Interview with Chris Naprawa, President of Khiron Life Sciences
I had the opportunity to interview Chris Naprawa, pictured above, who was recently appointed President of Khiron Life Sciences (TSXV: KHRN) reporting to Alvaro Torres the Chief Executive Officer. KHRN has been on a recruitment roll recently announcing the appointment of internationally recognized medical cannabis specialist, Dr. Maria Fernanda Arboleda, Khiron Medical Director on June 25, 2018; the appointment of Chris Naprawa as President on June 26, 2018; and the appointment of former President of Mexico Mr. Vicente Fox Quesada to its board of directors on July 17, 2018. When Chris Naprawa agreed to an interview, I jumped at the chance. After you read this interview, I think you will understand my enthusiasm for this investment opportunity.
Let’s Toke Business (LTB): Chris, why don’t you start by telling us a little about your background?
Chris Naprawa: I came to Bay Street at 35 years of age after starting as an entrepreneur with a successful private company Startcast Solutions in the webcasting space which I sold to a major telecommunications company in 2003. At that point I wanted more experience in the capital markets so I went to work in the investment industry staring with the successor to the old Yorkton Securities until we were eventually bought out in 2008 by Macquarie where I gained some valuable experience in the international space as Head of Equity Sales. Next I was Head of Equity Sales and Trading at Dundee Securities after which my business partner and I joined Primary Capital as a partner then helped start a new capital markets division at Sprott Inc. when I became a partner at Sprott Capital Partners.
My goal 15 years ago when all this started was to get some experience and make some contacts waiting for the file that would come across my desk that was perfect for me, would give me the chance to deploy some capital and concentrate on one file. That opportunity was Khiron Life Sciences (TSXV: KHRN).
LTB: how did you come across Khiron?
Chris Naprawa: I went to high school and university with Mark Monahan (now a Director of Khiron) and I worked on one of his earlier deals. I got to know Darren Collins (now Chief Financial Officer of Khiron) in a similar fashion. Around a year ago Mark introduced me to KHRN and Alvaro Torres (Chief Executive Officer of Khiron) while I was at Primary Capital. I made an investment in them and began to advise them after I moved to Sprott. When Alvaro decided to focus on growing KHRN and he offered me the chance to take on the capital markets side, I jumped at it. That was just a few weeks ago. This is, in my opinion, the best file I’ve ever had.
LTB: You are about a month in the saddle. What does your job description look like?
Chris Naprawa: Alvaro’s got the real job. He actually has to run the company which means he has to spend more time in Colombia and less time on airplanes. We have a lot going on: we’re completing our facility, starting our initial growing, building a laboratory, getting a marketing campaign underway, we’re launching our cosmetics line, expanding into Mexico and still adding to management. All of that takes up a lot of time and effort from many people so to realize the aspirations we have, we need many qualified people doing their jobs in many different areas. So I can assist on the capital markets strategy, on mergers and acquisitions, dealing with the banking issues and all of that will free up Alvaro’s time a little more.
I’m totally entrenched in the Bay Street world in Toronto so I have to make sure the company is properly financed, communicate our underlying strategies clearly and look for strategic partners that will help us advance our program faster and more efficiently leaving the people in Bogota freer to do their jobs.
LTB: So part of your job is also ensuring that the KHRN story gets out to more people is it not?
Chris Naprawa: Absolutely. I have 15 years of institutional contacts that we have started to leverage and a long list of high net worth individuals and other contacts as well. We don’t have a single institutional investor right now so we have to build that register. If we are going to be as strong as we plan to be we need powerful financial resources ready to help us. If you look at our direct competitors many of them are well financed and trade at much higher market caps. It shouldn’t surprise you to hear me say that I think we should be valued at a premium to any of them and that’s something I’m going to be working toward.
LTB: when you looked at hitching your star to Khiron, what attracted you?
Chris Naprawa: it’s the people. Strong teams - exceptional teams that work hard and stay in the same cadence are ultimately successful. What gets investors in trouble is supporting a good idea with poor management. It’s a chronic trap. When I went down to Bogota, I was astonished at the consistently high quality of people they had throughout the organization. So when I saw that and knowing they had a market cap of only around $50 million, I asked myself “What’s wrong with this picture?” In my first three weeks that’s what other investors have asked me, “What’s wrong?”
Sometimes, there’s nothing wrong. We all studied “efficient markets” in business school and I haven’t seen proof of it in the real world in the past 15 years. I’m not aware of it in practice. KHRN is a year and a half old and a lot of the progress has been made in the past six months. Here are some highlights:
On the regulatory side, we’ve done so much without a hiccup. Our Chief Regulatory Officer is Juan Diego Alvarez who is a Columbian and the recognized authority in medical cannabis regulations having been appointed by the Minister of Health to create and draft regulations for the legalization of medical cannabis. We’ve invested the resources to be first on the regulatory front and that gives us a significant regulatory advantage.
