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Perrigo Stock Soars After Settling Irish Tax Dispute

Perrigo stock climbs as the drugmaker agreed to a tax settlement to avoid the risks of litigation and ongoing legal costs.
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Perrigo  (PRGO) - Get Perrigo Co. Plc Report shares jumped on Thursday after the drugmaker said it had settled a dispute with Irish tax officials for about $344 million.

At last check shares of the Dublin company were up nearly 15% to $49.89.

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Perrigo, formerly known as Elan, said in a statement that it had settled with the Irish Office of the Revenue Commissioners regarding an amended assessment from Nov. 29, 2018. That assessment claimed income tax of 1.6 billion euros, or roughly $1.9 billion, not including penalties or interest.

Irish Revenue Commissioners had charged that intellectual property sales by Elan Pharma, including the multiple-sclerosis drug Tysabri, were taxed as trading income at 12.5%, when they should have been treated as a chargeable gain at a rate of 33%.

In July, the company said, tax officials said they did not have all the relevant facts when the notice was issued and allowed adjustments that cut about $764 million from the original amount.

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Perrigo said that while it believed that its tax position was correct and would have been confirmed on appeal, it agreed to settle "given the risks inherent in any litigation, as well as the ongoing costs of what could have been years of litigation and the uncertainty that would create."

The company agreed to pay 297 million euros, or $344 million, as a full and final settlement of all liabilities arising from the sale of the Tysabri patents. And it agreed to be taxed in periods from fiscal 2013 to fiscal 2021 inclusive.

In addition, Irish Revenue will give Perrigo credit for certain taxes already paid and for certain unused R&D credits, all of which will be applied against the 297 million euros.

So the total cash payment that Perrigo makes as part of the settlement will be 266.1 million, or about $308.1 million.

No interest is due and no penalties apply, the company said, and Irish Revenue will take no further action in relation to the amendment or any Tysabri-related income or transactions.

Earlier this month, Perrigo said it had agreed to acquire peer Héra SAS for 1.8 billion euros, or about $2.1 billion, cash.