How good is Jonathan Ross Goodman at profiting from the pharmaceutical market's inefficiencies?
Even as he continues to suffer the effects of extensive brain damage from a near-fatal bicycling accident in 2011, his latest company, Knight Therapeutics Inc., has almost tripled in three years, for a market value of $1.35-billion (U.S.).
Investors have good reason to have faith in the 49-year-old chief executive officer. In 2014, less than three years after the cycling accident left him debilitated for many months, Mr. Goodman sold his former company, Paladin Labs, to Endo Health for $2.95-billion (U.S.). The sale, coupled with his family's ownership of closely held generic drug maker Pharmascience Inc., vaulted him and three siblings into the ranks of the world's billionaires, according to the Bloomberg billionaires index.
"During that time, my cognition was improving and I realized I didn't have to be that smart to make money and I could still do it," Mr. Goodman said in a recent phone interview. Though the sector has since cooled, dropping his net worth below $1-billion as the valuations of generic drug makers such as Pharmascience have eased, Mr. Goodman sees potential for Knight to be another Paladin. Perhaps literally: Its business model is the same and Mr. Goodman even made a standing offer to Endo to buy Paladin back. Endo told him the division isn't for sale, he said. Endo declined to comment.
Mr. Goodman makes money by acquiring marketing rights to specialty drugs in countries deemed too small to be worth the trouble for multinational drug makers. That's basically every country outside of the United States, Europe, Japan and China, he says. Canada, for instance, accounts for 2 per cent of the global pharma market, according to government statistics. To gain access, drug makers have to win approval from review agency Health Canada, then get pricing approval from another board and negotiate with each provincial government to determine what each will pay for the drugs. Even for a rubber-stamp approval of a drug cleared by the U.S. Food & Drug Administration, reformatting the paperwork to Health Canada's requirements costs upward of $500,000 (Canadian) and takes about six months. Companies then face about two more years to wend through the layers of bureaucracy.
"If Canada was efficient, I wouldn't exist," Mr. Goodman said.
In 2016, Knight generated $4.4-million (U.S.) in sales, mostly from selling Movantik, an AstraZeneca treatment for opioid-caused constipation, and Impavido, a Paladin-developed treatment for leishmaniasis, a parasitic affliction that causes sores on skin and internal organs.
"Given that most of the company's products remain at a pre-commercial stage, investors should not read too much into the quarterly results at this time and focus on the firm's outlook for 2017 and beyond," wrote Laurentian Bank Securities analyst Joseph Walewicz in a March research note. Mr. Walewicz sees revenue rising to $6.9-million this year and $52.3-million in 2018 as more drugs work their way through approvals in Canada and other markets such as Israel, Russia, South Africa and the Caribbean.
Knight has another 14 prescription, over-the-counter and diagnostic products in its pipeline, according to a June presentation to investors. The company also has invested in nine life-science venture capital funds to gain preferred access to new drug rights. As a result, treatments for issues around diabetes and HPV-associated cancer have been added to Knight's pipeline, according to the presentation.
"If your time horizon is your grandchildren, you'll do very well with Knight," Mr. Goodman says.
Mr. Goodman grew up in a pharma household. His father, Morris, founded Pharmascience, a Montreal drug maker now owned by family investment company Joddes, according to a 2016 disclosure in a U.S. patent lawsuit. Joddes is evenly split by Mr. Goodman and his three siblings, including David, CEO of Pharmascience, sisters Shawna and Deborah. Paladin was the division of Pharmascience that Mr. Goodman took public in 1995 as a 26-year-old fresh out of graduate school at McGill University.
Mr. Goodman's life took a dramatic turn while on a bike ride in August, 2011, with some company managers through the Laurentian Mountains north of Montreal. At one point, Mr. Goodman circled back to bring an energy bar to a rider struggling up a summit. After reaching the peak, Mr. Goodman was going downhill alone when, for a reason no one knows, he fell off his bike and landed on his helmet. A five-week coma followed. Doctors told his wife he had a 90-per-cent chance of dying. He suffered septic shock, a pulmonary embolism, two heart attacks and partial paralysis. When he finally awoke, he told doctors he was a 32-year old Muslim woman.
Recuperating took a year and three hospitals, where Mr. Goodman learned to walk, talk and eat again. His wife and three kids were his reason to push on. "I would have given up. The task was so daunting," the executive said, his voice calm and sombre. The purpose of this interview, he explained, was to inspire others facing similar adversity.
"I'll never recover," he said. "Recovery is not the proper term for someone who suffered traumatic brain injury, because my brain will never be what it was."
Mr. Goodman still has trouble swallowing dry foods and he uses his iPhone for constant notes to supplement his poor short-term memory. For sports, there's Ping Pong. No more cycling (despite his e-mail signature that jokes about replying while riding). A concussion would kill him.
One more thing
When he was well enough to return to Paladin, he decided the time had come to sell the company. Endo, then a New Jersey-based drug maker, wanted Paladin as a necessary component to reincorporate outside the United States as a tax inversion to sidestep U.S. corporate tax rates, Mr. Goodman says. Rajiv De Silva, then Endo's CEO, offered a package worth $142 (Canadian) a share, a 9,300-per cent return on Paladin shares over their lifetime. Mr. Goodman accepted.
Although still suffering the after-effects of the accident, Mr. Goodman hadn't lost his negotiating savvy. As he walked out the door of Mr. De Silva's office, he turned and asked for one more thing, and then another and another. In quick succession, he got Endo to agree to let him form Knight as a spin-off to Paladin shareholders and toss in $1-million (U.S.) cash. He also retained the rights to Impavido and a priority review voucher the drug earned from the FDA as a reward for developing rare-disease drugs. Knight later sold the voucher to Gilead Sciences Inc. for $125-million and funded investments into life science funds that are feeding its product pipeline today. Mr. De Silva, who was replaced as Endo International PLC CEO in September, didn't respond to a request for comment.
"My mother used to tell me if you don't ask, you don't get," Mr. Goodman said.
He's still asking.