Khiron Life Sciences Corp.

Good morning, everyone, and welcome. It's Chris Naprawa here, Chairman of Chiron Life Sciences. I'm joined by Joel Freeman and Alvaro Torres here to answer your questions and present our Q3 results, which went out on the wire. last night. Just as we get into this, we'll give you a bit of an update, and as always, we'll answer as many questions as we can. There's a Q&A box in the bottom left side of your screen, which we will try to get to every single one, as always. We also remind you that we might make some forward-looking statements, and we refer you to the disclaimer in the presentation for all these types of presentations. Just quickly, as we get into it here, I'm going to turn it over to Alvaro and Joel. But, you know, what we said to you in the last webcast is that Q2 would mark the low watermark of the company's history, and I think that is true. I think the top line was up about 15% or so quarter on quarter. I think you can expect something similar or better than that this quarter as well. You know, we always have to go back and present our results. when we're still struggling through the heat of the pandemic. But since then, we've had some very, very good results, and Alvaro and Joel will share those with you. You guys also know that we did raise money in the last couple of weeks. There was a brief window open, and given COVID and uncertain times, it was just very, very prudent to take that cash and have everything that we need to grow the business over the next few years. And these are very exciting times for us. We've only been commercial for – uh, seven months, you know, selling cannabis in Columbia. We've learned a lot. We are getting way better at it. Uh, and that is culminated in our announcements in both Mexico. And now today in Medellin with, uh, announcing a clinic opening there, you're going to see a lot more of this type of clinic, uh, business from us. You've seen this operate very, very well in other jurisdictions, uh, like Florida, for instance. Um, so we have, we have, um, uh, We have a lot of great results that we think we can see from that model. It's a very, very capital light model. And with that, I'm going to turn it over to Alvaro to give you a bit of an update.

Thank you, Chris. Well, hello, everybody. Good morning. Thank you so much for joining us today for this webinar to discuss our Q3 financials, what we have been doing the last two months. So after the Q3 ended, where we are today and where we're headed. So I think Q3, as Chris said, you know, we... It's been tough. It was tough for the company and all across the pandemic and how these things affected us. What I'm most proud of is the fact that we were able to rebound so quickly and start showing that growth back up from Q2 in which we were just starting to sell medical cannabis. where we got the pandemic shutdowns in Colombia. Just to give you an idea of what that meant for us back in Q2, in February of this year, we were seeing about 9,000 patients a month in our two clinics. Then in April, in the middle of the Q of the second quarter, that dropped to 4,500 patients that we were seeing a month because you can understandably understand the issues regarding the pandemic and the social distancing. But I think the fact that this team was able to go back all the way from 4,500 to more than 9,000 patient services by September 30th, that shows a lot of resilience and shows that all the strategies that we took during May and June and July started to play well. One in particular was the opening of our new clinic, Serenia, in Bogota. It's a wonderful 14,000 square feet clinic, which is now sort of the anchor of the strategy for the company. The implementation of telehealth, which now accounts for almost 15% of all our consults. And that allows us to go back to our clients, insurance companies, and start talking about how we can recover down from that shutdown in April. I think the results that you're seeing on Q3, on the revenue line, on the clinic business, it started to show that, you know, we were able to recover from that. From what we can tell, you know, October and November, we are expecting additional growth on the clinic business. And this is all during the pandemic levels, and we're seeing 9,000 patients a day in Colombia. And I think it's very important for me to point that out, because in the end, you know, these things will eventually end, you know, normality will return. And I think we're extremely well positioned today to keep growing our business. So I'll start on that note, on the difficulty of how it was, but also how proud I am of everybody here that we were able to resume surgeries, that we were able to implement telehealth, that we were able to start again seeing the number of patients that we were looking for, that we had before the pandemic. But it's true that we also built this clinic and the telehealth so that we could double the capacity of the company and the clinics that we built and that we had bought. So, of course, now from now on, it's now even the pandemic, how do we expand our services? How do we keep talking to insurance companies? How do we keep increasing the funnel of patients that are coming to our clinic? I think the results, you know, the... less the exchange rate impact is, you know, more than 20% growth. And that's, you know, for me, considering the situation, something that's very commendable. And the fact that we're also now already seeing that worst part of that pandemic, we can sort of put behind us, of course, with these things you never know. We hope God knows when the vaccine will arrive and such. But The fact that we've been able to do this in the middle of the worst times of