Knight Therapeutics Inc - Building Canada's Leading Specialty Pharmaceutical Company
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Building Canada’s Leading Specialty Pharmaceutical Company Knight Therapeutics Inc.
Forward Looking Statements
• This document contains forward-looking statements for the Company and its subsidiaries
• These forward looking statements, by their nature, necessarily involve risks and uncertainties
that could cause actual results to differ materially from those contemplated by the forward-
looking statements
• The Company considers the assumptions on which these forward-looking statements are
based to be reasonable at the time they were prepared, but cautions the reader that these
assumptions regarding future events, many of which are beyond the control of the Company
and its subsidiaries, may ultimately prove to be incorrect
• Factors and risks, which could cause actual results to differ materially from current
expectations are discussed in the Company’s Annual Report and in the Company’s Annual
Information Form for the year ended December 31, 2018
• The Company disclaims any intention or obligation to update or revise any forward-looking
statements whether as a result of new information or future events, except as required by
law
2
Why Invest in Knight?
Disciplined capital stewardship and relentless focus on our long-term strategy
Knight’s Consistent Investment Attributes Successes at Knight to Date
Proven leadership with alignment, expertise Raised $685M at increasing valuations
and determination to build Paladin 2.0
In-licensed over 20 innovative pipeline products
from 19 companies
Proven track record of profitable growth
Acquired NeurAxon Inc. and the Neuragen® brand
and capital stewardship
Sold or out-licensed rights to Neuragen, Impavido
and NeurAxon
Proven strategy to build a profitable
specialty pharmaceutical company FDA approval for Impavido® in Mar. 2014 and sold
PRV for US$125M
Proven ability to develop a pipeline of Lent over $170M to 15 partners and generated
double-digit return
innovative, new products
Deployed over $350M of capital, to date
First-in-class corporate governance
Generated $220M of net income, to date
3
Knight’s Strategy is Working
We’ve come a long way in 5 short years
In-licensed over 20 innovative pipeline
Knight is building a specialty pharma products from 19 companies
business Current portfolio includes 17
innovative Rx products
16 of the 17 key products in Knight’s Rx
portfolio have protected IP
Knight is focused on innovative products 12 of 17 key products in Knight’s Rx
portfolio are new chemical entities
Securing Rest of World infrastructure
Knight is developing commercialization
and product rights via innovative
capabilities outside of Canada transactions (e.g. Moksha8, Triumvira)
On-track to create a leading Canadian and ROW specialty pharmaceutical company
4
Shareholder Value Creation
Knight has delivered leading returns across Canadian and Global Spec Pharma peers
• Knight has outperformed Canadian Pharma and Global Specialty Pharmaceutical Peers, and the S&P/TSX
Composite Index, on a total shareholder return basis since its public listing in Mar. 2014
− Time horizon encompasses a full market cycle, with substantial volatility and Specialty Pharma
industry headwinds from late 2014 through 2016
• Former Paladin shareholders that rolled-over to Knight in Apr. 2014 have experienced a return of 1,259%
since spin-off
Knight Canadian Pharma Peers (1) Global Spec Pharma Peers(2) S&P/TSX Index
200%
150%
Total Shareholder Return (%)
100% 91.6%
50%
31.8%
12.7%
0% 7.4%
(50%)
Note: Bloomberg as of Mar. 29, 2019; beginning date as of Mar. 3, 2014; indexes equally weighted
(1) Canadian Pharma peers include: Nuvo, BioSyent, Cipher, and HLS
(2) Global Spec Pharma peers include: Pacira, Ligand, AMAG, Eagle, Vanda, Flexion, PDL, Bausch, Amphastar, Horizon, Mallinckrodt, Akorn and Endo
5Table of Contents
I Executive Summary
II Executing on our Strategy
III Corporate Governance
IV The Jakobsohn Scheme
6I. Executive Summary Better a GUD Knight than a bad one
How Did We Get Here?
