Ariad adopts rights plan to protect tax assets

Fri Nov 1, 2013 10:54am EDT

Nov 1 (Reuters) - Ariad Pharmaceuticals Inc adopted a shareholder rights plan to protect its tax credits, a day after sales of its flagship drug Iclusig were suspended due to safety concerns following an investigation by the U.S. health regulator.

Ariad shares, which have lost 87 percent of their value in less than a month due to Iclusig's safety issues, rose 8 percent to $2.38 in early trading on the Nasdaq on Friday.

The company said it is adopting the rights plan as the use of its tax credits would be substantially limited if there is an "ownership change" under the tax code.

Ariad said an ownership change would be triggered under the code if investors who control 5 percent or more of its shares increase their stake by more than 50 percent over a rolling three-year period.

The company's tax assets as of Dec. 31 included net operating loss carry-forwards of $307.7 million and research tax credits of $17.8 million.

The assets could be used to offset Ariad's future taxable income or payable taxes.

Rights plans, or poison pills, are more commonly adopted to stop hostile attempts to take over a company by forcibly diluting the holdings of certain investors if they exceed a given threshold.

Ariad's rights plan, consisting of a right to buy one preferred share, will be triggered if an investor acquires 4.99 percent of the company's shares. The plan will also be triggered if an investor currently owning at least 4.99 percent buys an additional 0.5 percent of the company's shares.

According to Thomson Reuters data, investors holding more than 4.99 percent stake in Ariad include Sarissa Capital Management led by Alexander Denner, a former top deputy of billionaire activist Carl Icahn.

Ariad said it expected to seek shareholder approval for the rights plan at its 2014 annual meeting. The rights will expire on Oct. 30, 2014 if not approved by Ariad shareholders by then. If approved, they will expire on Oct. 30, 2016. (Reporting by Esha Dey in Bangalore; Editing by Kirti Pandey)

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