By Jonathan Stempel
(Reuters) – Amgen Inc has been sued in a proposed class action accusing the drugmaker of waiting too long to tell investors it might owe the Internal Revenue Service $10.7 billion in taxes and penalties.
In a complaint filed on Monday night in Manhattan federal court, a Detroit-based pension fund said Amgen artificially inflated its stock price by concealing the dispute over its international tax strategy between July 2020 and April 2022.
The IRS has accused Amgen of underreporting taxes from 2010 to 2015, mainly for attributing what should have been U.S. taxable income to a Puerto Rico unit that houses its main manufacturing business and produces many of its drugs.
Though Puerto Rico is a U.S. territory, it is considered a foreign country for corporate tax purposes. Amgen’s top-selling product is the arthritis drug Enbrel.
The plaintiff, Roofers Local No. 149 Pension Fund, said Amgen’s share price fell 6.5% on Aug. 4, 2021, and 4.3% on April 28, 2022, because the company waited until those dates to disclose its potential liabilities.
“Defendants failed to take any meaningful accrual or otherwise reveal the staggering amount of back taxes and penalties claimed by the U.S. government,” causing shareholder losses when the truth was revealed, the fund said.
Chief Executive Robert Bradway and Chief Financial Officer Peter Griffith are also defendants.
Amgen on Tuesday said it was reviewing the complaint.
The Thousand Oaks, California-based company has said the IRS demands are without merit, and the agency overstated the dispute by billions of dollars. It has also said it believes its tax reserves are appropriate.
Amgen is among drugmakers that have been examined by the Senate Finance Committee over their tax practices.
Its effective tax rate was 10.8% in 2022, lower than average among large U.S. drug companies.
The IRS is also examining Amgen for the years 2016 to 2018 on issues similar to the 2010 to 2015 period.
The case is Roofers Local No. 149 Pension Fund v. Amgen Inc, U.S. District Court, Southern District of New York, No. 23-02138.
(Reporting by Jonathan Stempel in New York; Editing by Mark Porter)