Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 13 — Income Taxes

The Company has incurred net losses since inception and, consequently, has not recorded any U.S. Federal and state income tax expense or benefit.

The components of loss before provision for income taxes were as follows:

	Years Ended December 31,
	2021			2020
Domestic	$	(159,632	)	$	(176,613	)
Foreign		(22,177	)		(6,201	)
Loss before provision for income taxes	$	(181,809	)	$	(182,814	)

The differences between the Company’s effective tax rate and the statutory tax rate in 2021, 2020, and 2019, are as follows:

	2021			2020			2019
Income tax benefit at federal statutory rate (21% for 2021, 2020 and 2019)	$	(38,175	)	$	(38,391	)	$	(22,868	)
State and local income taxes net of federal tax benefit		(2,288	)		(2,544	)		(1,591	)
Permanent items		(1,343	)		774			691
Rate change		−			(82	)		625
Expiration of attribute carryforwards		(1,057	)		3,774			3,976
Research and development tax credits		(5,994	)		(4,080	)		(4,938	)
Foreign rate differential		1,940			542			-
Other		1,216			1,456			281
Change in valuation allowance		47,954			38,551			23,824
Income tax expense	$	2,253		$	−		$	−

The Company recognizes the impact of a tax position in its financial statements if it is more likely than not that the position will be sustained on audit based on the technical merits of the position. The Company has concluded that it has an uncertain tax position pertaining to its research and development and orphan drug credit carryforwards. The Company has established these credits based on information and calculations it believes are appropriate and the best estimate of the underlying credit. Any changes to the Company’s unrecognized tax benefits are offset by an adjustment to the valuation allowance and there would be no impact on the Company’s financial statements. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2021		2020
Balance at January 1,	$	8,230	$	7,210
Additions to current period tax positions		1,499		1,020
Balance at December 31,	$	9,729	$	8,230

The Company’s ability to utilize the net operating loss and tax credit carryforwards in the future may be subject to substantial restrictions in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code of 1986, as amended and similar state tax law.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

	2021			2020
Deferred tax assets:
Net federal and state operating losses	$	113,649		$	159,939
Research and development credits		71,197			66,331
Royalty income		106,007			28,034
Stock-based compensation		14,512			10,732
Capitalized R&D		8,997			−
Leasing obligations		1,836			1,135
Other		4,809			5,563
Total deferred tax assets		321,007			271,734
Deferred tax liabilities:
Fixed assets		(607	)		(124	)
Right of use asset		(1,527	)		(854	)
Total deferred tax liabilities		(2,134	)		(978	)
Valuation allowance		(318,714	)		(270,756	)
Net deferred tax assets	$	159		$	−

The majority of the Company’s deferred tax assets relate to net operating loss and research and development carryforwards that can only be realized if the Company is profitable in future periods. It is uncertain whether the Company will realize any tax benefit related to these carryforwards. Accordingly, the Company has provided a valuation allowance against substantially all the net deferred tax assets due to uncertainties as to their ultimate realization. The valuation allowance will remain at the full amount of the deferred tax assets until it is more likely than not that the related tax benefits will be realized. The Company’s valuation allowance increased by $47,954, $38,551, and $23,824 in 2021, 2020, and 2019, respectively.

As of December 31, 2021, the Company had U.S. federal operating loss carryforwards of $480,331, state operating loss carryforwards of $177,567, foreign net operating losses of $29,355, and U.S. research and development and orphan drug credit carryforwards of $80,925, which will expire at various dates from 2022 through 2041. Federal losses, state losses, research and development credit carryforwards began expiring in 2020. The foreign net operating losses have an indefinite carryforward period.

Tax years 2018-2021 remain open to examination by the major taxing jurisdictions to which the Company is subject. Additionally, years prior to 2017 are also open to examination to the extent of loss and credit carryforwards from those years. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as components of its income tax provision. However, there were no provisions or accruals for interest and penalties in 2021, 2020 and 2019.

As of December 31, 2021, the Company has accumulated undistributed earnings of $750, generated by our foreign subsidiaries which have already been subject to local and U.S. tax (as part of the GILTI provisions). We intend to indefinitely reinvest these earnings, as well as future earnings from our foreign subsidiaries to fund out international operations. In addition, we expect future U.S. cash generation will be sufficient to meet future U.S cash needs.