Khiron Life Sciences Corp.

All right. Thank you very much, Anthony.

Good morning, everyone, and thank you for joining us today. I'm Robert Blum and with me on the call today are Alvaro Torres, Chief Executive Officer; Swapan Kakumanu, Chief Financial Officer; and Franziska Katterbach, Europe President.

Before we begin, please note the following caution, respecting forward-looking statements, which is made on behalf of Khiron 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 Khiron Life Sciences filings with the Canadian and provincial securities regulators, which are available on the SEDAR 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 we turn it over to Swapan to run through the Khiron 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.

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 are our patient-focused strategies. We're breaking significant revenue and gross profit milestones.

This has been 5 straight quarters of continuous medical cannabis revenues with more than 85% gross profit 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 been accomplishing these milestones under very different -- difficult circumstances worldwide. I think what we've been able to achieve so far is placing Khiron at the top of this new nascent medical industry in Latin America and Europe.

I hope that today you will 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 Swapan, our CFO, to provide more details of our Q3 financials and then myself and Franziska, the President of Europe, will return to talk a little bit about the operational highlights, and what we are looking at the next catalysts are going to continue to fuel this tremendous growth that we're able to show this quarter. Thank you.

Swapan, please.

Thank you, Alvaro. Good morning, everyone, and thank you for joining this call this morning.

My name is Swapan Kakumanu. I'm the Chief Financial Officer for Khiron.

Just want to give you a little bit of update on revenues, gross margins, expenses and EBITDA 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 and total medical cannabis products contributed 34% of the total revenues and 89% of the gross margins -- 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, reflective of 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 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 into 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.

The medical cannabis sales increased due to continued growth in Colombia, supported with 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 U.K. 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 ILANS and Zerenia 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 profit. I'll just go a little bit more detail on the gross profit.

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 the segment.

Quite significantly, Medical Cannabis contributed 65% of gross profits with a fair value of the quarter. In the 90% range, Medical Cannabis margins remained high and were consistent to the previous 3 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 segment related to reduced complex surgeries as a rest of COVID-19 impacts, as I mentioned above, and the impact of foreign exchange related to the Columbian pesos offset by higher contributions for the Medical Cannabis segment. Including a net fair adjustment of $0.1 million and $1.3 million, the gross profit recognition in the 3 and 9 months ended September 30, 2021, of $1.8 million and $5.2 million, respectively, represents an increase of 95% and 119%, respectively, compared to the prior year periods, which include -- 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 3 and 9 months ended September 30, 2021, decreased by 14% and 16%, respectively from the prior year comparative periods as a result of reduction in all categories with the 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 slightly -- Q2 2020 -- 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 9 months ended September 30, 2020 compared to a loss of $14.4 million for the 9 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 9 months ended September 30, 2021, compared to a net loss of $21.7 million for the same period in 2020.

Now quickly on the balance sheet. Looking at our balance sheet, we finished the quarter with a $15.4 million cash.

The loan obligations in Colombia continued 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 Franziska, our Europe President, to provide more details on our Q3 operational highlights and catalysts for revenue growth. Alvaro, off to you.

Thank you, Swapan. Thank you for that.

As I said before, I think this results in Q3, and we have been able to accomplish in the first 9 months continue to show that we have a very unique strategy that's all day and all months 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. And 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 3x as much as we sold in entire 2020. And we still maintain very strong gross margins above 85%, which are type of gross margins you don't see in the Latin American market yet, except in Khiron.

So we are very excited that we've been able to accomplish this. And we right now selling in Colombia, Peru, Brazil, in Latin America and so in Mexico, I mean 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 9 months of this year, we 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 Cannabis for the patients.

All that work has resulted at over 55% accumulated of the prescriptions are covered by insurance. We're right now working with 2 main insurance companies.

We will add more insurance companies to these with 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 for returning patients.

And this means that our growth is sustainable and that our -- the way that we look at the future is very bright because more patients are coming, 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 the list of new patients.

Because of this, we are planning to open 2 more midsized 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 health care hubs for insurance companies clients.

