ACADIA PHARMACEUTICALS INC Income Taxes Disclosure

8. Income Taxes

At December 31, 2025, the Company had federal, state, and foreign net operating losses (NOL) carryforwards of approximately $111.4 million, $453.0 million, and $271.0 million, respectively. Utilization of the domestic NOL and research and development (R&D) credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred or that could occur in the future, as required by Section 382 of the Code, as well as similar state and foreign provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups.

The Company previously completed a study to assess whether an ownership change, as defined by Section 382 of the Code, had occurred from the Company’s formation through December 31, 2013. Based upon this study, the Company determined that several ownership changes had occurred. Accordingly, the Company reduced its deferred tax assets related to the federal NOL carryforwards and the federal R&D credit carryforwards that are anticipated to expire unused as a result of these ownership changes. These tax attributes were excluded from deferred tax assets with a corresponding reduction of the valuation allowance with no net effect on income tax expense or the effective tax rate. The Company completed a study through December 31, 2024 and concluded no additional ownership changes occurred. Future ownership changes may further limit the Company’s ability to utilize its remaining tax attributes.

The Company has federal and state NOL carryforwards of $2.4 million and $453.0 million that will begin to expire in 2037 and 2026, respectively, unless utilized. The remaining federal and state NOL carryforwards of $109.0 million and $1.6 million, respectively, will carry forward indefinitely. At December 31, 2025, the Company had federal and state charitable contribution carryforwards of $141.0 million which will begin to expire in 2026. At December 31, 2025, the Company had $64.0 million of federal R&D credit carryforwards, of which $1.0 million will expire in 2026 unless utilized, and the remaining federal R&D credit carryforwards will begin to expire beginning in 2027. At December 31, 2025, the Company had state R&D credit carryforwards of approximately $1.9 million that will begin to expire in 2026 and $22.8 million that have no expiration date. At December 31, 2025, the Company had Switzerland NOL carryforwards of $253.9 million, of which, $108.0 million will expire in 2026 unless utilized. At December 31, 2025, the Company had other foreign NOL carryforwards of $17.1 million which do not expire. The Company continues to record the deferred tax assets related to these attributes, subject to valuation allowance, until expiration occurs.

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of its deferred tax assets. As of December 31, 2024, management determined none of their deferred tax assets were realizable. As of December 31, 2025, in part because in the current year the Company achieved three years of cumulative pretax income, management determined that there is sufficient positive evidence to conclude that it is more likely than not that deferred taxes of $249.9 million are realizable. Accordingly, the valuation allowance was reduced by $340.4 million.

The amount of the deferred tax asset considered realizable could be further adjusted if estimates of the future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as the Company’s projections for future growth.

An accounting policy may be selected to either (i) treat taxes due on future U.S. inclusions in taxable income related to global intangible low-taxed income (GILTI) as a current-period expense when incurred or (ii) factor such amounts into a company’s measurement of its deferred taxes. The Company has elected to account for GILTI as a period cost.

The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures on a prospective basis. As a result, the rate reconciliation for 2025 is presented in accordance with the new disclosure requirements, while the reconciliation for 2024 and 2023 continues to be presented under disclosure requirements in effect for those periods.

A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate to the net loss is summarized as follows (in thousands):

The tax years 2003 – 2025 remain open to examination by the major taxing jurisdictions to which the Company is subject.

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination. The Company recorded an uncertain tax position reserve of $3.2 million, $1.3 million and $18.0 million for the years ended December 31, 2025, 2024, and 2023, respectively. Due to the partial valuation allowance recorded against the Company’s deferred tax assets, approximately $39.4 million and $8.7 million of the total unrecognized tax benefits as of December 31, 2025 and 2024, respectively, would reduce the annual effective tax rate if recognized. The Company’s practice is to recognize interest and/or penalties related to uncertain income tax positions in income tax expense. The Company had immaterial interest and/or penalties accrued on the Company’s consolidated balance sheets at December 31, 2025 or 2024, respectively. Further, the Company recognized an insignificant amount of interest and/or penalties in the statement of operations for the years ended December 31, 2025, 2024 and 2023, respectively, related to uncertain tax positions.