Takeda still on the hook for €398M tax linked to distant AbbVie-Shire breakup fee

Takeda HQ
Takeda says it will challenge the decision using “all available legal means."

Takeda has largely washed its hands of the debt it incurred in its pricey Shire buyout, but a tax break fee tethered to that company's futile merger with AbbVie continues to haunt the Japanese drugmaker. 

As far as the Irish Tax Appeals Commission is concerned, Takeda still owes local authorities €398 million (about $472.9 million) in tax related to AbbVie’s failed takeover bid for Shire, which the Japanese pharma bought for more than $60 billion in 2019. Takeda, for its part, sees things differently.

Takeda appealed the first request it received from Ireland’s Revenue Commissioners in 2018 and won’t play sitting duck after the latest decision, either. The company says it plans to challenge the Irish Tax Appeals Commission’s ruling through “all available legal means,” including an appeal in Irish courts.

The tax stems from a $1.64 billion breakup fee AbbVie paid Shire in 2014 after its proposed $55 billion merger hit the bricks. Takeda ultimately snagged the rare disease specialist in a $62 billion deal that closed in January 2019. Following the mammoth Shire purchase, Takeda has embarked on a years-long debt-slashing spree fueled by sales of “noncore” drugs outside of its focus areas.

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Takeda doesn’t believe it’s liable for the tax break fee under Irish law, a company spokesperson told Fierce Pharma last January.

In light of the new decision from Irish authorities, however, Takeda says it will record a JPY 63 billion ($576.65 million) provision in its financial statements for the quarter that ended on June 30. The company will also revise its financial summary for the three-month period and plans to refile the information with the Tokyo Stock Exchange by August 6.

Takeda says it will need to tweak other first quarter earnings materials, too, though its underlying and core financial results remain unchanged. The company isn’t updating its full year sales forecast, either. Takeda’s 2021 fiscal year ends on March 31, 2022.

The drugmaker stressed that it continues to “assess the substance" of the Irish Tax Appeals Commission's decision. 

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Takeda unveiled the request from Irish tax authorities in a December 2018 U.S. securities filing. AbbVie, meanwhile, walked away from the Shire deal after the Obama Administration rolled out regulations to deter tax inversion deals. Shire at the time predicted the fee wouldn't be taxable in Ireland, though the situation certainly hasn't played out that way. 

The company last week reported fiscal 2021 first quarter sales of JPY 816.6 billion ($7.44 billion). It reached that figure after subtracting JPY 133 billion ($1.21 billion) from a clutch of diabetes meds it sold to Teijin Pharma.

Takeda's cost-cutting scheme is doing gangbusters, CEO Christophe Weber said at a May press conference. After inking up to $12.9 billion noncore asset sales, the company's remaining business is "accelerating" and Takeda can "continue to deleverage," the CEO said at the time.