And this expansion will allow us to be closer to our patients, liberate our Zerenia flagship 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 cannabis sales and continue to establish the 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 1 out of 3 patients that go to our clinics leaves 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 Khiron 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 Zerenia in September, we could have already observed that a doctor in our clinics in Zerenia prescribed 11x as much as an external doctor using the traditional pharma approach, which continues to showcase that this strategy over the last 2 years on building clinics, different types of formats to attract and retain patients is a way that we're going to continue doing our growth.

And that same model, we are now exporting to more countries.

Just 2 years ago, we had only 2 locations. Today, we have over 15, and we're exporting this model also into Europe, which Franzi will get on.

In Brazil, we are currently focused on building our first Zerenia clinic. In Rio de Janeiro, we've already selected a location.

We started the permit for construction, and we are looking to be able to begin operations in early Q1 of 2021. I think we will see great success in Brazil with our clinical strategy.

We have the right team, the right product, the right data, and this is the right mark. 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 offer in that market.

And lastly, in Mexico, and just focusing on Latin America, is a market that Khiron is very close to. And even though we are not able to provide more details on the growth that we have done, what I can say is that we're 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 Zerenia 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 of Mexico to Colombia so that they can get trained in our flagship Zerenia in Bogota. And that it 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 will be in Mexico very soon, and we're very, very confident that once we are there, we will be significant players 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 recommendations, But I think we are closer than ever to getting those first sales.

And I think just to give it to Franzi, we've 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, but we just started not too long ago. And even in these early stages, we see how it's growing, and we see tremendous catalyst for that.

But I will ask Franzi to give a brief background of 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 lately in terms of growth and profits. Franzi?

Yes. Thanks, Alvaro.

Hello, [Foreign Language] to everyone. We cannot be more excited about this market where we can be very competitive, bring our strategy into countries like the U.K.

and Germany.

In Q3, Khiron Europe recorded gross profit for European Medical Cannabis sales of more than CAD 370,000, thanks to our business strategy in the region. In the recent quarter, our sales in the U.K.

and Germany increased significantly quarter-over-quarter by 70% in the U.K. and more than 100% in Germany.

This was mainly supported by the continued training of prescribers with our infield sales force and our online training platform, Khiron 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 Khiron Zerenia clinics in the U.K.

with a 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 1, very important that the patient needs dictates what we are going to do.

One of the key aspects to our strategy is taking all the real-world evidence we are 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 doctor's community in the U.K. and Germany, which will then drive more evidence on our products.

So now I want to take a closer look at Germany. In Q3, we sold approximately 23,000 grams of dry flower just in Germany.

We are proud to say that our high CBD flower, our Khiron 1/14 became the leading product in the German high CBD flower segment. Therefore, what are our future catalysts for Germany?

We will definitely continue to train prescribers on our -- with our expanding in-field 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 Khiron? For us, it has been great news.

While we still have to wait to see how the final law looks like, we would still continue to establish and build out our in presence 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 that it's still a destabilization 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 U.K. In Q3 of this year, we sold over 10,000 grams of dry flower with our 2 cannabis flower varieties in the U.K.

We are 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 Zerenia in U.K. will facilitate further scripts for Khiron products.

Finally, Khiron Academy, which is our online medical cannabis, e-learning platform for doctors has been completed by hundreds of doctors in LATAM but also in Europe, and this certainly broadens our prescriber base.

Coming now to our U.K. catalyst.

We will continue to train independent physicians in the U.K. through our Khiron 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 to -- in the U.K. with our Zerenia clinics in the U.K.

and we have the ability to significantly improve the quality of reliable care and medication that a lot of cannabis patients in the U.K. are simply unable to find anywhere else.

So thank you all very much. We have a lots of catalysts coming to continue growing in Europe and to make Khiron 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. Thank you.

Congratulations on the quarter. So first question for me.

So I want to start with Colombia. You talked about 2 insurance companies today looking to add more.

Can you give some color in terms of the time line of -- or maybe where you are in the conversations to adding more insurance companies? And then maybe if you could provide maybe the market share, those 2 insurance companies you currently have, have of the total market and maybe the total opportunity you have in terms of adding on those additional insurance companies to get more opportunity to get to patients in Colombia.

So I'd love to know about that kind of TAM and opportunity within the market?

Thank you, Aaron. So insurance companies -- clinics already work with 15 insurance companies for our regular services.

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 thought.

