Lessons in Staging a Comeback From a Brain-Damaged CEO

Jonathan Goodman built Paladin Labs into Canada’s smartest drug company. Then he nearly died. Don’t bet he can’t build another one.

 
Written by Carol Toller for Canadian Business

Jonathan Goodman leans back in his chair, looking as if he’s savouring this moment. He’s about to launch into a telephone sales pitch—one he’s probably given hundreds of times. The fingers on one of his hands roll in rapid, restless waves across his thumb as he gears up to sell a U.S. drug company on the benefits of licensing the Canadian rights to one of its products to his new pharmaceutical sales and marketing company, Knight Therapeutics. The highly specialized medication, which has just received FDA approval in the United States, treats a sleeping disorder that commonly affects blind people.

Goodman has an impressive track record of finding lucrative markets for niche pharmaceuticals, and he wants this drug. He doles out some pleasantries to the company representative on the phone, then winds up for his pitch. “How can we help you in Canada with, uh…” There’s a pause as his eyes dart to notes he has attached to the wall beside him. He can’t recall the name of the drug. Then his eyes lock on what he’s searching for, and he drops it into his presentation, barely missing a beat. He moves on, sounding relaxed, confident, even a touch brash. None of the pauses or mild stutters that occasionally slow his more spontaneous speech enter into his next spiel.

During his 19-year career selling pharmaceuticals, he’s represented 35 firms, Goodman tells the company rep. “I could do this in my sleep if I wanted to.” Then he moves in for the kill. “Canada isn’t just one market,” he says. “It’s 10. You’re better off focusing on California than Canada.” His pitch? Let us handle north of the border.

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It’s a smart play for what he wants—and an angle he’s used before, when he was building Paladin Labs, the Montreal company he co-founded in 1995 and sold for $3 billion in one of 2014’s biggest acquisitions. Paladin was a spectacular success for Goodman—the company’s share price rose from $1.50 when it first went public to $140 by the time it was formally acquired by the U.S. firm Endo Health Solutions in February—and he’s hoping to pull off a second hit. With Knight, he is adopting an identical business model, even recruiting some of the same directors to his board. The only thing that’s different is Goodman himself. This time around, he’s running a company with a brain that doesn’t always do what he wants it to do.

Not many people can divide their lives in two as neatly as Goodman can. For him, the fault line emerged on Aug. 17, 2011—the day Goodman, a cycling enthusiast with a penchant for 100-kilometre spins, pulled on a Lycra jersey and invited his management team to join him in a victory lap. Paladin had just pulled off a major acquisition, the $20-million purchase of Labopharm Inc., and his crew had a habit of accompanying the boss on celebratory rides. The 70-kilometre route—considered only moderately challenging by the team of hard-core cyclists—took them out of the city and into the hills of Morin-Heights, in the Laurentian Mountains. It didn’t end well. The riders pounded their way through the lower Laurentians and had only a couple of kilometres to go as they made the long descent down the Mille Isles side road. Goodman was the second-to-last of seven riders to head down the stretch. Though no one saw exactly what happened next, his colleagues know he made it to the point where the road flattens out near Chemin Tamaracouta because that’s where they found him lying on the road, unconscious. He’d landed on his head.

He was wearing a helmet, but the injuries to his brain were massive. Ten days after the accident, he was still in a coma. Things got worse: Complications from the fall caused him to have two heart attacks and then a pulmonary embolism, followed by septic shock and double pneumonia. Doctors gave him a 10% chance to live—and told his wife he would likely remain in a vegetative state. No one predicted the triumphant return of Jonathan Goodman.

The coma lasted five weeks, but he came out of it with a slow, steady progression of physical responses that began on Day 15, when he opened his eyes—though he couldn’t yet control them and showed no recognition of his family. He had to learn to walk again and to speak clearly. A brain specialist taught him memory-strengthening techniques. Within a few months, he was able to chat with people and to walk his son—one of his three children—to school.

Today, he sits at the helm of his new company, determined to build another block-buster. The accident has left him not only chronically fatigued and prone to occasional memory lapses (“The next time I see you, I may not remember talking to you,” he says when we first meet in June) but also driven by a new mission: to show the world that traumatic brain injury doesn’t have to stop a high-performing CEO in his tracks. “I’m more competitive now,” he says, and people who know him well agree. Gideon Pollack, vice-president of business development with Claridge Inc. (Stephen Bronfman’s private investment firm), says his friend has always been a high-performing alpha executive, but he seems even more motivated to succeed since that day in the Laurentians. “I think he has more to prove.”

Goodman’s eyes light up when he hears that. “I don’t think I’m ever going to recover,” he says, adding that maybe recovery isn’t even a term worth applying to his situation. “I want to be known as the most successful brain-damaged CEO.”

