Wednesday 23 October 2019

Perrigo down $2bn after huge Revenue bill spooks investors

Dublin-based drugmaker sees shares plunge in New York but company that bought Elan vows to fight tax assessment

Stock picture
Stock picture
Gavin McLoughlin

Gavin McLoughlin

Nearly $2bn was wiped off shares in drugmaker Perrigo during early trading in New York yesterday, on news that tax authorities here had hit the business with a €1.6bn tax bill.

The stock plunged more than a quarter to its lowest level since Perrigo bought Irish pharmaceutical company Elan in 2013.

Perrigo is disputing the Revenue bill, which relates to Elan's earlier sale of the intellectual property behind a drug called Tysabri.

Revenue has determined the proceeds should have been taxed at the 33pc rate of capital gains tax. But Elan contends that the proceeds of the sale were trading income and should have only been subject to 12.5pc corporation tax.

Perrigo said it would file an appeal to the Tax Appeals Commission.

"No payment of any amount related to this assessment is required to be made, if at all, until all applicable proceedings have been completed," the company said.

In a statement, Perrigo confirmed it had been told about the assessment on November 29, although it did not alert investors until this week.

The company said it did not believe that the Irish tax decision would have an impact on its financial position at the end of the financial year.

"Perrigo strongly disagrees with both the basis on which Elan Pharma has been assessed and the methodology used to calculate the amount set out.

"Perrigo firmly believes...that Irish Revenue's position is incorrect as a matter of law." The company said there is case law to back up its argument that Elan had filed its tax returns correctly. It also said that on previous occasions it had treated income from selling intellectual property as trading income, and that Revenue had not disputed these cases.

Wells Fargo analyst David Maris slashed his price target on Perrigo's stock from $64 to $46.

"Given the tax authority makes the rules, it seems reasonable to think they may have the upper hand in this argument," Mr Maris wrote in a note to clients.

The €1.6bn figure does not include any interest or penalties that Revenue may charge the company.

The dispute comes hot on the heels of the European Commission's ruling that Apple owes Ireland €13bn in back taxes. In addition, US chipmaker Analog Devices is battling Revenue over an alleged bill of €43m.

The cases may make policymakers here nervous because of their potential to damage sentiment among multinationals towards Ireland.

The IDA declined to comment, while the American Chamber of Commerce Ireland, a representative group for US businesses operating here, did not respond to a request for comment.

Perrigo, which has its headquarters in Dublin, is one of the world's biggest suppliers of over-the-counter medicines. It makes private label versions of branded products like Sudafed and Claritin.

Additional reporting Bloomberg

Irish Independent

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