Investor Ideas #Potcasts, #Cannabis News and #Stocks on the Move; Episode 464 (NYSE: $ACB) (TSX: $ACB.TO) (OTC: $CTTH) (TSX: $WLLW.TO)
Delta, Kelowna, BC, September 8, 2020 (Investorideas.com Newswire) www.Investorideas.com, a global news source covering leading sectors including marijuana and hemp stocks and its potcast site,
www.potcasts.ca release today’s podcast edition of cannabis news and stocks to watch plus insight from thought leaders and experts.
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Today’s podcast overview/transcript:
Good afternoon and welcome to another episode of Investorideas.com "Potcast" featuring cannabis news, stocks to watch as well as insights from thought leaders and experts.
In today’s podcast we look at a few public and private company announcements.
Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB) announced an update on its business operations along with certain unaudited preliminary fiscal fourth quarter 2020 results. The Company also announced the appointment of Miguel Martin as its new CEO which is detailed in a separate announcement released this morning.
"Over the last six months, Aurora has focused on building the infrastructure and capabilities necessary for a successful and diversified business," stated Michael Singer, Executive Chairman and former Interim CEO of Aurora. "The first phase of our business transformation, which is now substantially complete, included the rationalization of our cost structure, reduced capital spending, and a more prudent and targeted approach to capital deployment. As a result, we now have a far more efficient asset base and infrastructure to supply our key global markets. I am delighted to now be transitioning the CEO responsibilities to Miguel and I am confident that Aurora is in a strong position to succeed under Miguel's leadership."
"Material progress has been made to optimize our Canadian operations and put Aurora on a much stronger footing," stated Miguel Martin, newly appointed CEO of Aurora. "With market leading brands and a culture rooted in innovation and science, I now feel even more confident in the opportunity to create a global leader in a rapidly growing industry."
Today, the Company is providing the following updates:
Preliminary Unaudited Net Revenue, Adjusted Gross Margin and SG&A Results for Q4 2020
Net revenue in Q4 2020 is expected to be between $70 million and $72 million, compared to $75.5 million in Q3 2020. Cannabis net revenue is expected to be between $66 million and $68 million, compared to $69.6 million in Q3 2020. We expect adjusted gross margin before fair value adjustments on cannabis net revenue to be within a range of 46%-50%, with lower gross margins expected from non-cannabis business segments.
As previously stated, Aurora has focused on prudently managing its sales, marketing and administrative ("SG&A") costs in the second half of fiscal 2020. Aurora successfully reduced SG&A costs (which include R&D spending) from over $100 million in fiscal Q2 2020 down to an expected range of $60 to $65 million in fiscal Q4 2020, excluding approximately $3 million of non-recurring costs related to the business reset and $2 million of costs associated with divested businesses.
Cost Rationalization and Near-Term Revenue Plan
The Company is now operating at its quarterly SG&A run-rate in the low $40 million range, and expects operational cost reductions from facility closures up to $10 million per quarter starting in the second half of fiscal 2021. With a tailwind of growth in the Canadian recreational market, the Company is better positioned for its next phase focused on profitability.
Under Aurora's new CEO, the team expects to be focused on executing a tactical plan intended to (1) grow Aurora's leading market share in key profitable Canadian consumer categories (2) protect and enhance Aurora's leading market share in Canadian medical, (3) grow our international medical business and (4) build leading brands under Reliva in the US CBD market. Ultimately, Aurora believes that it is capable of supporting significantly higher levels of net revenue in the future without a corresponding level of growth in SG&A.
Impairment Charges
As previously announced, and as part of the business transformation and cost reset, Aurora expects to record a number of balance sheet adjustments in Q4 2020 to recognize market realities and to position the Company for future performance. These adjustments include previously announced fixed asset impairment charges, now expected to be up to $90 million, due to production facility rationalization, and a charge of approximately $140 million in the carrying value of certain inventory, predominantly trim, in order to align inventory on hand with near term expectations for demand. Approximately 40% of the expected inventory provision relates to the non-cash IFRS fair value adjustment within inventory. Although the business prospects for Aurora remain strong, under IFRS, management is required to recognize the impact of overall industry risk, and to consider the book value of the Company relative to current market capitalization. Accordingly, the Company expects to recognize a non-cash write-down of goodwill and intangible assets in the range of $1.6 to $1.8 billion.
In addition, and consistent with a focus on financial discipline and the drive to positive Adjusted EBITDA, Aurora announced today that the Company and the UFC have agreed to mutually terminate their partnership. For Aurora, this decision reflects the evolution of the realities of the cannabis market and a focus on near term profit pools. In connection with this decision, the Company expects to make a one-time payment of US$30 million to terminate the contract in Q1 2021, which is expected to avoid more than $150 million in fees, research costs, and marketing activation expenses over the next five years.
