Nov 1 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
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
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
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)