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Jonathan Goodman , president and CEO of newly formed company Knight Therapeutics in his new space in Montreal, Feb. 28, 2014.

christinne muschi The Globe and Mail

Knight Therapeutics Inc., the drug distribution company created earlier this year by former Paladin Labs Inc. boss Jonathan Goodman, has pocketed $125-million (U.S.) by selling a certificate that allows companies to speed up the U.S. Food and Drug Administration's approval process.

Montreal-based Knight was set up by Mr. Goodman in the spring after he sold Paladin for roughly $3-billion. He started the new firm with just one drug that was transferred from Paladin – a treatment for the tropical disease leishmaniasis.

That product, Impavido, came with a bonus: a rare "priority review voucher" that was created by the FDA to encourage companies to develop new treatments for tropical and pediatric diseases. Only four of the transferable vouchers, which guarantee the FDA will fast-track any future drug's approval process, have been issued since the program began in 2007.

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Knight had no intention of using the voucher itself – it wants to distribute existing specialty drugs, not create new ones – so it began looking for a buyer in August. It hired an investment bank to set up an auction.

Mr. Goodman said it was not at all clear how much Knight could expect to get for its certificate. Only one had changed hands before, for $67.5-million. But the value can vary dramatically depending on how urgently a company wants to get a new product to market. The voucher cuts about four months off the FDA review process, and that can be hugely valuable for a new drug that could potentially generate billions of dollars of sales.

Mr. Goodman said in an interview Wednesday that there were "a handful" of interested buyers, and that created a bit of a bidding war.

The winning bidder for Knight's certificate was Gilead Sciences Inc., a global pharmaceuticals company based in California. It makes a wide range of drugs, including treatments for cancer, liver diseases and HIV/AIDS.

Gilead spokesman Nathan Kaiser said there are "a number of potential clinical candidates in our pipeline" where the voucher could be helpful. "We will make the decision to apply the [voucher] in conjunction with ongoing internal pipeline reviews," he said.

Knight will add the money from the sale to its growing cash resources, which stood at $227-million (Canadian) as of Sept. 30. "This gives us more possibilities to grow the business faster," Mr. Goodman said. The company is looking at dozens of potential transactions, he said, including drug distribution deals, company acquisitions, secured loans to other companies, and investments in life science funds.

Analyst Leon Aghazarian, of National Bank Financial, said Knight got a lot more for the voucher than he had expected. His prediction had been for a sale price of $75-million. The more lucrative proceeds will "further increase Knight's already rock-solid financial position," he said in a report.

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Knight share price rose more than 8 per cent Wednesday, to close at $6.53 a share. Mr. Aghazarian, who has an "outperform" rating on the stock, raised his 12-month target to $7 from $6.50.

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