AGIOS PHARMACEUTICALS, INC.AGIO
AGIOS PHARMACEUTICALS, INC. Income Taxes Disclosure
Income Taxes
The domestic and foreign components of (loss) income before income taxes are as follows:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic | $ | (413,806) | $ | 717,967 | $ | (352,085) | |||||||||||
| Foreign | 9 | 2 | (3) | ||||||||||||||
| Total | $ | (413,797) | $ | 717,969 | $ | (352,088) | |||||||||||
As further described in Note 2, Summary of Significant Accounting Policies, we have elected to prospectively adopt the guidance in ASU 2023-09. The following table is a reconciliation of our effective income tax rate to the statutory federal income tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09:
| (In thousands, except percentages) | Year Ended December 31, 2025 | ||||||||||
| Rate | Tax | ||||||||||
| At U.S. federal statutory rate | 21.0 | % | $ | (86,897) | |||||||
| State taxes, net of federal effect | — | % | (153) | ||||||||
| Tax credits | |||||||||||
| Research and development costs | 1.5 | % | (6,225) | ||||||||
| Orphan drug credit | 2.3 | % | (9,654) | ||||||||
| Changes in valuation allowances | (23.0) | % | 95,035 | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Stock compensation | (1.7) | % | 7,149 | ||||||||
| Other items | (0.1) | % | 592 | ||||||||
| Other adjustments | |||||||||||
| Other items | 0.2 | % | (863) | ||||||||
| Effective income tax rate | 0.2 | % | $ | (1,016) | |||||||
The following table is a reconciliation of our effective income tax rate to the statutory federal income tax rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:
| 2024 | 2023 | |||||||||||||
| Federal statutory tax rate | 21.0 | % | 21.0 | % | ||||||||||
| State taxes, net of federal benefit | 1.6 | % | 1.9 | % | ||||||||||
| Change in valuation allowance | (14.5) | % | (23.8) | % | ||||||||||
| General business credits and other credits | (2.6) | % | 4.2 | % | ||||||||||
| Permanent differences and other adjustments | 0.6 | % | (2.8) | % | ||||||||||
| Stock based compensation | 0.1 | % | (0.5) | % | ||||||||||
| Total | 6.2 | % | — | % | ||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities for the years ended December 31, 2025 and 2024 are as follows:
| (In thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 134,116 | $ | 26,492 | |||||||
| Tax credit carryforwards | 103,912 | 83,994 | |||||||||
| Purchased intangible assets | 13,301 | 12,713 | |||||||||
| Stock-based compensation | 18,381 | 21,090 | |||||||||
| Operating lease liability | 8,782 | 13,023 | |||||||||
| Non-deductible accruals and reserves, including inventory | 8,633 | 8,635 | |||||||||
| Section 174 R&D expense | 86,409 | 121,530 | |||||||||
| Total deferred tax assets | 373,534 | 287,477 | |||||||||
| Depreciation and amortization | (418) | (1,193) | |||||||||
| Operating lease right of use asset | (7,493) | (10,713) | |||||||||
| Less: valuation allowance | (365,623) | (275,571) | |||||||||
| Net deferred taxes | $ | — | $ | — | |||||||
On July 4, 2025, the One Big Beautiful Bill Act, or OBBBA, was enacted. The legislation includes several changes to the U.S. federal corporate income tax law, among other things, reinstating 100% bonus depreciation on qualified fixed assets, immediate expensing of domestic research and development expenditures, and favorable rules for determining the limitation on business interest expense. These changes were retroactively enacted for tax years beginning after December 31, 2024 with certain provisions effective after January 19, 2025 and were reflected in the income tax provision for the year ended December 31, 2025. The provisions of the OBBBA did not have a material impact on the effective income tax rate.
As of December 31, 2025, we had net operating loss carryforwards, or NOLs, available to reduce federal, state and foreign income taxes of approximately $515.8 million, $394.1 million and $38.0 million, respectively. The federal NOLs will be carried forward indefinitely and could be used to offset up to 80% of taxable income in all other future years. State NOLs will begin expiring in varying amounts through 2045 unless utilized. At December 31, 2025, we also had available research and development tax credits for federal and state income tax purposes of approximately $32.1 million and $31.2 million, respectively. If not utilized, the credits begin to expire in 2040 and 2028 for federal and state income tax purposes, respectively. Additionally, we engaged in clinical testing activities and incurred expenses that qualify for the federal orphan drug tax credit. At December 31, 2025, we had available orphan drug tax credits for federal purposes only of approximately $47.1 million. If not utilized, these orphan drug credits begin to expire in 2040.
