Organigram Holdings Inc (TSX: V.OGI, OTCQB: OGRMF, Forum) is a Canadian cannabis producer licensed under Health Canada’s ACMPR regulatory system and based in Moncton, New Brunswick. One of 43 licensed producers of cannabis in Canada, the Company has always been committed to providing its customers with the highest quality medical cannabis.
In December, during a routine inspection from Health Canada, some Organigram cannabis products were discovered to have been tainted with small amounts of two pesticides which are prohibited for use on cannabis plants under the Pest Control Products Act: myclobutanil and bifenazate. The Company initiated an immediate voluntary recall.
Unfailingly focused on the best interest of their patients throughout the experience, the company has seen a strong rebound, maintained shareholder confidence and has instituted what they refer to as their ‘Seven Steps’ with the objective of providing patients with “Canada’s Safest Cannabis”.
Stockhouse recently had the chance to ask OGI’s new CEO Greg Engel about these new product safety initiatives as well as Organigram’s recent acquisition of Trauma Healing Centers; announcement of a new, single-week sales record; and its pending expansion.
- The issue of low levels of two banned pesticides in OGI’s cannabis products was an unfortunate development for Organigram and its customers. What level of risk (if any) did these chemicals pose to users of Organigram cannabis?
The recall was deemed a Type II recall, which is defined as “a situation in which the use of, or exposure to, a product may cause temporary adverse health consequences or where the probability of serious adverse health consequences is remote”. Although research is very limited on the subject, we have been working closely with our patients and physician partners and have not found consistency in physical reactions.
- After launching an immediate product recall, the Company quickly implemented a new system of internal controls to ensure there is no repetition of this episode. Please inform investors of these initiatives.
These are the events that make a good company, great! I’m excited to say that from this event, Organigram is now stronger and more focused on the merits of product quality and consistency. Since January, we have instituted our “Canada’s Safest Cannabis” initiative, which includes seven key multi-departmental steps to ensure zero risk of contaminants in our product. I’d encourage investors to read up on the details of this project on our website at www.organigram.ca.
- The presence of these two pesticides came as a mystery and a surprise for Organigram. Was OGI ever able to precisely identify how these substances were introduced into the Company’s grow-room environment?
Following a vigorous process including both internal and external consultation, we have not been able to succinctly identify the source of the contaminant. We unfortunately cannot go back in time to test all the inputs used in our facility over that period. What we can say is that the process has identified several learning opportunities that will ensure that we will taking several incremental steps to ensure the contamination cannot occur again in the future.
- The product recall will obviously have a short-term impact on Organigram’s bottom line. However, OGI recently announced a new, one-week sales record, reaching $250,000 in weekly revenues for the first time. What does this say about the continued faith which the Company’s customers have in OGI cannabis products?
The entire financial impact of the recall has been captured in our latest quarterly results, which is part of our strategy to communicate to investors that the event is now behind us, we’ve learned from it and have adapted our strategies and processes. It’s obvious that Organigram patients have continued faith in our company and our products, as weekly sales results have continued to be positive since our initial harvests of newly tested products have been released. We can confidently say that our enhancements to product quality coupled with competitive pricing and industry-leading client service will result in continued growth as more and more patients join the Organigram family.
- On April 10, 2017; Organigram announced signing a letter of intention (LOI) with respect to the acquisition of Trauma Healing Centers. Please inform investors of the long working relationship between these two companies.
Our working relationship with THC has been very strong over the past several years, and their professional and compassionate approach to the business is what appeals to us most. They do an excellent job of serving the needs of Canadian Veterans, as well as all their patients, which is something we also strive for at Organigram.
- How will this combination help to expedite operations and add shareholder value?
The acquisition of THC helps both companies in three ways. First, it introduces 3,500 patients who may find they benefit from incorporating medical cannabis into their treatment to a trusted LP. Second, our support from a capital perspective will allow THC to extend their footprint across Canada. Finally, direct and honest feedback from both sides will increase speed to market and ensure we are both efficient with product mix and service offerings.
- On March 1, the Company announced that CEO Dennis Arsenault had been elevated to the newly created position of Chairman. You stepped in to become the new CEO. What was the thinking behind fine-tuning senior management at this time?
First of all, it’s invaluable what Denis has been able to build as CEO at Organigram. This transition has been in the works for several months and was instigated by Denis last year to help take the company to the next level. It allows Denis the time to focus on his strongest business traits, and allows me the opportunity to apply my experience within the space to further establish OGI as a leader in the industry.
- What qualities and credits do you bring to the table as Organigram’s new CEO?
I have spent the last 20 years building and leading companies within Canada and internationally, which provides me with operational and commercialization insights that are transferrable to the cannabis industry and will help drive operational efficiency and commercial success. Prior to joining Organigram, I was CEO of another Canadian medical cannabis company and established that company as a leader in the space and the first company to export cannabis products to the EU from Canada.
- When the Company announced the renewal of its ACMPR production license on March 29, 2017; OGI affirmed that its planned expansion remains on schedule for completion. Please detail this expansion and inform investors when the additional cultivation space is scheduled to come online.
We continue to trend on plan with our expansion, which will allow us to grow to 26,000kg of production by the end of 2018. The adult recreational market, anticipated on or before July 2018, this will put the company in an ideal position to compete within this market segment.
- Going forward, what is Organigram’s long-term growth strategy?
We’ve boiled our strategy down to three core priorities, each with their own set of objectives and tactics for success. They are cultivation efficiency, brand building, and international opportunity development. On the first measure, we’re currently producing dried cannabis at a cost of just under $2/g, with an achievable plan to reduce this to less than $1/g in the future. Couple this with the work we’ve done through our partnership with TGS Colorado to gain efficiencies and education on oil and extract manufacturing, it puts Organigram in great shape. On the second measure, we believe brands will play an incredibly important role within the adult recreational marketplace. Building our own brands and developing a series of partnerships with equity brands such as Trailer Park Boys will allow us to diversify and target effectively within the market. Finally, we’re finalizing a strategy that will allow us to be a major player in the international marketplace including import/export of cannabis products, research and unique investment opportunities. The combination of these three factors truly position Organigram as a leading licensed producer in the Canadian marketplace, and as a leading Cannabis company internationally.
FULL DISCLOSURE: Organigram Holdings Inc is a paid client of Stockhouse Publishing.