the crisis and grow, I think that's very important for us because that shows that we have the right services, that we have the right patients to trust us and the doctors to trust us as well. So from that follow comes our second line, which is, I would say, the most interesting part of what we've been seeing is the cannabis prescriptions. And I know it sounds like it's all a small number. We're talking about $110,000. But I want to point out a couple of things in there. One is we've purposely talked about how our strategy is based upon the clinic business, how we look at what's happening in Florida, what's happening in the U.S., that vertical integration that we're allowed to do in most countries, how that's going to be allowing us to be able to have a dominant position. Not only a dominant position in terms of competition and access to the demand of patients, but also on our ability to sell these products and gain a lot much larger margins than we would get when we sell it outside. We are seeing that if you look at the financials on what the gross margin of these products are. And we can talk about those gross margins because we are not here to sell bottles. We're here to sell services. And for any of you who may be Colombian and maybe have been able to access Serenia, you will see that all we focus about is access. When you think about a company that worries so much about having the right telehealth access on the right platforms, how easy can we make it for a patient that needs cannabis to have it? That's what we have been doing all three. We started sales on March 19 of this year, the day before the pandemic, the shutdowns in Colombia. And, you know, I'm not a man of excuses. So we started looking at how do we improve, how do we grow, even with what's happening here. I think we've shown that a 450% growth over the quarter is very significant, not because of the number and what is the number today, but that is telling us what's happening in the future. And that tells me two things. First of all, this is working. This is the medication that people need. A couple of weeks ago, my team reported to us our first results from observational trials that we've been running at the clinics with more than 400 patients. And to see that after three months of treatment, more than 92% of the patients are feeling significant improvement in the primary condition, that tells me that we are on the right track, that we are doing the right product, that we are asking the right questions, and that we're training the right doctors. When we started back in March, we had our five doctors who were writing prescriptions. Today we have more than 25 doctors in the clinic writing prescriptions. We have doctors who are writing more than 20 to 25 prescriptions a day. We have doctors that are writing one to two. And so what we're working on every day is how do we keep improving the knowledge of our doctors and take Serenia as that platform which we can build upon with that vertical integration. And I think that Q3 showed us that that started to work, that we have a lot of patients, that more patients are coming. It took us 12 to 14 weeks to get our first 1,000 prescriptions. And now we write 1,000 prescriptions every two and a half weeks. And it will be just a matter of time before we can get 1,000 prescriptions a week. And then that growth is going to be based on the fact that we are growing our patient attentions. We have to focus a lot on how many more services we can offer for insurance companies to keep sending us patients. We have to think about how many doctors are prescribing and how to improve that prescription rate. But when we start to see internally how our own doctors are reviewing the evidence that we're presenting to them and saying, I'm believing this more and more. We do see this noble effect of what's happening. And then you start seeing the word of mouth and how can we open serenity in our patients, which is why today the announcement we're going to open that next week in Medellin, which is a 4 million people city. And the reason we are doing that is because we are seeing that more than 25% of our patients today are calling from outside of Overland. So there is an opportunity. We do have a framework in which we are making sure that we improve the quality of life of people. And if we just keep growing at 10% on these prescriptions every month, in the next two years, we'll be doing 35,000 to 40,000 prescriptions a month. And then, you know, how do we take that model and multiply it in the countries that we're targeting? We recently announced that's how we're going to start in Mexico. Each strategy of vertical integration is very unique. I don't think there's any company in this business in this region that has thought about it that way. I think the more we see encouraging results in the United States, companies have been doing this for four years. extremely successful now. We just started six months ago with a strategy that allows us to capture our patients. I think that's very interesting. So we're going to see, again, growth this quarter on cannabis prescriptions. We're going to see how we're going to grow Serenity outside of Bogota, and that gets us very excited. When you look at the say at the well-being division uh you know a couple of months ago we talked about how difficult it was and how many times we've covered the large new products so what we've been working on the last you know three months and the next three is to position ourselves in the countries where we have been approved so that when the pandemic and shutdown stop, we can get ready to launch. So we purposely have not invested a lot of capital to be building the brand of Serenia. It's