Income Taxes

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Note 17: Income Taxes

Income Tax Expense

Income before income tax (benefit) expense and the income tax (benefit) expense consist of the following:

	For the Years Ended December 31,
(In millions)	2025		2024		2023
Income before income tax (benefit) expense:
Domestic	$	1,225.2	$	853.4	$	192.4
Foreign	331.3		1,052.6		1,104.4
Total income before income tax (benefit) expense	$	1,556.5	$	1,906.0	$	1,296.8
Income tax (benefit) expense:
Current:
Federal	$	10.1	$	448.9	$	377.6
State	47.3		50.5		15.1
Foreign	(155.4)		(67.5)		48.4
Total current	(98.0)		431.9		441.1
Deferred:
Federal	346.1		(154.5)		(587.4)
State	(25.1)		(17.3)		(12.7)
Foreign	40.6		13.7		294.3
Total deferred	361.6		(158.1)		(305.8)
Total income tax (benefit) expense	$	263.6	$	273.8	$	135.3

The lower Federal current provision in 2025 reflects the impact of a tax deduction for certain previously deferred capitalized research and development expenditures under the OBBBA and the impact of recording a capital loss on our sale of Sage common stock.

Foreign current benefit reflects the non-cash benefit of current year valuation allowance changes.

Transition Toll Tax

The Tax Cuts and Jobs Act of 2017 eliminated the deferral of U.S. income tax on the historical unrepatriated earnings by imposing the one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries' previously untaxed foreign earnings. The Transition Toll Tax was assessed on our share of our foreign corporations' accumulated foreign earnings that were not previously taxed. Earnings in the form of cash and cash equivalents were taxed at a rate of 15.5% and all other earnings were taxed at a rate of 8.0%.

As of December 31, 2024, we accrued income tax liabilities of approximately $234.0 million under the Transition Toll Tax, which was subsequently paid in full in April 2025.

Unremitted Earnings

At December 31, 2025, we considered our earnings not to be permanently reinvested outside the U.S. and therefore recorded deferred tax liabilities associated with an estimate of the total withholding taxes expected as a result of our repatriation of earnings. Other than for earnings, we are permanently reinvested for book/tax basis differences, primarily arising through the impacts of purchase accounting. These permanently reinvested basis differences could reverse through sales of the foreign subsidiaries, as well as various other events, none of which were considered probable as of December 31, 2025. The residual U.S. tax liability, if these differences reverse, would be between $300.0 million and $400.0 million as of December 31, 2025.

Deferred Tax Assets and Liabilities

Significant components of our deferred tax assets and liabilities are summarized as follows:

	As of December 31,
(In millions)	2025		2024
Deferred tax assets:
Tax credits	$	286.1	$	294.0
Inventory, other reserves and accruals	246.9		219.2
Intangibles, net	886.5		989.6
Capitalized research and development	457.2		733.9
Net operating loss	1,082.8		1,357.2
Share-based compensation	36.1		34.4
Other	141.7		318.4
Valuation allowance	(832.2)		(1,013.7)
Total deferred tax assets	$	2,305.1	$	2,933.0
Deferred tax liabilities:
Purchased inventory valuation step-up and intangible assets	$	(1,456.1)	$	(1,529.6)
GILTI	(891.3)		(1,054.8)
Depreciation, amortization and other	(172.8)		(214.9)
Total deferred tax liabilities	$	(2,520.2)	$	(2,799.3)

As of December 31, 2025, 2024, 2023 and 2022, we had a valuation allowance of $832.2 million, $1,013.7 million, $1,278.7 million and $2,003.3 million, respectively, related to net operating losses in Switzerland and Neurimmune's tax basis in ADUHELM.

The change in the valuation allowance between December 31, 2025 and 2024, was primarily driven by movements in net operating loss deferred tax assets in Switzerland. The net income tax impact of the changes in the valuation allowance was a benefit of approximately $37.9 million for the year ended December 31, 2025.

The change in the valuation allowance between December 31, 2024 and 2023, was primarily driven by movements in net operating loss deferred tax assets in Switzerland. The net income tax impact of the changes in the valuation allowance was a benefit of approximately $56.8 million for the year ended December 31, 2024.

The change in the valuation allowance between December 31, 2023 and 2022, was primarily driven by a reduction of approximately $470.3 million related to the elimination of Neurimmune's tax basis in ADUHELM as a result of its deconsolidation and reduction of approximately $230.3 million due to movements in net operating loss deferred tax assets in Switzerland. The net income tax impact of the changes in the valuation allowance was an expense of approximately $7.4 million for the year ended December 31, 2023. For additional information on the deconsolidation and our collaboration arrangement with Neurimmune, please read Note 20, Investments in Variable Interest Entities, to these consolidated financial statements.

