Amarin Corp Plc (AMRN)

[lizzy241]

jroon, the explanation was found using chatgpt. But in my experience I was told by my accountant that the company wasn't permitted to use NOL for a sale to another company in the same industry. Maybe the IRS changed Code.

🔍 Quick Summary:
Yes, NOLs can add value to a biotech company being acquired—particularly because they can potentially reduce future tax liabilities.

However, IRC Section 382 places strict limits on how much of the NOLs can be used after an ownership change, like in an acquisition.

The actual value of NOLs to the buyer depends on the size of the NOL, the buyer’s taxable income, and the Section 382 limitation.

📘 What is Section 382?
Under IRC § 382, if a company with NOLs undergoes an ownership change (typically defined as a change of more than 50% in ownership of stock over a 3-year period), the use of its NOLs is limited each year to:

Annual Limit
=
Fair Market Value of Loss Company
×
Long-Term Tax-Exempt Rate
Annual Limit=Fair Market Value of Loss Company×Long-Term Tax-Exempt Rate
As of mid-2025, that rate is around 2.5–3.5%, but it changes monthly.

💡 For example: If the biotech company has $100 million in NOLs and is worth $50 million at the time of acquisition, and the rate is 3%, then only $1.5 million of the NOL can be used each year by the acquirer.

🧬 Special Note for Biotech Companies
Biotech firms often accumulate large NOLs due to high R&D costs and little to no revenue. While these NOLs can be attractive, buyers must discount their value due to Section 382 limits and other risks (e.g., expiring NOLs, changes in tax law).

Also:

NOLs carry forward indefinitely under current U.S. tax law (post-2018), but can only offset 80% of taxable income per year.

Pre-2018 NOLs (under old law) can offset 100% of income and expire after 20 years.

💼 In Practice (Valuation)
In an M&A deal:

The seller may tout the NOLs to boost valuation.

The buyer’s accountants will apply a discount to reflect the Section 382 limits.

NOLs often impact the tax due diligence, purchase price allocation, and net present value of tax shields in deal models.

✅ Bottom Line
Yes, NOLs can be included in the valuation of a biotech company in a sale, but Section 382 significantly limits their usefulness post-acquisition. Therefore, while they can be a value-enhancing asset, they are heavily discounted in real M&A valuations.