Organigram eyes US opportunities, laments ‘THC inflation’ in quarterly loss

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Canadian cannabis producer Organigram Holdings is eyeing international investment opportunities with its new war chest of capital, and the company will focus those efforts largely on the U.S. market, CEO Beena Goldenberg says.

Organigram reported a net loss of 15.8 million Canadian dollars ($11.7 million) in its first fiscal quarter of 2024 and cannabis sales that were slightly below analysts’ expectations.

The company’s revenue was CA$36.5 million in the October-December quarter, while analysts had been looking for sales of roughly CA$37.8 million.

Organigram attributed the higher net loss primarily to impairment charges and lower flower revenue.

In a conference call with analysts, Goldenberg said the company’s so-called Jupiter fund will target investments in emerging cannabis opportunities, bankrolled by a CA$124.6 million investment from British American Tobacco.

The United States will be a focus, she said.

Because cannabis remains federally illegal in the U.S., and stock markets there don’t allow plant-touching issuers, Goldenberg said Organigram will observe how rival companies structure their U.S. acquisitions compliantly “and learn from that.”

“We don’t have to reinvent the wheel, and we’re excited about these opportunities going forward,” she added.

On the call, the Organigram CEO also said companies engaging in “THC inflation” – where labeled THC content is artificially inflated – have “dubiously” enjoyed “temporary competitive advantages.”

But she expects those advantages to fade as Health Canada and the Ontario Cannabis Store have announced random THC testing protocols.

“As capital markets have dried up, and increased enforcement removes unfair advantages and penalizes those who don’t contribute to the health of our sector, the Canadian market will experience a shakeout,” she said, referring to competitors who inflate the THC content of their products.

“As this materializes, Organigram stands to cement itself as a long-term industry leader, owing to its strong balance sheet, increasing production efficiency, industry-leading R&D and reinvigorated focus on international expansion supported by project Jupiter.”

Goldenberg said dried flower in the Canadian market with more than 25% THC now represents over three-quarters of all flower sales, a significant increase from last year’s 42%.

Like rival Canopy Growth Corp., Organigram’s cannabis sales declined in the quarter compared to the same period a year earlier.

Organigram said revenue decreased primarily because of a reduction in international and medical cannabis sales.

Sales of international flower and oil decreased to CA$1 million in the quarter, down from CA$5.9 million last year.

Medical cannabis sales amounted to CA$445,000 in the first quarter, down from CA$1.5 million in the first quarter a year earlier.

Adult-use cannabis revenue was $34.4 million, down about 4% compared to the same quarter a year ago.

Net revenue by recreational category for the three months ended Dec. 31, 2023, was:

  • CA$20.4 million for flower, down from CA$25.4 million a year earlier.
  • CA$834,000 for vapes, similar to the previous year.
  • CA$2.7 million for hash, up 26% from a year earlier.
  • CA$2.8 million for infused pre-rolls, up substantially from the CA$365,000 recorded in the same quarter last year.
  • CA$5.1 million for edibles, a small increase over the previous year’s quarter.
  • CA$2.6 million for ingestible extracts and oil, up from CA$2.3 million.

Wholesale sales increased to CA$557,000, up from CA$107,000 last year.

Organigram harvested 19,946 kilograms (19.9 metric tons) in the first quarter, lower than the 22,296 kilograms in the first quarter of 2023.

Organigram shares trade as OGI on the Nasdaq and Toronto Stock Exchange.