Income Taxes

9 Months Ended

Sep. 30, 2019

INCOME TAXES

The following table summarizes our effective tax rate and income tax expense (benefit) from continuing operations for the three and nine months ended September 30, 2019 and 2018 (in thousands except for percentages):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Effective tax rate	(1		)%	4		%	—		%	(40		)%
Income tax expense (benefit)	$	232		$	(2,352	)	$	(26	)	$	42,204

For the three and nine months ended September 30, 2019, we recognized an income tax expense of $0.2 million and an immaterial income tax benefit, respectively, representing an effective tax rate of (1)% and 0% respectively. The difference between the statutory federal tax rate of 21% and the effective tax rate for the three and nine months ended September 30, 2019, was primarily attributable to the valuation allowance established against our current period losses generated and the non-deductible IPR&D expense related to the Perosphere acquisition. We have established a valuation allowance on our deferred tax assets other than refundable alternative minimum tax (“AMT”) credits to the extent that our existing taxable temporary differences would not be available as a source of income to realize the benefits of those deferred tax assets. The income tax expense for the three months ended September 30, 2019 primarily related to state taxes. The income tax benefit for the nine months ended September 30, 2019 primarily related to the offset of the recognition of the income tax expense recorded in other comprehensive loss associated with the increase in the value of available-for-sale securities that we carried at fair market value during the period, partially offset by state income taxes.

For the three and nine months ended September 30, 2018, we recognized an income tax benefit of $2.4 million and an income tax expense of $42.2 million, respectively, representing an effective tax rate of 4% and (40)%, respectively. The difference between the statutory federal tax rate of 21% and the effective tax rates for the three and nine months ended September 30, 2018 was primarily attributable to the establishment of a valuation allowance on net deferred tax assets other than refundable AMT credits, the impact of non-deductible stock compensation and other non-deductible expenses, partially offset by a benefit from contingent consideration, state income taxes and orphan drug credits.

The primary driver of the increase in tax expense for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018 was state income taxes. The primary driver of the decrease in tax expense for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 was the valuation allowance established.