The trading market for our common shares
will depend in part on the research and reports that securities or industry analysts publish about us or our business. If no or
too few securities or industry analysts cover our company, the trading price for our common shares would likely be negatively affected.
In addition, if one or more of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research
about our business, the price of our common shares would likely decline. If one or more of these analysts cease coverage of our
company or fail to publish reports on us regularly, demand for our common shares could decrease, which might cause the price of
our common shares and trading volume to decline.
An increase in our tax rate could occur, which
could adversely affect our financial results.
On June 6, 2018, the Swiss Federal Council
published the draft bill of the new tax reform named “Tax Proposal 17” (Steuervorlage 17) and there will be
a vote on such bill on May 19, 2019. Thus, uncertainty will continue about the future level of Swiss Federal corporate income taxes
that may apply to us until revised proposals are put forward and gain acceptance. If the Tax Proposal 2017 is accepted by the public,
the main aspects of the reform are expected to come into force no earlier than on January 1, 2020. The Tax Proposal 17 includes
– amongst other measures – the following measures:
||repealing the status companies at the cantonal level as well as certain tax practices at the federal level, including transitional measures;|
||introducing a mandatory patent box regime at the cantonal level, and;|
||Introducing an optional R&D “super deduction” at the cantonal level.|
On January 1, 2019, the applicable corporate
tax rate in the canton of Vaud was reduced to an actual combined effective Swiss income tax rate of 13.63%.
For further discussion, see “Item
10. Additional Information—E. Taxation.”
Although we believe that
we were not a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes in 2018, we may be
a PFIC in 2019 or later years. If we were a PFIC in any year, U.S. shareholders could be subject to adverse U.S. federal income
Under the Internal Revenue Code of 1986,
as amended, or the Code, we will be a PFIC for any taxable year in which, after the application of certain look-through rules with
respect to subsidiaries, either (i) 75% or more of our gross income consists of passive income or (ii) 50% or more of the average
quarterly value of our assets consists of assets that produce, or are held for the production of, passive income. Passive income
generally includes dividends, interest, certain non-active rents and royalties, and capital gains. Based on the composition of
our income and assets during 2018 and certain estimates and projections, including as to the relative values of our assets, we
do not believe that we were a PFIC in 2018. However, there can be no assurance that the IRS will agree with our conclusion. In
addition, whether we will be a PFIC in 2019 or any future years is uncertain because, among other things, (i) we may not generate
a substantial amount of non-passive gross income, for U.S. federal income tax purposes, in any year, (ii) we currently own, a substantial
amount of passive assets, including cash, and (iii) the estimated valuation, for PFIC purposes, of our assets that generate non-passive
income for PFIC purposes, including our intangible assets, is likely to be dependent in large part on our market capitalization
and is therefore uncertain and may vary substantially over time. In this respect, our market capitalization has experienced significant
declines and volatility after the beginning of 2019, which could increase the risk that we will be a PFIC in 2019 or later years.
Accordingly, there can be no assurance that we will not be a PFIC for any taxable year.
If we are a PFIC for any taxable year during
which a U.S. investor holds common shares, we generally would continue to be treated as a PFIC with respect to that U.S. investor
for all succeeding years during which the U.S. investor holds common shares, even if we ceased to meet the threshold requirements
for PFIC status. Such a U.S. investor may be subject to adverse U.S. federal income tax consequences, including (i) the treatment
of all or a portion of any gain on disposition as ordinary income, (ii) the application of a deferred interest charge on such gain
and the receipt of certain dividends and (iii) compliance with certain reporting requirements. We do not intend to provide the
information that would enable investors to take a qualified electing fund election that could mitigate the adverse U.S. federal
income tax consequences should we be classified as a PFIC.
For further discussion, see “Item
10. Additional Information—Section E. Taxation.”