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Production capacity of Organigram Holdings Inc. (TSXV:OGI) triples to 16,000 kg per annum after license approval from Health Canada

SmallCapPower | February 13, 2018: Organigram Holdings Inc. (TSXV:OGI), a Moncton-based licensed medical cannabis producer, announced Monday that it has received a cultivation license of expansion from Health Canada related to its previously-announced Phase 2 expansion.

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The license approval has the following scope:

Organigram’s entire perimeter of the expanded facility, approximately 150,000 sq ft

First 10 of Organigram’s new 23 three-level cultivation rooms

Improved functional design to facilitate production, including a custom designed potting room, and an automated feed and watering system.

Because of this approval, Organigram moved cannabis plants to these new rooms on a rolling basis beginning on February 10, 2018. Organigram will start staggered harvests from these new rooms by the third week of April. The remaining 13 rooms await approval from Health Canada and are expected to come on line by March 10.

With the approval from Health Canada, Organigram capacity increased more than thrice from ~5,200 kg/year to an estimated 16,000 kg/year. The 23 planned cultivation rooms correspond to an additional 10,800 kg/year of production capacity.

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Organigram CEO Greg Engel said, “This is an important moment for Organigram. We have spent years perfecting three-level growing technology. We have developed a world-class cannabis production facility and are proud to be able to offer our medical and adult recreational customers exceptional award winning, high-quality product in 2018 and beyond.”

Organigram’s Phase 2 expansion consists of considerable improvements and efficiencies in its cultivation and processing systems. Overall, Organigram has benefited by means of immediate and ongoing cost savings coupled with increased yields through enhancements, which includes a fully-automated irrigation system in the Phase 2 grow rooms, automated potting, fully automated waste destruction system and automated packaging lines.

Organigram’s ongoing Phase 3 expansion is expected to be completed in May 2018, which will increase the Company’s production to 25,000 kg/annum. Furthermore, the Company is scheduled to commence its Phase 4 expansion in April, which will significantly boost the production to 65,000 kg/annum in three stages over the next two years.

Recently, Organigram has signed an MOU with Government of Prince Edward Island for the supply of a minimum of one million grams per year to the province’s adult recreational market, whose minimum retail value is expected to be $8 million – $12 million per year.

After the announcement of license approval, Organigram’s stock rose 3.4% to close at $4.31 on Monday. Organigram’s revenue is expected to grow in the near term with the increase in production capacity as well as its recent agreement with Prince Edward Island. At a price-to-book ratio of 5.29x, the Company’s stock looks attractive and currently trades at a market capitalization of $536.65 million.

Disclosure: Neither the author nor his/her family own shares in the company mentioned above.

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