CYTOKINETICS INC Income Taxes Disclosure
Note 10 — Income Taxes
We did not record an income tax provision in 2025, 2024, and 2023 because we had net taxable losses. Our significant jurisdictions are the United States and California.
Reconciliation of Statutory Federal Income Tax Rate to the Effective Income Tax Rate
Below is a tabular rate reconciliation for the years ended December 31, 2025, 2024, and 2023 (in thousands):
|
|
Years Ended December 31, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
|
|
Amount |
|
|
% |
|
|
Amount |
|
|
% |
|
|
Amount |
|
|
% |
|
||||||
Tax at federal statutory tax rate |
|
$ |
(160,679 |
) |
|
|
21.00 |
% |
|
$ |
(122,779 |
) |
|
|
21.00 |
% |
|
$ |
(109,217 |
) |
|
|
21.00 |
% |
State and local income taxes, net of federal benefit |
|
|
2 |
|
|
|
0.00 |
% |
|
|
2 |
|
|
|
0.00 |
% |
|
|
2 |
|
|
|
0.00 |
% |
Foreign tax effects |
|
|
30 |
|
|
|
0.00 |
% |
|
|
— |
|
|
|
0.00 |
% |
|
|
— |
|
|
|
0.00 |
% |
Tax credits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
R&D Tax Credit |
|
|
(9,780 |
) |
|
|
1.28 |
% |
|
|
(13,928 |
) |
|
|
2.38 |
% |
|
|
(7,734 |
) |
|
|
1.49 |
% |
Orphan Drug Credit |
|
|
(13,354 |
) |
|
|
1.75 |
% |
|
|
(17,728 |
) |
|
|
3.03 |
% |
|
|
(20,292 |
) |
|
|
3.90 |
% |
Change in valuation allowance |
|
|
137,963 |
|
|
|
(18.03 |
)% |
|
|
142,733 |
|
|
|
(24.41 |
)% |
|
|
120,814 |
|
|
|
(23.23 |
)% |
Non-taxable or non-deductible items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Section 162(m) Limitation |
|
|
4,164 |
|
|
|
(0.54 |
)% |
|
|
8,442 |
|
|
|
(1.45 |
)% |
|
|
4,425 |
|
|
|
(0.85 |
)% |
Stock Compensation Expense |
|
|
(82 |
) |
|
|
0.01 |
% |
|
|
(15,822 |
) |
|
|
2.71 |
% |
|
|
(3,951 |
) |
|
|
0.76 |
% |
Convertible Notes Due 2027 |
|
|
25,462 |
|
|
|
(3.33 |
)% |
|
|
— |
|
|
|
0.00 |
% |
|
|
— |
|
|
|
0.00 |
% |
Expiration of Attributes |
|
|
10,489 |
|
|
|
(1.37 |
)% |
|
|
9,073 |
|
|
|
(1.55 |
)% |
|
|
8,982 |
|
|
|
(1.73 |
)% |
Other |
|
|
1,464 |
|
|
|
(0.20 |
)% |
|
|
4,514 |
|
|
|
(0.77 |
)% |
|
|
371 |
|
|
|
(0.07 |
)% |
Changes in Unrecognized Tax Benefits |
|
|
4,321 |
|
|
|
(0.57 |
)% |
|
|
5,493 |
|
|
|
(0.94 |
)% |
|
|
6,600 |
|
|
|
(1.27 |
)% |
Income tax expense |
|
$ |
— |
|
|
|
0.00 |
% |
|
$ |
— |
|
|
|
0.00 |
% |
|
$ |
— |
|
|
|
0.00 |
% |
Income Tax Payments
The Company did not pay any income taxes by jurisdiction for the years ended December 31, 2025, 2024, and 2023.
Deferred Tax Assets
Deferred tax assets, net, reflecting the net tax effect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes, were as follows (in thousands):
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Net operating loss carryforwards |
|
$ |
498,689 |
|
|
$ |
282,974 |
|
Tax credits |
|
|
168,303 |
|
|
|
146,883 |
|
Liability related to sale of future royalties |
|
|
113,812 |
|
|
|
102,134 |
|
Reserves and accruals |
|
|
52,245 |
|
|
|
43,108 |
|
Capitalized R&D |
|
|
22,215 |
|
|
|
133,933 |
|
Long-term lease liability |
|
|
24,480 |
|
|
|
25,919 |
|
Total noncurrent deferred tax assets |
|
|
879,744 |
|
|
|
734,951 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
(4,973 |
) |
|
|
(5,834 |
) |
Operating lease right-of-use assets |
|
|
(15,450 |
) |
|
|
(15,778 |
) |
Unrealized Loss |
|
|
(419 |
) |
|
|
(432 |
) |
Total noncurrent deferred tax liabilities |
|
|
(20,842 |
) |
|
|
(22,044 |
) |
Less: Valuation allowance |
|
|
(858,902 |
) |
|
|
(712,907 |
) |
Net deferred tax assets |
|
$ |
— |
|
|
$ |
— |
|
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.
Based upon the weight of available evidence, which includes our historical operating performance, reported cumulative net losses
since inception, expected future losses, and difficulty in accurately forecasting our future results and an assessment of both positive
and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable, we maintained a full valuation allowance on the net deferred tax assets as of December 31, 2025 and 2024. The valuation allowance increased by $146.0 million in 2025 and increased by $140.4 million in 2024.
At December 31, 2025 federal NOL carryforwards were $2,210.0 million, apportioned state NOL carryforwards before federal
benefits were $443.9 million, and foreign NOL carryforwards were $20.3 million. If not utilized, federal and state net operating loss
carryforwards incurred prior to 2018 will expire in various amounts beginning 2026 and 2028, respectively, and the foreign net
operating loss carryforwards will begin to expire in 2030.
At December 31, 2025, tax credits of $177.6 million and $32.6 million for federal and California income tax purposes,
respectively consisted of Research and Development Credits and Orphan Drug Credits. If not utilized, the federal carryforwards will
expire in various amounts beginning in 2026. California based credit carryforwards do not expire.
In general, under Section 382, a corporation that undergoes an ‘ownership change’ is subject to limitations on its ability to
utilize its pre-change net operating losses and tax credits to offset future taxable income. We do not believe the Company has experienced an ownership change since 2006, however, a portion of its NOLs and tax credits prior to 2007 will be subject to limitations under Section 382.
On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”), was enacted. The OBBBA legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic research and development expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes are reflected in the income tax provision for the period ended December 31, 2025. The Company does not expect this law to have a significant effect on the Company's financial statements due to the full valuation allowance against deferred
tax.
Activity related to our gross unrecognized tax benefits were (in thousands):
|
|
Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Balance at the beginning of the year |
|
$ |
31,005 |
|
|
$ |
25,232 |
|
|
$ |
18,355 |
|
Increase related to prior year tax positions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Decrease related to prior year tax positions |
|
|
(188 |
) |
|
|
(97 |
) |
|
|
(97 |
) |
Increase related to current year tax positions |
|
|
5,128 |
|
|
|
5,870 |
|
|
|
6,974 |
|
Balance at the end of the year |
|
$ |
35,945 |
|
|
$ |
31,005 |
|
|
$ |
25,232 |
|
We are subject to federal and various state & local and foreign income tax examinations for all fiscal years with unutilized NOLs and tax credit carryforwards.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Mar 4, 2020 | |
| 2018 | Mar 7, 2019 | |
| 2017 | Mar 5, 2018 | |
| 2016 | Mar 6, 2017 | |
| 2015 | Mar 3, 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.