Khiron Life Sciences Corp (CVE:KHRN) CEO on LOI with Copservir Ltda, Colombia’s Largest Pharmacy Chain
Khiron Life Sciences Corp (CVE:KHRN) (OTCMKTS:KHRNF) (FRA:4KH) CEO Alvaro Torres is thrilled with the company’s Colombian distribution footprint. Torres sees Khiron’s recent letter of intent with Copservir Ltda, the largest pharmacy chain in the country, as key to ensuring the its products reach medical cannabis patients. He explains that many of Copservir’s 900 pharmacies in Colombia are already licensed to sell THC products. As a result, Khiron’s distribution reach allows it to mass market of medical cannabis in Colombia and the company is looking to replicate that plan in other jurisdictions. Torres discusses Khiron’s recent quarterly financial reporting and emphasizes the importance of showing investors that the company is building the right platforms as it moves towards profitability. While Khiron is aiming to hit its targets in 2020, Torres anticipates generating revenue in every country where Khiron operates in 2019. Torres explains why the recent JV with Dixie Brands Inc (CNSX:DIXI.U) (OTCMKTS:DXBRF) (FRA:0QV) is so critical for the company, as it allows Khiron to get a variety of branded products to market faster.
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: I’m joined now by Alvaro Torres, CEO of Khiron Life Sciences, trading on the TSX Venture under the symbol KHRN. Alvaro, welcome back.
Alvaro Torres: Nice to be here, James, thank you so much.
James West: Alvaro, Khiron has now become officially the first – not the first, but one of the top, multi-continent operators, and you’ve got just this incredible exciting development going on in cosmetics, in medicine, in Mexico, in Colombia. Let’s start off with a quick chat about that last press release you put out, wherein you’re now going to be distributed to 900 pharmacies throughout Colombia. That strikes me as quite a serious development for the company.
Alvaro Torres: I think it’s extremely serious, because we’ve always talked about Colombia as being our beachhead, and then how do we expand through Latin America. And now that we want to be multicontinental, how do we, you know, follow that path. It’s always important to execute, right? So it’s not just about how much you can grow, but also how you’re executing in your home country.
James West: Sure.
Alvaro Torres: I think the distribution deal that we just signed shows a lot of interest from the market, and from the retailers, that medical cannabis is coming; how do we start getting it into the hands of patients?
So we always talk about execution, cultivation, extraction, but for me, also the most important part of it is how you get in the patients’ hands. So we’ve always been talking about the last year how well we are moving in other countries, to make sure that in Colombia we can keep that dominant position that we have. And with that, then we’re just going to be copying that to the rest of the countries, and it’s also sends a message that the company is ready to start production, delivery, sales – that’s, you know, the power of the entire thing.
James West: Right. So for the 900 stores in Colombia, that’s exposure to 5 million people, as was disclosed in the press release.
Alvaro Torres: Yes, yes.
James West: Is it a case where they’re all able to just buy cannabinoids over the counter, or is it by prescription at this point?
Alvaro Torres: It’s going to be both. So one of the reasons we did this, because to buy THC products, which is a controlled substance, we need to be dispensing it through the appropriate, allowed dispensary pharmacies. So this company has in their 900 chains, stores, they have a lot of them that are already under, have the ability to sell controlled substances.
James West: Okay, cool.
Alvaro Torres: So what it does for us is to have the patient not just have to go to the clinic where he or she is getting the prescription, but being able to go to his or her nearest pharmacy to pick it up over the counter, and also under their prescription. So the idea here is, how do we mass-market medical cannabis and make sure that we can have a better service with the patients so they can go and pick it up, or get it distributed to their house, as quickly as possible. So it’s going to be both, but that retail presence allows us just to start thinking about how do we access more, those 5 million patients.
James West: Perfect. You also put out your financials, which, in keeping with the whole industry, there’s nothing spectacular yet in terms of revenue as you build your market. When will we expect to see serious revenue happen for Khiron?
Alvaro Torres: Well, I think 2018’s a pretty groovy new year, but even with that, we went public in May 24th. It’s been only 11 months since we started going public. We bought a clinic, we started selling cosmetic products, and you know, the results are just starting to show you that we are starting to get that retail presence built. I think for me particularly, only a year into our operations, to be able to start showing revenues has to show investors that we are building the right platforms,
James West: Right.
Alvaro Torres: And platforms take some time to build, because you’re talking about shelf space, you’re talking about medical education, helping those patients to really understand it.
2019, you’ll see us having revenues in every single one of the countries that we are executing on, and then all of that is built for 2020, which allowing to work with spoken to analysts and shareholders, is really the year where all these jurisdictions are starting to really roll out. But the fact that we already have sales in our country, with executing on what we told the market that we were going to execute, that shows that we have a clear path of understanding. Revenues are important. Execution is important.
