Amgen Faces Lawsuit Alleging Concealment of $10.7 Billion Tax Liability, Reports Reuters

By Jonathan Stempel

A federal judge has ordered Amgen to confront a proposed class action that accuses the pharmaceutical company of delaying notification to shareholders regarding a potential $10.7 billion tax liability owed to the Internal Revenue Service (IRS) due to underreporting over six years.

U.S. District Judge John Cronan, based in Manhattan, ruled on Monday that shareholders have presented reasonable claims that Amgen engaged in "reckless" concealment of this significant tax obligation.

Officials from Amgen and their legal team did not immediately respond to requests for comments, nor did representatives for the shareholders, who are led by the Roofers Local No. 149 Pension Fund from Detroit.

Amgen is widely known for its top-selling medications, including Prolia, used for treating osteoporosis, and Enbrel, a drug for rheumatoid arthritis.

The IRS’s accusation stems from Amgen’s tax reports from 2010 to 2015, wherein the company allegedly misclassified U.S. taxable income as belonging to its Puerto Rico unit, which manufactures many of its drugs. While Puerto Rico is a U.S. territory, it is treated as a foreign entity for corporate tax purposes.

The Roofers Fund claims that Amgen’s stock price dropped by 6.5% on August 4, 2021, and by 4.3% on April 28, 2022, due to the company’s delayed disclosure of these tax risks.

In its attempt to have the case dismissed, Amgen contended that it did not conceal the IRS’s stance and had previously cautioned that the agency was intensifying its scrutiny of how corporations allocate income and expenses across various tax jurisdictions.

Judge Cronan remarked that investors were inadequately informed about the extent of Amgen’s potential financial liability, which amounts to one-sixth of its assets and exceeds its available cash reserves. He likened the company’s disclosures to a child misrepresenting an entire cake as merely "dessert," emphasizing that such a simplification would not change the misleading nature of the information provided.

In its most recent quarterly report, Amgen asserted that the IRS’s case lacks merit, with a trial date scheduled for November 4, according to court documents.

The case is identified as In re Amgen Inc. Securities Litigation, filed in the U.S. District Court for the Southern District of New York.