Discussions with Jakobsohn to Date Our Conclusions
Sept. 2015 Mar. 2018: Aug. 2018: Dec. 2018: Oct. 2018 – Mar. 2019: Disingenuous
Feb. 2019: independence concerns:
Knight partners with Jakobsohn advises Knight board Jakobsohn sends paper to Less than 24 hours
Jakobsohn and Goodman that categorically rejects Knight advocating a Canadian Knight after engaging Jakobsohn would appoint
Medison via Medison will Jakobsohn’s focused “Diamonds” strategy continues good constructively with himself chairman though
acquisition of 28% breach Investor separation terms, and requesting that he be faith effort to Knight’s board, he’s not, in fact,
equity interest in Rights Agreement which are appointed chairman and replace negotiate Jakobsohn publishes independent
Medison in exchange and no longer significantly 3 board members with his own separation; white paper
for a 10.5M shares of declare dividend disadvantageous to unidentified appointees Jakobsohn’s asserting a LATAM &
Knight(1) and Knight shareholders, separation ROW focused So-called "governance
reciprocal 1-seat and to the benefit of Jakobsohn demands Knight demands strategy and a $50M concerns" are raised to
board representation Jakobsohn allocate hundreds of millions of become more VC fund allocation, distract investors from
dollars on undefined Jakobsohn onerous far below his private personal agenda
managed VC fund and other requests
high risk investments
So-called strategic plan
has changed drastically
since initial private
discussions, indicating
Oct. 2015 – Dec. 2018: Mar. – Aug. 2018: Oct. 2018: Jan. 2019: Feb. 2019: that he’s just improvising
All of Jakobsohn’s Goodman makes Jakobsohn sends letter to Jakobsohn requests Jakobsohn publishes
votes support Knight’s every effort to Knight expressing, for the first Goodman allocate $300M to public letter to
board resolutions on negotiate mutual time, strategy and governance undefined VC fund that Knight’s board Lacks understanding of our
strategy, governance, agreement to concerns; Knight encourages Jakobsohn would manage in business and the pharma
product in-licensing resolve breach of him to share his nominees exchange for stopping his market outside Israel
and investment Agreement, activist campaign; Goodman
decisions culminating in Jakobsohn asserts that Knight refuses
proposed should focus on early-stage /
biotech, Canada only and Jakobsohn tells Goodman Jakobsohn is looking out
separation terms by solely for his own interest,
Jakobsohn suspend ROW strategy, to sell his 15% stake in
calling LATAM “corrupt” Knight; Goodman refuses not yours
Jakobsohn’s ever-changing agenda and refusal to engage demonstrate a clear disregard for responsible shareholder and corporate engagement
(1) Jakobsohn currently holds a 7% indirect interest in Knight via Medison Biotech (1995) Ltd. and Tzalir Holdings Ltd; he is Medison’s
controlling shareholder, with a 72% ownership interest
8What’s the Bottom Line?
Jakobsohn wants to remove Jonathan Goodman, take control of Knight without
paying shareholders a premium, and make risky, self-serving bets with your cash
The Jakobsohn Scheme
Knight Invests Jakobsohn Gambles
Value orientation and patient Bigger bets & higher, binary risk
Strategy Late-stage product focus Short-term, top-line growth,
Long-term, de-risked profitable lower profit margins
growth Unclear strategy lacks specificity
Proven and Experienced Unproven and Self-Interested
Long and successful track record No management team
Leadership Independent directors with the Misaligned strategy
right experience and expertise Motivated by 72% stake in
Aligned with Knight shareholders Medison and his private VC funds
Shareholder Value Creation Jakobsohn Value Creation
Financial Long-term focus Take control of Knight without
Disciplined approach paying a premium
Objective Use Knight’s cash to help fix
Medison and finance his VC funds
9Your Choice: Invest or Roll the Dice?
Shareholders didn’t sign up for Jakobsohn’s risky scheme
The Jakobsohn Scheme
Disciplined Approach
Make RISKY bets with UNCERTAIN outcomes
to Value
Portfolio
Make LARGE & CONCENTRATED bets
Diversification
Disciplined Approach Deploy capital with MYOPIC TOP-LINE FOCUS,
to Capital Deployment with little regard for profit
Manage Appropriate Balloon the cost structure with EXCESSIVE
Cost Structure OVERHEAD & INFRASTRUCTURE
“Mr. Goodman is the most intelligent steward of capital in the Canadian Specialty Pharmaceutical space and
has been consistent, honest and unwavering with his strategy for the company since day one.”
March 15, 2019
10Proven Leader or Unknown?
Jonathan Goodman Value of the Businesses They’ve Built Since 1995
Thousands
Regarded as one of the best specialty pharma
investors in Canada
Highly motivated to build Canada’s leading specialty
pharma company (1)
Track record of significant shareholder value creation $3.2B $1.1B $4.2B
Deep respect for shareholders and their hard earned
cash Jonathan
Goodman
Meir Jakobsohn
No experience in Canada or any country outside of (2)
Israel and Romania $0.3B
His business is struggling with declining net income
Spends most of his time on Medison, not Knight
No management team in so-called “plan” Meir
Jakobsohn
“With a consistent track record of disciplined capital deployment, Jonathan Goodman led Paladin Labs through 19 years of
consecutive record revenues, growing the share price a staggering 100-fold… we remain confident in Mr. Goodman’s ability
to replicate his former success”
March 1, 2019
(1) Paladin Labs implied equity value of C$3.2B at acquisition closing on Feb. 29, 2014 and Knight market cap of C$1.1B as at Mar. 29, 2019
(2) Implied 100% value based on Knight’s Sept. 2015 acquisition of 28.3% of Medison for C$82.0M, including contingent consideration of C$1.1M
11Whose Track Record Do You Trust?
