Khiron Life Sciences Corp (CVE:KHRN) Achieves $6 Per Share Buy Rating From AltaCorp
Khiron Life Sciences Corp (CVE:KHRN) (OTCMKTS:KHRNF) (FRA:4KH) President Chris Naprawa joins Midas Letter to discuss the recently released AltaCorp Capital research update. Senior Equity Research Analyst David Kideckel reiterated his “speculative buy” rating for the company with a price target of $6.00 – representing a return of over 200 per cent at the time of this interview.
“In our view, the market is completely discounting the value associated with Khiron’s entry into the medical cannabis product segment in other LATAM markets, which we believe is due to the regulatory uncertainty in those markets. However, we expect Khiron’s stock to revalue as the Company successfully enters into countries such as Mexico, Chile, and Brazil. There are several near-term catalysts that could drive the story, including revenues from the commercial launch of CBD in Colombia and new regulatory medical cannabis guidelines in Mexico, both of which are expected to happen in F2019,” – David Kideckel, AltaCorp Capital Senior Equity Research Analyst
Khiron’s president, though cannot speak to the forecasted numbers from three seperate analysts, believes people are starting to understand that the company is leading the way in the global cannabis business inside Latin America. Several different press releases released by the company in recent weeks support this notion. Mr. Naprawa comments on Khiron’s recently received conditional TSX-V approval for Latin American joint venture with Dixie Brands and U.S. distribution and sale of the company’s Kuida cosmeceutical line and Khiron’s move into the PGP business with SURA EPS. These pieces of news essentially allow Kuida products to expand globally with strong credibility and will allow Khiron to be able to cover cannabis with insurance in Colombia. Lastly, the Khiron Life Sciences president explains how the company’s demand in Colombia is greater than supply. The company are currently building the infrastructure to keep up with this “high” demand inside the country and also in Brazil, Uruguay plus other countries in South America.
Narrator: Khiron Life Sciences Corp. is a Latin-American-based pharmaceutical company that develops and commercializes medical cannabis product. 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 joins me now. He’s the President of Khiron Life Sciences, trading on the TSX Venture under the symbol KHRN. Chris, welcome back.
Chris Naprawa: Hello, James.
James West: Chris, amazing development in that AltaCorp Capital has issued this research that puts a $6 price target on the company, and I’m curious as to what, how do you feel about that, and what motivates them to be so bullish on the company?
Chris Naprawa: Well, that’s our third analyst to cover us, now, and now we have analyst consensus. We can’t spoke those consensus numbers; I think our numbers will look good for Q2 and be pretty close to what the analysts have for us.
But I think as the word gets out and people start to understand that, you know, cannabis is clearly a global business, and we’re one of the leaders, if not the de facto leader, for Latin America. So the analysts are starting to catch on.
James West: Yeah, no doubt, eh? Okay, so you’ve got so many different things happening, and I see so many press releases, I can barely keep up with what’s going on. But, so now you’ve got a firm plan, with, let’s just start with Dixie, for example.
Chris Naprawa: Yeah.
James West: You’ve got this firm plan to start selling Kuida products throughout the United States in your partnership with Dixie; that sounds like a huge revenue proposition.
Chris Naprawa: Yeah, it’s the biggest market in the world. It’s a crowded market, but it’s a big market. We’ve got an excellent product; people really like it. They really like it, here. Stay tuned: maybe once we can sell it here in Canada, we’ll have it here, as well.
But Dixie’s done an amazing job. They announced their joint venture with Arizona Iced Tea; that’s a massive consumer packaged goods company. It’s one of the first ones to do a deal like this. That’s not like their business is in decline, like some of the alcohol and tobacco companies; this is a massively profitable consumer packaged goods company. That will benefit us, as well, and the JV that we have with them.
You know, the other news that we put out recently that was really, really important, was our move into the PGP business with SURA EPS. That essentially says, there’s a lot of words in that press release, but what it essentially says is that now we’ll be able to cover cannabis with insurance in Colombia. And that’s not something down the road; that’s going to happen right away.
James West: So that’s an insurance company paying for cannabis as a medicine for an initial 450 patients?
Chris Naprawa: Yeah, and they cover 3.2 million lives.
James West: And that’s actually – I mean, I just want to clarify this, because for me that’s significant. How many other countries in the world have insurance agencies paying for registered patients’ cannabis use?
