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Second Largest Knight Therapeutics Shareholder Submits Proposal to Amend Bylaws to Address Conflicts of Interest at Board and Management Level

  • Medison Biotech makes shareholder proposal to effect governance reform after a number of significant Knight shareholders express grave concerns over Board and management conflicts of interest

/EIN News/ -- PETACH TIKVA, Israel, March 08, 2019 (GLOBE NEWSWIRE) -- Medison Biotech Ltd. (“Medison”), which together with its affiliates owns more than 10.4 million shares, or 7.3% of Knight Therapeutics, Inc. (“Knight” or “the Company”) has submitted a shareholder proposal to effect necessary and overdue governance reform. A copy of Medison’s letter to Knight’s board of directors that accompanied the proposal is included below:

Board of Directors
Knight Therapeutics Inc.
3400 de Maisonneuve Boulevard W., Suite 1055
Montreal, Quebec H3Z 3B8

Re:       Shareholder Proposal to Effect Governance Reform

Dear Members of the Board:

Medison Biotech (1995) Ltd. (“Medison”), together with its affiliate Tzalir Holdings Inc. and Meir Jakobsohn, owns more than 10.4 million common shares of Knight Therapeutics Inc. (“Knight”) and has been a shareholder of Knight since September 2015. Medison’s address is 10 Hashiloach St. P.O.B 7090 Petach Tikva, 4917002, Israel.

As described in our letter of February 28, 2019, we believe that Knight’s CEO, Jonathan Goodman, has untenable conflicts of interest with the shareholders of Knight and the board of directors is critically missing the independence and dedication to shareholder interests that are the hallmarks of good corporate governance.

CEO’s Conflicted Position is Untenable

Knight’s CEO, Jonathan Goodman, has a very substantial ownership interest in a company that directly competes with Knight. In fact, we believe that Mr. Goodman’s ownership share of the competitor exceeds his ownership percentage in Knight. This creates a perverse incentive for Mr. Goodman to be rooting for Knight’s competitor.

We have taken no comfort from Knight’s February 28, 2019 response to our allegation. Knight was shockingly unable to state that Mr. Goodman is free from conflicts or is always operating in the best interests of Knight shareholders. Instead, the most Knight could muster is that these conflicts “have been well known to the market for decades…” First, we do not believe the extent of the conflicts have been known. Second, Knight’s competition with Pharmascience is fairly new, given Pharmascience’s entry into Knight’s sector of the pharmaceutical business. And, most importantly, we do not believe that disclosure is tantamount to a solution. Knight’s shareholders deserve a CEO that is rooting for Knight! The knowledge supposedly possessed by the “market” that Mr. Goodman’s loyalties are elsewhere, is no solace or substitute for full dedication to Knight’s interests.  

Conflicted Chairman Makes Matters Worse

As we noted in our letter, Knight’s Chairman has close financial and business ties to the CEO (and his family) that we believe may impede his ability to provide objective oversight of the executive team for the benefit of the company and its shareholders. Again, Knight does not deny that the Chairman has deep entanglements and financial relationships with Mr. Goodman and his family. Instead, Knight merely proclaims that its Board is dedicated to “Best-In-Class Governance”. There is no proof of this, nor are there share price gains that might make shareholders forgive or forget the lack of oversight.

Indeed, shareholders are not fooled or forgiving. Since the release of our February 28 letter, many of Knight’s largest shareholders have expressed grave concerns to us regarding the conflicts at Knight. 

Shareholder Proposal to Protect Shareholder Interests

Accordingly, we are writing to request that Knight include on the agenda for its upcoming annual meeting a proposed by-law amendment, the full text of which is set forth in Schedule “A”, for shareholder consideration and approval. If approved by shareholders, the proposed by-law would ensure that none of Knight’s officers would have a conflict of interest with Knight’s shareholders, including through material direct or indirect ownership of a competitor of Knight. The proposed by-law would also ensure that the Chairman is free from economic entanglements with the officers of the corporation, so as to ensure proper oversight.  We believe that this proposal, if included in the agenda and approved by shareholders, will be an important first step in addressing some of the concerns that we have raised.

Attached as Schedule “B” is a statement in support of our proposal that complies with the limitations provided in the Canada Business Corporations Act (the “Act”) and that we request be attached, together with the full text of our proposal, to the information circular for the meeting.

We recognize that the deadline under the Act for submitting a shareholder proposal at the upcoming annual meeting has technically passed.  However, given the fundamental importance of this matter, we believe there is urgency in allowing shareholders to consider this proposal at the upcoming meeting.  Further, given that we are delivering our proposal approximately one month in advance of the deadline for mailing the information circular to shareholders, we trust that including our proposal would not impose any administrative burdens or delays.  Accordingly, we urge the board to include our proposal and supporting statement in the information circular for the upcoming annual meeting.

We believe submitting our proposal to shareholders at the annual meeting will allow the board to ascertain shareholders’ views in a democratic and constructive manner, and we urge the board to pursue this path.  We would appreciate confirmation as to whether our proposal will be included on the agenda for the meeting by the close of business on March 13, 2019. 