Jakobsohn’s track record underscores his focus on short-term, top-line growth and low margins
Jonathan Goodman: Proven Profitability and Growth
• Disciplined investment approach $65 $180
− Focused on late-stage products with opportunistic approach $160
$55
to earlier stage products via de-risked structures $140
Delivering outsized returns to
Net Income ($M)
$45
• patient investors $120
Share Price ($)
Focused on long-term, profitable growth $1.50 in Mar. 1995 was worth $100
− Targets in-licensing deals with 15 year minimum term $35
$151.60 by Feb. 2014 (27.5% CAGR) 34% 35%33%
$80
− Financial profile hurdles in-line with Canadian and broader $25 23% $60
spec pharma peers 19%
$15 $40
’96 – ’08 Average: 15%
• Working hard to execute on the strategy and stay disciplined $5
$20
$-
throughout the cycle
− Reputation as a highly financially disciplined investor, having ($5)
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
($20)
evaluated over 1,000 product opportunities in the past 5
Net Income Net Income Margin Share Price
years
Meir Jakobsohn: Unsustainable and Deteriorating Profitability
• Short-term top-line growth
− Myopic focus on short-term, top-line growth
− Low profit margins 14%
11%
2016 - 2018
• Jakobsohn’s true agenda: gamble your money on schemes that 8% CAGR
benefit himself
(8.6%)
− Jakobsohn benefits 72 cents for every dollar Medison earns $28M $25M $21M
but only 7 cents for every dollar Knight earns – and he
wants control of both 2016 2017 2018
− Shareholders should ask: Where do his real interests lie? Net Income(1) Net Income Margin
(1) Financial information from Knight’s public disclosure; derived from Medison’s consolidated financial statements, excluding amortization of acquisition
fair value adjustments and converted to IFRS from Israeli GAAP in CAD
12What’s Next?
Two paths for Knight, but only ONE that is GUD for shareholders
The Jakobsohn Scheme
Seize control of your company, without
Long-term strategy focused on value creation paying a premium, and use your cash to
and de-risked profitable growth boost Jakobsohn’s private company
Unclear strategy that would gamble with
your capital
Disciplined investment approach throughout
the cycle
Unproven leadership motivated by 72%
stake in Medison and private VC funds
Jonathan has an extensive track record and is Has not invested any of his own money
financially aligned with Knight shareholders into Knight and has actually sold shares
Clear Choice for Shareholders:
VOTE YOUR BLUE PROXY
13II. Executing on our Strategy We never rest at Knight
Knight’s Disciplined and Clear Strategy
Rigorous diligence process underpinned by value-investing philosophy
• Building a specialty pharma company serving 17 Innovative Rx Products
Canada and select ROW
− In-licensing innovative products Equity / Debt
− Late-stage product focus In-licensed / Acquired
Transactions
− Opportunistic approach to earlier stages
via de-risked structures (e.g. equity or
debt)
• Product build-out across four key Therapeutic
Areas (TA’s)
Tenapanor
− TA platforms drive more profitable growth
within existing pillars
− Opportunistically pursue new TA’s
• Lending and fund investments are tools from
which to support the core strategy: sourcing
innovative products for Canada and ROW
• Working hard to execute
− Evaluated over 1,000 product
opportunities in the past 5 years
− Built a reputation as highly financially
disciplined
15Core Growth Strategies
• In-license innovative pharmaceuticals in Canada
• Acquire mature or “under-promoted” products from Big Pharma
In-licensing or • Develop near-term, low risk / low expense products
Acquiring • Lending and fund investment activities are tools in support of the core
Product Rights strategy
− Strategic loans to source near and long-term product pipeline
(e.g. Triumvira)
− Ceased fund investments beyond committed capital
• Partner of choice for 2nd / 3rd tier markets
• High growth countries with stable legal and regulatory systems, IP protection
Rest of World • Focus on Big Pharma’s non-core geographies / 2nd tier markets
• Partner with international operators via investment and strategic loans to
expand ROW infrastructure (e.g. Moksha8)
16Focused on Late-Stage Products
Sound diligence process focused on growing profitability while mitigating risk
