The Company operates the mandatory pension
schemes for its employees in Switzerland. The schemes are generally funded through payments to insurance companies. The Company
has a pension plan designed to pay pensions based on accumulated contributions on individual savings accounts. However, this plan
is classified as a defined benefit plan under IAS 19.
The net defined benefit liability is the
present value of the defined benefit obligation at the balance sheet date minus the fair value of plan assets. Significant estimates
are used in determining the assumptions incorporated in the calculation of the pension obligations, which is supported by input
from independent actuaries. The defined benefit obligation is calculated annually with the assistance of an independent actuary
using the projected unit credit method, which reflects services rendered by employees to the date of valuation, incorporates assumptions
concerning employees’ projected salaries, pension increases as well as discount rates of highly liquid corporate bonds which
have terms to maturity approximating the terms of the related liability.
Remeasurements of the net defined benefit
liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest), are recognized immediately
in Other Comprehensive Loss. Past service costs, including curtailment gains or losses, are recognized immediately as a split in
research and development and general and administrative expenses within the operating results. Settlement gains or losses are recognized
in either research and development and/or general and administrative expenses within the operating results. The Company determines
the net interest expense (income) on the net defined benefit liability for the period by applying the discount rate used to measure
the defined benefit obligation at the beginning of the annual period or in case of any significant events between measurement dates
to the then-net defined benefit liability, taking into account any changes in the net defined benefit liability during the period
as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are
recognized in the statement of income.
The Company operates an equity-settled,
share-based compensation plan. The fair value of the employee services received in exchange for the grant of equity based awards
is recognized as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value
of the instruments granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included
in assumptions about the number of instruments that are expected to become exercisable. At each balance sheet date, the Company
revises its estimates of the number of instruments that are expected to become exercisable. It recognizes the impact of the revision
of original estimates, if any, prospectively in the income statement, and a corresponding adjustment to equity over the remaining
Stock options granted under the Company’s
stock option plans A, B, C and the 2016 Stock Option and Incentive Plan are valued using the Black-Scholes option pricing model
(see Note 16). This valuation model as well as parameters used such as expected volatility and expected term of the stock options
are partially based on management’s estimates.
The proceeds received net of any directly
attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
We estimate the fair value of non-vested
stock awards (restricted shares and restricted share units) using a reasonable estimate of market value of the common stock on
the date of the award. We classify our share-based payments as equity-classified awards as they are settled in shares of our common
stock. We measure equity-classified awards at their grant date fair value and do not subsequently remeasure them. Compensation
costs related to equity-classified awards are equal to the fair value of the award at grant-date amortized over the vesting period
of the award using the graded method. We reclassify that portion of vested awards to share premium as the awards vest.