If you look at our cosmetics line, we have 11 products approved by The Colombia National Food and Drug Surveillance Institute (INVIMA), a level four World Health Organization (WHO) agency. Another star in our leadership team is Andrés Galofre, our Chief Commercial Officer. Andrés is a Colombian and a co-founder of KHRN. He has 15 years of leadership experience in pharmaceutical marketing, brand management, and distribution of ethical drugs and consumer products in Latin America. Investors haven’t heard much about our cosmetics lines but we’ll be launching soon and it is going to surprise a lot of people.
INVIMA is the group that has to approve our pharmaceutical products and the relationships we are making with our cosmetics work will help us when the time is right. We have made inroads with the medical associations which is a key part of the pharmaceutical challenge. We have initiated contact with 3,000 doctors in one way or another for our pharmaceuticals before anyone has even had products approved but we are there and we are ready. This is important because physicians won’t prescribe anything to their patients that the associations haven’t already approved.
Another of the exceptional persons on our team is Dr. Maria Fernanda Arboleda, Khiron’s Medical Director. She was born in Colombia, educated in Mexico and is currently the head of Chronic Pain, Palliative Care and Cannabis Research at McGill University in Montreal that ranks 1st in Canada among medical-doctoral universities and 18th in the world. Maria Fernanda will shorty return to Mexico with Khiron where she will head up our doctor education program.
I think of Latin America as a full time job. You can’t have someone trying to do something in a warehouse in Ontario in the morning and dealing with growing in Colombia in the afternoon. It requires all your focus. So we have and are committing the time and resources to do this work and it will pay dividends for us.
LTB: Let’s pretend it’s now July 2019, one year out, and we’re looking back at what you’ve accomplished. What are some of the milestones you expect to see?
Chris Naprawa: I think we will have had first commercial production of medical marijuana, we’ll have commercial sales of medical marijuana and related products, we will have fulfilled our first patient prescriptions of medical marijuana, we’ll be in multiple jurisdictions and we’ll have built a sizeable moat around our business. But those are just a few of things I think we’ll get done in the next twelve months.
LTB: What about on the capital markets side?
Chris Naprawa: I think you’ll notice a change in our share registry. We want to establish relationships with capital partners that will not only help us finance our near term growth but will be there to support us in the long term as well. I’m talking about getting some institutional shareholders. And I don’t think it’s out of the realm of possibility that we will have made one or more strategic partnerships at the top.
LTB: You mean like Constellation Brands and Canopy Growth?
Chris Naprawa: In a very general sense. That sort of relationship.
LTB: I was very pleasantly surprised when former President of Mexico Mr. Vicente Fox Quesada joined your board of directors. Can you give us some insight into how that came about?
Chris Naprawa: I think it speaks to the quality of people we have at Khiron. This wasn’t a chance meeting or some kind of fluke. We want to be the largest medical cannabis company in Latin America and you can’t be that unless you have a strong presence in Mexico. So we made a list of people we wanted to help us get there. Mr. Fox was on our list and the list of several others. In my opinion, after meeting Alvaro and Andrés and Juan Diego and Maria Fernanda and the others, he came to the same conclusion I did. This is an exceptional group of people and I want to be a part of it.
Mr. Fox is passionate about the space. He knows just about anyone who is anyone in Mexico and he can open doors and make introductions. He is a center of influence who also brings a certain amount of celebrity and cachet. He is going to be an important asset for us.
LTB: Why Colombia and why now?
Chris Naprawa: if we could go back in a time machine and know then what we know now, I think most people would agree that things might have been better if they had been done differently. The road map to success would have been a country where the Federal Government is strongly in support of medical cannabis in a region where there is a massive population with health issues that require treatment. You would make sure the medical associations were onside and there were programs supporting their doctors with strong educational resources. Finally, it would help the companies if there is less competition. I’ve just described Colombia, Latin America and Khiron. There’s a reason we don’t grow coffee in Ontario.
LTB: I’m a cannabis industry and company analyst. What do you see for Khiron over the next year?
Chris Naprawa: Khiron with a market capitalization of around $50 million sells at a deep discount to some of our direct competitors. Given the people we have and the headway we are making, I think we should trade at a premium. Admittedly I’m biased. But a competitor of ours just raised $300 million; another trades at a market cap of about triple ours, the world’s largest cannabis company just invested nearly double our market cap in unlicensed assets. There is a huge disparity and the main difference between them and us is they have a handful of large financial partners who support them. We can do the same. In the next twelve months months, we hope to be valued on our merit and our results.
LTB Conclusion: we share this vision of the future with Mr. Naprawa and Khiron. As he said and as we said, it’s the people. Khiron’s recent additions strengthen an already superior team: internationally recognized medical cannabis specialist, Dr. Maria Fernanda Arboleda, Khiron Medical Director, Chris Naprawa, Khiron President and former President of Mexico Mr. Vicente Fox Quesada, Director of Khiron. This interview summarizes why we like Khiron (TSXV: KHRN) as an outstanding investment in the cannabis space.