|Shares Out. (in M):||68||P/E||0||0|
|Market Cap (in $M):||82||P/FCF||0||0|
|Net Debt (in $M):||0||EBIT||0||0|
Sign up for free guest access to view investment idea with a 45 days delay.
Investment Thesis – We believe Khiron is one of 2 or 3 leading companies in Latin America with at LatAm founders, management and ownership that is poised to become one of the dominant companies throughout the region. Khiron is only one of a limited number of licensed producers in Colombia. The company plans to not only serve the domestic medical marijuana market, but also acquire licenses and expand into neighboring countries as part of a greater LatAm rollup strategy. It is trading at a steep discount to peers despite significant white space in LatAm and an impressive politically connected Mgmt team. Khiron could easily continue to grow organically or be acquired by either a global consolidator (such as Aurora or Canopy). The potential for a partnership with a pharma company could provide another avenue for growth.
In terms of valuation, given Khiron has a market cap of ~USD$62m and will be serving a population of ~50m people in Colombia and potentially ~620m in the region, this compares favorably vs. the Canada market of ~37m people where Canadian LPs currently have a combined market cap of ~$35-40b. We see potential for Khiron to grow into a multi-billion dollar company over the long term, with a valuation of a few hundred million in medium term, and in the short term we don’t see how this stock isn’t a double or a triple from current levels.
Situation – So far Uruguay is the only country that has fully legalized recreational marijuana in South America, but 5 other large LatAm countries neighboring Colombia have early stage medical marijuana programs (Brazil, Mexico, Argentina, Peru and Chile). Khiron received the first THC license issued by the Colombian Government, and should be well positioned to capitalize on the growth in both Colombia’s domestic medical marijuana market as well as the growth in neighboring countries.
Company Overview– Khiron Life Sciences Corp, founded in Feb 2017, is a Canadian integrated medical cannabis company with its core operations in Colombia. The company operates in a similar fashion to a pharmaceutical company, by developing and commercializing medical cannabis products for trauma treatment facilities. Khiron combines leading international scientific expertise with branded product market entrance experience with the longer-term goal of addressing the unmet medical needs of ~620m people in the LatAm market (where Mgmt estimates there are an ~68m potential patients)
Its primary focus near term is to build its brand reputation by selling medical cannabis products in the forms of high quality GMP certified extracts to the domestic market. Khiron is focused on addressing the unmet medical needs of Colombians with conditions including: Epilepsy, Chronic pain, Cancer, PTSD, Anxiety, Insomnia, MS, Parkinson’s, Depression, Tourettes, and Anorexia. Khiron received its first license to cultivate medicinal cannabis in Colombia last September, which was the first such license granted in Colombia. Khiron has since secured several other requisite licenses from the Colombian Government that now allow it to cultivate, produce, distribute domestically and export both tetrahydrocannabinol (THC) and cannabidiol (CBD) medicinal cannabis. Khiron also completed a reverse merger with Adent Capital and raised ~C$12m of capital in its second round completed last month. Its shares began trading on the TSX under the ticker KHRN on May 24th.
Currently, the company is in the midst of completing its initial 80k square foot greenhouse, which should house ~8,400 plants per production cycle or ~8,000kg annually, enough cannabis for 50,000 patients. Khiron plans to open its first clinic, located in Bogota (population of 9m) by year end 2018, with initial medicinal cannabis sales occurring in Q1’19. Mgmt expects the three physicians staffing this facility to handle over 1,600 patients/month. Khiron plans to expand to three other major cities in 2019 (two of which are very likely Cali and Medellin, both of which are just over 2m each.) This is only the beginning phases however, beside regulatory approvals and construction, Khiron has focused most of its efforts on educating doctors regarding its products. The company has held large medical conferences earlier this year with over 1,000 physicians attending. It has also gained endorsements from and signed cooperation agreements with The Colombian Association of Internal Medicine (ACMI) and the Colombian Association of Neurology (ACN). Khiron also plans to have its products GMP certified (which should not only help build its brand domestically but also help exports).
Lower Cost Advantage – Despite facing lower margins on domestic sales, Khiron will benefit from having lower costs of production and capex requirements than other producers in more developed countries, which should give it an advantage in terms of expanding into and supplying other markets.
Competition – In terms of competition, Khiron claims that their competitors are primarily focused on generating low cost homogenous products for international export as base extractors, as opposed to Khiron’s approach of creating higher quality GMP certified branded product formulations for the domestic market. Most of the competition has English speaking Canadian management teams, who lack the same expertise with regard to both the domestic Colombian market and also the greater LatAm region.
Market Size – According to Mgmt, which is relying on an analysis from QuantilesIMS, Colombia, with a population of almost 50m, has an estimated ~5.6m people with qualifying conditions. The largest portion of which (~44%) is pain, followed by Depression (16%), Anxiety (10%), Insomia (9%) and PTSD (7.5%).
Mgmt – Insiders own ~31% of the company and given both their expertise and political ties this should serve to benefit Khiron’s other shareholders
|show sort by|
Are you sure you want to close this position Khiron Life Sciences Corp?
By closing position, I’m notifying VIC Members that at today’s market price, I no longer am recommending this position.
Are you sure you want to Flag this idea Khiron Life Sciences Corp for removal?
Flagging an idea indicates that the idea does not meet the standards of the club and you believe it should be removed from the site. Once a threshold has been reached the idea will be removed.
You currently do not have message posting privilages, there are 1 way you can get the privilage.
Apply for or reactivate your full membership
You can apply for full membership by submitting an investment idea of your own. Or if you are in reactivation status, you need to reactivate your full membership.
What is wrong with message, "".