Why Aurora Cannabis' Latest Technology Deal Matters More Than You Might Think

For Aurora Cannabis (NYSE: ACB), 10 million Canadian dollars (roughly $7.4 million) is pretty much chump change. Sure, it's nearly one-fifth of the Canadian marijuana producer's sales last quarter. But in the grand scheme of things, it isn't a lot for Aurora to spend.

So when Aurora announced on Friday that it was investing that amount in Vancouver-based technology company EnWave (NASDAQOTH: NWVCF), the news wasn't met with major fanfare. But this deal might be more important over the long run for Aurora than you'd expect. 

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What the deal involves

Aurora will own just under 5% of EnWave as a result of the transaction. But there's more to the deal than just an investment.

The two companies also entered into an agreement that gives Aurora exclusive rights to use EnWave's Radiant Energy Vacuum (REV) drying technology in all European Union countries in except Portugal, plus a non-exclusive sub-license to use the technology in Canada.

Further, Aurora will have options to exclusively license REV technology in Australia, and throughout South America except for Peru. These options can be exercised if Aurora meets specified minimum purchase order requirements for the REV systems.

Aurora will share a percentage of royalties with EnWave for any money it makes through sub-licensing EnWave's technology in Europe and potentially in Australia and South America. The details of that financial arrangement, however, weren't disclosed.

In addition, the cannabis company has already placed orders for two of EnWave's REV dehydration systems, which it plans to install at its Aurora Sky and Aurora Sun facilities in Canada. It expects to buy another for the Aurora Nordic facility in Denmark.

Why the tech is important

You might be wondering why investors ought to get excited about such a dry topic as licensing dehydration technology (pun fully intended). There are several good reasons.

As Aurora Cannabis CEO Terry Booth explained, "EnWave's technology offers very significant benefits that further improve the economic returns on our Sky Class facilities." In particular, he said, REV technology will provide the company with "industrial-scale flow-through, reducing working capital requirements, accelerating time to market from harvest, as well as increasing our ability to produce bulk-scale cannabis for extraction and use in derivative products."

Is all that just spin? Nope. EnWave's technology can reduce the time required to dry cannabis from between five and seven days to less than one hour. That's huge -- and it's likely to become even more important soon. Canada is expected to open its market to cannabis-infused beverages and edibles later this year. Aurora will be able to extract more cannabinoids from cannabis plants at lower costs using the REV technology.

Bringing that tech to its Aurora Nordic facility should also help Aurora achieve more success in Europe. Cannabis-focused market research firm Brightfield Group projects that the European cannabidiol (CBD) market should reach $1.7 billion in sales by 2023.

Standing out from the cannabis crowd

Aurora isn't the only Canadian marijuana producer interested in EnWave's technology. Tilray purchased a REV system for its Portugal facility, and has exclusive licensing rights to the technology in that country. The Green Organic Dutchman has also bought several REV systems for its Canadian operations.