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spk10: Good morning, and welcome to the Keyron Life Sciences Report's third quarter fiscal year 2021 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded I'd like to turn the conference over to Robert Bloom. Please go ahead.
spk00: All right. Thank you very much, Anthony. Good morning, everyone, and thank you for joining us today. I'm Robert Bloom, and with me on the call today are Alvaro Torres, Chief Executive Officer, Swapen Kakamanu, Chief Financial Officer, and Franziska Kaderbach, Europe President. Before we begin, please note the following caution respecting forward-looking statements, which is made on behalf of Chiron Life Sciences, and all of 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 the COVID-19 pandemic. Actual results could differ materially from a conclusion, forecast, or projection in the forward-looking statement information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusions, forecasts, or projections in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are contained in Chiron Life Sciences filings with the Canadian and provincial securities regulators, which are available on the CDAR website at SEDAR.com. To provide a brief agenda, we'll start with a discussion of the quarter where Alvaro will walk through some of the key highlights before he turns it over to Swapen to run through the Chiron financial results. After that, we'll dive into key catalysts in each market that will drive growth, and we'll wrap up with a Q&A session. Now with that, it's my pleasure to turn the call over to Alvaro Torres, CEO and Director. Please proceed.
spk07: Thank you, Robert, and thank you, everybody, for joining us today. Today we'll be discussing our financial results for the third quarter. These results continue to show how unique and strong our patient-focused strategy is. We are breaking significant revenue and gross profit milestones. This has been five straight quarters of continuous medical cannabis revenues with more than 85% gross profits in Latin America and Europe. At the same time, we are continuing to show a very strong global medical services business that will continue to attract and retain patients, and I think we are just in the first stages of our potential, and of course, I'm very proud of the team who has helped been accomplishing these milestones under very different difficult circumstances worldwide. I mean, I think what we've been able to achieve so far is placing Chiron at the top of this new nascent medical industry in Latin America and Europe. I hope that today you'll be able to see the catalysts that are going to take us to the next stages, next quarter and beyond. So with that introduction, I'm going to ask Suapan, our CFO, to provide more details on the financials, And then myself and Francie, the president of Europe, will return to talk to you about the operational highlights and what we're looking at the next category that are going to continue to fuel this tremendous growth that we're able to show this quarter. Thank you. Swapn, please.
spk06: Thank you, Alvaro. Good morning, everyone, and thank you for joining this call this morning. My name is Swapn Takumani. I'm the chief financial officer for Taiwan. I just want to give you a little bit of update on revenues, gross margins, expenses, and the balance sheet picture. Overall revenue in Q3 2021, the company recorded revenue of $3.5 million, an increase of 26% sequentially, and 83% year over year. Medical cannabis revenue increased 46% for the prior quarter, reaching over $1.2 million in total medical cannabis products, contributed 34% of the total revenues, and 89% of the gross profit. Driven by growth in medical cannabis, the company achieved a gross profit margin before fair market value adjustments of 48% or 1.7 million, reflecting a 425% increase from Q3 2020, mainly due to the contributions for medical cannabis sales with a margin of 89% in the quarter. Gross profits for medical cannabis are mainly a result of sales in Colombia, where prices have been stable in Colombian pesos, while approximately 35% of medical cannabis gross profits in Q3 2021 were contributed by European operations, which are accounted for on a net basis, contributing gross margin of 100%. Now, let me just go in a little bit of details between medical cannabis and health services. First, medical cannabis. Medical cannabis revenues increased 46% sequentially and 996% year over year. Europe represented 31% of medical cannabis revenue, an increase of 75% sequentially. Medical cannabis sales increased due to continued growth in Colombia, supported by the company's expansion, expanding clinic network, and the continued support from insurance coverage, which began in December 2020, along with continued growth in Peru, the UK, and Germany. Latin America represented 69% of medical cannabis revenues. The regions contributed an increase of 36% sequentially and 657% year-to-year. Now, health services. Looking at our health services segment, which includes the revenues and costs from Elance and Zarinia health centers, revenues in Q3 2021 increased 28% from Q3 2020 to $2.3 million. as a result of the reduced impacts from COVID-19 related restrictions, which limited operations significantly throughout Q3 2020. As certain surgeries could not be provided in current period due to restrictions, this has contributed to a backlog of services, which we expect to see contribute to operating activities over the coming quarters. A little bit on the gross profits. I'll just go a little bit more detailed on the gross profits. The gross profits continue to benefit from growth in the higher margin medical cannabis segments. As mentioned a moment ago, 34% of the total Q3 revenues were attributed to this segment. Quite significantly, medical cannabis contributed 64% of gross profits before fair value of the quarter. In the 90% range, medical cannabis margins remain high and were consistent with the previous three quarters. Gross profits before fair value gains of $1.7 million in Q3 2021, slightly higher than Q2 2021, which had a significant decrease due to the health services segments related to reduced complex surgeries as a result of COVID-19 impacts, as I mentioned about, and the impact of foreign exchange related to the Colombian pesos offset by high contributions for the medical cannabis segment, including a net fair adjustment of $0.1 million and And 1.3 million, the gross profit recognition in the three and nine months ended September 30th, 2021, of 1.8 million and 5.2 million respectively represents increase of 95% and 119% respectively compared to the prior year periods, which included the transition to the company accounting for biological assets at fair value following commercialization. Despite weakness in the clinic segment, I want to highlight that we still achieved consolidated gross margins in line with our highest levels to date due to the growth of