• Knight takes on late-stage commercialization risk, not early-stage development risk with lower probability
of success
− Focus on later stage products (Phase II, Phase III or approved in foreign markets) with lower clinical /
regulatory risk
• Opportunistic approach to earlier stage products via de-risked structures (e.g. equity or loans)
• Jakobsohn’s publicly proposed strategy lacks clarity and has changed considerably since initial private
discussions (when his emphasis was on early stage products and venture investing)
− What’s clear is that Jakobsohn wants to make bigger bets on riskier products with Knight shareholders
taking the risk
The Jakobsohn
Scheme
Pre - IND Phase I Phase II Phase IIl NDA / Approval
Several months 1 – 2 Years 1 – 4 Years
Probability of Success: All Therapeutic Areas Across Trial Phases(1)
Phase I to Approval Phase II to Approval Phase III to Approval
Compound Likelihood of Approval 10% 17% 42%
(1) Kola, Nature Reviews-Clinical Success Rates
17Growing and Diverse Pipeline
An impressive portfolio of innovative prescription pharmaceuticals, prioritizing 4 TA’s
Therapeutic Area Product Licensor Status Transaction Date NCE IP
Marketed in CAN &
Movantik® AstraZeneca December 2016
approved in ISR
Probuphine™ Titan Marketed February 2016 -
Pain / Gastrointestinal Ibsrela™ Ardelyx Pending submission March 2018
Mytesi® Jaguar Pending submission September 2018
NeurAxon Family N/A Pre-Clinical – Phase III January 2015
Antibe Family Antibe Pre-Clinical – Phase II November 2015 -
AzaSite™ Akorn Approved July 2015 -
Ophthalmic Iluvien® Alimera Approved July 2015 -
Netildex™ SIFI Submitted August 2016 -
TX-004HR(1) TherapeuticsMD Pending submission February 2019
Women’s Health
TX-001HR(2) TherapeuticsMD Pending submission February 2019
Nerlynx® Puma Submitted January 2019
Oncology
Advaxis Family Advaxis Phase I – Phase III August 2015 Biologic
Impavido® N/A Marketed February 2014
Tenapanor Ardelyx Phase III March 2018
Other
Arakoda™ 60P Pending submission December 2015
Phase II – Pending
60P family 60P December 2015 -
submission
Note: NCE – New Chemical Entity; IP – Intellectual Property
(1) Marketed as IMVEXXY in the US
(2) Marketed as BIJUVA in the US 18Canadian Portfolio
Providing stable growth, with opportunities to leverage current footprint
Strengthening Foundation Superior sourcing and research capabilities
Growth Pillars BD focus on adding products to footprint
Opportunity to expand coverage and add new
Streamline & Expand therapeutic areas
Building for the Long-Term ROW strategy helps secure products for Canada
19Expand Geographically
Prioritizing LATAM based on size, growth and proximity
Stage 1 Stage 2
2017
700 10.0%
2022
’17 – ’22 CAGR
600 8.0% Global Growth
Market Size (USD Billions)
500
6.0%
2017-2022 CAGR
400
4.0%
300
2.0%
200
100 0.0%
0 (2.0%)
USA/CA Europe China Japan LATAM Southeast Asia ME, India, Eastern
Africa Europe
Source: IQVIA – IMS Market Prognosis March 2018
20Rest of World Strategy
Identify markets with attractive growth profiles and a high degree of fragmentation
ROW (ex-US, Target Geographies
Europe, Japan,
China) specialty
pharma will
continue to grow
• High-growth countries with expanding
access and funding for medicines
Leveraging 13+
• Stable legal and regulatory systems,
Partner of choice
licensed products in including IP protection
for 2nd / 3rd tier
markets
select international
markets • Focus on Big Pharma’s non-core
geographies / 2nd tier markets
• LATAM prioritization driven by:
− Market size
− Underlying growth drivers
Strategic investments
to increase capacity to
Deploy financial
strength and BD
− Proximity / current presence
evaluate international capabilities to − Compelling pan-American (ex-USA)
opportunities accelerate growth in “one-stop shop” commercial solution
focus markets
• Additional ROW growth levers identified
in Middle East, Africa, Eastern Europe
Diligent and calculated approach to ROW; strategy is underway
21Strategic Lending Overview
Leveraging the balance sheet to source additional products and an attractive return
Nominal
• Secured loans with life-sciences companies
Company
Loan
Balance(1)
Interest
Rate Maturity
Product
Rights
in exchange for product rights or pipeline
