NOTE 9 : Income Taxes

The components of income (loss) before income taxes consist of the following for the years ended December 31:

	2015		2014		2013

United States	$	101,241	$	(89,939)	$	(53,864)
France		6,622		(392)		(3,889)
Ireland		(29,469)		-		-
Total income (loss) before income taxes	$	78,394	$	(90,331)	$	(57,753)

The income tax provision (benefit) consists of the following for the years ended December 31,:

	2015		2014		2013
Current:
United States - Federal	$	33,748	$	-	$	-
United States - State		980		-		-
France		1,657		1,400		76
Total current		36,385		1,400		76

Deferred:
United States - Federal		1,830		(2,457)		(9,905)
United States - State		1,267		(350)		(1,415)
France		(1,747)		-		-
Total deferred		1,350		(2,807)		(11,320)

Income tax provision (benefit)	$	37,735	$	(1,407)	$	(11,244)

The items accounting for the difference between the income tax provision (benefit) computed at the French statutory rate and the Company's effective tax rate are as follows for the years ended December 31,:

	2015			2014			2013

Statutory tax rate		33.3	%		33.3	%		33.3	%
Non-deductible changes in fair value of contingent consideration		13.8	%		(24.7)	%		(16.6)	%
Change in valuation allowance		(9.5)	%		5.2	%		(4.5)	%
Income tax deferred charge		-			(16.9)	%		-
International tax rates differential		10.9	%		6.7	%		6.2	%
Other		(0.4)	%		(2.0)	%		1.1	%
Effective income tax rate		48.1	%		1.6	%		19.5	%

Income tax provision (benefit) - at Statutory tax rate	$	26,105		$	(30,080)		$	(19,232)
Non-deductible changes in fair value of contingent consideration		10,835			22,326			9,592
Change in valuation allowance		(7,425)			(4,732)			2,616
Income tax deferred charge		-			15,273			-
International tax rates differential		8,559			(6,026)			(3,609)
Other		(339)			1,832			(611)
Income tax provision (benefit) - at Effective income tax rate	$	37,735		$	(1,407)		$	(11,244)

The Company's effective tax rates for the years ended December 31, 2015, 2014 and 2013 were 48.1%, 1.6% and 19.5%, respectively. Increased expenses reported during 2015, 2014 and 2013 due to changes in fair value of contingent consideration are not deductible for income tax purposes, and therefore unfavorably impact the Company’s effective income tax rate. In 2013, valuation allowances were placed against the deferred tax assets generated by pre-tax losses in France. In 2014, the Company entered into an intra-entity transaction to transfer intellectual property from France to Ireland which resulted in a charge of $15,273 after utilization of net operating loss carryforwards that were previously fully reserved with a valuation allowance. In 2015 certain valuation allowances were reversed with respect to pre-tax income of our U.S. and French operations as the Company had sufficient taxable income to utilize net operating losses. These rates also reflect the additional tax impacts of the Company's significant U.S. operations at a higher statutory tax rate than the French statutory tax rate, and in 2015 are additionally unfavorably impacted by losses incurred at our Irish entity at a lower statutory tax rate.

Deferred Tax Assets (Liabilities)

Deferred income tax provisions reflect the effect of temporary differences between consolidated financial statement and tax reporting of income and expense items. The net deferred tax assets/liabilities at December 31, 2015 and 2014 resulted from the following temporary differences:

	2015		2014
Deferred tax assets:
Net operating loss carryforwards	$	44,587	$	66,167
Stock based compensation		1,767		-
Fair value royalty agreements		2,435		2,130
Other		1,025		1,039
Total deferred tax assets		49,814		69,336
Valuation allowances		(45,516)		(57,980)
Net deferred tax assets		4,298		11,356

Deferred tax liabilities:
Amortization of IPR&D		(5,649)		(11,356)
Total deferred tax liabilities		(5,649)		(11,356)

Net deferred tax assets (liabilities)	$	(1,351)	$	-

The net operating loss carryforwards at December 31, 2015 relate primarily to Irish and French operations. While these net operating losses have no expiration in France or Ireland, in France they are limited to annual utilization of €1,000 plus fifty per cent (50%) of any taxable income in excess of €1,000. The company continually reviews the adequacy of the valuation allowance. A valuation allowance is recorded if, based on the weight of available evidence, it is more likely than not that a deferred tax asset will not be realized. This assessment is based on an evaluation of the level of historical taxable income and projections for future taxable income. The Company has provided valuation allowances covering 100% of these deferred tax assets as of December 31, 2015.

At December 31, 2015, the Company has no unremitted earnings outside of France as measured on a US GAAP basis. Whereas the measure of earnings for purposes of taxation of a distribution may be different for tax purposes, these earnings, which are considered to be invested indefinitely, would become subject to income tax if they were remitted as dividends or if the Company were to sell its stock in the subsidiaries. It is not practicable to estimate the amount of deferred tax liability on such earnings.

The Company and its subsidiaries file income tax returns in France, Ireland and U.S. federal and various state jurisdictions. The Company is no longer subject to, with limited exceptions, French income tax examinations by tax authorities for years prior to 2013. Any other tax period or jurisdiction in which the Company files remains subject to potential tax examination by the respective tax authorities.

Certain vested and exercised employee equity compensation awards have resulted in tax deductions in excess of previously recorded tax benefits based on the value of such equity compensation awards at the time of grant, and have been recorded as additional paid-in capital. The excess tax benefit from stock-based compensation recognized in 2015 is $2,814.

Research and Development Tax Credits Receivable

The French government provides tax credits to companies for spending on innovative R&D. These credits are recorded as an offset of R&D expenses and are credited against income taxes payable in each of the four years after being incurred or, if not so utilized, are recoverable in cash. As of December 31, 2015, the Company’s net Research tax credit receivable amounts to $2,382 and represents a gross research tax credit of $3,720, partially offset by current income tax payable of $1,338.

Income Tax Deferred Charge

On December 16, 2014, the Company transferred all of its intangible intellectual property from its French entity to its Irish entity as a part of a global reorganization. The intellectual property includes patents on drug delivery platforms, clinical data sets and other intangible assets related to the pipeline of proprietary products in development. This intra-entity transaction resulted in a charge of $14,088 of related taxes to the French government in December 2014. As this represents an intra-entity transaction, no deferred tax asset has been recognized, but rather was originally recorded as $986 of prepaid expenses and $13,102 of a long-term Income tax deferred charge asset in accordance with ASC 740-10-25-3 (e). This income tax deferred charge asset is amortized over the tax life of the asset at a rate of 7% per year and will result in tax relief in Ireland of $8.5 million from 2016 to 2029. At December 31, 2015, the balance of these respective accounts was classified as prepaid expenses of $842 and Income tax deferred charge asset of $11,581. This deferred charge asset will not be changed by future events other than the sale or amortization, including market write-down or impairment measured on a pretax basis, of the related asset in Ireland. No impairment has been identified in connection with the impairment test performed as of December 31, 2015.