Khiron Life Sciences Reports Third Quarter 2022 Financial Results

In Europe, revenues increased by 141% year-over-year, driven by revenues in the United Kingdom, where the Corporation is now increasing its existing product portfolio, and the specialized cannabis clinic Zerenia™ Clinics UK celebrates its first anniversary.
Overall revenues for Q3 2022 decreased 24% driven primarily by a reduction of medical cannabis sales in Colombia, due to an interruption in insurance-covered prescriptions for Colombian patients during the new change of government.
As of September 30, 2022, the Corporation´s cash used in operating activities was $9.8 million, compared to -$15.2 million in the nine months ended September 30, 2021, resulting in a net cash of $1.9 million at the end of Q3 2022.
Outlook Q4: In October 2022, Khiron began sales of its first THC-dominant, Khiron-branded products into Brazil. In November 2022, Khiron entered the Swiss medical cannabis market with the first sales of two of its new flower products and after obtaining import approvals from German regulators, Khiron has begun selling its new product portfolio in Germany and the UK.

TORONTO, Nov. 30, 2022 /CNW/ – Khiron Life Sciences Corp. (“Khiron” or the “Corporation“) (TSXV: KHRN) (OTCQX: KHRNF) (Frankfurt: A2JMZC), a global leader in medical cannabis throughout Latin America and Europe, announced today its financial results for the quarter ended September 30, 2022, which were prepared in accordance with International Financial Reporting Standards (“IFRS“). Third quarter 2021 comparable numbers were also prepared in accordance with IFRS. All financial results for the third quarter ended September 30, 2022, and related comparisons to prior periods included in this press release have not been reviewed by the auditors of the Corporation. These filings are available for review on the Corporation’s SEDAR profile at www.sedar.com. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

Summary of Key Financial Results:

	3 Months Ended September 30 2022	3 Months Ended September 30 2021	3 Months Ended June 30 2022
Canadian dollars (‘000s)
	$	$	$
Revenues	3,385	3,519	4,473
Medical Cannabis	1,604	1,207	2,607
Gross profit before fair value adjustments	1,381	1,693	2,246
Gross profit from Medical Cannabis before FV	1,081	1,078	1,993
General and administrative costs	4,403	5,182	3,799
Net loss	(3,576)	(3,337)	(2,171)
Adjusted EBITDA ⁽¹⁾	(2,831)	(3,772)	(2,288)
Net loss per share (basic and diluted)	(0.02)	(0.02)	(0.01)
Weighted average shares outstanding	214,528	177,028	186,444

(1)

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization or in this case loss) and Gross Profit do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. The Corporation calculates Adjusted EBITDA as net loss before tax as reported under IFRS and adding back share-based compensation expenses, transaction fees, unrealized gain on changes in fair value of biological assets, interest, depreciation, amortization, impairments, unrealized gain or loss in warrants and non-recurring items. The Corporation calculates Gross Profit as revenue less cost of revenue, changes in fair value of inventory sold, and unrealized gain (loss) on changes in fair value of biological assets. Please refer to the section entitled “Non-IFRS Financial Measures” in this press release.

Q3 2022 operating highlights and subsequent events:

Adjusted EBITDA loss of $2.8 million, a reduction of 25% year-over-year, driven by a decrease of 17% year-over-year in expenses during Q3 2022, and the Corporation´s high gross margins across its medical cannabis segment of 67%.
Overall revenues for Q3 2022 decreased 24% driven primarily by a reduction of medical cannabis sales in Colombia, due to an interruption in insurance-covered prescriptions for Colombian patients during the new change of Government, which began its new period August 7^th, 2022. The new incoming Government is reviewing the protocols for use of medical cannabis for specific conditions for which there is much evidence of medical cannabis use, to create a more robust financing framework under Colombia´s universal health benefits system.
In Europe, revenues increased by 141% year-over-year, driven by revenues in the United Kingdom, where the Corporation is now increasing its existing product portfolio. In Germany, the restart of Khiron medical cannabis product sales was delayed because of import product approvals to Pharmadrug GmbH (“Pharmadrug“) for Khiron’s existing and new product portfolio, which have now been obtained. The Pharmadrug acquisition enables Khiron to sell directly to pharmacies in Germany without the need for a third-party distribution partner. As a result of the Pharmadrug acquisition, the Corporation was able to successfully export to and sell its first two medical cannabis SKUs in Switzerland. The acquisition formally closed on August 2^nd, 2022, after the clearance certificate required under German Foreign Trade Regulation was obtained. Since obtaining import approvals from German regulators, Khiron is now selling a total of seven medical cannabis SKUs and further SKUs are already registered and will be launched over the next weeks.
In October 2022, Khiron began sales of its first THC-dominant, Khiron-branded products into Brazil, making it one of the first companies to sell approved THC medications into the country. The Company opened its first Zerenia^TM clinic in Rio de Janeiro and it is in full operation.
As of September 30, 2022, the Corporation´s cash used in operating activities was $9.8 million, compared to -$15.2 million in the nine months ended September 30, 2021, resulting in a net cash of $1.9 million at the end of Q3 2022. The Corporation continues to actively manage its working capital cycle, while reducing overall general and administrative costs.
In November 2022, the Corporation was approved a loan with one of Colombia´s most traditional bank lenders for an initial amount of approximately $700,000, which will be used to fund working capital requirements in its Zerenia™ clinical operations in Colombia. This would mark the first time that a privately-owned, traditional banking entity lends funds to a medical cannabis-related business in Colombia. In addition, the Corporation continues to evaluate options for capitalizing the growth of its business.

Management commentary:

Alvaro Torres, Khiron CEO and Director, comments, “This quarter presented transitional challenges in Colombia and Germany, impacting top line sales and our short-term goals on profitability. In Colombia, insurance coverage has always been a priority for the Company, and as we have witnessed in the past year and a half, it’s an importance in serving patients from all communities. The new Government has been very supportive of the industry and the efforts of companies such as Khiron to ensure access to medical cannabis. We want to thank our patient base, who was instrumental in advocating for the need of insurance coverage, and the Government of Colombia who will create a more robust long-term framework, so that medical cannabis continues reach patients who depend on our services. In Germany, we are pleased to have finished all regulatory approvals for the acquisition of Pharmadrug as well as obtaining import permits for our product portfolio. This has allowed us, in Q4 2022, to increase our presence in this country and to look at different growth opportunities through our Pharmadrug distribution platform, such as our new exports into Switzerland. Meanwhile, we continue to reduce expenses, while growing our high gross margin medical cannabis business in Europe and the rest of Latin America. The Company continues to evaluate all strategic opportunities and financing options.”

Webcast Details:

Khiron invites individual and institutional investors, as well as advisors and analysts, to attend the Corporation’s Third Quarter 2022 Conference Call, followed by a Q&A session.

DATE: Wednesday, November 30, 2022
TIME: 11:00am ET
PRESENTERS: Alvaro Torres, Khiron Chief Executive Officer and Director, Helen Bellwood, Khiron Chief Financial Officer, and Franziska Katterbach, President of Khiron Europe.
FORMAT: Live 45-minute presentation & Q&A session
REGISTER LINK: https://us06web.zoom.us/webinar/register/WN_nB0mQsxmR2SgKJCnHlhL9Q

Grant of Restricted Share Units

On November 23, 2022, the Board of Directors approved the grant of 87,500 restricted share units (“RSUs”) to an officer of the Corporation, upon the satisfaction of certain milestones associated with the grant. The RSUs were subject to performance-based vesting conditions that are already met and will expire on December 15, 2025.