assets for Canada and select international Synergy US$7.5M 15% 2020
markets
60° Pharma US$6.8M 15% 2020
• Over C$170M loaned to over a dozen
strategic loan partners generating double- Crescita C$3.6M 9% 2022
digit annual return on invested capital
Medimetriks US$1.0M 13% 2019
• Lending has served a valuable role in Ember US$0.5M 12.5% n/a
securing product and pipeline assets
− Sourced a number of early-stage Moksha8 US$10.0M 15% 2024
pipeline products and two commercial
consumer health assets (Neuragen and Triumvira US$5.0M 15% 2020
Synergy family of products)
Total(2) C$44.8M
Access to in-licensed product or M&A are threshold criteria for future investment
(1) As at Dec. 31, 2018, except for Moksha8 (Feb. 15, 2019) and Triumvira (Feb. 20, 2019)
(2) Total converted to CAD using Bank of Canada exchange rates on Mar. 29, 2019
22Strategic Lending Supports Growth
Secured loans with Moksha8 (US$10M) and Triumvira (US$5M)
Securing ROW infrastructure Securing product rights
• Committed up to US$25M in strategic financing agreement. • Access to early stage, novel T cell technology with limited
Loaned US$10M to date at 15% interest rate, maturing capital at risk
early 2024, fully secured
• Issued US$5M bridge-loan at 15% interest rate maturing
• An additional US$100M loan may be issued to Moksha8 for early 2020
corporate development or acquisition of product licenses
• Own warrants representing 3.5% of the fully diluted
• Own warrants at a nominal exercise price for 5% of the common shares of Triumvira
fully diluted shares of Moksha8
• In-licensed commercial rights to Triumvira’s future
• Allows Knight access to partner in Mexico and Brazil oncology products in select territories
“The Moksha 8 transaction is consistent with Knight’s expansion
“The [Triumvira] transaction is in keeping with Knight’s targeted
strategy internationally, where it seeks strong partner companies
lending strategy. That is, on top of a 10-15% interest rate, the deal
with regional expertise. The deal also highlights a string of increased
comes attached to warrants and product rights. With licensed
business development activity by Knight recently with eight
geographies including Canada, Israel, Mexico, Brazil and Colombia,
transactions by our count in the past 12 months vs. one in the year
this is in line with Knight’s goal of expanding its presence in the
prior. We see this activity by Knight as a strong leading indicator for
large and underserved Latin American market.”
continued record revenue and shareholder value creation.”
February 19, 2019 February 21, 2019
23Strategic Funds Overview
Attractive financial return with product access upside optionality
• Fund investments were made to obtain Fund Amount Stage Geography
preferential access to innovative products Teralys C$30.0M VCAP Fund of funds Canada
for Canadian market
Domain US$25.0M Early stage N.A.
• LP financial returns have been attractive,
but fund investments have not been as Forbion €19.5M All clinical stages Europe
effective at generating product leads
− Sourced Iluvien® and Advaxis portfolio Sectoral US$13.0M Late stage to small cap Global
− Core challenges with sourcing product Sanderling US$10.0M Early stage N.A.
under fund structure (lack of “new”
opportunities, GP fiduciary duties and HarbourVest C$10.0M VCAP Fund of funds Canada
conflict with LPs)
TVM US$1.6M All clinical stages Global
• No longer investing into funds, beyond
already committed capital Bloom
C$1.5M Commercial stage Canada
Burton(1)
Genesys C$1.0M Early Stages N.A.
Total(2) C$126.7M All stages Worldwide
We’ve ceased allocating capital to funds, beyond already committed capital
(1) Bloom Burton healthcare lending trusts are managed by Stratigis Capital Advisors
(2) Total converted to CAD at Bank of Canada exchange rates as of the commitment dates; using the Mar. 29, 2019 exchange rates, total fund commitments would be C$138.0M
24A Consistent Message to Shareholders
Knight’s unwavering commitment to long-term shareholder value creation
Proven leadership with alignment, Long-Term Shareholder Value Creation Takes Time
expertise and determination to build
Paladin 2.0 What did we say in May 2015?
“We continue to execute on our value-creating strategy…while
simultaneously making a difference to the health of Canadians.