There are a few things that become immediately apparent when you spend time with Goodman. One is that he’s a pharma geek. His father, Morris Goodman, started one of Canada’s first big drug companies, Pharmascience, and a passion for the industry runs through his family. While other kids talked about sports or sitcoms at the dinner table, the Goodmans discussed the latest findings in the New England Journal of Medicine. Another is that he’s got an oddball sense of humour. His current e-mail sign-off reads, “Please excuse any typographical errors. I am riding a bike, after all!” He’s also unapologetically, even gleefully, cheap. Ask about the couch in his office or the table in the boardroom of Knight’s Westmount office, and he’ll explain that it’s a family castoff he couldn’t bear to toss. He even made the art on the wall. Why pay for a Warhol when you can stick rows of Elvis stamps in a frame and create your own pop art gem for $100? Then there’s that other thing. The grim fact that gets him out of bed every morning and makes him more than a little obsessed with success: He really has no business being alive—which may be the reason he’s determined to move fast.

By 2012, Goodman had begun dropping by work again, trying to get back into the game. But Paladin wasn’t the same. His colleague and co-founder, Mark Beaudet, had done an admirable job as interim CEO, keeping Paladin running smoothly and profitably, but the culture had changed. “It had become a democracy,” says Goodman, who uses the term “control freak” enthusiastically to describe his personal leadership style. “I love democracy as a theory, but I don’t think it’s necessarily the best thing for a company. I’m more of a dictator.”

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Goodman wasn’t the same either. Relentlessly exhausted and still wobbly in his head, he didn’t have the strength to reassert control over Paladin. So he asked Credit Suisse to find a buyer for the company, and Endo made a stock-and-cash offer that was “too juicy” to turn down. (The deal was juicy for Endo too: It allowed the then Pennsylvania-based company to take advantage of a U.S. tax loophole that enables corporations to merge with smaller, foreign-owned firms and then relocate to a more tax-friendly country in a so-called “tax inversion.” Endo has since set up shop in Ireland.)

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By the time the deal closed in February of this year, Goodman was ready for his next move. It’s still early days for Knight, but industry watchers are taking keen interest. In an early round of financing this spring, Knight raised $255 million in just six weeks through an IPO and the sale of special warrants (including a $40-million purchase by Goodman). For investors, one of the most tantalizing aspects of Goodman’s business model is that he has found a way to net big profits from big pharma without assuming the risk of capital-intensive R&D. “It’s a very smart, fairly unique niche,” says Lea Katsanis, a professor at Concordia’s John Molson School of Business, who’s just finished writing a book on the pharmaceutical industry. “There aren’t many companies that don’t do homegrown product development.”

What Goodman does do is license sales and marketing rights to highly specialized drug products from larger international companies. Sometimes he buys Canadian rights, carving out opportunity in the small but lucrative domestic market here—Canada represents just 2% of the global market, so it isn’t a priority for many pharma companies—and in other cases he acquires drugs outright from firms that want to streamline their product lines. Goodman then sells them in not only Canada but in emerging markets like South Africa and Mexico. “It’s a sort of big fish, small pond strategy,” says Katsanis. “He takes drugs that aren’t necessarily great for big markets but that really serve small but very profitable markets. He’s got a real knack for it.”

Goodman’s latest venture is essentially a replica of Paladin—and not just strategically. He’s brought the office furniture with him. The desks and chairs that used to sit in Paladin’s corporate headquarters were included in the terms of the sale agreement. If he closed his eyes and ignored the constant low-grade lethargy, Goodman could be back at Paladin. The company PR materials even use the same green and gold corporate colours and fonts. One of the few notable differences is that many of those desks sit empty: He’s aiming to fill the office, but for now, he only has seven full-time employees.

“I’m shamelessly ripping off everything Paladin,” he says with a shrug. (Endo didn’t require him to sign a non-compete agreement, likely because it was most interested in Paladin for tax purposes.) “What can I say? I’m risk-averse. This is what I know.”

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It’s also what investors know, and based on past experience, they’re keen to see Goodman hit replay. As National Bank Financial analyst Leon Aghazarian said in a recent note initiating coverage of Knight, the new company offers investors an opportunity to “get in early on a potential Paladin Labs 2.0.” The company is already on a growth track. In September, it announced its first acquisition, a small Canadian drug company called Orphan with two key products: one that treats a rare form of esophageal cancer and a preventive medication for a hereditary blood-clotting disorder. Following the sale, Orphan’s founders, Jason Flowerday and Joost van der Mark, joined the Knight leadership team as vice-president of commercial operations and vice-president of corporate development, respectively.

