The Elephant in the Room With Aurora Cannabis Latest Update – Motley Fool

Aurora Cannabis (NYSE:ACB) doesnt make investors wait until the companys financial reports each quarter to shed light on whats going on with its operations. The Canadian cannabis producer has committed to “provide regular, quarterly updates to its stakeholders in an effort to demonstrate continued transparency and disclosure.”

On Thursday, Aurora released its latest business update. The company shared plenty of information about the status of its global operations and its growth initiatives. But youve no doubt heard the expression that “theres an elephant in the room,” a reference to an obvious issue that no one wants to talk about. For Aurora, there was a big elephant in its recent update.

Yesterday, the CATO Institute reported the results of its 2019 Welfare, Work, and Wealth Survey, which it conducted between March 7 and March 13, 2019. The survey gathered online responses from 1,700 US residents older than 18. According to the survey, 55% of Americans supported the decriminalization of drug-related offenses, and 44% opposed it. The survey also indicated that 69% of Democrats and 54% of Independents supported the decriminalization of drug-related crimes. However, 59% of Republicans opposed it.

You cant fault Aurora for not providing lots of details. The company supplied nearly everything youd want to know about how its capacity expansion efforts are coming along.

This year, the cannabis sector has been underperforming the broader equity market. YTD (year-to-date), cannabis ETFs the Horizons Marijuana Life Sciences Index ETF (HMMJ) and the ETFMG Alternative Harvest ETF (MJ) have fallen 18.5% and 18.7%, respectively. During the same period, the S&P 500 Index has increased 15.2%. Increased operating expenses, concerns over vaping-related deaths and illnesses, and regulatory scandals have dragged cannabis stocks down.

Aurora CEO Terry Booth stated that the companys 1.6 million square-foot Aurora Sun facility in Alberta “is nearing completion with the majority of capital investment now behind us.” The company has also made solid progress on its 1 million square-foot Aurora Nordic facility in Denmark. Booth said that “the primary outdoor construction, including the enclosure of the facility, nears completion.”

In June, Aurora announced that it would partner with PAX Labs to introduce the PAX Era device in the vape category. It also announced its launch of a portfolio of vape products post-legalization. The company has also expanded its production capacity via the opening of its Aurora Sky, Aurora River, and Aurora Vie facilities. For more on Auroras Cannabis 2.0 preparations, read Cannabis 2.0: Aurora Cannabis Gears Up for Edibles Market.

While Auroras Sky Class production facilities are its crown jewels, the companys Aurora Polaris facility for producing products including edibles and vapes is also a key component of its growth strategy. Aurora said that staff should begin moving into this new facility in early November.

In addition, the construction of the companys Whistler Pemberton facility should wrap up in the fourth quarter of this year. Four grow rooms for organic cannabis are already operational. Aurora also expects to finish construction of its cannabis innovation center in Comox, British Columbia in December.

During its first-quarter earnings call, Canopy Growth announced that it would be introducing around 15 SKUs of vape devices in December. Last month, Canopys CFO, Mike Lee, announced that the company was building a production facility for infused beverages in Smiths Falls, Ontario. For more on Canopy Growths initiatives, read Canopy Growth: Getting Ready for Cannabis 2.0.

Not all of Auroras business update was about construction efforts. The company said that its first harvest at its Aurora Valley outdoor facility in British Columbia began this week, and the first harvest at its Aurora Eau outdoor facility in Quebec is also underway.

The results appear to have boosted cannabis stock prices, especially for US-based companies. Yesterday, Curaleaf Holdings (CURA) (CURLF), MedMen Enterprises (MMNFF) (MMEN), Cresco Labs (CRLBF), Green Thumb Industries (GTBIF), and the Green Organic Dutchman Holdings (TGOD) (TGODF) were up 14.5%, 12.1%, 7.0%, 10.8%, and 4.9%, respectively.

Aurora also noted that its Agropro hemp subsidiary in Europe is harvesting around 9,000 acres of hemp in three Eastern European countries. And its ICC Labs subsidiary in Latin America expects to begin planting around 434 acres of hemp in November.

In June, Aphria estimated that vapes and concentrates could form 30% of the recreational cannabis market by 2021. It recently agreed to a partnership with PAX Labs whereby it will provide cannabis extracts for PAX Labs vape products. The company plans to design these products for both medical and recreational purposes.

