Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

The Company’s provision for income taxes is comprised of the following for the periods ended December 31, 2024 and 2023 (in thousands):

	Year Ended December 31,
	2024		2023
Current:
Federal	$	—	$	2,488
State		—		110
Foreign		—		—
		—		2,598
Deferred:
Federal		—		—
State		—		—
Foreign		—		—
		—		—
Provision for income taxes	$	—	$	2,598

The Company recorded $2.6 million of income tax expense in 2023 related to a change in estimate with respect to the tax treatment of the GSK License Agreement, which resulted in taxable income and the utilization of $236.5 million of U.S. federal net operating losses and $6.9 million of U.S. federal research and development tax credits on its amended 2022 U.S. federal tax return.

During the years ended December 31, 2024 and 2023, the Company recorded no income tax benefits for the net operating income (losses) incurred in each year or interim period due to its uncertainty of realizing a benefit from those items.

The domestic and foreign components of income (loss) before income taxes were as follows (in thousands):

	Year Ended December 31,
	2024			2023
Domestic	$	(68,566	)	$	25,404
Foreign		-			-
Income (loss) before income taxes	$	(68,566	)	$	25,404

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:

	Year Ended December 31,
	2024				2023
Federal statutory income tax rate		(21.0	)			21.0
Federal tax credits		(4.3	)			(4.9	)
State taxes, net of federal benefit		1.6				(0.4	)
Nondeductible stock compensation		0.8				8.5
Other nondeductible items		-				0.3
Other		(1.0	)			(1.0	)
Reduction in tax attributes		-				13.9
Increase in deferred tax asset valuation allowance		21.0				(27.2	)
Deferred true-up		2.9				-
Effective income tax rate		—		%		10.20

Net deferred tax assets as of December 31, 2024 and 2023 consisted of the following (in thousands):

	December 31,
	2024			2023
Net operating loss carryforwards	$	42,310		$	25,646
Deferred revenue		41,745			47,014
Research and development and orphan drug tax credit carryforwards		10,952			7,612
Capitalized research and development expenses		21,149			21,342
Other		6,101			6,264
Total deferred tax assets		122,257			107,878
Valuation allowance		(122,257	)		(107,878	)
Net deferred tax assets	$	—		$	—

As of December 31, 2024, the company had United States federal, state and foreign net operating loss carryforwards ("NOLs") of $165.2 million, $120.6 million and $4.6 million, respectively. $152 million federal NOLs can be carried forward indefinitely and $13.2 million of NOLs begin to expire in 2034. The state NOLs begin to expire in 2034 and will expire at various dates through 2044. The foreign NOLs do not expire. As of December 31, 2024, the Company also had federal and state research and development tax credit carryforwards of $6.2 million and $2.1 million respectively, and federal orphan drug tax credit carryforwards of $2.9 million, which may be available to offset future income tax liabilities. The federal and state research and development tax credits begin to expire in 2036 and 2033, respectively, and the federal orphan drug credits begin to expire in 2044.

Utilization of the U.S. net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. If the Company experiences a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. The Company recently completed a Section 382 study and concluded that we underwent several ownership changes as defined by the Code, the last of which occurred during the year ended December 31, 2018. Any carryforwards that will expire prior to utilization were removed from deferred tax assets, with a corresponding reduction of the valuation allowance. Future ownership changes may limit our ability to utilize remaining tax attributes.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2024 and 2023. Management reevaluates the positive and negative evidence at each reporting period.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2024 and 2023 related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards partially offset by a reduction in deferred revenue, and were as follows (in thousands):

	December 31,
	2024			2023
Valuation allowance as of beginning of year	$	(107,878	)	$	(114,790	)
Increases recorded to income tax provision		(14,379	)		6,912
Valuation allowance as of end of year	$	(122,257	)	$	(107,878	)

The Company has not recorded any amounts for unrecognized tax benefits as of December 31, 2024 or 2023. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. As of December 31, 2024 or 2023, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s statement of operations and comprehensive loss.

The Company conducted a study of its research and development (R&D) credit carryforwards for the years 2016 to 2023. We have updated the carryforwards for the result of the study and the changes were not material.

The Company had filed separate U.S. income tax returns return for each of its subsidiaries prior to its reorganization in 2015. The Company now files U.S. income tax returns as a U.S. consolidated group. In Massachusetts, the Company files income tax returns as a combined group except for its Massachusetts Securities Corporation subsidiary, which is a separate income tax filing. The statute of limitations for assessment by the Internal Revenue Service and Massachusetts tax authorities remains open for tax years 2021 and forward. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state authorities to the extent utilized in a future period. No federal or state tax audits are currently in process.