Khiron Life Sciences A De Facto Beneficiary of Aurora Cannabis – ICC Labs Deal
Khiron Life Sciences Corp (CVE:KHRN | OTCMKTS:KHRNF) had a great day yesterday, even if it wasn’t of its own doing. The Latin American cannabis operator not only added almost $10 million in market cap (up ↑19.63%), but became a more attractive acquisition target by default. We explain further.
The basis of this reasoning centers around yesterday’s Aurora Cannabis Inc. acquisition of ICC Labs Inc. The acquirer intends to purchase all of the issued and outstanding common shares of ICC Labs for $1.95/share—payable in ACB common shares—reflecting an aggregate purchase price of approximately C$290 million. By purchasing the Uruguayan medical and recreational operator, Aurora Cannabis now segues itself into the Latin American cannabis market, in which it held little presence.
Now that ICC Labs if off the marketplace, there are very few—if any—publicly listed Latin American value operators to acquire; let alone ones with established medical patients enrollment, CBD extraction/export licenses, and a Rolodex which includes Matt Murphy (former DEA supervisor) and Vincente Fox (the former president of Mexico) as evangelists.
The situation is akin to a coveted urban neighborhood, where mansions have replaced most of the existing pre-World War II builds on the street. Each time a remaining tear-down sells, the value of the others rises by ‘X’ percent, as existing low-cost supply contracts ever further. Although nothing was added, value-wise, to the inflated cost of the junker, skewed supply & demand dynamics push prices higher regardless.
Khiron Life Sciences Medical Director Dr. Maria Arboleda shares the company’s three-pronged approach to the medical cannabis space in Colombia specifically and, more broadly, Latin America
Khiron Life Sciences is one of the last-standing ‘tear-downs’ on that Latin American street, in which bigger operators can gain fast entry for an affordable price. Thus, I wholly expect someone with deep pockets will come building at some point.
Speaking of possible suitors, I expect the laundry list is quite extensive.
Hexo Corp. is on record stating that international expansion remains a high priority. Just last Friday, the company stated, “Future plans include making a move into the international market, as well as listing on a major US stock exchange, with announcements coming in the near future” while commenting on their recent share price activity. To date, HEXO is mainly a Quebec-based cannabis operator, and Khiron Life Sciences could provide an ideal, value-based segue into Latin America which has lower cost barriers than E.U. residency.
Tilray Inc. is another company undoubtedly looking for Latin American entry at some point. As I wrote on September 4th, Tilray currently has no discernible Latin American (LATAM) strategy, as far as we can tell. For a company that operates on five continents and is now considered a leader in the space—perhaps playing second admiral behind Canopy Growth—Tilray’s LATAM entry is all but a formality. The question is when.
This is especially true when you consider that Tilray is a primary medical operator, with pharmaceutical ties to Sandoz Canada Inc.—a Canadian unit of global health care giant Novartis AG. The potential ultra-low cost benefits of growing high yielding CBD strains in ideal ’12/12′ lighting and climatic growing conditions will be too lucrative to ignore. The companies plans to develop and sell cannabis products that are non-smokable and co-branded. Novartis AG is also a direct shareholder in Tilray.
CannTrust Holdings Inc. is another company with scant presence in South America—or internationally for that matter. It’s not hard to envision the company taking a closer look at Khiron’s 100,000 patient medical enrollment list—currently EBITDA positive—and not be intrigued.
Essentially, the company could hold appeal for any mid-major outside of Aurora, Canopy, Cronos and Aphria not currently immersed in the region. That is, assuming those aforementioned players aren’t interested in expanding their presence even further.
At this time, I don’t have any specific information that Khiron Life Sciences is necessarily a takeover target. If I did, I wouldn’t be able to divulge that information anyway. But the company’s value proposition is plainly clear for all to see: They have terrific management, export & production licensing all ready to go, and 6-figure medical patient enrollment in a major urban center (Bogota). Khiron is fast spreading its tentacles throughout the region, including preliminary action in Brazil, which is Latin America’s biggest prize. Its association with Vincente Fox bodes well for future Mexican market integration, where cannabis get legalization draws ever closer.
Perhaps most importantly, Khiron is among the last pure-play Latin American cannabis LP standing in this elite neighborhood. Of course, Canadian LPs could elect to build organically through private amalgamation, as we’ve seen from Canopy and Cronos recently. But with a very affordable market capitalization and tantalizing asset base, Khiron makes sense. The opportunity costs associated with a ground floor startup may not be desirable at this juncture, where the major operators already have a big head start.
