Aurora Cannabis Technology Embrace Should Give it an Edge

Aurora Cannabis Inc. (TSX:ACB), one of the Canadian marijuana stocks, said it has entered into a license agreement with EnWave Corporation (TSXV:ENW)

SmallCapPower | May 1, 2019: Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB), one of the Canadian cannabis stocks, Friday announced that it has entered into a royalty-bearing commercial license agreement with EnWave Corporation (TSXV:ENW). Under the terms of the agreement, Aurora will have an exclusive license, with sub-licensing rights to EnWave’s Radiant Energy Vacuum (REV) technology in the European Union (excluding Portugal) and exclusive options to secure the same rights in South America (excluding Peru) and Australia. Additionally, the Companies have entered into a non-exclusive sub-license to use REV technology in Canada.

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Under the agreement, Aurora Cannabis will pay EnWave a royalty on all cannabis products processed using the REV machinery. Aurora will receive an undisclosed share of royalties derived from any cannabis product dried with REV technology by sub-licensees in jurisdictions where it holds the exclusive license.

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Aurora Cannabis has placed a purchase order for two of EnWave’s 120kW REV dehydration systems for its Aurora Sky and Aurora Sun facilities in Canada and further plans to purchase a third system for its Aurora Nordic facility in Denmark within 60 days. Moreover, Aurora has also acquired a 10kW pilot-scale REV machine for product development, protocol development and R&D.

The Companies have also entered into an Intellectual Property Agreement to jointly develop new innovations relating to the REV technology that are applicable to the cannabis industry. All intellectual property developed under the agreement will be owned by EnWave, but any realizable commercial value will be shared on an undisclosed basis with Aurora Cannabis. In a bid to strengthen the economic alliance between Aurora and EnWave, Aurora has made a $10 million strategic equity investment in EnWave.

Aurora Cannabis CEO Terry Booth said, “EnWave’s technology offers very significant benefits that further improve the economic returns on our Sky Class facilities. The technology provides us with industrial-scale flow-through, reducing working capital requirements, accelerating time to market from harvest, as well as increasing our ability to produce bulk-sale cannabis for extraction and use in derivative products. Our ownership interest in EnWave and the exclusive license arrangement in many of our current and target markets creates the potential to generate additional financial synergies.”

Through the use of EnWave’s REV technology, Aurora would benefit from huge potential CapEx savings on drying space and HVAC investments. Moreover, the technology would help to reduce drying time from five to seven days to less than one hour, leading to significant working capital savings and speed to market of product.

Aurora Cannabis also announced recently an agreement to acquire a privately-held Chemi Pharmaceutical Inc, an Ontario-based laboratory specialized in providing analytics services to the pharmaceutical and cannabis industries.

Headquartered in Edmonton, Alberta, Aurora Cannabis is one of the leading cannabis companies with sales and operations across five continents, and a funded capacity of over 625,000 kg per annum. The Company is vertically integrated and horizontally diversified across the cannabis value chain. Currently, Aurora Cannabis stock trades at a market capitalization of C$12.3 billion with a price-to-book multiple of 2.6x.

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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