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Highlights:
  1. Aurora to buy Mexico City drug distributor for undisclosed price, to import cannabis resin
  2. Mexico recently allowed the import and sale of low-THC products without a prescription 
  3. Major legislative change expected in 2019, which could make imports obsolete

Aurora Cannabis Inc. has doubled down on its plans to import resin into Mexico. With major cannabis reform on the horizon, however, it’s unclear how long the country will need to imports.

On Monday, Aurora announced a letter of intent to acquire Mexico City-based drug importer and distributor Farmacias Magistrales S.A., in an all-share deal at an undisclosed price.

Farmacias Magistrales is one of several companies that recently received approval from Mexico’s Federal Commission for the Protection against Sanitary Risk (COFEPRIS) to import cannabidiol for use in cosmetics, dietary supplements and herbal remedies. It also has approval to import THC-rich resin for formulation in yet-to-be-approved medical products.

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Aurora is the first large Canadian marijuana company to stake a claim, at least publicly, in Mexico's shifting legal landscape. As with all early moves, it comes with uncertainty.

Cannabis reform is moving rapidly in Mexico, following the election of president Andrés Manuel López Obrador and his party, Movimiento Regeneración Nacional (MORENA), in the summer. After a delay of more than nine months, COFEPRIS finally unveiled regulations in late October that enable the importation and sale, over-the-counter or online, of low-THC (less than 1 per cent) nutraceutical products. As of early November, it had approved 38 products: 21 food supplements, nine cosmetics, six food products and two raw materials.

These regulations – the result of earlier, limited legislation passed by the previous government in 2017 – have given Aurora, and other Canadian companies like Khiron Life Sciences Corp., cover to enter the Mexican market. However, a new round of legislation could make the COFEPRIS regulations redundant.

"We think that what exists now is going to change radically, probably in 2019," said Mario Torres, a lawyer with Ottawa-based Brazeau Seller Law, who is working with clients in Latin America.

Members of the incoming government have already tabled draft legislation, indicating a robust move towards medical and recreational legalization. Congress is expected to vote on a bill in March or April, with regulation following within 180 days.

"This [legislative]initiative is amazing because it allows cultivation, and the whole process can be here in Mexico,” said Lorena Beltrán, co-founder EndoNatura Labs, one of the companies approved for CBD-importation. "Importing products, when we have a country where the cannabis plant grows everywhere, is just ridiculous, and that's not really going to help our economy.”

A widespread shift towards in-country cultivation could make imported product obsolete. Even so, Aurora’s early positioning with Farmacias Magistrales may enable it to take advantage of a new legal regime, Mr. Torres said.

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“You’re seeing Aurora and other folks heading on down early and trying to get whatever they can under these regulations, because you’d assume, and I think correctly so, you’re going to get migrated into whatever new regulations come into play," he said.

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