Amgen says IRS seeks billions in back taxes

(Reuters) – Amgen Inc (AMGN.O) on Wednesday said the U.S. Internal Revenue Service (IRS) is seeking additional back taxes of $5.1 billion, plus interest and penalties, related to the drugmaker’s 2013 to 2015 accounting for profits between the United States and Puerto Rico, the location of most of its manufacturing operations.

Shares of Amgen, which also reported higher first-quarter revenue and earnings, were down more than 6% at $233 in extended trading.

The company’s quarterly financial results held “no major surprises,” but the tax dispute is “notable,” Jefferies analyst Michael Yee said in a research note. “So we’re now into $12 billion plus of disputes and the 2016-2018 period is also now being audited,” he said.

Amgen was already in the process of disputing a previous IRS decision to increase the company’s taxable income for 2010-2012 by an amount that would result in additional federal tax of around $3.6 billion, plus interest.

The California-based biotech is “vigorously” contesting the tax notices and expects the legal process to take years to conclude, Chief Financial Officer Peter Griffith said on a conference call.

He said U.S. corporate tax law changes made in 2017 greatly reduced the gap between U.S. and Puerto Rico rates.

Amgen also said it believes the IRS adjustments for 2010-2015 are overstated by around $2 billion.

“Any additional tax that could be imposed for the 2010-2015 period would be reduced by up to approximately $3.1 billion of repatriation tax previously accrued with respect to the company’s Puerto Rico earnings,” it said in a statement.

Amgen also said it has made advance tax deposits to the IRS totaling $1.1 billion for the 2010-2015 period, which would further reduce any additional tax that could be imposed.

Amgen said its first-quarter revenue rose 6% to $6.2 billion as product sales increased 2%, and it posted higher revenue from an agreement to manufacture COVID treatments sold by Eli Lilly and Co (LLY.N).

Adjusted earnings for the quarter were up 15% from a year earlier to $4.25 per share, driven by higher revenue and share repurchases, beating the average analysts’ estimate by 16 cents, according to Refinitiv.

Net profit fell 5% to $2.68 per share.

First-quarter sales of arthritis drug Enbrel fell 7% to $862 million, while sales of psoriasis drug Otezla fell 5% to $451 million as prices of both were pressured by increased competition.

Sales of Amgen’s new lung cancer drug Lumakras totaled $62 million for the quarter, in line with analysts’ estimates.

For the full year, Amgen said it still expects adjusted earnings of $17.00 to $18.00 per share on revenue of $25.4 billion to $26.5 billion.

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