7 Key Takeaways From Khiron’s Q1 Earnings That Investors Should Be Paying Close Attention To

Last week, Khiron Life Sciences Corp. (TSXV: KHRN) (OTCQX: KHRNF) (Frankfurt: A2JMZC) reported strong first quarter financial results and announced several new company records. From the number of prescriptions filled to the amount of revenue generated, Khiron’s first quarter financial results showed impressive growth on several key metrics and our readers need to be aware of how the business has advanced.

A Multi-National Global Cannabis Execution Story

Khiron is a vertically integrated cannabis company that has core operations in Latin America and Europe. So far this year, the company has reported a series of positive developments and we believe it has been nothing short of an execution story. From the increased distribution in Colombia to being allowed to sell cannabis products in Germany, we believe Khiron is reaching an inflection point and is well positioned for long-term growth.

One of the main growth pillars for Khiron is the international cannabis market. During the last year, the management team has been laser focused on executing on the international market and has been expanding into emerging cannabis markets. We are impressed with how this aspect of Khiron’s business has advanced so far this year and expect it to become a more significant revenue stream on a going forward basis.

In March, Khiron reported a major milestone and exported its Colombian-registered cannabis strains (in the form of live clones) to Europe. Shortly after this achievement was reported, the company announced that it started to sell cannabis in Germany and successfully delivered EU-GMP medical cannabis products (Khiron 1/14: High CBD flower).

In April, Khiron announced another important milestone and started to expand its cannabis offering in the UK, both in terms of volume and variety. The company introduced 5-gram jars of flower products and Khiron 1/14: High CBD flower to the market and we are favorable on how this aspect of the business has advanced.

Another important development for Khiron in the UK was it having received accreditation for Continuing Professional Development credits in the country. This accreditation is for Khiron Academy, which is the company’s medical cannabis e-learning certification business. Shortly thereafter, the company formed a strategic partnership with Cellen Therapeutics, a leader in digital healthcare in the UK, to increase patient access through medical cannabis education initially.

Khiron Academy will be made available to prescribers in the UK that have registered with Cellen’s MedCanHub, an emerging education portal. Cellen is widely recognized for launching the UK’s first digital pain clinic, Leva, and we are favorable on the potential value that can be created through the relationship.

7 Key Takeaways from the First Quarter Earnings Report

Going forward, we believe that Khiron is positioned to continue to record strong growth and would not be surprised if revenues continue to ramp up on a quarter-over-quarter basis. Below, we highlighted some of the key takeaways from the first quarter earnings report that show how the business has advanced so far this year:

1. Generated $2.8 million of revenue, a new company record. This amount is 49% higher than the amount of revenue that was recorded during the same period last year and a 13% increase from the prior quarter
2. When compared to the prior quarter, gross profits increased by more than 170% and came in at $1.1 million (before fair market value adjustments), a new company record
3. Gross margins were another company record and the business reported a consolidated gross margin of 38%
4. Khiron filled a record number of prescriptions (more than 7,500) with more than 19,000 to date
5. Recorded a milestone and started to sell cannabis products in Germany
6. International sales represented approx. 10% of total medical cannabis product revenues
7. Reported that returning medical cannabis patients were 50% in Colombia (reported 20% in the third quarter of 2020)
8. Started to sell medical cannabis in Peru and first quarter revenue increased by over 175% when compared to 2020 (started to sell cannabis in Peru toward the end of the third quarter of 2020)
9. Reported to have $12.5 million of cash and $22.5 million of working capital (as of March 31^st)

A Company with Catalysts for Growth

The biggest catalyst for Khiron in the first quarter is related to the insurance coverage that is being offered to medical cannabis patients in Colombia and Germany. These two markets are strategically significant for certain reasons, and we are bullish on the company’s leverage to these markets.

In Colombia, Khiron can produce cannabis at industry leading numbers as the economics associated with cultivation are much more attractive than in the Canadian market. In Germany, the cost of cannabis is higher at the consumer level which can benefit the company by improving profitability through higher gross profit margins.