Terry Booth said that “the Aurora team is working to advance several major strategic initiatives in Canada, the United States, and abroad aimed at further strengthening Auroras global position.” Aurora mentioned some efforts, including its recent agreements with two partners in the United Kingdom aimed at speeding up the delivery of more medical cannabis to the U.K. market and the companys work with Ultimate Fighting Championship (UFC).

Canopy Growth (CGC) (WEED), Aurora Cannabis (ACB), Tilray (TLRY), Cronos Group (CRON), and Aphria (APHA) have lost 19.9%, 18.0%, 65.9%, 17.9%, and 12.6% of their values, respectively, this year. Only HEXO (HEXO) has delivered a positive return of 6.6%. Will these stocks bleed more after MKM Partners bearish outlook?

But the one glaring thing missing in Auroras update was any news about its quest to land a major partner outside the cannabis industry. Earlier this year, the company trumpeted its move to bring billionaire investor Nelson Peltz onboard as a strategic advisor to help secure big partners, particularly in the consumer packaged goods (CPG) industry. Since then, though, investors have learned practically nothing about how Peltzs mission is progressing.

Later this month, Canada is expected to legalize the sale of cannabis-derived products, including vapes, edibles, and beverages. We expect the second phase of legalization in Canada, also called Cannabis 2.0, to boost cannabis companies stock prices. Many companies are already getting ready for Cannabis 2.0.

In Auroras fiscal 2019 fourth-quarter conference call last month, Booth said that the company had “gone on a significant MSO [multistate operator] review tour of the states” and added that Auroras strategic partners were “helping us talk to some of the top companies in the world” about the U.S. hemp CBD opportunity. He even mentioned that “probably 90% of my time is dealt on new opportunities.”

However, there was no information whatsoever in Auroras business update this week about any progress on finding a partner to enter the potentially lucrative U.S. hemp CBD market. Not even a hint.

Some might think that no news is good news. In this case, though, its fair to wonder if no news means theres really no news. If so, that could be concerning for investors. Aurora is burning through cash like its going out of style. Competing in the U.S. hemp CBD market will be costly, making securing a major partnership more urgent for the company.

After taking some time off, recession fears have again started raising their ugly heads. Barclays chief US economist Michael Gapen shares this view, too.

Speaking of burning through cash, Aurora faces the prospects of needing more cash to pay off convertible debentures of 230 million in Canadian dollars that mature in March 2020. The company is likely to go to the well again with another convertible debt offering, which means more share dilution is probably on the way.

Costco (COST) announced its fiscal 2019 fourth-quarter results yesterday. Investors expecting a special dividend from the retailer may have to wait longer.

Aurora hopes to have some good news with the upcoming launch of the Cannabis 2.0 market for cannabis derivatives. The company is focusing heavily on vapes and edibles rather than cannabis-infused beverages.

Snap (SNAP) stock tumbled as much as 7% during the trading session on Thursday and ended with a 3.38% decline after Facebook (FB) unveiled Threads.”

Investing in marijuana stocks often doesnt come with enough transparency. Its encouraging that Aurora is making an effort to keep investors updated on its business operations, but its time for the company to give at least a little more information about its partnership strategy. The elephant in the room for Aurora isnt going to disappear until that happens.

EDMONTON, Oct. 3, 2019 /PRNewswire/ – Aurora Cannabis Inc. (the "Company" or "Aurora") (NYSE | TSX: ACB), the Canadian company defining the future of cannabis worldwide, today provided a corporate update on its global operations, business units, and portfolio of strategic investments. As a global leader in cannabis revenues, cannabis production, research, innovation, and international market development, the Company will provide regular, quarterly updates to its stakeholders in an effort to demonstrate continued transparency and disclosure. The Company also launched today, Aurora Insider, an investor focused blog which will provide regular updates and insight into the operations at Aurora.

The Trump campaign purchased Facebook ads worth about $2.0 million in the final week of September to talk about President Trumps impeachment.

"Aurora takes its leadership position in the global cannabis industry seriously, and is committed to being open and transparent with all of our stakeholders," said Terry Booth, CEO of Aurora. "The Aurora team is working to advance several major strategic initiatives in Canada, the United States and abroad aimed at further strengthening Auroras global position. We are laser-focused on delivering on our business plan and prudently managing our investors capital."

Netflix (NFLX) has something to smile about. A Piper Jaffray survey has revealed customers may not leave Netflix for Disney+ and Apple TV+.

