Edgewise Therapeutics, Inc. Income Taxes Disclosure
NOTE 6 INCOME TAXES
Since inception, the Company has incurred net taxable losses, and accordingly, no current provision for income taxes has been recorded. Net loss before income tax expense or benefit of $167.8 million, $133.8 million, and $100.2 million for the years ended December 31, 2025, 2024 and 2023, respectively, was incurred in the United States. The Company has not recorded any United States federal or foreign income tax expense or benefit.
The effective income tax rate of the provision for income taxes differs from the federal statutory rate as follows:
As of December 31, | |||||||||||||||
| 2025 | | 2024 | | 2023 | ||||||||||
Income tax benefit at federal statutory rate | (35,238) | 21.0 | % | (28,101) | 21.0 | % | (21,034) | 21.0 | % | ||||||
State and local income taxes, net of federal income tax effect | 4 | (0.0) | % | 3 | (0.0) | % | 4 | (0.0) | % | ||||||
Federal tax credits | |||||||||||||||
Orphan drug | (15,704) | 9.4 | % | (670) | 0.5 | % | (691) | 0.7 | % | ||||||
Research and development | (2,510) | 1.5 | % | (6,499) | 4.9 | % | (5,346) | 5.3 | % | ||||||
Change in valuation allowance | 49,707 | (29.6) | % | 34,832 | (26.0) | % | 25,071 | (25.0) | % | ||||||
Non-deductible or non-taxable items | |||||||||||||||
Section 162(m) limitations | 4,450 | (2.7) | % | 4,629 | (3.5) | % | 1,432 | (1.4) | % | ||||||
Share based compensation | (528) | 0.3 | % | (4,596) | 3.4 | % | 551 | (0.6) | % | ||||||
Other | (177) | 0.1 | % | 405 | (0.3) | % | 17 | (0.0) | % | ||||||
Effective income tax rate | 4.0 | (0.0) | % | | 3.0 | (0.0) | % | | 4.0 | (0.0) | % | ||||
The tax effect of temporary differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases that give rise to deferred tax assets and liabilities is as follows:
As of December 31, | ||||||
| 2025 | | 2024 | |||
Deferred tax assets: | ||||||
Federal net operating loss carryforward | $ | 67,128 | $ | 30,714 | ||
Capitalized research expenses | 40,957 | 49,054 | ||||
Federal and state R&D credits | 21,616 | 16,854 | ||||
Orphan Drug Credit | 16,311 | 606 | ||||
State net operating loss carryforward | 14,671 | 6,956 | ||||
Stock-based compensation | 6,442 | 4,929 | ||||
Accrued expenses | 1,808 | 1,661 | ||||
Lease liability | 1,034 | 1,236 | ||||
Property and equipment | 261 | 107 | ||||
Total deferred tax assets before valuation allowance | 170,228 | 112,117 | ||||
Valuation allowance | (169,741) | (111,692) | ||||
Total deferred tax assets | 487 | 425 | ||||
Deferred tax liabilities: | ||||||
Other | (128) | (15) | ||||
ROU asset | (359) | (410) | ||||
Total deferred tax liabilities | (487) | (425) | ||||
Net deferred tax asset (liability) | $ | $ | ||||
For the period ended December 31, 2025, the Company has federal and state post-apportioned net operating loss (NOL) carryforwards of $319.7 million and $333.3 million, respectively. Of the federal amount, $1.2 million have a limited carryforward period and will begin to expire in 2037; the remaining $318.5 million will have an indefinite carryforward period. Of the state post-apportioned amount, $300.6 million have a limited carryforward period and will begin to expire in 2037; the remaining $32.7 million will have an indefinite carryforward period. The Company also has federal and state tax credit carryforwards of $34.8 million and $3.1 million, respectively. The full federal amount of $34.8 million has a limited carryforward period and will begin to expire in 2039. Of the state tax credit carryforwards, $2.3 million will begin to expire in 2037; the remaining $0.8 million have an indefinite carryforward period. In accordance with Section 382 and Section 383, utilization of the NOL and tax credit carryforwards may be subject to limitations based on prior or future ownership changes. After weighing all available positive and negative evidence, the Company determined a full valuation allowance was necessary, consistent with prior year.
The Company is subject to income tax in multiple jurisdictions, including federal and several states. The Company has federal and state income tax returns that are open to examination from 2022 and 2021 forward, respectively. In addition, the utilization of NOLs and tax credit carryforwards, from periods prior to those previously mentioned may also be audited by the taxing authorities once utilized. As a result, the Company continuously monitors its current and prior filing positions in order to determine if any unrecognized tax positions need to be recorded. The analysis involves considerable judgement and is based on the best information available. For the period ended December 31, 2025, the Company is not aware of any positions which require an uncertain tax position liability.
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.