PUMA BIOTECHNOLOGY, INC. Income Taxes Disclosure

Note 12—Income Taxes 

 

The Company uses the asset and liability method of accounting for income taxes in accordance with Accounting Standards Codification Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date.

 

The components of income before income taxes for the years ended  December 31 (in thousands) are as follows: 

 

 

 

 

		2025				2024				2023
Domestic		$	35,782			$	24,100			$	22,674
Foreign			—				—				—
Income Before Income Taxes		$	35,782			$	24,100			$	22,674

 

 

The provisions of income taxes are summarized as follows (in thousands):

 

 

		2025				2024				2023
Current:
Federal		$	—			$	—			$	—
State			1,247				722				905
Foreign			179				175				178
			1,426				897				1,083
Deferred:
Federal			3,052				(6,632	)			—
State			193				(443	)			—
			3,245				(7,075	)			—
Total		$	4,671			$	(6,178	)		$	1,083

 

Reconciliation of Statutory Federal Income Tax Rate to the Effective Income Tax Rate

 

The Company has elected to prospectively adopt the guidance in ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures, or ASU 2023-09. The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company's effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09:

 

 

		2025
		Amount				Percentage
U.S. federal statutory income tax			7,514				21.0	%
State and local income taxes, net of federal income tax effect (1)			1,238				3.5	%
Foreign tax effects			179				0.5	%
Tax credits			(1,280	)			-3.6	%
Change in valuation allowance			(18,639	)			-52.1	%
Non-taxable or non-deductible items
SBC Options			14,619				40.9	%
Section 162(m)			777				2.2	%
Other nontaxable or nondeductible items			243				0.7	%
Other			20				0.1	%
Income tax expense			4,671				13.1	%

 

(1) State taxes in Kentucky and Indiana comprise the majority (greater than 50%) of the tax effect in this category.

 

As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:

 

 

		2024				2023
Tax computed at the federal statutory rate		$	5,061			$	4,488
State taxes			744				1,312
Foreign taxes			175				178
Permanent items			12,946				4,837
R&D credits			(1,532	)			(1,806	)
Prior year adjustment			1,697				(1,715	)
Change in valuation allowance			(25,269	)			(6,211	)
Total provision		$	(6,178	)		$	1,083

 

Approximately $3.8 million of the $18.7 million change in valuation allowance is attributable to a partial valuation allowance release (see further discussion within the tax footnotes below). Approximately $15.0 million of tax expense is due to stock-based compensation expense shortfall, the expiration of vested stock options, and non-deductible stock-based compensation. Approximately $1.6 million of the tax benefits are due to R&D tax credits, net of a $0.4 million reserve related to unrecognized tax benefits for the method of allocation of expenses used in the R&D credit calculation. 

 

Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes give rise to the Company’s deferred income taxes. The components of the Company’s net deferred tax assets as of December 31, 2025, 2024 and 2023 are as follows (in thousands):

 

 

 

		2025				2024				2023
Deferred tax assets:
Net operating loss carryforwards		$	230,018			$	232,184			$	240,960
Business credit carryforwards			64,968				63,175				62,051
Compensation			13,104				26,081				37,946
Sec 174 R&D expenses			14,505				23,933				19,882
Accrued expenses			139				90				261
Carryforward of disallowed interest			—				—				1,477
Accrued legal verdict			—				—				1,976
Other deferred tax assets			5,718				4,745				4,231
Lease liabilities			1,530				1,764				3,034
Gross deferred tax assets			329,982				351,972				371,818
Valuation allowance			(324,787	)			(343,482	)			(368,751	)
Net deferred tax assets			5,195				8,490				3,067
Deferred tax liabilities:
Other deferred tax liabilities			—				(70	)			(149	)
Right of use assets			(1,365	)			(1,148	)			(1,997	)
Inventory			—				(197	)			(921	)
Total deferred tax liabilities			(1,365	)			(1,415	)			(3,067	)
Net deferred tax assets (liability)		$	3,830			$	7,075			$	—

 

As of December 31, 2024, the Company had deferred tax assets totaling $352.0 million, primarily attributable to net operating loss (NOL) carryforwards and R&D tax credit carryforwards. A valuation allowance of $343.5 million had been established in prior periods as the management concluded it was more likely than not that the asset will not be realized.

