2021 is proving to be a banner year for Khiron Life Sciences Corp. (TSXV: KHRN) (OTCMKTS: KHRNF) and this is a story that we are closely following.
Specifically, we are impressed with how Khiron is capitalizing on emerging international markets in the European Union (EU) as well as in Latin America. Over the next year, we expect the expansion into additional markets will serve as a substantial catalyst for growth and believe the market is discounting this aspect of the story.
We are favorable on how Khiron has been executing on a previously announced expansion strategy. By opening clinics in emerging international markets, the company is building out a distribution footprint and laying the foundation as well as the infrastructure that is needed to be a long-term beneficiary of the legal cannabis movement.
Currently, Khiron has 10 cannabis clinics in Colombia and the management expects this number to increase significantly in future quarters. After seeing how successful its Medellin satellite clinic was, the company opened 6 additional satellite clinics in Colombia (3 health centers in Bogota and 7 satellite clinics across the country).
Through a joint venture with Clinica Montesur, Khiron recently opened its first Zerenia™ clinic in Peru and we are favorable on this opportunity. The opening of the first Zerenia™ clinic in Lima, Peru would establish the company a leading Latin American first multi-country medical cannabis clinic operator and we are bullish on the growth prospects that are associated with the market.
In the back half of the year, Khiron plans to launch the first Zerenia™ clinic in in Mexico and Brazil. We consider these markets to be attractive long-term opportunities and expect the management team to replicate the success that it has had in Colombia.
Recently, the company announced regulatory and supply chain advances that accelerate Khiron’s entry into the Mexican market by several months. Leveraging the Company’s designation in Colombia as a National Strategic Project, Khiron received authorization to include Mexico as a destination country within its international export quota, with over 700 kg of high-THC extract now available for export to Mexico. In addition, the Company has finalized agreements for the manufacture of finished medical cannabis products in Mexico. In Brazil, first sales are expected in the very near term.
In the EU, Khiron is a multi-faceted growth opportunity and recently announced an education partnership with Cellen Therapeutics, a leader in digital healthcare in the United Kingdom (UK). By focusing on educating doctors on medical cannabis, Khiron will be able to remove the stigma that is still associated with cannabis. By showing the data from its clinics in Colombia, the company should be able to prove that there are medical benefits associated with cannabis and we are favorable on the data driven approach it will take with regards to education.
Khiron is working to increase patient access (and sales) in the EU by expanding its product portfolio and by leveraging its Latin America assets (i.e. clinical data, intellectual property, brands and genetics). A few months ago, Khiron started to sell cannabis products in Germany and we considered this to be an important milestone for the business. Germany is the company’s 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 its success in Colombia.
By 2024, Khiron wants to reach 1 million patients and consumers mission and we are favorable on the strategy it is executing on to hit this milestone. The company recently announced the largest shipment to date of an EU-GMP-certified medical cannabis product for sale and distribution in Germany. 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.
According to New Frontier Data, 12.8 million Colombians have conditions that could benefit from medical cannabis. 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. The development has already served as a major catalyst for growth and this is a trend that is just getting started.
We believe that Khiron has the necessary traits and assets that are required to be considered a leading play on the international cannabis market. From the management team to strategic partnerships, we consider Khiron to be an attractive growth opportunity that is trading at a considerable discount to its peers.
By having leverage to Latin America and the EU, Khiron is positioned to record strong growth on a going forward basis. We believe the company has a favorable risk-reward profile and consider it to be an underappreciated opportunity.
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