16 June 2021
One of the most exciting aspects of Khiron’s model is related to how it is positioned to disrupt the opioid market in Latin America and the EU. With a combined population of more than 1 billion, we believe these markets represent attractive long-term growth opportunities. Khiron is led by a management team that knows how to build a substantial business model and that understands that Latin America and the EU are nascent markets.
Khiron recently reported first quarter financial results that showed massive medical cannabis growth when compared to the prior quarter. Going forward, the management team expects this trend to continue due to how the business is ramping up in Colombia, Germany, Peru, and the UK.
By 2024, Khiron’s aims to reach 1 million patients and customers and we believe its first quarter financial results show that the business is on the right path. If the company can disrupt the opioid market in Latin America and the EU, we believe that it will easily be able to achieve this goal and are favorable on the growth prospects that are associated with the business.
We believe that Khiron’s vertical integration strategy will play a key role in how it accomplishes its goal of reaching 1 million patients and customers by 2024. Due to the structure of the business model, we believe that it will be challenging for companies to replicate Khiron’s model and find this to be a key aspect that sets Khiron up for success. Due to the complex nature of the business model and its early mover advantage in several emerging markets, Khiron is well positioned to capitalize on the global cannabis legalization trend.
There are a number of reasons to explain our confidence in Khiron’s strategy and how the business could disrupt the opioid market:
In Latin America and the EU, there are more than 75 million people suffering from illnesses that can be treated with from medical cannabis (chronic pain, anxiety, depression, epilepsy, and more)
In Colombia, the cost associated with treating a patient who is suffering from neuropathic pain is $5,200 to the insurance company. Approx. 80% of that cost is related to opioid prescriptions, and medical cannabis can substantially lower that cost to the insurance company
Khiron is working with one of 15 insurance companies in Colombia. By using real world data from the sale of more than 20,000 prescriptions in Latin America, it should start to work with additional insurance providers in the country. We believe that an in increase in the number of insurance companies should prove to be a major growth catalyst and expect sales to ramp as a result
Khiron recently started to sell prescriptions in Peru and expects to start to generate strong revenue growth from Brazil in the near future. In Mexico, the company has been educating doctors with Tec of Monterrey and has supply chain agreements in place. In the second half of the year, Khiron expects to open its first clinics in Mexico and Brazil. We believe the international scale of the business in Latin America will play an important role in how Khiron disrupts the opioid market
To disrupt the opioid market in the EU, Khiron will use real-world evidence from its clinics in Colombia and Peru to educate doctors on the benefits associated with treating debilitating illnesses with medical cannabis. By showing the medical evidence and the lower costs associated with using medical cannabis to treat certain conditions instead of opioids, we expect Khiron to convince insurance companies and doctors in the EU to start to prescribe medical cannabis
The chronic pain market in the EU is significant. Khiron plans to replicate its success in Latin America in the EU and is starting with Germany (the largest market in the EU) and the UK. In Germany and the UK, approx. 8 to 10 million and 7 to 10 million people are suffering from chronic pain, respectively. Similar to Latin America, the costs associated with opioids in the EU is substantially higher than cannabis and we expect this to support how Khiron disrupts the opioid market
With a business-to-consumer model, Khiron is executing on a strategy that is centered around improving quality of life, educating doctors, bringing medical cannabis to the forefront, entering into strategic relationships, and creating demand in a responsible manner, Khiron is positioned for long-term growth
During the first quarter, Khiron reported a 50% patient retention rate and we attribute the high rate to the close relationships that are formed as a result of Khiron’s business-to-consumer model. We expect this strategy to play an important role in how the company disrupts the opioid market over the long term
When compared to the prior quarter, Khiron recorded a 120% increase in the number of prescriptions filled in the first quarter. These numbers imply that Khiron has the potential to disrupt the opioid market and are favorable on the growth that the management team is forecasting in future quarters.
When compared to the entirety of 2020, Khiron recorded a 175% increase the amount of medical cannabis prescriptions that were filled in Peru in Q1 2021
During the first quarter, Khiron reported that 60% of prescriptions that were filled were from insurance companies. When compared to the prior quarter, this amount increased by 3x. In addition, 90% of patients are reported to have seen a benefit from medical cannabis treatment after four months. We consider this to be a bullish indicator and a positive trend as it relates to disrupting the opioid market
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