Khiron Life Sciences Corp.

Thank you for joining us here today. I am Chris Naprawa. With me on the webcast today is Alvaro Torres, Chief Executive Officer, and Joel Friedman, Chief Financial Officer, and I am Chairman of the Board. Just before we begin, some forward-looking statements. Please note the following caution respecting forward-looking statements, which is made on behalf of Chiron Life Sciences and all its representatives on this call. The statements made on this call will contain forward-looking information that involves risks and uncertainties, including those introduced by COVID-19 pandemic. Actual results could differ materially from the conclusion of the forecast or projection of the forward-looking information. Certain material factors, assumptions were applied in drawing the conclusion and making the forecasts and projections reflected in the forward-looking information. additional information about the material factors that could cause actual results to differ materially from the conclusions, forecasts, and projections of forward-looking information forecast reflected in the forward-looking information contained in the Chiron Life Sciences filings with the Canadian and provincial securities regulators, which are available on CDAR on the website cdar.com. Now, with that, it's my sincere pleasure to call on Alvaro Torres, CEO and Director.

Thank you, Chris. Thank you, everybody, for joining in. Good morning. This is our first call for the first quarter of the year. I would say that we're very excited about the results that we've been able to produce, and particularly in the path that we're going forward with this. So four years ago, we founded this company with the goal of improving the quality of life of patients and consumers all across Latam and Europe. Our vision is to reach one million pages and we want to do this in a sustainable manner, being able to change as many lives as possible with a very unique approach as a B2C type of company. I think despite all the obstacles we've had, particularly the last 15 months, we've been able to start showing tremendous growth, which I think is starting to be a guideline of where we're going to be in the future. So, for looking at the first quarter and the overview, what we've been able to accomplish, we're able to present revenues of $2.8 million in the Q1 of 2021. That is 49% growth over Q1 2020 last year and 13% growth over last quarter. I think what's interesting about the are attributable to medical cannabis, and that starts to show the trend of what we're building in terms of how our services revenues are becoming a platform for growth of medical cannabis. This last year, cannabis revenues were 5% of our entire revenues for the year, and now we're turning to 20%. We had a record quarter in terms of gross profitability, $1.1 million before fair value adjustments, and that's 171% growth over Q4 last year and 149% over the same quarter of 2020. And we're particularly mindful because we're still in the middle of this pandemic. I think what's interesting that we're able to start seeing how medical cannabis profits, which are for this quarter and have been for the last 18 months about 90% gross profits. And that's now becoming a very big part of our profitability as a company with 45% of our revenues coming from medical cannabis. I'd like to point out that we started sales in Colombia last year in March. We are now selling four countries, Colombia, Peru, Germany in the first quarter, and the U.K. And our plan for this year is to continue to expand that into Brazil and Mexico. So this is how we look at how the growth of the company has been growing. that we have been experiencing, it gives me a lot of optimism about the way that we're going and how our business is building in a sustainable way and growing very, very fast. Look at what's happening in Colombia in particular, which is the first country where we started having medical cannabis sales. We'll start to see that the number of patients that we've been able to grow We've had more than 7,500 patient prescriptions in the first quarter of 2021. That's 120% growth from Q4. As you look at this trend, you're starting to see that we are on the right path in an exponential manner. And we're really just starting to scratch the surface of what can be accomplished in Colombia, which is the first country where we start sales. And the more positive we feel about Colombia, the more positive we feel that our business model is going to be able to be translated into other countries like Panama and Europe. So far, our expectation is to be able to fill and sell more than 20,000 prescriptions by the end of May next week, which is a tremendous accomplishment, particularly under the circumstances that we have had so far. If we look at what has been driving that growth, it's not happening by accident. 60% of those 3,500 units that we were able to sell are coming from insurance companies. And that is three times as much as we had in Q4 of last year. After that, we talk about how good the product is doing for the patients. And when we have patients that are saying 90% of our patients are improving their primary condition because of the product that we sell, that's creating a model around our business as well. When we are able to talk about how do we convince more insurance companies, right now we're only talking to one that has been covered. And now we're in the plan of being able to convince the rest of the insurance companies in Colombia to include the protocols to include medical cannabis. When we start to show them that after these 12 months, we have patients that are able to save, with our program, up to 60% of the annualized cost of treatment for things like neuropathic pain, that is starting to become a real appealing news and really appealing conversation with insurance companies, which gets me very excited about how we're going to be able to continue our growth and be able to expand our insurance coverage basis. In Colombia, an average patient of neuropathic pain costs an insurance company of almost 6,000 Canadian dollars a year. And now we're proving and showing the real-life data to insurance companies that we're able to save 60% of that cost. We now have 10 health centers and satellite clinics in Colombia, three main in Bogota. We've been opening satellite clinics in major cities all across Colombia. And that is starting to also show the growth that's going to fuel our business in the next couple of years. And at least at last and most importantly, the retention that we're getting from our patients. When we're able to talk about 50% retention rate, You're talking about sustainability, this growth that we're experiencing, and the one that we will see in Q2, Q3, Q4, and next year are happening because we got insurance growth, because our patients like the product, because there's a retention rate. And that is the basis towards a sustainable growth of the company. So I think all these things have been working out for the last 15 months, but I would say Q1 starts to really show that all these things are coming into play. And this growth that you're seeing here is the type of growth that we are anticipating for the rest of the year and that we will anticipate that we can do in the rest of the countries that we are targeting. So when we talk about Colombia and being that proof of concept, I think we're in a very unique position to show that we have a very unique business model that is replicable, that is very hard to copy from somebody else because of the obsession that we have on this type of metric. When we look at the rest of Latin America, what we have been doing what we were planning to do. I think Peru in Q1, we had 175% more prescriptions than in Q4 of last year. And with this growth, that's why we decided to open our first clinic in Peru. This will be Serenia's first foray into international