TORONTO - Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), a leading licensed producer of cannabis, has partially funded its final third tranche investment into Phylos Bioscience Inc., a U.S. cannabis genetics firm. This strategic move is aimed at expanding and differentiating Organigram's product portfolio, particularly in the realm of high THCV cultivars and other rare cannabinoids like CBG, CBC, and CBDV.
The investment into Phylos supports the development of 21 unique auto-flower seed varietals, which are due for delivery by September 30, 2024, with an additional 21 varietals expected by January 31, 2025. With this expanded genetics license, Organigram has access to a wider range of high-potency seed-based cultivars, bolstering its competitive edge in the market.
Borna Zlamalik, Senior Vice President, R&D and Innovation at Organigram, expressed satisfaction with the progress and the tangible benefits stemming from the strategic investment. The company's goal is to enhance its market position through a diversified offering that meets consumer demand for distinct aromas and flavors.
Organigram holds exclusive rights in Canada to commercialize THCV derived from Phylos' cultivars until May 2028. Its current THCV product lineup includes a variety of formats and ratios, making it the sole producer in Canada to offer whole-flower-derived THCV products in certain categories.
The company has advanced a total of US $7 million to Phylos in the form of a convertible loan, with an additional US $1 million contingent upon the successful completion of the expanded milestone by March 31, 2026. The loan accrues interest at U.S. Prime + 3.5% and is convertible into Phylos common share equity under specific conditions, including federal legalization or decriminalization of cannabis in the U.S.
Organigram's investment in Phylos is part of its broader strategy to produce high-quality cannabis for adult recreational use and to establish international business partnerships. The company operates cultivation and manufacturing facilities in New Brunswick (NYSE:BC) and Quebec, with an edibles manufacturing facility in Manitoba.
This news is based on a press release statement.
In other recent news, Organigram Holdings Inc. has made significant strides in its global expansion strategy. The company's recent strategic investment of €14 million in Sanity Group GmbH has bolstered its presence in the European market, particularly Germany. This investment comprises an unsecured convertible note and a minority equity stake, opening avenues for Organigram's expansion in Europe.
In addition to the European market, Organigram has also secured a three-year agreement to supply medical cannabis to Avida Medical in the UK. This agreement involves the delivery of 1,700 kilograms of indoor-grown dried cannabis flower over the period, with 500 kilograms planned for the first year. This deal reinforces Organigram's global expansion strategy and marks its second international customer in the UK market.
On the financial front, Organigram reported a 21% growth in recreational net revenue year-over-year in its Second Quarter Fiscal 2024 Earnings Conference Call. The company's total cash position has improved, standing at $83.6 million as of March 31, 2024. Despite regulatory challenges, the company aims for 30% seed-based production by the end of 2024 and continues to focus on international expansion, notably in the U.S. and Germany.
These recent developments demonstrate Organigram's commitment to expanding its global reach and navigating the complex regulatory landscape within the cannabis industry.
InvestingPro Insights
As Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI) continues to diversify its cannabis product offerings, the company's financial health and market performance remain pivotal for investors. Recent data from InvestingPro shows a mixed financial picture for Organigram. The company's market capitalization currently stands at $182.78 million USD, reflecting its standing in the market. However, the P/E ratio, a measure of a company's current share price relative to its per-share earnings, is negative at -3.74 for the last twelve months as of Q4 2023, indicating that the company is not currently profitable.
Despite the challenges, Organigram's gross profit margin for the same period is 23.51%, suggesting that the company is able to retain a reasonable percentage of revenue after accounting for the cost of goods sold. This is a crucial metric for investors as it provides insight into the company's operational efficiency and pricing strategy.
InvestingPro Tips highlight some concerns, such as Organigram's quick rate of cash burn and the fact that analysts have revised their earnings expectations downwards for the upcoming period. These factors could influence the company's ability to fund future investments and maintain its growth trajectory. Additionally, analysts do not anticipate Organigram will be profitable this year, which is a critical consideration for those looking at the long-term viability of the company.
On the positive side, Organigram's liquid assets exceed its short-term obligations, which is a good indicator of the company's short-term financial health and its ability to cover immediate liabilities. Moreover, Organigram's investment in Phylos could potentially enhance its market position through the development of unique seed varietals, which may lead to future revenue growth.
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