Aurora Cannabis Inc (NYSE:ACB)(TSX:ACB) announced on Friday that The Company had entered into an agreement with EnWave Corporation (TSX-V:ENW) to use its Radiant Energy Vacuum (REV) technology. Under a royalty agreement, Aurora would have exclusive rights to the REV drying technology in various parts of the world. In Canada, The Company would have a non-exclusive sub-license.
Why is the REV technology so special?
EnWave has patented the REV technology which is a continuous drying method that is low temperature and that maintains the flavor of terpenes along with other key attributes. It is a superior method to both freeze and air drying and can allow for a uniform drying process. It will help a company like Aurora a great deal of consistency in its production and help ensure a high quality of cannabis while also doing it much quicker.
EnWave has been able to secure more than 20 royalty deals thus far as it continues to target industry leaders and sees many opportunities in both the food and pharmaceutical sectors.
More than just a licensing agreement
The two companies also agreed to an Intellectual Property Agreement whereby the two would work on innovations to further improve the REV technology. Under the agreement, EnWave would still own any intellectual property but would share with Aurora any commercial value that is realized from it. EnWave has already been working on other technologies and has a patent-pending method that will dry and decontaminate cannabis using REV which will result in less time to develop cannabis products after harvesting.
In addition, Aurora is going to be purchasing two of EnWave’s dehydration systems, for its two key facilities – Aurora Sun and Aurora Sky. It is also planning to purchase another one for its Nordic operations. The dehydration system will improve the throughput for materials that will be used in the development of derivative cannabis products.
The technology provides us with industrial-scale flow-through, reducing working capital requirements, accelerating time to market from harvest, as well as increasing our ability to produce bulk-sale cannabis for extraction and use in derivative products
– Terry Booth, CEO of Aurora Cannabis
Aurora also agreed to make a $10 million investment in EnWave in what’s effectively a swap of shares between the two companies.
Takeaway for investors
It’s never a bad move for a cannabis company to partner with a company that knows technology. With lots of competition and pressure to cut costs, cannabis companies are going to need any edge that they can get on their peers. Anytime you can speed up the process or improve the quality of a product, it’s a good decision to make. The real value could come from further developments between the two companies as there is an opportunity to find even more cost savings.
Rather than spending up to a week on drying cannabis, using the REV technology will allow Aurora to spend less than an hour doing so. It’s a big win for Aurora that should translate to quicker turnaround times and hopefully more sales and better margins as well.