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ORGANIGRAM HLDGS I COM NPV (OTCMKTS:OGRMF) In A Strong Comeback

ORGANIGRAM HLDGS I COM NPV (OTCMKTS:OGRMF) In A Strong Comeback
Written by
Jim Bloom
Published on
September 27, 2017
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In our last coverage of ORGANIGRAM HLDGS I COM NPV (OTCMKTS:OGRMF) on May 9, 2017, we discussed how the company was weathering the storm following its voluntary recall of certain products over pesticide contamination fears. In today’s coverage, we continue to examine the strong comeback of OGRMF with more evidence to that effect. But before we go any further, take a look at the company’s share price action. OGRMF Daily ChartBusinessFor the sake of readers not already familiar with OGRMF, a little background on the company will suffice.OGRMF was founded in 2013 and is headquartered in Moncton, Canada. The company plays in the regulated cannabis industry in Canada and it operates through a wholly-owned subsidiary called Organigram Inc. Through this subsidiary, OGRMF produces and commercializes products for medical marijuana market. It boasts highest-quality and condition-specific medical marijuana products.OGRMF carries out its medical marijuana production activities at a facility is located in Moncton.In the wake of the voluntary recall of certain products produced in 2016, OGRMF bolstered its production quality measures as it seeks to establish itself as the industry leader in terms of highest quality production. As a result, the company responded by introducing a quality assurance program (QA Program) for increased focus on product quality and safety.Looking at the company’s financial results for fiscal 3Q17, the QA Program is starting to have a positive impact on sales. Despite the disruption from the voluntary recall, OGRMF’s net sales topped 1.9 million compared to 1.8 billion in the same quarter a year earlier.Although net loss ballooned in the latest quarter due to high expenses tied to efforts to increase product quarterly, OGRMF still had cash balance of more than C$48 million at the end of the latest quarter. This cash balance should be enough to keep OGRMF in business and enable it drive more growth as Canada’s regulated marijuana market is set to expand with the legalization of marijuana for adults or recreational use.Provincial government supply agreementCanada is working toward a July 2018 deadline for federal legalization of recreational marijuana in a move that is expected to significantly expand the country’s regulated marijuana market. Going by recent developments, Canada’s recreational marijuana market is set to unlock tremendous revenue opportunity for OGRMF.On September 15, OGRMF announced that it has entered into a memorandum of understanding (MOU) with the provincial government of New Brunswick for the supply of marijuana to the province’s recreational marijuana market.As part of the preparation for federal legalization of marijuana for adult use in Canada, the administration of New Brunswick set up a corporate entity that will be in charge of retail distribution of recreational marijuana in the province and OGRMF and another company have been tapped as suppliers.The supply agreement with New Brunswick guarantees a yearly market for at least 5 million grams of recreational marijuana that OGRMF produces. As such, OGRMF is looking at between C$40 million and C$60 million in additional annual revenues due to the MOU.Greg Engel, the CEO of OGRMF, stated the following regarding the supply arrangement with New Brunswick provincial government.

"We applaud the New Brunswick government's efforts to foster an innovative, forward-thinking economic climate that supports cannabis as a driver of growth for New Brunswick-based businesses."

SourceNot only does the supply deal with New Brunswick guarantee a consistent stream of revenue for OGRMF, the way the provincial government has envisioned its recreational marijuana market could also reduce unfair competition for licensed marijuana producers like OGRMF. For example, putting a government-run corporation in charge of retail distribution of marijuana in the province would quash the backstreet cannabis market in the province.Research collaboration with a New Brunswick fundBesides recreational marijuana, OGRMF is also collaborating with New Brunswick on research tied to medical marijuana. The market for medical marijuana has continued to expand in Canada. According to Canada Health, the number of patients who qualify for cannabis treatment in Canada soared 167.9% year-over-year in the second-quarter of this year, implying a rapidly growing medical marijuana market alongside a potentially explosive recreational marijuana market next year.To feed Canada’s expanding medical marijuana market, OGRMF is working with a New Brunswick innovation fund called the New Brunswick Innovation Research Chair in Medical Technologies (NBIRC). OGRMF announced on September that it has entered into an MOU with NBIRC to develop a more efficient way of extracting cannabinoids to be used in extracts and edibles.ConclusionThe latest comeback of OGRMF seems built on more solid ground.The company’s supply contract with the provincial government of New Brunswick and the research collaboration with the province’s innovation fund are rewards for its commitment to highest production quality and safety standards. If that is the case, then OGRMF’s product quality focus should help it unlock even more revenue opportunities and profile-enhancing deals as Canada’s regulated cannabis market expands with the legalization of recreational cannabis. And the stock should reflect these gains.We will be updating our subscribers as soon as we know more. For the latest updates on OGRMF, sign up below!For the full story, check out our complete coverage on OGRMF.Disclosure: We have no position in OGRMF and have not been compensated for this article.

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