Aurora Cannabis Tumbles Ahead of Earnings Report – TheStreet.com

Aurora Cannabis Tumbles Ahead of Earnings Report - TheStreet.com
Aurora Cannabis and Radient Technologies Announce First Commercial Delivery of Cannabis Derivatives
EDMONTON , May 13, 2019 /CNW/ – Aurora Cannabis Inc. (the “Company” or “Aurora”) (ACB) (ACB) ( Frankfurt : 21P; WKN: A1C4WM) and Radient Technologies Inc. (“Radient”) (TSX Venture: RTI; OTCQX: RDDTF), announced today that Aurora has taken delivery of Radients first commercial batch of finished cannabis derivatives, from Radients proprietary extraction platform. With this first batch, Radient has proven its enhanced ability to produce cannabinoid derivatives at commercial scale, and will continue to scale up production at Radients cannabis facility in Edmonton , reaching an expected eventual annual throughput of approximately 300,000 kg of cannabis biomass at this single location. 

Aurora Cannabis Inc. (CNW Group/Aurora Cannabis Inc.)MoreThe partnership between Radient and Aurora was established in 2017 after the completion of a Research Joint Venture that validated Radients MAPTM extraction technology was capable of superior cannabinoid extraction at commercial scale. For Aurora, the relationship with Radient forms an important component of its derivative product strategy, providing a greater return on the biomass allocated for extraction, favourable cost advantages, and significantly increased extraction capacity. 

In Radients deliveries to Aurora, commercial scale batches of dried cannabis biomass were fully processed and refined within a 24-hour period, due mainly to the speed of initial extraction and the unique, continuous flow nature of Radients platform.

Is Aurora Cannabis Partnering Strategy Brilliant or Boneheaded?

Radients technology platform is designed for high extraction efficiencies and high-volume throughput of cannabinoids available in the plant biomass. This is anticipated to provide Aurora with cost and volume advantages in delivering a broad suite of derivative products.

Radients Hemp facility in Edmonton will have an annual throughput of approximately 3,200,000 kg of hemp biomass. Phase one is expected to be completed in calendar Q3 of 2019.  

“Aurora recognized early that high-throughput, high-quality extraction technologies would be a competitive advantage in a rapidly developing cannabis industry,” said Terry Booth , CEO of Aurora. “Our investment will begin to pay dividends with Radient achieving fully licensed, commercial status. Once scaled up, the addition of Radients technology will significantly increase our ability to deliver high-value cannabis products at scale, complementing our existing internal extraction capabilities, which will support a full suite of derivative products.”  

Mr. Booth continued, “Cannabidiol (CBD) derived from hemp requires the level of throughput that Radients technology and state-of-the-art second facility will provide to existing and future medical, wellness and consumer markets. We look forward to working with Denis and the Radient team to further our global position in the derivative markets.” 

Denis Taschuk , CEO of Radient, added, “Achieving commercial production and sales is a crucial milestone we are very proud to have achieved. We have worked diligently over the past two years towards this inflection point, together with our partner Aurora and we are now very well positioned for accelerated growth going forward. We appreciate the patience our shareholders have shown as we executed on our transformational business plan. Auroras execution in the global medical cannabis space inspired us with their continued confidence in our technology.” 

Headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 625,000 kg of cannabis per annum and sales and operations in 24 countries across five continents, Aurora is one of the worlds largest and leading cannabis companies. Aurora is vertically integrated and horizontally diversified across every key segment of the value chain, from facility engineering and design to cannabis breeding and genetics research, cannabis and hemp production, derivatives, high value-add product development, home cultivation, wholesale and retail distribution.

Highly differentiated from its peers, Aurora has established a uniquely advanced, consistent and efficient production strategy, based on purpose-built facilities that integrate leading-edge technologies across all processes, defined by extensive automation and customization, resulting in the massive scale production of high-quality product at low cost. Intended to be replicable and scalable globally, our production facilities are designed to produce cannabis of significant scale, with high quality, industry-leading yields, and low per gram production costs. Each of Auroras facilities is built to meet EU GMP standards. EU GMP certification has been granted to Auroras first production facility in Mountain View County, the MedReleaf Markham facility, and its wholly owned European medical cannabis distributor Aurora Deutschland.

In addition to the Companys rapid organic growth and strong execution on strategic M&A, which to date includes 17 wholly owned subsidiary companies – MedReleaf, CanvasRX, Peloton Pharmaceutical, Aurora Deutschland, H2 Biopharma, Urban Cultivator, BC Northern Lights, Larssen Greenhouses, CanniMed Therapeutics, Anandia, HotHouse Consulting, MED Colombia, Agropro, Borela, ICC Labs, Whistler, and Chemi Pharmaceutical – Aurora is distinguished by its reputation as a partner and employer of choice in the global cannabis sector, having invested in and established strategic partnerships with a range of leading innovators, including: Radient Technologies Inc. (RTI.V), Hempco Food and Fiber Inc. (HEMP.V), Cann Group Ltd. (CAN.AX), Micron Waste Technologies Inc. (CSE:MWM), Choom Holdings Inc. (CSE:CHOO), Capcium Inc. (private), Evio Beauty Group (private), Wagner Dimas (private), CTT Pharmaceuticals (CTTH), Alcanna Inc. (CLIQ.TO), High Tide Inc. (CSE:HITI) and EnWave Corporate (ENW.V).

Auroras Common Shares trade on the TSX and NYSE under the symbol “ACB”, and are a constituent of the S&P/TSX Composite Index.

