Khiron Life Sciences Archives - Green Market Report

Debra BorchardtDebra BorchardtAugust 26, 2019
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3min13010

Latin American cannabis company Khiron Life Sciences Corp. (TSXV: KHRN)(OTCQB: KHRNF) stock slid on news of the company’s second-quarter earnings. Khiron delivered a net loss for the three months ending June 30, 2019, of $10.6 million or $0.11 per share versus last year’s net loss of $6.2 million causing the company stock to drop by over 4% to lately trade at $1.15.

Khiron reported that its revenues of $2.2 million came from the sale of services at its clinics and sale of its cosmeceutical products, both of which began in the fourth quarter of 2018. The company said that revenues were in line with expectations and gross profits were consistent with the first quarter of 2019.

“We are pleased to report significant progress during the Q2 financial reporting period, including revenue generation, expansion of our Kuida cosmeceutical retail network, a growing and more profitable patient base at our ILANS clinics, closing of a $28.75 million bought deal and commencement of full operations at our completed Colombia lab facilities,” said Alvaro Torres , Khiron CEO and Director.

The company also delivered an adjusted EBITDA loss of $7.7 million for the second quarter, which was $2.7 million higher than last year and was attributed to the “growth of the business and readiness to grow in multiple countries.” In addition, Khiron said that it incurred $1.1 million in research and development costs in the second quarter of 2019 which were related to operating costs at the company’s cultivation site.

Mr. Torres added, “We are about to commence commercialization of our CBD strains of cannabis for medical purposes and subsequent to the quarter have received TSXV approval to bring Kuida to the U.S. market. As we strengthen our position in other jurisdictions, including Europe, to be ready for business as regulations open for us, our leadership, research, medical and operational teams continue to be fully focused towards our mission to be a Latin American cannabis leader with global growth.”


William SumnerWilliam SumnerSeptember 27, 2018
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5min14500

The medical cannabis producer Khiron Life Sciences (KHRNF) is positioned to secure a significant share of the cannabis market in Latin America, according to a report released Canaccord Genuity, initiating coverage on the company with a speculative buy rating at a C$3.00 per share target rate.

This comes right as the company announced that it signed a non-binding memorandum of understanding (MOU) with Fundacion Daya, Chile’s leading medical cannabis institution and the holder of Chile’s only medical cannabis license through DayaCann, a joint venture entity established between Fundacion Daya and AusCann Group Holdings Ltd.

Chile And Fundacion Daya

Fundacion Daya and Khiron plan to cultivate a minimum of 5 tonnes of dried flower in Chile exclusively for Khiron to be used to formulate two products targeting patients with neuropathic pain and epilepsy. The two companies also plan to start clinical trials led by medical teams directed by Khiron and Fundacion Daya. The goal is to be able to distribute products by the first quarter of 2020. As part of the partnership, Khiron will provide Fundacion Daya the equivalent of $1 million USD over a period of 2 years.

Canaccord Report

In the report, Canaccord lists six specific reasons as the basis for initiating coverage on Khiron; which is as follows: first-mover advantage, a replicable platform for Latin America, its current patient network, a highly experienced management team, near-term catalysts, and valuation.

First-Mover Advantage

Operating in Colombia, Khiron is one of the few cannabis companies with a presence in Latin America. As a country, Colombia has several conditions that are advantageous to cannabis cultivation; including optimal climate for cultivation, operating costs that are on average 65-90% cheaper than in Canada, and a market of up to 700,000 patients. Khiron’s production capacity is 16,900 kilograms per year, allowing the company to service roughly 100,000 patients.

Replicable Platform for Latin America

Khiron intends to replicate their Colombia strategy in other Latin American countries, with the entire marker reportedly worth roughly $8-$9 billion. Viewing Mexico as the next front for expansion, Canaccord believes that Khiron is positioned to add ~$1/sh for every 50,000 patients it can secure.

Current Patient Network

Through strategic Alliances and its education platform, Khiron has approximately 3,000 doctors and 400,000 patients within its network, and with the company’s recent $7 million acquisition of ILANS clinic, another 100,000 would also come into its network. This acquisition plays a significant role in Khiron’s valuation.

Highly Experience Management

Canaccord was encouraged by Khiron’s management team’s focus on delivering long-term shareholder value. Particularly the report pointed out Khiron CEO Alvaro Torres building SNC-Lavalin Colombia from two to 2,000 employees and the addition of Vincente Fox, the former President of Mexico, whose influential scope could prove critical to Khiron securing new business ventures.

Near-Term Catalysts

A confluence of upcoming short-term events have also helped strengthen Khiron’s position; including the launch of its Kuida Cosmeceutical line, the start of clinical operations, and the start of commercial cannabis cultivation and sales. Potential insurance coverage for medical cannabis could also potentially double the per share target price if volumes and prices increase as projected.

Valuation

To come to their speculative buy rating, Canaccord used a sum-of-the-parts DCF Model; reflecting an EV of $210 million and a 2020E EV/EBITDA multiple of 9.2x. Risks to their target include the pricing of cannabis in Colombia, the closing of the ILANS acquisition, patient conversion rates, and receipt of commercial quotas.

Khiron is currently trading at around C$1.86 per share, with a market cap of approximately C$116 Million. It trades at $1.43 on the OTC Markets.



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