Earnings Call: Q2 2021

Aug 23, 2021

Earnings release

Thank you for joining us. I'm Krishna Prowett, Chairman of Chiron's Board of Directors. And with me on our webcast today is Alvaro Torres, Chief Officer and Juel Friedman, Chief Financial Officer as well as Francesca Katterbach, European President. Before we start, there's a forward looking statement. Please note that the following caution respecting the forward looking statements, which is made on behalf of Chiron Life Sciences and all its representatives on this call. The statements made on this call will contain forward looking information that involve risks and uncertainties, including those introduced by the COVID-nineteen pandemic. Actual results could differ materially from the conclusion, forecast or projection, the forward looking information, certain material factors and assumptions applied in drawing a conclusion and making a forecast projection reflected in the forward looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusions, forecasts and projections in the forward looking information. The material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection reflected in the forward looking Information are contained in the Chiron Life Sciences filing with the Canadian Provincial Securities Regulators, which are available on SEDAR and on SEDAR, at website atsedar.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, And he turns it over to Joel to run through the financial results. After that, we'll dive into our guidance for 2022 for various growth scenarios there, including catalysts in each market that will drive growth. We'll wrap it up with a quick Q and A at the end. Now with that, it is my sincere pleasure to turn it over to Alvaro Torres, CEO and Director. Thank you, Chris. Thank you, everybody, for tuning in this call. 4 years ago, We founded this company with the goal of improving the quality of life of patients and consumers through the diabetes of cannabis. As you know, Chiron is a B2C medical cannabis company and we're focused on building brands. We're focused on building relationships with doctors, With patients and insurance companies, we're focused on generating value versus exporting commodities in a race to the bottom. When we think about being a B2C company in the international markets, that means speaking every day about building and generating demand. And to generate demand, we need to think about and solve for evidence, quality and access. So without evidence, doctors will not prescribe medical cannabis. If the product quality is not good and by that I mean consistent and safe, patients will not take on and continue the treatment. Without access and I mean distribution, insurance coverage, good health care service and governmental support, there is no market. Because of this, we created our business model. We are focused on servicing patients through great healthcare and using this as a platform to introduce Patients and doctors, medical cannabis in a responsible manner. Our medical cannabis sales grew by 47% to 825,000 Canadian maintaining a gross margin level of 88%. We are able to achieve this because we focus on creating High value for our patients. These results were largely because of the growth in Colombia and because the acceleration of sales in Germany. And this rate of growth and the catalyst I'll be talking about very soon in the immediate future gets us very excited about the path that we're creating. As you know, we acquired our clinics almost 3 years ago because we believe that to build the market we want to be in, we need a strategy to solve for these issues. So today we see our clinics are generating data that is creating real world evidence that is driving prescriptions and credibility. Because of these evidence, we're able to convince and persuade insurance companies and the governments that medical cannabis is not a fad, The medical cannabis is not a trend that is good for patients and is less costly. That makes medical cannabis a disruptive force. And the clinics allows us to provide access to our pharmacy or partnering pharmacies through our conversations with insurance companies and through our service. And in the back of this, we're able to sell a great medication that is improving the quality of life of patients. When I look back at our Q2 results and I think they continue to showcase We're on the right track and with the right acceleration because, 1, we are growing in the medical cannabis sector in every market we are entering. 2, that our B2C strategy is producing strong profitability. 3, that our vertical integration strategy It's the best path towards growth and that we need to deploy this clinic strategy in our target markets wherever possible as fast as possible. I'm 4th that Europe is becoming a significant part of our medical cannabis operations. We are without a doubt The leading company in the Colombia Medical Cannabis domestic market. I think this is thanks to our vertical integration strategy. We set in a good mix of our products Increasing number of patients that are benefiting from our treatment. The last few months have encouraged us to continue moving forward with this strategy and deploy our clinics in Mexico, In Peru, in Brazil and in the UK, we know how to prescribe medical cannabis responsible. We know how to persuade doctors into prescribing Because we are creating a level of evidence that very few companies can talk about particularly in our regions. We know how difficult it is to persuade physicians of Crespec Cannabis and we have created an ecosystem of evidence and education that needs to be deployed faster in every market that we're targeting. Very soon, we will be making our first publication in an index medical journal, showcasing the real world evidence We have collected with more than 1400 patients in Colombia, all of them with CairoMate products. We plan to launch more publications for different conditions In the coming months, I think you can agree with me that this will create a level of credibility worldwide that very few companies can enjoy And that will drive more prescriptions across all our markets. We are executing plans to finish this year with sales in Mexico, Colombia, Peru, Brazil, UK and Germany. Our clinic strategy will certainly be a big part of this, which is all about creating demand, generating real world evidence, developing new products and increasing profitability. And of course, we have to do this while we continue to be mindful of our cash investment, our collection of revenues from