Khiron Life Sciences (KHRN.V) dodges regulatory export nightmare

06/19/2019

Navigating the regulatory maze of Colombian cannabis to get products to market is not a task for amateurs.

There’s some logic behind wrapping up the production, distribution and sale of cannabis in thirty-miles of red tape for a country with something of a notorious relationship with drugs.

For example, exports of dried flower for commercial purposes are not allowed from Colombia.

This seems like a roadblock in getting Khiron Life Science’s (KHRN.V) cannabis to international markets, especially since they primarily operate and grow out of Colombia. But if the company could somehow grow and export from a more cannabis-friendly market they could avoid the regulations altogether and still bring in revenue.

That’s a good reason for today’s acquisition of NettaGrowth International and its subsidiary Dormul SAS.

Another good reason is that Dormul also has the distinction of being an Uruguayan company with the first license to produce and export medical cannabis with THC for commercialization. Their recent developments include a medical cannabis cultivation and commercialization license bringing with it a cultivation capacity of 120 tons and 170,000 plants.

Also, a pending application for an extraction license that will position Khiron among the first companies in Uruguay to be approved for both domestic sale and export of medical cannabis-based CBD oils.

Uruguay is pretty liberal compared to Colombia. They haven’t ever criminalized cannabis possession, and were the first country in the world to legalize and regulate the drug.

Decree Law 14294 set a precedent that people could avoid jail time so long they held “a minimum quantity [of illicit substances], intended solely for personal use.” You couldn’t manufacture drugs or sell them, but you were free to snort, inject, and toke as you pleased.

The problem here is that there’s no statute laying out what constitutes a minimum quantity, which leaves it open for individual judges to interpret.

That’s considerably better than Colombia where simple possession of more than 20 grams can get you a 30-year jail sentence, and Colombians make airport arrests every day, snatching foreigners with drugs.

Just the first step

Khiron has their eyes set on bigger markets than dried flower and distillates. Their long term plans involve Latin America, with attention specifically on the affluent and middle-classes of countries like Mexico, Argentina and Chile.

They even hired a medical doctor earlier this year to head up their research and brand development division to expand their line of cosmeceutical skincare products beyond the Colombian market into Latin America.

Khiron’s stock price rose $0.23 to close at $2.48.

They have 111,839,263 issued and outstanding shares and a market cap of $231 million.

—Joseph Morton

Full Disclosure: Khiron Life Sciences is an Equity.Guru marketing client.

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