Sincerely,

//signed//

Meir Jakobsohn
Chief Executive Officer
Medison Biotech (1995) Ltd.

cc:       Jonathan Feldman, Goodmans LLP
Mark Spiro, Goodmans LLP

Schedule “A”
Shareholder Proposal

BE IT RESOLVED THAT:

  1. A new By-Law No. 3, which amends By-Law No. 1, is hereby approved, authorized and adopted in the form attached hereto as Exhibit “A”.

  2. Any one director or officer of Knight Therapeutics Inc. (the “Corporation”) is hereby authorized, for and on behalf of the Corporation, to execute and, if appropriate, deliver all other documents and instruments and do all other things as in the opinion of such director or officer may be necessary or advisable to implement By-Law No. 3, which amends By-Law No. 1, and the matters authorized thereunder and carry out the purposes and intent of the foregoing resolutions, such determination to be conclusively evidenced by the execution and delivery of any such document or instrument, or the taking of any such action.

Exhibit A
By-Law Amendment

BY-LAW NO. 3
A by-law amending By-law No. 1
of Knight Therapeutics Inc.
 (the “Corporation”)

  1. A new Section 6.15 shall be added to By-law No. 1 of the Corporation as follows:

No Conflicts of Interest.  No officer of the Corporation shall be permitted to serve in such office if such individual directly or indirectly, in any manner whatsoever including, without limitation, either individually, in partnership, or jointly or in conjunction with any other person, shall have a material financial interest in a business enterprise that competes with the Corporation. No director shall serve as Chairperson if that director has material financial, economic or business relationships with any officer of the Corporation. 

Schedule “B”
Supporting Statement

As Knight’s second largest shareholder, Medison Biotech (1995) Ltd. is concerned about the CEO’s conflicts of interest and the Board’s inability to faithfully serve shareholder interests through objective oversight of the company and its leadership team.

Knight’s CEO, Jonathan Goodman, is a substantial, indirect owner of Pharmascience, which operates a large pharmaceutical business that competes directly with Knight. Pharmascience was started by Mr. Goodman’s father and is run by his brother, Dr. David Goodman. We believe that Jonathan Goodman’s percentage ownership in Pharmascience exceeds his stake in Knight.

In Knight’s Annual Information Form for 2016, Knight specifically acknowledged that Pharmascience is a competitor. Yet, Knight’s CEO continues to own a large economic stake in Pharmascience.

While Jonathan Goodman has said he does not make decisions on behalf of, or oversee, Pharmascience, he does have direct executive and operating control of Knight; he decides whether Knight should pursue particular markets, licenses and partnerships. Knowing that he has a large economic stake in Pharmascience could affect Jonathan Goodman’s willingness or aggressiveness in pursuing deals that he knows would be attractive to Pharmascience. Since he owns more of Pharmascience than Knight, Jonathan Goodman’s personal economic fortunes are enhanced if Pharmascience out-maneuvers Knight to secure lucrative business opportunities.

Many pharmaceutical companies, including for example Pfizer and Sanofi, have policies that expressly acknowledge that any employee owning stock in a competitor can present a conflict of interest. And many executive employment agreements in the pharmaceutical industry (and many other industries) expressly forbid an executive from owning more than a small, passive stake in a competitor.

We are not aware of any public company CEO other than Jonathan Goodman that has a larger economic stake in a competitor than the stake he has in the company he is running. We believe this is an untenable conflict of interest.

We are also aware that Knight’s Chairman, James Gales, has many financial and business ties to Jonathan Goodman and the Goodman family. For example, Jonathan Goodman is an indirect partner in Mr. Gale’s investment management business, Signet Healthcare Management. We believe it is important for the Chairman of Knight to be completely independent of management and able to provide objective oversight of the executive team on behalf of the company and its shareholders.

We are therefore proposing that shareholders adopt a by-law amendment that would prohibit an officer of Knight from having a material interest in a competing business and ensure that the Chairman has no material financial or business ties to an officer.

Medison has engaged Olshan Frome Wolosky LLP and Goodmans LLP as legal advisors.

About Medison

Medison is one of the world's largest commercial partners of leading global biotech companies. Backed by three generations of experience in the healthcare industry since 1937, Medison is uniquely qualified to provide the complete spectrum of integrated services for international companies looking to enter or expand their presence in Israeli and selected ROW markets. Medison runs Medison Ventures, a corporate venture arm with a dedicated research and evaluation team boasting deep scientific and commercial backgrounds. Medison Ventures operates a scouting program to cater its partners and is an active investor in life science projects around drug development and digital health.

Additional information can be found at www.medison.co.il.

Forward Looking Statement

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "may", "will", "should", "believe", "plans" and similar expressions are intended to identify forward-looking information or statements. The forward-looking statements and information are based on certain key expectations and assumptions made by Medison. Although Medison believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because Medison can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward looking information for anything other than its intended purpose. Medison undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

For more information:

Investors

Shorecrest Group
Christine Carson
647-931-7396

Media

Longview Communications & Public Affairs

Joel Shaffer
416-649-8006
          Peter Block
416-649-8008


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