Paladin Labs CEO in serious accident

Paladin Labs CEO in serious accident

August 22nd, 2011 // 12:11 pm @

Paladin Labs Inc.’s chief executive officer has been seriously injured in a cycling accident, raising uncertainty about the company at a crucial time in its history.

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Its shares fell 6% to $38.50 in afternoon trading on the Toronto Stock Exchange amid a broader market selloff.

The Montreal pharmaceutical firm shocked the investment community and employees Thursday morning with the news that its chief executive, Jonathan Ross Goodman, was involved in an accident and is currently hospitalized. Paladin’s board has asked Mark Beaudet, co-founder, director and vice-president of marketing and sales, to assume the CEO position for the time being because Mr. Goodman is unable to perform his duties.

Paladin is in the midst of takeover bids for Edmonton-based Afexa Life Sciences Inc., the maker of popular flu remedy Cold-FX, as well as Montreal drug developer Labopharm.

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The company announced the Labopharm deal Wednesday morning. After meeting with Labopharm executives at their Laval, Que. headquarters, Mr. Goodman set off on a pre-scheduled afternoon bike ride with a group of people in the lower Laurentians, including Mr. Beaudet.

An avid cyclist who regularly went on multi-hour rides, Mr. Goodman fell off his bike on a downhill slope, Paladin chief financial officer Samira Sakhia said in an interview. He was wearing a helmet.

“He did hit his head,” Mr. Beaudet said. “He’s currently stable and he’s in hospital receiving treatment. The challenging part of it is that doctors are telling us that they can’t tell us much at this point and that it takes at least several days before they can provide a good assessment of his condition.”

Mr. Beaudet declined to say whether Mr. Goodman, 44, was conscious or not at the hospital. No one else was injured in the accident.

Ms. Sakhia called the fall in Paladin shares an unwarranted “emotional reaction” by shareholders. “We have a strong management team,” she said. “We have a strong business.”

Former colleagues at Proctor & Gamble in Toronto, Messrs. Beaudet and Goodman co-founded Paladin in 1996. The two have collaborated intimately on its strategic direction since the start.

Mr. Beaudet sought Thursday to reassure investors that Paladin will not stray off course in daily operations or the execution of the two acquisitions.

“[We will] continue to move the business forward as it had been moving” at the same pace and timing, Mr. Beaudet said. He added that Paladin’s management team has worked together for several years and that all members are involved in all aspects of operations. “There’s not an area of the business where we can say ‘Only Jonathan was doing that.’”

Paul Moroz, portfolio manager at Mawer Investment Management, which owns just over 10% of Paladin, said he has the “upmost confidence” in Mr. Beaudet going forward.

“What people may not realize is that a lot of the deals they’ve put together are Mark’s deals,” Mr. Moroz said. “The credit might go to Paladin or Jonathan but they’ve kind of split up the business development and the deals.”

The larger question is what happens in a worst case scenario in which Mr. Goodman is unable to return to his job. The Goodman family owns roughly 35% of Paladin.

“If this goes down the road where Jonathan isn’t able to come back to the business and the family has a large stake in the business, it might [result in selling] the business to Valiant or another pharmaceutical player,” Mr. Moroz said. “I hope for our sake that Jonathan recovers and they continue to run the business because it’s one of those teams and assets that as a shareholder that you want to hold for a very long period of time.”

Desjardins Securities analyst Pooya Hemami said he was reassured that the event will not influence Paladin’s near-term operations, including its proposed acquisitions. The analyst maintained his “hold” rating on the company’s shares with a target of $42.75.

Paladin, which has a current market cap of $780-million, has cranked out 15 consecutive years of record revenue and grown earnings before interest, taxes, depreciation and amortization for the last six years. It distributes a range of products, including cancer and diabetes medications.

The company’s business model is to buy the rights to specialty brand-name drug products that are nearly ready for the market or proven-but-underpromoted products ignored by big pharmaceutical companies. The attractiveness of the model is the risk element. Paladin does not design and manufacture new products on its own so carries no exposure to potentially expensive drug research and development. It is a company focused on commercialization.

In February, Paladin acquired the Canadian rights to Tempra children’s pain relief products from Bristol Myers Squibb.

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