Knight shareholder battle escalates

In 23 years in Canada’s pharmaceutical sector, Knight Therapeutics Ltd. CEO Jonathan Goodman says he’s never needed a lawyer for anything outside of a contract negotiation.

“I’ve never sued someone or been sued,” Goodman told Knight’s fourth-quarter earnings conference call on Thursday.

But as a dispute with the company’s second-largest shareholder deepens, Goodman acknowledged its likely he will have to become more familiar with his lawyer.

The conference call was dominated by the battle between Knight and Israelbased executive Meir Jakobsohn, who owns 10.4 per cent of the company, and who has accused Goodman of having “serious conflicts of interest.”

Only half an hour before the conference call on Thursday, Jakobsohn once again called for Goodman’s resignation while releasing an 88-page plan that he says can take the company from $12 million in revenues in 2018 to $500 million by 2025.

Jakobsohn, the chief executive of Medison Biotech Ltd., has suggested Goodman is not doing enough to pursue in-licensing deals that have been won by Pharmascience, a competitor that is owned by Goodman’s brother and in which Goodman has a 25 per cent stake, according to Jakobsohn.

He has also blasted the company for deploying a lowrisk strategy while it sits on $780 million in “idle cash.”

Goodman didn’t address the allegations himself on the call, but did reject the notion of stepping down, saying that he has spoken to shareholders and that they support him and his board and are excited to see where the company is heading.

“I intend to see my vision through as the CEO of Knight,” Goodman said.

Knight president Samira Sakhia, when asked if she ever felt pressured to pass on an opportunity to benefit a competitor, said that Goodman has never told her to halt her pursuit of a licensing deal because Pharmascience was involved. Only after a deal has been made does she find out who Knight was bidding against, she said.

Sakhia told the Financial Post in February that Jakobsohn was trying to embarrass Knight and its board in a bid to get a better deal after Medison and Knight agreed that their deteriorating relationship should come to an end. Sakhia also said the company was debating legal action.

A Knight spokesperson said on Thursday that the company hasn’t done so yet, but has retained legal counsel because Jakobsohn is attempting to breach multiple parts of the contract that established the working relationship between the two parties in 2015.

“(Jakobsohn) is a serial breacher of his contractual commitments in Israel,” said spokesperson Ian Robertson. “It is only under significant legal pressure that he decides to acquiesce. This is why the company has been forced to retain counsel and ensure its contractual rights are enforced.”

The relationship, Sakhia said, began to break down after Jakobsohn privately complained about the company not taking more risks in pursuit of greater profit. Jakobsohn’s three-pronged plan to boost Knight’s sales proposes to do just that.

First, he wants Knight to stop “any non-strategic financial activities” such as offering loans to companies in markets it’s looking to enter and purchasing LP interests in venture funds. These moves are part of Knight’s low-risk strategy, but Jakobsohn argues they are contributing to undervaluation of the stock, because it is being valued as an asset holding company and not an operating business.

Next, the company should begin to use the cash that it has stored up and introduce a special dividend or a share buyback program to help boost its stock.

The third peg of Jakobsohn’s plan concerns licensing deals for what he calls “diamonds” — innovative therapies that offer high lifetime values for patients. The company can do this by expanding its focus outside of Canada and attempting to become the “go-to partner” for “rest of the world” markets by acquiring partners or building commercialization teams.

“This plan ensures early access to highly innovative treatments in Canada and other markets, while creating value for shareholders,” Jakobsohn said in a statement.

Goodman, in turn, said there was “absolutely nothing new in the plan that we’re not doing.”

The plan and Jakobsohn’s allegations are expected to take centre stage at the company’s annual general meeting which will likely take place in May. Sakhia is already anticipating that Jakobsohn will be putting forward a new board of directors for shareholders to vote on.

The dispute between the two companies doesn’t seem likely to end any time soon, Sakhia said.

“We’d like to arrive to a solution as soon as possible, she said.

“Unfortunately we’re not sure that’s what the other side is aiming for.”