our clients, our management of expenses and the well-being of our team and the patients who are responsible for the successful path that we are creating. With that all being said, I'd like to ask Joel, our CFO, To provide more details in our Q2 financials before I come back with Franci, talk about a little bit operational highlights, Our guidance that we've talked about on MD and A and a quick Q and A session. So with that, thank you, please, Joel. Shall we Continue, Alvaro, and maybe then go back to your later one. Yes. Yes. Absolutely. So we will continue the operational while we To get you all back online with the discussion on the financials, all of that information is already set up in our MD and A, For which we also open up a little bit more discussion about our operational metrics and our financial results, which are basically growth on the medical cannabis business, maintaining the profitability level and our ability in the clinics to capture more demand and the important fact That Europe is becoming more and more a more important part of our revenue and our profitability, the reduction of our cash expenses for the quarter and the continuous ability we have to keep reducing our overall SG and A while we continue to grow and the excitement of the future. So before we get into Joel, I'll get into the operational highlights with France. So I'd like to begin by discussing our Latin American operations. And And then France will come in and talk about Europe. France is our new President for CAGR Europe. So overall, we sold over 11,300 prescriptions. That is almost twice as much as we saw in the entire 2020. We are in the very early stages of our growth and then very excited about our next few quarters. You think about July alone, we sold 2.5x more than what we did in the entire month of January this year and 91% of our product sales in LatAm Came from our clinics in the first half of the year. In Latin America for this quarter, we're reporting sales in Colombia and Peru. And as you all may know, we just recently shipped our 1st shipment In to BEST. Let's talk a bit about Colombia. Colombia, we have 2 main sources of revenues. 1 is health services. So we provide health services to our clinics. We are focused on chronic pain, neurology, sleep disorders and mental health. We offer integrated services that include consultations, procedures, neurosurgeries, therapeutic support and sleep diagnosis. In Q2, our revenues for health services excluding medical cannabis were reduced by 15% compared to last quarter, but we grew 19% year over year. Now, the main reason for this drop is that the impact of the COVID-nineteen restrictions on our high end surgeries. In March of this year in Q1, When Colombia was reducing the number of COVID cases, we were able to perform more than 16 of these high end surgeries, which took our monthly revenues in Clinic to CAD1 1,000,000 per month. Now in Colombia, as you know, we enter a 3rd wave in March all through mid July. That costs of course more restrictions on the services coming down from 16 in March to 6 in June. Now what that really means for us is that Today, we have a backlog of over 42 surgeries that are scheduled to be executed within the next 5 months. That represents about $1,300,000 Canadian of revenues that we will get back throughout the year on top of the Revenues that we are already doing every single month. So those revenues are not lost, they have been delayed. As you know, Colombia has reduced cases from 30,000 cases 3 weeks ago to almost 2,500 cases. So we are on the right trajectory when it comes to COVID restrictions. And despite that, we maintain our console levels from Q1 around 24,000 consoles And increased him by 77% compared to last year in the same period. And I think most importantly, our conversion rate from consults to medical cannabis patients grew from 25% to 31%. I think our ability to continue growing monthly consoles is great. We have a current installed capacity of over 50,000 consoles per quarter and we will see a greater number of consoles now that restrictions on patient visits Are being reduced. Now when it comes to medical cannabis, I think that even with all the difficult circumstances regarding COVID-nineteen, We serviced over 7,300 patients with medical cannabis. This is 24% more than last quarter. But also very important is that the average Units sold per patient grew from 1.3 units per month in Q1 to 1.5 units per month in Q2 per patient, Which resulted in almost 11,000 units sold in the quarter, that is 43% more than Q1 with an average selling price of CAD50 With a gross profitability of over 80%. Now the reasons for this growth, I could encapsulate in a couple of reasons. One is that there's more willingness to prescribe from our doctors and there's a growing number of doctors who are prescribed. In Q1, we had 28 doctors prescribing 3.5 prescriptions per day. And in July, we had 36 specialists prescribing 5 prescriptions per day. Now the second reason would be the continuing number of returning patients. In Q1, 48% of the patients We're recurring and in Q2 that number went up to 61% of the total patients serviced with medical cannabis. So Not only are we having more doctors prescribing, but we're also having a lot more patients returning. Now one of the key factors for this is insurance coverage. And as you know, Colombia is one of the few countries in the world like Germany where medical cannabis is called. One of the biggest challenge we've been having always It's convincing more insurance companies to open their processes to include medical accounts. In Q2, around 50% of the total units sold We're covered by 1 insurance company. In our last call, I think I mentioned our goal of convincing more insurers And just last week we started prescribing an initial population of patients belonging to another insurance company, which is by the way Well, the top 3 insurance companies in Colombia. I think it's just a matter of time before the rest of these companies begin doing the same. Now, why are we able to do this is because we are generating tremendous amount of data on the pharmacoeconomic benefits of medical cannabis. So as we keep converting more patients and in some cases like we are today, we're taking some patients off opioids. More insurers will be convinced and And we will continue to grow Exponentia. As you know, we have now 10 clinics in Colombia, 3 main health centers in Bogota where most of the patients are going And another 7 satellite clinics in other cities. In addition