As provided by Section 382 of the Internal Revenue Code of 1986, or Section 382, and similar state provisions, utilization of NOLs and tax credit carryforwards may be subject to substantial annual limitations due to ownership change limitations that have previously occurred or that could occur in the future. Ownership changes may limit the amount of NOLs and tax 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, results from transactions that increase the ownership of five percent stockholders in the
stock of a corporation by more than 50 percent in the aggregate over a three year period. We completed a review of our changes in ownership through December 31, 2025 and determined that transactions have resulted in no ownership changes during the year ended December 31, 2025, as defined by Section 382. The impact of the historical ownership changes has been reflected in our deferred tax assets in the table above.
As required by ASC 740, we have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets. Based on the weight of available evidence, both positive and negative, we recorded a valuation allowance of $365.6 million and $275.6 million as of December 31, 2025 and December 31, 2024, respectively, because we have determined that it is more likely than not that these assets will not be fully realized. The valuation allowance increased by $90.1 million for the year ended December 31, 2025 and decreased by $104.1 million for the year ended December 31, 2024. The increase for the year ended December 31, 2025 is primarily due to Section 174 R&D domestic expense and the decrease for the year ended December 31, 2024 relates primarily to the utilization of tax attributes to offset taxable income.
The following table presents our change in valuation allowance for the years ended December 31, 2025 and, 2024:
| (In thousands) | 2025 | 2024 | |||||||||
| Valuation allowance at the beginning of the year | $ | 275,571 | $ | 379,660 | |||||||
| Increase (decrease) for the current period | 90,052 | (104,089) | |||||||||
| Valuation allowance at the end of the year | $ | 365,623 | $ | 275,571 | |||||||
As of December 31, 2025, the unremitted earnings of our foreign subsidiaries are not material. We have not provided for U.S. income taxes or foreign withholding taxes on these earnings as it is our current intention to permanently reinvest these earnings outside the U.S. The tax liability on these earnings is also not material. Events that could trigger a tax liability include, but are not limited to, distributions, reorganizations or restructurings and/or tax law changes.
We apply the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes. Our reserves related to taxes are based on a determination of whether, and how much of, a tax benefit taken by us in our tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit.
The following table presents our unrecognized tax benefits activity for the years ended December 31, 2025 and 2024:
| (In thousands) | 2025 | 2024 | |||||||||
| Unrecognized tax benefits at the beginning of the year | $ | 31,591 | $ | 28,578 | |||||||
| Gross increases - current period tax positions | 2,871 | 3,013 | |||||||||
| Gross increases - prior period tax positions | 1,327 | — | |||||||||
| Unrecognized tax benefits at the end of the year | $ | 35,789 | $ | 31,591 | |||||||
We will recognize interest and penalties related to uncertain tax positions above the line as an expense to continuing operations. As of December 31, 2025 and 2024, we had no accrued interest or penalties related to uncertain tax positions and no such amounts have been recognized. If all of our unrecognized tax benefits as of December 31, 2025 were to become recognizable in the future, we would record $35.8 million of unrecognized tax benefits. The uncertain tax position does not impact our effective income tax rate due to the full valuation allowance.
We are subject to taxation in the United States, Switzerland, Netherlands, Germany, Italy and France. The statute of limitations for assessment by the IRS and state tax authorities is open for tax years ending December 31, 2025, 2024, 2023, 2022 and 2021, although carryforward attributes that were generated for tax years prior to 2021 may still be adjusted upon examination by the IRS or state tax authorities if they either have been, or will be, used in a future period. The statute of limitations for assessments in Switzerland, the Netherlands and Italy remains open for tax years ending December 31, 2025, 2024, 2023, 2022 and 2021. Our subsidiary in Germany has statute of limitations for assessments open are for the tax years ending December 31, 2025, 2024, 2023, and 2022, and our subsidiary in France has statute of limitations for assessments for the tax years ending December 31, 2025, 2024, and 2023. There are currently no federal, state or foreign audits in progress.
As of December 31, 2025 we had an income tax receivable of $0.2 million, which is recorded within prepaid expenses and other current assets in our consolidated balance sheets, and as of December 31, 2024 we had an income tax payable of $0.9 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 19, 2020 | |
| 2018 | Feb 14, 2019 | |
| 2017 | Feb 14, 2018 | |
| 2016 | Feb 16, 2017 | |
| 2015 | Feb 26, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.