Khiron Life Sciences Corp (CVE:KHRN) President on Potential of Brazilian Medical Market
Khiron Life Sciences Corp (CVE:KHRN) (OTCMKTS:KHRNF) (FRA:4KH) President Chris Naprawa is thrilled the company’s stock has been on fire in 2019 and believes investors are realizing the global opportunity cannabis offers. Naprawa discusses the importance of Brazil, noting the country has the potential to be the largest medical cannabis market in the world. Khiron’s deal with NettaGro should be completed soon and allows the company to prepare for the Brazilian market in advance of legalization. Naprawa indicates that Khiron’s clinical business is still driving revenue for the company while its Kuida-branded product sales continue to grow since launching in November. Naprawa emphasizes the importance of the cosmeceutical space. Khiron is taking part in the largest cosmetics conference in the world in Bologna, Italy and will be one of the few cannabis companies in attendance.
Narrator: Khiron Life Sciences Corp. is a Latin American-based pharmaceutical company that develops and commercializes medical cannabis products. Khiron has core operations in Colombia, and is fully licensed in the country for the cultivation, production, domestic distribution and international export of both THC and CBD medical cannabis.
In May 2018, Khiron listed on the TSX Venture, becoming one of the first Colombian-based medical cannabis companies to trade on any exchange globally.
Khiron Life Sciences Corp. is listed on the TSX Venture under the ticker symbol KHRN.
James West: Chris Naprawa, the President of Khiron Life Sciences, joins me in studio now. Chris, welcome back!
Chris Naprawa: Thank you, James. Glad to be here.
James West: Chris, the stock has been on fire. It has tripled, come back again, risen as strongly again; the volumes are way up. What is going on behind the scenes at Khiron?
Chris Naprawa: Well, I think people are starting to wake up to the fact that this is a, you know, cannabis is a global phenomenon; it’s not just a Canada thing or a California thing, it’s global. And, you know, where better to start a business like this than Colombia? You know, the equatorial region where we have no seasons or it’s perfect to grow, our costs are low, our ability to track talent is incredible, and so we’ve grown a lot. And we have to spend a lot of time helping make sure that people try to, you know, overcome their biases and prejudices about the certain regions and just focus on the business. And the business itself is doing very, very well.
James West: Right. So it’s been just over a year since Khiron held the Khiron Life Sciences Conference in Bogota, which I was fortunate enough to attend, and at that conference, you had a room of 1,000 people full of doctors from all over the countryside in Colombia. So what has evolved in Colombia in terms of the attitude towards cannabis as a medicine in that year that has passed?
Chris Naprawa: Well, in that year that’s passed, you know, think about what we’ve accomplished: we went public via RTO on the TSX-V, we’ve completed two acquisitions, we’ve done our JV with Dixie, we’ve done three financings. So we’ve worked very, very hard to grow the company up and add some scale.
In Colombia itself, people have always been favourable towards medical cannabis. You know, we proved that through our number of surveys, including our one with Quintiles IMS, right from the very beginning, and if anything, those physicians and physician groups are even more likely now to endorse the use of cannabis for certain types of indications and for medical patients.
In fact, you know, a recent conference that we just had saw four of the medical heads from the four largest medical associations in Colombia, all at our conference, all endorse Khiron, all endorse medical cannabis. And then more recently, only two weeks ago, that same kind of conference that you had in Bogota a year ago, we just did that for the very first time in Mexico City a couple of weeks ago, and the response was phenomenal.
James West: Okay. So without doubt, the movement for pain treatment and for nervous system disorders is moving away from opiates to the benefit of cannabinoids. And so, is your progress through Mexico, through Colombia, throughout the rest of Latin America – is it uniform? Or is it sort of, is it kind of like happening more so in Mexico and Colombia where you’ve got more of a presence, than it is in other countries? Or is it also happening there just as fast?
Chris Naprawa: Well, I think, you know, Latin America is a big place, and things are happening at different paces in different places. But one thing that’s uniform is that the toothpaste is out of the tube. There’s only direction that we’re going, here, and it’s more access, not less.
