The issue of safety has become an unexpected focus of the nascent marijuana industry and one company, Aurora Cannabis (Aurora Cannabis Stock Quote, Chart, News: TSXV:ACB), is head and shoulders above the others in the area, says Cannacord Genuity analyst Neil Maruoka.
On Thursday, Aurora introduced a new product testing disclosure process it said would ensure to clients that its product had been certified by an independent third party laboratory as having passed testing for the widest possible range of potential contaminants.
“This initiative further extends Aurora’s best-in-class quality assurance and testing protocols, and gives our clients additional certainty regarding the purity and safety of the cannabis we produce and sell,” said CEO Terry Booth. “From the founding of our company, we have established and emphasized a strict culture of regulatory compliance. We have never used pesticides in our production, yet we have always tested all the products we sell for the presence of pesticides and other potential contaminants. It is imperative that patients have confidence in the safety of the products they consume and in the integrity of the medical cannabis system. We believe our testing disclosure process will raise the bar for the entire sector and offer a model for other companies to follow.”
Maruoka says Aurora is getting out in front of an issue that has put pressure on some of its peers.
“We believe that a trust issue has arisen between the emerging Canadian cannabis industry and its medical customers following two high-profile recalls by Aurora’s competitors,” says the analyst. “Further, we believe that safety is particularly important for therapeutics regulated through Health Canada, including medical cannabis. While Aurora has never been found to grow contaminated product, we view this as an important strategy to rebuild customer confidence.”
In a research update to clients Maruoka maintained his “Speculative Buy” rating and one-year price target of $3.15 on Aurora Cannabis.
Maruoka thinks Aurora will post EBITDA of $10.2-million on revenue of $29-million in fiscal 2017. He expects these numbers will improve to EBITDA of $80.2-million on a topline of $192-million in fiscal 2018.