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3 Significant Benefits Aurora Cannabis Gets From Radient Technologies

Feb. 06, 2019 10:53 AM ETAurora Cannabis Inc. (ACB), ACB:CARDDTF, RTI:CA59 Comments
Gary Bourgeault profile picture
Gary Bourgeault
13.32K Followers

Summary

  • Aurora's ability to differentiate in its health segment is a key aspect of the licensing.
  • Its hemp segment will get a nice boost from the licensing approval.
  • Radient Technologies should generate good returns for Aurora over the long term.

aurora cannabis gets huge benefit from licensing approval of radient technologiessource: seeking alpha

Aurora Cannabis (NASDAQ:ACB) got a nice boost on the news its partner Radient Technologies received its Standard Processing License from Health Canada, and rightly so.

I see 3 major benefits Aurora gets from the licensing, including benefits to its health and hemp segments, and the value of its holding in Radient Technologies growing nicely over the long term.

The level of value will be predicated upon the expected premium prices Aurora will be able to get from the products developed from Radient's proprietary extraction technology, along with the highly probable increase in sales in its medical and hemp units in the years ahead from its superior products.

Value to health segment

The key to long-term growth and profitability of Aurora Cannabis and other cannabis competitors will be the ability to differentiate while providing high quality products that go beyond being considered a commodity by the market.

That was and is the concern in the recreational pot market, and in the health segment, the market is looking for products, services or delivery systems that stand apart from the competition. With Radient Technologies Aurora gets that.

Here's how Radient describes its disruptive technology:

Radient has developed a new, proprietary technology for the extraction of active ingredients from biomass, such as cannabis and hemp. Radient's patented Microwave Assisted Processing or MAP™ technology is based on the selective and localized heating of the moisture that is present in all natural materials, using microwaves as the energy source.While conventional solvent-based extraction is a diffusion-driven process, which relies on concentration gradients, Radient's continuous-flow MAP™ technology provides instant volumetric heating of the biomass, creating a targeted, pressure-driven extraction process. MAP™ extraction allows higher throughputs for a much faster recovery of the extracted compound (minutes vs hours). The process also increases yield and purity of the extracted compound, while decreasing solvent and energy requirements.

This article was written by

Gary Bourgeault profile picture
13.32K Followers
I am a former investment advisor and owner of several businesses. These days I invest only for myself while continuing to write on a variety of financial and economic topics.

Analyst’s Disclosure: I am/we are long ACB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (59)

Jolene5689 profile picture
2019👍
Darren McCammon profile picture
Next Week In The Cannabis Industry
seekingalpha.com/...

Summary:
- Aurora and Canopy will be reporting earnings next week, revenue growth expectations are high.

- US political considerations have aligned to favor continued cannabis legislation if not outright legalization.

- 2019 is stacking up to be the year of cannabis, both long term investors and traders should take notice.
r
I like your comments 🥇
r
I have had a serious cancer in my entire body, Lymfoma for the recent 3 years. I got treatment with medical cannabis one year ago. I would say that this changed my life entirely. Now I can be out with people and sleep during the nights. I am happy and very grateful for that we have medical cannabis and would like it to be avaliable all over the world. This is the savior of mankind.
mg62bk profile picture
In this purest world concerned with processed food s ,now hemp what affect will this have on the product (s) being processed by using the following materials during extraction?
"The Company's extraction process uses a range of solvents, including ethanol, hexane and acetone". Source: etrade in the company's description.
Steeley profile picture
RT extracts for a wide variety of purposes, not just food products. Their biomass extraction using their MAP platform technology for consumables uses only water and/or ethanol. Their extraction processes for electronic applications (for example) can use other, more toxic solvents without concern for latent toxicity, so the general technology description on ETrade isn't of particular concern.
Beery1 profile picture
Good article, as usual, Gary. You write, "What hemp needs is some large breakthrough products that have the potential rapidly scale, which in turn would attract a lot of coverage from the media."

It has those. The problem now is a supply issue. For example, the Charlotte's Web (OTC: CWBHF) brand is absolutely awash in positive media coverage, has a huge retail demand, and at the moment cannot process and package enough of its proprietary hemp strain of products to keep the store shelves stocked, my buyer sources tell me. There is so much demand, CW simply cannot keep up and buyers are ordering and then ladder ordering again before they receive shipment just in the hopes of getting a steady shelf supply. Retail customers readily plunk down $150 for 4 ounces of CW's premium line and clamor for more, my sources say.

Those empty CW shelves and that demand must be filled, so companies like #2 CV Sciences Inc. (OTC: CVSI) and others are pushing HARD to get buyers to stock their brands as a fallback when CW is out, thereby pulling away customers who may then become loyal. Buyers are inundated with calls daily from these companies, large and small, trying to grab some of the overage of customers who cannot get CW.

Indeed, total U.S. uptake of hemp products spurred a TRIPLING of total U.S. hemp acreage planted in 2018, and it is set to zoom again this coming growth season following the Farm Bill's helpful verbiage.

CW alone has added 70% more capacity to grow its proprietary genetic line of hemp in 2019, year over year.

