Khiron Life Sciences has an upside of 627%, AltaCorp Capital says

In a tough cannabis environment, Khiron Life Sciences (Khiron Life Sciences Stock Quote, Chart, News TSXV:KHRN) is set to capitalize on the significant medical cannabis opportunity in Latin America, according to AltaCorp Capital analyst David Kideckel.

In an update to clients Thursday, Kideckel reiterated his “Speculative Buy” rating and C$4.00 target for KHRN, which at press time represented a projected 12-month return of 627 per cent.

Shares of Khiron bucked the trend on Thursday. With the rest of the market skidding, the stock climbed on the company’s announcement it has received approval to cultivate 9.3 tons of THC from the Colombian Technical Quotas Group.

The approval, which followed news earlier this month that the Brazilian Health Regulatory Agency (ANVISA) had authorized for Khiron medical cannabis product to be imported into Brazil on an individual patient basis, effectively gives Khiron 17 per cent of Colombia’s full quota for 2020 — in total, Columbia’s production quota of 56.2 tons of medical cannabis represents about 30 per cent of the worldwide legal supply of high-THC medical cannabis.

Khiron said it would begin cultivation activities immediately in its Colombian facility, which has a capacity of 45 tons per year.

“We are very satisfied to have been awarded 17% of Colombia`s total production quota for 2020. This continues to demonstrate our regulatory expertise and the trust that the Government of Colombia, and the Ministry of Justice has on our business plan,” said Alvaro Torres, CEO of Khiron, in a press release. “For the last three years, Khiron has been a leader in Colombia by driving regulatory milestones which place the Company on a path to imminent sales of medical cannabis in Colombia and improving the lives of
million of patients in the country, Latin America, and Europe.”

Kideckel see the development as good news for the stock and company.

“Overall, we view this announcement as positive since it assures Khiron will have supply to meet its previously announced strategic goals. As such, we believe the Company is progressing well through its strategy to provide medical cannabis in Colombia and internationally,” he said.

“As highlighted in our initiating coverage report, we expected Khiron to receive its quota for commercial cultivation of High-THC cannabis strains in FY2020. Therefore, we believe the Company is progressing well through its regulatory and operational milestones, which demonstrates management’s ability to execute,” he added.

Kideckel thinks Khiron will generate fiscal 2020 revenue and adjusted EBITDA of $29.6 million and negative $4.7 million, respectively.

KHRN climbed from a dollar a share in mid-2018 to over $4 per share by early 2019. Like the rest of the cannabis sector, the stock fell over ensuing months, ending 2019 down 31 per cent. The losses have continued into 2020 where KHRN is now down 46 per cent.

Earlier this month, Khiron announced it will be conducting a share buyback for a total of five per cent of its outstanding shares. Management wrote the buyback was spurred by the currently sagging equity price which “does not accurately reflect” the company’s value.

“The firm believes that conducting such buybacks while in a growth stage represents an appropriate use of the firms financial resources, and that it will improve shareholder value,” management wrote in a February 11 press release.