Amgen Faces Class Action Lawsuit Over IRS Tax Liability

By Jonathan Stempel

NEW YORK (Reuters) – A federal judge ruled that Amgen must face a proposed class action lawsuit alleging that the drugmaker delayed notifying shareholders about a potential $10.7 billion tax liability reported to the Internal Revenue Service (IRS) due to underreporting taxes over six years.

U.S. District Judge John Cronan, based in Manhattan, decided on Monday that shareholders have convincingly claimed they were misled by Amgen’s “reckless” concealment of its significant potential tax obligations.

As of now, there has been no immediate response from Amgen or its legal representatives. Similarly, lawyers representing the shareholders, including those from the Detroit-based Roofers Local No. 149 Pension Fund, have also not commented.

Amgen’s leading products include Prolia, for osteoporosis, and Enbrel, for rheumatoid arthritis.

The IRS contended that Amgen underreported taxes from 2010 to 2015, mainly due to misallocating taxable income to a Puerto Rico unit that manufactures numerous drugs. While Puerto Rico is a U.S. territory, it is treated as a foreign entity for corporate tax purposes.

The Roofers fund stated that Amgen’s stock price plummeted by 6.5% on August 4, 2021, and by 4.3% on April 28, 2022, after the company revealed the tax risks at those times.

In its defense, Amgen claimed it “did not hide” the IRS’s stance and had previously cautioned investors about the agency’s intensified scrutiny regarding income allocation across tax jurisdictions.

Judge Cronan noted that investors remained “in the dark” about the magnitude of Amgen’s potential liability, which corresponds to one-sixth of its assets and exceeds its available cash.

He likened Amgen’s disclosures to a child misleadingly informing parents that he had dessert while having consumed an entire cake. The judge opined that the case would not differ even if the child characterized the treat as merely “significant” or “substantial.”

In its latest quarterly report, Amgen asserted that the IRS case lacks merit. A trial is set for November 4, according to court documents.

The case is recorded as In re Amgen Inc (NASDAQ:AMGN) Securities Litigation, U.S. District Court, Southern District of New York, No. 23-02138.