a day of CUIDA. It's been there. It's a really great brand. It's a product that's approved in Hong Kong, Spain. The European Union just approved CBD products as non-narcotics. That's a tremendous advantage for us for that type of product. We already have the product in the States, but no, we are also in the mode of wait and see, because I think we've built something really good. We cannot be in the middle of this pandemic trying to go everywhere and let's use our capital where we have to and where we can get the most value. So we will see the reactivation of Cuida probably second half of the Q1. and most likely in Europe and Asia. When those things start to happen, I'm very confident that they will. We're going to be talking about great things about why we build a global drive like that. But of course, the pandemic today gives us a lot of challenges of where to open and how to open it. But the more we rely on the digital strategy, the more we rely on distribution partners that have the know-how of the market, I think we'll be able to get there. And as you can see, we closed the quarter with a strong cash position. We've said that we've been managing our cash. We have been doing that despite all of what's happening. And the quarter-on-quarter growth that we're seeing, of course, is not yet at the level that we would like. But I just want to know how important it is, everything that we're building. And not only that, how important it is to me that that is starting to happen. We recently announced the entrance of Dr. Juan Carlos Echeverri to our board of directors. We announced that very recently, former CEO of the Coquetel, which is Colombia's largest company, and the former Minister of Finance. I think one key takeaway from our conversation with Juan Carlos was, where is the future of the cannabis industry is going to go? And to be honest, the more I see the future of this industry and this company, I am more and more saying that it's got to be all about patience. It has to be all about patience because there's plenty of supply out there. There's a lot of companies that are trying to sell the same product to everybody else. That is today creating a price compression unlike things that we haven't seen in a while. And the more we focus on the value added to the patient, the more value we can bring and the more close to our profitability we will be. And that conversation is going to happen all across Latin America. I think 2021, and I've said it in the MJB's conference, 2021 is going to show that all the countries that we're targeting are opening up. We already started selling in Peru about a month and a half ago. And, you know, the results in Peru are very encouraging because we are selling more in Peru than in Colombia, where we started, despite the fact that we don't have a clinic in Peru. That doesn't mean that we're not going to look at a way to launch Cerenia there and start using a Cerenia clinic as a launchpad for the rest of the region. Last week, we started a new program that's very interesting for us that's going to drive more doctor prescriptions in which we're now using Cerenia as our internship model. So after training doctors, we send the doctors to Cerenia to stay with us for two days so that they can see a clinic that does 80 to 90 prescriptions a day and grow it. So Once we start leveraging that more, that's going to be leveraged across the region, a lot of people are calling because the business model that we've built, the knowledge that we have built with Serenia is something that, you know, honestly, I don't think many people have in the region. So it's going to be up to us to see how we deploy the capital that we've been able to raise to grow that presence of Serenia. In the small formats that we're doing in Colombia, I think that allows us to do this very quickly, being able to leverage the hubs that we have in this area, in Bogota, and being able to access a lot more patients. Couple that with telehealth, and it's going to give what we want the most for our patients, it's access. So the fourth part of what we've been working as well, this Q3 and we will see it soon is, you know, affordability. Can patients afford these products? How do we make sure they are affordable for the long term, which is very key to our, you know, sustainability. And today, you know, I think I'm 250% confident that we will get Colombia coverage of medical coverage from the Colombian government. And we've been working very hard on that. I think being named part of the strategic national project allowed us to have that conversation with the Colombian government. I'm very confident that that's going to happen within the next, you know, before the end of this year. And once that happens, we're going to be able to access a lot more patients. And all of this matters completely if you don't have the access to the patients, if you don't have the retail strategy, if you don't have telehealth, if you don't have the doctor's training. So everything we've been working on over the years, we just have to keep doing it and keep doing it better. So, no, but we're going to expect for this quarter that's coming is more growth out of our clinics, hopefully without any issues from the pandemic that may affect that. More growth out of cannabis sales in Colombia and Peru. And, you know, we're going to now very well positioned to start showing interesting figures out of Europe once, you know, this pandemic starts to ease up on the logistics and customs issues of, you know, transcontinental type of shipments. But I think our European strategy is very sound. Our partnership with 2021 is great. We have to work out issues regarding supply and logistics to get to the