In an update to clients on Friday, Kideckel reiterated his “Speculative Buy” rating and $4.00 target for KHRN.
Toronto-headquarterd Khiron, which has core cannabis operations in Latin America including being licensed in Colombia for cultivation, production, domestic distribution and international export of both THC and CBD medical cannabis, announced on Friday receipt of Good Elaboration Practices for Magistral Preparations with Cannabis (GEP) in Colombia, the authorization to manufacture cannabis preparations in the country.
Calling it a hugely important milestone for Khiron, management said it will start filling its first prescriptions of full-spectrum, high CBD formulations within days.
“With this GEP certification we begin a new phase in commercializing our medical cannabis product pipeline and towards meeting our market potential. We have been preparing for this day for three years,” Khiron CEO Alvaro Torres said in a press release.
“From day one our mission has always been to model our business on serving patient needs, and now we are delivering on that focus, targeting the millions of patients in Colombia who have the potential to benefit from medical cannabis.”
Kideckel called the announcement expected while at the same time attributing it to the company’s ability to progress according to plan.
“We expected Khiron to commence its medical cannabis sales in FY2020. Therefore, we believe the Company is progressing well through its regulatory and operational milestones, which demonstrates management’s ability to execute,” Kideckel said.
Khiron also provided an update on its operations vis a vis the COVID-19 pandemic, saying that it will concentrate its focus on the Colombian medical market for the time being and has suspended the construction of cultivation operations in Uruguay while significantly reducing sales and marketing spending for its CPG segment in the European and US markets.
“With worldwide efforts underway to manage the spread of Covid-19, I wanted to personally add that Khiron is in discussions with regulators in Colombia with the aim of ensuring that the Company is doing everything it can to assist authorities and communities with Covid-19 suppression efforts,” Torres wrote.
The company also reported that Khiron and Dixie Brands have mutually agreed to terminate their joint venture, announced in January 2019, which was aimed at bringing cannabis-infused products to Latin American countries. The stated reason for the termination was the merger between Dixie Brands and BR Brands.
On the joint venture announcement, Kideckel said, “In our view, the JV termination has no material impact in our previously published estimates for Khiron as we assume medical cannabis to be Khiron’s core revenue-generating segment, and we had not assigned value when forecasting sales from the US for the CPG segment.”
For 2020, Kideckel thinks KHRN will generate revenue and adjusted EBITDA of $29.6-million and negative $4.7-million, respectively.
As of publication date, the analyst’s $4.00 price target represented a projected 12-month return of 770 per cent.
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