Khiron Life Sciences Inc. (TSX Venture: KHRN) (OTC: KHRN) is a cannabis company that is flying under the radar and is one that we are closely following. The Latin American cannabis company is focused on improving people’s quality of life and we are favorable on how the management team has been executing on this strategy.
Khiron is capitalizing on markets in the European Union (EU) and Latin America. During the last quarter, the company has reported impressive growth and we attribute much of its success to the expansion of its footprint of medical cannabis clinics, which are a cornerstone for medical cannabis growth.
The data the company continues to generate at its clinics has resulted in consultations and medical cannabis now being covered by insurance companies in Colombia. Khiron was the first company to secure insurance coverage for patients in Colombia, with 60% of prescriptions in Colombia receiving coverage in Q1 2021. As products become more affordable, the company has achieved a 50% patient retention rate, which continues to increase. Khiron has reported strong growth on a number of key metrics and we believe insurance coverage in Colombia has played an important role in the growth of Khiron’s medical cannabis business.
At current levels, we believe the market is discounting the growth of the business and expect Khiron to report strong growth in the coming quarters. We are of the opinion that the Latin American medical cannabis company is in the early innings of a multinational clinic expansion and are favorable on how the management team has been able to execute on this vertical.
In the near-term, we expect Khiron’s clinic expansion strategy to play an important role in the success of the business. Currently, the company has 10 cannabis clinics in Colombia and 1 Clinic in Peru, and the management expects this number to increase in future quarters in the region. After seeing how successful its Medellin satellite clinic was, Khiron opened 6 additional satellite clinics in Colombia (3 health centers in Bogota and 7 satellite clinics across the country).
Through a joint venture, Khiron recently opened its first Zerenia™ clinic in Peru and we are favorable on its entry into another market in Latin America. Before the end of the year, the company plans to open its first Zerenia™ clinic in in Mexico and Brazil and we believe this would prove to be a major catalyst for growth. We view these countries as attractive long-term opportunities and will monitor how the management team is able to execute on these markets.
The opportunity in Mexico remains massive for companies that can solve for demand and navigate the regulatory landscape. Khiron recently received a THC extract export quota for Mexico from Colombia, accelerating its market entry by several months. The company also has finalized agreements for the manufacture and distribution of finished medical cannabis products in Mexico, establishing a key component of its Mexican supply chain, as it leverages its education partnership with Tecnologico de Monterrey to address a key barrier to access.
In Brazil, the company recently achieved a major milestone, completing its first sale of medical cannabis products in the country to a child with epilepsy. Leveraging production, distribution, and clinical assets in Latin America, along with marketing agreements with leading pharmaceutical distributors, the company now plans to expand its presence in Brazil. The company has established two pharmaceutical partnerships in Brazil to increase product awareness and medical cannabis education for health care providers across the country. Based on its success in Colombia, Khiron plans to launch Zerenia clinics in Brazil as it looks to disrupt the market with affordable, high-quality products and an exceptional patient experience.
A European Growth Story
In Europe, Khiron has an education partnership with Cellen Therapeutics, a leader in digital healthcare in the United Kingdom (UK). By showing medical cannabis data from its clinics in Colombia, Khiron should be able to prove that there are medical benefits associated with cannabis. We are favorable on the data driven strategy the company will use to educate doctors and expect it to help remove the stigma that is still associated with cannabis.
A key pillar of Khiron’s growth strategy is related to the work that is being conducted to increase patient access (and sales) in Europe by expanding its product portfolio and by leveraging its Latin America assets (data and insights).
Earlier this year, Khiron announced a major milestone and reported that it had started to sell cannabis products in Germany. The market is the second country where medical cannabis qualifies for insurance coverage and we expect Khiron to benefit from this trend in a way that is similar to what it has seen in Colombia.
Focused on Strategic Growth Markets
By 2024, Khiron wants to reach 1 million patients and consumers and we are favorable on the strategy it is executing on to hit this milestone. By focusing on large markets in Latin America and the EU, we believe the business can accomplish this feat and will monitor how the management team continues to drive the story forward.
So far this year, Khiron’s business has recorded impressive growth and we attribute its success to Colombia’s decision to allow for insurance coverage for medical cannabis. Going forward, we expect the company to report ramping revenue from Germany as a result of the country’s decision to allow for insurance to cover the cost of medical cannabis.
We expect Khiron’s clinic expansion strategy to serve as a core growth driver and are favorable on the strategic assets it owns in burgeoning cannabis markets like Brazil, Germany, Mexico, Peru, and the UK. According to New Frontier Data, Brazil’s addressable medical cannabis market could reach $1.4 billion in annual revenue and we are favorable to the size of the markets the company is targeting.
Over the next year, we expect Khiron to receive additional coverage from broker-dealers and believe they will start to take the business more seriously after future earnings reports. Based on the previously announced rise in the number of patients that are purchasing medical cannabis that is covered by insurance from Khiron, we believe the business has visible growth prospects and find this to be a key aspect of our thesis.
We believe that Khiron is executing on a multi-national growth strategy and are favorable on how the business has advanced on the international side of the cannabis industry. If you are interested in learning more about Khiron, please send an email to email@example.com with the subject “Khiron” to be added to our distribution list.
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