Khiron is capitalizing on strategic medical cannabis markets where several countries have passed legal cannabis legislation. These markets are the European Union (EU) and Latin America (Central and South America).
According to Prohibition Partners, the EU and Latin American medical cannabis markets are forecasted to grow at more than 50% per year through 2025. With a combined population of almost 1 billion, the opportunity for Khiron is significant and we are favorable on how this aspect of the story has advanced so far this year.
One of the most significant growth catalysts for Khiron is Colombia’s and Germany’s national insurance coverage for cannabinoid-based medicines. In December 2020, Khiron started to benefit from Colombia’s decision to offer insurance to patients and recorded more than 140% of sequential quarter-over-quarter revenue growth in medical cannabis product sales in Q1 2021 as a result.
Of these prescriptions, 60% were fully covered by insurance and we are bullish on this trend. Looking at the current quarter, as of April, prescriptions in Colombia were already equal to 44% of those filled in Q1, positioning the Company for another record quarter in Q2. In future quarters, Khiron should continue to benefit from this trend and we expect the company to report ramping up revenues on a going forward basis.
The management team has its finger on the pulse of the medical cannabis market and has been executing on a multi-national expansion. Khiron is entering the EU cannabis market through a unique growth strategy and we expect the company to capture market share in strategic markets. We believe Khiron has a competitive advantage due to the following:
- Medical Education:
- Khiron incorporates Real-World Evidence from its wholly owned clinics and projects to address barriers for prescription.
- Khiron is uniquely positioned thanks to its global patient population.
- Registered Varieties:
- Khiron successfully completed the first export of live clones from Colombia to Europe.
- The Company is replicating in Europe its Colombian cannabis formulations, which have been used to treat over 20,000 patients in LatAm.
- Clinical Expertise:
- Khiron has 60+ doctors working at its LatAm clinics.
- Through its medical staff, Khiron has significant clinical expertise on neurosurgery, chronic and neuropathic pain, spasticity and sleep, motor and other neurological disorders.
- The company’s medical cannabis products and clinic services are covered by major health insurance providers, including medical cannabis as a first line therapy.
- Real-World Evidence:
- A key aspect of Khiron’s medical education platform addresses unjustified safety concerns about prescribing cannabis-based medications.
- Real-World Evidence provides leads for novel/comorbid indications and de risks clinical development.
Gaining a Smart Mover Advantage in Strategic Markets in the EU
When analyzing Khiron’s business on a year-over-year comparative basis, we determined that it has been executing on a series of EU-focused high-impact growth projects and we are favorable on the growth profile that is associated with this vertical of the business. Currently, Khiron is levered to the UK and Germany and we expect the business to further expand its presence in the EU.
Khiron has been executing on an asset-light growth strategy with strategic partnerships and alliances with focus on European core markets in the UK and Germany and we believe these markets provide an attractive way to enter new markets in the EU. In March, Khiron commenced sales in Germany with the successful delivery of EU-GMP medical cannabis products. The following month, the company introduced high CBD flower in the UK and we are favorable on how the business has advanced.
In early June, Khiron reported a major milestone and announced its largest shipment of EU-GMP certified medical cannabis product to Germany. This comes after the company’s German distribution partner, Nimbus Health GmbH, received approx. 36kg of Khiron 20/1 medical cannabis product, a THC-dominant cannabis flower product which started to be prescribed to patients in the UK in July 2020.
The development represents Khiron’s second branded product to launch in Germany and this is a market that we are excited about. According to Prohibition Partners’ most recent EU cannabis report, Germany’s patient base is expected to continue to increase as national insurance is offered to medical patients. With approx. 100,000 medical cannabis patients, we consider Germany to be a burgeoning market and will monitor how Khiron is able to capitalize on it.
Following the development, Khiron will have both THC-dominant and CBD-dominant cannabis products available for sale in Germany and we are favorable on the diversity of the offering. Khiron expects revenue from the EU to start to ramp higher in the second quarter and this is a trend that we are bullish on.