medical cannabis revenues. I'll briefly touch on expenses. Expenses, which is basically including G&A, sales and marketing, R&D, and share-based compensation put together. In the three and nine months ended September 30th, 2021, decreased by 14% and 16% respectively from the prior comparative periods as a result of reduction in all categories with exception of research and development, which we have contributed a little bit more in Q3 2021 as the company continues to prudently manage resources with the ongoing pandemic. Total expenses for the quarter have remained consistent with Q2 2021 by decreasing by 1% the previous quarter, Q2 2021, compared to Q2 2021 expenses reduced by 1%. EBITDA and net loss. Adjusted EBITDA loss for Q3 2021 was lower at 3.8 million compared to a loss of 4.7 million for the same quarter in 2020. and adjusted EBITDA loss was lower at $11.8 million for the nine months in September 30, 2020, compared to a loss of $14.4 million for the nine months period of 2020. Net loss for Q3 2021 was lower at $3.3 million compared to a net loss of $6.7 million for the same quarter in 2020, and lower net loss of $13.6 million for the nine months in September 30, 2021, compared to a net loss of $21.7 million for the same period in 2020. Quickly on the balance sheet, looking at our balance sheet, we finished the quarter with a $15.4 million in cash. The loan obligations in Columbia continue to reduce in line with the payment obligations, creating opportunities to leverage our balance sheet to support continued growth going forward. With that in mind, I will ask Alvaro, our CEO, and Francesca, our president, to provide more details on our Q3 operational highlights and the catalysts for revenue growth. Alvaro, off to you.
spk07: Thank you, Swapan. Thank you for that. As I said before, I think these results in Q3 and what we have been able to accomplish in the first nine months continue to show that we have a very unique strategy that's all day and all month capturing more patients, converting them to cannabis and retaining them. And that is what's going to continue to drive our growth in the markets in Latin America and Europe. Every day we see more patients in our clinics and we sell more medical cannabis worldwide than we did the day before. This is happening because we have a commitment to creating access for patients in every country we are in. And we are certainly becoming one of the leaders or the leader in this category in the markets that we're in. In Latin America alone, we sold over 15,000 medical cannabis units, which is almost three times as much as we sold in 2020. And we still maintain very strong gross margins, about 85%, which are a type of gross margins you don't see in the Latin American market yet, except in Cayman. So we're very excited that we've been able to accomplish this. And we're right now selling Colombia, Peru, Brazil, Latin America, and soon in Mexico. And in Europe, we're selling medical cannabis in the U.K. and Germany. In Colombia, as you know, our main sources of revenue are health services and medical cannabis. We continue to increase the total number of patient interactions that we see. In the first nine months of this year, we've already exceeded the total number of patients that come to our clinics from 2020. And we continue to do the work of convincing insurance companies to cover medical care for their patients. All that work has resulted that over 55% accumulated of the prescriptions are covered by insurance. But right now, working with two main insurance companies, we will add more insurance companies to be more evidence on the economics and the health benefits of cannabis start to show up. And this just creates a huge potential upside to the business that we're already doing. And the more outcomes we can show and the more better the patients are getting with medical cannabis, the more retention we can have. Just in Q3 alone, 63% of the patients that received medical cannabis were returning patients. And this means that our growth is sustainable. And the way that we look at the future, it's very bright because more patients that come in, the more sticky we can make our revenues and our gross profits. And of course, our clinics continue to improve their gross profitability and increasing their reach to new patients. Because of this, we are planning to open two more mid-sized health centers of around 3,000 square feet each by early Q1 of next year. They are going to be located in very large shopping malls in other neighborhoods of Bogota, which are becoming huge healthcare hubs for insurance companies' clients. And this expansion will allow us to be closer to our patients, liberate our Xenia flagships so we can focus on the out-of-pocket patients, and expand our capacity by more than what we have today. And this will continue to drive the revenues and the profits of more medical care sales and continue to establish that leadership position that we have in Colombia that we are very positive, we'll be able to translate in other countries of Latin America and in Europe. This expansion is happening at the request of our clients, and we plan to fund, as Swapan was mentioning, this expansion through standard corporate finance tools with Colombian banks who believe in our model and are looking at how fast we are actually growing and how much we're selling and how our operations in Colombia are becoming more cash flow-neutral. And so the more we expand them, we will add more patients and more insurance companies. We will introduce new products in our pipeline and, of course, improve our patient conversion and retention. I mean, today, almost one out of three patients that go to our clinics live with a cannabis prescription. And more than 50% of those prescriptions sold in Q3 were sold to insurance. And 63% of the patients who got prescriptions were returning patients. There is no operational number that Kyrie is looking at that is not increasing day to day. In Peru, as you know, we began sales in Peru last year. In this quarter, our sales increased 50% from the quarter before Q2, and we have seen more than 1,200 patients served year-to-date. In the first month of operations of our clinic in Serenia in September, we could already observe that a doctor in our clinics in Serenia prescribed 11 times as much as an external doctor using the traditional pharma approach, which continues to showcase that This strategy over the last two years of building clinics in different types of formats to attract and retain patients is the way that we're going to continue doing our growth. And that same model, we are now exporting to more countries. Just two years ago, we had only two locations. Today, we have over 15. And we're exporting this model also into Europe, which Francie will get on. In Brazil, we are currently focused on building our first sedentary clinic in Rio de Janeiro. We've already selected the location. We started the permit for constructions. and