OrganiGram Inc. (TSX-V: OGI) became the latest publicly traded licensed producer under Canada’s Marihuana for Medical Purposes Regulations (“MMPR”), following in the footsteps of companies like Tweed Inc. (TSX-V: TWD) (OTC: TWMJF). After completing its reverse merger and a mandatory trading halt, investors can now purchase the stock under the ticker symbol “OGI”.
Canada’s medical marijuana market is expected to grow from $179 million to $1.34 billion over the next ten years, according to Health Canada, with the patient population jumping from 41,384 to 308,755. With only 13 licensed producers approved to date, investors in OrganiGram have a unique opportunity to capitalize on the growing demand at a very early stage for the industry.
OrganiGram is the only fully bilingual licensed producer east of Ontario with high-quality, organic, condition-specific medical marijuana. With no synthetic nutrients, pesticides, herbicides or additives of any kind, the company’s 100% organic products come in five different strains for various objectives, ranging from appetite stimulation for cancer patients to managing chronic pain for arthritis sufferers.
According to Globe News, the company’s initial batch of medical marijuana had already sold out from pre-orders until next February, in a testament of the strong demand. Management plans to expand its operations to generate more than $30 million in sales and create 40 more jobs by next summer, according to OrganiGram CEO Dennis Arsenault, who was quoted in the article.
The company also has first-mover advantage as one of only 13 licensed producers approved by Health Canada to date. Often times, the first entrants into an industry can gain control of resources that followers may not be able to match. Canadian medical marijuana patients are a prime example, since they would likely be hesitant to switch providers after establishing a relationship.
OrganiGram plans to expand its total production square footage from 115,000 in 2015 to 235,000 by 2016, driving revenue from $2.2 million to $88 million and before-tax profits from to $15 million to $42 million, according to Mr. Arsenault. With Canada’s patient population expected to rise from 41,384 to 308,755 over the next ten years, these estimates could move even higher.
Additional growth opportunities may include industry consolidation and commercialization of its intellectual property. If Canada ultimately decides to legalize recreational marijuana, the company would also be well positioned to capitalize on the growing demand with its large production footprint, quality control processes, and existing relationship with the government.
In a recent survey, two-thirds of Canadians indicated that they wanted marijuana laws softened, although a small majority believe companies should not be permitted to sell marijuana just as they sell alcohol and cigarettes. The recreational legalization in U.S. states like Colorado and Washington State could sway opinion, however, as the data from those programs establishes a better case.
OrganiGram CEO Denis Arsenault is a successful entrepreneur that has built, run, and sold several profitable businesses over the past 25 years. Jim Laffoley and CFO Scott Franklin join Mr. Asenault to round out the executive team, with a combined 55+ years of experience in corporate executive roles, helping to build significant value for shareholders of their respective companies over time.
On an operational level, Randy Fleming provides over 10 years of experience as a licensed grower under the previous Medical Marihuana Access Regulations (“MMAR”) program. With an extensive understanding of plant genetics, growing methods, and technology, Mr. Fleming has managed as many as 21 separate strains in controlled growing environments and is adept at using automated systems.
The team’s focus on producing high-quality organic products sets it apart from many other licensed producers and aspiring licensed producers. In many cases, these companies lack significant growing expertise and are more focused on maximizing near-term profits than establishing an infrastructure to create high-quality products that have the potential to capture greater market share.
OrganiGram represents a unique opportunity in the medical marijuana market, as one of the few publicly traded licensed producers. While companies like GW Pharmaceuticals plc (NASDAQ: GWPH) are focused on creating pharmaceutical compounds, OrganiGram is squarely in its commercialization phase, having already sold out until February before it even began shipping its products.
The company recently led Chris Parry’s Weedco Power Rankings, where he suggests that the stock could be “likely to double” given its differentiating factors.
With its relatively modest market capitalization, compared to peers like Tweed Inc., investors may want to take a second look at the micro-cap stock as it begins trading on the TSX Venture exchange under the ticker symbol “OGI”, with a U.S. OTC trading symbol coming soon.
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