markets. As you can see below, we are opening the clinic next week. The advertisements, the branding, all of that is already starting to happen. In this case, we partnered with a leading clinic in Peru called Montezur. This is a clinic that has more than 91 doctors with service units such as oncology, dermatology, traumatology. And this is going to be replicating our business model, being able to capture demand, being able to bring in and start converting medical cannabis patients with medical cannabis. Just a couple of weeks ago and a month ago, we were able to start bringing doctors from Peru to Colombia, to train and know how to prescribe cannabis, the Chiron and the Serenia way in a responsible manner. Now all these doctors are going back to Peru and they're going to be replicating their business model in a country that's, you know, 35 million people. So very excited about, you know, making our company the first medical cannabis clinic with international operations. I think that's the type of things that make our company thrive. As I said before, we're thriving to get into Mexico and Brazil. We have an ongoing medical education program with the Tech of Monterrey. As of today, all the supply agreements, chain agreements have already been in place. We haven't announced it because we've been focusing on how to start execution rather than just announcing what, you know, LOIs and finalized deals for production. But all of those things are in place. And for those of you who have known Carmen for a long time, you know, We have a very unique regulatory understanding and commercial. We know how to get product compliant away from Colombia to other countries. I'm going to do the same in Mexico. We're planning to start opening our Serenia, one Serenia clinic in Mexico starting second half of next year. The same in Brazil. It's our first patients are imminent. We're working on all the supply chain issues, being able to transport the product logistics and such. But we're very comfortable with the timings that we have to start our first sales in Brazil. And at the same time, we're working to be able to open in Sirenia in the second half of this year. So, you know, when I look at what's going to happen in December of this year, we're going to be continuing to grow in Colombia, have our first clinic in Peru that's going to show us the same type of growth we're having in Colombia. and start to get this business model in Mexico and Brazil, with a first-mover advantage that I think it's going to make our company in a very unique, unique, unique position. So when we talk about Latam, it gets very excited about the growth that we've been having. And I would say that Q1 starts to show also what we've been able to accomplish in Europe. We've been talking about Europe for quite some time. I'm happy to say that we had our first sales in 2020. Germany in late Q1. And that is a tremendous opportunity for us, as we keep seeing that our education platforms and everything that we've been working for are starting to pay dividends. You know, this is, Germany will make Cairo's fourth country and the second country with medical cannabis insurance. And, you know, we already started also expanding our offering of different types of medical cannabis packages in the UK. As you know, we are the exclusive LATAM supplier to Project 2021, which has reported the first results of the study, and in some cases, the high THC using Chiron's own THC flower. And these results are amazing, not only because they already talked about the the benefits of medical cannabis against other medications, but also because this is breaking the barriers of doctors and prescriptions. And I think if this company knows one thing how to do is how to educate doctors and convert and making sure that they understand why medical cannabis can be an alternative. We recently exported our generics from Colombia into Europe. I think in the medium term, that's gonna provide us a very significant mode out around the quality of our products. So, you know, as we are now in the middle of Q2, We're very optimistic about the growth in sales in Europe for this second quarter and beyond. We are already expecting more than 300% of growth in sales in Germany as we stand today before the end of this quarter. And that type of growth we're going to keep seeing in those markets. I think that's going to start to show investors and shareholders that these diversification strategies in the time in Europe with a first-world advantage It's going to provide for us a very sustainable growth and de-risk our company from issues such as currency risk and things like that. So when we talk about Europe, we'll be talking a lot about more. Europe is going to start becoming a big part of our revenues and a very big part of our growth for us. And so I think everything that we've been doing with 2021 and with Germany has taken some time, but I think we're on the right track and starting to show the execution and sales that get us very optimistic about how big that market can be for our company. When we look at, as of today, some of our biggest revenues come from our health services that, if you recall, we acquired about two and a half years ago. I think the progress we've been making in this quarter are showing why we're growing. We had revenues of $2.2 million in the first quarter in the clinics. That's up 23% from the same period last year, particularly for a business that's very cyclical. That's very important, particularly if you consider that we're still in the second or third wave of COVID in Colombia. Our gross profit gross margin increased 25%, which is 250% more than what we had in last quarter. And that is happening because we're able, even in these circumstances, And I think that we see this as the company being able to grow our quarterly services. We have 32,000 quarterly patient services this quarter. That's up 14% from last quarter and 20% from a year ago. In the middle of the pandemic with shutdowns and all this social unrest that you may have heard about, I will address in a minute, we've been able to expand our clinics into different cities. We are now opening in Medellin, Cali, Bucaramanga, Armenia, Pereira, Ibagué, And what we're seeing is the appetite and the interest of patients to be able to find a new alternative. And that growth that we've been investing on is going to continue to fuel that growth rate that we just talked about in Colombia. And when we see how we've been able to educate doctors and convince them, now we're seeing 200% growth in the daily prescriptions that doctors are giving for medical cannabis. in only a span of three months and that number has nowhere to go back up because the more evidence the more education we're providing for the doctors and the more retention we get from patients the more willing to prescribe our doctors are because they're feeling a lot more comfortable with the quality of our product with the service we're providing and you know with response from insurance companies so doctors prescriptions are increasing our patient services are increasing and i have to say again and this is happening during the worst time When you think about April of last year when we were doing 88 prescriptions per month, and today we're doing three times that on a daily basis. And how we're going to keep doing that, I think it's very exciting times for the company and the growth, and particularly on the business model that we set out to have from the very beginning since we started this company as a B2C company. So with that, I'm going to leave it to Joel Freeman, our CFO, to discuss some of our financial aspects and cash position and revenue base and cash flow from operations. And then I'll go back just to give all of you an outlook of where we're seeing the company go within the next 12 months and beyond. So thank you. And, Joel, please take it away.

