Highlights
- A 249.2% increase over last year in active registered patients to 45,776 was driven in particular by the acquisition of CanniMed, contributing 21,327 patients. Excluding the CanniMed patients, Aurora increased its active registered patients in Q3 2018 by 86.5% to 24,449, as compared to 13,110 for March 31, 2017.
- The Company recorded $16.1 million in revenues, up 211.1% from Q3 2017 and up 37.6% sequentially from Q2 2018.
- Total cannabis sales of $10.8 million, up 149.4% from Q3 2017 and up 11.0% sequentially
- Dried cannabis sold in Canada: $6.3 million, up 45.4% from Q3 2017 and up 9.6% sequentially;
- Dried cannabis sold internationally: $2.3 million, down 6.1% sequentially. No international revenues were recorded in Q3 2017;
- Cannabis oils sold in Canada: $2.2 million, up 44.4% sequentially. No cannabis oil sales were recorded in Q3 2017.
- Service and other revenues: $2.3 million, up 175.1% from Q3 2017 and up 17.8% sequentially.
- Design and construction consulting: $3.0 million. No such revenues were recorded for the previous quarter and same period in the prior year, respectively.
- Completed key strategic acquisition and investments, including CanniMed Therapeutics, Liquor Stores NA, and The Green Organic Dutchman.
- Project milestones continue to be met at Aurora Sky, including installation of key operational systems. The facility remains on schedule for first harvest, subject to licensing, in June, and significant production ramp up is expected in the second half of calendar 2018.
- Successfully completed first three harvests at Aurora Vie.
- Announced major funded capacity expansion with Aurora Nordic and Aurora Sun, raising total funded capacity to 430,000 kg per year.
- Continued focus on international opportunities in key developing markets across multiple continents driving sustainable long-term value.
Management commentary
"More than tripling our revenues year-over-year demonstrates that Aurora continues to execute consistently on its growth strategy, with exceptional performance across all functions, both in Canada and internationally," said Terry Booth, CEO. "It's worth noting that Aurora's industry-leading revenue growth since starting commercial operations has thus far been driven predominantly by the output of a single production facility, Aurora Mountain, supported by differentiation into additional revenue streams. With production underway at Aurora Vie and Aurora Sky, yield enhancements being implemented at CanniMed, and significant new capacity coming online through 2018, we are targeting further, accelerated growth in subsequent quarters.
We also continue to prepare for legalization of the adult consumer use market, as our unique investment in Liquor Stores, growing inventory, and our supply deal with Quebec are testament to. We have consistently executed at an exceptionally high pace, investing in facilities, as well as in vertical and horizontal diversification. This has created a strong platform for continued growth, and we look forward to reporting on our progress in the coming quarters."
Q3 2018 and Subsequent Operational Highlights
Aurora continues to build a vertically integrated, and geographically and horizontally diversified cannabis company. During and subsequent to the quarter, the Company entered into a number of strategic transactions and partnerships to drive growth.
CanniMed Acquisition
On May 1, 2018, Aurora completed the acquisition of CanniMed Therapeutics Inc. ("CanniMed"), which subsequently was delisted and now operates as a wholly-owned subsidiary of the Company. CanniMed will form the heart of Aurora's Medical Cannabis Centre of Excellence, and focus, in addition to servicing its patient base, on expanding capacity, product development, scientific research and education. The combination with CanniMed adds in excess of 20,000 patients and 20,000 kg per annum in funded capacity, as well as new drug delivery technologies, high-margin cannabis products, and additional domestic and international distribution channels.
- An agreement was signed with Pharmasave for the supply of cannabis to one of Canada's largest member-owned chain of pharmacies.
- A topical cream was launched. Early sales have been strong with positive feedback from physicians and patients on the efficacy of the new product.
- An agreement with CTT Pharmaceuticals ("CTT") provides Aurora and CanniMed with exclusive access to CTT's sub-lingual wafer drug delivery technology. The companies are currently working towards obtaining regulatory approval prior to market launch.
