Replimune Group, Inc.REPL
Replimune Group, Inc. Income Taxes Disclosure
Income taxes
Loss before income taxes for the years ended March 31, 2025 and 2024 were as follows:
| Year ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| United States | (25,870) | (19,367) | |||||||||
| United Kingdom | (220,959) | (196,019) | |||||||||
| Total | $ | (246,829) | $ | (215,386) | |||||||
During the year ended March 31, 2025 and 2024, the Company recorded an income tax provision of $0.5 million and $0.4 million, respectively, related to U.S. current taxes primarily due to the transfer pricing arrangement between the U.S. and the U.K., as well as unfavorable adjustments related to stock compensation, resulting in U.S. taxable income partially reduced by certain prior year available net operating losses and U.S. tax partially reduced by certain credits.
Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of March 31, 2025 and 2024, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company’s assessment is based on the weight of available evidence, including cumulative losses since inception and expected future losses and, as such, the Company does not believe it is more likely than not that the deferred tax assets will be realized. Accordingly, a full valuation allowance was maintained as of March 31, 2025 and 2024.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate for the years ended March 31, 2025 and 2024 is as follows:
| Year Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| U.S. federal statutory income tax rate | (21.0) | % | (21.0) | % | |||||||
| State taxes, net of federal benefit | (0.5) | % | (0.3) | % | |||||||
| Research and development | (1.6) | % | 0.7 | % | |||||||
| Stock compensation | 1.2 | % | 3 | % | |||||||
| Foreign tax rate differential | (3.6) | % | (3.6) | % | |||||||
| Change in tax rates | 0.4 | % | — | % | |||||||
| Change in valuation allowance | 24.3 | % | 21.4 | % | |||||||
| Other | 1.0 | % | 0.0 | % | |||||||
| 0.2 | % | 0.2 | % | ||||||||
Components of the Company’s deferred tax assets as of March 31, 2025 and 2024 were as follows:
| Year Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 192,909 | $ | 141,911 | |||||||
Research and development credits | 2,676 | — | |||||||||
| Property, plant and equipment | 4,596 | 4,706 | |||||||||
| Capitalized start-up costs | 1,014 | 1,199 | |||||||||
| Stock compensation | 16,478 | 13,798 | |||||||||
| Accrued expenses | 6,397 | 3,221 | |||||||||
| Lease liability | 7,318 | 7,938 | |||||||||
| Other | — | 39 | |||||||||
| Total deferred tax assets | 231,388 | 172,812 | |||||||||
| Valuation allowance | (221,629) | (161,890) | |||||||||
| Net deferred tax assets | 9,759 | 10,922 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right of use asset | (9,698) | (10,922) | |||||||||
Other | (61) | — | |||||||||
| Total deferred tax liabilities | (9,759) | (10,922) | |||||||||
| Net deferred tax assets (liabilities) | $ | — | $ | — | |||||||
As of March 31, 2025, the Company had U.S. federal operating loss carryforwards of approximately $15.9 million, which can be carried forward indefinitely subject to 80% limitation of taxable income when utilized. As of March 31, 2025, the Company had U.S. state net operating loss carryforwards of $54.4 million before gross unrecognized tax benefits from uncertain tax positions, which will begin to expire in 2040. As of March 31, 2025, the Company had U.K. net operating loss carryforwards of approximately $737.6 million, which can be carried forward indefinitely. Such U.S. federal and state, as well as U.K., net operating loss carryforwards are based on tax returns filed and does not reflect gross unrecognized tax benefits from uncertain tax positions in the U.S. and offsetting positions in the U.K. related to the transfer pricing arrangement between the U.S. and the U.K.
As of March 31, 2025, the Company had U.S. federal research and development credit carryforwards of approximately $5.4 million before gross unrecognized tax benefits from uncertain tax positions, which begin to expire in 2041. Additionally, the Company has state research and development credit carryforwards of approximately $1.5 million before gross unrecognized tax benefits from uncertain tax positions, which will begin to expire in 2036.
Utilization of the U.S. federal and state net operating loss as well as research and development credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss as well as research and development credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company has completed a study through March 31, 2025 and determined that an ownership change occurred on July 19, 2018. Due to the ownership change, the utilization of certain net operating loss as well as research and development credit carryforwards to offset future taxable income and tax are limited; however, none of the net operating loss as well as research and development credits are expected to expire unutilized.
Changes in the valuation allowance for deferred tax assets during the years ended March 31, 2025 and 2024 related primarily to the increase in net operating loss carryforwards were as follows:
| Year Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Valuation allowance as of beginning of year | $ | 161,890 | $ | 113,889 | |||||||
| Increases recorded to income tax provision | 59,848 | 45,941 | |||||||||
(Decreases) increases recorded to equity | (109) | 2,060 | |||||||||
| Valuation allowance as of end of year | $ | 221,629 | $ | 161,890 | |||||||
Changes in the Company's gross unrecognized tax benefits from uncertain tax positions, excluding interest and penalties, consisted of the following:
| Year Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Unrecognized tax benefits - beginning of year | $ | 8,667 | $ | 8,757 | |||||||
Increases for tax positions taken during current years | 921 | — | |||||||||
| Increases (decreases) for tax positions taken during prior years | 855 | (90) | |||||||||
| Unrecognized tax benefits - end of year | $ | 10,443 | $ | 8,667 | |||||||
The Company's unrecognized tax benefits primarily relate to the Company's transfer pricing arrangement between the U.S. and the U.K. and the impacts to the Company’s net operating loss as well as research and development credit carryforwards.
The Company's unrecognized tax benefits, if recognized, would not have a material impact to the Company's effective tax rate and income tax provision due to the Company's full valuation allowance.
As of March 31, 2025 and 2024, the Company had not accrued interest or penalties related to uncertain income tax positions.
The Company files U.S. federal and state as well as U.K. income tax returns. In the normal course of business, the Company is subject to examination by U.S. federal and state as well as U.K. jurisdictions, where applicable. There are currently no pending income tax examinations. The Company is open to future U.S. federal income tax examination from 2021 to the present and in the U.K. from 2023 to the present. Although, carryforward attributes from earlier years may still be adjusted upon examination if they either have been used in an open year or will be used in a future period.
As of March 31, 2025 and 2024, income taxes on outside basis differences, primarily related to undistributed earnings, of the Company’s subsidiary have not been provided for as the Company intends to indefinitely reinvest its outside basis differences, and the undistributed earnings were in a cumulative and overall deficit.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | May 22, 2025 | Showing above |
| 2024 | May 16, 2024 | |
| 2023 | May 18, 2023 | |
| 2022 | May 19, 2022 | |
| 2021 | May 20, 2021 | |
| 2020 | Jun 3, 2020 | |
| 2019 | Jun 28, 2019 | |
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.