National Post (National Edition)
CEO accused of ‘serious conflicts of interest’
Knight Therapeutics
TORON TO •A top shareholder accused the CEO of one of Canada’s leading pharmaceutical companies of "serious conflicts of interest” and called for his resignation on Thursday, in an apparent escalation of a simmering dispute between the parties.
In a scathing public letter, Israel-based biotech executive Meir Jakobsohn criticized Knight Therapeutics Ltd. chief executive Jonathan Goodman for pursing a low-risk strategy and for missing out on a series of licensing deals that went instead to Pharmascience — a private company that was started by Goodman’s father and is now run by his brother, David.
Jakobsohn, who is the CEO of Medison Biotech Ltd. and owns 7.3 per cent of Knight’s shares., suggested that Goodman’s interest in Pharmascience meant he was in a position to win "either way” — even if Knight did not secure the deals.
“So far, at least, Pharmascience has out-maneuvered and out-paced Knight, though it is unclear that Mr. Goodman is personally any worse off economically,” he wrote.
“This Board should insist that Mr. Goodman relinquish his role at Knight or his financial stake in the competing family business.”
In a response, Knight, which owns a 28-per-cent stake in Medison, accused Jakobsohn of using bullying tactics to gain an advantage in separation negotiations after the relationship between the two companies turned sour.
Knight president Samira Sakhia said Jakobsohn has been unhappy for nearly a year because he expected the cash he had invested in the company would be used in higher-risk investments. Instead, the company has sought de-risked investments, such as loaning money to healthcare companies that it may have an interest in purchasing in the future.
“I’m not sure where his misunderstanding came from,” said Sakhia, adding the company never changed its strategy.
While the relationship with Jakobsohn, which began in 2015, was no longer “cordial,” it did remain “professional.” But it was clear where it was heading.
“This is a relationship that is no longer working and what needs to happen is for us to separate,” she said. “He’s using the tactic of trying to embarrass the board and trying to embarrass the company to try to get a better deal as we separate.”
As the disagreements have escalated, Jakobsohn, according to a Knight press release, withheld a dividend that he was “contractually obligated to pay” and also withheld records that Knight required to prepare its financial statements. The alleged behaviour only stopped, the release said, when Knight threatened legal action.
Knight and Medison had already discussed separating but could not come to an agreement because “unfortunately, Meir would only discuss an option where he stood to gain while the rest of Knight shareholders would lose,” Sakhia alleged.
In the letter, Jakobsohn also accused Knight’s board of directors of having “independence issues,” citing chairman James Gale’s connections to other members of the Goodman family through their joint ownership of Signet Healthcare Management.
The investment management firm teamed up with Pharmascience to co-found Bionpharma Inc., where Gale and David Goodman are on the board of directors. Knight, Jakobsohn said, also provided debt financing in the acquisition of Medicure Inc., a Canadian company to which Signet provided equity financing.
Sakhia said the Knight board of directors was “well aware” of Goodman’s connection to Pharmascience but never saw it as an issue because he does not sit on Pharmascience’s board of directors and has “no knowledge” of their projects.
In any deals involving Pharmascience or in which Knight is competing against them, Goodman is excluded and Sakhia or another member of the team will take the lead, she said. Goodman has never stopped the team from pursuing licences because Pharmascience was also in the running, according to Sakhia.
Goodman is known in the pharma sector for securing the sale of his former com- pany, Paladin Labs Inc. to Endo Pharmaceuticals for a 20-per-cent premium in a move that netted his family $1 billion. The CEO then invested $75 million into the creation of Knight.
The company, Sakhia said, sees Pharmascience in the same way it does Endo Pharmaceuticals: There are connections, but the two are still competitors.
When he invested in Knight, Jakobsohn said he was “amazed” by Goodman’s work with Paladin and expected him to turn his new company into a leading innovative pharmaceutical firm with global aspirations.
The company has $745 million — about 70 per cent of its market value — in what Jakobsohn calls “idle cash.” Sakhia said the company will not risk using the money in high-growth opportunities when it can continue to grow long term with its lower-risk strategy.
She flagged a deal to lend Moksha8, a Mexican pharmaceutical company, up to $25 million as an example. The company will gain access to Brazilian and Mexican markets, have its loan repaid and earn interest while studying if it wants to pursue an acquisition.
As the two parties continue to spar, Jakobsohn has threatened to “exercise my rights as a shareholder to further the interests of all of Knight’s owners.”
Sakhia, in turn, suggested Knight may pursue legal action.