This is thanks to top Canadian marijuana stock Aurora Cannabis (NYSE:ACB), which announced Tuesday that it has launched cannabinoid-infused “sublingual wafers” — i.e., thin strips meant to be held under the tongue until they dissolve to nothing. The strips are aimed at medical cannabis users and will be sold on the Canadian market.
In the press release for the somewhat unimaginatively brand-named Dissolve Strips, Aurora said that it is the first of its kind. Dissolve Strips were developed by Aurora in conjunction with fellow Canadian company CTT Pharmaceutical Holdings.
Aurora, incidentally, holds an approximate 9% stake in CTT, one of various minor shareholdings it has in other companies. Aurora also owns warrants that would allow it to boost this figure significantly, to 42%.
According to Aurora, the new offering “adds yet another innovative offering to our growing portfolio of high quality, medical products that we offer our patient base, and is testament to our industry leading ability to work with technology partners and regulators to bring new form factors to market rapidly.”
CTTs oral fast dissolving drug delivery systems consist of edible Wafers that dissolve without water and within a few seconds after placement in the mouth. The majority of drugs administered using our drug delivery system mirror injections in that they have the ability to enter the bloodstream quickly, are convenient and discreet, and can be administered anywhere. A faster absorption rate is achieved because the mouth contains a very thin mucosa and is extremely vascular. There is no bitter taste, no smoke inhalation, less degradation of medication (by bypassing the stomach) and most importantly lower dosage units are required given the efficacy of absorption. Patient compliance is also improved especially with those who have a fear of choking or difficulty swallowing, and/or are pediatric, geriatric or incapacitated.
The company titles this particular form factor Orally Dissolvable Thin Film Wafers, which are made of polymer film.
Aurora claims the strips have several advantages over other means of ingestion. Among these are quick consumption (five to 15 seconds, the company says) and the ability to be taken orally without having to drink water or to swallow. Such features make Dissolve Strips appropriate for patients who have difficulty taking medicine in traditional ways.
In the press release, Aurora gave no indication of the potential size of the market for Dissolve Strips. It also did not mention any possibility of rolling out or modifying the product for the recreational consumer market, which has been lively in Canada following the legalization of that type of consumption almost one year ago.
Regardless, Aurora stock closed marginally higher on the day the announcement was made, bucking the general downward trend of the stock market. The price has generally been on a decline since March, however, and so far in 2019, its down by 16%. In fact, it has lately been bouncing around lows not seen in over a year.
In some cases of course companies deserve the negative outlook concerning them – both in the short and long term, because their performances are not only weak, but the way to increased sales and ultimate profitability are not visible at this time.
Thats not the case with Aurora Cannabis, and its not the case with the overall cannabis sector, which will continue to expand at a significant pace for many years.
In this article well look at why the nail-biting concerning the long-term growth prospects for Aurora Cannabis and the sector are unjustified, even though there will continue to be some short-term pain over the next couple of quarters.
Its readily apparent that nothing is going to stop the growth trajectory of cannabis for a long time. As a matter of fact, where its struggling is directly correlated with under performing government bureaucracies, heavy taxation, and regulations that differ from province to province of state to state.
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.
Even so, the demand for cannabis in its recreational, medical, CBD, and industrial hemp forms, remains very high, and were really in the very early stages of growth in all of them.
Auroras Common Shares trade on the TSX and NYSE under the symbol "ACB", and is a constituent of the S&P/TSX Composite Index.
It was inevitable that there would eventually be a correction in the cannabis market because of the heavy media coverage and investors bidding up the share prices of numerous companies.
But these types of sell-offs only last for a period of time before they reverse direction. When that happens in the cannabis industry, many of the stocks that have been getting hammered are going to start rebounding at strong levels.
That doesnt mean were at the end of the sell-off yet, but it does mean investors should seriously start considering taking positions and holding them in the near future.
We shouldnt try to time the lows, but should understand that when we do take positions they could still drop. The key is not to let pressure from further decline in share price (if thats how it plays out) flush us out of our positions. Investors should look at holding for the long term when they invest under current market conditions, because when the turnaround comes, its going to reward those investing in companies with long-term potential.
The most important question to ask concerning Aurora Cannabis, or any cannabis company for that matter, is whether or not the narrative of the company remains intact. In the case of Aurora, nothing has changed concerning its long-term growth except itll take a little longer to generate a profit than originally believed.
Even there, most of that isnt because of inefficiencies at the company, or a lack of productivity, but rather the extremely slow roll out of retail outlets in Canada, which were expected to be much further along than they are now.
Not too long ago, Ontario only had five physical locations consumers could buy cannabis products; thats in a market numbering in the millions. While its still going to take time to reach market saturation and full potential, at least there is some progress being made on that front, and that will benefit Aurora, especially as it benefits from sales from derivatives in the first calendar quarter of 2020.
With production capacity expected to reach at least 650,000 kilograms annually by the end of June 2020, costs per gram continuing to drop, and gross profit coming in at a little under 60 percent, the long-term future of Aurora looks bright.
Add to that the fact it is getting ready to sale more into the European market because of the completion of two GMP-compliant facilities, and the company is poised to expand for many years. That should support wider margins and its path toward profitability because of price premiums and insurance coverage in Germany, as will its overall 84,000 medical cannabis patients, which are expected to continue to grow in number.
The only real concern at this time is how itll perform in the short term because of the lack of Canadian retail outlets, the length of time itll take to boost global sales, and its measured approach toward competing in the CBD market in the U.S.
The analyst believes the company boasts solid operating fundamentals which “paints a picture of a business in good health.” The analyst added, “When considered alongside one of the lowest valuations among peers (CY20 EV/EBITDA 8.6x, Tilray 8.9x, Canopy 10x, Cronos 12.5x), we continue to see upside from here.” (See ACB stock analysis on TipRanks)
Contrary to some commentators, the cannabis market is not experiencing oversupply at this time, especially in Canada. The problem isnt demand, but the lack of retail outlets to sell cannabis to consumers. That is gradually getting fixed, and it should, in the near future, have a significant impact on the performance of Aurora.
Eventually supply in Canada will exceed demand, which is why the 25 countries Aurora has a presence in will help it to better manage the ceiling in Canadian sales, when it arrives.
In the short term Aurora will probably have to endure some more pain. My conclusion is once it has at least one quarter under its belt concerning selling derivatives in Canada, it ramps up sales to Europe, production capacity jumps to over 650,000 kilograms annually, and it slashes cost per gram to about $1.00 or lower, its going to being consistent growth that will give support and a steady increase to its share price.
For most stocks I dont encourage investors to average down, but in the case of Aurora Cannabis, which has such a clear growth trajectory, while operating in a market that will expand for many years, its obvious this stock, even if it takes some more short-term hits, is going to do very well in the years ahead.
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