The Green Organic Dutchman
The Company completed a strategic investment in The Green Organic Dutchman ("TGOD"), who are completing a 14,000 kg per annum facility in Ancaster, Ontario, and in addition are constructing a 102,000 kg per year, Aurora Larssen Projects (ALPS) designed facility in Valleyfield, Quebec. Furthermore, the companies signed an agreement giving Aurora the right to purchase approximately 23,000 kg per year of premium organic cannabis.
Subsequent to the quarter, TGOD completed its initial public offering (IPO), in which Aurora participated to maintain its ownership interest at 17.6%. The Company anticipates benefiting both strategically and financially from its ownership interest in TGOD, as reflected by the significant appreciation in value of its investment.
Liquor Stores NA
The Company completed a strategic investment in Liquor Stores NA ("LIQ") in preparation for the adult consumer use market. LIQ is one of the leading liquor retail chains in Western Canada, and is in the process of converting a number of existing locations, while establishing a number of new stores for the sale of cannabis once adult consumer use is legalized. LIQ operates out of a large number of premium retail locations, and has the experience, systems, facilities and capabilities to drive a large retail network.
Facilities – Capacity Expansion
The Company is executing on a focused strategy to achieve massive production capacity through the construction of state of the art technology, highly automated, hybrid greenhouse facilities to deliver consistently high quality of cannabis at ultra-low production costs. The Company currently has over 430,000 kg per year of funded production capacity.
Aurora Sky
Aurora Sky, the benchmark facility for the high-technology, low cost production of cannabis, received its production license in January 2018 and subsequently plant material was moved into the facility in preparation for a first harvest expected in June 2018. The Company remains on schedule for completion of the entire facility this summer, and continues to work with Health Canada on the licensing of new bays as these come online.
Aurora Sky is now fully under glass, and the Company continues to meet project milestones, including the recent installation of key operational systems, such as:
- The overhead crane systems;
- Key automation components;
- The high-tech irrigation and fertilization systems, and
- The overpressure, filtration and air treatment systems.
The Company has also introduced several new genetics into production to expand the range of offerings available for the medical and adult consumer use market.
Aurora Sun
The latest addition to the Aurora family of facilities, Aurora Sun, at 1,200,000 square foot, will be the Company's largest facility, and is to be located in Medicine Hat, Alberta. Aurora Sun is expected to produce in excess of 150,000 kg of high-quality cannabis per year at full capacity. The Company anticipates benefiting from positive local government and community support, municipality-owned utilities offering low energy costs and free power transmission, as well as country-leading annual sunshine hours in Medicine Hat to accelerate construction timelines and continue reducing production and operating costs.
Aurora Vie
The Company has completed its first three harvests at Aurora Vie in Pointe-Claire Quebec and is ramping up production at the facility while working towards obtaining its sales license from Health Canada.
Lachute Quebec Facility
The Lachute Quebec facility is structurally complete. The Company is currently outfitting the grow rooms for production, with the first growing tables currently being installed. Furthermore, the facility is going through the final stages of completing the processing areas for EU GMP certification. Plants, subject to licensing, are expected to move into the facility within the next 4-6 weeks
Aurora Nordic
The Company announced that 51% owned Aurora Nordic will be constructing a 1,000,000 square foot high-technology, low cost hybrid greenhouse cannabis facility in Denmark. Design for the 1,000,000 square foot Aurora Nordic facility is currently being completed. Once all required permitting has been received, construction will commence.
Odense
In order to accelerate time to market, Aurora Nordic is retrofitting an existing, Larssen designed 100,000 square foot greenhouse that at full capacity should produce approximately 8,000 kg per annum of cannabis. The facility will be EU GMP compliant to ensure Aurora Nordic can service the international market. The retrofit is progressing well, and Aurora anticipates cultivation to commence this summer.
International
The Company continues to execute on its international expansion strategy. The countries Aurora is currently active in include Canada, Germany, Italy, Denmark, Australia, Cayman Islands, and South Africa through a combination of strategic investments, domestic production, and supply agreements, providing a strong early mover advantage in a growing number of key international markets.
Aurora continues to staff up in Europe to further accelerate its international expansion, and is actively engaged in a number of discussions, and is prioritizing 2018 entry into those jurisdictions that provide an optimal strategic fit.