to the telehealth platform, which is called Doctor. Serenity. These satellite clinics are small, one doctor, one nurse. And for now, they have limited installed capacity. As we keep growing, we will add more consult capabilities in each one of these cities. But the conversion rates, the conversion rates of patients in these clinics are above 80%, whereas in Bogota, the conversion rates above 25%. This happens because patients that come to Bogota are not necessarily looking for medical cannabis, whereas patients that go to our clinics in Medellin, in Barranquilla, in Italy I actually actively looking for medical caps. I think in the first half of our year, our satellite clinics and the telehealth accounted for More than 12% of the total consoles and that expansion of that installed capacity is going to provide great growth for us. I think, you know, of course we are very excited about the growth we're experiencing, more excited about the fact that we're doing it in the middle of the 3rd wave of the pandemic. And I think that as more cases going to keep going down on COVID as vaccinations are going up, we are continuing to prove that the vertical integration model Executive works and that we're providing month on month growth and that we keep maintaining a very high profitability and it's a matter of time before We're able to expand this model in other markets. Now, one of the catalysts that we're looking for in Colombia that you should all be looking for is, Of course, one more insurance coverage. As I said before, we're now working with 2 of the largest insurance companies in Colombia. The more data Serenia generates, The more tools we have to convince more insurers, we're able to show them a very significant reduction on their average annual expenditures For chronic patient patients, chronic pain patients. And when you start to show insurance that we can save you money with a proper treatment Now, we can actually show you that there's a lot of patients that are improving their quality of life. It's just really a matter of time. Now, of course, also recently, The government of Colombia issued a new decree in which they allow the dispensation of medical cannabis across pharmacies and drugstores. This is very important to us because most insurance companies have pretty challenged relationships with large pharmacy chains. So the more access the government is now providing, the more conversations and the easier it gets and the less impairments we have for universal Healthcare Coverage, which is the goal of the company, which we will then take the rest of the countries like Mexico, like Peru, like Brazil. Now we are also looking Vice of 5 different sublingual oils. And with these topicals, we already began pilot programs in the clinic So we can start generating medical evidence on these topicals and that will give us a unique medical backing. So be attentive, we're going to be launching these products very soon I think with the number of patients that have asked for this type of topical screens with very high quality, we'll be making a very Good growth in our revenues in Colombia. We're also planning to launch a new line of veterinarian medical products in Colombia. There is a favorable regulatory framework and we have been approached by several prominent veterinary clinics, veterinary doctors want to take our size based approach and give it to a big population of pets and masks that have already increased with the pandemic. So We're going to be launching that also very soon. I think that will also be a catalyst for growth for the company in Colombia. Now moving on to Peru. As you know, we began sales in Peru last year and even though we grew 21% quarter over quarter, Our Peruvian sales still represent a small fraction of our LatAm sales. 51% of the units are high THC and 1 to 1 And even though we have grown in the total number of external doctors that are prescribing, I'm very sure we can do a lot better. Now I said before that we believe that our clinic strategy is the key to generating demand. And this is why we partnered with Clinica Montesuri Lima. And then last month and a half we have dedicated ourselves to systems, infrastructure setup, soft opening, training, bringing doctors from Peru to Colombia. And now with all of that done, we're able to open the clinic fully commercial operations in the beginning of September. So I think we will see an uptick in prescriptions and We generate demand like we have seen in Colombia. Now in Peru, we've also been working in parallel for certain important things that are key catalysts for our company. First of all, about a week or so, Kairum was awarded its 1st ever medical product registration by the local FDA and across Latin America. The brand of the product is named Alixen, it's a CBD 30 millions per milliliter approved product. I think what's exciting about it is that now we can sell this product in any pharmacy in Peru and not just in Lima as we're doing today. It also means that any patient with a prescription can pick up their medication anywhere in them. So by now the team is working on codifying We're also going to introduce a new medical grade topical portfolio for pain in Peru based on what we're doing in Colombia. And I think we could be looking at early Q4 introduction for this topical grade products and that will continue to drive more growth for us. When we look at Brazil, It's a market that you know we have been after for quite some time. I am very proud of the team that we were able to find the regulatory and compliant manner To take our Chiron branded product from Colombia into the hands of a patient in Brazil. I think as far as I know, This is the 1st branded medical cannabis product from Colombia into Brazil. And I think that opens up a credibility The company that we are able to deliver a product that's actually also a lot less expensive than the rest of the products out there today in the market. We recently announced the event of Doctor. Eduardo Faverate as Medical Director for VASI. Eduardo who was just here last week He's considered to be, like some say, the name are of medical cannabis over there. He's prescribed more than 3,000 patients. I think having him in our team is very positive. He will drive prescriptions, he will drive training and it's not going to be only based on his experience, But on the tremendous platform we have created at Serenia that we will provide to him and his team. We have proven our ability to deliver the medication to Basel. And as I said before with a significant