Still, Goodman insists it’s a different CEO running this company. “The old me died on Aug. 17, 2011,” he says. The new him has a brain that’s only operating at about 75% capacity, Goodman says, though Pollack rolls his eyes at the estimate and says he thinks it’s more like 90%. Goodman cites plenty of residual symptoms, like the fact that he feels continually jet-lagged. (He uses the couch in his office for regular naps.) He takes constant notes so he won’t forget things others have said—or commitments he’s made. But he is always aware that without the mental prompts, his brain could fail him.

When he was in hospital, his official diagnosis was “diffuse axonal injury”—loosely defined, it means there’s no one particular chunk of nervous tissue that has been damaged. Instead, Goodman’s entire brain effectively bounced around inside his skull after his head slammed into the pavement. To begin working effectively again, the neurons had to reconnect. Over time, they have, but Goodman says he’s conscious of his brain working extra hard to process straightforward information: “It’s like I’m going from Montreal to Toronto, but to get there, I have to pass through Buffalo and Rochester.” The function most affected is his short-term memory. He remembers high school vividly, but what he ate for dinner last night might remain a blur. When I see Goodman again a month after our first interview, he knows who I am, but some details of our conversation are vague. “Do you bike?” he asks, then his eyes flicker, as if something’s triggering a memory. “Wait, I know you bike…I know you bike…. Why do I know that?”

Back inside his office, Goodman’s business call with the U.S. drug company ends inconclusively—the rep needs to talk to others. But Goodman throws out another offer. “Do you need money?” he asks. “Because we could loan you money in exchange for Canadian rights.” It’s the third prong of his Paladin business model: providing capital to pharmaceutical companies as loans secured by rights to their products. He lent $150 million to six companies at Paladin—earning it the nickname “Bank of Paladin” in one analyst’s note—and now does the same at Knight for double-digit returns. (Goodman himself refuses to use credit to grow his own business, noting proudly that he’s “never borrowed a dime in 19 years.”)

The business also has one other, unusual asset it hopes to one day liquidate: a voucher that speeds up the FDA’s drug approval process. Known as a priority review voucher, it’s a rare incentive offered by the FDA to encourage research into neglected tropical diseases. Paladin received one for a tropical disease treatment called Impavido it had acquired the rights to, and Goodman negotiated it into the terms of Paladin’s sale. Knight now plans to auction it off to a firm desperate to get a drug into market. How much the voucher is worth isn’t clear—Goodman hoped it could sell for as much as $200 million earlier this year, but may revise that estimate now that another company has sold a voucher for US$67.5 million.

Whether he deserves to sell the voucher at all is another question. A recent article in the medical journal BMJ criticized Goodman for trying to commercially exploit a system designed to reward companies investing in research; Knight’s only selling the drug, the writer pointed out, not helping create treatments. Goodman’s response to the criticism was to request signed copies of the article for his office. “It’s going to sound self-serving, but if we do our job and get a big price tag for this voucher, we will be doing humanity a great service. And our shareholders,” he said in an e-mail to the author that ended with his trademark joke about excusing typos, except this time he wrote that he was driving. Lines like that are classic Goodman. He says post-accident, he no longer has a filter—whatever’s on his mind, he’ll say; whatever he feels inclined to do, he’ll do. A case in point: The presentation materials he prepared for Knight investors are dotted with goofy wisecracks. A list of tropical diseases with names like Dracunculiasis and SoilTransmitted Helmithiasis appears under the title “Love in the Time Of….” Another page features a column of puns and jokes derived from the Goodman and Knight names: “Knighting wrong with making money” and “Gudluck Jonathan,” a nod to both the company’s stock ticker, GUD, and Nigerian president Goodluck Jonathan. Goodman says his bankers “yelled at him” when they saw the jokes and have urged him to take them out of his presentation. “That’s just me,” he says. “I like having a laugh.”

It’s unclear, though, how much of his irrepressible quirkiness actually stems from his 2011 spill. Friends say he’s never been interested in playing the part of a starchy executive. The Village People album he displays in his office alongside corporate memorabilia and tributes to multimillion-dollar deals predates the cycling incident.

“He’s not as different as he says he is,” says Pollack. “He’s always been a bit of a weirdo. But he has tremendous judgment, and he’s really great at what he does. He’s totally underselling himself if he says his brain isn’t working properly.”

Goodman doesn’t question for a moment that he can recreate Paladin’s success, though he insists he’ll “always need notes and workarounds.” And then he adds this—because he can’t resist: “When I woke from my coma, they asked my name and age. I was a 45-year-old balding Jew, and what did I tell them? That I was a 32-year-old Muslim.”

This feature is from the December 2014 issue of Canadian Business. Subscribe now!

Originally appeared on PROFITguide.com

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