- H1
2019 results reflect excellent operational execution: lowest cost of
cultivation per gram among publicly reporting Canadian LPs,
industry-leading adjusted gross margin and adjusted EBITDA (positive
adjusted EBITDA for 3rd consecutive quarter in Q2 2019)
- On
track to increase target production capacity to 113,000 kg/year by the end
of 2019
- Well-positioned
for Canada’s new edibles and derivative legalization expected in October
2019 with expanding production capacity, R&D and various strategic
partnerships
- Invested
in biosynthesis to produce cannabinoids without growing the plant at a
fraction of cultivation costs
- Focused
on developing further international partnerships, prioritizing the CBD
market
Organigram Holdings Inc. (TSX.V: OGI) (NASDAQ: OGI) is
the parent company of Organigram Inc., a leading Canadian licensed producer
(“LP”) of high-quality cannabis and extract-based products. Founded in 2013,
Organigram is focused on producing high quality, indoor-grown cannabis for
patients and adult recreational consumers in Canada, as well as developing
international business partnerships to expand the Company’s global footprint.
The Company has distribution arrangements in all 10
provinces. Organigram delivers industry-leading yields and maximizes quality
cannabis production at the lowest cultivation cost per gram among publicly
reporting Canadian LPs.
Financial Results
In Q2 2019, the Company reported record net revenue of
C$26.9 million, cash cost of cultivation of C$0.65 per gram, industry leading
gross margin of C$16 million or 60% and adjusted EBITDA of C$13.3 million or
margin of 49%, positive for the third consecutive quarter.
Significant Expansion Plans with Streamlined Licensing
Process
Located in Moncton, New Brunswick, Organigram’s production
facility and research & development program includes a state of the art,
indoor 3-tier cultivation system which maximizes facility square footage. Its
Phase 4 expansion project is expected to be completed by the end of 2019 for
increased target production capacity of 113,000 kg/year (249,000 lbs.). As the
Company expands its cultivation and processing capacities, Organigram is able
to file amendments to the existing facility and each new production area is
largely a replica of previously licensed areas, which results in a relatively
streamlined and predictable licensing process with Health Canada.
In addition to increased production capacity from Phase 4,
Organigram’s Phase 5 expansion includes plans for additional extraction
capacity and its own edibles facility. Construction is expected to be
substantially completed in October 2019.
Proprietary Technology
The Company’s indoor facility allows for control of all
critical facets of the lighting and environmental elements to drive maximum
quality and yield in the plants. The Company’s in-house proprietary information
technology system, called OrganiGrow, tracks grow cycles, environmental conditions
and other factors to optimize cultivation.
Numerous design and automation improvements include
automated potting, pre-roll and packaging machines, and larger propagation
rooms with advanced environmental systems.
Well Positioned for Canada’s Legalization of Edibles and
Other Derivatives Products
Through its facility expansions, partnerships and research
and development, the Company is well-positioned to capture further growth from
the legalization of edibles and derivative products expected in October 2019.
Its initial product focus is on vaporizable products and edibles.
Organigram’s development of a shelf-stable, thermally
stable, water-soluble and tasteless cannabinoid nano-emulsion formulation may
provide for an initial onset of effect within 10 to 15 minutes in a beverage.
Non-cannabis formulations with a similar molecule size are water-soluble in
humans (i.e., absorbed through the bloodstream rather than requiring first-pass
liver metabolism, which results in longer onset and duration uncertainty). The
Company expects to receive research and development licensing in the near term,
at which point testing will be conducted to confirm the onset and duration.
Organigram has entered into an exclusive consulting agreement
with The Green Solution (TGS), a proven market leader based in Denver, Colorado
for the development of commercial scale extraction and derivative product
development in Canada. Organigram’s partnership with Canada’s Smartest Kitchen,
a leader in food product development, will expand the Company’s edibles R&D
program.
The Company recently announced a C$15 million investment
commitment in a high-speed, high-capacity, fully automated production line with
a capacity of 4 million kilograms of exceptional chocolate cannabis edibles per
year.
Organigram also has a multiyear extraction contract with
Valens GroWorks Corp. to produce extract concentrate for oils and other
derivative products.
Disruptive Technology
Through its partnership with Hyasynth Biologicals Inc., a
biotech company and leader in the field of cannabinoid science and
biosynthesis, Organigram has invested in a potentially disruptive technology
that uses patented yeast strains and enzymes to naturally produce cannabinoids
without growing the cannabis plant. This process has the potential to create a
global supply of pure cannabinoids at a fraction of the cost of traditional
cultivation. Organigram views this investment as providing early access to what
it expects to be the future of cannabinoid production – cost-effectiveness,
purity and scalability.
International
Organigram believes there will be increasing demand for CBD
in Canada and beyond. As such, the Company has invested in Alpha-Cannabis
Germany (ACG) and expects to provide ACG with flower for conversion into
extracts. ACG is a medical cannabis provider serving the largest legalized
medical market in Europe. The Company anticipates entering into an agreement
with ACB to purchase pure synthetic CBD isolate in the future.
Organigram is also invested in Eviana Health Corp. (CSE:
EHC), a Serbian-based company with hemp farming and processing assets.
Experienced Executive Team
- CEO
Gregory Engel has 30 years of national and international experience in
pharmaceuticals, biotechnology, cannabis, and consumer packaged goods
(CPG), and most recently served as CEO of Tilray Inc. where he was
instrumental in the company becoming the first Canadian exporter of
medical cannabis, as well as establishing several trailblazing industry
standards
- Jeff
Purcell, Senior Vice President of operations, has 25 years of experience
in operations for companies such as Ganong Chocolates and McCain Foods
- Tim
Emberg, Senior Vice President of Sales and Commercial operations, has 20
years of experience in pharmaceutical sales and marketing in the OTC and
CPG industries
- Paolo
DeLuca, Chief Financial Officer, has 20 years of diversified financial
business experience including with West Face Capital and TD Securities
- Ray
Gracewood, Senior Vice President, Marketing & Communications, has 15
years of experience in the marketing space and was senior Director of
Dales and Marketing for Moosehead Breweries Ltd.
This profile contains certain non-IFRS performance
measures including cash and all-in cost of cultivation per gram, net revenue, adjusted
EBITDA, and adjusted gross margin which are not calculated in accordance with
IFRS and may not be comparable to similar data presented by other companies.
Please see the company’s Q2 2019 MD&A.
For more information, visit the company’s website at www.Organigram.ca
NOTE TO INVESTORS: The latest news and updates
relating to OGI are available in the company’s newsroom at http://ibn.fm/OGRMF
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