we're looking to be able to begin operations in early Q1 of 2021. I think we will see great success in Brazil with that clinical strategy. We have the right team, the right product, the right data, and this is the right market. We are now working on the import of our first THC product, just like we did with CBD, and this will allow us to expand our product offering in that market. And lastly, in Mexico, I'm just focusing on Latin America, it's a market that Cairo is very close to, And even though we are not able to provide more details on the growth progress we have done, what I can say is that we are working on the importation of medical cannabis into the country, which nobody has been able to achieve yet. We are establishing and creating alliances with hospitals and health centers all across the country so we can introduce our Serenia brand in their locations, as we did in Peru. And we continue to train Mexican doctors in medical cannabis, not only in theory, but also in practice. bringing doctors from Mexico to Colombia so that they can get trained in our flagship Serenia and Bovota. And that is going to allow us to increase the willingness of those doctors to prescribe once we have the product in Mexico. I am very certain we'll be in Mexico very soon, and we're very, very confident that once we are there, we will be a significant place in this market because this company knows how to prescribe medical cannabis. We know how to convert patients to use medical cannabis responsibly We know how to train and convince doctors. It's a matter of regulations, but I think we are closer than ever to getting those first sales. And I think, you know, just to give it to Francie, who's been doing a tremendous job in European operations, Europe is becoming a more significant part of our business. It represents more than 30% of the medical cannabis sales that we just started not too long ago. And even in these early stages, we see how it's growing, and we see tremendous catalysts for that. But I will ask Francie to give a bit of background on what we're doing in Europe, next catalyst, and why we are so bullish about the European market and our strategy that's been paying off greatly in terms of growth and profits. Francie?
spk09: Yes, thanks, Álvaro. Hello, buenas tardes, and guten tag to everyone. We cannot be more excited about this market where we can be very competitive, bring our strategy into countries like the UK and Germany. In Q3, current Europe recorded gross profits for European medical sales, cannabis sales of more than 370,000 Canadian dollars thanks to our business strategy in the region. In the recent quarter, our sales in the UK and Germany increased significantly quarter over quarter by 70% in the UK and more than 100% in Germany. This was mainly supported by the continued training of prescribers with our in-field Salesforce and our online training platform, Chiron Academy. As a result, Europe accounted for over 30% of the Q3 medical cannabis sales. Europe is becoming and will still continue to be a major driver for growth and profitability in Europe. You might have seen that we just recently announced the opening of Chiron Zirinia Clinics in the UK with the hybrid clinic model. which means that we can both do fully online consultations for patients, but also in-person appointments with medical cannabis specialists. We chose this hybrid model to be able to serve each patient's needs, because for us it has been, from day one, very important that the patient needs dictate what we're going to do. One of the key aspects to our strategy is taking all the real-world evidence we're generating in Colombia in order to persuade doctors of the benefits of medical cannabis and turn them into medical cannabis prescribers. We're also very excited about our first publication on medical cannabis scientific outcomes, which will be published very soon on an index journal. This will create an even greater credibility within the doctors community in the UK and Germany, which will then drive more evidence on our products. So now I want to take a closer look at Germany. In Tier 3, we sold approximately 23,000 grams of dried flour just in Germany. We are proud to say that our high-CBD flour, our Chiron 114, became the leading product in the German high-CBD flour segment. Therefore, what are our future catalysts for Germany? We will definitely continue to train prescribers with our expanding infield sales force. On top of that, we will also introduce new products in different categories very soon, including new cannabis products developed from our Colombian varieties. Last but not least, I want to share one very recent update, which I'm sure many of you already read. The future government of Germany just decided to legalize adult use of cannabis. So what does that mean for Kind Europe? For us, it has been great news. While we still have to wait to see how the final overview looks like, we will still continue to establish and build out our president in Germany and our brand. And while we still execute, we increase our medical sales force and observe the market for new developments and opportunities. And what just this release means for us, it's still a destigmatization of the product itself, which we think can tremendously drive future medical sales scripts because we have to keep in mind Germany is the market where the product for medical use is fully reimbursed by the government. Now leaving Germany, let's move north to the UK. In Q3 of this year, we sold over 10,000 grams of dried flower with our two cannibal flower varieties in the UK. We're glad to be able to say that we've captured almost 50% of the high THC flower market in Project 2021 during this quarter. We also continue to maintain an excellent patient feedback on our quality of product, leading to a buyback rate of 77%. Also, our recent launch of Zeronectomyx in the UK will facilitate further scripts for Chiron products. Finally, Chiron Academy, which is our online medical cannabis e-learning platform for doctors, has been completed by hundreds of doctors in the past, but also in Europe. And this certainly broadens our prescriber base. Coming now to our UK catalyst. We will continue to train independent physicians in the UK through our Cain Academy. In addition, we will also deploy the very same medical product categories sourced in Europe, which we do in Germany, so we can cater the growing needs of patients. We have also expanded our clinic footprint in the UK with our Derenia clinics in the UK, And we have the ability to significantly improve the quality of reliable care and medication that a lot of cannabis patients in the UK are simply unable to find anywhere else. So thank you all very much. We have lots of capitalists coming to continue growing in Europe and to make Chiron one of the few truly global medical cannabis companies. Like in the last quarters, our main focus is on execution to build out our market share.
