$800 Million in One Year

A look at the meteoric rise of pharmaceutical start-up Knight Therapeutics and how its two leaders have prepared it for future growth

When CEO Jonathan Goodman was starting pharmaceutical company Knight Therapeutics, he called his former boss at Bain & Company and asked him to recommend CFOs. Goodman was given one name: Jeffrey Kadanoff. “I hired him based on his big brain, 14 years at Bain, and impressive list of scholarships,” Goodman says. In the early days of the company, anyone who called Knight Therapeutics reached either Goodman or Kadanoff—the only two employees at the time. The duo shared one handset purchased at Walmart and started without furniture, walls, carpet, or even Outlook. What they had, though, was Goodman’s track record: he had sold Paladin Labs for $3.2 billion on the same day he started Knight. Together, the pair set out to make Knight Therapeutics (TSX: GUD) the next Paladin Labs. Here’s a look at the stats surrounding the company’s brief history and staggering success.

Kadanoff, a Montréal native, is fluent in English and French and has travelled the world as a consultant, identifying strategies and leading growth and revenue opportunities for clients in North America, Europe, Asia, and Africa. After 14 years with Bain & Company, he returned to Montréal to join Reitmans in 2011 before starting his own consultancy and ultimately stepping in as Knight Therapeutics’ CFO.

$142 stock price

Paladin’s sale to Endo Health Solutions closed on February 28, 2014, and Knight Therapeutics was born. Kadanoff was consulting for Paladin Labs to help spin out the new company and stepped in as its CFO to help build upon Goodman’s earlier successes. “Jonathan took Paladin’s stock from $1.50 to $142 a share over 19 years, and our goal is to do the same here at Knight,” Kadanoff says.

Kadanoff, who earned a bachelor’s in engineering from McGill University and an MBA from INSEAD, spent 14 years as a consultant at Bain & Company, where he specialized in retail and airlines. He returned to his native Montréal as vice president of strategic planning and development at Reitmans. He knew he could leverage his expertise and Goodman’s success to convince investors to pour back into Knight Therapeutics.

$255 million raised in 3 weeks

When Goodman and Kadanoff started using their shared phone, they started landing investors early. In fact, Knight Therapeutics finalized two bought deals in its first three weeks—the first for $75 million (which was raised while on vacation) and a second for $180 million. As the investments came in, the team focused on personnel, adding one of Paladin’s former stars, Amal Khouri, as vice president of business development. “We had to build quickly after raising equity, and we were negotiating product deals all while trying to figure out where to put the electrical outlets and the light switches,” Kadanoff says.

At the start, with just two employees, the public company had $1 million in cash, product rights to a drug with only $3 million in annual sales globally, and the potential to receive an FDA voucher worth millions. In December 2014, it raised another $100 million in a third bought deal, for a total of $355 million raised in less than a year.

US$125 million in voucher sale

In 2007, the US Food and Drug Administration (FDA) announced the Neglected Tropical Disease Priority Review Voucher Program, through which the group awards companies that invest in new treatments for neglected diseases.

Companies that win a transferrable FDA voucher can use it to reduce the FDA’s standard review of a New Drug Application from 10 to 6 months, thereby speeding up a new drug’s time to market, which can be worth hundreds of millions of dollars in additional revenue. In 2014, Knight Therapeutics struck a deal to sell its voucher, granted with the approval of Impavido (miltefosine) for treatment of patients with leishmaniasis, a disease common in 98 countries. Gilead Sciences paid US$125 million for the voucher, making Knight Therapeutics just the second company to sell a voucher since the program’s inception. The price tag, which was almost double the US$67.5 million of the prior voucher sale, will boost the program.

1, 2, 3, 4, 5

In the company’s early days, its leaders had completed one voucher sale, two sets of product acquisitions, three equity raises, four loans, and five fund investments. “We lend money to life-science companies to strengthen our ties in the industry and get access to more products,” Kadanoff explains. The fund investments earn Knight a return in life-science VC funds, but more importantly they provide well-placed introductions to help secure Canadian and select international product rights.

Because of the moves, Knight now has three products approved in various markets. Its initial product was Impavido, for which the company has global rights. Other products in the portfolio include FOCUSfactor and Photofrin, a drug that treats esophageal, endobronchial, and bladder cancer. Knight will submit at least one drug, ATryn, for approval in 2015, and it recently acquired a company with interesting technology that has two products in phase-two development and others in preclinical phases.

5 key functions

Today, Knight Therapeutics has 12 employees, including a vice president of business development. But Goodman and Kadanoff still manage several important functions directly. “Jonathan casts strategic vision and is our deal-maker,” Kadanoff says. “Then he relies on a good team to execute on that vision.” Kadanoff, meanwhile, partners with business development on loan deals, fund investments, and acquisitions while leading finance, investor relations, HR, IT, and product commercialization.

To say 2014 was a good year for Knight Therapeutics would be an understatement. Rarely can a new company accomplish so much in so little time. Now Kadanoff and his colleagues are focused on sustaining their success. “Paladin had 19 years of record revenues, and we want to be the next Paladin,” he says. “We’ll accomplish our goals by deploying capital in low-risk, high-return opportunities—and we’ll have fun as we do it.”