Jonathan GoodmanInvestors are betting big on former Paladin Labs CEO Jonathan Goodman and his latest pharmaceutical endeavour: Knight Therapeutics (TSXV:GUD). This week, the company closed a $75 million financing, announced a second $75 million dollar round, and then decided to upsize the deal to a staggering $180 million. That gives Knight approximately $240 million on its balance sheet and a market cap of over $400 million. For the time being, Knight is a one-drug company; Impavido is its sole treatment, but with a bulging treasury and Mr. Goodman’s knack for finding pharmaceutical assets, the shopping spree should begin shortly. When Paladin was sold to Endo Pharmaceuticals, Mr. Goodman negotiated to keep the Paladin asset, Impavido, and formed Knight Therapeutics around it. Impavido is indicated for three forms of leishmaniasis, a rare tropical parasitic disease. The drug has been approved throughout much of the world but not in the United States. As a commercial pharmaceutical asset, it is not especially attractive. Paladin, who bought the rights from AEterna Zentaris (TSX:AEZ) in 2009, has generally reported around $2.5 million in annual sales from the product. Which begs the question: Why did Mr. Goodman want Impavido? The answer lies in a Food and Drug Administration (FDA) incentive program for drug development in tropical disease indications. The FDA grants a “Priority Review Voucher” for companies that successfully develop a tropical disease drug through to approval. Priority review is generally given to drugs that could fill a critical medical need. However, the voucher allows the holder to receive a priority review for a drug submission regardless of whether it meets the criteria. A priority review can shave four to six months off a standard review timeline, which can be invaluable when you consider the sales potential of a new drug and its finite patent life. Consequently the voucher could be very valuable in the right company’s hands, and here is the kicker, it is transferable. It can be sold! That is why Mr. Goodman coveted Impavido. So when Knight announced last week that Impavido had just been approved by FDA, it wasn’t the increased sales potential of the product that allowed the company to upsize its financing from $75 million to $180 million, it was the receipt of the transferable priority review voucher. The FDA has granted very few vouchers and none have been sold, so ascribing a value for one is difficult. In Knight’s TSX Venture application they state that an independent valuation pegged the fair market value of the voucher between $5 million and $15 million. In comparison, a recent analyst initiation report valued the voucher at over a $100 million. Only time will tell what the true value of a voucher is. But with a plump balance sheet, Mr. Goodman doesn’t need to monetize it anytime soon. The voucher will be sold at some point and provide the company with a nice source of non-dilutive capital. Knight Therapeutics now has two assets, Impavido and the voucher, but expect that portfolio to expand quickly and dramatically. Mr. Goodman will replicate the strategy that served him so well at Paladin, acquiring and marketing an eclectic group of prescription and over-the-counter drugs. He probably already has a number of products, for acquisition or in-licensing, in his sights and clearly Knight has the money to invest. The upsizing of this last round of funding from $75 million to $180 million is a tremendous vote of confidence by investors in Mr. Goodman and Knight Therapeutics. In the press release announcing the increased raise Mr. Goodman stated, ““I am honoured by the overwhelming support from investors and will never take this support for granted.” It is worth highlighting that through his private investment company, Mr. Goodman has invested over $60 million in Knight Therapeutics. He too is betting big on Knight.