aibioHeron Therapeutics adopts rights plan with 4.99% trigger to protect tax losses
Tickers HRTX
Heron's board adopted a Tax Benefit Preservation Plan on August 13, 2025. A holder that reaches 4.99% without board approval would trigger rights, and the company says it had about $1.37 billion of U.S. federal NOLs at December 31, 2024.
Key facts
- Company
- Heron Therapeutics, Inc. (NASDAQ: HRTX)
- News type
- Mergers
- Primary source
- HERON THERAPEUTICS, INC. /DE/ Form 8-K filed August 15, 2025 (SEC EDGAR)
Heron Therapeutics, Inc. (Nasdaq: HRTX) adopted a Tax Benefit Preservation Plan on August 13, 2025. The company calls it a Section 382 rights plan. The Form 8-K filed August 15, 2025 describes the plan under Item 3.03. The plan is dated August 14, 2025, and Computershare Trust Company, N.A. is the rights agent. The board adopted it unanimously, according to the press release.
How the plan works
The board declared one preferred stock purchase right for each share of common stock held at the close of business on August 15, 2025. Once exercisable, each right lets its holder buy one one-thousandth of a share of Series B Preferred Stock at $7.00. The company has reserved 400,000 shares of preferred stock for the rights. Each Series B share would carry a minimum quarterly dividend of the greater of $1.00 or 1,000 times the common dividend, a $1,000 liquidation preference and 1,000 votes, under a Certificate of Designation filed in Delaware on August 14, 2025.
The rights become exercisable on a distribution date. That is the tenth business day after a public announcement that a person or group has acquired, or has the right to acquire, 4.99% or more of the common stock. It is also the tenth business day after a tender or exchange offer that would reach that level. The board can postpone the distribution date in some circumstances.
If a person becomes an Acquiring Person, every other holder can buy common stock worth two times the purchase price per right, and the acquirer's own rights become void. Before an acquirer reaches 50%, the board may exchange rights for one common share each. Before anyone becomes an Acquiring Person, the board may redeem the rights at $0.01 each.
The rights expire on August 14, 2026, unless the company extends them, redeems or exchanges them, or terminates them earlier. The board can end them early if it determines the NOLs are used up or no longer available in any material respect. Holders who were at or above 4.99% when the plan was first announced are not treated as acquiring persons, unless they buy more shares. The board can also exempt proposed acquisitions it finds would not impair the NOLs.
Why the company says it acted
Heron says it can carry forward NOLs to offset future taxable income, subject to requirements. Under Section 382 of the Internal Revenue Code, an ownership change would significantly limit that use. An ownership change generally occurs when the stake held by five-percent stockholders rises by more than fifty percentage points over three years. The 8-K says recent financings to raise capital and fund operations increased the holdings of certain existing investors, which raised that risk.
Board Chairman Adam Morgan said the plan is "intended solely to protect the significant potential value" of the NOLs. The company says those losses can offset pre-tax income as it pursues its "near-term and long-term organic and inorganic growth plan". The press release also says the plan satisfies a covenant to preserve NOLs in a note purchase agreement with Rubric Capital Management dated August 8, 2025. In other words, a debt term required the plan to exist.
What is not in the filings
The 8-K gives no figure for the NOLs. The press release puts federal NOLs at approximately $1.37 billion at December 31, 2024 and says they "may be available" to offset future taxable income. The 8-K does not name any holder at or above 4.99%, and it does not say what the plan cost to adopt. The press release lists risks that the forward-looking statements do not cover, including the difficulty of determining all facts relevant to Section 382, unreported stockholder trading activity, and the possibility that the plan may not prevent transactions that could harm the tax attributes.
Any party seeking 4.99% or more would need board approval or the exemption procedure to avoid the rights, so large stake-building faces a board gate until the rights expire in August 2026, unless the company extends them.