 31, 2017, fully offset by a valuation allowance without impact to the financial statements. The Company does not anticipate that other provisions of the Act would have a material impact on its financial statements.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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