Use Markets Continue To Mature
6th Jul 2021
So far this year, the North American cannabis industry has recorded impressive advancements, and this is a trend that we are closely following.
From a conservative US Supreme Court Justice calling cannabis regulation outdated to Mexico’s Supreme Court decriminalizing recreational cannabis, we are favorable on the legalization trend and believe that it is just getting started.
Earlier this week, Mexico’s Supreme Court voted 8 to 3 to decriminalize recreational cannabis. The court ruled that adults would be able to apply for permits to cultivate and consume their own cannabis and we consider this to be an important milestone for the sector.
Although the legislation does not cover the commercialization of cannabis, we believe the sector is trending the right way and expect Mexico to become a major market over the long-term. The announcement comes after a legalization bill failed to advance in Congress and we expect companies with leverage to the Mexican cannabis market to benefit.
A Global Expansion Story to be Aware of
Concurrent with the announcement, Khiron reported finalized agreements to manufacture finished medical cannabis products in Mexico. We have been bullish on the Mexican cannabis market and believe the company is well positioned to benefit from a regulatory change.
Mexico is the second largest market in Latin America and has a population that is close to 130 million people. According to IMS Quintiles, approx. 11.7 million people in Mexico have been diagnosed with conditions that are treatable with medical cannabis.
We expect Khiron to replicate its business model in Mexico and are bullish on the growth prospects associated with its strategy. By finalizing agreements for the manufacturing and distribution of finished medical cannabis products, the company has executed on a key aspect of its Mexican supply chain growth strategy, and we find this to be of significance.
In the back half of 2021, Khiron plans to launch Zerenia™ clinics across major cities in Mexico and build on the success of its vertically integrated model in Colombia and Peru. Due to the success of this aspect of the business, the company can use a real-life data driven approach to prove the value that is associated with its clinics. We expect the data from these clinics to play an important role in the opening of new locations and are favorable on this.
Leveraging a Strategic Relationship to Advance Operations in Mexico
As part of its Mexican growth strategy, Khiron plans to leverage its education partnership with Tecnologico de Monterrey. Earlier this year, the company rolled out Latin America’s first internationally accredited post graduate medical cannabis program that is hosted in partnership with Mexico’s TecSalud School of Medicine and Health Sciences.
The program is expected to provide essential medical cannabis education to practicing doctors and we are favorable on the awareness that the partnership will create for Khiron in Mexico. The partnership with Tecnologico de Monterrey will allow for the introduction of the first internationally recognized medical cannabis diploma program in Latin America. By ingraining itself with doctors in Mexico, we expect Khiron to have a significant first mover and sustainable advantage on Mexico’s cannabis market.
So far, approx. 550 Latin American physicians have obtained their diploma by completing Khiron’s medical education program and we are favorable on how the platform is gaining traction. The program will cover the theoretical and practical basis of medical cannabis, pharmacological properties of cannabinoids, and the international regulatory frameworks for medical cannabis. Over the next year, we expect to see increased interest in the Mexican cannabis market and are bullish on how Khiron is positioned to benefit from this.
With over 24,000 prescriptions sold in Colombia and Peru, Khiron is a leading Latin American medical cannabis operator and we are monitoring how the management team is able to execute on the expansion. We believe Khiron is well positioned to capitalize on the growth of the Latin American cannabis market and expect Mexico to play an important role in the long-term success of the business.
Expected to Benefit from Having a First Mover Advantage
Although many companies have focused on the Latin American cannabis opportunity, the vast majority have failed. Khiron is one of the only companies that has been able to successfully expand the business and we are favorable on the markets that it is focused on.
From the United Kingdom to Peru, the Latin American cannabis company is focused on high-growth markets and we believe the market does not fully appreciate this aspect of the story. As Khiron continues to capitalize on burgeoning international markets, we expect to see increased interest in the operator and will monitor how broker-dealers respond to the advancements by the business.
Over the next year, we expect Khiron to benefit from its exposure to Latin America and the EU. Due to the assets that it owns in these markets, we expect the company to report ramping revenues in the back half of the year and we believe the market is discounting this aspect of the story. We believe Khiron has significant potential growth catalysts and is an opportunity that is positioned to benefit from the Mexican market.
Comments