In addition to deferred tax assets and liabilities, we have recorded deferred charges related to intra-entity sales of inventory. As of December 31, 2025 and 2024, the total deferred charges were $498.8 million and $273.1 million, respectively.

2025 OBBBA Tax Provisions

On July 4, 2025, the U.S. signed into law the H.R.1 legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14", commonly referred to as the OBBBA.

The OBBBA contains tax provisions, such as the permanent extension or revision of certain expiring provisions of the Tax Cuts and Jobs Act enacted in 2017, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The provisions of the OBBBA have multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA did not result in any material adjustments to our total income tax provision for the year ended December 31, 2025, and we have adjusted our deferred tax balances to reflect the impacts of the OBBBA enactment.

Pillar Two

The OECD has issued model rules, which generally provide for a jurisdictional minimum effective tax rate of 15.0% as defined in those rules. Various countries have or are in the process of enacting legislation intended to implement the principles. Our income tax provision for the years ended December 31, 2025 and 2024, reflects currently enacted legislation and guidance related to the OECD model rules including the Pillar Two side-by-side package announced by the OECD in January 2026. This enacted legislation and guidance related to the OECD model rules did not result in any material adjustments to our income tax provision or income tax balances as of December 31, 2025 and 2024.

Tax Rate

For the year ended December 31, 2025, we adopted ASU 2023-09 on a prospective basis. In preparing the tabular rate reconciliation, we are presenting the effects of cross-border tax laws net of the related U.S. tax credits. The tax effects for all jurisdictions of changes in judgment related to tax positions taken in prior annual reporting periods, and associated interest, are reported in the changes in unrecognized tax benefits category. Unrecognized tax benefits related to current year tax positions are shown net with the reconciling item that relates to the uncertain tax position.

The following table is a reconciliation of the U.S. federal statutory rate of 21.0% to our effective tax rate for the year ended December 31, 2025, in accordance with the guidance in ASU 2023-09.

	For the Year Ended December 31, 2025
(In millions, except percentages)	Amount		Rate
Statutory rate	$	326.9	21.0	%
State and local income taxes, net of federal income tax effect(1)	8.5		0.5
Foreign tax effects:
Italy
Withholding tax	(20.4)		(1.3)
Other	1.8		0.1
Switzerland
Statutory tax rate difference	(22.1)		(1.4)
Cantonal tax impact	11.9		0.8
Pillar Two taxes	(17.2)		(1.1)
Changes in valuation allowances	(190.2)		(12.2)
Taxable intercompany dividend	22.8		1.5
Other	(6.1)		(0.4)
U.K.
Litigation matter	21.0		1.3
Other	0.7		—
Other foreign jurisdictions	9.5		0.6
Effects of changes in tax laws or rates	(11.5)		(0.7)
Effects of cross-border tax laws
GILTI, net of foreign tax credits	88.0		5.7
Other, net of foreign tax credits	18.5		1.2
Tax Credits
Orphan drug credits	(31.3)		(2.0)
Other credits	(4.5)		(0.3)
Nontaxable or nondeductible items
Equity compensation	18.9		1.2
Other permanent differences	16.9		1.1
Changes in unrecognized tax benefits	9.6		0.6
Other adjustments	11.9		0.7
Income tax expense and effective tax rate	$	263.6	16.9	%

(1) State taxes in Tennessee, Massachusetts, Kentucky and North Carolina made up the majority (greater than 50.0%) of the tax effect in this category.

The following table is a reconciliation of the U.S. federal statutory tax rate of 21.0% to our effective tax rate for the years ended December 31, 2024 and 2023, in accordance with the guidance prior to the adoption of ASU 2023-09:

	For the Years Ended December 31,
	2024		2023
Statutory rate	21.0	%	21.0	%
State taxes	1.8		1.1
Taxes on foreign earnings, including valuation allowances	(7.6)		(5.9)
Tax credits	(2.2)		(7.3)
Purchased inventory valuation step-up and intangible assets	2.1		0.7
GILTI	(1.6)		(0.6)
Internal reorganization	—		(0.1)
Other, including permanent items	0.9		1.5
Effective tax rate	14.4	%	10.4	%

In the reconciliation for the year ended December 31, 2025, in accordance with the guidance in ASU 2023-09, the GILTI foreign tax credit impacts of changes in foreign valuation allowances are included within the GILTI, net of foreign tax credits line. For reconciliation for the years ended December 31, 2024 and 2023, the GILTI foreign tax credit impacts of changes in foreign valuation allowances are included within the taxes on foreign earnings, including valuation allowances line.