cost discount and we will begin to work on introduction of THC products Into the country very soon. Right now, we are looking for locations for a new flagship Semenya, most likely in Rio de Janeiro. I think we are very certain that we know our clinics are the go to market strategy for us to build demand. We will execute on this as soon as possible While we figure out new partnerships to expand Celine into 2022. And lastly, Latin America, I want to talk about Mexico. Mexico is a market that we are very close to as you know, former President Bicentefos is a member of our Board of Directors. In the past few months, we have been working closely with him to set up our operations and execute important partnerships that will cement Our leadership position is Mexico. We recently announced that we obtained quotas for TAC exports into Mexico from the government of Colombia. And this milestone is very important because we can start to plan and executing a lot earlier than we thought at the beginning of the year. On the meantime, we are finalizing more agreements with manufacturing companies that will manufacture our Chiron branded products in Mexico. And very soon we'll be exporting our first CBD shipments. So we all have to be on the lookout for that. Our goal in Mexico is to become market leaders. We want to deploy our clinic business model just like we're doing Colombia, but at a very much larger scale. And thanks to pressing folks, We're making great progress with large healthcare institutions to be able to position Serenia in as many cities as possible as fast as possible. We will bring a level of real world evidence for our quality and access that will make Mexico very Officer for us. We have already closed for the information and LOI, we are prominent oncology center with more than 5 locations Nationwide as part of these initiatives and we will be announcing a lot more LOIs and partnerships with bigger of large medical institutions, so we can put up serenias in as many places as possible. There will be a lot of new snow coming in the next few months. We have already closed an agreement with a clinic operator so that we can set up Serenia almost immediately now that we have all the permits and administrative process back office We need to set it up. And so the new flow out of Mexico would be very interesting. I cannot be more excited about the possibilities. I think that the more our model proves to work In Colombia, the more excited we are about the market that is 3x as large as Colombia. So with that, I'd like to introduce you to Francie, Our President for Europe and then Joel will come in with the financial review. I think that Europe is a market where we can be very competitive, Bringing our strategy to countries like the U. K. And what we're doing in Germany. Now this Q2 begins to show why we decided to Europe accounted for 26% of our medical cannabis sales and for 30% of our medical cannabis profitability. So it's becoming and it will be a major driver for growth and profitability for the company. So, Francie, welcome and please Tell us a little bit about what we've been doing in Europe. I I think you're on mute, Nancy. Can you hear and see me? Yes. Yes. So hello, buenos dias and Guten Tag. My name is Franziska Katarbach. I'm President of Chiron in Europe Since June this year, and I'm happy to say that right now, I'm exactly where I want to be. I joined Chiron almost 2 years ago after I met Alvaro and Chris in Bogota, and of Bogota. And I saw the team and the vision, which is bright. After my visit to Bogota, I started with a very broad mandate of Building Chiron Business in Europe, which is exactly the challenge I wanted to have. Before this, I was working for a cannabis director of almost 8 years of experience in the European Medicines sector and 5 years of this identical cannabis business in Europe. So much for me. Let's talk about business. As our sales in Europe are driven by the sales of high quality products In Germany and in the UK, we presented 6% of the total Which was up by more than 400% from last quarter. I'm very hard to say that within a few months, we captured 1% of the dried flower Market share in Germany and 40% of high flower market in the UK. It's best if you put yourself out of video and let's see if yes with the audio. Here. So let's talk about Germany, home sweet home. I would like to start with a brief overview of the German market. So far, Germany has 8000000 to 10000000 people suffering chronic pain, it's roughly 8% of the population. And If you take this conservative number, these are patients which can potentially benefit from cannabis based medication. In Germany, generally every doctor can prescribe medical cannabis since March 2017, which means we're now in year 5 Officer Legalization. So far, we have between 60,128,000 patients and this is roughly 0.1% 0.3 percent of the market. If we just apply very conservative number of the Canadian market, which is that 1% of the population can become cannabis patient. There's still a lot of room to grow. Cannabinoid based medications are reimbursed like in of Colombia. And up until now, roughly 70% of the scripts are reimbursed. The majority of scripts to give you an overview of the split is for high THC dried flower. It's roughly the dried flower market is at 45%, Isolates make 30%, finished pharmaceuticals make roughly 20% and extracts around 5%. Germany, as we know, is the most mature market for medical cannabis in Europe, but there's also some good news for us. There's Still no defined market leader yet. And this means there's still a void which we as Chiron can fill. As the market in Europe and Germany goes more mature, we also see that the patients get more Sure. So it is given that products have to comply and have to be grown under EU GMP standards, but The patients are looking for more. They're not only looking for certain THC and CBT ratio, but they're looking for strength and they're looking for brands. So they become real connoisseurs. We as Chiron, we're truly patient focused. But what does that mean? It means that we work backwards. We think what does the patient need and then we look how we can get it. Generally, we believe that every dosage format has its use for patients. So dried flowers, extracts, isolates, Everything is there for a reason and we're not agnostic here. Big question, why are we growing in Germany? I think we're growing in Germany because We do things different because we know our customer. First of all, our very experienced team has a close ear to