But I can say that our expectations is to be able to add at least one more by Q3 and continue with another additional every quarter starting next year.

And so what you're asking about also 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 Khiron certainly has more than 85% of the total Colombian approved insurance product for medical cannabis. 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 this process going on much faster.

I think the more information we are able to share with the insurance companies, the more positive outcomes we're able to show that's making the conversation a lot easier. Now of course, being as one of the few ones that 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 all insurance companies will be a huge upside for us.

That's really helpful. And then second question from me, I just want to shift to Columbia.

It's a little bit different strategy you guys have than maybe some of the other Latin American companies that I 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 various licenses and time lines to maybe do more of the clinics and then selling your own products to the patients? Just thinking about maybe some of the barriers that you might have and competitive advantage that you have today and how difficult it will be for somebody else to kind of take that route?

Well, I think the biggest competitive advantage that Khiron has and we've shown in the last 1.5 years is that we are extremely focused on generating demand and creating access. So that means that we are constantly creating more barriers of entry because if you're a Khiron patient, not only do you have these products ensure to get it delivered very quickly.

You have a fantastic product quality. We have patient follow-ups to ensure that the patient is comfortable when they're talking about cannabis.

We talked to -- 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 are 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 where 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 challenges will remain 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 is 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 date, an internal doctor of Khiron can prescribe 20x as much amount as any other external doctors.

Because in the end, they're trying to help the patients to get the prescription approved by insurance company, and that takes a lot of know-how on that relationship.

So I would say that we've been able to do it because that was the strategy of the company from the beginning. And I think we will continue to maintain this nice position for many years.

Well done this quarter. My first question relates to Mexico and whether you -- and you mentioned that you're preparing for regulation.

I was wondering if you have any update on regulation in Mexico and its timing?

Thank you so much for your question. And so when we think about Mexico, we have to separate, there's 2 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 more definitive time line on getting passing this bill to approve adult use in Mexico.

The conversations you hear publicly is that they want to get this approved this year, that could change because in the end, we all -- the priorities for congress always a little bit shifting.

Even if that were to happen, there's still will be some time required to actually regulate those laws. But of course, for sure, I think there will 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 is going to get us in a very good position at least in a first-mover position advantage in next 2 or 3 months.

I mean, Khiron was the first company to ever sell medical cannabis in Colombia in certain 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 will be the exception.

This question might be for Franziska, but I was wondering if she can highlight the biggest -- your biggest competitors in Europe right now and whether you have any market share data?

Yes, thanks. So I think the biggest competitor certainly come out 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, in the last week, we had it in Germany, our first product sales in March this year.

And since then, we built our market share to almost 2% of the dry flower market within just the last 6 months. So this is the data I can share.

And in the U.K., we're part of this Project 2021. And there, we captured almost 50% of the high THC dry flower.

Final question. For 2022, I was wondering if you are considering expanding to any new international markets?

And, Jack, I think that even though the international markets have started to open up, the 6 countries we have chosen to be in Mexico, Colombia, Peru, Brazil, U.K. and Germany, are -- provides a tremendous opportunity.

So we will look at these other markets 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 now, just call the "distraction," but I think if we're able -- once we're able to be leaders in these 6 markets, basically presence in the biggest market in Europe and LATAM. So that's what we are thinking right now in terms of expansion beyond that.

Congrats on the quarter. Just about the margins in the Medical Cannabis segment, over 85% gross margins are really impressive.

But do you see any risk of margin compression happening over the next 2 quarters, maybe with competition in Colombia or Europe? Or do you expect those margins to remain at those levels?

Frederico, I think those margins will maintain steady. Because if you look at our business today and the next 2 quarters, particularly let's call it in Latin America and Europe, but in Latin America, we sell 96% of our Medical Cannabis through our own network we have.

Of course, that that's been 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 in 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 that patient increases.

If we think about last year when we just started, let's call it the average lifetime value of our patients would have been $120. Today, we're talking and we're looking at an average lifetime value of our patients about $450.

So that's sort of the equation that we see.

And I think the more that we think about Medical -- our clinics and just like we are doing in the U.K. where we can actually have a better conversation with the patients to understand what those needs are, I don't think the next quarter will be seeing any significant price compression.

