VIDEO: Organigram Holdings Inc (CVE:OGI) European Access Deal with Eviana Health Corporation (CNSX:EHC)
Organigram Holdings Inc (CVE:OGI) (OTCMKTS:OGRMF) (FRA:0OG) CEO Greg Engel is excited about the company’s Atlantic Canada presence and the fully operational retail stores in the region. The company recently announced a $5 million deal with European hemp and CBD producer Eviana Health Corporation (CNSX:EHC), which allows Organigram to play in the European market. Earlier this month, Organigram earned its organic re-certification and is eager to determine the recreational demand for organic cannabis. The company has partnered with Hyasynth Biologicals Inc, a producer of yeast-based cannabinoids, which Engel believes is the future of CBDs in the industry.
James West: Hey, welcome back. My guest in this segment is Greg Engel; he’s the CEO of Organigram Holdings, trading on the TSX Venture under the symbol OGI. Greg, welcome back.
Greg Engel: Thanks for having me again, James.
James West: Greg, tell me what has changed since October 17th for Organigram?
Greg Engel: So, a lot of exciting things for us. I think for one thing is, having such a strong position in Atlantic Canada is a key for us in terms of, you know, that’s the only place in the country where all the retail stores are built out, up and running, fully functional. So we see, of course, across the country, you know, certainly online sales available and a limited number of retail stores. But Atlantic Canada, fully blown out, have product on the shelf. So on Day One, looks the same as it’s going to look like in three months. So it’s exciting.
James West: Really. So, are they making jokes about Eastern or Western Canada now in the Maritimes?
Greg Engel: No, I think people are just really proud of what’s accomplished out there. You know, the province of New Brunswick in particular has been a big proponent of this as an industry, has really been supportive of us as a company, but they really see job creation opportunities. You know, as we’ve talked about before, the largest test lab in Canada, RPC, is there, and certainly they wanted to make sure early on that they have product for, you know, consumers. And that’s why last September we struck a deal with them, as did Canopy, and it was the first deal ever announced in terms of, you know, a retail dale for cannabis for the adult rec space. And that was months ahead of anybody else.
James West: Interesting. Do you think that the lack of an ability to sort of coordinate everything for October 17th is going to be a catalyst for continued black market opportunists who are still, you know, out there?
Greg Engel: Well, I think we can look at a market like Colorado, and even kind of three years, four years in, there is still a black market that exists; you know, different estimates would tell you it’s between 10 and 12 percent, and I think with the staggered launches we’re going to see across Canada, other than Atlantic Canada, you know, I think it is going to take a little bit longer to push out and displace the black market. But at the end of the day, consumers are going to be looking for, you know, a tested proven, regulated source for product, and I think that’s going to be one of the things that’s key. But at the end of the day as well, as we know you know, there’s really two launches to this program, right? There’s the launch this year with the dried flower and the oils and edible oils and capsules, etcetera, that are available.
But then there’s next year, where we get into the derivative based products and beverages and edibles and everything. So it’s going to a slow and steady growth over time, and, you know, that’s what people are excited about, is not just today but what this looks like in 12 months from Wednesday.
James West: Okay. The – you announced that you had unveiled a new brand called TrailBlazer, and I’m assuming, just by the sound of the name, that it’s a recreational brand.
Greg Engel: It is, and I think TrailBlazer, it’s a bit of a kind of double-entendre too in terms of, you know, blazing is a term that’s used with cannabis users pretty commonly, but also kind of trailblazing, that as a company, as an industry, as a country we’re blazing a trail in terms of, you know, cannabis legalization and having this adult recreational program. I think it’s going to be, you know, what’s really interesting is, the world is watching Canada, and it’s a really exciting time to be here. And the coverage that we’re seeing kind of, you know, globally on what’s happening in Canada has been building over time, and we’ll continue to see that.
So it’s a bit of a play on that.
James West: Sure. So the – you also closed a $5 million investment in European hemp and CBD producer Eviana, and is that because hemp is largely available in Europe and legal to sell?
Greg Engel: Yeah, so we see that as an investment in two aspects is. One is, you know, their company, currently publicly traded on the CSE, and they’re one that we see great opportunity with in terms of, they’ve actually been growing hemp with CBD in it for the last three years, and now they’re in the stage of finalizing all their processing. So we’ll have access to up to 25 percent of the CBD isolate or concentrate that they produce, you know, at a discount to marketplace.
So that gives us resources to allow, to go after the European market, which we know today is primarily a medical CBD market, as well as a nutraceutical market going forward.
But the other aspect as well is, you know, our strategy, kind of international, is very much to look at who’s a strategic partner? This is a low-cost source, we believe in the operational team there; we spent a lot of tie, and our management team has spent time with them, so it’s, you know, we don’t need to go in and fully acquire a company; it’s let’s find the best partner, let’s invest in the right partner and get access to the market.