As Aurora executes on its strategy of leading scalable, purpose-built cultivation, it continues to prudently manage capital allocation decisions driven by global forecasts for demand. Many of the Companys significant construction projects are nearing completion of major milestones with significant capital investments concluded.

Cannabis legalization has Americas attention. A Gallup survey has shown that two-thirds of Americans want cannabis legalized now.

Aurora continues to progress construction of its 1.6 million square foot facility, Aurora Sun, located in Medicine Hat, Alberta, and its 1 million square foot facility, Nordic Sky, strategically located in Odense, Denmark. The new purpose-built, "Sky Class" facilities Aurora are constructing will have full control over all anticipated environmental and harvest conditions, resulting in the production of consistently high yielding, high-quality cannabis at low-cost.

Mr. Booth added, "Aurora Sun in Medicine Hat and Aurora Nordic in Denmark represent the next evolution of our "Sky Class" cultivation philosophy and construction of these projects is proceeding well. Aurora Sun is nearing completion with the majority of capital investment now behind us, while at Aurora Nordic the primary outdoor construction, including the enclosure of the facility, nears completion. Our design philosophy allows for flexibility in licensing and commissioning in-line with the long-term growth in global demand for medical cannabis."

Construction of Aurora Polaris, the Companys hub for industrial-scale production of higher margin, value-added products, such as edibles and vape products, is near completion. Building occupancy is expected October 31, 2019 with staff starting to move in as early as the first week of November. Warehouse racking is expected to arrive the first week of October.

Construction of the Whistler Pemberton facility remains on track for completion in calendar Q4 2019. To date, four rooms are fully operational with an annual capacity of 1,200 kg of premium certified organic cannabis. Eleven additional rooms are expected to come on-line beginning in November 2019. Upon completion Pemberton is expected to produce in excess of 4,500 kg per year of certified premium organic cannabis. The Companys organic consumer brand, Whistler Cannabis Co.,  intends to launch new cannabis derivative products in the consumer market including organic certified hash and resin upon legalization in December 2019.

The Pemberton facility will incorporate a public lounge to educate visitors to the region about Whistler and its history as cultivation pioneers of organic certified cannabis. Whistler, British Columbia attracts over 2.7 million visitors annually and consistently ranks as one of the top global travel destinations.

On October 8, 2019, Anandia Laboratories Inc ("Anandia"), Auroras wholly-owned cannabis testing subsidiary, will officially open its new headquarters in Vancouver, British Columbia. This new facility adds 12,600 square feet of laboratory space and approximately 40 new employees, bringing the total Anandia headcount to over 100. A further 13,000 square feet of office space is scheduled to  be added to the headquarters by the end of 2019. This represents a 700% total increase of Anandias Canadian footprint in the last year, enabling Anandia to scale up and service more Canadian licensed producers in support of cannabis patients and consumers.

Currently, Anandia is implementing state-of-the-art technology and automation to increase efficiency. The new facility is capable of performing an industry leading number of different tests on cannabis and cannabis products, including tests for 14 different cannabinoids. The new headquarters also contain a unique plant tissue culture facility that will offer genetics archiving and backup services to support the plant genetics needs of licensed producers to strengthen productivity of this new high-value crop and the cannabis industry in general.

Construction of Auroras purpose-built cannabis innovation center in Comox, British Columbia is on track for completion in December 2019 and is on budget. The new facility includes a 22,500 square foot greenhouse and an accompanying 10,000 square foot laboratory. The Comox facility will focus on the development of valuable IP, new genetics and specialized cultivation technology to further improve production in Auroras Sky Class facilities.

Production at Aurora Sky, the Companys flagship production facility, continues to scale on track of the facilitys annual production target of more than 100,000 kg of cannabis per year. Located near the Edmonton International Airport, Aurora Sky is the Companys most technologically advanced production facility in operation with 16 flower rooms and state-of-the-art automation to ensure precise control of each environmental variable required for the consistent production of high-quality and low-cost cannabis. Take a unique, behind the scenes journey through the most technologically advanced cannabis cultivation facility through an in-depth, clone-to-sale tour of the facility:

The first harvest at Aurora Valley, located in Westwold, British Columbia, began on Wednesday October 2, 2019. Spanning more than 200 acres, the first harvest includes approximately 55,000 cannabis plants across six unique plant cultivars: Banana Split, Blue Dream, Cannatonic, Chocolope, Krypt Melon, and LA Confidential. The cannabis will be shipped to Aurora Sky for extraction and further testing. This first harvest is an important milestone for the Company as it develops cultivation techniques to further excel at growing cannabis in varying climate conditions and examines approaches to environmentally responsible cannabis agriculture. The cultivation research performed this year is anticipated to help the Company develop new technology, genetics and intellectual property in order to drive sustainable, high-quality outdoor production.