James West: Yeah.
Chris Naprawa: So you know, I think in places like Mexico, we’re seeing phenomenal adoption. You know, the big market that I keep talking about for the last several weeks now is Brazil. Even though legislation isn’t quite on the books yet, this is a market of 240 million people. They’re very, very eager for our solutions; we’ve got feet on the ground there now. Look for more news out of Brazil for us, because that is the biggest potential medical market in the world. AltaCorp just put out a report saying it’s the biggest potential medical market in the world. So, are we going to wait for the day that it’s all announced, or are we going to do some work ahead of time? We’re going to do some work ahead of time.
James West: Interestingly, our show is just, we just did a deal with YouTube where we will be doing a regular show each month from the studios in Rio de Janeiro, so that’s probably where we’re going to have to interview you next.
Chris Naprawa: I look forward to it! Rio is an amazing place.
James West: Yes, it is. So, what is the company looking like now in terms of revenue scale, in terms of distribution, profitability and all that, going into 2019?
Chris Naprawa: Well, you know, you highlight some of our big differentiators. As you know, many of our competitors are very much focused on low-cost cultivation for export into foreign markets, whatever they may be. You know, we’ve been focused on building a grassroots business from the ground up, so we’re enjoying revenues now not only from our clinical business, which is calls ILANS; as you know, we may try to replicate that kind of business elsewhere.
Our Kuida sales started in November; they are growing. We were in, I’ll give you a little bit of a sneak peek: you know, we did that deal with Farmatodo, they had exclusive for four months. There’s about 54 or 56 stores in Colombia. You know, I wouldn’t be surprised, by the end of next quarter, that we’re in three or four hundred stores with that product. We’ve got that product now approved in Peru, we’ve got certain of those products approved in Mexico, you’re going to see them elsewhere…so, you know, getting into 2,000 or 3,000 doors over the next year or so would be, I think, a goal that we would strive for.
James West: Sure. So I just want to zero in on that a bit, because the cosmeceutical segment is something that is tremendously overlooked by the vast majority of the largest cannabis companies in the world, and the fact that you’ve already launched sales and growing into such a huge market in Latin America, to me, smacks of, like, this is a whole new path and trail being blazed that, you know, in consideration of the totality of what Khiron is today, seems that even at the current valuations, you might be a little bit undervalued.
Chris Naprawa: Well, I might not be the first executive on your show to claim that we’re undervalued; but certainly, if you look at the opportunity in front of us, I think we are, and for guys like yourself have been great supporters and friends right from the very, very beginning – as I’m noticing, some of these pictures are very, very old, James, but we’ll get you some updated B-roll for next time I’m on.
But you know, we’ve grown very, very steadily. We’ve made acquisitions, we’ve expanded our markets, we’ve established a dominant position in Latin America, which was always our goal, and whether you measure that by revenue, employees, jurisdictions, licenses, you know, I think we can stand up to that kind of scrutiny.
But you know, the signal that we’re trying to give to the markets now is, look out – you know, we’re coming on for the rest of the world. So this week in Bologna, Italy, is the largest cosmetic show in the world, called Cosmoprof; we’re the only company of our type that is there. Just to give you an idea of the scale, there’s 200,000 registered buyers that are going to be there. Not attendees, but people that buy cosmetics. And we’re one of the few companies of our type that are there, and we’re going global. What better place to start a global cannabis business than Bogota, Colombia?
James West: Sure, fantastic. There’s been a couple of other names start circulating on the Street trying to raise money, but I don’t know that they’ve had that much success. Is there any competition in Colombia or Latin America that’s noteworthy, at this point?
Chris Naprawa: No, absolutely. There’s – money is starting to flow in, and I think that’s a good thing for us. It means that people are getting more and more comfortable. You know, if you think back two years ago, trying to raise money for a startup Colombian cannabis company was not the easiest thing, but now that we’re starting to see big brand names flow into our country and our region, rather, I think that’s a really good thing for us.