The "majors" in the cannabis sector are constantly sniffing around to acquire strong hemp products companies, and I think it is just a matter of time before some great synergistic deals get done. That's because CBD is a kind of precursor business in the U.S. - legal to sell NOW in many states, where cannabis is not, it can gradually open doors for later expansion into a legal cannabis sector. Hemp is acting as the camel's nose going under the blanket in that age old tale.

So it behooves the investor seeking the earlier side of a developing trend to at least be aware of what is going on in the sector.
Steeley profile picture
>That's because CBD is a kind of precursor business in the U.S. - legal to sell NOW in many states, where cannabis is not,

Ummm... no. There is only one therapeutic CBD product approved by the FDA, and hence "legal". Up until very recently CBD wasn't enforced because harm wasn't necessarily established, but with the 2018 Farm Bill passage the regulatory structure was more specifically codified and now the question of "harm" isn't the enforcement key, FDA approval of any CBD-containing product is now *required*.

As I noted in an earlier comment, Congress handcuffed the DoJ enforcement, but not the FDA approval requirement (and in fact, the Farm Bill specifically addresses FDA regulatory authority), and states are free to enforce the FDA approval requirements on their own.

So, depending on how the state laws are written, it's quite possible that the laws in those states that have approved products for medicinal and/or recreational use of cannabinoids that contain THC don't pertain to products that DON'T contain THC, and therefore are subject to the Farm Bill regulatory requirements pertaining to THC-free cannabinoids..
jammastermike profile picture
good info., thanks @Steeley
d
OK, fine. But today I learned that NY pulled all cbd products because cbd is not FDA approved. Obviously I was not the first to know. crap!
jammastermike profile picture
hi guys, i just started a position in NEPT. Radient seems interesting too. i dont know much about the extraction sector but i sure would appreciate any thoughts you may share on NEPT as well. NEPT seems pretty solid, but is Radient a threat? all opinions are welcome.
glta!
G
Radient has solid tobacco prospects as well. I wonder if this precludes aurora from taking full control of this company. Does Aurora want to get into the nicotine game? Radients nicotine potential is so significant that it could one day rival it's cannabis revenue . Quite an interesting company. long RTI since 2017 and have added significantly when it bottomed out last year.
M
I don't think so personally. The massive anti smoking campaigns coupled with the vaping alternative are driving traditional smoking down pretty hard in my opinion. even anti-vaping campaigns have started. that said I definitely think (and hope) that Radient will continue to expand Its portfolio of materials they are able to process. this can only make them more diverse and allow revenue streams from various sectors. if the tech is grown right Radient has the ability to grow pretty big. Chemical dependent processing is massively expensive. not just the chemicals but disposing of, regulation compliance. the cost savings is reason enough, that's not to mention product purity.
aragorn6 profile picture
What's not to like about this? The two are a good fit.

The Microwave Assisted Processing™ enables:
1. Much quicker extraction of targeted cannabinoids (minutes instead of hours)
2. Much purer cannabinoids as a result
3. Greater quantities of cannabinoids
4. Much cheaper and cleaner extraction process

"Utilizing its patented MAP™ extraction technology, Radient delivers superior customer outcomes in terms of ingredient purity, yield, and cost, and serves global market leaders in industries such as foods & beverages, nutraceuticals, pharmaceuticals, cosmetics, and personal care. Since 2016, Radient has expanded its offerings to enter the cannabinoids market, using its MAP™ platform to provide premium ingredients that contain a full range of cannabinoid and terpene profiles."
https://www.radientinc.com/

Allan Cleiren, who is Chief Operating Officer of Aurora Cannabis Inc.(TSX: ACB; NYSE:ACB) and a Director of Hempco Food & Fiber Ltd., will replace Terry Booth on Radient's Board of Directors.

Mr. Cleiren commented: "Having worked closely with Radient for the past couple of years, I have been very impressed with the technical accomplishment, vision and professionalism at the organization. As regulations are finalized this year that will allow for new form factors for both the medical and adult use of cannabis, Radient's extraction capabilities will be paramount for success."

Mr. Booth commented: "With the transformative grant of their processor license, Radient will now transition from technology development to commercial operations, which requires a shift in focus. Allan, Aurora's COO, who has been extensively involved with RTI over the past couple of years as they progressed to being licensed, as well as with our hemp assets through Agropro and Hempco, is better positioned than myself to provide the bandwidth and focus RTI requires."
www.nasdaq.com/...
M
I don't know a great deal about Mr. Booth. I have heard people trash talk him as not knowing what he is doing and not having a very good stage presence. To that my position has always been that I don't know they that well, but I have been watching Aurora since they were about a 1.50 USD a share and the entire time they have been climbing there have been people saying they were a money sink. now they are arguably in the top 3. Seems like Mr. Booth is doing a good job so far.

Reading his comment about Allan knowing more about the topic them him and therefore being a better fit is encouraging. It's important that leaders know their strengths and be able to admit when they aren't the best fit and appoint someone better suited. that gives me additional comfort in his leadership.
aragorn6 profile picture
Quite right. Being able to delegate is an encouraging sign.

