Years of hard work yield a $540 million payday

Bruce Paddock was a working-class kid who delivered newspapers and pumped gas when he wasn't in class or playing ball at Duluth East High School 45 years ago.

By the end of this summer, Paddock expects to close on the $540 million sale of his family-owned Paddock Laboratories, a maker of specialty and generic drugs, to Perrigo Co. of Michigan.

The Paddock company, profitable and growing about 15 percent annually, will generate about $230 million in sales this year from 450 employees who work at a New Hope campus that's as big as three Target stores.

Paddock Labs' roots were planted in 1978 when Paddock bought the assets of a bankrupt predecessor company for $20,000 at a bank auction. Paddock had signed on as a pharmacist for $20,000 a year in 1974 at the former C.R. Canfield, a specialty drug maker that was housed in the basement of a commercial building at 27th Street and Lyndale Avenue S.

Paddock, paying off pharmacy school debt, mixed concoctions by day at Canfield and worked nights and weekends as a part-time pharmacist. His late wife, Carlene, was a nurse. The couple lived off her salary so Paddock could retire school loans and establish a rainy day fund.

"I loved Canfield," Paddock said. "I was making different products and formulas for hospitals and retail pharmacies. I found retail pharmacy work a little boring."

Paddock paid $20,000 cash for the assets of Canfield in early 1978, and a community banker gave him a $30,000 line of credit.

He changed the name to Paddock Labs and kept three of the six employees, which meant Paddock did two or three jobs.

"I wish I could tell you that I had great vision," Paddock recalled. "I had more [bravado] than brains. I was working 70 hours a week. I moonlighted as a pharmacist until about 1980 when I started drawing a $30,000 salary. We focused on several specialty drugs. Generics did not have a good reputation."

That changed in 1984, when Congress passed legislation that created the abbreviated pathway for generic manufacturers to prove their drugs were the "bio-equivalent" of higher-priced, brand-name drugs that had lost their patent protection over time.

Paddock Labs sales, about $185,000 in 1978, topped $1 million that year. And the Wells Fargo bank at Nicollet and Lake Street loaned him $500,000 to expand to a larger building in New Hope.

A quarter century later, Paddock spends his time in endless meetings with lawyers working on the deal and assuring employees that Perrigo plans to grow its Minnesota manufacturing, regulatory and sales operations in Minnesota.

Tougher early years

After the deal closes this spring or summer, Paddock will leave the company and focus on smaller businesses in which he is an investor and on philanthropy. He plans to work from a family office he expects to open in the western suburbs.

It's a big change from a working-class childhood that included its share of adversity. Paddock's dad, who refinished furniture in the family's basement, died when Bruce was a kid. His mom worked in a drape shop.

During freshman year at the University of Minnesota Duluth, Paddock worked part time for a moving company. Not thrilled with college, and making $3.24 per hour, Paddock, a hard worker, was offered full-time employment.

A short time later, he witnessed a co-worker, the father of several kids, crushed to death by a piano. Then high school buddy Scott Baldwin, an Army draftee, returned home from a combat tour in Vietnam. In a coffin.

"I decided to stick with college," recalled Paddock, partly for the student exemption from military service.

Paddock, a good chemistry student, earned a pharmacy degree.

"It worked out," Paddock, 62, recalled the other day.

Paddock already has placed 56 percent of his company in trust for his adult children and grandchildren. That leaves him only a quarter-billion or so.

"Bruce loves toys, particularly boats and motorcycles," quipped Chip Fischer, a longtime friend and managing director at Minneapolis-based Greene Holcomb & Fisher, an adviser to Paddock on the Perrigo deal. "What you see is what you get. His best friends are high school and college buddies who live in a completely different economic sphere: teachers and workers and pharmacists. They watch hockey, drink beer and ride motorcycles."

Paddock, who started tinkering with bikes in high school, sports a classic 1939 "Indian Ace" in his office. He owns several speedboats and a vacation home in Florida.

Paddock's first wife, the mother of his two kids, died in 1997 after a long battle with multiple sclerosis. He's divorced from his second wife.

Paddock, who donated $5 million in 2005 to the university to build a pharmacy building on the UMD campus, plans to donate unspecified millions to medical causes and scholarships for working-class kids with college aspirations. He's just starting to think through his philanthropic mission.

"My lifestyle is not going to change after the sale," Paddock said last week. "I will remain a Minnesota resident, except for [the winter]. My family is here. I will try and continue to do whatever I do with passion, and I will try to do it well."

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com