Germany and the UK are two of the largest chronic pain markets in Europe and we are favorable on the data that Khiron has aggregated from the sale of cannabis products in Latin America. The expansion into the EU represents a major development for the business and we will monitor how the market responds to this aspect of Khiron’s story.
We also expect these markets to support the growth of the business as these regions are not saturated and more countries become an attractive market to expand upon.
With regard to the German cannabis market, the transaction was completed as part of a distribution agreement that Khiron has with Nimbus Health, a leading EU-GMP/GDP certified medical cannabis distributor in Germany with a network of 300+ pharmacies. Currently, Khiron’s products are located at Nimbus’ warehouse and are ready to be distributed through its network.
Over the next year, the company plans to leverage its clinical expertise from Colombia to provide the EU market with additional cannabis-based medical products and we will monitor how the story advances from here.
Highly Focused on Entering New Markets in the EU
Through its EU-GMP certified supply chain partners in Europe, Khiron continues to expand its offering of medical cannabis products. Khiron has already proven its ability to introduce medical cannabis products in Colombia and Peru and we are favorable on its track record as it makes us more confident in the management team’s ability to execute.
A few weeks before completing the first delivery to Germany, Khiron successfully exported its registered cannabis strains, in the form of live clones, from Colombia to Europe. Khiron is using its established network of European contract manufacturing and distribution partners to accelerate production and delivery of EU-GMP certified medical cannabis products and we are bullish on this opportunity. These products are backed by extensive real-world data of over 20,000 treated patients in Colombia from Khiron´s wholly-owned clinics. This is expected to serve as a cornerstone of Khiron’s European strategy and we will monitor how it gains traction this year.
Khiron is well positioned to capitalize on the EU cannabis market through its differentiated education platform, the amount of clinical evidence it has, and the EU-GMP certified products that are available for prescription. In the coming months, Khiron plans to introduce additional cannabis-based medical products from its registered Colombian strains and this should increase the amount of clinical data that is available to medical professionals in the UK and Germany.
Khiron Academy Receives Important Accreditation
Last month, Khiron reported to have received a Continuing Professional Development (CPD) accreditation in the UK for the Khiron Academy, which is a global medical cannabis education platform. Through the platform, UK medical professionals may now earn CPD credits through Khiron’s program and we are favorable on this development.
Through the Khiron Academy training, the company is considered to be a leading international medical cannabis educator, having nearly 1,000 medical professionals in Latin America and in the UK register or complete the program.
To further advance the program, Khiron entered into a strategic partnership with Cellen Therapeutics, a leader in digital healthcare in the UK, so as 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.
Over the last year, physicians trained by Khiron in Latin America have issued over 20,000 prescriptions, with a compound monthly growth rate of nearly 50% in 2020. Going forward, the Khiron Academy will be a platform for sharing the company’s clinical expertise in conjunction with clinical data from Khiron’s wholly-owned clinics in Latin America.
An International Growth Story that is Flying Under the Radar
During the last year, Khiron has reported impressive growth and we believe the business is in the early innings of a multi-faceted expansion strategy. We are especially bullish on the increasing number of patients that are able to access medical cannabis with their treatment covered by national insurance in Colombia and in Germany.
Based on the numbers that Khiron released with regard to the current quarter, we expect Khiron to report strong growth in future earnings reports. Going forward, we expect to see a higher percentage of insurance covered transactions in Colombia and believe that Khiron is well positioned to capitalize on a burgeoning cannabis market.
At current levels, we believe that Khiron has a favorable risk-reward profile and a compelling valuation. The company represents a unique growth opportunity as there are only a handful of businesses that are capitalizing on the EU and on Latin America. We believe that Khiron is in a league of its own and this is an opportunity that is trading at a considerable discount to companies that have a smaller footprint and more limited growth prospects.
We believe that Khiron has significant potential catalysts for growth. So far this year, the company has reported a number of important advancements and we are favorable on how the business has advanced. We believe that Khiron is targeting high-value and not-saturated verticals of the cannabis industry and believe the market is discounting the growth prospects that are associated with its strategy.
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