CTT Pharmaceutical Holdings, Inc. (OTC: CTTH), an innovative life sciences company with a portfolio of IP in novel drug delivery systems, today announced that it has entered into a business development partnership with 3 Rivers Biotech, a pre-eminent tissue culture company. Under the agreement, 3 Rivers will leverage its network of suppliers to and manufacturers of Consumer Packaged Goods (CPG) to secure commercial partnerships based on CTT's patented sublingual wafer technology.
Additionally, the agreement includes the ability for CTT to utilize 3 Rivers' operational capabilities to execute technology transfers and project implementation for new customers, providing a cost-efficient and de-risked expansion of CTT's operational capacity.
3 Rivers' is one of few companies with a successful track record in the consistent, commercial-scale supply of tissue-culture-based clones for a variety of sectors, including the hemp industry. As a trusted partner, 3 Rivers is very well positioned to engage in meaningful discussions within its network to explore the potential for commercial partnerships on behalf of CTT.
CTT's rapidly dissolving sublingual wafers deliver active ingredients through the buccal/mucosal route, which provides a number of key advantages over other delivery mechanisms, meeting important current market dynamics. These advantages offer CPG companies the opportunity to expand their portfolios with a well-differentiated, high-margin product offering on rapidly growing market segments.
● Rapid onset CTT's strips dissolve quickly in the oral cavity (5-15 seconds), with the active ingredient rapidly absorbed into the bloodstream
● Increased bioavailability the active ingredient, once absorbed, can bypass the liver's first-pass effect, improving therapeutic outcomes and efficacy through improved bioavailability
● Safe smoke-free delivery bypassing lungs and digestive system
● Ease of use taken orally, not requiring water or swallowing
● Accurate and consistent dosing precisely determined and consistent potency of the active ingredient, a critical advantage over most other form factors
● Increased adherence the ease of use and discrete administration can help increase positive adherence outcomes
● Large target markets suitable for a wide range of applications in medical, wellness and recreational markets
Marc Lakmaaker, SVP Commercial Development for CTT, stated, "3 Rivers is a trusted partner at the root of the value chain for a growing number of companies in the CPG sector. Its network in large geographic markets, such as North America, China and Europe, creates a very significant opportunity for CTT to accelerate growth. The partnership also provides additional implementation bandwidth, which further de-risks our expansion efforts in a cost-effective manner."
Dr. Kevin Mehr, VP of Sales at 3 Rivers, added, "We believe that CTT's sublingual strips provide a unique and compelling commercial proposition for many companies in our network across a wide variety of sectors. The science behind CTT's technology, the effectiveness of its products, the Company's successful track record in bringing a new technology to market, and the caliber of its people, clearly differentiate CTT from its competition. We believe that these factors will greatly facilitate our ability to build new partnerships, and we look forward engaging with our network, on behalf of CTT."
Willow Biosciences Inc. (TSX: WLLW) (OTCQX: CANSF) announced that its subsidiary - Willow Analytics Inc. - will receive advisory services and conditional funding from the National Research Council of Canada Industrial Research Assistance Program ("NRC IRAP") supporting a research and development project to advance production of its varin cannabinoids, using its proprietary biosynthetic platform.
"We welcome the advice and funding from NRC IRAP to support our rare cannabinoid development platform," said Dr. Mathias Schuetz, Willow's Vice-President of Research & Development. "This support is an important catalyst for us to advance our strain development capabilities and will enable us to progress from lab-scale work to pre-commercialization scale up."
Willow has built a strong reputation as a high-quality, high-purity biosynthetic cannabinoid producer. Its yeast fermentation production platform, initially developed for cannabigerol ("CBG") and cannabidiol ("CBD"), has shown impressive success and Willow expects to be the first company to biosynthetically produce material amounts of cannabinoids. By varying the feedstock used in its fermentation platform, the Company has made significant progress on developing strains for its varin series of cannabinoids and will use the NRC IRAP funding to accelerate the commercialization plan for these cannabinoids.
Trevor Peters, Willow's President & CEO, added "By using the platform technology that has allowed us to advance our CBG program ahead of schedule, we are able to expand our portfolio and pursue fermentation-based production of additional cannabinoids. We have made strong progress with our varins development to date and expect the varins program to reach scale-up phase in the first half of 2021 and market-ready levels in the second half of 2021."
The varins series of cannabinoids that Willow is developing include cannabigerovarin ("CBGV"), cannabidivarin ("CBDV") and tetrahydrocannabivarin ("THCV"). These varin cannabinoids are considered minor or rare cannabinoids as they occur naturally in cannabis plants at less than one percent of biomass, making them challenging and costly to produce via cultivation. Despite the lack of supply, there are advanced clinical trials and significant recreational interest due to the possible therapeutic benefits of the Varin cannabinoids, including uses for autism, diabetes and as an appetite suppressant.
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