The largest shareholder in Knight Therapeutics Inc. plans to launch a proxy fight Monday for control of the $1-billion drug company, following a year-long activist campaign against Canadian pharmaceutical entrepreneur Jonathan Goodman.
Medison Biotech Ltd., a pharmaceutical company based in Israel, owns about 7 per cent of Montreal-based Knight. On Monday, Medison is expected to propose six new directors and the reappointment of its own chief executive to the company’s board. Knight has a seven person board that includes Medison CEO Meir Jakobsohn.
The proxy fight comes less than two weeks after Knight launched a lawsuit against Medison and Mr. Jakobsohn aimed at shutting down their activist campaign, which has been playing out for over a year.
Knight’s CEO, Mr. Goodman, is well known in business circles for both running successful drug companies and for bouncing back from a near-fatal cycling accident in 2011. His family owns a number of drug companies and Mr. Goodman previously ran Paladin Labs Inc., then sold the firm to Endo Health for US$2.95-billion in 2014. The same year, Mr. Goodman launched Knight, and the company’s strategy is to snap up marketing rights on specialty drugs deemed too small to be worth the trouble for multinational drug makers.
Medison alleges Mr. Goodman is being overly cautious in executing on this strategy, and called for a “new day at Knight” that would see the company license more drugs and return approximately $100-million to shareholders through a special dividend. Knight holds more than $750-million in cash and securities. The company’s stock price declined by 25 per cent over the past two years, closing Friday at $7.34 on the Toronto Stock Exchange.
“Rather than seizing opportunities and deploying the company’s ample capital to build a valuable and dynamic operating business, Knight has allowed shareholders’ cash to stagnate,” Mr. Jakobsohn said in a press release obtained in advance by The Globe and Mail. “Knight meekly sits on the sidelines, dabbling in lending and banking or licensing unremarkable products with modest profit potential.”
Knight executives could not be reached for comment on Sunday, outside normal business hours.
In the past, Knight executives have defended their strategy by saying the company’s business plan has always included lending money to small pharmaceutical firms. In mid-March, the company said in a press release that “Knight continues to be disappointed by Mr. Jakobsohn’s ongoing attempts to extort Knight’s board of directors into agreeing to a scheme that is not in the best interest of Knight’s shareholders and only advances his own self-serving agenda.”
Medison is launching a fight for control of Knight at a time when activist shareholders are starting more fights and winning the majority of proxy contests. Law firm Fasken Martineau DuMoulin LLP recently published a report that shows in 2018, activists won a full or partial victory in 60 per cent of contests, and 13 campaigns played out, up from 10 proxy fights in each of the two previous years. Last year, Fasken’s research also showed “fewer contests initiated by current or former management and more contests initiated by outside activists.”
Two other major Canadian companies are currently in proxy fights with activist investors, Hudbay Minerals Inc. and Transalta Corp.
Along with Mr. Jakobsohn, the six directors that Medison is putting forward are all experienced pharmaceutical executives. They are Kevin Cameron, CEO of Ionetix Corp.; Elaine Campbell, the former president and CEO of AstraZeneca Canada; Michael Cloutier, the former general manager of PTC Therapeutics Canada; Christophe Jean, the former EVP of Ipsen Group; and Robert Oliver, former CEO of Otsuka North America Pharmaceutical Co.