Organigram Holdings Inc. (TSX: OGI) (NASDAQ: OGI) is the parent company of Organigram Inc., a leading Canadian licensed producer ("LP") of premium-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 sales in all 10 provinces. Organigram delivers industry-leading yields and maximizes quality cannabis production at one of the lowest cultivation costs per gram1 among publicly reporting Canadian LPs. Organigram is focused on translating operational excellence into strong financial results and return on investment for shareholders.
Financial Results
Fiscal year-to-date, the Company has reported net revenue of C$64.1 million, adjusted gross margin of C$37.1 million or 58%1 and adjusted EBITDA of C$27.8 million or margin of 43%1, the latter of which has been positive for four consecutive quarters.
Significant Expansion on Schedule
Located on a 14-acre campus in Moncton, New Brunswick, Organigram's production facility and research and development program includes a state-of-the-art, indoor, three-tier cultivation system that maximizes facility square footage. Design and automation improvements of the three-tier system include an ergonomically friendly grow room design, automatic potting, pre-roll and packaging machines, and larger propagation rooms with advanced environment systems.
Organigram's Phase 4, fully funded expansion project is on target to be completed by the end of 2019 and is expected to increase target production capacity to 113,000 kg/year (249,000 lbs), once fully licensed and operational.
Beyond Phase 4, Organigram is refurbishing 56,000 square feet of space within its existing Moncton Campus designed under EU GMP standards for its own edibles and derivative production facility as well as additional extraction capacity. Substantial construction of Phase 5 is expected to be completed in October 2019.
Proprietary Nano-emulsification Technology
Organigram has developed a proprietary nano-emulsification technology that is anticipated to provide an initial onset of the effects of the cannabinoids within 10 to 15 minutes. The emulsion process developed by the Organigram team generates micro-droplets that are very small and uniform (size of 20 nanometers), translating to an absorption and onset of effect that is rapid, reliable and controlled. With traditional edibles and beverages, the body spends significant time breaking down fat soluble cannabinoid particles which are then absorbed and metabolized in the body before effects are felt. This lengthy process can result in accidental overconsumption and undesirable experiences. Organigram, subject to the receipt of any required approvals, plans to conduct further testing, to confirm the onset of action and duration of effect.
The nano-emulsion technology is stable to temperature variations, mechanical disturbance, salinity, pH, and sweeteners.
The Company's researchers have also recently developed a way to transform this emulsification system into a solid form, turning it into a dissolvable powder. This shelf-stable, thermally-stable, water-compatible and palatable cannabinoid nano-emulsion formulation will also provide an initial onset of effect within 10 to 15 minutes if used in a beverage.
The powdered formulation will offer consumers a measured dose of cannabinoids which they can then add to the beverage of their choice, while also offering the discretion, portability and shelf life expected of a dry formulation.
The Company is planning to launch a variety of dried powder formulation beverage products in early calendar 2020 and is actively seeking a strategic partner with proven experience in beverage product development to take advantage of the liquid formulation it has developed.
Disruptive Production Technology
Organigram is one of only two Canadian LPs to make a strategic investment in biosynthesis – a disruptive production technology.
Biosynthesis has the potential to create cannabinoids at large scale at a fraction of the cost of traditional cultivation.
Organigram has invested in Hyasynth Biologicals Inc. a Montreal-based biotechnology company and leader in the field of cannabinoid science and biosynthesis. Hyasynth has developed a disruptive technology using proprietary yeast strains and patent-pending enzymes to naturally produce cannabinoids without growing the cannabis plant.
Biosynthesis vs Traditional Cultivation:
Well Positioned for Adult-Use Recreational Launch 2.0 ("Rec 2.0) – Legalization of Edibles and Derivative Products
Outlook
Experienced Executive Team
1 Cultivation cost per gram, adjusted gross margin, and adjusted EBITDA are nonIFRS measures. Please see the Company's latest MD&A.
2 QUICK TAKE – Cannabis – Cowen's THC Tracker: U.S. Brands – Cowen and Company, March 29, 2019
3 The Company has no investment or ownership in any entity in the United States nor does it provide any products or services to entities in the United States.
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