Khiron Life Sciences (CVE:KHRN) Expanded Retail Presence and Latin American Growth
Khiron Life Sciences Corp (TSX-V:KHRN) (OTCQB:KHRNF) joins Midas Letter on Skype from his office in Bogota, Colombia to discuss his outlook for the company in the next few quarters. Khiron’s revenue has been growing, reporting an adjusted EBITDA of 7.7 million, and will expand its income statement as the company will begin medical cannabis sales within the next six months. Patients living in Colombia should be able to start enjoying shipments of Khiron medical products before the end of the calendar year pending just a couple more regulatory hurdles. Khiron’s Kuida cosmeceutical product line is also increasing its distribution across different retail networks. Most recently, Khiron’s 50/50 joint-venture with Dixie Brands Inc (CSE:DIXI.U) (OTCQX:DXBRF) received conditional TSX-Venture exchange approval allowing for the commercialization of the Kuida products in the U.S. market. Khiron have advantages in the cannabis market with the lower-cost of running a cannabis company based out of Colombia coupled with the company’s progress in Europe and the rest of Latin American like Mexico, Brazil and Argentina. For these reasons, the CEO sees Khiron exceeding the expectations of a consensus of six different analysts indicating that the company’s projected profit in 2021 will be at least $6.1 million.
James West: Alvaro Torres joins me now, Khiron Life Sciences, live from Bogota. Alvaro, how are you doing today?
Alvaro Torres: Hey, Jim, how are you doing? It’s been a long time!
James West: It has been a long time. Bit of a reversal in the cannabis market, and I saw some interesting news from Khiron today that you’d received approval from a Colombian government-affiliated group?
Alvaro Torres: Yes! No, we continue to work to be able to get a sponsored for medical conferences and medical associations. Now I think we are up to seven or eight, and this is just another stepping stone to be able to start prescribing medical cannabis soon. So, very excited.
James West: Yeah, excellent. Okay, you’re making progress towards, you know, your revenue is growing, adjusted EBITDA of 7.7 million. Nonetheless, a loss consistent with the entire sector. What is the outlook for the next few quarters?
Alvaro Torres: Well, I think, James, the most important aspect of our operation in the next six months is to be able to start with medical sales. We’ve been talking about this for two and a half years, since, you know, since we met also a year ago, and now we’re very close to be able to start selling medical cannabis. And we’re just waiting for a couple more regulatory hurdles to go through, but we’re expecting to be able to do this in Colombia, and hopefully being able to start shipping product to patients in that time, as well, by the end of the year. So, very exciting times, as well as continuing to sell our Kuida products, increasing the distribution across the different retail networks, and also, the launch of our clinics, which will be very significant for us.
As you know, that’s a significant channel for education and patient adoption, so very exciting next six months, I can tell you that. Very happy.
James West: Sure. So is the delay in getting your product onto shelves in Colombia, is that consistent across the industry there? Is it specific to Khiron, or is it a case of the progress of the medical authority there?
Alvaro Torres: No, I don’t think there’s been any delays. What we’ve been talking about for the last six months is always to try to get to Q3 and Q4. You know, you follow our story very closely, so you know we’ve been going through all the approvals on a seed registration. We have over 22 seeds now registered that are being cultivated, and now that we finalized some part of that cultivation, we’re just now ready to begin sales. So no more delays that we expected over a year ago, and I think what the government of Colombia is trying to do is to do things right. And, you know, once we are able to start selling, there’ll be no stopping it.
James West: Yeah, you bet. Okay, Alvaro, now, what is the market looking like in terms of Colombia? On the medical side, you’ve got, you know, the ability to sell medical products directly to patients; on the cosmeceutical side, you’re already selling Kuida products in stores in Colombia, correct?
Alvaro Torres: Yes, since November last year.
James West: And is that the source of your revenue? The major source?
Alvaro Torres: So, yeah, two sources right now. One, of course, is our clinic; you know, we did an acquisition of a neurological clinic called ILANS; that gives us about $2.1 million every quarter, for now, which is in line with what we had expected since we acquired it. And the other line of revenue is Kuida, which is, you know, taking form as we start to educate other consumers on the benefits of CBD in cosmetics. And you can start seeing that building up as more retail chains are picking up our products.
So we’re very excited about what’s happening in this Q3 and Q4, because now that we have groups like the Exito Group, which is part of the Casino Group out of France – it’s the largest retailer in Colombia – to start, you know, opening up shelf space for us, that gets very exciting to be able to continue to sell Kuida. And I mean, you know, we reported revenues of about $2.1 million, $2.2. million for the quarter, which, you know, for us is very significant, because we started, we were public, almost only a year and a half ago. Companies in Canada have been doing this for five years. So, you know, we are very happy that we’re striving and trying to catch up even in a market that’s just starting.
James West: Sure. And is the partnership with Dixie progressing towards your product being available in the United States?