Achieving this goal will take time, but we are convinced that our
Proven track record of profitable relentless implementation of our version of the Canadian
growth and capital stewardship specialty pharmaceutical strategy will deliver handsome returns
for the patient investor.”(1)
Proven strategy to build a profitable
specialty pharmaceutical company
Proven ability to develop a pipeline
of innovative, new products
First-in-class corporate governance
(1) Knight’s Q1/2015 conference call on May 13, 2015 and May 2015 investor presentation
25III. Corporate Governance Independent, aligned with track records of success
Knight’s Board of Directors
Relevant, diverse and proven experience
James Gale Nancy Harrison Robert Lande
Chairman
Chairman Director Director
Since
Since2014
2004 Since 2014
Since 2018
CCGNC: Chair Audit: Chair
Audit: Member CCGNC: Member
Over 20 years of 26 years of experience in Over 20 years of
Pharmaceutical experience Pharmaceuticals and Life Pharmaceutical experience
Sciences Strong background in
Former investment banker
Co-founder and former Finance and
Served on eight public telecommunication
President of MSI
pharmaceutical companies Former President and CFO
Methylation
Current board member of of FXCM Group LLC., an
Former Partner and Senior online brokerage firm
Teligent Inc., a specialty
Vice President of Ventures
generic pharmaceutical Former COO of Riverridge
West Management Inc
company Capital Partners LLC., an
investment management
Positive Total Shareholder firm
Return track record
Unrivaled Leadership in the Pharma Industry
27Knight’s Board of Directors
Relevant, diverse and proven experience
Samira Sakhia Sylvie Tendler Michael Tremblay
President, & CFO
Chairman Director Director
Since
and2014
Director Since 2014 New Nominee
Audit: Member
Since 2016 CCGNC: Member
Over 40 years of
Over 20 years of A leading pharmaceutical pharmaceutical experience
Pharmaceutical experience market research specialist
Significant experience in
Strong background in Founder of the Tendler sales, marketing, and
accounting Group, a custom medical business development in the
marketing research pharmaceutical industry
Successful record in M&A
company
and strategic lending
Former President of Tokyo-
transactions, and completed Substantial experience in
based Astellas Pharma
the sale of Paladin to Endo pharmaceutical marketing
Canada Inc
International for over $3B consulting
Positive Total Shareholder
Former chairman and director
Return track record of Innovative Medicines
Canada
The Tendler Group Inc
IntrinsiQ Tendler Inc
Unrivaled Leadership in the Pharma Industry
28Aligned Executive Leadership
Jonathan Goodman has a track record of success
Under Jonathan’s leadership, Paladin Labs share price increased by 101x, creating over
Jonathan Goodman $3B of shareholder value(1)
Founder, CEO
and Director Significant skin-in-the-game via 15.3% ownership interest in Knight
Over 30 years of Personally invested over $70M in Knight’s equity offerings, representing 10% of funds
Pharmaceutical experience raised
Jonathan Goodman
Former co-founder, President Zero visibility, influence or involvement in Family Holdings
and CEO of Paladin Labs Inc Pharmascience
Paladin’s stock price increased Jonathan holds an indirect interest in Blind Trust
by 101x under his leadership Goodman Family holding company via blind ~25% equity 0.02% votes
Served on boards of five public trust structure
Goodman Family
pharmaceutical companies Family holding company manages HoldCo
Positive Total Shareholder investment decisions in its subsidiaries, not
Return track record Jonathan (virtually nil voting power) Many Subsidiaries
Complete information firewall
Pharmascience
“…Mr. Goodman is the fundamental cornerstone of our conviction in Knight… Our discussions
with current investors lead us to believe that the majority of existing stockholders share our
opinion and thus, we believe Knight's future will continue to be one that is championed by Mr.
Goodman.”
March 15, 2019
Shareholders place considerable conviction behind Jonathan’s ability to execute
(1) Paladin Labs’ market cap increased from $6M to $3.2B between Mar. 1995 until its sale to Endo in Feb. 2014
29Unassailable Governance Approach
Knight has a highly skilled and experienced Board of Directors
Knight’s board is 71% independent, excluding Meir Jakobsohn
Legal / Regulatory
Experience
Public Company
43% of Knight’s board consist of women, excluding Meir Jakobsohn
CEO/NEO Experience
18% Financial / Accounting
23%
Two fully independent committees of the board
6%
Experience
Capital Markets /
Robust board renewal process M&A Experience
Should shareholders elect Nancy Harrison and Michael 18%
Public Company Board
Tremblay at the AGM, over 70% of the board will comprise 35% Experience
directors that have been appointed over the last four years Pharmaceutical
100%
Past experience with Paladin is a strength: key understanding of
Experience
the business model
Finance Industry Experience/Knowledge
Public Company Public Company
2018 Meeting
Nominees CEO / NEO Board Legal Gender
Attendance Financial / Capital Markets / Biotechnology / Entrepreneurial
Experience Experience
Accounting M&A Pharmaceutical Experience
Jonathan R Goodman 100% ✓ ✓ ✓ ✓ ✓ ✓ M
James C Gale 100% ✓ ✓ ✓ M
Sylvie Tendler 100% ✓ ✓ ✓ ✓ F
Robert Lande 100% ✓ ✓ ✓ ✓ M
Samira Sakhia 100% ✓ ✓ ✓ ✓ ✓ F
Nancy Harrison(1) 75% ✓ ✓ ✓ F
Michael Tremblay (2)
n/a ✓ ✓ ✓ M
Meir Jakobsohn 67% × × × × × ✓ ✓ M
Equipped with the right skills to make Knight the next Paladin
(1) Nancy Harrison joined Knight’s board in Aug. 2018
(2) Michael Tremblay is a new nominee in 2019
30IV. The Jakobsohn Scheme A major risk for shareholders
The Jakobsohn Scheme
Not additive to board composition or strategic direction
• Jakobsohn would appoint himself as Chairman, though he’s not independent
− Why doesn’t Jakobsohn believe this is a conflict?
