Canadian producer Organigram Holdings is investing as much as $8 million in Portland, Oregon-based cannabis genetics and seeds company Phylos Bioscience.
Under the deal, Organigram will shift to producing cannabis from seed and create new products containing the minor cannabinoid THCV.
Organigram also will become “the first Canadian licensed producer to release high potency whole plant derived THCV in Canada based on Phylos’ genetics platform,” the Moncton, New Brunswick, company said in a news release.
Organigram said the deal will:
- Allow the company “to modernize cannabis production and employ seed-based production at scale.”
- Provide access to “proprietary genetic identification tools” to boost development of proprietary cannabis cultivars.
- Permit Organigram to develop new genetics for its brands such as Shred, “providing future opportunities to offer ‘turn-key’ U.S. and international licensing of seed-based genetics and an established cannabis brand when and where legal.”
“We know consumers are using cannabis products for a variety of purposes, which is why genetics with high concentrations of novel cannabinoids like THCV are of particular interest,” Organigram CEO Beena Goldenberg said in a statement.
“THCV is often referenced for its apparent appetite suppressing effect, and provides an energizing, focusing and uplifting consumer experience, one that is clearly differentiated from the real or perceived appetite-stimulating effects of THC.”
In exchange, Organigram is funding Phylos in the form of a convertible loan.
Organigram has already lent Phylos $3.25 million and will advance up to $4.75 million more in two tranches – one in 12 months and the other in 24 months “upon the completion of certain milestones.”
The loan:
- Accrues paid-in-kind interest at the U.S. prime rate plus 3.5%, up to 11%.
- Matures in five years, “subject to one-year extensions and subject to certain conditions.”
- Is convertible into Phylos equity under certain circumstances, including federal cannabis legalization or decriminalization in the U.S.
Organigram said that production using first-generation cannabis seeds instead of clones “offers the economic advantages of reduced labor while recapturing existing facility footprint currently used by Organigram for raising clones for production.”
Organigram shares trade as OGI on the Nasdaq and the Toronto Stock Exchange.