spk08: Thank you. We will now begin the Q&A session.
spk10: To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
spk08: Our first question comes from Aaron Gray with Alliance Global Partners.
spk10: You may go ahead.
spk11: Hi, good morning. Thank you for the questions and congratulations on the quarter. So first question for me, so I want to start with Columbia. You talked about, you know, two insurance companies today looking to add more. What are some current trends of the timeline of or maybe where you are in the conversations to adding more insurance companies and then maybe if you could provide maybe you know, the market share, those two insurance companies you currently have, how the total market and maybe the total opportunity you have in terms of adding on those additional insurance companies to get, you know, more opportunity to get to patients in Columbia. So I'd love to know about that kind of, you know, TAM and opportunity within the market. Thanks.
spk07: Thank you, Adam. So insurance companies, you know, Cleans has already worked with 15 insurance companies for our regular service. the conversations are mostly about showing the pharmacoeconomic benefits of cannabis to all of these ones. And, of course, there's a lot of things that we can and we cannot control, particularly with the COVID pandemic being such an important part of the insurance company's thoughts. But I can say that our expectation is to be able to add at least one more by Q3 and continue with another additional every quarter starting next year. And so... But you were asking about what that means in terms of our growth. Today, I would say that when we look at the insurance market and what the government approves for every insurance product, I would say with confidence that Tidal certainly has more than 85% of the total Colombian-approved insurance product for medical candidates. Now, I think the opportunities for growth are great because what we also do We have out-of-pocket patients who are coming and paying on their own, and they're also helping us to provide a little bit more pressure for insurance companies to accept those processes and get these processes going on much faster. I think the more information we're able to share with insurance companies, the more positive outcomes we're able to show. That's making the conversation a lot easier. Now, of course, being us, one of the few ones that are actually having these conversations, it takes a little bit more time, but I think the upside is tremendous because just with the insurance companies we have today, we know, we are very certain that we will continue to exceed quarter on quarter on our revenue sales in Colombia. So other insurance companies will be a huge upside for us.
spk11: Thanks for that, Carter. That's really helpful. And then second question for me, it just wants to go to Colombia. It's a little bit different of a strategy you guys have than maybe some of the other Latin American companies that investors might think of when they first think of Latin America cannabis. But I just want to think about maybe some of the barriers you might have to entry if others were to take more of a formulated product strategy. Are there kind of barriers to the licenses and timelines to maybe do more of the clinics and then sell your own product to the patients? Yes. Just thinking about maybe some of the barriers you might have in competitive advantage that you have today and how difficult it will be for somebody else to kind of take that route. Thank you.
spk07: Well, I think the biggest competitive advantage that Chiron has, and we've shown the last year and a half, is that we are extremely focused on generating demand and creating access. So that means that we're constantly creating more barriers of entry because if you're a Chiron patient, not only do you have these products insured, You get it delivered very quickly. You have a fantastic photo quality. We have patient follow-ups to ensure that the patient is comfortable when they're talking about cannabis. We do follow-up on the appointments with the doctors. And we do, I would say, a very good job of ensuring that those patients are being well treated. At the same time, we're providing all this amount of information and data on the evidence of cannabis that we can get in better conversations with insurance companies. And I would say that Even though there will be a time when we can start looking at registering products, which of course we are thinking about it, the main challenge that we have is that patients don't know they need it and doctors don't know how to prescribe it. And that challenge is going to maintain because we're still in the very early stages. So that is to say that I think that advantage that we have built with the clinics and the agility that we have to expand it, it's getting more difficult to try to catch up with a company that's moving so fast. Now, we cannot get complacent on this. And because of this, we need to continue thinking, how do we register products? How do we train more doctors? How do we start stepping outside our clinics? But even today, even to this day, an internal doctor of Chiron can prescribe 20 times as much per month as any other external doctors. Because in the end, they're trying to help the patients to get the prescription approved by the insurance company, and that takes a lot of know-how on that relationship. So I would say that we've been able to deal with this because that was the strategy of the company from the beginning, and I think we will continue to maintain this position for many years.
spk11: All right. Thank you very much for the call, and I'll go ahead and jump back into the queue.
spk08: Thank you, Aaron. Our next question comes from Jack Keating with Research Capital.
spk10: You may go ahead. Hi, everyone.
