Although the United States marijuana sector offers investors a lot of upside, it offers even more risk. The Canadian cannabis industry on the other hand is less risky because medical cannabis is legal at the federal level.
The Canadian medical cannabis industry continues to record double digit percentage growth on a monthly basis and has almost 200,000 registered patients. If these growth prospects were not attractive enough, the country plans to implement a legal recreational marijuana program before July 2018.
Do Your Due Diligence
When investors ask what we look for in a cannabis company before investing, at a minimum we suggest that investors look into: 1) its management team, 2) its financial structure, 3) the exchange it trades on, and 4) its ability to execute on company initiatives and track record.
Investors need to be cautious and focus on companies that are well capitalized, led by a management team with a proven track record, have a sound financial structure, act in the best interests of shareholders, and continue to execute on business initiatives.
We believe that Aurora Cannabis Inc (V:ACB) represents an attractive investment as it possesses the right traits and continues to execute on initiatives.
About Aurora Cannabis
Aurora Cannabis is one of the 52 federally licensed medical cannabis producers in Canada under Health Canada's Access to Cannabis for Medical Purposes Regulations (ACMPR).
From Australia to Germany, this Canadian licensed producer has entered new legal cannabis markets across the globe and is well positioned to capitalize on these new opportunities.
We are favorable on Aurora Cannabis due to the following reasons:
1) The company is led by a management team that continues to execute.
2) Aurora continues to record strong growth and is levered to international cannabis markets.
3) The balance sheet is flush with cash and leaves the company positioned to capitalize on inorganic and organic growth opportunities.
4) Aurora is focused on increasing production capacity to satisfy future higher demand.
5) The fundamental story continues to improve and we view Aurora as a long-term opportunity.
Cannabis Oils Drive Growth
Since late 2015, Aurora Cannabis has executed flawlessly and the company has gone from having zero registered medical cannabis patients to more than 16,000.
Cannabis oil has already become a significant revenue stream for licensed producers in Canada and this is a trend we expect to continue for the foreseeable future. Cannabis oil represents a fantastic opportunity and solution for licensed producers.
In April, Aurora started selling a new product line of ingestible cannabis oils called Aurora Drops. The product line consists of three different types and each will be sold for $115 a bottle ($80 for clients in Aurora's compassionate pricing program). The products offered are a high THC Sativa, a high THC Indica, and a high CBD.
This development was reported shortly after Aurora finalized its agreement with Radient Technologies (RTI.V). In December 2016, Aurora entered a joint venture agreement with Radient Technologies to evaluate an exclusive partnership regarding the joint development and commercialization of high-quality standardized cannabinoid extracts.
Health Canada reported that 5,673 kilograms of cannabis oil were sold during the quarter that ended on March 31st. This number is 38% higher than the prior quarter and 870% higher than the same quarter last year. We are favorable on this partnership and believe it will help Aurora capitalize on the booming cannabis oil market in Canada.
Continues to Enter New Markets
In May, Aurora Cannabis acquired Germany-based Pedanios GmbH which has been importing, exporting, and distributing medical cannabis into and within the EU since December 2015.
Germany represents a very attractive opportunity for cannabis businesses. Germany is the largest country (by population) in the European Union and the current population is approx. 81 million, twice the size of California.
In late March, Aurora made a significant investment in Cann Group Limited (ASX: CAN), the first Australian company licensed to conduct research on and cultivate medical cannabis. Aurora acquired 19.9% of the company ahead of its initial public offering (IPO).
In June, Cann Group became the first Australian company to be licensed by the Office of Drug Control for commercial medical cannabis cultivation and production. The company expects to harvest its initial crop in early August if everything goes to plan.
Cann Group has facilities in Australia’s northern and southern region and is currently expanding both of its facilities to satisfy expected future demand. The company’s expansion project is fully funded and the company is focused on completing the buildout of its facilities, securing licenses for expansion purposes, and executing on its business plan.
Today, Aurora and Cann Group entered a technical services agreement through the end of 2022. The agreement is related to an exchange of information and support that include: 1) Cultivating and processing medical cannabis, 2) Extraction and manufacturing technology, and 3) The analysis of cannabis extracts.
The agreement will provide Cann Group significant technical support as it continues to expand its R&D and cultivation facilities. Cann Group will benefit from an exchange of information, including reciprocal visits of key personnel.
Focused on Increasing Production Capacity
Aurora's subsidiary operates a 55,200 square foot production facility in Alberta and is currently constructing a second 800,000 square foot production facility. Aurora also acquired and is working on the completion of a 40,000 square foot production facility near Montreal.
In late 2016, Aurora broke ground on an unprecedented 800,000 square foot production facility that will be known as Aurora Sky. The facility is expected to be completed in the first half of 2018, with part of the facility commencing production in 2017. More than 200,000 square feet of steel frame has been erected, with glass installed, and foundation for the rest of the structure underway.
Through these initiatives, Aurora is poised to be one of the largest licensed cannabis producers in the world. We are favorable on the company’s focus on increasing production capacity and expect this to support revenue growth for years to come.
Continues to Execute and Position itself for Growth
Aurora possesses several traits that set them apart from the competition. Recent developments at Aurora Cannabis have made the company a leader in a country that is leading the cannabis reform movement.
We continue to expect the company to be one of the long-term leaders of the legal cannabis industry and view the firm as a very attractive opportunity.