the market and understands the needs of Patient. And as I already mentioned before, the needs of patients develop over time and they can also change. At the Same time, our amazing sales force is able to convince doctors to write a kyron script, which is a legal requirement in Germany. So taking a step back In Germany, it's not that a doctor writes a script with dried flower, 20% THC and then deferring the dispensation decision to the pharmacist. In Germany, the doctor would have in our case to write a script which states, Chiron 20:one. And then the pharmacist has to Executive. Exactly that product and cannot substitute with another one. So what makes us different in the eyes of a doctor? I think it's certainly our people, our dedicated team. It's our product portfolio and it's also our real world evidence from Colombia and the UK, which Helps us to generally persuade doctors of the benefits of medical cannabis, but at the same time convince them about our product portfolio. Together with our strong distribution partner in Germany, we're also able to talk to the pharmacists and understand their preferences and needs, which don't have to be The same as the doctor wants or the patient wants. So altogether, I think we truly understand all of our customer categories, which is patients, doctors and Pharmacist. By doing so, we were able to increase sales of medical cannabis in Germany by 2 65% in comparison to Q1, which was heavily supported by the introduction of Officer to Q1, which was heavily supported by the introduction of our new product category, which is the current 2021, it is Executive. Our goal ultimately is to make sure that every patient finds within the current portfolio, the Another catalyst is our genetics. We have released that we successfully imported Our life clones and genetics from Colombia to Europe. And as we are now speaking, our varieties have grown within Europe. And I can already tell you that they look very promising us. Finally, let's talk about the Colombian decree. As you know, the Colombian government recently approved the export of medical dried flower. And this is a huge opportunity for us in Europe and in Colombia When the Colombian market comes online, our We focus on the sourcing local from our European side partners. Let's go up north to the U. K. As you might know, Kiron was a founding member of Project 2021 in the U. K. Back in 2019. Through Project 2021, eligible patients can get access to affordable cannabis treatment. The project overall aims to create the U. K. Largest body of evidence for effectiveness and vulnerability, medical cannabis. Officer. And the end goal is that the CNX is NHS funded for the benefits of the treatment with Medical cannabis is proven to outweigh the potential risks. We are proud that we were able to gather a 40% market share of the dried flower And in Q2, we increased the systematic cannabis in UK by 4 75% from Executive. Now that we did that, and that we became a really recognized brand within this Projected in the U. K. Overall. We think it's the exact right time to deploy our U. K. Our Zirenia clinics in the U. K. And we are targeting to open our 1st Zirenia clinic in U. K. Very soon. Why would we do that? Alvaro already Officer. Thank you, our model. And I think we learned from our Latin experience that the clinics model, this simply works. In the U. K, we started with 2021 to serve for the demand at the beginning. And now that we build that and seeing success, we think it's the right time to build that out further As the U. K. Market is still at this very, very beginning and still heavily undersupplied and we want to solve for that in order to help patients. Another cornerstone in the U. K. Is our Chiron Academy. Chiron Academy is our medical cannabis e learning platform It has been completed by hundreds of physicians across LATAM, but also in Europe. And it was just recently accredited for U. K. CBD. And this means that a doctor who's completing our online course gets he receives CPD credits for continuous education. In addition, in the U. K. Market, like in Germany, we want to deploy new medical product categories sourced within Europe so far, hopefully very soon coming from of Colombia. Overall, one of the key aspects to our strategy is our and this is our unparalleled differentiator is the real world evidence, which we Already collect for a long time in Colombia and at the same time collect in the U. K. Because with this, we can persuade some doctors to prescribe medical cannabis and As Alvaro mentioned earlier, we will soon make our first publication in Indexed Journal And this will create a massive credibility within the doctors community in UK and Germany. We're really looking forward to it. And it's exciting to think about the amount of data and evidence we'll be collecting just within Kiron in the future. And I used to say that, I call our data set really our treasury chest, which is Julius. So thanks a lot. Thanks for listening. I think we have exciting things to do in Europe. And then I would want to give back to Alvaro, I just want to let you know That really the European team is working 20 1st 7 to make Carbonite success and this quarter shows that we're definitely on the right path. Thanks. Thank you, Francie. I appreciate it. Joel, could you take on for the discussions on the financial results for Q2 please? Yes. Thank you, Alvaro, and apologies for the technical difficulties, everyone. In Q2 2021, the company recorded revenues of $2,800,000 consistent with Record revenues of Q1 2021 as increases in medical cannabis offset a decline in health services. The devaluation of the Colombian peso resulted in a decrease in Canadian equivalent revenues of approximately 7% versus Q1 2021. At stable exchange rates to Q1, we would have seen another quarter of record revenues of of approximately $3,000,000 with higher revenues in all segments. On a year over year basis, revenues were up 68% News in the Q2, which represented an increase of 47% over Q1 2021 and a contribution of approximately 30% of total revenues compared to 20% in Q1 2021 and less than 1% a year ago. The largest contributor to sequential Medical cannabis revenue growth was from Europe with unit revenues of approximately 270,000 where sales increased 280% sequentially and contributed 60% of our Q2 medical cannabis sales growth. Prescription volumes in Latin America also increased significantly Over 40% from Q1, but revenue in Canadian dollars were impacted by the devaluation of the Colombian peso and lower unit pricing