spk03: Thanks for taking our questions and well done this quarter. My first question relates to Mexico and you mentioned that you're preparing for regulation. I was wondering if you have any update on regulation in Mexico and its timing.
spk07: Hi, Jack. Thank you so much for your question. So when we think about Mexico, we have to separate. There's two types of regulation, medical and the adult use. I will start with the adult use. There's been several conversations lately in the past couple of weeks of maybe a more definitive timeline on getting passing this bill to approve adult use in Mexico. The conversations you hear probably is that they want to get this approved this year. That could change because in the end, the priorities for Congress are always a little bit shifting. Even if that were to happen, there still will be some time required to actually regulate those laws. But of course, for sure, I think that would be a huge market in the world economy when adult use gets legalized. But I don't think the outcomes of that would be necessarily immediate. In terms of medical, I think the challenge today, and I think what's interesting for us is that even though it's already legal for medical, the regulations for import, quality controls, dispensation require a very deep understanding so that we can talk to the authorities and show them what the path is. But I think that the way we've been able to approach the Mexican authorities with our manufacturing partners and to show that we have a unique understanding of the regulation, it's going to get us in a very good position or at least in a first mover position advantage in the next two or three months. I mean, Chiron was the first company to ever sell medical cannabis in Colombia in its current form or the first company to sell in Peru, the first company to actually import cannabis into Scotland. So we have a very good regulatory understanding, I don't think Mexico would be the exception.
spk06: Great, thank you.
spk03: This question might be for Franziska, but I was wondering if she can highlight your biggest competitors in Europe right now and whether you have any market share data.
spk09: Yes, thanks. So I think the biggest competitor is certainly some LCs from Canada still who came in when the legalization happened. But what we're seeing is that even the big ones are losing some market share, and we grow our market share. So in Europe, we had it in Germany, our first product sale in March this year. And since then, we've built our market share to almost 2% of the dried flower market within just the last six months. So this is the data I can share. And in the UK, we're part of this Project 2021, and there we captured almost 50%. of the high Q3 dried flower.
spk03: Awesome. Thank you. Final question. For 2022, I was wondering if you are considering expanding to any new international markets?
spk07: Jack, I think that even though the international markets are starting to open up, the six countries we have chosen to be, Mexico, Colombia, Peru, Brazil, UK, and Germany, provide us a tremendous opportunity. So we will look at these other markets that are opening up on a case-by-case basis, but to be honest, our full focus is to continue building this dominant position that we're building in Colombia and the rest of these countries. There may be other avenues for us to enter without what's called the quote-unquote distraction, but I think if we're able, once we're able to be leaders in these six markets, to basically, you know, Presidency is the biggest market in Europe at that time. So that's what we're thinking right now in terms of expansion beyond that.
spk03: Okay, great. Thanks so much. Well done this quarter.
spk08: Thank you, Jack. Our next question comes from Federico Gomez with ATB Capital Markets.
spk10: You may go ahead.
spk05: Hi, good morning, guys. Congrats on the quarter. Thanks for taking my questions. Just about the margins in the medical cannabis segment, over 85% gross margins, really impressive. But do you see any risk of margin compression happening over the next two quarters, maybe with competition in Colombia or Europe, or do you expect those margins to remain at those levels? Thanks.
spk07: Hi, Federico. I think those margins will maintain steady. because if you look at our business today and the next two quarters, particularly in Latin America and Europe, but in Latin America, we sell 96% of our medical care through our own network. We have, of course, the advantage of being low cost and the advantage that we are selling a high-value product that's now being covered by insurance. When we think about price, we think more about it in terms of how do we make sure that the out-of-pocket patients can continue the program. So we do occasion discounts on longer-term type of patients, but that is because we want to continue to make sure that the lifetime value of that patient increases. If we think about last year when we just started, let's call it the average lifetime value of a patient would have been $120. Today we're talking and we're looking at an average lifetime value of a patient about $450. So that's sort of the question that we see. And I think the more that we think about our own P&E plan, just like we're doing in the UK, where we can actually have a better conversation with the patients to understand what those needs are, I don't think the next two quarters we'll be seeing any significant price compression. And of course, as the markets expand, they could be dropping that in 2023 and beyond. But also at the same time, we've already built a very big position. We're trying to expand into more market shifts.
spk05: Okay, thanks, Albert. That's a great caller. And then in terms of your presence in Brazil and Mexico as well, so you guys are planning to open a clinic in Brazil in Q1. When do you expect sales there to start to really become material to your financials? And in Mexico, I know that you touched on it, but should we expect any sales coming out of there in 2022 as well? Thanks.
