Aurora Cannabis recently announced it intends to buy all the issued and outstanding shares of Farmacias Magistrales. The announcement was made three days after separately informing the public that it inked an exclusive supply arrangement with the Mexican company.
These steps effectively gave Aurora strategic access to the Mexican market that has more than 130 million people who are legally allowed to buy the company’s products containing tetrahydrocannabinol (THC).
Elsewhere, market observers were surprised of Aurora’s two big decisions made almost simultaneously.
The company’s moves were made as reports emerged that Mexico is planning to legalize recreational marijuana. This may have a play behind the fast developments in the relation between the two entities.
Giving shareholders substantial and long-term value
With Farmacias Magistrales now under the wings of Aurora, the Canadian cannabis producer also gained access to the Mexican’s company’s facilities. The latter produces pharmaceuticals in a 12,000-square-foot plant in the capital city.
There could be no other partner that could give Aurora a lead in one of the world’s most populous countries than Farmacias. At its current status, Farmacias already has a well-established distribution network for its products. It currently distributes cannabidiol (CBD) products to as many as 80,000 retailers and THC products to 500 pharmacies and hospitals.
Most importantly, Farmacias has been the only one company granted by the Mexican government to import THC.
With broad market reach, big facility and a license which normally takes four years to be granted, Farmacias is one strong asset for Aurora, the company said in its announcement. With it, Aurora now has an arm in Latin America added to its footprints in Colombia and Uruguay.
“Integrating Farmacias with our operations in Canada and Latin America will not only accelerate growth, it will build substantial long-term shareholder value while also enabling us to capture the full margin of the medical cannabis we sell there,” Terry Booth, CEO of Aurora, said in a statement.
Legalizing recreational marijuana in Mexico
As first noted by Reuters, Aurora’s decision to partner with Farmacias was made a month after reports emerged that Mexico has plans to establish a marijuana industry and legalize its recreational use.
If the law is passed, Mexicans are allowed to plant marijuana in up to 20 farms and to produce up to 17 ounces of weed per year, the Los Angeles Times reported. The latter translates to up to 1,440 joints a year. The law will also grant the right to smoke weed in public.
The Mexican government has yet to announce a timeline for which the law will be enacted.
There could be two scenarios that could happen with regard to Aurora and Farmacias partnership. First, together, they could be the first to catch the market of which demands will double the moment the law was enacted. Second, together, they will uphold the use of marijuana products for strictly medical purposes.
In a statement, Cesar Vargas Dominguez, Commercial Director of Farmacias, explained why they agree into a partnership with Aurora.
“Aurora is our partner of choice because of its production capacity, global reach, product quality, patient-first culture, and commitment to a science-based approach to medical cannabis. We look forward to becoming part of the Aurora family and executing on the Mexican medical cannabis opportunity,” he said.
Whatever is behind Aurora’s venture into Mexico, the company seemed to have made a strategic business decision that could boost its global reach and strengthen its foothold in a burgeoning market.