associated with increased B2B sales. Looking at our Health Services segment, which Revenues and costs from Maryland and Zirenia Health Centers. Revenues in Q2 2021 were 1,900,000 Resulting reflecting a 22% increase year over year, however, a 13% sequential decline from the prior quarter. On the 13% decline approximately half related to the foreign exchange rates, while the remainder was larger result or reduction of high margin services Such as the surgeries as Alvaro explained. As he noted, certain surgeries could not be provided, but we have the backlog of services that we expect to contribute to Quite significantly, medical cannabis contributed about 70% of gross profits or about 750,000 for the quarter. In the 90% range, medical cannabis margins remain high and were consistent with the previous three quarters. Medical cannabis growth offset the reductions in health services where gross profit declined to 16% of revenues Below the 25% margin in Q1, but consistent with the prior year. As was explained by Alvaro, the margin compression from the health services were driven by the Executive Officer of High Margin Services and we expect these contributions to come back over the coming quarters. Despite the weakness in the clinic segment, I want to highlight that we still achieve consolidated gross margins in line with our highest levels to date driven by the growth of medical cannabis revenues. Looking at expenses, Q2, 2021 total expenses were down about 1% versus the prior year and 6% from the prior quarter. Our SG and A costs which excluded share based payments in R and D were down 15% or 900,000 from Q1 2021 as the company continued to manage spending and benefited from the weaker peso. Looking at EBITDA, in Q2 2021, We recorded an adjusted EBITDA of about 3,850,000, a 5% improvement from Q1 2021 as medical cannabis operations continue to contribute And these levels are consistent with Q2 2020 when operating activity was suppressed due to the COVID-nineteen restrictions. Looking at our balance sheet, we finished the quarter with 9,300,000 in cash. We had a cash burn from March 31, 2021 of 3 point of 2,000,000, 1,700,000 in debt, which is largely comprised of our lease obligations. The loan obligations in Colombia continue to reduce in line with In early July 2021, we completed a financing that brought our pro form a cash position over $20,000,000 Positioning us well to continue to execute with our major capital investments behind us based on our current operations. I'll turn it back over to Alvaro who will discuss the more of the outlook for the coming quarters. Thank you, Joel. So, In our MD and A, we talk about providing revenue guidance for the first time and I think that we are able to do that because The continuous growth that we're seeing in every market that we're in. And with these guidance, we talk about a run rate of at least minimum $1,000,000 per month in medical cannabis In addition to the $1,000,000 in medical services that we already achieved in March. So how do we get those to those $2,000,000 a month With that same level of predictability within the next 6, 9 months, is really continuing to grow at a market rate of about 35% to 40% quarter on quarter in every market that we're in. I mean that's led lower than the historic quarterly growth that we've had. We are entering Mexico. We are entering Brazil. We are opening clinics in the UK. We are opening our full commercial operation for Peru and Colombia keeps to Continue to grow very significantly the same as in Germany. So what that gives us to when we get to that point very soon We saw an annual revenue of between $24,000,000 $35,000,000 for 2022, mindful again with the same level of profitability, We're as close as possible to that above 80%, which is something that not many companies in this region can claim to do. The reason we've been waiting to be able to do is because we want to come to you to show that where more business model works. And now that we have that a Higher competence level, we're able to provide that guidance. A lot more details on that are within on the MD and A. But at the rates that we're growing, this is something that not only can be Achievable, but that can also be much higher than what we expect in that range that I just mentioned. And this is done only through organic growth setting up What we've set up for the last two and a half years that's now shown to be very fruitful and profitable for us in the next couple of Force. So, please, you can look at the MD and A for this and I think you'll start to see a lot more of those results As we keep talking about all these catalysts that I just mentioned, in each one of these countries, each one of these countries were working on certain Several things are going to continue to expand on that growth and I guess is very excited about showing that our business model works that it takes a little time always As good things that are sustainable take time, but they're very excited about it. We are, we see what's happening on the ground and we see The success that we're having. So with that, we got a couple of minutes, we have more for questions about 10, 15 minutes. We've been having a lot of questions here in The chat, so maybe Chris, you want to moderate and well, Francie and I will make ourselves available to answer. If we are not able to answer all those questions, Please write back to Paola Ricardo. She's our IR manager. She's in Toronto and she will get promptly back to all of you if we're not able to answer all Vice President. So with that, I know, Chris, why don't we get into the Q and A? Sure. Thanks, Alvaro. And so the first question is from Federico, I wanted to know about Zareunia expansion in Germany and other European countries, including UK and Portugal. I think you've covered off a lot of that, but maybe just highlight what our Zarenea expansion plans are. Yes. Engine Plans, Czar. Yes. Germany, it's not something that we can actually do just because of the regulations. But I think the German market is Sufficiently strong enough that we don't need to build that demand, but certainly we're going to do this in the U. K. France, it was just last Back up in Colombia against the other competitors. So maybe just talk about our market share and what's going on in Colombia? I think I said it before, I think we are at the Clear leaders in Colombia. We have more than 90% market share in the short market. I don't see anything like Serenia anywhere here. And I think, of course, most companies are focused on the B2B