As the marijuana industry continues to grow exponentially, cannabis companies in both the US and Canada are looking to increase their visibility and gain a share of the burgeoning market. One company that has proven its worth is OrganiGram Holdings (TSXV:OGI) (NASDAQ:OGI).
OrganiGram is a leading licensed Canadian cannabis producer based in New Brunswick that is making some serious headway in the industry. The company just began trading on the NASDAQ, joining cannabis industry giants like Canopy Growth Corp (NYSE:CGC), Aurora Cannabis (TSX:ACB) (NYSE:ACB), Tilray (NASDAQ:TLRY), and Cronos Group (TSX:CRON) (NASDAQ:CRON).
At the same time, OGI announced a $15 million investment in chocolate cannabis edibles and a high-speed, high-capacity, fully automated production line that will have the ability to produce an estimated four million kilograms of chocolate cannabis edibles annually.
Let's take a look at why graduating to a major exchange listing is a big deal and how OrganiGram is positioning itself well for the upcoming legalization of edibles in Canada.
Why OrganiGram is a Good Fit for the NASDAQ
To be listed on a major exchange list the NYSE or NASDAQ, companies must meet listing requirements in regards to their total value, corporate profits, price per share, daily and monthly trading volume, and revenues.
Considering that OrganiGram boasts an average trading volume upwards of 1.79 million, has a market cap of $1.16 billion and is one of the lowest cost per gram producers, it's clear why the company moved to the big leagues.
The company's also reported a 693% increase in revenues compared to Q2 2018, reaching a record net revenue of $26.9 million CAD in its first quarter of recreational adult-use cannabis sales. At the same time, OGI reported an all-in-cost of cultivation of $0.85 CAD per gram of dried harvested flower, which was down from $1.48 CAD in Q2 2018. The company said the decrease in cost is largely due to higher yields per plant.
On top of that, OrganiGram reported an adjusted EBITDA of $13.3 million as well as an adjusted EBITDA margin of 49%, which has been positive for the last three quarters.
OrganiGram is one of four licensed producers in Canada to have a presence in all 10 provinces. Add that to the company's low cost of cultivation and it seems that OrganiGram will be able to maintain its positive revenue even when an oversupply of cannabis hits the market and the price drops.
Investing in the Growing Edibles Market
Besides boosting its cannabis flower sales revenue, OrganiGram has also been positioning itself for the upcoming legalization of cannabis edibles in Canada, which is expected for October 17, 2019.
The company is expanding capacity with Phase 4 and Phase 5 expansions of its Moncton manufacturing and processing facility. It also has a multi-year extraction agreement with Valens GroWorks Corp. (CSE:VGW) to extract cannabis from its Moncton operation and hemp purchased from 1812 Hemp, to produce extract concentrate for oil production and build up its inventory of concentrate.
OGI is also focusing on vaporizable pen technologies and a selection of edible products, which is why it has made a $15 million investment that will contribute to a state-of-the-art chocolate molding line and a fully integrated packaging line with robotics, advanced engineering, high-speed labeling, and automated shipping carton packing. It expects to take delivery of the line in the fall.
On top of its cannabis edibles and derivative initiatives, Organigram has also developed a water-soluble and tasteless cannabinoid nano-emulsion formulation that will provide an initial onset within 10 to 15 minutes if used in a beverage. OGI said that it will not develop its own cannabis-infused drink line, but is seeking a strategic partner with proven experience in beverage product development.
Although OrganiGram has faced hardships in the past, it's clear that the company is on the right path. With $63.4 million in cash in the bank, impressive recreational and medical marijuana sales, one of the lowest costs per gram, and a strategic growth plan, OrganiGram is definitely worth watching.
It will be exciting to see how OrganiGram will stand up against competition once the legalization of adult-use cannabis edibles happens this coming fall.
OGI share price reacted favorably to all of the positive news, increasing by more than $1.00 CAD on the TSXV over the last week to reach $10.51 CAD by 12:30 pm EST. Since it began trading on the NASDAQ at a price of $8 USD, the company's stock has been trading at an average volume just under one million, hitting a high of $8.44 USD and a low of $7.80 USD.
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