And as more countries start to get aligned behind this, then we’re going to start seeing those in 2020. But 2019, for sure, we talk about Mexico, Chile, Brazil, Uruguay, we’ll start to see revenues coming in all those jurisdictions. Italy now, and I think that’s exciting. We’re building a platform.
James West: Sure. So you’ve got all these different products coming in: over the counter medicines, prescription medicines, and then the cosmetic side is a completely different thing. You’ve got Dixie Brands partnership, so you’ve got brands, brands, brands everywhere. How important is the brand strategy to Khiron?
Alvaro Torres: I think that’s the most important part of our strategy. The rest is supply chain logistics, right? So cultivation, production, quality is important, but the sustainable part of this business always going to be in the brands. If you don’t have a connection with the consumer, whether it’s a patient, it’s a user, it’s a consumer, for his pet or for supplements, you don’t have that connection, then you’re talking about very short term. But I think cannabis is here to stay in the long term; that’s why we spent so much time building Kuida, because Kuida is now a brand that, you know, women appreciate, and that’s going to allow us to have more skus or more relationships with the retailers and with the consumers.
If you’re just worried about the production part of it, which, you know, I guess if you were from Latin America, that’s, for me, the commodity type of play, then you’re going to be competing against anybody that can produce and cultivate CBD. But when you talk about brands, then you have the ability to rule and make decisions on your supply chain that are going to be better for the price. So for us, it’s always been like that. I told you before when we started, when we first met: I don’t want to build a company that sells coffee at $0.90 a pound; I want to build a company that sells the cup of coffee at $5 a cup, and that’s what we’re trying to do. And the rest of it is just the supply chain, which has got to be efficient and logical.
Some of that will be done by ourselves, in our facility. Some of that will be outsourced. I think it just creates an economy for everybody in Latin America, although we’re growing, allows you to have, you know, better options. But the branding side of it, which is also why we did Italy – Italy is not just cultivation, it’s because they have retail presence, and they’re selling product. And that channel is very important to us, because then we can start pushing the rest of our products in the pipeline. Now that we did the Dixie as well, Dixie comes with a very strong brand, it comes with formulations. That gains 10 months of research that we don’t have to do ourselves.
The production part of it is the easiest part. The most difficult part is to get the consumer to really believe in the brand, and be loyal to it. And so that’s where we spend most of our capital.
James West: Sure. Yeah. So with your exposure to Italy now, that’s more or less your gateway into all of Europe, and with the sort of incremental easing of rules governing CBD products, does this mean that Kuida will be available throughout Europe as the regulations sort of keep up?
Alvaro Torres: Well, yes. We were just invited to Cosmoprof, which is the biggest trade show for cosmetics, and that was in Bologna, in Italy. And the amount of interest that we have been receiving on how do you get a product like Kuida with that quality, into the shelves, is very interesting. Now, of course we have to go through all the regulatory issues, because as you know, the rules are easing up, but right now we have the ability to start making conversations that nobody else is able to have on cosmetics. And of course, now what that means for us is just the ability to export supply chain, whether you manufacture, but that brand we’ve been able to do in Colombia, is now very easily translatable in Europe. And Italy, for us, is the beachhead of how do we get into Europe. You know, that’s just very much like the way the Allies did in World War Two, you know, start by Italy and then the rest of Europe.
James West: [laughter] That’s right. Different companies have different strengths and different weaknesses. Khiron seems to be developing a very lateral approach across these three different main sectors, so there’s the medical, the cosmetics, and the consumer packaged goods on the branded side a la Dixie Brands. So I mean, I’m just wondering, how soon until I’m drinking a soda that’s made with Khiron’s cannabis product in any of New York or London or Bogota?
Alvaro Torres: [laughter] That’s a very good question, Jim. That’s always strive for, and we try to do these partnerships so that we can get faster to market. To develop our own type of drinks for ourselves would have been very difficult; that’s why we partnered with Dixie. Now I just look at the regulatory side to it, right? You talk about Latin America, that could come sooner than later than United States; of course, we know what the regulations.
But we had this question about, you know, I remember a year ago, we were talking about how soon can I get a cosmetic product done by Khiron? And it only took us six months after that question.
James West: Right.
Alvaro Torres: So I think it’s going to be sooner than everybody expects, because we’re very good at regulatory understanding. Europe is the next market that’s coming online as well, fairly legal and with CBD, and you know, the United States is easing the rules. And the way I look at the world is that there’s no global brand that’s dominating the market in cannabis; why can’t it be Khiron? Because in the end, you know, the biggest beer company in the world is Brazilian. And so why can’t cannabis be from Latin America, either?
James West: Well, Colombian Gold. [laughter]
Alvaro Torres: And coffee.
James West: Yeah, exactly. All right, Alvaro, that’s a great update. We’ll leave it there for now; thank you very much for joining me today.
Alvaro Torres: Thank you, Jim. Appreciate your time.
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