Alvaro Torres: Yes. So we are very excited about that. As you know, we recently announced that we got TSX approval to be able to export Kuida to United States, so right now, the plan is, you know, working on the marketing plan, the launch plan, which states can we go on. And, you know, continuing to work here on regulators to understand, for them to understand, what the product is about, and alongside Dixie as well, which is a tremendous partner for us.
So, very excited about that because, you know, we’ve been making a lot of strides. In this business, sometimes, you know, there’s so many regulatory hurdles that every time we go through one jump and we are able to, you know, exceed some expectations in terms of timing, it gets very exciting.
I think now we’re just ready, waiting, to make sure we do things right. So we have the right branding, the right marketing strategy, the right retailers. But once we’re able to launch it, I think we’ll be tremendous success for the company.
James West: Right. Consensus of six analysts indicates that you’re projected to generate profit of at least 6.1 million in 2021. Do you feel like you’re on track for that, you’re going to beat it, or is it going to be a challenge to get there?
Alvaro Torres: No, Jim, I’m very, actually, very optimistic. The way I look at the markets in LatAm as they continue to open up…you know, we, being based out of Colombia, we have a tremendous team that’s not really that costly for us, and the markets are opening up. And 2021, when we see Colombia, Mexico, Brazil and Argentina, and what we’re doing in Europe, I’m really very confident that we’ll not only beat it, but we will always exceed expectations.
James West: Yeah, you bet. You recently made a few key executive appointments to boost your penetration into Europe; what is the significance of these individuals, and how is the European sort of strategy going for you?
Alvaro Torres: Well, James, you know, these companies are built on great teams. I’m very lucky to be able to lead a company with such fantastic talent, and it always starts with us on regulation. If you don’t master regulation, it’s going to be hard to be a leader in the field, and that’s sort of what we were trying to go for with the team that we’re bringing in from Europe. Where we see Europe is that it’s a very interesting market, of course with a higher GDP per capita, higher consumption rates, more knowledge of CBD, and we’ve been going to Europe many months since January of this year, particularly with Kuida. We started to see how the European market looks at our Kuida products as something that’s really interesting, and something that’s very exciting because of the quality and because of this narrative and the brand that we’ve built.
So then we started looking at, well, why can’t we take our brands and our knowledge and our education to Europe? And that’s sort of the story that we start thinking to ourselves, how do we bring the right team that wants to help us build that platform in Europe? And considering everything that we’ve done in LatAm, we’re very exciting about bringing these first two executives to our team. There will be a lot of accomplishments that we’ll be talking about in the next six months in Europe, and they will be a significant part of it.
But it’s all about building teams, because these companies are not built just from capital. You have to have the right people that know and understand the regulations, the market, to make sure that we are successful. So we’re very happy about that.
James West: Yeah. You bet. Alvaro, I hear no end of new companies starting up in Colombia and they say they’re getting licenses, and you know, they’re projecting a rosy future. But at this point, I’m not really aware of anybody else in Latin America who’s got penetration into the major markets. Are there any other cannabis companies that have the level of penetration that Khiron has achieved, at this point?
Alvaro Torres: Well, Jim, I think I could say that probably eight to ten companies that we’ve known for a long time, who are part of the guild that we co-founded about a year and a half ago. I think it’s always good to be able to work alongside great companies. What I’m not seeing really any more than the usual suspects that we all know in Colombia who started this business a couple of years ago. I’m not seeing that much anymore, but there’s a lot of excitement about Colombia, but there’s also the challenges of starting a little bit late, and as you talked about it with the capital markets, you know, I think it’s getting harder and harder to enter, because there is companies like us and, you know, a couple of more others, that started earlier.
And this industry, as you know, and Canada has shown it, if you are one of the first ones, you’re going to have a significant advantage, at least in the short term. So I think it’s exciting times for Colombia; I think it’s exciting times for Latin America. But I think Colombia, you know, the companies that started this ten years ago, these are the companies I’m seeing leading the industry. I mean, everybody has a different strategy; you know, my strategy, and our company’s strategy, is to dominate the domestic markets. We’re not that interested in exporter of raw product.
But that’s because, you know, we come from a more pharmaceutical background. And as for the rest, I think, I’ve seen a lot of tremendous, positive news, and it’s always good that the rest of companies that start this industry have great news, because you cannot build a successful restaurant in an empty street. So we’re rooting for the industry, and I’m very excited to see what the rest of the companies are doing. And it’s all good news for us.
James West: Yeah, you bet, Alvaro. Well, I’m excited to be coming down to see you at the end of September, and so it sounds like you’re making great progress, and I really look forward to seeing you then.
Alvaro Torres: Oh, well, absolutely, Jim. I was just reminding the last time you were here, it was February, 2018, and I’m really excited to take you to the site, because it’s, of course, changed dramatically and tremendously. I’m sure you will be very impressed. Thank you for everything you have been doing for us, and we’re looking forward to seeing you here.
James West: You bet. I can’t wait to see you, Alvaro. Thanks very much.
Alvaro Torres: All right, Jim, thank you so much. Thank you for your time, and thank you for everything. Bye.
James West: Same to you. Bye-bye.
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