spk07: So in Brazil, we've already started selling cannabis to the compassionate care. It's still, as you say, we haven't reported specific sales of Brazil until they start becoming more meaningful. We were planning to expand to start the clinic this quarter, but as you know, permitting and getting the right land and be able to get all the right bank guarantees so we can have those leases took us a little bit longer than we expected, certainly unforeseen, but We are now on track deciding things elective, contracts have been selected. We already started the design process, the build up, and the way that we're doing it is going to be very modular. So we're going to be able to start data operations, those clinics, and start bringing more revenues in early parts of Q1. And I think that's going to show us that Q2 will start to see meaningful results out of Brazil. And if Brazil just follows the same path as Colombia, which we are very confident that we'll do, I think by the end of next year, we will start talking about Brazil a lot more. In terms of Mexico, as I said, you know, we are working on three things. And I say one is how do you put the product there. I think we have a very good idea of how close we can be. But there's, of course, we're talking about regulation and paperwork and documentations. And there are still some unknowns there. But I think the unknowns are the timing. whether it's three months or two months, not on whether we are going to be able to do it. At the same time, we're able to start in Mexico with our first product. We've already started partnerships so that we can set up serenity there. We already have the doctors who are trained who are asking us when is the product coming. And so I think that for sure Mexico will start generating sales in 2022 most likely. We'll start talking about it more meaningful in Q2 of next year.
spk05: Thanks. Congrats again on the quarter. I'll hop back into the queue.
spk08: Thank you.
spk10: Our next question comes from Greg Gibas with Northland Securities. You may go ahead.
spk02: Good morning, guys. Thanks for taking the question, and congrats on the results. You know, you mentioned strong results out of Peru. Just wondering how we should think about the changes there. Could you help us maybe understand – how many doctors have been trained in Peru and maybe what that looks like at the end of 2022?
spk07: Yes. Hi, Greg. So, as you know, we started Peru with our strategy of educating external doctors. I would say that if you look at what's happening in Peru since we started just this year, we've had more than 96 doctors prescribing all throughout the year. sorry, 175 doctors prescribing throughout the year, each one prescribing almost 10 prescriptions per month. The reason we opened the clinic is because we know that in our own environment, we can improve that quite consistently. And if you look at the first month in September, we had three doctors prescribing almost 10 times as much per month as an external doctor, which is why that gets us very excited about being able to deploy our model successfully in a country like Peru, where we know there is more willingness from the patients to try American cannabis. Now, I think when we start looking at Q1, we will start to showcase and be a little bit more detailed in terms of our operational reports of where Peru is going. The way I look at it is we have to look at the growth that is happening and how do we maintain the growth, just like within Colombia, where we started selling in Q2. one of 2020. But certainly the clinical trial is going to be a very important factor for this. We already see that in the first month. And that also means that we can do less effort to try to educate all the doctors possible when we know that we've been able to develop an ecosystem that's been able to be exported. And all of these learnings are just helping us to be able to say, how do we improve that in countries like Mexico and Brazil? But the ecosystem of Serenia, and in the UK as well, the ecosystem of Serenia shows us that we know how to educate doctors in those places, and we know how to get patients comfortable around cannabis and how to improve their quality of life. So Peru will continue to show those results. It's going to be mostly doing bioclinics, and it's exciting to be able to show that this strategy is working in more than one country. which is key for us because we are in places in the Mediterranean, in Mexico, in Brazil, in the UK, under different formats. But it's really all about how do we educate those doctors to capture those patients.
spk02: Okay, great. I appreciate the call.
spk08: Thanks. Thank you, Greg. Again, if you have a question, please press star, then 1.
spk10: Our next question comes from Pablo Zuanic with Cantor Fitzgerald. You may go ahead.
spk04: Yes, good morning. Alvaro, just to try to put things in perspective, right, because I understand early days, you know, this is a group where a lot of people make claims and you're, you know, talking about being a global leader and your medical cannabis sales are 1.2 million, right? So I know that we analysts and investors have to look forward and look at the potential of But I mean, a couple of questions here. So first, when I look at your Latin American sales, about $833,000 Canadian dollars for the quarter, right? And you talk about 15,600 units. Okay, that's about $50 per unit. I'm just trying to get an understanding of for the quarter, right? How many patients bought cannabis, your cannabis products in Latin America? and then if you can help us think how we project that going forward. I mean, are these patients spending $50 a quarter a month? I mean, how many units per month? Just some help there with helping to understand the potential. Thank you.
spk07: Thank you, Pablo. You're absolutely right. We're in the very early stages. I think a sort of welcoming situation. I think what we've always talked about is where the park is going to be, not necessarily where it's at today, but I think the way that we're looking at our business, we are going to be certainly exceeding those numbers quarter over quarter. When we look at, say, Colombia, which is right now the biggest seller in Latin America, there are two things that are happening. In the quarter, we saw almost a little bit beyond $6. 1,700 patients overall. That means that the average ticket, the average bottle per patient is around 1.5, 1.6. So the average monthly ticket is increasing from $50 to somewhere around $75, $80. That means that patients are buying more on a monthly basis. And that is happening because we are able to have more patient retention where 60% of these 6,700 patients were returning patients. And when we look at that projection, we always have to think about what is the monthly new patient acquisition, which today we are looking at 10% to 12%, 15% per month, and continue to maintain that 50% to 55% retention per month, which is now buying 1.5, 1.6 units per month that have been sold at $50. The reason we look so much at expansion of the clinics is is because we continue to see how many out of all these patients that come are living with a prescription. When we started last year, it was one out of 20 patients that were living with a prescription. And today it's one out of three. And the more we expand those clinics and the more we have more patient interactions, you can start to sense that the more conversion we make into cannabis, the more monthly tickets are happening. That's how we're projecting our growth in Colombia. And the same thing is going to start happening in Peru as we have more patients who are returning, increasing the monthly tickets. And these tickets are increasing because of the insurance coverage as well and because the product works. So it's all about how many patients we're seeing, conversion to cannabis, new patient acquisition, and patient retention. And that is returning into a bigger ticket size per month. And that's how we're making our revenue. So I think for next quarter, Colombia will continue to show that upper double-digit type of growth because we keep adding new patients, and we still have 55% retention, and that's going to increase as we get more insurance coverage as well.
