Aurora Cannabis Inc (TSE:ACB) CCO Cam Battley: Shareholders to benefit from US-focused Australis

James West
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Aurora Cannabis Inc (TSE:ACB) (OTCMKTS:ACBFF) (FRA:21P) CCO Cam Battley lists the catalysts that will drive value into Aurora’s share price going forward, and how Aurora shareholders will receive free Australis shares upon that company’s launch – anticipated in August

Transcript:

James West:    Hey, welcome to Midas Letter Live. My guest in this segment is none other than Cam Battley, Chief Corporate Officer for Aurora Cannabis Inc. Cam, welcome back.

Cam Battley:   Nice to see you, James.

James West:    Cam, you guys have been on fire in both directions, and it’s been very entertaining to watch.

Cam Battley:   That sounds actually pretty unhealthy.

James West:    Well, but, you know, burning the candle at both ends –

Cam Battley:   We’ve been very busy.

James West:    It articulates a brilliant lifestyle. So what’s happening with the MedReleaf takeover? Where are we at on all of that?

Cam Battley:   It’s going fast. Much faster than the CanniMed integration, and the CanniMed integration, I’m pleased to say, we got completed in the 90-day period. We have an amazing head of integration and a great integration team; our head of integration, Andre Jerome, ironically, we got him via acquisition, when we acquired a company in Lachute, Quebec called H2 Biopharma, which is soon to be our Aurora Eau, French for water, facility in Lachute. When we acquired that company, we got Andre Jerome with it, and he is our Senior VP of Integration, and he’s doing a splendid job.

So we’ve completed the integration of CanniMed in the proscribed period; we’re now moving on, having closed MedReleaf, to doing exactly the same thing there, and that will be a much faster process, I think. The cultures are so similar, the companies have a real affinity for each other, and if you recall, we spoke before about the fact that across the entire Canadian cannabis sector, there were no two companies that were really so similar in their outlook with respect to the market, with respect to our production and cultivation technologies.

James West:    Sure, amazing. Okay, then, you know, never mind MedReleaf; the MedReleaf thing seems to be –

Cam Battley:   Oh, don’t say never mind MedReleaf, because we’re doing really, really well.

James West:    Well, I mean, it’s now Aurora.

Cam Battley:   It is, it is, but that portion of Aurora that we’ve now just closed on, I’m getting word that they’re doing exceedingly well, that sales are really on fire. So when we report our year-end, which will be around or about the 25th of September, we won’t actually have consolidated the MedReleaf results in, but I think we’ll probably do a pro forma to give people a good idea as to where Aurora plus CanniMed plus MedReleaf are doing.

James West:    Sure. What was Aurora up to developmentally before you made the takeover bid? Like, they had their own growth and, you know, development strategy underway.

Cam Battley:   Aurora did, or MedReleaf?

James West:    Sorry, MedReleaf.

Cam Battley:   Okay, yeah. So you know, it’s funny because I’ve been reflecting on the fact that if we had waited just a little bit longer to make a bid for MedReleaf, I don’t think we could have afforded them. They’re hitting some pretty key inflection points right now, both domestically and internationally. So you recall that not too long ago, they got clearance, their provisional clearance to start selling into Germany. So you can imagine, that’s a significant catalyst for them, for us.

James West:    So this is another channel for Aurora into Germany.

Cam Battley:   Another channel, another channel, and it’s such a good channel, because as you know, they pay a premium price for cannabis flower, for dried bud, compared to Canada, given the currency differences. And that’s before we get into the value-added products which are, you know, a few weeks away. We’re a few weeks away from being able to ship our oils, our cannabis oils, into Germany. And once again, those will get a premium price. So this is a pretty exciting time. The Fall is going to be very nice.

James West:    Yeah. What is the status of the rules in Germany in terms of recreational and medical? At this point there’s only about 20,000 patients in all of Germany, which implies that there’s a huge opportunity there with 80 million residents.

Cam Battley:   Yeah, it’s growing very, very quickly. The demand is significant, and thus far, it’s unquenchable. So there are basically only a handful of Canadian companies that have European Union GMP – Good Manufacturing Practices – certificaiton, who are able to sell there, and also there’s one company in the Netherlands, Bedrocan BV, that’s been selling into Germany for some time. So there’s not much competition; there is huge demand; and I suspect that the population in Germany using prescription cannabis is going to grow even faster than we’ve seen in Canada, because most of them, more than two-thirds, are getting insurance reimbursement for that.

Now, imagine how much faster the Canadian system, which has been on a blistering pace for the last four years, would have grown if there had been broad insurance coverage? So a very, very exciting market. And beyond that, of course, through our German division, Padanios, this is the distributor that we acquired last year – we’re also selling into Italy, Malta with its massive population of 400,000 or so…but it’s another important market for us. And so we’re pretty excited about the future in Europe. That will be always be an excellent market because of the Canadian-style reliance on quite a lot of regulation, and therefore, high barriers to entry.

James West:    Right. Is Padanios the largest distributor of cannabis in Germany?