Changes in Tax Rate

For the year ended December 31, 2025, compared to 2024, the increase in our effective tax rate was partially driven by changes in the territorial mix of our profitability and the impact of certain share-based compensation awards that vested during the first quarter of 2025, partially offset by the impact of the elimination of Italian withholding tax.

For the year ended December 31, 2024, compared to 2023, the increase in our effective tax rate was partially driven by the relative deferred tax effects of the changes in the value of our equity investments and amortization of purchased intangible assets and inventory. Further, 2023 benefited from the combined impacts of Reata acquisition-related expenses and the resolution of an uncertain tax matter related to tax credits. This was partially offset by a 2024 benefit related to a decrease in our valuation allowance related to projected future foreign taxable income, as discussed in the Deferred Tax Assets and Liabilities section above.

For additional information on our acquisition of Reata, please read Note 2, Acquisitions, to these consolidated financial statements.

Tax Attributes

As of December 31, 2025, we had credit carry forwards for U.S. federal income tax purposes of approximately $146.2 million that begin to expire in 2030 and net operating losses of approximately $142.8 million that do not expire. For U.S. state income tax purposes, we had research and investment credit carry forwards of approximately $172.1 million that begin to expire in 2027 and net operating losses of approximately $356.6 million that begin to expire in 2028. For foreign income tax purposes, we had $9.1 billion of federal net operating loss carryforwards that begin to expire in 2027 and $8.4 billion of Swiss cantonal net operating loss carryforwards that begin to expire in 2027.

In assessing the realizability of our deferred tax assets, we have considered whether it is more likely than not that some portion or all 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. In making this determination, under the applicable financial reporting standards, we are allowed to consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Based upon the level of historical taxable income and income tax liability and projections for future taxable income over the periods in which the deferred tax assets are utilizable, we believe it is more likely than not that we will realize the net benefits of the deferred tax assets of our wholly owned subsidiaries, net of the recorded valuation allowance. In the event that actual results differ from our estimates or we adjust our estimates in future

periods, we may need to adjust or establish a valuation allowance, which could materially impact our consolidated financial position and results of operations.

Income Taxes Paid

The following table presents income taxes paid (net of refunds received) for the year ended December 31, 2025.

(In millions)	For the Year Ended December 31, 2025
Federal	$	721.0
State	48.4
Foreign	94.6
Total	$	864.0

No individual state or foreign jurisdiction accounted for 5.0% or more of the total taxes paid in 2025.

Accounting for Uncertainty in Income Taxes

A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows:

	For the Years Ended December 31,
(In millions)	2025		2024		2023
Beginning balance	$	186.3	$	173.4	$	606.4
Additions based on tax positions related to the current period	3.6		1.2		5.2
Additions for tax positions of prior periods	12.4		31.5		60.2
Reductions for tax positions of prior periods	(3.9)		(3.1)		(485.0)
Statute expirations	(6.6)		(12.7)		(2.1)
Settlement refund (payment)	(11.8)		(4.0)		(11.3)
Ending balance	$	180.0	$	186.3	$	173.4

As of December 31, 2022, the unrecognized tax benefits related to a deferred tax asset for Swiss tax purposes for Neurimmune's tax basis in ADUHELM was approximately $450.0 million. This unrecognized tax benefit was recorded as a reduction to the gross deferred tax asset, resulting in a net deferred tax asset and not as a separate liability on our consolidated balance sheets. During the year ended December 31, 2023, we decreased our gross unrecognized tax benefits by approximately $450.0 million related to this item as a result of the deconsolidation of Neurimmune.

We file income tax returns in various U.S. states and in U.S. federal and other foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal tax examination for years before 2022 or state, local or non-U.S. income tax examinations for years before 2013.

Included in the balance of unrecognized tax benefits as of December 31, 2025, 2024 and 2023, are $127.6 million, $139.3 million and $147.6 million (net of the federal benefit on state issues), respectively, of unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods.

We recognize potential interest and penalties related to unrecognized tax benefits in income tax (benefit) expense within our consolidated statements of income. During the years ended December 31, 2025, 2024 and 2023, we recognized total interest and penalty expense of $12.6 million, $13.8 million and $5.1 million, respectively. We have accrued $48.5 million and $40.7 million for the payment of interest and penalties as of December 31, 2025 and 2024, respectively.

It is reasonably possible that we will adjust the value of our uncertain tax positions related to certain transfer pricing, collaboration matters, withholding taxes and other issues as we receive additional information from various taxing authorities, including reaching settlements with such authorities.