And of course, as the markets expand, they could be tapping that in 2023 and beyond, but also at the same time, we've already build a very big position, we're trying to expand to more market share.

Okay. That's great color.

And then in terms of your presence in Brazil and Mexico. You guys are planning to open clinic in Brazil in Q1.

When do you expect sales there to start to really become material to your financials? And Mexico, I know that you touched on it, but should we expect any sales coming out of there in 2022 as well?

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 start the clinic this quarter. But as you know, permitting and getting the right land and be able to get all the right bank guarantee, so we can have those leases.

It took us a little bit longer than we expected, that's totally unforeseen, but now the site has been selected, contractors have been selected. We already started the design process and buildup.

But the way that we're doing is going to be very modern. So we're going to be able to start that operation, those clinics and start bringing more revenues in early part 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 of 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, we are working on 3 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 of the timing whether it's 3 months or 2 months, not on where we are going to be able to do it.

And the same that we're -- by the time we are able to start in Mexico with our first product, we're already starting some partnership so that we can set up Zerenia 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 more meaningful in Q2 of next year.

Congrats on the results. 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?

Yes. Greg.

So as you know, we started Peru with our strategy of educating external doctors. I would say that if you look at something 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 3 doctors prescribing almost 10x as much per month as an external doctor, which is -- 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 on Medical 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 we did in Colombia, where we started selling in Q1 of 2020.

But certainly, the clinics drive is going to be a very important part for this. We are going to 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 is being 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. The ecosystem of Zerenia and in the U.K.

as well, the ecosystem system of Zerenia shows us that we know how to train doctors in those places. And we know how to get patients comfortable around cannabis and how to improve the quality of life.

So Peru will continue to show those results. It's going to be mostly driven by clinics and it's exciting to be able to show that this strategy working in more than one country which is true for us because we are placing Zerenia in Mexico, in Brazil, in the U.K.

under different formats, but it's really all about how do we educate those doctors and capture those patients.

Alvaro, just to try to put things in perspective, right? Because I understand early days, this is a group where a lot of people make claims and you are 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. But I mean, a couple of questions here.

So first, when I look at your Latin American sales, about CAD 833,000 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 for the quarter, right, how many patients bought cannabis, your cannabis products in Latin America? And then if we can -- 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 -- help me understand the potential.

Thank you, Pablo. Just -- you're absolutely right.

We are in the very early stages. I think sort of a comment, I think what we've always [indiscernible] today.

But I think the way that we're looking at our business, we're 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 2 things that are happening. In the quarter, in Q3, we saw almost a little bit beyond 6,700 patients overall.

That means that the average ticket at -- the average bottle per patient is around 1.5 and 1.6 units. 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 -- 1.5 or 1.6 units per month that have been sold at $50.

The reason we look so much expansion of the clinics is because we continue to see how many patients have come are leaving with a prescription. We started last year, it was 1 out of 20 patients that were leaving with a prescription and today it is 1 out of 3.

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 in the cannabis, the more monthly tickets are happening. That's how we're projecting our growth in Colombia.

And the same thing is going to happen in Peru as we have more patients who are returning increasing the monthly tickets.

And this tickets are increasing because of the insurance coverage as well and because the product works. So it's all about how many patients we see converts into cannabis, new patient acquisition and patient retention and that is returning into a bigger ticket size per month.

And that's how we are making our revenue. So I think for next quarter, Columbia 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.

And just on that point -- 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 probably knowledge that insurance covers cannabis?

Or are doctors prescribing 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 the insurance is available?

I know it's -- there's a lot there, but I'm just trying to understand 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?

Well, Pablo, so I would say that in our clinics, we have 2 types of patients. One, the bigger population, which are patients that are coming to do chronic pain, neurological services, surgeries, sleep disorders, anxiety that's the main core of the business that 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 patients, which are the out-of-pocket patients, and they're coming to the clinic because they're seeing the Instagram, 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 openly. And they all -- they both come to the clinic.

These clinics again where the patient comes out-of-pocket, he or she may not be looking for insurance coverage, but every doctor at Khiron and every support infrastructure that we have with the nurses and the receptionist that is always a part of the conversation, you know you can get this for free.

If the insurance companies that are going covering it, you can ask directly the insurance company to do that. And that creates pressure on insurance companies more and more to go back and call and say, how do we get this done?

