Khiron Life Sciences signs MOU with Fundacion Daya
Khiron (TSXV: KHRN) has taken a significant step forward in its quest to become the recognized leader in the cannabis industry in Latin America by signing a non-binding Memorandum of Understanding (MOU) with Fundacion Daya, the holder of Chile’s only medical cannabis license through DavaCann, a joint venture between Fundacion and AusCann Group Holdings. We think this is a very important development in the history of KHRN because it is the first major step toward its objective of being the dominant player in the Latin American cannabis industry. Chile was the first country in Latin America to allow local cultivation of cannabis, it has the highest Gross Domestic Product (GDP) per capita and the strongest economy in Latin American and has greater social acceptance and use of cannabis.
Not only that, this transaction demonstrates once again that KHRN has the ability to enter into agreements with the best partners available. Here is a summary of the lineage of this transaction:
Khiron Life Sciences: is positioned to be the leading integrated medical cannabis company in Latin America. The Company has core operations in Colombia and is fully licensed in the country for the cultivation, production, domestic distribution, and international export of both tetrahydrocannabinol (THC) and cannabidiol (CBD) medical cannabis. We have been recommending that cannabis investors take a serious look at Khiron since the company began trading on the Toronto Venture Exchange in May 2014.
Fundacion Daya: is a non-profit Chilean organization and the leading medical cannabis institution in the country. Its objective is the research and promotion of medicinal cannabis, aimed at relieving human suffering as well as advising on the design of public policies that promote the physical and well-being of people. This is an excellent partner because they approach the business in a manner similar to KHRN through relationships with hospitals, patients, and pharmaceutical distributors.
DayaCann: is a joint venture entity established by Fundacion Daya and its Australian partner AusCann Group Holdings Ltd. DayaCann has been cultivating for two years and holds the only medical cannabis cultivation license to be issued in Chile.
AusCann Group Holdings (Australian Stock Exchange: AC8): develops cannabis based medical products for application in anti-convulsion, neuro-protectant, anti-inflammatory, anti-nausea, glaucoma, pain management, and appetite stimulation areas. AC8 has a supply agreement with Canopy Growth under which Canopy acts as AC8’s exclusive supplier of medical cannabis for the Australian market.
Canopy Growth (NYSE: CGC) (TSX: WEED): is a world leader in the burgeoning cannabis industry that recently entered into an agreement with Constellation Brands (NYSE: STZ) under which STZ will invest a further $5 billion into CGC. Canopy management has indicated its plans are concentrated on international expansion in the cannabis industry.
As we have said, this transaction is consistent with KHRN’s multi-jurisdictional strategy. When I first met with KHRN management over six months ago, Chile was high on their list of candidates but that seemed to be overshadowed when Vicente Fox, former President of Mexico and head of Coca Cola’s Latin American operations joined KHRN's board of directors. While expansion into Mexico is very much in the cards for KHRN, as Alvaro Torres, Chief Executive Officer of KHRN says, "This agreement with Fundacion Daya to enter the Chilean market gives us access to more than 1.8 Million potential patients in Chile, and is consistent with our stated objective of becoming the dominant medical cannabis company in Latin America. Fundacion Daya was selected as an ideal partner due to their deep regulatory knowledge, strong patient relationships, and cultivation capacity through its DayaCann joint venture, as holders of the only cultivation license issued in Chile."
This proposed collaboration and services agreement with Fundacion Daya complements KHRN's stated focus to market high quality and clinically validated medical cannabis products. Upon closing of the partnership, Fundacion Daya and Khiron expect to:
Cultivate a minimum of 5 tonnes of dried flower in Chile exclusively for Khiron to be used to formulate two products targeting patients with neuropathic pain and epilepsy;
Commence clinical trials led by medical teams directed by Khiron and Fundacion Daya;
Manufacture products at a GMP lab to be constructed by DayaCann. It is anticipated that the lab will be completed in 2019; and
Target distribution of products by the first quarter of 2020.
Khiron will provide Fundacion Daya the equivalent of $1 million USD over a period of 2 years
I believe this transaction establishes once again that Khiron is one of if not the leading cannabis company operating out of Colombia and perhaps in Latin America. It is another reason why the significant undervaluation of Khiron relative to its comparables should disappear in the near term.