ADC Therapeutics SAADCT

ADC Therapeutics SA Income Taxes Disclosure

10-KFiled Mar 10, 20265 min read
Income taxes
For the years ended December 31, 2025 and 2024, loss before taxes consists of the following:
Year Ended December 31,
(in thousands)20252024
Switzerland
$(86,229)$(113,982)
United Kingdom2,576 2,568 
US operations
(57,955)(44,722)
Total$(141,608)$(156,136)
Income tax expense (benefit) attributable to income consists of:
(in thousands)CurrentDeferred
Year ended December 31, 2025
Switzerland
— — 
United Kingdom1,303 — 
US federal
(150)— 
US state
(138)— 
Total$1,015 $— 
Year ended December 31, 2024
Switzerland
$— $— 
United Kingdom(148)— 
US federal
140 — 
US state
173 — 
Total$165 $— 

Tax rate reconciliation

Income tax expense attributable to income was $1.0 million and $0.2 million for the years ended December 31, 2025 and 2024, respectively. The income tax expense differed from the amounts computed by applying the Swiss income tax rate of 7.83% for both periods to pretax income from continuing operations as a result of the following:
For the years ended December 31,
20252024
(in thousands)AmountPercentageAmountPercentage
Swiss Federal Statutory Income Tax Rate$(11,088)7.83 %$(12,225)7.83 %
Federal
Shared Based Compensation531 (0.37)%452 (0.29)%
Other24 (0.02)%(149)0.10 %
Cantonal Taxes
Cantonal Taxes(5,027)3.55 %(6,645)4.26 %
Shared Based Compensation395 (0.28)%337 (0.22)%
Other9 (0.01)%(111)0.07 %
Foreign tax effects
United States
Statutory Income Tax Rate Differential(7,633)5.39 %(5,890)3.77 %
State Taxes - Net of Federal Benefit(1,670)1.18 %(1,453)0.93 %
Research and development tax credits(6,697)4.73 %(7,524)4.82 %
Nontaxable or nondeductible items1,829 (1.29)%1,598 (1.02)%
Shared Based Compensation(355)0.25 %(356)0.23 %
Adjustments for current tax of prior periods1,036 (0.73)%(429)0.27 %
Other(288)0.20 %(107)0.07 %
United Kingdom
Statutory Income Tax Rate Differential442 (0.31)%441 (0.28)%
Adjustments for current tax of prior periods(2)— %(681)0.44 %
Other27 (0.02)%(24)0.02 %
Worldwide Change in Uncertain Tax Positions(712)0.50 %1,314 (0.84)%
Change In the Valuation Allowance$30,194 (21.32)%$31,618 (20.25)%
Income tax expense$1,015 (0.72)%$166 (0.11)%

In the table above, the Company used ADCT SA’s statutory tax rate as the starting point for the reconciliation since it is the parent entity of the business. The rate reconciliation begins with the statutory tax rate of the Company’s country of domicile, Switzerland. Effective tax rate varies from the statutory tax rate primarily due to valuation allowance recorded in the current losses in Switzerland and U.S. deferred tax assets.

Deferred tax assets

The income tax effect of each type of temporary difference comprising the net deferred tax asset as of December 31, 2025 and 2024 is as follows:
Year ended December 31,
(in thousands)20252024
Deferred tax assets:
Net operating loss carryforwards
$165,508 $149,925 
Federal R&D credit (US)35,800 28,999 
State R&D credits (US)7,062 6,310 
Share-based compensation13,049 14,880 
Capitalized research and development21,121 13,958 
Accrued rebate reserve1,956 1,880 
Other deferred tax assets7,262 5,796 
Total gross deferred tax assets251,758 221,748 
Less: Valuation allowance(250,969)(219,836)
Net deferred tax assets$789 $1,912 
Deferred tax liabilities:
Interest in joint venture— — 
Other deferred tax liabilities(789)(1,912)
Total gross deferred tax liabilities(789)(1,912)
Net deferred tax liability$(789)$(1,912)
Total deferred tax$— $— 

The valuation allowance at December 31, 2025 was primarily related to Swiss NOL, Federal R&D and Orphan Drug credits, Capitalized Research & Development, and Share Based Compensation that, in the judgment of management, may not be realized. The valuation allowance increased by $31.1 million in 2025. The change in valuation allowance from 2024 was related to increases in U.S. capitalized R&D, share-based compensation, orphan drug credit deferred tax assets and U.S. and Swiss NOL. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the effect of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate significant future taxable income prior to the expiration of R&D credit carryforwards in 2045.

At December 31, 2025, the Company has R&D credit for federal and state income tax purposes of $42.9 million which are available to offset partial future federal taxable income, if any, through 2045. The Company has not recognized the entire R&D carryforward due to the reasons stated above.

As of December 31, 2025, the Company had net operating loss carryforwards of approximately $1,009 million for Swiss corporate income tax purposes and $19.3 million for U.S. corporate income tax purposes. The Swiss net operating loss carryforwards expire between 2026 to 2032. The U.S. net operating loss carryforwards do not expire; however,their utilization is subject to certain limitations. The Company has not recognized deferred tax assets related to these net operating loss carryforwards, as it is not considered more likely than not that such deferred tax asset will be realized, for the reasons stated above.

Uncertain tax positions

The Company recorded uncertain tax positions without interest and penalties of $6.8 million and $7.5 million as of December 31, 2025 and 2024, respectively. The increase of uncertain tax positions from tax year 2024 is related to current year positions. The uncertain tax position is recorded in the deduction of deferred tax assets.
(in thousands)20252024
Balance at January 1,
$7,510 $6,617 
Decrease related to prior year tax positions(71)(1)
Increase related to current year tax positions913 1,314 
Settlements(785)— 
Lapse of statute of limitations(769)(420)
Balance at December 31,
$6,798 $7,510 

The Company files income tax returns in Switzerland, United States, and United Kingdom. The Company remains subject to tax examinations in the following jurisdictions as of December 31, 2025:
Tax Year
United States - Federal2022-2025
United States - States
2021-2025
Switzerland2019-2025

Income taxes paid, net of refunds

For the years ended December 31, 2025 and December 31, 2024, the Company obtained income tax refunds, net of payments, totaling $0.1 million and $0.9 million, respectively. Cash taxes were paid (or refunded) across U.S. federal and various U.S. state jurisdictions, as shown below. Positive amounts represent tax payments, while amounts in parentheses represent tax refunds received.

Amount Payment (Refund)
Jurisdiction (in thousands)20252024
U.S. federal$(6)$0
U.S. state——
Florida810
Illinois(19)—
New York49(342)
Philadelphia (82)5
Pennsylvania—(488)
Tennessee (61)(149)
Other States519
Total Income Tax Paid (Refunded)$(106)$(945)

Historical Timeline

Fiscal YearFiled
2025Mar 10, 2026Showing above
2024Mar 27, 2025
2023Mar 13, 2024

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.

Other Available Disclosures

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