Cam Battley:   By volume, we believe it is the largest distributor of medical cannabis in Europe, as a matter of fact.

James West:    And so now with the MedReleaf distribution channel, you’ll be hands-down the largest provider of medical cannabis in Germany.

Cam Battley:   That’s exactly the way we see it, and it’s pretty exciting. And it brings us back to some decisions that we have to make as a company, and that’s the product allocation. Because across, you know, Aurora plus CanniMed plus MedReleaf, we have quite a large number of Canadian patients, and we’ve made it very, very clear that they will always come first. They get the first product allocation.

Then we have the Canadian consumer system, and of course, we’re going to be selling into all the provinces’ retail systems. And then we’ve got, of course, these international markets, which are so exciting. And we’re moving fast. We have a real sense of urgency to establish our presence, get boots on the ground, create that infrastructure in country after country, because we know where we’re going: we want to be a very, very large global company, and that’s the direction we’re headed in.

James West:    Yeah. So I’m going to take this opportunity just to pull up the intercorporate relationships of Aurora right now, because I look at this thing and I try to wrap my head around it, and then I look at all the people selling Aurora stock and saying, Wait, you fools! There’s so much more going on here!

Cam Battley:   I actually have a cheat sheet.

James West:    Oh, do you? Well, we have a cheat sheet too, because anytime anybody asks us about what are all the corporate relationships, I just hold up the sheet and go, do you want me to start a three-hour explanation?

Cam Battley:   There’s a lot of value in there.

James West:    Yeah. So then, in terms of the, you know, let’s talk about – let’s start at the top, Alcanna.

Cam Battley:   Alcanna! So, our partners. We own 25 percent of Alcanna, formerly Liquor Stores North America, the largest private liquor retailer in Canada. And I’ve been huddling more and more with the management team over there. This is a very, very strong management team. This is a very competent group of people, and I’m very excited about what we’re going to be doing. So we’re establishing Aurora-branded stores that are operated by Alcanna, and this is going to prove to be a very, very beneficial partnership to both parties. I’m excited about that.

James West:    Yeah, no doubt. So then –

Cam Battley:   Are you going to ask me about Ontario?

James West:    Well, [laughter] sounds like I am. Tell me about Ontario.

Cam Battley:   Well, you’ve heard the rumours. You know, it’s been swirling around the media that the anticipation is that Ontario will move away from the prior anticipated system of, you know, government monopoly, to a system of private cannabis retail, which I think would be absolutely the right thing to do for a whole host of reasons. But we’ll obviously wait and see what the framework looks like, but if allowed, we certainly will be in there in a heartbeat, and pretty darned excited about it in the largest market in Canada.

James West:    Yeah, no doubt. Okay, so then, besides, you know, Alcanna, I’m looking over the list here, and you know, let’s talk a bit about TGOD. One of our viewers, who’s also a bit of an influencer himself, Jason Spatafora, better known as the Wolf of Weed Street, has a question: and he’s asking, if Aurora did eventually take over TGOD, would TGOD’s energy deal with Eaton and other power companies be applied to Aurora’s existing facilities? Which is a bit of a loaded question; I suspect Jason might be a bit of a shareholder of TGOD.

Cam Battley:   There’s a couple layers of hypotheticals on there.

James West:    Yeah, there is, isn’t there?

Cam Battley:   If and would. Well, certainly we’d be open to it in that circumstance. I mean, it’s hard to go down that path in terms of hypotheticals, because that all lies in the future. All the decision-making lies in the future. For now, we’re pleased with what TGOD’s doing, and with their progress, and with their capital structure. We just think that they’re doing a very good job. They seem to be moving very, very quickly on the construction front, and we can’t wait to have access to that organic cannabis, because remember, we have an offtake agreement with them.

So I’m very, very pleased with that partnership, as well.

James West:    Wow, fantastic. Hector –

Cam Battley:   And by the way, I need to add: the new CEO, Brian Athaide of TGOD, formerly the CFO, really, really sharp guy. I spent a fair bit of time with him in recent days, and I am impressed.

James West:    Okay, interesting. Did Hector Lopes (phon), who’s one of our viewers on Facebook, wants to ask if integrating the three companies – Aurora, CanniMed and MedReleaf – has been a challenging experience, and he’d like an overview of how each acquisition will add to the company’s culture and bottom line.

Cam Battley:   Oh, great questions, absolutely, really. So first thing, has it been a challenge? Yeah, it’s fair to call it a challenge, but not a problem. So what we’ve done, effectively, we’ve turned integration into a core competency at Aurora, and we needed to do that, because we’ve completed 10 acquisitions in the last two years, and that’s in addition to roughly the same number of strategic partnerships that we’ve established, where we’ve made strategic investments in partners like Radiant Technologies and Hempco, which we now majority control, and TGOD, and Cann Group in Australia, and others.

So integration is a core competency at Aurora, and I’m pleased to say, as indicated earlier, that’s going really, really well. We’ve gotten good at that.

