Aurora Cannabis Inc Medical-Based Cannabis Buildout Continues

Benjamin A. Smith
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Aurora Cannabis Inc (TSE:ACB) (OTCQB:ACBFF) (FRA:21P) quest to become the premier medicinal cannabis everything-provider took another significant step today. The company staked a position in a leader softgel cap manufacturer, ensuring its medicine delivery pipeline is in good hands.

The announcement comes via a pre-market press release issued this morning. Aurora Cannabis disclosed it had inked a deal with Capcium Inc. to produce cannabis softgels for the medical market. The company’s 19.99% ownership interest in Capcium is financed via $10 million non-brokered private placement, and continues the trend of Aurora adding strategic pieces—both big and small—to buildout its entire medical supply chain.

Capcium intends to use the proceeds to expand its cannabis softgel manufacturing business, to be completed in Q4, 2019.

While cannabis investors are fully aware of the large deals (and here) Aurora Cannabis is making, it’s the smaller ones that are flying under the radar. When looking at the entire picture, we can grasp how the company is filling-in different pieces of its product portfolio to satisfy its medical delivery apparatus.

Here are the deals Aurora Cannabis have brokered since May alone:

Company Industry Strategic Benefit Stake
Capcium Inc. softgel manufacturing oral cannabis delivery 19.90%
Heinrich Klenk GmbH & Co. medical cannabis grower supply chain & distribution – Germany collaboration agreement
CTT Pharmaceutical Holdings Inc. oral strip developer/patent holder oral cannabis delivery 9.14% ownership; optionality to 42.5%
Hempco Food and Fiber Inc. cannabis supply/CBD extracts raw supply/health supplements
ownership increased to 52.7% (controlling interest)
MedReleaf Corp. full-scale medical cannabis provider full-spectrum production, strains and refined goods
100% upon shareholder approval
CanniMed Therapeutics Inc. (previously brokered in January 2018) full-scale medical cannabis provider full-spectrum production, strains and refined goods 100% ownership

No company has been this aggressive in acquiring the entirety of product cycle components to build out its medical portfolio. Some shareholders may not appreciate the premium or dilution which comes from the liberal use of shareholder capital, but there’s no mistaking a medical cannabis powerhouse is being built right before our eyes.

Aurora Cannabis Corp CCO Cam Battley on MedReleaf, Aphria and Earnings

Fortunately for investors, the market seem to be coming around to the notion that Aurora Cannabis is doing the right thing.

Irrespective of today gap-open move lower, shares have been surging over the past couple sessions. The stock gained ↑19.68% between June 5-6, despite the huge public float which will approach 1 billion shares once the MedReleaf deal finalizes (s/o is currently 561.52 million). By adding $904 million dollars in market capitalization so quickly on no ‘material’ news, Aurora Cannabis has dispelled the notion it had taken on more than it could chew. Investors are pouring money into the name in-line with the rest of the sector, which can be considered tacit market approval.

Time will tell whether Aurora’s spirited acquisition strategy was the right call. But with huge institutional backing, first-in advantage and an unparalleled full-spectrum medical cannabis portfolio, they’re sitting at the head table in terms of product distribution, delivery, visibility and cost. It may have been costly, but it’s a priceless position to attain at the stage of the industry growth cycle.

While the Capium deal may not generate much buzz from investors, they shouldn’t underestimate how those smaller deals are likely to generate outsized and long term shareholder value.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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