• Who will run the company under Jakobsohn’s Scheme?
Leadership &
− Recommendations conspicuously lack a management team
Governance • Director nominees have managed – but have never built – Canadian pharmaceutical companies
• The dissident slate lacks finance experience, with no director nominee capable of sitting on the
Audit Committee
• “Vision” is hardly new; Jakobsohn offers no unique strategy for Knight
− Privately, Jakobsohn was calling for massive Knight investments dedicated to venture investing
− Publicly, Jakobsohn is re-hashing many elements of Knight’s existing strategy and calling it his
own
− Redacted material lacks real substance but gives the illusion of having novel ideas
• Overstated value of “Diamonds”
Strategy − Jakobsohn’s review is oversimplified and lacks understanding of Knight and Canadian market
dynamics
− Understates risk of a concentrated portfolio with so-called “Diamonds”-only focus
• Ever-changing strategy to fit the latest narrative; he’s simply improvising
• If Jakobsohn has a real plan to deliver $500M of revenue with 20% EBITDA margins, why hasn’t he
implemented on his ailing Medison business?
The True Agenda: Take control of Knight and use your cash for Jakobsohn
32The Dissident Slate
Zero entrepreneurial pharma experience
NO entrepreneurial pharma experience
NO product acquisition experience in the pharma industry
NO capital markets / M&A experience; none capable of sitting on the Audit Committee of the board
NOT a diverse slate: only one female dissident nominee, compared with three incumbent nominees
ONLY 1 of 6 nominees reside in Canada
WEAK Total Shareholder Return track record
Ecotality Inc. and Reddy Ice Holdings Inc. filed for bankruptcy during Kevin Cameron’s tenure at the
company
Outside Public Company Finance Industry Experience/Knowledge
Average TSR Record Public Public
Company Company Entrepreneurial Gender
Dissident Slate Financial / Capital Markets Legal Biotechnology /
CEO/NEO Board Pharmaceutical
Director Roles NEO Roles Experience Experience Accounting / (M&A) Pharmaceutical
Experience
Kevin Cameron -50% ✓ ✓ ✓ M
Elaine Campbell ✓ ✓ F
Michael Cloutier 7% -50% ✓ ✓ ✓ M
Robert Oliver ✓ ✓ M
Christophe Jean 13% 17% ✓ ✓ ✓ ✓ M
A slate of followers, not leaders
33Much of Jakobsohn’s “Vision” isn’t New
Knight already pursues (or has considered) much of Jakobsohn’s so-called “strategy”
Jakobsohn Scheme “Vision” New Idea? Knight’s Existing Strategy
“Knight should focus on in-licensing This is Knight’s stated strategy
innovative products and building a
commercialization infrastructure” We’ve built a portfolio of 17 innovative Rx products
“Knight should halt all non-strategic Knight ceased allocating capital to VC funds, well
financial activities (purchasing LP interests
in venture funds and opportunistic lending
activities)”
prior to Jakobsohn’s objections
Strategic loans are a tool to source product in-
licensing opportunities (e.g. Triumvira)
“Knight can provide a comprehensive This is Knight’s stated strategy: to become the
ROW solution and become the trusted go-
to partner of any new diamond developer
for the ROW markets”
partner of choice in 2nd and 3rd tier markets
Develop ROW infrastructure via diligent and
calculated approach
“Cash should be deployed in a strategic Knight is actively seeking a number of strategic
manner to create value for shareholders;
excess cash should be returned to
shareholders”
opportunities, including in-licensing and M&A
Evaluated over 1,000 product opportunities in the
past 5 years relying on a disciplined approach
34Myopic “Diamonds” Focus a Needless Risk
Oversimplified review lacks understanding of Knight and pharmaceutical business model
Jakobsohn Scheme Allegation Market Reality
• Pharma companies mitigate risk by building diversified portfolios of products
• “Focus only on Diamonds in defined therapeutic with varying degrees of innovation, risk/pricing profile
area clusters” • Knight’s portfolio of innovative products is in line with other pharma
companies’ diversified portfolios
• Payers across the globe are struggling with declining healthcare budgets, and
• “Diamonds are less vulnerable to competition and are specifically addressing high priced medicines
pricing pressures compared to other segments of
the pharma market” • Specializing in high-valued innovative therapies does not create pricing power