It's true that some people look upon Booth with disdain, but then show me a stock and I'll show you plenty of people trying to trash it and the leadership of the underlying company.

As for being a money sink, that's likely referring to ACB's use of equity when making acquisitions (and there have been plenty) which increases the share count and is widely seen as dilutive. My answer to that is, that it's only dilutive if the acquisition is a dud. If the acquisition adds value and generates (or will generate) revenue, that would be "accretive" as opposed to dilutive (IMO).
w
Very good explanation by all. Thanks, but I am curious, is this a water soluble product or an oil?
t
It’s time the US legalizes Medical Cannabis on the Federal side,that would be a good start.
Sebastian Rogerson profile picture
I was hoping trump would have mentioned it last night. markets would have been on fire today if he did
p
Thanks Gary. So would it not be a wise decision to hold some RTI, in addition to ACB. if this technology is that good, I assume other LP's would be interested. Also would it not be a possibility that ACB buys RTI?
simonjshaw profile picture
@pouliotm I like how Denis Taschuk had said that buying RTI would be a question for ACB...who knows..? Once RTI gets rolling, it might the right purchase to make. But I see RTI more like Lexeria- they could have multiple revenue streams, not just from weed & hemp.
J
Not sure why no mention of the speed of the processing self?
Apparently it takes the competition hours to process and Radiant takes minutes.
Significant factor in my not so humble opinion
G
you're right. but i think he said he wasn't getting into the nitty gritty of radient because that would entail a topic all to itself. he's just pointing out the synergies but if you want to learn more about radient i guess we have to do that ourselves, or wait for another story.
D
thnx Simon
my other concerns re: mktobserver & 408frank have mentioned
"what happens when patents expire Nov./2018 & Nov. 2019"
G
i was aware of this as i accumulated more rti. reason why is i have seen time and time again, patents are one thing, but actually building the thing is another story all together. it took radient years and years to get to this point. it took almost a year just get one license. the facilities required are massive. teams of scientists. very detailed and methodical science with multiple process patents pending or secured. can it be copied? yes, but radient has a massive muti year headstart in perfecting this. and they have the board and backing of aurora to ensure that they only continue to grow by leaps and bounds over the next decade.
D
Q: Is ACB their only customer?
Or can they do business with anyone?
simonjshaw profile picture
@DR "J" as Denis says on the Midas Letter - like the Tobacco or drink industries, the bigger companies probably wont like to work together. But Aurora will fill out most of their work & in addition take on smaller companies to help fill the gap.
M
I would respectfully disagree. Radiant is positioned as a middle man and not a direct competitor. While the are partially owned by Aurora they are themselves their own business. I work with a lot of beverage a food industries and it's not uncommon for them to use a common middle man. even if that middle man is partly owned by a competitor. so long as they have NDA's signed and they are directly owned or controlled by the competitor then large companies don't mind swimming in the same pool if it benefits them.

as I mentioned that's one of the reason I like them. They have Aurora as a steady customer but can still appeal to other growers as a processor. not to mention the other viable markets the technology can be applied to.
Y
If RTI get their new process patents granted for tailoring MAP to extract oils from cannabis, ACB probably will take a majority position in RTI. The cuirent 17-19% give ACB a seat on the RTI board. It sounds like there is a very cozy relationship between ACB and RTI in the press release, so for all practical purpose, RTI will take care of ACB and vice versa.
simonjshaw profile picture
Thank-you @Gary Bourgeault ...this is a great article & sheds some much needed light on Radient. I like your line of thinking - both Aurora AND Radient benefit from each other; not just one or the other.
I am crossing my fingers this company is currently under vaiued- and it will - as you say 'grow in value and its share price to jump a lot higher'. Although not profitable til 2020 (correct me if I am wrong here) as mentioned by Dennis Taschuk on Midas letter (link below-starts around 19mins?) I am confident that this is a company I want to invest in & do.

thanks again

www.youtube.com/...
Jolene5689 profile picture
Go radiente
etailer10 profile picture
Nuking Cannabis? not sure if that will be received favorably to some health conscientious consumers.
G
competitions uses co2 with a lot more dangerous solvents involved. microwave is the energy source but the final product is not radioactive at all. I see your concern but I don't think you understand the process at all.
aragorn6 profile picture
@etailer10
"Nuking Cannabis? not sure if that will be received favorably to some health conscientious consumers."

Have you never used a microwave oven to nuke your chicken tikka masala (or whatever)..?
Y
Yep.. that ‘s why no one ever bought microwave ovens. It’s full of radioactive isotopes.
F
Fcmd
06 Feb. 2019
Great article Gary! I've been following both Aurora and Radient for a few years now and haven't seen an article that portrays their strategic relationship so well. Radient had shaky beginnings for many investors but it has flourished under Aurora's and Denis' barnstorming. Finally the license has arrived and the future looks great!
r
love reading you articles, especially on AURORA. You are honest, true to the fact and un bias as some are on the motley fool.
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