When Aurora Cannabis Inc. (NYSE: ACB) reported second-quarter fiscal 2019 results after markets closed Monday evening, the marijuana grower and distributor posted a quarterly net loss per share of C$0.25 on revenues of C$54.18 million. In the same period a year ago, the company had earnings per share of $0.02 on revenue of C$11.7 million. Analysts had forecast a net loss per share of C$0.05 and revenues of C$54.56 million. At today’s conversion rate, one Canadian dollar is equal to $0.75.

The company said sales of medical cannabis products totaled C$26 million in the quarter, up from C$24 million sequentially. Total cannabis net revenue totaled C$47.58 million, up from C$24.6 in the prior quarter.

An excise tax on all Canadian sales channels went into effect on October 17, cutting into profits, but falling wholesale prices in the Canadian consumer market were the bigger problem. The company said it would continue to focus on higher margin medical patients in Canada and globally.

The average net sales price of cannabis was $10.00 per gram in the second quarter, down 18% sequentially. Total production rose 57% sequentially to 7,822 kilograms, and kilograms sold rose from 2,676 in the first fiscal quarter to 6,999 in the second quarter. Cash costs of production rose by 33%, from $1.45 per gram to $1.92.

Although the company did not discuss falling wholesale prices, it would be surprising if legal sales in Canada are not falling victim to the same kind of competition from illegal sales that has rippled through legal state-wide markets in California, Oregon and Washington. The guy on the corner who does not pay taxes or have to meet other government imposed conditions is always going to underprice the legal market.

CEO Terry Booth said:

Our brands continue to resonate extremely well in the consumer market, our patient numbers continue to increase steadily, and we have maintained our market leadership in Germany and other key international markets. We are experiencing exceptional demand for our Canadian medical and consumer products, as well as sustained strong demand internationally. With our Aurora Sky and MedReleaf Bradford facilities ramping up production as anticipated and our other licensed facilities operating at full capacity, we are reiterating our earlier guidance of achieving sustained EBITDA positive results from the second calendar quarter of this year (our fiscal Q4).

Shares traded down about 2.2% in Tuesday’s New York Stock Exchange premarket at $6.92, in a post-IPO range of $4.05 to $12.52. The 12-month consensus price target on the stock is $C11.80, compared with Monday’s closing price in Toronto of C$9.50.

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