For the patients who are coming regularly for they pay in consult. Since what we have created is an ability to educate those patients not only on cannabis but also on how to access it.

And every doctor in the company understands cannabis and understand the effort, and they are seeing 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 or second or 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 the understanding of where it works or not, what are the doses patients for the specific type of patients. And if you think about Zerenia that information and that buildup is happening all the time.

So the reason we expand our clinic in different formats so that we can reach those out-of-pocket patients who are coming. We can offer insurance company services in other cities and keep bringing those patients that way in an ecosystem they already understand how to prescribe it and how to guide the patients so that they get that coverage.

If you go to a clinic in Zerenia today, they route the patient after getting the prescriptions, route of education and also there is a route of how do we make that product covered by the Colombian government insurance, how do we deliver it to your 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 than we can create and other companies want to replicate that more.

Understood. Just one on Europe.

So I guess it's a 2-part question. One, if you can remind us about your supply chain?

I mean your 2% dry flower in Germany share, and then you're selling high potency flower in the U.K. Is that your own product grown in Colombia or that's being both from third-party people?

Just a reminder on that.

And then the second part of your question is that, yes, we are all going to get excited about Germany legalizing regulational cannabis, potentially. You be in position as a medical company there, how do you make that transition?

How much investment would you need to make? I understand it's early days, but it just seems to me that some companies may or may not 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 Khiron would benefit based on what you have on the ground in terms of a great opportunity in Germany? But let's start with the first question on the supply chain.

And that's all.

Thanks, Pablo. Franzi may be better positioned to answer that.

Yes. So currently, we have both in the U.K.

and in Germany, 2 products, one high-THC dry flower and one high CBD flower, which we source within Europe. And our plan is to broaden our product suite that we also add extracts and further dried flower products, whatever is needed on the market.

I think our advantages 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 evolved in our asset-light model on the downstream path 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 and the supply is there. So there is a lot of growth within Europe where we can source on different suppliers of our products.

That answers your question. So in the end, we are not agnostic, our product range will not be either flower or extract but will be both.

And on your second question, so very early talking about that. I think we're a medical company for now.

We're focused on the medical downstream path. We are focused on opening channels, getting access.

So we're 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, it's just for us -- for us it's just positive news because cannabis is still, to a certain extent, stigmatized. 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 in looking to and making it adult use as well.

This is just positive route 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 rec against medical.

Medical will always be there because insurance is paying for that.

Yes. Can you hear me, folks?

Yes, Mark.

Congratulations on a fantastic quarter. Congratulations on fantastic growth.

I was hoping that someone or both of you -- or all 3 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, Mark. If you look at our revenues are right now in medical services and medical cannabis.

And looking at Khiron in the last 1.5 years, one could think that this is our revenues and 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, will be 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 CAD 12 million, where at least CAD 4 million of that will be medical cannabis, which is going to be a 10x 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 -- 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, 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 this high gross profits, these 2 businesses are a little bit intertwined in that.

Just today, we think about surgery, if you think about procedures because they are still a significant part of our business in terms of the overall revenues. But looking at '22 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 $3.5 million, $4 million, we will be ending sales by the end of this year.

Today, Germany will be -- Europe will be around 30% of that.

Next year, we're looking at Europe and Latin America to provide us almost 50-50 types of revenues between those 2 regions. We have the advantage that in Europe, we're talking about European euros and U.K.

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 are 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 1.5 years, 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 just to reduce the cost of acquisition of new patients. But you're really going behind it generating a lot more high-value sales.

And so the company is always been looked at -- you look at last year from -- they sell services, they sell you the cannabis but today, what we say, well, they are growing their services, but well, the amount of cannabis they're selling and the way that is 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 for the next year.

So we are running out of time. I want to appreciate everybody for the 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 CAD 12 million revenues.

That would be a year-on-year growth of at least 45% and more than 10x the Medical Cannabis revenues we saw in 2020. And that growth will not start happening because in very early stages of our business.

This is the first evening 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 it's tremendously important for us.

For us to be able to break that first $1.0 million in gross profit, 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 teams 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 Khiron will 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 Investor Relations team in [email protected] and they will appropriately relay any unanswered questions you may have.

With that, thank you so much, and have a great day.