We expect Khiron to report even stronger numbers in future quarters and want to highlight some of the key reasons for our thesis:

1. Khiron continues to fill more prescriptions and record strong month-over-month growth in Colombia. As of April, prescriptions in Colombia were already equal to 44% of those filled in the first quarter
2. When compared to the prior quarter, the percentage of prescriptions issued and covered by insurance increased to more than 60% from over 40%. Going forward, we expect the percentage of prescriptions covered by insurance to continue to rise and the company should see more repeat customers
3. So far this year, Khiron has opened five additional satellite clinics in Colombia. We will monitor how the company’s three health centers in Bogota and six satellite clinics across the country support revenue growth for the entire business
4. Due to the increase in the sale of cannabis in Peru, Khiron plans to open its first international Zerenia™ satellite clinic in the country in the coming weeks
5. Going forward, Khiron plans to build on the success of its vertical integration strategy in Colombia and expand its Zerenia™ medical cannabis clinic and telehealth platform and enter Mexico and Brazil
6. Khiron formed a strategic partnership with the Colombia Cancer League to deliver an additional 3,000 medical cannabis patient consultations in June. The partnership is working in collaboration with 21 leading medical institutions in 11 cities throughout Colombia and we expect it to serve as a near and long-term growth driver

Cut Costs While Ramping Revenues: A Trend to be Excited About

During the first quarter, Khiron reported lower general and administrative costs (on a year-over-year basis) and this was primarily due to cost cutting measures that were implemented in the second quarter of 2020. We are favorable on the management team’s focus on profitability and expect these types of cuts to support the growth of the business over the long-term.

One of the reasons we are excited about Khiron is related to the structure of the business. The company is a multi-faceted growth opportunity that is focused on attractive verticals of the cannabis value chain. During the first quarter, Khiron reported significant margin appreciation from its health services division. When compared to the prior quarter, margins increased to 26% from 7% of revenues and we consider this business unit to be an important growth vertical for the entire company

Insurance coverage for medical cannabis in Colombia continues to have a positive impact on Khiron’s business. We believe the improvement has provided the business with better revenue stability as returning patients reached 50% of medical cannabis patient volume in the first quarter. Insurance continues to drive growth, and medical cannabis sales reached 20% of Q1 revenues, while contributing over 45% of gross profits.

In Europe, we expect Khiron to continue to capture additional market share in burgeoning markets and we expect this region to become a major revenue stream for the business. We are bullish on the relationship it has with Cellen Therapeutics and are favorable on the direction the management team is taking the business.

If you are interested in learning more about Khiron Life Sciences, please send an email to support@technical420.com with the subject “Khiron Life Sciences” to be added to our distribution list.

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Pursuant to an agreement between StoneBridge Partners LLC and Khiron Life Sciences Inc. (KHRN) we have been hired for a period of 90 days beginning May 5, 2021 and ending August 5, 2021 to publicly disseminate information about (KHRN) including on the Website and other media including Facebook and Twitter. We are being paid $6,000 per month (KHRN) for or were paid “0” shares of restricted common shares. We own zero shares of (KHRN), which we purchased in the open market. We plan to sell the “ZERO” shares of (KHRN) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (KHRN) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.

This press release may include predictions, estimates or other information that might be considered forward-looking within the meaning of applicable securities laws, including statements related to the Company’s ability to support its continued growth and fund the business’ sales and financial goals for at least the remainder of fiscal 2021 with proceeds remaining from its recent offering. While these forward-looking statements represent the Company’s current judgments, they are subject to risks and uncertainties that could cause actual results to differ materially, including risks and uncertainties associated with market conditions. You are cautioned not to place undue reliance on these forward-looking statements, which reflect the opinions of the Company’s management only as of the date of this release. Please keep in mind that the Company is not obligating itself to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. When used herein, words such as: “potential,” “expect”, “look forward,” “believe,” “dedicated,” “building,” or variations of such words and similar expressions are intended to identify forward-looking statements.

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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