Dealing with a bitter activist campaign spearheaded by its second largest shareholder, Knight Therapeutics Inc. president Samira Sakhia suspected things would escalate to a point where shareholders would have to get involved.
On Monday, that finally happened.
For a year, Knight has been locked in a dispute with Israel’s Medison Biotech Ltd, which owns a 7.3 per cent stake in Knight. Medison CEO Meir Jakobsohn has been calling for the resignation of Knight CEO Jonathan Goodman over alleged conflicts of interest and differences on the company’s strategy, which Jakobsohn believes is too risk averse.
The conflict, which began privately, escalated when the two sides could not agree on a peaceful split, Sakhia said. They’ve exchanged public allegations multiple times since then, with Knight accusing Jakobsohn of using Medison cash to fund his activist campaign.
When Jakobsohn, on Monday, officially began a proxy battle by nominating five new board members to advance his vision for the company, Sakhia wasn’t surprised.
“We knew it was inevitable,” said Sakhia, adding that Jakobsohn had been threatening to nominate a new board since December. “We’ve been trying to negotiate with him for several months and each step of the way he’s been extremely unreasonable. This is the natural outcome.”
Jakobsohn, who already sits on Knight’s board, nominated five people who have held or currently hold executive roles in Canadian pharmaceutical companies. Two are former presidents and CEOs of AstraZeneca Canada.
Sakhia said shareholders will have two slates of board members to vote on at Knight’s annual general meeting on May 7, unless the parties settle their differences before then.
In a statement, Jakobsohn said the company and its shareholders deserve the “enhanced stewardship and oversight” from a board that is willing to take on a more aggressive strategy.
Knight has been conservative in its approach since Goodman formed the company in 2014, choosing to focus on a de-risked strategy including providing loans to companies in markets into which it is looking to enter. The company currently holds $750 million in cash and securities, which Jakobsohn said should be put towards securing contracts.
Knight’s stock is down 25 per cent in two years, but was up slightly at $7.36 on Monday.
“Shareholders, large and small, have invested their hard-earned money hoping, like me, that Knight would succeed,” Jakobsohn said in a statement. “For three years, however, Knight’s stock has floundered, and shareholders simply are not seeing the returns that all of us deserve.”
We knew it was inevitable
Those concerns appear to be at the forefront of Jakobsohn’s plan. The Medison CEO believes he can turn the company into one that can generate $500 million of annual revenue by 2025, while returning at least $100 million to shareholders. The way forward for the company is to focus on commercializing innovative products that treat life-altering or life-threatening illnesses, expanding into international markets and giving money back to shareholders, he said.
The plan lacks specifics, Sakhia said, and while Knight does find some of his points interesting, the company argues it has already deploying much of his strategy.
With Knight and Medison adding fuel to their feud, it appears that shareholders will have a substantial decision to make in May that could drastically change the company moving forward.
Sakhia is looking forward to it.
“We see this as a distraction to the management team,” Sakhia said. “We think this is a huge waster of money and we want to put this behind us.”