Chris Naprawa: Not a lot. That’s a great question, because I actually don’t know the answer to that. I know there’s a little bit of that here in Canada; I think Manulife and a couple of others. I think first responders also have some sort of compensation for cannabis here in Canada, but not a lot of places. Certainly not in the United States, and most of Europe. So once again, Colombia kind of leading the way in that, and that’s something that we hope to replicated elsewhere. But you know, it speaks to the sophistication of the team that we have in Colombia. You know, we’re not just talking about grams and tonnes and bales of hay down in Colombia; this is people working on sophisticated deals with insurance companies, doing complicated actuarial science, to come up with these deals.
James West: Yeah. No, that’s incredible. So obviously the potential for Kuida products to go global, now, is a lot more credible than just merely being an expressed ambition of the company previously. So is Kuida products next going to be available in Europe?
Chris Naprawa: Yeah. I think you’re going to see them in Europe. We also announced that we did a deal with Exito – Exito is a massive retail chain in South America. They’re owned by a group called Casino. They’ve been listed, I think, for 120 years as a public company.
James West: Oh, really?
Chris Naprawa: And they have 225,000 employees globally. They’re a massive, massive retailer with huge operations in Europe and around the world. So you know, that relationship is starting with some stores in Colombia, and we’ll see where it goes.
James West: Wow, fantastic. Okay, so you know, the – you’ve got this thing going also in Uruguay, which, you know, it sounds like more of a medical research project.
Chris Naprawa: Yes. So the work that we’re doing in Uruguay, you know, we acquired that amazing team there. We’re going to go into the cultivation business; the plans for that are all done, and we’re going to start working on the physical properties there. But building those relationships with medical associations, universities, that’s something that we’ve been doing for the last couple of years. It’s a really great way to build awareness, education, credibility within the medical community, and that’s the program that we’re going to stick on. And that’s very much about how we get into Brazil as well, down the road.
Brazil is probably the furthest off as far as legalization for South America for medical, but it’s also the biggest opportunity. So we’ve got to do everything that we can to prepare for that.
James West: Yeah, you bet. I know that there’s a conference on Tuesday that Anvisa, the Brazilian medical organization, is putting on. Does that sort of – is the read on that, that Anvisa is finally sort of moving in the right direction, a little bit? Have they picked up the pace at all towards really broadening access to cannabis?
Chris Naprawa: Cannabis in Brazil is like the opinion about medical cannabis kind of, rest of the world has come somewhere in the low 60 percent range right across the board. So politically, it’s a very, very safe place to tread. You know, Brazil has got other problems and things they have to deal with right now, as well, but there’s no real opposition to cannabis. There’s over 10,000 people on the waiting list for compassionate care right now in Sao Paulo.
James West: Wow, that’s incredible. So I would think that, as has been the case in most countries around the world, the emergent necessity for cannabis a medicine by people who are in, you know, dire straits now, needing it now, has been the greatest impetus to drive that legislation through. And obviously, Brazil is, like, if it goes legal, that just opens up everything for you guys in terms of, like, all of Latin America.
Chris Naprawa: Yeah, I think so. And I think – and we’re building infrastructure not only in Brazil and Uruguay, we’re looking at other countries in South America. We’re already in Lima. We’re in Santiago, Panama City, Mexico City. We just did another medical conference this week in Mexico City; the reception is enormously favourable. So we just have to keep working with the regulators, working with the doctors, working with the medical associations, and keep building that awareness as the regulation keeps up with the demand that’s already there.
The demand that we see in Colombia today, you know, I’ll say right now that I think my demand will outstrip my supply for the foreseeable future.
James West: Wow, that’s fantastic. So on the supply side, do you have plans to expand production at all in Colombia at this point?
Chris Naprawa: Yeah. We’ve already said that we’re going to at least double production. Our processing capability, you know, we’ve put far more money into the laboratory and the processing capabilities than into the cultivation itself; you know, we probably have ten times more processing capability than we have cultivation capability right now. But even today, licensed and approved and ready to go, you know, that’s enough to serve about 100,000 patients. At 100,000 patients, that’s about 50 million in revenue for us, and I think that there’s no doubt that there’s 100,000 patients in Colombia for us.
James West: Yeah, no doubt. Okay, Chris, well, that’s an awesome update, as per usual. Thanks very much for joining me again today.
Chris Naprawa: Thanks, James.
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