in Canada; payers negotiate pricing on a product-by-product basis (no
• “Payers have stronger leverage when negotiating bundling)
with pharma companies that have non-innovative
products” • The Knight team has a track record of successfully negotiating favourable
listings
• “Diamonds commercialization demand specialized • Specializing in “Diamonds” doesn’t create a competitive advantage; available
expertise and high level of compliance and ethical pool of biotech / ex-pharma talent can be recruited by anyone
code adherence that serve as a very high barrier to • Knight’s strategy is to create a competitive advantage by offering a one-
entry for potential competitors” stop-shop commercial solution in underserved markets
• “We do not believe Knight has fully evaluated
partnering with these [redacted] companies; it
• Knight has, or is, evaluating partnering with all the redacted so-called
“missed opportunities” and companies with upcoming product approvals
should”
Knight should have a diversified product portfolio that adds value for shareholders
35Jakobsohn Proposes Risks and Losses
Acting on Jakobsohn’s scheme would add risk and create unnecessary losses
Jakobsohn Scheme Proposition Key Considerations
• Terminating license agreements for no cause would be hugely detrimental to
Exit current licensing deals for “less Knight's reputation as a partner in the industry: Knight honours its agreements!
specialized” products • Knight would forego existing and future revenue and incur losses on investments
already made (e.g. license fees, regulatory and commercial)
• An 8-year term is not sufficient to make a healthy return
Pursue in-licensing agreements with • 8-year term only affords ~5 years to launch product, recoup investment and
terms of 8 years make a healthy return, after considering ~2 year regulatory filing and review and
~1 year to build market access and reimbursement coverage
• Gross margins of 40% are too low to generate a healthy return
• Rare / orphan and oncology peers would typically feature gross margins much
Pursue “over 40% gross margin” on
higher than 40%
in-licensed products
• Jakobsohn’s recommendation for below-market terms illustrates his myopic
focus on top line with little attention to profitability
• Selling fund holdings on secondary market would require Knight to sell at a
Exit fund investments
discount, thereby incurring needless frictional costs
Found a C$500M VC fund with • GP interest will not improve product access compared to an LP interest
significant GP participation (C$50M • GPs still face the same fundamental challenge as LPs (e.g. GP fiduciary duties
from Knight) and conflict with LPs)
36Jakobsohn’s Ever Changing Strategy
No conviction in a strategy that changes after every discussion
Jakobsohn Scheme Iterations Shareholders Should Ask Themselves
Internal Discussion Public Campaign
Why Is he just
now? improvising?
October 2018
March 2019
“Knight should focus only
“Focus only on ‘Diamonds’”
on Early-stage / biotech” Who’s going to run
the company?
October 2018
March 2019
“Knight should focus only
“Prioritize ROW Markets” What will Jakobsohn
on Canada”
“LATAM is ‘corrupt’”
“Focus on LATAM” promise next?
December 2018 March 2019 What’s Jakobsohn
“Knight should allocate “Halt all non-strategic saying in private, that
capital and form VCs” financial activities” he’s not telling us?
37The Jakobsohn Scheme is a Major Risk for
Shareholders
The Jakobsohn Scheme has no leadership and hasn’t offered a unique “vision”
The Jakobsohn Scheme overstates the value of “Diamonds”-only focus and understates
the risk of placing concentrated bets on a few opportunities
Jakobsohn’s true agenda:
Take control of Knight and use shareholder cash for Jakobsohn, his ailing Medison and
his VC funds
Clear Choice for Shareholders:
VOTE YOUR BLUE PROXY
38Vote Your BLUE Proxy Now
Vote for management and direction that will deliver long-term, sustainable, profitable growth
Questions?
Need help voting?
Contact our strategic shareholder advisor and proxy solicitation agent
• Toll-Free (Within North America): 1-888-518-1552
• Collect (Outside North America): 1-416-867-2272
• Email: contactus@kingsdaleadvisors.com
39Building Canada’s leading specialty pharmaceutical company Knight Therapeutics Inc. (TSX:GUD)
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