James West: Interesting. Then their certification process with Ecocert – what is the significance of that?
Greg Engel: Yeah, so really exciting for us to get our organic certification back. I mean, as we know, the company is called Organigram, and we have roots in organic production, and you know, going back over a year and a half ago, we lost our organic certification due to some issues around production. And we’ve been working closely with them over the last year and a half to really get that back. So, critical for us in terms of today, serving our medical patients, and then moving forward in the future, providing an organic product for the recreational market.
While we certainly feel that there’s a great opportunity for organic, it’s not all of what we’re going to be producing; we’re actually producing, you know, less than 5 percent of our total organically. But we see there is definitely a market demand and a need there, both medically and in the rec market, as well.
James West: Yeah, I can tell you unequivocally that I will only be buying organic products, so I’ll be looking forward to that. So you say only 5 percent of your entire supply – is that reflective of the marketplace demand for organic versus non-organic?
Greg Engel: It’s a bit of a combination of two things. One is that the market demand is still untested, so we’re not exactly sure what it is. But I think the other is that we know from a production perspective, organic production is challenging; you certainly don’t see the same yields. And you know, I was on with you not that long ago talking about our record yields and our low cost of goods through our mineral production. So certainly, we’ll never be able to match up with our organic production what our mineral production is in terms of, you know, the type of yields and the low cost.
And what’s yet to be determined is really still what level of premium will the market pay for an organic product. So certainly we’ve had experience in the medical market, but none in the rec market, as of yet.
James West: Interesting. Great. Well, so, you’re supplying into all of the provinces, or all of the provinces of Eastern Canada, and you have the ability to supply Ontario as well, assuming that they roll out on October 17th. There’s, you know, a lot of the provinces are coming out with, you know, no stores, and apart from Alberta and the Maritimes, no stores and an online presence. So it strikes me as interesting in a not exactly positive way, that so, the LPs are going to send product to the provincial cannabis agency; the provincial cannabis agency will then forward it on to end users and customers.
But if, and then you’re limited to how much you can possess, and how much you can buy, and everything. Is it conceivable that at some point they’re going to say, you know what? Let’s just let the LPs sell directly to the end user, thereby eliminating a cost and a timeline, you know, impediment, and let the customers and the market decide. Do you see that happening?
Greg Engel: Well, ultimately what we see, and so, you know, we’ve got agreements, as you said, not only in Atlantic Canada but also Ontario, Manitoba, Alberta as well, and we’re looking to formalize agreements in British Columbia and Saskatchewan. So we’ll truly be a national player. What we’re really seeing is across all of Canada, that the, other than Saskatchewan and Newfoundland, you know, the provincial liquor board/cannabis board is the primary wholesaler.
And with that wholesale-ability, they’re also taking on the role of being the email order fulfilment. So they are centrally warehousing product; they are looking to have it in a central location. So I think there is kind of an advantage from a consumer perspective of being able to order product from different companies from one source online, and I think that’s from a – we look at it from a ‘what’s the best experience for the consumer, how are they looking to do that’.
Newfoundland, actually, in their early days, is going to have product shipped directly from the LPs that are providing the marketplace, so that is a bit different, because they don’t have a central warehousing. But everywhere else, really, other than Saskatchewan, they’re centrally warehousing. So they probably are the best solution for direct mail order today.
James West: And your partnered with Canopy Growth in Newfoundland and Labrador. Now, that’s interesting; one might say was this Canopy Growth making a move towards, you know, more participation in Organigram as a company?
Greg Engel: Well, I think certainly we’re recognizing we’ve talked before about how we’re seen as a leader with our indoor production of a very high quality product, as we’ve talked about in the past. We won two of the Canadian Cannabis Awards from Lift last November; we’re actually up for nine awards this fall, and we’ll see the results at the end of November. So you know, one of the key things is, our high quality product is in very high demand. So that agreement with Canopy in Newfoundland is not unique; we’ve done an agreement with Hiku in Manitoba, as well.
So really, we have retailers coming to us, whether or not they’re owned and/or affiliated with the licensed producer, or they’re independents, and the government agencies coming to us looking for that high-quality product, because we’re really, you know, the only company other than Cronos that has continued to build out with indoor production and producing a high-quality, indoor-grown product.
James West: And interesting to me is the fact that, despite your commitment to obviously growing premium flower grown in an indoor environment, you’ve also got a bit of a hedge on your bets in terms of lowest input costs per unit in the future based on your investment in Hyasynth BioPharma. And is – I don’t know if I got the name right, there: Hyasynth Bio, I know it is. But so, how is that progressing? We had Kevin Chan in here, and he mentioned that he was, they were moving towards commercial-scale production of CBDs from GMO-modified organisms. And is that still in, are they at the state of commercial scale yet?