In addition, when you talk about culture, that’s critical. You know, Warren Buffett has spoken a lot about the importance of culture, and it’s often overlooked. It’s not soft, it’s actually hard. It’s one of the critical skills, is to establish and maintain a strong corporate culture. And we’ve put a lot of very specific effort into that at Aurora.

Now, it’s a playful culture; we had our annual all-employee meeting a few weeks ago in Edmonton, and it was really quite astonishing, because the previous year we had around 200 people in a hotel ballroom. This time, we had 700 of our, at that point, 1,000 global employees; now it’s 1,200, post-MedReleaf, all in a very, very big room at the Shaw Conference Centre in Edmonton. And I’ve never seen a vibe like that in a company before, and I’ve done, you know, events like this around the world with big pharmaceutical companies and small biotech companies and medical device companies and so on. I’ve never felt a vibe quite like that. It was so positive, so focused, a feeling that what we’re doing is not just, you know, good from a business perspective, but actually valuable and right from a social perspective. And a sense that we get to play a key role in changing the world for the better.

So positive, and so reflective of that kind of unique hybrid culture of ours, with, you know, people from mature industries and people who come from the cannabis culture, coming together incredibly harmoniously and learning from each other. It’s really, really cool.

James West:    So, so far, all three companies have sort of been able to play well together, sort of thing?

Cam Battley:   Yeah. And, you know, it’s – as we grow, and we’ve been growing really, really quickly, and huge kudos to our HR department for making that happen so seamlessly – we’re self-selecting, or rather, people who join Aurora are self-selecting. They tend to be aggressive, they tend to like the fast pace, and they tend to have a degree of what I could only characterize as kind of a practical idealism. And once again, that circles back to the culture that we’re building here. And not just in Canada; we had our teams from all over Europe, and actually other parts of the world, come to that all-employee meeting, and they all spoke, and they all got, you know, the ovations, and we’re thrilled for everything they’re doing, but it doesn’t matter what country they come from: that culture crosses borders, and it does so beautifully.

James West:    Okay, interesting. So there’s – here’s a tough question for you.

Cam Battley:   Okay.

James West:    I’m just going to throw this at you, because I know you can take it.

Cam Battley:   All right, you’re going to give me something to strengthen my coffee?

James West:    If I see you turn pale, then I’ll quickly throw a shot in there. Mike Johnston (phon), a viewer on Facebook, wants to know, he’d like a comment as to why the stock has declined so much while the company continues to make what seems like positive announcements.

Cam Battley:   Not just positive announcements; we’re exactly where we need to be, with the capabilities that we need to have, at exactly the right time. So that’s my opening comment on that. But let’s speak directly to the share price: what we’re seeing right now is a couple of things. I think one is, risk capital has gone to the cottage for the summer.

James West:    Muskoka, in fact.

Cam Battley:   Yeah, and we’ve actually, we’re seeing something that was very similar to last year. So last summer, Aurora’s stock was, and actually the sector, was a little bit soft; lower volumes through the summer, and then picked up and then really started to run in the Fall. So I think that’s part of it.

There’s another part of it, too: we just are digesting a massive acquisition, MedReleaf. And my sense is that some of those MedReleaf shareholders, some of the larger shareholders there, have been seeking liquidity, so they may be holding us back a little bit, and once that’s through, I expect the pressure will be taken off the stock.

James West:    Sure. So they view this event as an exit strategy for them, which they might be leaving a lot of money on the table, by my understanding, because if we talk about the Australis transaction that is going on laterally to what’s happening here, it seems to me that there’s an opportunity to get a free ride in the US market on the heels of one of the most powerful and dynamic cannabis companies in the world.

Cam Battley:   So I’m really proud of what we’ve put together with respect to Australis Capital Corporation which, of course, is our divestment of our US assets. But it’s a heck of a lot more than that. We’re spinning this company off to our shareholders, so each of our shareholders, as of the record date – I don’t have that just yet, but it’ll be shortly – will receive a share, and a warrant, in Australis Capital Corporation. So we have to make sure that it is completely separate from us in order to satisfy the TSX and future US listing. We have to make sure that it’s completely separate, and that’s what we’re doing. We are going to have a separate management, separate Board, separate operations, but with a pedigree from Aurora, and they are like our offspring.

So we’re pushing the baby bird out of the nest, and it’s going to fly.

James West:    And it’s going to have access to the capital that Aurora does, it’s going to have the backing of management, the expertise of, for example, Larssen greenhouses should they decide to take that stuff over?

Cam Battley:   No connection, no direct connection between the companies; we have to maintain it that way, and we will, religiously. But it does have that pedigree, you know, and it will have access to our knowledge, our brains, contacts, and stuff like that. And the idea is to snap up attractive assets in the US, a very, very fragmented market, but with some incredible gems. So we want to snap up those assets and make them sing in the US and elsewhere, and that’s what Australis is all about.

So yeah, that’s a pretty exciting move. I’m glad that we’re able to do that for our shareholders, because we’re able to give them effectively a dividend.

James West:    We’re going to wrap it there. Thanks very much for coming in today.

Cam Battley:   My pleasure.

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James West

James West

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