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Aurora Cannabis

We Americans like to think we’re in the forefront when it comes to cannabis legalization.

After all, nearly 30 states have medical cannabis and nine have approved recreational cannabis for adults, the most significant wave of legalization since the plant was banned seven decades ago.

But it’s our neighbors to the north who are quietly paving the way for the future of the industry. Colorado and California may get all the press, but Canada has developed one of the world’s most liberal medical cannabis policies, one that has allowed truly national cannabis companies to develop in ways American companies cannot because the plant remains federally illegal here.

As to how this future may shape out, look no further than Aurora Cannabis. While the largest U.S. cannabis companies are valued around $190 million, the Edmonton-based company was recently valued at $2.4 billion—yes, with a “b”—with a stake in nearly every phase of the process from seed to sale.

Not too shabby, eh? And as Canada moves toward legal use for adults, they’re only getting started.

“I have a joke I tell that I wake up every morning and say a prayer of thanks to the DEA for keeping cannabis federally illegal in the U.S.,” said Cam Battley, 49, Aurora’s chief corporate officer. It’s a joke, and he is quick to point out that he thinks it’s ridiculous that the plant remains federally illegal here.

But behind every joke is a bit of truth.

“The huge advantage we’ve got over the U.S. is that in the U.S. cannabis remains federally illegal. It means the companies can’t produce in one state and sell in another. It means they can’t deduct their business expenses so the effective tax rate can be 60 to 70 percent. And they can’t list on public exchanges and have the same access to capital that Canadian companies have used to successfully begin our global growth.”

“Not only have we been able to expand across Canada and establish massive capacity, but we’ve been able to expand around the world.”

“The Squarest Guy in the Cannabis Business”

Battley doesn’t fit the profile of your typical cannabis peddler.

He spent most of his career working in the pharmaceutical industry until a friend in 2014 suggested he look into medical cannabis. While the American government spent years battling and shutting down dispensaries, Canada’s government in 2013 created a legal framework for the industry.

“Are you crazy? I do serious stuff,” Battley responded to his friend. Then he began to look at the actual medical benefits of the plant.

“What resonated with me is that medical cannabis is used to manage the symptoms of a wide range of health conditions, and I was well aware of the vast unmet medical need with respect to symptom management across this wide range of conditions,” he said. “So a light bulb went on for me immediately, and it was one of those times in life when you’re absolutely delighted to find out you were completely wrong about something.”

“Today they call me ‘the squarest guy in the cannabis business’ because of my business background. Plus I’ve been a Scout leader for 10 years and soccer coach for 10 years.”

In 2016, he took the job as chief corporate officer at Aurora, making him the company’s public face in dealing with the media, investors, regulators and others. And he won’t even admit to ever enjoying the product.

There’s a good reason for that, however. The U.S. Border Patrol in recent years has begun banning non-citizens from entry—in some cases for life—for simply admitting to having consumed cannabis.

Growth and Enterprise

When Battley joined Aurora Cannabis in 2016, the company had 35 employees and a value of $70 million.

Today the company has 480 employees, rivaled in size and value in Canada only by Canopy Growth Corp. The two companies together are valued at $6 billion, which is more than Canadians spent on medical and recreational cannabis in 2017.

Battley credits Aurora’s growth to Founder Terry Booth, who used his own money to launch the company’s first 100-acre grow operation in 2013 and has guided it through the sort of growth that would be impossible in the U.S.

Take the company’s 800,000-square-foot grow operation at Edmonton International Airport, where they expect to produce 100,000 kilograms of cannabis a year. Said Battley, “The airport authority is our landlord, and that’s a federal body, so effectively Prime Minister Justin Trudeau is our landlord. Can you imagine having Donald Trump as a landlord of a cannabis company?”

Alberta’s minister of economic development even showed up at the press conference announcing the airport project.

Such government support is just one of many factors that has allowed Aurora and its competitors to reach a size American companies only dream of. The federal agency Health Canada has created a nationwide framework for medical cannabis, so unlike in the U.S., patients don’t have to worry when they travel that what is legal at home could be a felony in the province they are visiting. For Aurora, that means the ability to operate across the country, which U.S. companies can’t do.

The company also has access to investor money through Toronto Stock Exchange and does not face limits on vertical integration like many U.S. states have established. That means companies are limited from controlling all phases of production and sale. Lacking such regulations, Aurora has invested in or purchased companies that specialize in extractions, companies that conduct cannabis research, companies that specialize in gardening techniques and companies that design waste digesters. Aurora owns one of Europe’s leading medical cannabis importers, which provides up to 40 percent of the company’s revenue.

In anticipation of Canada’s legal recreational market, Aurora purchased 200 liquor stores in order to convert them to cannabis sales.

Despite all this growth, it doesn’t do a dime of business in the U.S.

So while his joke about U.S. cannabis policy is just that, a joke, nobody at Aurora is laughing.

“It’s ironic, because we’re very much aware [U.S. policy] is prolonging the social harms associated with prohibition in the U.S., and I disapprove of that very, very strongly. The advocate in me gets quite angry at that, because we also know that those social harms associated with prohibition land much more on Americans who are minorities and poor than they do on others.”

“That said, the longer cannabis remains federally illegal in the U.S., the more lead time we have to establish our global leadership.”

“That said, the longer cannabis remains federally illegal in the U.S., the more lead time we have to establish our global leadership. It’s an odd situation of public policy, which I strongly disapprove and think is wrong is actually in the short-term beneficial to leading Canadian companies like Aurora.”

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