Aurora Cannabis Inc. (TSX:ACB) has acquired an ownership stake in CTT Pharmaceutical Holdings Inc
SmallCapPower | May 24, 2018: Aurora Cannabis Inc. (TSX:ACB) Tuesday announced that it has acquired an initial ownership interest of 9.14% in CTT Pharmaceutical Holdings Inc. through a non-brokered private placement in the form of a US$1 million 5% convertible debenture. The debentures will have a maturity date of three years from the closing date of the offering and will bear interest from the date of closing at 5.0% per annum, payable semi-annually. The debentures will be convertible, at the option of the holder, into common shares of CTT at any time prior to the close of business on the last business day immediately preceding the maturity date at a conversion price of $0.268 per common share.
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This private placement deal includes an issuance of warrants, which will allow Aurora Cannabis to increase its stake in CTT to 42.5%. Through each warrant, Aurora will have the right to purchase one common share of CTT at a price of $0.35. The warrants are exercisable upon certain conditions being met. With the initial investment, Aurora Cannabis has the right to appoint one member of CTT’s board of directors. After achieving 42.5% ownership, Aurora shall have the right to appoint a second board member of CTT.
Aurora Cannabis CEO Terry Booth said, “The investment in CTT reflects our commitment to science-based diversification into higher-margin drug delivery technologies for both the medical and adult consumer use markets. The clinically-proven rapid onset of action of CTT’s wafers is a key differentiator that, we believe, will resonate strongly with physicians, patients and adult use consumers. This provides us with an important competitive advantage in the rapidly growing market segment for smoke-free form factors.”
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Furthermore, both companies intend to complete a final commercial agreement within 60 days for expanding the exclusivity agreement, announced first on April 16, 2018, regarding distribution in Canada only of CTT’s patent-protected drug delivery technologies. CTT will now provide Aurora Cannabis with global exclusivity to develop, manufacture and market CTT’s oral thin films wafers. Also, both Aurora Cannabis and CTT will jointly work towards Health Canada’s approval for introducing new products into the Canadian market, as well as getting commercial access to other international jurisdictions in which Aurora Cannabis is active.
As well, Aurora Cannabis and CTT have entered into an investor rights agreement that provides Aurora with anti-dilution protections, thereby enabling Aurora to maintain its ownership level. Aurora Cannabis trades at market capitalization of $4.75 billion on the TSX with price-to-book multiple of 7.15x. After the announcement, the stock rose 5.6% on the TSX to close at $8.36 on Tuesday.
Disclosure: Neither the author nor his family own shares in the company mentioned above.
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