Thank you, Alvaro. Q1 was an exceptional quarter for Chiron with record revenues, record gross profits, and the highest gross margins recorded to date given the steep growth in medical cannabis sales. We continue to prudently manage our balance sheet and expenses as we execute sales in four markets. Digging a little deeper, the company recorded record revenues at $2.8 million in Q1 2021, a 49% increase from Q1 2020, and a 13% increase from Q4 2020. During the quarter, revenues from health services increased 23% from the prior year quarter and were flat compared to Q4 2020. However, gross profits from health services increased as a result of higher service volumes year over year and contributions from higher margin services, such as surgeries. In Q1, medical cannabis revenues surpassed $500,000 for the first time, increasing 141% sequentially from Q4 2020. Quarter-on-quarter growth was supported by the company's expanding clinic network and the introduction of insurance coverage in December 2020. Additionally, we saw continued growth in Peru and the UK and a commencement of sales in Germany. In total, European sales were roughly 10% the total medical cannabis sales. Gross profit before fair value adjustments was 1.1 million, reflecting 150% increase from Q1 2020 and 171% increase from Q4 2020. Gross margins at 36% overall represented a high for the company driven by contributions from medical cannabis sales, which continue to generate high margins. As Alvaro mentioned, in Q1, medical cannabis sales made up 20% of our revenue versus only 5% in 2020. That 20% of revenues contributed 50% of our gross profits. As our future growth is being driven by medical cannabis, these contributions are expected to continue to increase quarter over quarter. Our medical cannabis margins remain high in the 90% range for consecutive quarters. I would point out that gross profits from medical cannabis are mainly a result of sales in Colombia in the current quarter, where pricing has been stable in Colombian pesos. However, approximately 10% of medical cannabis sales and gross profits in Q1 2021 were contributed by European operations, which are accounted for on a net basis, contributing gross margins of 100%. And as Alvaro mentioned, we expect these contributions to increase significantly as we move forward. While sales in Peru increased over 175% over 2020, due to the early stages of the market development, overall contributions were not significant in Q1. Additionally, as Alvaro indicated, we saw stronger margins on the clinic side due to the type of services offered and operating efficiencies. Moving on to expenses, SG&A expenses in Q1 2021 decreased 9% from the prior year to roughly $6 million as the company continues to prudently manage resources with the ongoing pandemic. one notable increase in the quarter related to corp as a result of significant increases in insurance premiums due to market dynamics in the insurance industry outside of the company's control while this expense will continue throughout 2021 i would note that the cash used to purchase the dno insurance flowed through working capital this quarter with an offset to our prepaids so we will not have to incur the cash expense on an ongoing basis throughout 2021 As a partial offset going forward, expense recognition for previously accrued signing bonuses dating back to 2019 ended in Q1 2021. On an adjusted EBITDA basis, Q1 2021 was a $4 million loss compared to an adjusted loss of $5.9 million in Q1 2020 and the loss of $4.3 million in Q4 2020. From medical cannabis sales, which come with that high gross margin, we expect this to continue to trend in a downward state. Moving on to a couple of highlights on the balance sheet. At the end of Q1, the company had $12.5 million in cash and working capital balance of $22.5 million. The net cash used in operating activities before changes in working capital was approximately $5 million which is expected to decrease going forward as sales in medical cannabis continue to increase quarter over quarter and contribute these high gross profits. Changes in working capital and reductions in outstanding obligations including our accounts payable and accrued liabilities contribute to the total net cash used in Q1 of $8.5 million. As noted, this was driven by the one-year impact of approximately $2.4 million related to insurance costs and $1.5 million reduction in accounts payable. Capital purchases were quite minor in the quarter as our significant capital investments are behind us. And now I'll turn it back to Alvaro to discuss the near-term outlook.