Again, a lot of them have a different business plan than us, focusing more on the B2B commodity-type business, and I think that business has a lot of merit and has a lot of legs, and it’s a business we may enter into at one point in time. But we’re a vertically integrated branding CPG company; that’s what we want to be.
James West: Okay. There’s some questions from our audience: a gentleman is asking, What is the status of the joint venture between Dixie Brands and Khiron at this point?
Chris Naprawa: Dixie is an amazing JV. Dixie’s an amazing company. It’s been around for 9 years; they’re based in Denver, Colorado. Chuck Smith, the CEO, has amazing vision, and that business, we announced that that JV is consummated. You should see very, very shortly that that business has been concluded and that we’re going into commercial operations.
You know, to give the viewers an idea, there’s 15 brands there, there’s over 100 skus, there’s probably another 200 skus and formulations that we could have access to, and that’s for our entire region: that’s everything south of the Texas border. So Dixie is a phenomenal company with wonderful people; there’s an amazing cultural fit between the two organizations, and I think this business, this JV, gives us maybe a two or three year head start on what we could do organically.
James West: Okay. And another question from Larry Limo wants to know when you will be starting construction of a facility in Uruguay?
Chris Naprawa: So first of all, we’re going to conclude that acquisition; again, we’re kind of hours and days away from concluding that. We’ll be setting scope and scale for building that business, and we’re coming at it for now with two years of experience in building our own cultivation facilities and our new, 15,000 square foot purpose-built GMP lab facility, which is the only one of its type in our region; can’t wait to have you down to see that one, as well. There’s nothing like it in the region – it’s on par with anything you’d see anywhere else in the Western Hemisphere.
James West: Right. Wow, that’s fantastic. Okay, so is Khiron looking to supply the whole world in its diverse product lines, from operations in Latin America? Or will it actually diversify in terms of operational footprint to other parts of the world?
Chris Naprawa: Oh, one of the CEOs that you had on once said that we’re all regulatory companies that sell cannabis, and I think if you really pay attention to the regulations in each country, it’s clear to me that most of these countries and most of these governments want to have as much of the value chain in their own borders as possible. So we respect that, and if we’re going to be the kind of company that we really want to be, we’re going to have to be of a certain size in each one of those regions. So in Mexico, we just hired a country manager; it’s going to be run by Mexicans, and Chile is run by Chileans, and, you know, when we go to Europe, it’ll be run by Europeans.
The thing about how far we’ve come with 250 employees now just in Colombia, we’re going to replicate that in Brazil. We’re going to replicate that elsewhere. So no, do I think you can have one big hub and spoke it out to the world? I don’t think that business works. I think we have to have feet on the ground and understand the nuances of each individual region.
James West: Okay. Outside of Latin America, where do you have your sights set?
Chris Naprawa: You know, I think Europe is the next big fighting ground for us. I’ll be taking off for there in the next couple of days; we’ve got people on the ground there now. Again, things are deregulating at an incredible pace around the world. People are realizing that not only are these products safe and effective, but they also provide a revenue base for these governments that they so dearly need.
So I see more, not less, and we want to be able to attack those regions. We think in Spain and Portugal, we have an advantage from a language standpoint, a cultural standpoint. That’s a major starting point compared to, you know, the frozen tundra that we live in.
James West: Yeah, that’s true! Are there any sort of barriers coming up in the rollout of the whole cannabis legalization proposition in Latin America?
Chris Naprawa: No, I think it’s the opposite, James. I think the barriers are coming down; I think acceptance is going up. You know, maybe in a couple of places it might take one more generation for it to be fully adopted and for people to understand that, you know, the nature of these products. But I think the toothpaste is out of the tube; I think we’re on our way, now. You know, with very, very few exceptions, I’m more excited about this business than I’ve ever been.
James West: Okay. That’s great. All right, we’re going to leave it there now, Chris. We’ll come back to you again soon. Thanks for joining me today.
Chris Naprawa: Thank you, James.
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