Client companies come to us in a number of different ways. Sometimes because they’ve read our articles. Sometimes because they respect the journalistic chops of our boss Chris Parry. Sometimes, they’ve been referred to us by another client.
Occasionally, we go to them.
This is what happened late last year, when Equity Guru’s own Ethan Reyes hopped on a plane and flew to Colombia to learn more about a cannabis company called Khiron Life Sciences (KHRN.V) who – at the time – was not a client.
“Khiron is currently expanding its operations throughout Latin America,” wrote Reyes from Bogata, “Besides its operations in Colombia, the company signed a non-binding MOU in September to enter the Chilean cannabis market with Chile’s only LP, DayaCann.
On Nov. 27, the company entered the Peruvian cannabis market after receiving approval to commercialize four products in its cosmeceutical product line.”
Khiron is also moving aggressively into the massive Mexican health & wellness market.
“Mexico has a population roughly five times that of Canada, its climate allows for outdoor growing all-season and its labour force costs pennies on the dollar compared to Canadian workers,” wrote Reyes.
The last three years, cannabis investors have made serious coin investing in the North American weed markets.
Numerous plot-lines drove the share prices of cannabis companies higher: 1. Rec cannabis going legal in Canada, 2. The FDA approving a cannabis-based drug, 2. popularity of cannabis edibles in California, 4. Deregulation of hemp production.
This cycle may be about to repeat itself in Latin America (LATAM).
In the last five years, 10 LATAM countries have legalized and/or decriminalized medical cannabis. 2018 medical cannabis sales in Latin America were $125 million.
Like Canada in 2016, recreational cannabis is currently illegal in all Latin American (LATAM) countries except Uruguay – but political opposition to cannabis is weakening.
Khiron operates like a pharmaceutical company:
- Commercializing medical cannabis products;
2. Operating medical clinics;
3. Developing and selling cannabis wellness products; and
4. Developing brands for international distribution.
The Latin American beauty, health & wellness market is currently worth about $108 billion.
Khiron has commercialized seven wellness products in Colombia with a sales green light from INVIMA. These products contain CBD – a non-psychoactive cannabis compound used to treat a wide variety of ailments including age-related bone and muscle pain.
CBD demand is largely driven by the medical needs of the creaking baby boomers – and in Latin America, that is a growing demographic.
According to The Population Reference Bureau, “The number of Latin Americans age 65 or older is projected to more than double between 2000 and 2025 and to double again by 2050.”
Latin America is complicated place to do business. It is critically important to have the right allies. Khiron has accumulated a formidable network of business influencers. For instance, Vicente Fox, Mexico’s 55th president, sits on Khiron’s board of directors.
“The President brings outstanding leadership, a proven track record in packaged goods, and deep political connections,” stated Khiron’s President, Chris Naprawa.
On July 8, 2019 Khiron gave an update in its participation in the XLIV International Course of Internal Medicine conference (July 3-6) in Monterrey, Mexico.
Khiron was the only cannabis company to participate in this year’s conference, where it joined over 2000 physicians and medical specialists to inform, educate and discuss medical cannabis knowledge and developments.
The lack of other companies present lends support to Khiron’s thesis that this market is underserved.
Khiron gave a one-hour presentation covering global research on medical cannabis, presented by Dr. Maria Fernanda Arboleda, International Director of Medical Services at Khiron Life Sciences.
“At Khiron, we have been continually committed to helping doctors and health care professionals provide safe and effective medical cannabis treatment options,” stated Luis Chaves, Khiron’s Mexico country manager.
Khiron acquired the Latin American Institute of Neurology and Nervous System (ILANS)– an organisation that represents 119,000 patients, generating $10 million in audited revenues.
“As scientific research continues to support the use of cannabis-based products for various medical conditions, the XLIV International Course of Internal Medicine aims to train health leaders in the safe use and prescription of medicinal cannabis,” stated Dr. Roberto Lopez, president of the Mexican College of Internal Medicine, “We were incredibly excited to have Khiron join us and participate in this year’s conference.”
Back in Colombia, where Reyes first met Khiron’s team, the production facility is located in the municipality of Piedras – 200 kilometres west of Bogotá.
The climate accommodates four harvests per year without artificial light, improving yields and crop quality, while reducing costs.
The Company’s operations are located on 1,850,000 ft2 of leased land – including 265,000 cubic feet of greenhouse, a water facility station and a large harvest processing area.
A research report from Canaccord Genuity, “estimates initial all-in production, packaging and distribution costs of $0.30/gram – well below current Canadian costs of $0.80-2.00/gram.”
Khiron has received approval from Colombia’s National Food and Drug Surveillance Institute (INVIMA) to commercialize CBD products for domestic sale and export.
With its track-record for cannabis-education in Latin America – and established distribution networks – Khiron is strategically positioned for “first-mover” advantage in Brazil.
“Following a recent wave of medical cannabis legalizations in Latin America, we believe the market is on the cusp of exponential growth,” stated Canaccord Genuity “In our view, Khiron Life Sciences is positioned to secure a sizeable market share given its:
- first-mover advantage;
- low-cost operations;
- robust medical platform; and
- strong management team.
“Khiron intends to replicate its Colombian strategy in select LATAM countries, where we estimate a potential annual market of $8-9 billion,” added Canaccord.
– Lukas Kane
Full Disclosure: Thanks to Ethan Reyes hutzpah – Khiron is now an Equity Guru marketing client.Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.