business of cannabis, which is not something we do. But I would say that we are enjoying a very good market share and we'll continue to do that as we keep growing our clinics and our revenues. The next one is about when do we plan on ramping up Quita sales. I can answer that one that we're really focused on the clinics and medical cannabis and we won't be spending a great deal of capital on that product line at this time, even though it is such a great product. Next one from Larry about Mexico and how many clinics we have expect head up by the end of the year. I think you talked about that in your remarks. Maybe you just highlight the Mexican strategy. Yes. Harry, I'm not going to give away a Specific number of clinics that we want to close by. I think our main focus right now is to set up as many partnerships as possible, But we certainly want to start with 1, but on the back of doing and showing investors the pipeline of big clinics that we'll be setting up there very, very soon. But right now, I think we are doing the right conversations with all the right groups. But I'll give you an example. We have 10 in Colombia and Mexico is 3 times of large. So when we think about Mexico, we got to think the 20s 30s and just a matter of The right capital deployment strategy, the right strategy and partnerships and it doesn't not necessarily have to be All in the back of our capital like we're doing in Peru. Okay. This next one is important from Tommy, talking about the share based compensation that we Leonounced. I think that's important that you cover that off. Yes. Well, I think we have a company where we have very committed employees. We gave 1,500,000 shares to almost 95% of our employees from the lady that welcomes people at the clinic All the way up to the Vice President, we're making a lot of these things happen. We need our employees to be compensated and to think about the future and What they can do with that equity. I don't think there's anything ever as a non successful company that doesn't get their employees involved in the success of the company. And when you talk about giving 1,000 or 2,000 shares to the nurse that's picking up patients, that means a lot to that person. I think that level of commitment, this is why we are seeing our results. This is not happening by accident. It's happening because there's a committed team that's every day thinking how do we grow And I think it was good for the Board and for the company to recognize all that effort, particularly on this on the pandemic And everything that everybody's done to get us to this point. Yes. The next question here is related to the insurance providers. I don't think we put out a press release on our 2nd insurance provider. Executive. But what you see in this disclosure here today, not only with this broadcast, but also in the MD and A, I think you're seeing a super high level of disclosure. We're telling you just every detail we possibly can and being as transparent as possible. This one is for Franzi. Any thoughts on competition and price in Germany. Are we bringing in new patients? Are we taking patients away from competitors in Germany? Yes, we do. So it's very easy to answer. Yes, we're stealing market share for the big ones because the market is still growing. And if you look at it, the Like established or more established brands are losing market share quite a bit. So yes, we're taking market share away and on the pricing as it's reimbursed, Pricing is not primarily important here, but we can offer very competitive prices in both Germany and in the UK. Another one for you, Franzi. Do you expect insurance coverage in the UK in the medium to long term? Well, I personally expect governments overall over the whole world to kind of cover and reimburse the treatment which is necessary. Officer. We have this in Germany. We have this in Colombia. That's the right path. And the UK 2021 trial was set up in order to convince the NHS, which is the regulator, To in the future also cover these products. So I'm hoping for it. We're working on it. But when this will happen, it's difficult to say. Another question here, because Joel commented on currency fluctuations in Colombia and do these fluctuations concern Executive. Our revenue is spreading out over many different countries and territories right now. And people need to understand like even though we've had fluctuations in the Colombian peso, our costs are in Columbia of Bezos as well. So although the only thing that bugs us is that it doesn't reflect the top line growth that is obviously there. But these things are a way of turning around Well. But also Chris, I would say that that's one of the reasons why a year and a half ago we decided to bench goals with jurisdictions. The exposure of the company to the Colombian peso will be reduced quarter by quarter as Germany and the UK start to come up with different sales and the same as the Mexican peso and the Brazilian Real. So this is very short term and this is more of a translation risk. And so we are not concerned about that. And I want investors to understand that this diversification of revenues is the entire reason we got also into Germany and the UK Almost a year and a half ago. Yeah. There's a question here from Steven about our run rate. He's saying that our math is that we've only got a couple of quarters left. I think, Stephen, you might want to recheck your numbers there. We used just over $3,000,000 in cash in the quarter. And we have $20,000,000 in cash and no debt. So, there's an ample cash on the balance sheet for guys to understand that we raise this money to grow. We can disagree on Timing and the pricing and all that stuff. We raised the money because we are committed to growing this business and we can see a massive Juniti in front of us. There's a couple of questions in here just about share price and share performance. And folks, Executive. We are the largest shareholders individually and we care a great deal about Executives. Our answer to that is our 100% focus is on execution. And only with execution do we think we'll see meaningful share price Improvement. But we are all committed to it. We are all hugely exposed to it. And We're doing everything we can to execute every single day as you can see. And the leadership position that we have in these markets, No one else has done it. I was going to add on that note. I mean, As founder co founder of the company, it's of course very difficult all the time to see that the lack of appreciation is done sometimes by what we do. But