Khiron Life Sciences Corp (CVE:KHRN) The Allure of Latin America
Khiron Life Sciences Corp (TSX-V: KHRN) (OTCQB: KHRNF) (Frankfurt: A2JMZC) has set its sights on Latin America, where it wants to become the dominant player in the mainstream medical cannabis market. Khiron has a license to conduct all cannabis related activities in Colombia, including cultivation, production, domestic distribution and international export of THC (tetrahydrocannabinol) and medical CBD cannabis (cannabidiol). The focus on Latin America sets Khiron apart: while other cannabis manufacturers are starting from Canada, facing more competition and legislative barriers and/or uncertainties, Khiron has jumped the proverbial line, avoiding the congestion and establishing a solid base in what promises to be a huge market – with relatively fewer competitors. Khiron offers investors the opportunity to take full advantage of the latest processing medicinal and recreational cannabis technologies in the backdrop of what is set to become a market encompassing the entire Latin American region as well as Europe.
The fact that in July 2018, former Mexican President Vicente Fox, who ran Coca-Cola Mexico before embarking on his political career, clearly shows that experienced entrepreneurs (it’s no surprise, given his understanding of the appeal of Coca-Cola) would recognize the value of the cannabis market and Khiron’s potential role. Fox, who has become a cannabis legalization activist, expects more and more governments in Latin America (with a population of about 650 million) to authorize the use of marijuana.
The Vancouver-based Khiron, has already started selling products in Colombia, and has established a 50/50 joint venture (JV) with Dixie Brands (CNSX:DIXI.U) (FRA:0QV)of Colorado to develop and sell a line of CPG (consumer package goods) cannabis-based products in four countries (so far) in the region, including nutritional supplements and pets lines. On August 6, 2019, the Toronto Venture Exchange approved (conditionally) the JV, which will prompt two key catalysts for growth, starting in early 2020 – and in what is a $20 billion skincare market in the U.S. alone:
1. Sales of the Kuida cosmeceutical line will begin in the United States.
2. Dixie’s CBD-infused line will gain access to Latin American markets.
In a press release, Khiron CEO and Director Alvaro Torres said that through the JV would allow Khiron to bring “the full Kuida product line to U.S. consumers”, just as the company builds “capacity and market access to expand Kuida brand distribution into new jurisdictions globally.” Meanwhile, Khiron has acquired properties to build its strategic foothold in South America; and in the Mercosur (the South American common market, which includes full members Argentina, Brazil, Paraguay, Uruguay) trade bloc in particular. Apart, from Uruguay, recreational cannabis has not been legalized for consumption anywhere in Latin America. But, most analysts expect Mexico to legalize it before the end of 2019 (a draft Law was approved in 2018). Meanwhile, Brazil’s governments seems ready to legalize the cultivation of medicinal cannabis. Argentina has already done so – and loosened recreational use regulations.
The attraction of Colombia
Many of Khiron’s Canadian competitors have focused their activities on North American production. But, Khiron, along with a handful of others, including Canopy Growth, have set up operations in Colombia. Simply put, Colombia presents ideal conditions for cannabis from both the production and the investment points of view, thanks to the land characteristics for cultivation, favorable climatic conditions and low production costs. Moreover, Colombia has adopted legislation that promotes profitable export worldwide, thanks to its multiple free trade agreements.
Cannabis is not just for export. The medicinal cannabis industry has been growing rapidly in Colombia, following the overall Latin American trend. And Colombian officials have encouraged and welcomed the injection of capital from Canadian entrepreneurs in the cannabinoid space. Canada, arguably, boasts the most experienced cultivators and processors of cannabis and Colombia wants to exploit the expertise to enhance its own existing technology to develop extracts and other cannabis derivatives. Thus, Canadian firms have found a welcoming regulatory environment, aimed at reducing risk. Indeed, Colombia’s success in attracting and retaining (mostly) Canadian cannabis entrepreneurs that neighboring Chile and Peru have adopted, and in some cases surpassed, Bogota’s licensing approach as a model.
Of course, in 2014, Uruguay was the first country in the world to legalize the consumption of marijuana for medical and recreational purposes. Keeping these budding prospects in mind, consider that Khiron announced that the company has closed a memorandum of understanding with Dayacann, which holds Chile’s first medical cannabis cultivation license. Khiron’s range of competence will enable it to cultivate, run clinical trials and access a medical cannabis market of some 1.8 million patients across the country. As Alvaro Torres, Co-Founder and Chief Executive Officer, Khiron Life Sciences, stated, Khiron has secured a first-mover advantage in the Chilean medical cannabis market.
Latin America the Next Major Cannabis Eldorado
International consultancy New Frontier Data released its “Regional Report on Cannabis in Latin America: Sector Outlook in 2019”, noting that Latin America the cannabis industry could be worth as much as US$9.8 billion. Latin America, after Canada (a comparably small market), has witnessed a significant expansion of cannabis legalization for both medicinal and recreational use. Many countries in the region are legalizing cannabis and encouraging the establishment of (highly regulated) industrial producers and processers. Governments have clearly recognized the domestic and export opportunities that a regulated cannabis sector is capable of offering. Brazil, with a population of about 209 million, is the top prospect with its $2.38 billion potential market. Mexico follows at $1.9 billion and then there are Chile ($1.5 billion), Argentina ($1.1 billion) and the rest worth $2.8 billion. (Source: New Frontier Data).
Beyond Mercosur, Colombia, Peru, Ecuador, and Venezuela have followed suit, legalizing medical weed and decriminalizing personal use. Moreover, the European Union and Mercosur have recently concluded a preliminary agreement for a free trade deal, which would open what is the world’s largest cannabis market to Latin American producers. In this context Uruguayan producers are the ones poised to benefit first, given they’ve had a six-year head start over everyone else. And, Khiron recently acquired Netta Growth International, based in Uruguay. NettaGrowth, and wholly-owned subsidiary Dormul S.A., were among the very first companies to secure licenses to produce and export THC cannabis. Therefore, Khiron has gained some 120 metric tons of additional and licensed (flower and medical use capacity product), along with access to key markets in Mercosur, the rest of the Latin American market and the European Union.
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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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