more patients that we want. But those issues will be resolved very soon as these restrictions start to ease up. But I think that what's more important to us is there's a patient, there's demand. We have a strategy to win there, which is going to be always focused on the patient. And in us is how do we build a relationship? And I know all of that sounds like it's going to take a long time. And, you know, these things don't happen that easily, particularly in the pandemic, but we've been able to do this and grow despite the fact that back in Q2 we had 1,000 cases a day and now we have 9,000. And, you know, we don't believe that once these things start to mix up, what we can achieve without that is going to be a lot more significant. So I'm actually very happy and very proud of what we did. We've been growing and serving our cash. We don't have a lot of assets, which is important. We don't have to spend money on curating hundreds and hundreds of hectares for cultivation. And we are looking forward to next year being Colombia, Peru, Brazil, Mexico, and Germany. And if we keep showing the way that they're doing this in all these six jurisdictions, we're going to see a very good 2021. Of course, there's still a lot that we cannot control, but I guess my point to all the investors and to my team here is that even despite the fact that we cannot control a lot of what's happening today, we've been able to grow and we've been able to show prescriptions. And now we're reaching more than 6,000 prescriptions. And, you know, it's growing. It's growing and patients are very happy about it and doctors are continuously liking it. And it's been, you know, the fact that we're the only ones that have been really doing it uh that just tells me that there's a lot of great success in the future um i think we're still on the first half of the first inning of the world series i think international medical cannabis is a very big opportunity i think 660 million people that those are there and we're where we have a product that's working this is all about speed and it's also about acceleration And so that acceleration is a matter of, you know, when the country is allowed to export, how do we bring that leverage of Sirenia to other countries? How do we dominate those markets? How do we make great margins? I'm not thinking, I'm not saying that 90% of those margins are going to be sustainable all our lives, but certainly the way we look at taking that value to the product and the patient, I think that's what the focus is. is going to do. So, you know, we've reduced, in comparison to 2018, we have reduced our losses. We have reduced our losses in EBITDA. Our sales in the clinic were not as good as we expected as we had last year. But I think that's understandable considering the situation we're living in right now in the pandemic. And I'm more interested in seeing how that growth is happening than looking back and saying, well, yes, we dropped our revenues, but honestly, with the things that were happening in the country and what's happening worldwide, there's not a lot of business out there that are still surviving, and we're in the position that we're actually going. And the most exciting part of this conversation at this company is that We said, this is what we wanted to do. When I started this company three years ago, I said, we want to be a company focused on patients. We're going to pay vertical integration, then that's where the patients are going to come from. And that's exactly what we're doing today. We just need to keep working and growing it, increasing the attention of Serenia, increasing the physical presence of the clinic, try to expand in as many places as possible using these small formats, and we'll continue to see the growth in patients. And the fact that we're actually selling a product that works Not many people talk about that, but I think everything we're building is based on the fact that we actually have a product that works, that we spend our capital to have a product that actually 94% of the patients that take it like it and feel better about it. And that's the type of data that nobody here in Colombia and Mexico and Brazil has today. How do we leverage that data so we can grow? I think that's the biggest challenge that we have as a company. As Chris said, in a very short amount of time, it's not something that we were looking for, just the market conditions were there. And I think in these situations of uncertainty, I think it's better to have the money in the bank to be able to execute and grow. I don't want to be looking behind my shoulder and saying how many months I have left. And that's always a question surrounding everybody in this industry, because in the end, demand is going down worldwide, and there's economic damages, all of these things are happening, and we don't know what's going to happen. But we've been able to do this in the middle of the worst time of the pandemic. I'm very confident we'll continue to grow it. And it doesn't take much for us to keep doing this. Our most sales come from Colombia, but we will soon be entering pain in Brazil. And we're already starting in Peru, and we'll soon be entering Mexico as well. And we are coming to this country that's very sound. And it's also very unique, because in the end, there's only one cannabis clinic in Colombia that has the type of data and numbers that we have. So that being said, yes.

We're just on the sake of time, because some of these are going to be questions that are going to come up here anyways, because I think there's a bunch getting packed up. But maybe just before we answer questions, can we just go to Joel quickly, just to do the highlight on the financials?