Amgen and CEO Robert Bradway Sued for Hiding $10.7 Billion Tax Bill from Investors
Biopharmaceutical company Amgen and its leadership was sued earlier this week by investors for allegedly failing to disclose an outstanding $10.7 billion bill owed to the Internal Revenue Service.
Established in 1980 and based in Thousand Oaks, California, the company recorded more than $26 billion in revenue for 2022. Its top-selling drugs are Enbrel, an arthritis medication, and Prolia, used to slow bone loss.
Amgen, Robert Bradway and Peter Griffith, CEO and chief financial officer respectively, were sued on March 13 in Manhattan federal court in a proposed class action lawsuit from a Detroit-based pension fund.
Up until April 2022, Amgen failed to disclose that it owed the Internal Revenue Service more than $10 billion in taxes and penalties, according to the complaint filed by the Roofers Local No. 149 Pension Fund.
“These material omissions caused the price of Amgen stock to trade at artificially inflated prices” and caused “investors to suffer hundreds of millions of dollars in losses when the truth was belatedly revealed,” according to court documents.
In 2017, the IRS notified Amgen that it owed $3.6 billion in taxes for 2010 to 2012, while in 2020 the company received a similar notice relating to $5.1 billion in back taxes for 2013 to 2015. The IRS is additionally seeking interest and a proposed $2 billion penalty because of the company’s tax avoidance strategies.
Amgen allegedly hid details of its billion-dollar tax dispute
The tax claims primarily relate to the allocation of Amgen’s profits between its facilities in the U.S. and Puerto Rico. The company claims it performs much of its commercial manufacturing activities in Puerto Rico, which is treated as a foreign jurisdiction for U.S. tax purposes.
While Securities and Exchange Commission rules dictate Amgen was required to disclose the existence of the IRS’s tax dispute, the company didn’t reveal its 2017 $3.6 billion bill until an earnings release in August 2021, according to the complaint. During an earnings call that same month, Griffith claimed that the “IRS’s position is without merit” and that Amgen had “appropriate tax reserves.” The price of Amgen stock fell 6.5 percent in response to the news.
The biopharmaceutical company also allegedly waited until an April 2022 earnings release to disclose its $5.1 billion tax bill and $2 billion penalty, after which the company’s stock fell by 4.3 percent.
Amgen is additionally under examination by the IRS for similar issues between 2016 and 2018, according to the pension fund, which is seeking undisclosed damages.
“We believe the allegations in the lawsuit are without merit and will vigorously defend our position in court,” said Amgen in an emailed statement.
In an April 2022 letter to shareholders, the company claimed the IRS’s proposed $10.7 billion worth of back taxes and penalties “overstates the magnitude of the dispute by billions of dollars,” adding that Amgen will contest the fees in the U.S. Tax Court. The final total should be around $2.5 billion, after factors such as unwarranted penalties and IRS accounting errors are taken into account, according to the letter.