Khiron Life Sciences Corp.(TSX-V:KHRN) (OTCQB:KHRNF) as President Chris Naprawa noted at the 39th Annual Canaccord Genuity Growth Conference (Aug.7-8, 2019), has jumped over all the major regulatory and start-up hurdles. All that’s left standing in the way between the Khiron and revenue and earnings is packaging and marketing. Doubtless, these are important steps, which need to be done well. But, they are the last stages and free from the uncertainties and ‘adventure’, if you will, that concern investors in the early phases of any new company – let alone the legal, biological, medical, distribution and marketing hurdles that must be overcome for a company to achieve production in a newly regulated industry such as cannabis.
A number of cannabis companies – including multi-state operators (MSO), CBD and wellness, leading extractors – participated at the Canaccord Genuity Conference, discussing various topics of interest to industry leaders and investors. Certainly, the overall conclusion is that the cannabis sector is growing – and growing quickly. In the United States, MSOs are expanding, and more and more States are legalizing cannabis. So far 34 have already done so. Expectations are that the U.S. market should generate some $50 billion in sales over the next five years. The CBD health and wellness sector is becoming an ever more important driver of demand and companies are responding, launching more CBD product offerings, addressing applications from beauty and skincare to pet health. The U.S. Dept. Off Justice is studying the antitrust environment surrounding the cannabis sector with a view toward stimulating M&A activity, which should help increase valuations of cannabis stocks.
In the wider context of the overall growth, the companies, which are going to establish a wider ‘footprint’ must have a clear strategy. It’s not enough to be growing quality cannabis and have adequate extraction equipment. It’s becoming increasingly apparent that understanding the various national and international regulation and distribution patterns and working out the appropriate strategies to exploit these, better than the competition, is the key to success. And even then, it’s not enough to be aware of regulatory environments; it’s essential to understand how to exploit international trade agreements to build and secure international distribution patterns. Enter Khiron
Khiron has Cast a Wide Net and is Ready to reap the Rewards
Khiron has $55 million, cash, in the bank. But it’s not the sum itself, which should impress investors. Rather, the fact that Khiron has grown tremendously, growing the company, adding personnel (from about 40 in summer 2018 to 250-260 with a fully operational cannabis facility, complete with a 15,000 square ft. laboratory, offices in Bogota, Lima, Santiago de Chile, Montevideo, Mexico City, Panama City), building markets and opportunities in Latin America as well as Europe is what should impress most.
The secret to this achievement is both simple and ambitious: Khiron simply wants to be the dominant cannabis player in Latin America. The true genius of this central idea, which has driven the entire scope of Khiron’s growth over the course of 2019, is that the Latin American market is ready to open up – and it’s a market that’s more than twice as large than Canada and the United States combined. Even if you add Germany (which has the largest cannabis market in the European Union), Latin America alone is a bigger market with its 620 million consumers. And within this huge market reality, Khiron has chosen a different path. While most companies (and not just in LatAm) have focused on achieving low-cost cultivation for export.
Doubtless, the math suggests such a formula should work. Produce at lower costs than the Canadians or Europeans and extract bigger margins from export sales. But, Khiron is farsighted. Its goal is to win over patients – that is users, aiming to secure a million customers. It does not matter where the customers might reside. Khiron has cast a net over all the most significant regulated and about to be regulated markets. Naprawa said that Khiron will sell to the first of the million customers of its plan before the end of the third quarter, as its line of medical cannabis products will be launched for sale. And Khiron has a solid footing in Brazil, which many analysts believe will be the largest medical cannabis market in the world.
