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Knight Therapeutics plans appeal as Canadian regulator levies additional taxes

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Knight Therapeutics plans appeal as Canadian regulator levies additional taxes

Knight Therapeutics Inc. said that Canada's federal tax regulator has requested US$23.3 million in additional taxes and interest from the company over the US$125 million sale of a priority review voucher in 2014.

The Montreal-based drugmaker said in a July 6 release that the Canada Revenue Agency has served a notice of reassessment for the fiscal year ending Dec. 31, 2014, regarding the sale of a priority review voucher, which was purchased by Gilead Sciences Inc. The Quebec Revenue Agency is also likely to request an additional tax liability of US$19 million for the voucher, taking Knight Therapeutics' total tax liability to US$42.3 million.

A priority review voucher, granted by the U.S. Food & Drug Administration, is a transferable asset that reduces the review time for a new drug application by about six months. The program was designed to encourage the development of treatments for diseases that might not otherwise attract interest due to the cost or lack of market opportunities, Knight Therapeutics said.

Subsidiary Knight Therapeutics (Barbados) Inc. received the voucher upon the approval of its anti-parasitic drug Impavido on March 19, 2014.

Knight Therapeutics said the Canada Revenue Agency's notice is unfounded, and the company plans to file a notice of objection to start the appeals process. Meanwhile, the company has deposited US$23.3 million to the Canada Revenue Agency and also expects to deposit US$19 million to the Quebec Revenue Agency. The company added that the tax provision for the total tax liability has not yet been recorded in its financial statements.