Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

11. Income Taxes

        Due to ongoing operating losses and the inability to recognize any income tax benefit, there is no provision for income taxes for any periods presented.

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows:

	December 31,
(in thousands)	2011			2010
Deferred tax assets:
Net operating loss carryforwards	$	359,000		$	311,000
Deferred revenues		56,000			63,000
Capitalized research and development expenditures		35,000			34,000
Research and development tax credit carryforwards		37,000			34,000
Other		31,000			26,000
Valuation allowance		(518,000	)		(468,000	)
Net deferred tax assets	$	—		$	—

        Realization of deferred tax assets is dependent on future taxable income, if any, the timing and the amount of which are uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $50.0 million in 2011, $35.0 million in 2010, and $32.0 million in 2009.

        As of December 31, 2011, the Company had federal net operating loss carryforwards of approximately $1,068.2 million, which will expire from 2012 through 2030, and federal research and development tax credit carryforwards of approximately $43.2 million, which will expire from 2018 through 2030. The Company also had state net operating loss carryforwards of approximately $425.0 million expiring in the years 2012 through 2030 and state research tax credits of approximately $46.9 million, which do not expire.

        The net operating loss deferred tax asset balances as of December 31, 2011 and 2010 do not include excess tax benefits from stock option exercises. Stockholders' net capital deficiency will be credited if and when such excess tax benefits are ultimately realized.

        Utilization of net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The Company conducted an analysis through 2011 to determine whether an ownership change had occurred since inception. The analysis indicated that two ownership changes occurred in prior years. However, notwithstanding the applicable annual limitations, no portion of the net operating loss or credit carryforwards are expected to expire before becoming available to reduce federal and state income tax liabilities. Annual limitations may result in expiration of net operating loss and tax credit carryforwards before some or all of such amounts have been utilized.

Uncertain Tax Positions

        A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits are as follows (in thousands):

Gross unrecognized tax benefits as of January 1, 2009	$	36,200
Gross decrease for tax positions for prior years		(100	)
Gross increase in tax positions for current year		3,500
Unrecognized tax benefits as of December 31, 2009		39,600
Gross decrease for tax positions for prior years		—
Gross increase in tax positions for current year		3,000
Unrecognized tax benefits as of December 31, 2010		42,600
Gross decrease for tax positions for prior years		—
Gross increase in tax positions for current year		4,300
Unrecognized tax benefits as of December 31, 2011	$	46,900

        If the Company eventually is able to recognize these uncertain positions, most of the $46.9 million of the unrecognized benefit would reduce the effective tax rate, except for excess tax benefits related to stock-based payments. The Company currently has a full valuation allowance against its deferred tax asset which would impact the timing of the effective tax rate benefit should any of these uncertain positions be favorably settled in the future. The Company does not believe it is reasonably possible that its unrecognized tax benefits will significantly change within the next twelve months.

        The Company is subject to taxation in the U.S. and various state jurisdictions. The tax years 1996 and forward remain open to examination by the federal and most state tax authorities due to net operating loss and overall credit carryforward positions.