Khiron Life Sciences Corp (CVE:KHRN) Will Soon Grow Cannabis At Scale

Benjamin A. Smith
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Khiron Life Sciences Corp (CVE:KHRN) (OTCMKTS:KHRNF) (FRA:4KH) will soon diversify into the growing business, as this week’s press release shows. It may not become a cornerstone of their business model à la loose rival PharmaCielo Ltd., but it opens up optionality as the company builds out promising medical patient and cosmetics line divisions.

This occurrence moved one step closer towards reality this week as Khiron Life Sciences announced it had signed a definitive agreement for the acquisition of NettaGrowth International Inc. NettaGrowth will, at the time of the acquisition closing, own all of the outstanding shares of Dormul S.A., a Uruguayan company with licence to produce and export medical cannabis with THC for commercialization in Uruguay.

Really, the NettaGrowth International acquisition—first announced on January 25th—was multi-faceted in the sense that Khiron acquired key licenses, personnel, research partnerships and production capacity all in one. But by combining significant production capacity with the Uruguayan export license, Khiron can address a broader consumer demographic and export products to key regions as able. To date, the company isn’t known for its high dry flower output—although they’ve leased 17 hectares of leased land in Colombia for such purposes.

Officially, NettaGrowth will net an additional ~120,000kg of production capacity on an annualized basis upon deal closure. This is a far cry from PharmaCielo’s claimed annualized production capacity of 5,530,000 kg, but it doesn’t need to be. Khiron Life Science’s calling card has always been about producing as much cannabis required to serve its business interests. Getting into a wholesale cultivation war—in a region where cannabis costs less than $0.10/g to produce—isn’t the skinny margin game they wish to play. Khiron operates in higher-margin segments of the industry; they do not wish to become farmers (exclusively).

Overall, it’s been interesting to see Khiron’s transformation over the past few months. They’ve gone from a predominantly Colombian-based medical cannabis clinician provider to becoming an emerging regional power player, with tentacles into cosmetics (both LATAM and U.S.), oils, THC/CBD cannabis exports, and now expanded cultivation.

Dixie Brands CEO Chuck Smith is excited about the company’s announced joint venture with Khiron Life Sciences

Their stock price has responded in kind (↑103.16% since Dixie JV announced January 25; ↑109.80 year-to-date), with Canaccord Genuity upping their Speculative Buy price target to C$5.00/share from C$3.40/share following the company’s joint venture with Dixie Brands and acquisition of NettaGro (February 4, 2019). While KHRN stock has stalled over the past few weeks—in line with the stagnation of most HMMJ components—investors best keep in mind the company’s differentiator advantages and operations that are geared exclusively outside Canada. KHRN may get lumped into Canadian MJ sector trade, but in reality it plays in a different sandbox altogether.

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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.

 

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Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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