By Jonathan Stempel
NEW YORK (Reuters) -A federal judge said Amgen must face a proposed class action accusing the drugmaker of waiting too long to tell shareholders it might owe the Internal Revenue Service $10.7 billion for underreporting six years of taxes.
U.S. District Judge John Cronan in Manhattan ruled on Monday that shareholders plausibly alleged they were misled by Amgen’s “reckless” concealing of its “enormous” potential tax liability.
Neither Amgen nor its lawyers immediately responded to requests for comment. Lawyers for shareholders led by the Detroit-based Roofers Local No. 149 Pension Fund did not immediately respond to similar requests.
Amgen’s top-selling products include the osteoporosis treatment Prolia and the rheumatoid arthritis drug Enbrel.
The IRS 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 produces many of its drugs.
Though Puerto Rico is a U.S. territory, it is considered a foreign country for corporate tax purposes.
The roofers fund said Amgen’s share price fell 6.5% on Aug. 4, 2021 and 4.3% on April 28, 2022 because the Thousand Oaks, California-based biotech company waited until then to disclose the tax risks.
In seeking a dismissal, Amgen said it “did not hide” the IRS’ position, and had warned that the agency was becoming more aggressive in policing how companies allocated income and expenses among tax jurisdictions.
The judge said investors were “left in the dark” about the size of Amgen’s potential payout, equal to one-sixth of its assets and more than its cash on hand.
Amgen’s disclosures resembled “a child telling his parents that he had ‘dessert’ when in fact he had eaten the ‘whole cake,’” Cronan wrote. “This court does not believe that analogy would have come out differently had the child described his treat as merely ‘significant’ or ‘substantial.’”
In its latest quarterly report, Amgen maintained that the IRS case had no merit. A trial is scheduled for Nov. 4, court records show.
The case is In re Amgen Inc (NASDAQ:AMGN) Securities Litigation, U.S. District Court, Southern District of New York, No. 23-02138.
