Khiron (TSXV: KHRN) represents an outstanding buying opportunity

QUESTION: Last week you reported on the setback created by the Mexican government that cancelled all of the CBD product import licenses. You said, “…KHRN reported that all licensees of CBD products will be asked to reapply. I liken this to a similar event in Colombia following last year’s election. The market basically ignored the news and we should as well.

The market has not ignored the news and Khiron (TSXV: KHRN) is down a lot this week. Do you think we should continue to ignore this news?”

M. de G. from the Netherlands

ANSWER: Let me begin with an apology. I try very hard to make sure the things I write are clear and in this case I failed. I meant the market ignored the news in Colombia in 2018 when the stock was around $1.25 a share and now it’s over $3.50 per share having been over $4.00. So I was talking the longer term. Not the shorter term effect. So I’m sorry for the confusion.

As a result I think the correction in Khiron’s share price today provides an outstanding buying opportunity just as it did in 2018. So I would jump on today’s weakness as an opportunity to buy at very attractive prices.

By a happy coincidence, Chris Naprawa, President of Khiron Life Sciences (TSXV: KHRN) was interviewed recently and much of his commentary related to the situation in Mexico. At the same time, he gave us some insight as to how Khiron is taking up the challenge of becoming a player on the world stage.

This is my synopsis of what he had to say.

The situation in Mexico is an old government that shortly before going out of power, approved 57 cannabis based products of which Khiron had three. The new government having submitted legislation to legalize medical and adult use cannabis is undertaking a product review to make sure the old approvals align with the new regulations. It is very similar to what occurred in Colombia, Canada and even Germany. Sometimes governments go through product reviews as the legalization process changes and broadens. What we’re talking about in the new legislation is full legalization as compared to only medical before. Now we are talking about cultivation and import/export of products including medical and adult use. So it’s a much broader scope and we expect reviews from time to time, we’re comfortable with it, we understand it, we’re participating in it and we’re not worried about it. We’re actually quite excited.

When we think about adult use marijuana in Mexico by just the tourist market combined with the opportunity to be there first with brands that American tourists recognize, that would be like having access to and a leadership position in a “Top 5 State” in the United States. Consider the millions of tourists who go to Mexico and seeing recognizable American brands they trust.

There’s no real opposition at all in Mexico right now but we haven’t seen the final legislation. What was tabled was, as former Mexico President Fox says, the whole enchilada. It’s everything, including THC and alcohol and edibles and everything. Both sides of the bench are very much in support. The voters are very much in support. That’s why we want to be well-positioned when it starts.

Originally, we thought that legalization in Mexico would begin by the end of the first quarter. But that’s been pushed back with the product reviews so it’s looking like a second half event. But we have lots to do in the meantime. We want to find out which part of the government will manage the process, which part will approve products and regulate and inspect them. So we’re watching this carefully. In the meantime, we just hired a fabulous country manager for Mexico, we’ve got people there right now such as Maria Fernanda and President Fox, of course. We just held the very first medical symposium for physicians there about three weeks ago in Mexico City; it was an unbelievable success. We’re holding CannaMexico that we’re co-sponsoring with Central Fox, the presidential library; that’s happening at the end of this month, 24th and 25th, in Guanajuato. That’s going to be a great time to talk about all these issues. We’re going to have a regulatory forum so everyone will get to hear what’s actually happening in the real Mexico, outside of Twittersphere.

So you know, we think the toothpaste is out of the tube and this is a global phenomenon, not only in Mexico but around the world and we’ll see where the ultimate global platforms are built from. Are they built from Canada, are they built from the US, or are they built from elsewhere? We think we have an equal shot as anyone of making a very big impact on the global cannabis market. If you look at the Mexican market, pick another product category – cell phones, beverage, automotive, whatever – they’re kind of number 11, 12, 13, 14 in every single category in the world; why would this be any different? If you include the massive 365-day tourist population in Mexico, that’s a really, really attractive market to us, as well.

I think long term, so the global pharma, global consumer packaged goods (CPG), that’s who we have our eyes on long term. You know, people are now just entering Colombia and we’re already in Peru. When they come to Peru, we’re already in Chile. When they’re there, we’re already in Brazil and Uruguay. And certainly we are, there’s not a lot of people in Mexico yet, and they’re not really understanding that opportunity. And by the time they figure that out, we’ll be in multiple countries in Europe. That’s how we are thinking.

On the investment side, when you talk to professional investors and you come to an agreement that this is an international opportunity and it’s about execution, it’s about people, and they look at different companies across the spectrum, and one is $10 billion and one is $350 million, and they have similar execution capabilities, similar accesses to capital and to people, Khiron is a compelling investment to some people.

To see the complete Chris Naprawa interview on Midas Letter Live (here).

I think if you have the time to listen to the whole interview, readers will understand why I am such an enthusiastic supporter of Khiron President Chris Naprawa based out of Toronto and, of course, Alvaro Torres located in Bogota, Colombia. The stock has done exceptionally well in the less than a year it has been trading on the public stock exchanges. But you’ve only missed the boat if you don’t get on. I think the stock can do again in the year ahead what it’s already done in the year just passed.