Khiron has over a 90% gross margin for medical cannabis products, and prescription sales are increasing by 25% month on month. What fundamentals make Khiron a solid business?
For us, it has always been about creating the market and generating demand; therefore, we take the conversations about medical cannabis to doctors and patients, and make sure they understand it as a viable alternative. We focus on getting new patients and retaining them. Is it about the sustainability of the business, because selling medical cannabis is a challenge, particularly in Latin America. We measure variables such as patient acquisition, patient retention, dollar per gram that we sell, cross profitability per patient, lifetime value of the patient, doctors' willingness to prescribe, and monthly prescriptions per doctor. Our goal is to have 1 million patients by 2024, so our concern is not about the amount of grams, but about how we improve the patients' quality of life. We also work on providing access and ensuring insurance covers it. Today, 60% of our patients have insurance coverage in Colombia, which means if we do our work right, those patients will stay with us for a long time, which will make us sustainable, and allow for exponential growth. We also want to take this model to the rest of Latin America.
Khiron has 10 clinics in Colombia that form the basis of the distribution network. What are the advantages of having these health centers as a distribution channel and what has been the overall performance of the business?
We have long focused on medical education, and we have a top-quality medical program. We partner with Tec de Monterrey to provide a diploma on medical cannabis. But afterwards, you need to bring the theory to practice. If you visit one of our health centers, you will see more than 300 daily prescriptions for medical cannabis for different conditions. We have been creating an ecosystem of evidence and education, and have our own health centers where we constantly train our doctors. We have just expanded to Peru, and we brought all our doctors from there to Colombia for a week to see the operation of the clinics. We are setting up a medical board, where doctors from anywhere in Colombia can get together to discuss cases. We are set to commence publishing papers in 2021 so doctors can see the data, which will allow us to bring more patients to our clinics.
What company features distinguish Khiron from other companies in the country?
In Colombia, there are 3.5 million patients with chronic pain. The average cost for the insurance system for a neuropathic pain patient is about USD5,000. 80% of that cost is for opioid medications. Healthcare in Latin America is funded by taxes from the tobacco, sugar, and gambling industries. In addition, our population is aging while the cost of healthcare is increasing. Medical cannabis is a disruptor of that model, because patients should have integrated care for mind, body, and spirit. Medical cannabis for certain conditions can be at the center of comprehensive treatments if we provide the right data. Three to five years from now, we will be able to get Latin America off opioids, which will generate major savings and ultimately provide better results for patients. With the pandemic the government has had to spend much more money on healthcare, and the question is how to pay for it?
How is Khiron working on key ESG concerns, and what are the advantages in terms of operations and investment performances?
Our mission is to improve the quality of life of patients, so from the beginning we have wanted to disrupt non-sustainable industries. We work with gender equality, pay equality, solar power generation because we believe we are here to do good. When the pandemic started, we donated PCR tests to the city of Bogotá. We work on these measures to align with the UN's sustainable goals. We believe in the future, and we have investors that understand this company is here to do good. We have also completed an ESG specific report that will shortly be released.