Cannabis is turning into a global phenomenon and its growth is now not limited to the United States and Canada. Foreign markets have continued to adopt the product, both for medical purposes and for recreational use. The result has been that firms which have looked into this space and opted to globalize have enjoyed the benefits of a higher valuation given their investment outlook.
One such firm is Khiron Life Sciences Corp (OTCMKTS:KHRNF).
KHRNF has been at the forefront of globalization in the cannabis space and has continued to push for the entry of cannabis and its allied products into South America. The firm has, in doing so, featured greatly in news pertaining internationalization and its impact on the cannabis industry. This led it to gain traction and, coupled with its price increment, led us to review it.
Over the past two months, after a period of decline within the cannabis sector, the firm’s share price begun to rise. As at the beginning of January, the price was trading just above $1 per share, however, it is currently trading 95% above this price at $1.9456 per share. Furthermore, the number of shares traded during the same period has increased greatly to nearly 1.5 million during the February period. The price movement is significant of a near 50% increment per month over the past two months (on average) and, coupled with the traded volumes, postulates great stock momentum, seen in the chart below:
This price movement has necessitated our look into KHRNF and drawn us to look at what makes the firm tick. This piece presents a synopsis of this review.
KHNRF: An Overview
Khiron Life Sciences Corp was founded back in 2017 and its headquarters based on Toronto, Canada. Its formation came in the wake of a cannabis market boom which was forerun by news that cannabis would be federally legalized in the country.
The firm, however, did not settle as it opted to venture into international waters given especially the numerous market entrants who opened shop in Canada. As such, it entered Latin America, setting up in Columbia. Here, they obtained a license to cultivate, produce, domestically distribute and internationally export both THC (tetrahydrocannabinol) and CBD (cannabidiol) for medical purposes. Following further its listing on TSXV back in May, 2018 the firm gained its status as one of the first Colombian-based companies to trade on any global exchange.
The firm brings to market a patient-oriented approach and through its scientific studies, has been able to boost its synergies and brand to penetrate the market, drive education thus ensures brand loyalty and consequently grow. It prioritizes the treatment of medical conditions such as depression, chronic pains, epilepsy and anxiety within the Latin American market; one with over 620 million people.
News Affecting KHRNF
As earlier stated, there is a lot which has happened to KHRNF in the past few months necessitating the firm’s current price increment. Below is a brief look at some of the catalysts driving this rise.
Entry into Brazil and Uruguay
Following news that Khiron had signed a binding letter of intent as at 24th January, 2019 to acquire 100% of NettaGrowth International Inc., and in doing so acquire all outstanding shares of Dormul S.A., investors in the firm were in a frenzy. Here is why.
Dormul S.A. was the first firm to acquire the license to produce medical cannabis for commercial use in Uruguay. As a result, the acquisition would provide the firm with the ability to venture into the country, allowing it to grow within the Latin American region. Moreover, courtesy of the Mercosur Regional Free Trade Bloc, the firm has jurisdiction to gain access into the Southern Brazil region which has 75 million people.
The transaction will allow the firm to develop, package and distribute products to the larger Latin American market and give them a significant advantage over its competitors courtesy of the already-established NettaGrowth brand. As a result, the partnership between the two firms is expected to see them achieve their growth strategies while maintaining their keen interest in ensuring the quality remains unmatched.
The move was thus highly welcomed by Khiron Co-founder and CEO, Alvaro Torres who stated:
“This acquisition marks a significant advancement on our strategy to serve the largest markets in Latin America. Like us, NettaGrowth is a market innovator that is shaping how and where the cannabis industry grows across the region.”
The Legalization of Exportation
Columbia is currently the producer of 44% of the world’s total legal marijuana output. As a result, news that exportation of its products to Canada was now legal came as a big win, especially for firms engaged in cultivation within the country.
Through this venture, firms operating within the country, such as KHRNF, will soon be able to export their produce to Canada. Given the yields seen in Columbia, the gains realized from investment will be significant for investors. As a result, we expect that KHRNF will soon reap the benefits of setting up in Columbia.
Bought Deal Financing
The firm increased the ticket size of their bought deal financing from $20 million to $25 million earlier this month following investors’ high subscription to the firm’s shares. Through the sale of 11.4 million shares at a price of $2.2, the firm expects to raise the money which will be used to expand their business and fund their working capital requirements.
All in all, the above oversubscription postulates the growing demand for the firm’s shares therefore the expected fulfilment of their value proposition going forward.
The venture into the Latin American market is a smart strategic move by KHRNF. With the market untapped yet growing, it presents a future star for firm. Furthermore, news on exports to Canada from Colombia goes further to provide a ready market for the firm’s products. Therefore, we remain bullish about the future of KHRNF.
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Disclosure: We have no position in KHRNF and have not been compensated for this article.