'This synergistic transaction adds critical mass and significantly increases the size of our Canadian business,' Knight CEO Samira Sakhia said in a statement.Chloë Ellingson/The Globe and Mail
Knight Therapeutics Inc. GUD-T has signed a deal to buy the assets of Paladin Pharma Inc. as the Canadian drug company looks to build out its domestic business after a strategic push into South America in recent years.
Knight will pay $120-million cash to seller Endo Operations Ltd. for Paladin as well as future contingency payments of up to US$15-million if it achieves certain sales targets, the Montreal-based company said in a statement Tuesday. Paladin generated revenues of $70-million last year from continuing operations.
“This synergistic transaction adds critical mass and significantly increases the size of our business in Canada,” Knight chief executive Samira Sakhia told analysts on a conference call. Paladin has a portfolio of solid, cash-flow generating pharmaceuticals that will help fund Knight’s growth, she said.
Knight founder and executive chairman Jonathan Goodman launched Paladin fresh out of McGill University grad school with friend Mark Beaudet, making the current transaction a highly personal one as it comes back into his hands. Ms. Sakhia also worked there as chief financial officer.
Paladin had a stunning run under Mr. Goodman as he established a Canadian pharmaceutical stalwart by distributing proven drugs licensed or bought from other companies.
From 1998 to 2012, revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) grew by nearly 30 per cent, compounded annually, before he sold the company to what was then Endo Health Solutions Inc. for about $3-billion in 2013. Endo, based in Malvern, Pa., later went through a bankruptcy reorganization.
Mr. Goodman suffered a damaging brain injury in a bicycle accident in 2011 and nearly died, a life-changing event that led to the Paladin sale. Just days after that transaction, he started Knight.
“The reunion of Paladin and Knight, two companies dear to me, is both financially attractive and personally gratifying,” Mr. Goodman said in Tuesday’s statement.
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Investors who’ve stuck with Knight are betting that Mr. Goodman and Ms. Sakhia will grow Knight much like they did Paladin and the story will end in another big takeout or large-scale partnership down the road. Knight shares have fallen significantly from a peak of $10.74 in late 2016 but were given an 11-per-cent boost in early trading by Tuesday’s announcement.
Knight bought Grupo Biotoscana for $420-million in 2019, a deal that launched a major strategic push by the Canadian company into Latin America. The pharmaceutical company now has operations in Canada and 10 Latin American countries, including Argentina, Brazil and Mexico.
Bulking up in Canada with Paladin allows Knight to avoid having to deal with currency fluctuations, Ms. Sakhia said on the call. The transaction will be immediately accretive to EBITDA, she said. “It’ll bring stability to the entire organization.”
RBC Capital Markets was the financial adviser to Knight on this latest deal while Davies Ward Phillips & Vineberg served as its legal counsel. The transaction is expected to close later this year.