Earlier this year Aurora entered into a long-term electricity purchase contract to buy power from a 600-kW roof top solar project installed at Auroras first flagship location, Aurora Mountain located in Mountain View County, Alberta. The solar installation consists of 1,768 solar modules connected directly to Albertas power grid which will seamlessly supply the Mountain facility with green electricity. As the industry leader in integrating technology into the design and operation of its facilities, Aurora identified the alternative energy pilot project as an ideal way to explore the use of solar at one of its facilities. without any new investment cost. The project is expected to reduce greenhouse gases and based on a third-party price forecast, Aurora expects the solar project will result in positive savings over the next 20 years.

All rooms at Aurora Vie, located in Pointe Claire, Quebec, are licensed by Health Canada and the facility is currently operating at its licensed capacity of 4,000 kg/ annum. An EU GMP audit has been completed of the facility which resulted in no major observations, accordingly Aurora anticipates the facility will receive certification imminently.

The first harvest of approximately 6,000 outdoor grown cannabis plants at Aurora Eau, located in Lachute, Quebec, is currently underway. Upon completion, the nearly 600 kg of biomass will be sent to Aurora Sky for extraction and further testing. 

All rooms at Aurora Ridge (formerly MedReleaf Markham), located in Markham, Ontario, are licensed by Health Canada and the facility is currently operating at its name plate capacity of 7,000 kg/ annum.

All rooms at Aurora River (formerly MedReleaf Bradford), located in Bradford, Ontario, are licensed by Health Canada and the facility is currently operating at its name plate capacity of 28,000 kg/ annum. An EU GMP audit has been completed of the facility which resulted in no major observations, accordingly Aurora anticipates the facility will receive certification imminently. Obtaining this certificate will substantially increase the Companys capacity to ship product to the European market.

The Company recently invested $1.5 million at Aurora Prairie, located in Saskatoon, Saskatchewan, to advance the facilitys scientific infrastructure. In total, ten cultivation spaces have been dedicated to research and development. Research at Aurora Prairie is focused on identifying new plant genetics with improved characteristics to optimize plant growth and breed high-quality, custom cultivars.

Auroras leadership position extends beyond cultivation and beyond the Canadian market. The Company is now active in 25 countries around the world, and has been the driving force in the development of the global medical cannabis industry and now the global hemp industry. The vision for Aurora remains global and we are making the investments today to ensure we have the cultivation, genetics, production, packaging and distribution and sales and marketing infrastructure in place to win on a global scale.

Aurora and the Ultimate Fighting Championship ("UFC") are conducting a joint research program focused on a number of health indications and desired health and wellness outcomes that are of importance not just for mixed martial arts ("MMA") athletes but for any level of athlete across any sport. The study will focus on the efficacy of hemp-derived cannabidiol (CBD) therapies, as well as on identifying optimal dosage via a variety of delivery mechanisms.

Currently, Aurora and the UFC are in the final stages of preparing an athlete intake survey for submission to an Independent Review Board, which will engage UFC athletes at the Performance Institute in Las Vegas. Simultaneously, Aurora is developing the formulations and clinical trial protocols for the first pilot interventional study which is focused on pain and inflammation. Upon completion of the studies, Aurora intends to develop new products for the medical and wellness markets under the new brand, ROAR Sports, which stands for research on accelerated recovery.

Auroras wholly-owned European hemp subsidiary, Agropro, is currently harvesting approximately 9,000 acres of hemp across Lithuania, Latvia and Estonia. The harvested material will be processed at the Companys large-scale drying facility located in Kaunas, Lithuania, which at approximately 60 metres in length, can process up to 5 tonnes of material an hour.

Auroras Latin American wholly-owned subsidiary ICC Labs is currently preparing for the upcoming hemp growing season, which is scheduled to begin with initial planting in November 2019. Approximately 435 acres of land are anticipated to be sowed, with the potential to yield ~100,000 kg of raw material upon harvest in April 2020. The hemp biomass will be processed at the Companys GMP compliant extraction facility that is strategically located approximately five minutes from the Canelones International Airport and within Uruguays "Science Park" free trade zone.