spk04: And just on that point, and thank you, that's very helpful, Color. So those 6,700 patients... They are all covered. Are patients in Colombia, if I'm a regular, maybe not using cannabis, am I aware? Is it public knowledge that insurance covers cannabis? Or are doctors prescribing it as a last resort? I'm just trying to understand better the interaction there in terms of garnering those patients to come in, how you market to them, and whether people are aware that doctors can prescribe cannabis and that insurance is available. I know there's a lot there, but I'm just trying to understand better from just the normal consumer point of view, how much awareness is there about that this is available and that it may be covered by insurance? Thanks.
spk07: Well, Pablo, so I would say that in our clinics, we have two types of patients. One, the bigger population, which are patients that are coming to do chronic pain, neurological services, surgeries on sleep disorders, anxiety, That's the main core of the business, which is health services, and they're being sent to us by the insurance companies who are looking at the clinics to be able to provide services for them, which is why we're also expanding because our clinics are getting fuller and fuller. There's another population of patients, which are the out-of-pocket patients, and they're coming to the clinic because they're seeing the Instagrams, the Facebook, the posts, from people who are going to our clinics and having a very positive response, who are willing to talk about this policy. And they both come to the clinic. And these clinics, in the end, when the patient comes out of the pocket, he or she may not be looking for insurance coverage. But every doctor at Chiron and every support infrastructure that we have with the nurses and the receptionists, that is always a part of the conversation. You know you can get this for free. If your insurance company is not currently covering it, you can ask directly insurance company to do that. And that creates pressure on insurance companies more and more to go back and call us and say, how do we get this done? For the patients who are coming regularly for their pain consult, since what we have created is an ability to educate those patients, not only on cannabis, but also on how do you access it. And every doctor in the company understands cannabis and understands the efforts and they're seeing the evidence happening every day. This is a very simple and easy conversation. We don't consider cannabis to be a third-line alternative. I think the evidence that we've been able to provide is that our doctors understand that cannabis can be a first, a second, or a third line of treatment. And that's a very big change in mentality because any doctor in Colombia can prescribe cannabis, any doctor. There's no requirements for a doctor not to be able to do that. It's really more about their understanding of whether it works or not, what are the dosage bases for a specific type of patient. And if you think about Cerenia, that information and that buildup is happening all the time. So the reason we expand our clinics in different formats is so that we can reach those out-of-pocket patients that are coming. We can offer insurance company services in our cities and keep bringing those patients that way in an ecosystem that already understands how to prescribe it and how to guide the patient so that they get that coverage. If you go to a clinic in Sirenia today, the route the patient goes after getting the prescription is a route of education, and also then it's a route of how do we make that product covered by the government insurance, how do we deliver it to their home, and make that experience as easy as possible, which for us, the more access we can provide to the patients, the more values of it that we can create when other companies want to replicate that model.
spk04: Thank you. If I may add just one on Europe. So I guess it's a two-part question. One, if you can remind us about your supply chain. I mean, your 2% dry flour in Germany share, and then you're selling high-potency flour in the UK. Is that your own product grown in Colombia, or that's being bought from third-party people? Just a reminder on that. And then the second part to the question is that, yes, we're all going to get excited about Germany legalizing recreational cannabis potentially. you being positioned as a medical company there, you know, how do you make that transition? Do you know how much investment will you need to make? I understand it's early days, but it just seems to me that, you know, some companies may or may not, right, be better prepared than others in terms of benefiting from that opportunity in Germany. And I would like to understand better how, I'm not saying it's not, but how Chiron could benefit based on what you have on the ground in terms of a rig opportunity in Germany. But let's start with the first question on the supply chain. Thank you, and that's all.
spk07: Thank you, Pablo. Francie, maybe better position to answer that.
spk09: Yes, so currently we have both in the UK and in Germany two products, one high THC dry flour and one high CBD flour, which we source within Europe. And our plan is to broaden our product suite, but we also add extracts and further dried flower products, whatever is needed on the market. I think our advantage is here that we're operating in this country for some years now. We have a good understanding of what's needed. So we're more involved in our Acid Light model on the downstream part, like convincing doctors to prescribe, make them feel comfortable, showing them evidence that cannabis is a safe and efficacy treatment, and also work on the supply side. And the supply is there, so there's lots of growth within Europe where we can source on different suppliers of our product, if that answers your question. So in the end, we're non-agnostic. Our product range will not be either flour or extract, but will be both.
spk08: Okay, thank you.
