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The next Paladin: A fresh stock with a veteran face

Deborah Baic/The Globe and Mail

After selling off his specialty pharmaceutical company Paladin Labs Inc. in a deal worth $3-billion, Montreal entrepreneur Jonathan Goodman is starting from scratch with a new drug distribution venture.

The sale of Paladin closed Friday, a complex cash and stock arrangement in which the Canadian firm merges with Pennsylvania-based Endo Health Solutions Inc. under a new Irish-based holding company. Paladin will cease to exist as a separate public company, while the new Endo International PLC will trade on Nasdaq and the TSX.

Mr. Goodman, who turned Paladin into one of Canada's most successful marketers of specialty drugs – everything from allergy treatments to birth control pills to pain medications – is walking away from the company he founded in 1995 and grew to reach annual sales of over $200-million.

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But under the terms of the deal, he is holding on to one Paladin product, a treatment for a rare tropical disease called leishmaniasis. He is using this drug, Impavido, as the base for a new company called Knight Therapeutics Inc., which is set to begin trading Monday on the TSX Venture exchange. (Under the terms of the Endo deal, Paladin shareholders got, along with cash and Endo shares, one Knight share for each share of Paladin they held.)

"I have a clean desk," Mr. Goodman said Friday after moving into new digs and hiring Knight's first employee, chief financial officer Jeffrey Kadanoff. His intention is to build Knight into another Paladin, an opportunistic and acquisitive distributor of specialty drug products that have been developed by research-based companies. "Whatever we can make money with, we're going to go into," he said.

Indeed, Mr. Goodman intends to go head to head with his old firm, and he has not signed any non-compete agreements as part of the sale of Paladin, in which he held about one-third of the stock.

"I hope to be their worst nightmare," Mr. Goodman said.

Mr. Goodman acknowledges that the pharmaceutical market has changed significantly since he started Paladin, with far more competition for products. He also notes, tongue-in-cheek, that "my charisma will not carry as much weight as it used to."

He is also still recovering from a devastating bicycle accident that took place in August, 2011, and left him in a coma for weeks, fighting for his life. He returned to work at Paladin nine months later as chairman, but left the CEO job in the hands of his long-time partner Mark Beaudet, who is staying with Endo, as are all the other Paladin executives.

Despite the fact the accident was 21/2 years ago, "I will never be 100 per cent," Mr. Goodman said. "I still have issues that I am working through and I am developing strategies to cope with those issues."

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One thing he has not lost, however, is his entrepreneurial drive.

"I am crazy motivated. I am wired to sell drugs," Mr. Goodman said.

What he also has, says analyst Alan Ridgeway of Paradigm Capital in Toronto, is a reputation for building a hugely successful drug company and making a lot of money for investors.

"He has a very successful track record," and that will help him draw interest and investment to Knight Therapeutics, Mr. Ridgeway said. Essentially, Mr. Goodman has proven he can turn a small organization into a very big one.

Even before the Endo takeover deal, Paladin stock had more than tripled in the previous four years. And after the takeover was announced – and shareholders realized how much tax the merged company would save by setting up its headquarters in Ireland – Paladin's shares more than doubled again.

While it is unfortunate that the public markets are losing one of the few Canadian mid-cap pharmaceutical firms, the sale of Paladin was also good for the sector because it showed that it is possible to make a lot of money off a pharma stock, Mr. Ridgeway said.

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"It demonstrates that there are exit strategies for specialty pharmaceutical companies that are small but growing."

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