Greg Engel: Not yet. So they have proven, Hyasynth has proven to date that they can produce CBG, CBD and THC through yeast fermentation with genetically modified yeast, and then converting olivetol, which is a precursor molecule to the various cannabinoids, with proprietary enzymes. So they’ve been able to do that benchtop, small scale, and have been building that up.
So two paths they’re taking right now: one is, working with a contract manufacturer who has a long experience in this area, to help them optimize as they scale up. So, going from, you know, a 1 litre or a 2 litre vessel is very different from producing in a 100-litre vessel. So going though that process, and that’s what they’re working on right now.
An then looking to move forward on terms of having their own facility at a large or small initial pilot scale for commercial use. And I think, one of the things I know Kevin spoke about when he was on is that, at the end of the day, you know, the amount of capital that’s required to do this is very low, and that certainly the amount of production that you can produce of ultimately a pure cannabinoid is, you know, ultimately a penny on the dollar or two cents on the dollar versus plant-based production.
So, definitely a hedge, and we see it as really a disruptive technology for the future.
James West: Because I guess just like most medical-grade insulin is produced the same way, at some point there’s going to be a high level of contribution from biosynthetics.
Greg Engel: Yeah, no, absolutely. I mean, more than half the world’s insulin is produced that way; a lot of vitamins are produced that way, and biologic for pharmaceutical. And again, at the end of the day, it’s not only they’re producing the pure, you know, CBG, CBD, THC today, the work has already started on minor cannabinoids as well. And ultimately, you could see in the future where the companies looking to produce kind of, you know, some unique formulation products that include minor cannabinoids at a set level, which you couldn’t get from a plant-derived extraction methodology. So I think there’s a lot of creativity that can come into it, and a lot of edibles and, you know, vaporizable products. So a lot of excitement around what Hyasynth is doing and really great partner for us to work with.
James West: Sure. I was talking to another company that was involved in the creation of stabilizing agents for cannabinoid products that are liquids, foodstuffs, etcetera. Is the stability of cannabinoids in produced products that are typically contain fats and acids – is that an outstanding issue that has yet to be solved? Or is that something that is well in hand and is just part of the process of developing the products?
Greg Engel: Yeah, so I think there’s really two aspects to that. One is, you know, cannabinoids in their pure form, in a stored form, and we’re already building up extract concentrate for next year in terms of the edibles market and the vaporizable market, so we’ve been taking by-product and producing that and storing it, and it doesn’t degrade over time in a pure form; so that’s kind of one aspect.
I think it depends, at the end of the day, on the formulation and what you’re putting the product into, right? Whether or not that can degrade over time, and is there a loss, and I think, you now, a lot of the work right now – and we’re working on the emulsification process, and you know, the key in areas like emulsification is coming out with you know, the ideal structure in terms of not only is it stable and fully in solution, but also what is the particle size that you end up with, right? So particle size of 100 nanometers will cross the blood-brain barrier and have an immediate effect; a particle size of 100 nanometers doesn’t cross the blood-brain barrier very easily, so it doesn’t have the same effect overall.
But in terms of stability, it really depends on the end product, right? Is it in a food product? Well then the food is actually the less stable component over time, right, and if you think of some of the markets in the US like brownies, for example, or baked goods, they have a very short shelf life. So you know, it’s not what the cannabinoid shelf life is; it’s really the edible product itself.
James West: Interesting. So, not a huge issue?
Greg Engel: Again, it depends on the product and how long you’re looking on the life cycle.
James West: Okay. So Organigram – and I always gathered by your background – that Organigram would be very focused on the idea of cannabinoids as a medical ingredient, and with an eye towards supporting new medical products derived from cannabinoids. Is that something that you have been, you know, sort of focused on, and is that evolving into a bigger part of the Organigram picture?
Greg Engel: It has been part of our focus, and I think at the end of the day, our Hyasynth agreement was part of that focus, right? Getting a source of the pure cannabinoid, which lends itself to those formulations.
We actually did submit with a partner company last year, a unique delivery form for Health Canada approval, but ultimately they didn’t approve it because of the way there’s restrictions on the formulations and additives and, you know, agents that give you stability right now. But I think we’re still always looking at, you know, what are those products look like from a delivery perspective, because ultimately, you know, on a medical side, you want consistent and concise dosing, and that’s a critical thing. Not that that’s not important recreationally, but I think that’s one of the keys.
So we continue to valuate technologies and determine, you know, what is the best move. But now that we will have a source going forward of a pure, you know, active pharmaceutical ingredient from Hyasynth in the future, that really sets us up for those new products.
James West: Okay, Greg, we’re going to leave it there for now, and we’ll come back to you, of course, as we always do, in due course. And so, thanks for joining me again today.
Greg Engel: Great. Thanks, James.
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