spk09: And on your second question, so very early talking about that, I think we're a medical company for now. We are focused on the medical downstream path. We are focused on opening channels, getting access. So we are a medical cannabis access company. We have not a clear picture on how the law will look like and when it will come. What we can just say is that we have a close eye on that. And once it comes, we can definitely assess if it makes sense that we also go into that market. But without knowing how the law will look like, for us it's just positive news because cannabis is still, to a certain extent, And when the German government, who's already paying for medical cannabis, like when the German government is putting out that PR saying that, oh, we rethink and looking to and making it adult use as well, this is just positive for us because we just have to remember the patient will still be reimbursed if he goes medical. So I don't see a problem like either back against medical. Medical will always be there because insurance is paying for that.
spk08: Our next question comes from Mark George with Accord Capital Management. You may go ahead.
spk01: Yes, can you hear me, folks? Yes, Mark. Good morning. Congratulations on a fantastic quarter. Congratulations on fantastic growth. I was hoping that someone or both of you or all three of you could speak to your thoughts on your revenue mix. You have multiple lines of revenue from surgeries, which I know are on hold, to cannabis, to medical treatments in general with or without cannabis. And clearly the diamond in the rough is the cannabis margins. And I'm just wondering, can you speak at all to your vision for your future revenue mix between all those sources? Thank you.
spk07: Thank you, Mark. Thank you, Mark. If you look at our revenues right now in medical services and medical care, and looking at Cairo in the last year and a half, one could think that this is our revenues and our growth are going to be focused more on the health services, but this is really a platform for us to be able to capture more demand. If you look at last year, Last year, we had revenues of $8.5 million or so, with almost $400,000 worth of medical cannabis, which is, I think, a little bit less than 5% of our revenues. This year to date, we have already, by the end of this year, we'll be reaching a number of total revenues that's going to be around a little bit higher than $12 million of Canadian dollars, where at least $4 million of that will be medical cannabis, which is going to be a 10-time increase from what we had last year. Today, this quarter, 35% of our sales came from cannabis. And that rate of growth is going to continue in the future. And that means that looking at 22 and beyond, you will start seeing that our revenues will be somewhere equal in terms of medical cannabis and services. Our services revenues will, you know, it's a service that will grow probably 10% to 15% per year. whereas medical cannabis is growing at this fantastic rate of growth. And moving beyond 2022 and 2023, then we will start to continue to see that medical cannabis revenues are going to be the primary force behind our overall revenues. But because we look at our services as a platform to be able to capture this demand and be able to generate these high gross profits, these two businesses are a little bit intertwined in that. Yes, today we think about surgeries, we think about procedures, because they are still a significant part of our business in terms of the overall revenues. But looking at 2022 and beyond, we will have less exposure as a company to those type of anomalies, if there's a fifth or a sixth or a seventh wave of COVID, because we already know how much cannabis we're selling. Now, out of that three and a half, four million, we will be ending sales by the end of this year. Today, Germany will be, Europe will be around... 30% of that. But next year, we're looking at Europe and Latin America to provide us almost 50-50 tax revenues between those two regions. We have the advantage that in Europe, we're talking about European euros and UK pounds, and Latin America, we have to think about different currencies. And I think that diversification of revenues and patients is going to get us very successful. So if you look at just what we were thinking for the end of the year, being able to grow 45% of the top line and more than that in our gross profits, which are driven by medical cannabis. What we've really been doing the last year and a half is to build a platform that's generating high value growth. Our clinical services provide us a profit of 20 to 25%, but that really allows us to reduce the cost of acquisition of your patients. What you're really doing behind it is generating a lot more high value sales. And so the company is always being looked at, if you look at it last year from they sell services, they sell new cannabis, to today where we're saying, well, they are growing their services. But, wow, the amount of cannabis they're selling and the way that it's going, you will see more that the health services are a platform that we're going to continue to grow just to be able to generate a lot more cannabis revenues and, of course, very high profitability in the next year.
spk01: Thank you, and thanks for taking my question, Alvaro.
spk07: Thank you, Mark. So we are running out of time. I want to appreciate everybody for their time. I would just like to end by saying that you can expect our revenues to continue growing. We are looking at ending the year with a little bit of over $12 million Canadian revenues. That will be a year-on-year growth of at least 45%. and more than 10 times the American Canadian revenues we saw in 2020. And that growth will not stop happening because in very early stages of our business. This is the first inning of the first game of the World Series when it comes to international cannabis. And even though we're looking at small numbers now, the rate of growth is tremendously important for us. For us to be able to break that first $1.0 million in gross profits, which is much higher than any of the peers in Latin America, it starts to show that our strategy is working. And we just have to continue managing our cash, being able to think about our working capital, expanding our base, and being able to continue selling by developing and nurturing those relationships with the doctors, those relationships with the patients. I think all these catalysts that we've been talking about certainly kind of would be very, very well positioned to take over them. Thank you for everybody. I apologize if we did not get through all the questions today, but please feel free to reach out to the investor relations team in investors at chiron.ca, and they will promptly relay any unanswered questions you may have. With that, thank you so much, and have a great day.
spk08: Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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