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Income Taxes | 12 Months Ended
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Dec. 31, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | 9. INCOME TAXES There was no provision for income taxes for the years ended December 31, 2025 and 2024, because the Company has incurred losses since inception. At December 31, 2025 and 2024 the Company concluded it was not more likely than not that it would realize its deferred tax assets, and therefore has recorded a full valuation allowance. The Company paid no income taxes for the years ended December 31, 2025 and 2024, respectively. For the years ended December 31, 2025 and 2024, income tax provision (benefit) related to continuing operations differ from the amounts computed by applying the statutory income tax rate of 21% to pre-tax loss as follows (in thousands):
|  | Year Ended December 31, |
|  | 2025 |  |  | 2024 |
U.S. federal provision (benefit) |  |  |  |  |  |  |  |  |  |
At statutory rate |  | $ | (5,514 | ) |  | 21.0 | % |  | $ | (8,786 | ) |  | 21.0 | %
Change in valuation allowance |  |  | 5,105 |  |  | -19.4 | % |  |  | 9,199 |  |  | -22.0 | %
Nontaxable or Nondeductible Items |  |  |  |  |  |  |  |  |  |
Stock-based compensation |  |  | 343 |  |  | -1.3 | % |  |  | 709 |  |  | -1.7 | %
Transaction costs |  |  | 454 |  |  | -1.7 | % |  |  | — |  |  | 0.0 | %
Nontaxable or nondeductible items |  |  | 90 |  |  | -0.4 | % |  |  | 14 |  |  | 0.0 | %
Tax credits |  |  |  |  |  |  |  |  |  |
Research and development credit |  |  | (478 | ) |  | 1.8 | % |  |  | (1,136 | ) |  | 2.7 | %
Total |  | $ | — |  |  | 0.0 | % |  | $ | — |  |  | 0.0 | %
State income taxes in California comprise the majority of the state income taxes, net of federal effect category for the years ended December 31, 2025 and 2024, respectively. Significant components of the Company’s deferred tax assets at December 31, 2025 and 2024 are shown below.
|  | 2025 |  |  | 2024 |
Deferred tax assets: |  |  |  |  |  |
Net operating losses |  | $ | 152,074 |  |  | $ | 143,896 |
Research and development tax credits |  |  | 21,198 |  |  |  | 20,513 |
Amortization |  |  | 489 |  |  |  | 603 |
Lease liability |  |  | 2,354 |  |  |  | 2,625 |
Stock based compensation |  |  | 1,583 |  |  |  | 1,167 |
Other |  |  | 98 |  |  |  | 491 |
Capitalized R&D |  |  | 7,901 |  |  |  | 10,041 |
Total gross deferred tax assets |  |  | 185,697 |  |  |  | 179,336 |
Less: valuation allowance |  |  | (183,498 | ) |  |  | (176,799 | )
Total deferred tax assets |  |  | 2,199 |  |  |  | 2,537 |
Deferred tax liability: |  |  |  |  |  |
Right-of-use assets |  |  | (2,180 | ) |  |  | (2,518 | )
Fixed assets |  |  | (19 | ) |  |  | (19 | )
Total gross deferred tax liabilities |  |  | (2,199 | ) |  |  | (2,537 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
The valuation allowance increased by $6.7 million from December 31, 2024 to December 31, 2025 due primarily to the generation of net operating losses and research and development credits. As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the "change in valuation allowance" line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance (in thousands):
|  | Year Ended December 31, |
|  | 2025 |  |  | 2024 |
Beginning Balance |  |  | 176,799 |  |  |  | 164,643 |
Change related to continuing operations |  |  | 6,699 |  |  |  | 12,156 |
Ending Balance |  | $ | 183,498 |  |  | $ | 176,799 |
As of December 31, 2025, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $534.5 million and $501.9 million, respectively. As of December 31, 2024, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $502.2 million and $487.8 million, respectively. The federal and state net operating loss carryforwards begin to expire in 2031 and 2025, respectively, if not utilized. Federal net operating losses of $313.3 million are not subject to expiration. As of December 31, 2025, the Company had federal and state research and development carryforwards of approximately $14.7 million and $4.4 million, respectively. The Company also had $7.4 million of Orphan Drug Credit. As of December 31, 2024, the Company had federal and state research and development carryforwards of approximately $14.1 million and $4.1 million, respectively. The federal and state credits begin to expire in 2031 and 2029, respectively, if not utilized; $3.3 million of the state credits can be carried forward indefinitely. Utilization of some of the federal and state net operating loss and credit carryforwards may be subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization. The Company has not performed a Section 382 study as of December 31, 2025. At least $455.8 thousand of legacy Millendo federal net operating losses are expected to expire unused due to prior ownership changes. The Company has the following activity relating to unrecognized tax benefits as of December 31, 2025 and 2024:
|  | 2025 |  |  | 2024 |
Beginning balance |  | $ | 5,239 |  |  | $ | 4,923 |
Gross increase - tax position in current period |  |  | 167 |  |  |  | 316 |
Ending balance |  | $ | 5,406 |  |  | $ | 5,239 |
As of December 31, 2025 and 2024, none of the unrecognized tax benefits would impact the Company's effective tax rate due to the valuation allowance. The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest and penalties on the accompanying balance sheet as of December 31, 2025 and 2024, respectively, and has not recognized penalties and/or interest in the accompanying statements of operations for the years ended December 31, 2025 and 2024, respectively. The Company is subject to taxation in the United States, California, Massachusetts, and Michigan. The Company's tax years from inception are subject to examination by the IRS and state tax authorities due to the carryforward of unutilized net operating losses and research and development credits.

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