 

During the year ended December 31, 2025, the Company has recorded a net decrease in the valuation allowance of $18.7 million. The decrease is attributable to recognizing $14.9 million of net deferred tax assets primarily related to utilization of net operating losses and stock-based compensation. The remaining change is attributable to a partial valuation allowance release of $3.8 million driven by forecasted earnings in 2026. The remaining valuation allowance of $324.8 million reserves against deferred tax assets that are more likely than not to not be recognized, as the Company's forecasted profitability is uncertain beyond 2026.

 

Management’s decision to release a portion of the valuation allowance was based on an assessment of both positive and negative evidence, as required under ASC 740.

 

Positive evidence supporting the partial release included:

 

•

Three consecutive years of cumulative pretax income, indicating a trend of profitability.

 

•

Projected earnings in 2026, increasing the likelihood of realizing certain deferred tax assets.

 

Negative evidence that led to retaining a portion of the valuation allowance included:

 

•

Competitive pressure in the oncology market, including the risks of alternative treatments gaining market share or impacting pricing flexibility.

  

•

Ability to generate sustained profitability remains uncertain due to dependence on NYRLYNX as a primary commercial product

 

•

Future profits are contingent on the successful clinical development and approval of pipeline products

 

•

Future limitations on the utilization of NOL and R&D tax credits.

 

•

The Company does not have material deferred tax liabilities (DTLs) to offset deferred tax assets (DTAs).

 

As of December 31, 2025, the remaining valuation allowance of $324.8 million continues to reflect management’s assessment of uncertainties related to the realization of certain net operating losses and R&D tax credit carryforwards, which remain subject to expiration or utilization limitations. The decision to retain the remaining valuation allowance was based on inherent uncertainty in forecasting taxable income beyond 2026. 

 

The partial release of the valuation allowance decreased the effective tax rate by 9.07%.

 

Management will continue to evaluate the realizability of deferred tax assets on a quarterly basis.

 

At December 31, 2025, the Company had federal and state net operating loss carryforwards respectively of approximately $827.8 million and $819.2 million, respectively, which will begin to expire respectively in 2035 and 2036. At December 31, 2025, the Company also has federal research and development credit carryforwards of approximately $42.0 million. If not utilized, the research and development credit carryforwards will begin expiring in 2033. The Company has state research and development credit carryforwards of approximately $26.3 million which do not expire. Pursuant to the Internal Revenue Code, Sections 382 and 383, use of the Company’s net operating loss and credit carryforwards could be limited if a cumulative change in ownership of more than 50% occurs within a three-year period. The Company performed an assessment of the potential limitation on net operating loss and credit carryforwards, and concluded that there will be no limitation for the tax year 2025 for federal purposes.

 

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits at December 31 (in thousands):

 

 

		2025				2024				2023
Unrecognized tax benefits - January 1		$	3,045			$	2,811			$	2,522
Gross decreases - tax positions in prior period			(50	)			(143	)			(163	)
Gross increases - tax positions in a current period			403				377				452
Unrecognized tax benefits - December 31		$	3,398			$	3,045			$	2,811

 

During prior period we completed research and development credit study. As a result of the study, we computed our credit under safe harbor rules which when applied consistently result in more conservative approach of calculating the amount of credit. We concluded that a release of uncertain tax benefits for the portion of the R&D credit attributable to safe harbor was appropriate and released a portion of previously recorded uncertain tax positions reserve. 

 

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by the federal and state jurisdictions where applicable. The Company is currently pending a federal income tax examination for the fiscal year ended December 31, 2022. The Company’s tax years for 2012 and forward are subject to examination by the federal and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits.

 

Income Tax Payments

 

Disclosed below is a summary of income taxes paid by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025:

 

 

		2025
Federal income taxes paid (net of refunds)			—
State income taxes paid (net of refunds)			1,092
Foreign income taxes paid (net of refunds)			179
Total income taxes paid (net of refunds)			1,271

 

Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdictions:

 

State		2025
Alabama			172,000
California			181,700
Indiana			199,000
Kentucky			181,400
New York			77,800
Pennsylvania			121,600
Foreign		2025
South Korea			179,120