Expanding on Auroras first commercial export of cannabis oil into the United Kingdom ("UK"), the Company recently entered into agreements with two local partners to accelerate delivery of additional medical cannabis to the UK market. The partners will oversee the implementation of an educational program for UK based healthcare professionals and manage the distribution of medical cannabis within the country. It is anticipated that the agreements will see a broad range of full spectrum cannabis oils and dried flower introduced to the UK market to satisfy growing patient needs.

Further to the Companys press release dated October 25, 2018, on August the 14th, 2019, the Office for Registration of Medicinal Products, Medical Devices and Biocides in Poland, released the marketing authorization for 4 of Auroras products. This authorization enables Aurora to expand its product offering in Poland with the following varieties:

The registration of these new product formats significantly expands Polish patient access to high-quality, medical cannabis and provides physicians with the tools to optimally treat individual patients with a variety of different indications. Aurora anticipates that shipments of the expanded product portfolio to Poland to commence in the fourth quarter of calendar 2019, commensurate with medical patient demand as supply enters the market.

With a population of more than 24 million, Australias medical cannabis system has begun to expand rapidly in a similar manner to the Canadian system, making this an important market with significant growth potential. Recent changes to the Special Access Scheme ("SAS") in Australia have made it easier for prescribers to process medical cannabis applications and simultaneously obtain Federal and state / territory approvals which are starting to remove barriers for patients to access treatment. To date there have been a total of 14,420 SAS-B applications approved, with 13,217, or 92%, occurring within the last 12 months and 2,893, or 20%, in August 2019 alone.

Aurora has established a presence in Australia through its strategic investments in Cann Group Limited ("Cann") (ASX: CAN) and MedReleaf Australia. Cann, the first company licensed to research cannabis and cultivate the plant for medical purposes in the country, operates two cultivation facilities and is constructing a third, which is expected to be completed by the end of 2020.

On September 12, 2019, Auroras wholly-owned subsidiary, BC Northern Lights, launched its latest at-home hydroponic grow box, RoomMate Pro. The highly automated grow box can produce up to four plants every eight to twelve weeks. Compact and technologically advanced, the device features a touchscreen console, fully-customizable controls, as well as sensors that monitor everything from pH levels to humidity, an odour-removing carbon filter and energy-efficient LED lighting.

Aurora has a broad partnership portfolio of cannabis and cannabis-adjacent businesses which all provide valuable strategic benefits to Aurora. The benefits include retail footprint and customer insights, product technology/intellectual property, and operational or cost advantages. The Company continuously evaluates the strategic fit of these investments and may choose to monetize investments which are no longer core to the strategic plan.

Headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 625,000 kg per annum and sales and operations in 25 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 consistent product. Designed to be replicable and scalable globally, our production facilities are designed to produce cannabis at significant scale, with high quality, industry-leading yields, and low-per gram production costs. Each of Auroras facilities is built to meet European Union Good Manufacturing Practices ("EU GMP") standards. 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. All Aurora facilities are designed and built to the EU GMP standard.

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, BC Northern Lights, Larssen Greenhouses, CanniMed Therapeutics, Anandia, HotHouse Consulting, MED Colombia, Agropro, Borela, ICC Labs, Whistler, Chemi Pharmaceutical, and Hempco – 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. (TSXV: RTI), Cann Group Ltd. (ASX: CAN), Micron Waste Technologies Inc. (CSE: MWM), Choom Holdings Inc. (CSE: CHOO), CTT Pharmaceuticals (OTCC: CTTH), Alcanna Inc. (TSX: CLIQ), High Tide Inc. (CSE: HITI), EnWave Corporation (TSXV: ENW), Capcium Inc. (private), Evio Beauty Group (private), and Wagner Dimas (private).

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

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, including, but not limited to,  the time frames associated with the completion of the Companys facilities, the ability of the Company to scale up construction projects to mirror the global demand, the Companys control over  environmental and harvest conditions  in "Sky Class" facilities and the associated yield and quality of cannabis produced at such facilities, and the potential increase in the Companys capacity to ship product to the European market related to  obtaining EU GMP certification . 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 TSX, NYSE nor their applicable Regulation Services Providers (as that term is defined in the policies of the Toronto Stock Exchange and New York Stock Exchange) accept responsibility for the adequacy or accuracy of this release.

Posted in Aurora