I also believe that this is a marathon and that we're winning that marathon because we have the best base. Sometimes it talks about profitability and people think about revenues. We have to start looking beyond that. You have to start looking at new patient acquisition, how much profits are you making and whether that's going to get us to that 1,000,000 pages that I talked about in 2024. When we look at the way that we're growing and how many patients are returning, how many patients are buying, the average annual expenditure per patient, which is now Between Europe and LatAm about $1,000 per year. That's how we get to the $100,000,000 of revenue and there's no metric in this company That is not growing. And I think that while we put out this MD and A this quarter with all these details to show you that in every metric we are growing. And so I think the market needs to we'll continue to start appreciating that level of execution. When we think about international Executives. We always say they may be slower, they're not as fast as the U. S. And that is absolutely true. But if we look at it in 3 years from now, I can tell you this is going to be the fastest markets in medical cannabis and it's not going to happen just by its own. It's going to happen because third companies like Kiron We're building that demand, we're building that access. And when you think about insurance coverage, right, we think about the black market. Look at a company that's now selling 2 Countries that have full medical insurance that we don't have to reduce our price, we are doing something special. Now, how long does it will take the market to understand it? I'm not really sure. But what I know that we are doing is actually executing every day. Anybody that comes to Selenium in Colombia, From Doctor. Eduardo from Brazil to the doctors in Lima knows that we're building something very special that we're able to grow and grow and grow. And when I tell you that we are the absolute clear leaders in the Colombian domestic space, this is just the first inning of the first game of the World Series. So it's It's not something that we can absolutely control. I can't control the fact that no insiders have sold this stock since we founded it. But because we believe in this, we believe this is going to be $1,000,000,000 opportunity. It just takes a little bit of patience. But if we were just selling commodity price and trying to As much as we could, as cheap as we would, that's not going to be the way that we're going to grow our company. Today, 100 to the 1000000 patients or the 100000 patients. So we We just have to be very disciplined as we are be able to collect our revenues, which are very important to our cash burn. Every day, more insurance companies are including this And that takes a longer collection period, but now we're getting that cash back from our clients and that is The role that we have to take on because 2 years from now, we'll look back at this and say, well, what a good opportunity it was to Get on the most dominant play in Latin America, at the moment where the market wasn't appreciating it, but we are long term shareholders. We're here to stay. We're here to make sure that every patient that we can get service. I think we're very proud of every work that we've done, even in the worst of circumstances. So you can imagine what What will happen to this company when things start to ease up? So, I think we have to look at it on a different view and with the cash that we have, we're not trying to we're We're not looking to raise anymore. Right now, it's all about growth mode. How many clinics in Mexico? How many partnerships? How many clinics in the UK? We assume we will have the most dominant Medical Cannabis Clinic Network in our markets. So I think that's very exciting. All right. And with that, I think we're Right at the end of the broadcast, I do remind everybody to take advantage of the website investors. Caira. Ca. We respond to all our emails, we respond to all our questions. And I I think that's it for today. Thank you very much everybody. Maybe just one last question we have here from Fran talking about the stock and he's been asking many, many times. Fran, I'm not selling stock, who is not selling stock? I haven't sold a single stock since we started even though we no longer have lockups. I I think in the end it's about commitment to the company. Who's selling the stock? Investors who don't understand that this will go very, Very deep, but I think after looking at Q2, you start looking at the right numbers that we put out, you start seeing a lot of growth and a lot of profitability And people start making their own calculations and I start to tell you this is what our guidance looks for. This is what our 2022 revenues can look like. Give me any multiplier, I think this company is way undervalued, but we have to prove it and we'll show it to you and the rest of the investors to know that we are going to get to those points And that the comparables in the market today, which are probably much more valuable, this is not a 100 meter dash These are marathon and this marathon is about who's got the best pace. And at that pace, I think we're certainly winning and by very certain that the market will start to Every single metric that we put out. So I can tell you that we have a very committed management team, starting from Chris, myself and the rest of the executives, The rest of the team that's working here. Nobody here that got 1,000 shares on the last services is thinking of selling at this price. This is about building equity and building a long term future. So on that you can be investors can be comfortable that We are here to stay and we are working very hard and eventually very soon the market will start to appreciate the level of execution these companies have. So I think with that, Chris, sorry I cut you off. No, that's all right. We'll wrap it up. Thank you so much everybody for joining us today. And as I said, if you have more questions, there would be You can write at investors@kyron. Ca. Paola Ricardo, our Investor Manager, Relations Manager will try to answer them any questions that You may have, we are a very transparent management team. We've answered as much questions we can. And well, thank you so much for believing the company and We'll see each other very soon talking about all these successes and all the PRs that we'll be launching based on the catalyst that we talked about today. So thank you so much. Have a great day and see you later. Thank you.