**IMPORTANT! BY VIEWING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**
Notice for Forward-Looking Information
Certain statements in this press release are forward-looking statements and are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Such forward-looking information includes that Khiron Life Sciences Corp will be a big, successful company in the cannabis sector; that cannabis use and sales will grow and KHIRON’s sales along with it; KHIRON’s intended acquisition of various foreign companies and expansion into the European and South and North American markets; that cosmeceuticals is and will continue to be a fast growing and profitable sector of the cannabis industry; and that it will be able to carry out its business plans.
Readers are cautioned to not place undue reliance on forward-looking information. Forward looking information is subject to a number of risks and uncertainties that may cause actual results or events to differ materially from those contemplated in the forward-looking information, and even if such actual results or events are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on KHIRON. Such risks and uncertainties include, among other things: that a regulatory approval that may be required for the intended acquisitions and subsequent sales are not obtained or are obtained subject to conditions that are not anticipated; growing competition for intended acquisitions in the cannabis industry; potential future competition in the markets KHIRON operates for sales; competitors may quickly enter the industry; general economic conditions in the US, Canada and globally; the inability to secure financing necessary to carry out its business plans; competition for, among other things, capital and skilled personnel; the possibility that government policies or laws may not permit legal cannabis sales or growth or that favorable laws in place may change; KHIRON not adequately protecting its intellectual property; interruption or failure of information technology systems; the cannabis market may not grow as expected; KHIRON’s technology may not achieve the expected results and its accomplishments may be limited; even if it is granted patents, it may not have success at licensing its technologies or sell its products at the rate expected; planned acquisitions and partnerships may not materialize because of inability to agree on terms with prospective partners or targets; KHIRON’s business plan also carries risk, including its ability to comply with all applicable governmental regulations in a highly regulated business; incubator risk investing in target companies or projects which have limited or no operating history and are engaged in activities currently considered illegal under US federal and foreign laws; and other regulatory risks relating to KHIRON’s business, financings and strategic acquisitions, including securities laws, trade rules, and foreign country regulation that is not the same as Canadian or US regulations.
PAID ADVERTISEMENT. This communication is a paid advertisement and is not a recommendation to buy or sell securities. James West, Global Financial Network Ltd. and Midas Letter Media Corp. and their owners, managers, employees, and assigns (collectively “the Company”) has been paid by the profiled company or a third party to disseminate this communication. In this case the Company has been paid by KHIRON $100,000 per month for one year as of May 15, 2019 for a newsletter campaign and certain banner ads, of which a portion is spent to produce multi-media content and a portion to the advertising budget targeting investor. In addition, the Company owns 150,000 Restricted Share Units (RSU’s) of KHIRON, and will benefit from its price appreciation. This compensation and our rights ownership in KHIRON is a major conflict with our ability to be unbiased, more specifically:
This communication is for entertainment purposes only. Never invest purely based on our communication. Gains mentioned in our newsletter and on our website may be based on end-of- day or intraday data. We have been compensated by KHIRON to conduct investor awareness advertising and marketing for KHIRON. Therefore, this communication should be viewed as a commercial advertisement only. We have not investigated the background of the profiled company. The profiled company or its affiliates may liquidate shares of the profiled company at or near the time you receive this communication, which has the potential to hurt share prices. Frequently companies profiled in our newsletters experience a large increase in volume and share price during the course of investor awareness marketing, which often end as soon as the investor awareness marketing ceases. The investor awareness marketing may be as brief as one day, after which a large decrease in volume and share price is likely to occur.
We do not guarantee the timeliness, accuracy, or completeness of the information on our site or in our newsletters. The information in our communications and on our website is believed to be accurate and correct, but has not been independently verified and is not guaranteed to be correct. The information is collected from public and non-public sources but is not researched or verified in any way whatsoever to ensure the information is correct.
SHARE OWNERSHIP. The Company, which includes the owner and publisher of the Midas Letter owns Restricted Share Units of this featured company and therefore has an additional incentive to see the featured company’s stock perform well. The Company will not notify the market when it decides to buy or sell shares of this profiled company in the market. The Company may be buying and selling additional shares of the featured company for its own profit. This is why we stress that you conduct extensive due diligence as well as seek the advice of your financial advisor or a registered broker-dealer before investing in any securities.
NOT AN INVESTMENT ADVISOR. The Company and its affiliates are not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.
INDEMNIFICATION/RELEASE OF LIABILITY. By reading this communication, you agree to the terms of this disclaimer, including, but not limited to: releasing the Company, its affiliates, assigns and successors from any and all liability, damages, and injury from the information contained in this communication. You further warrant that you are solely responsible for any financial outcome that may come from your investment decisions.
RISK OF INVESTING. Investing is inherently risky. While a potential for rewards exists, by investing, you are putting yourself at risk. You must be aware of the risks and be willing to accept them in order to invest in any type of security. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell securities.
Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.
Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.
Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.