Radient Technologies provides industrial scale manufacturing solutions for premium natural ingredients and products. Utilizing its patented MAP™ extraction technology, Radient delivers superior customer outcomes in terms of ingredient purity, yield, and cost, serving global market leaders in industries such as food & beverage, nutraceutical, pharmaceutical, cosmetic, and personal care. Since 2016, Radient has expanded its offerings to enter the cannabinoid market, using its MAP™ platform to provide premium ingredients that contain a full range of cannabinoid and terpene profiles. Please visit www.radientinc.com for more information.

Terry Booth , CEOAurora Cannabis Inc.               

This news release includes statements containing certain “forward-looking information” within the meaning of applicable securities law (“forward-looking statements”). Forward-looking statements are frequently characterized by words such as “plan”, “continue”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “potential”, “proposed” and other similar words, or statements that certain events or conditions “may” or “will” occur and include, but are not limited to future deliveries of cannabinoid extracts by Radient, future yields and efficiencies resulting from Radients MAPTM extraction technology and Radients ability to expand its business in the cannabis sector. These statements are only predictions. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this news release. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Company is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

Neither the TSX, TSX Venture, NYSE, nor their Regulation Services Provider (as that term is defined in the policies of the TSX, TSX Venture and NYSE) accepts responsibility for the adequacy or accuracy of this release.

Dont expect Aurora Cannabis (NYSE:ACB) to receive a huge investment from a big company outside the cannabis industry. There arent likely to be high-dollar transactions like Canopy Growth (NYSE:CGC) or Cronos Group (NASDAQ:CRON) had. Theres a simple reason: Aurora doesnt want that kind of a deal.

Auroras chief corporate officer stated in an interview with MarketWatch earlier this month that the company is “taking a different approach” to partnering outside of the cannabis industry than some of its peers have. Sure, Aurora wants a major partner. But it doesnt want to give up an equity stake to make such a deal happen.

Auroras executives didnt come up with the idea of taking a different approach to partnering, according to Battley. In March, Aurora brought billionaire investor Nelson Peltz on board as a strategic advisor. Peltz recommended that the company not start down a path where control of Aurora could eventually be handed over to a larger company.

This scenario could — and many think will — happen for both Canopy Growth and Cronos Group. Big alcoholic-beverage maker Constellation Brands owns a 38% stake in Canopy and has warrants that could up its interest to above 50%. Its a similar story for tobacco giant Altria, which owns 45% of Cronos.

But Peltz urged Auroras management team to remain independent. And instead of teaming up with just one big company outside of the cannabis industry, he advised Aurora to seek multiple partners across several industries that could be disrupted by cannabis. Aurora CEO Terry Booth and the rest of the companys top executives bought into Peltzs plan.

There are two primary advantages to this approach. First, Aurora shareholders could make even greater returns over the long run if the company achieves tremendous success as a standalone entity. Second, this approach allows Aurora to partner with several major companies outside of the cannabis industry rather than just one — which just might increase its odds of succeeding.

Aurora isnt the only major Canadian cannabis company employing this partnering strategy. Tilray hasnt given up an equity stake to a partner so far. The company has already teamed up with partners in several industries: big drugmaker Novartis, giant beer maker Anheuser-Busch InBev, and consumer brands company Authentic Brands Group. Tilrays partnering approach is arguably its biggest competitive advantage right now.

This partnering strategy that Aurora is adopting isnt perfect, though. While it could reward the companys shareholders over the long term, you could make a pretty good case that the lack of a major equity partner is holding Aurora back at least somewhat for now.

Some might argue that Auroras stock performance has been really good even without a big partner. And it has been.

But Auroras market cap is only a little over half the market cap of Canopy Growth. Yet Aurora has a greater production capacity than Canopy, has a stronger international presence, and is a close No. 2 behind Canopy in the Canadian adult-use recreational marijuana market. The most plausible explanation as to why Canopys market cap is so much higher than Auroras is that Canopy has a big partner and Aurora doesnt.

Another drawback to Auroras partnering approach is that it wont have the huge infusion of cash that comes with an equity partnership deal. Canopy Growth reported a cash stockpile of more than $4.9 billion Canadian (around US$3.7 billion) at the end of 2018. Aurora, on the other hand, had only CA$88.2 million (around US$66.8 million) in cash and cash equivalents at the end of last year.

So while Canopy Growth is flush with cash to fund its expansion efforts, Aurora must raise additional cash by either taking on more debt or issuing new shares. The company has done a lot more of the latter, announcing in April that it had filed regulatory paperwork to raise up to US$750 million by issuing new securities. The main problem with issuing new shares is that it dilutes the value of existing shares. 

Theres also one other potential fly in the ointment with Auroras partnering strategy. Its entirely possible that a big partner outside of the cannabis industry is adamant about obtaining an equity stake in its cannabis partner. Aurora could conceivably lose out on winning a major partnership deal if it isnt flexible about handing over ownership interest. Maybe this wont turn out to be a problem, but it seems likely that Altria and Constellation Brands wouldnt have teamed up with Cronos and Canopy if the two cannabis producers had not been willing to give up equity stakes.

If the companys partnership deals are structured in the right way, Aurora could be in great shape. The problem for now, though, is that there arent any partners lining up at Auroras doorstep that we know about.

Still, it seems likely that Aurora will land one or more big partners in other industries. But well have to wait and see if the companys partnering strategy turns out to be brilliant or boneheaded — or maybe somewhere in between — over the long run.


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