With the EU GMP certification of Aurora Mountain and Pedanios GmbH, Aurora is one of few companies globally with this pharma-grade designation across both production and distribution facilities in Canada and Germany, respectively, allowing it to sell into the most restrictive and promising markets in the EU, such as Italy.
Germany
- The Company continues to ship wholesale product directly to German pharmacies. Revenue growth at Pedanios is currently constrained by supply availability due to Aurora Mountain operating at full capacity. However, due to the rapid adoption of the medical cannabis system by patients and prescribing physicians in Germany and the anticipated additional supply coming from Aurora Sky and Aurora Vie, the Company anticipates having an increase in international shipments in the second half of this calendar year.
Italy
- Pedanios won the first ever public tender to supply medical cannabis to the Italian Ministry of Defense, who control supply of the Italian market.
- The first lots were successfully supplied to the Italian market and are being sold in pharmacies.
- The Company believes that having won this first tender, and becoming the first private company ever to supply medical cannabis to the Italian government, provides a distinct early mover advantage in a market with access to over 60 million people and insurance cost coverage.
Denmark
- Aurora Nordic, in which Aurora holds a 51% stake, with the balance owned by its partner Alfred Pederson & Son, has made excellent progress on the Odense facility retrofit and anticipates completing the import of live Aurora genetics before the end of this summer in order to establish a functional medical cannabis transit corridor, develop its mother plant and genetics collection, address phytosanitary demands and controls, develop cultivation and processing methods, and validate laboratory testing protocols.
Australia
- In January 2018, Aurora increased its ownership interest in Cann Group to 22.9%, Australia's first and largest cannabis company.
- Cann Group recently signed an agreement with Aurora Larssen Projects (ALPS) for the design and construction consulting services for Cann's phase III cannabis facility, measuring approximately 250,000 square feet. Site selection for the facility is imminent, with applications for the required planning permits and regulatory approvals progressing. Cann Group anticipates the facility to be operational in the first half of calendar 2019.
- The Company continues to export quantities of product to Australia for research purposes, both through Aurora and CanniMed.
Vertical Integration
Aurora increasingly is becoming the trusted partner of choice for a growing constellation of companies, through a vertically integrated offering of B2B and B2C products and services.
Aurora Larssen Projects ("ALPS") continues to work on a growing number of cannabis projects globally, with Cann Group the latest addition to its customer portfolio. ALPS is also assisting The Green Organic Dutchman in the development of a high-technology hybrid greenhouse.
The Company's counselling and outreach service CanvasRx continues to grow rapidly and now has established 28 locations. To date, CanvasRx has assisted 42,200 patients, with an accumulative prescription length of 15,786,305 days since inception.
Distribution Channels
The Company continues to develop new distribution channels for its products, such as the completed agreements with Pharmasave and Shoppers Drug Mart. Additionally, the investment in LIQ and the completed agreement with the Société des Alcools du Québec are some of the Company's initial preparations for the legalization of adult consumer use.
Strengthened Balance Sheet
The Company strengthened its balance sheet and liquidity position during the third quarter of 2018 with $356 million in new funds and the conversion of $112.7 million in convertible debentures into common shares.
Management Team Expansion and Director Change
Aurora continues to attract top industry talent, strengthening its senior management team to ensure the Company has the leadership to continue growing and building shareholder value.
- Mr. Cam Battley was promoted to Chief Corporate Officer
- Mr. Savior Joseph was appointed as SVP Global Marketing
- Ms. Jillian Swainson was appointed as SVP and General Counsel
- Mr. André Jérôme was appointed as SVP, Business Integration, and Director and Interim CEO of CanniMed
- Dr. Shane Morris was appointed as VP Product Development and Regulatory Affairs
- Dr. Kelly Narine was appointed as Vice President of Research
- Mr. Joseph del Moral resigned from the Company's Board and as CEO of CanvasRx.
Financial review Q3 2018
A comprehensive discussion of Aurora's financials and operations are provided in the Company's Management Discussion & Analysis and Financial Statements to be filed with SEDAR today and will be published on www.sedar.com.
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