OrganiGram Holdings Inc (CVE:OGI) (OTCMKTS:OGRMF) (FRA:0OG) CEO Greg Engel is pleased by the company’s recent milestones. OrganiGram is now a national player in the recreational space, supplying every province except Quebec; in addition, the company also recently produced its 1,000,000th pre-roll. While the company plans to release its first rec sales numbers in mid-February, Engel reveals OrganiGram’s brand recognition has soared on the strength of its consistent supply and the quality of its products, such as Rio Bravo, from its recreational Edison line. The company’s approach to legalization focused on guaranteeing a select number of SKUs were consistently available to the rec market while ensuring medical patients had a full range of products available. OrganiGram is currently building out its European operations, with a focus on Germany and Serbia. Engel believes Europe represents a considerable opportunity, especially in terms of CBD products. He provides an update on OrganiGram’s partnership with Hyasynth Biologicals, a yeast-based synthetic cannabinoid producer.
James West: And now I’m joined by Greg Engel, CEO of Organigram Holdings. Greg, welcome back!
Greg Engel: Hey, great to be on again, James.
James West: Yeah, it’s been a while since we’ve seen you. I was just commenting to Ed that on December 20th he could have bought your stock at $4.50 a share, and now here it is way back up in the sixes. So tell me, what’s going on with Organigram? What’s happened in the beginning of 2019, and what’s going to be the highlights of the year?
Greg Engel: Yeah, a couple key things. I mean, you’ve seen some reports out on the market, so certainly just before the holidays we saw BNN Bloomberg talking about kind of our market share in Atlantic Canada, and we’re now really a national player in the adult rec market; we’re in every province except for Quebec now. I think one key milestone we actually just passed on the weekend is, we produced our one millionth pre-roll. So we’ve been one of the big providers in that section of the space, and certainly continuing to kind of ramp up and really provide the market with as much product as we can. And getting great brand recognition now, that now we’re a few months into the adult rec program, as well.
So our Edison Cannabis brand is getting really good recognition out in the marketplace.
James West: So of all of your revenue, what percentage is medical versus recreational, would you say?
Greg Engel: So we have not put out any adult rec results yet, so our Q1, which was, you know, September, October, November, will be put out in a few week, and that’ll have our first sales in the adult rec market. Half a month –
James West: Half a month of rec numbers. So that won’t really be the telling one, but –
Greg Engel: But that’ll be the load-in, though. There will be October, November, right, so certainly –
James West: Sure. But from a product side, what are you seeing? Like, mostly rec?
Greg Engel: Mostly rec for sure. And certainly one of the things too is, we’ve been, as far as I know, we’ve seen some ups and downs in the medical space in terms of companies being able to meet supply, so we had anticipated kind of our medical demand, and we make sure that day in and day out we’ve got product for our medical patient base. So we’re one of the only companies that’s consistently supplying our medical patients and have a full range of oils and dried products for them as well as supplying the adult rec market.
James West: I’ve ordered Organigram product on October 17th.
Greg Engel: Excellent. Well, thanks for your support, James.
James West: Of course! Of course! Okay, so now you’re in every province at this point –
Greg Engel: Pretty much.
James West: Except Quebec, at this point, and what is the expectation from where Organigram sits in terms of, like, the ability to service the national market as a East Coast brand? Do you think that East Coast element which at one point was kind of like a flag in the sand saying ‘we’re the only East Coast thing’, now everybody’s crowded into Eastern Canada. You, in turn, crowded into Canada. So is the playing field now equal in terms of brands? Do Canadians have any loyalty to a brand based on geographical location?
Greg Engel: I think the biggest thing we’ve seen to date is that people have loyalty to the product that’s available, to be frank. I mean, there’s definitely been some supply gaps, and I mean, that’s one of Organigram’s big success points to date is that, you know, while we haven’t met 100 percent of every commitment that we’ve had, we’ve been one of the best performers in our ability to actually supply product on a consistent basis, and you know, we see reports where there are surveys going on to look at how much product and who has less listings, and some of those reports are not always accurate because they look at the number of skus.
We didn’t focus on a broad range of skus, we focused on a select number of skus and making sure that those were consistently available, because that’s at the end of the day how you’re going to build a brand, and that’s been critical to us.
James West: Ah, I see, very good. So the shortages that we’ve seen in Ontario, I’ve noticed that I’ve never seen Organigram out of stock.
Greg Engel: We’ve had product there consistently for sure, and we’ve, you know, we’re focused on – and one of the things we made a very conscious choice was, you know, our commitments in Atlantic Canada, and then kind of subsequent to that, Ontario and Alberta as our core markets. And then as we went into other markets, Manitoba, Saskatchewan, and most recently BC is, before we enter into agreements, we want to make sure that we can supply the market. And that’s one of the key things that we’re very proud of and, you know, our sales team is working closely.
I think the biggest thing we’re seeing now, you know, with the exception of Ontario that doesn’t have retail stores as of yet is, you know, what’s that in-store experience like, right? Our sales team spent a lot of time in terms of training staff still and providing point of sale material, and making sure that when you go into retail locations – you know, over the holidays I was out in Alberta visiting family and had a chance to go into a couple of the retail stores out there, and you know, it was really great to see our products and the recognition we have in the store, and also hear some of the dialogue from some of the staff on how things are being accepted. So again, great feedback in terms of our product line and also having a product consistently available.
James West: Have you seen any direct relationship between an uptake in recreational product among Organigram customers at the expense of the medical coterie?
Greg Engel: So what was interesting is, you know, in the couple of weeks leading up to the launch of the rec program, we actually saw a jump in our medical sales, and I think a lot of medical patients were concerned about supply. So our medical kind of patient numbers and revenue has been consistent; we’re on the same kind of run rate. Part of that, again, has been having product available.
So you know, in certainly we expected to see a little bit of a drop off, but then there’s that whole side of, if you’re trying a product, you’ve never been a cannabis user, you go into a recreational store, and then you realize that hey, I can get in on the health care spending account, or I can get some level of coverage, or, you know, in case of Organigram, we’re covering the excise tax for medical patients – there’s an advantage to shifting to medical. So I think some people are trying cannabis as a self-treatment and then looking to go into the medical program as well at the same time as they’ve tried product from the rec market.
James West: Yeah. I personally have, you know, I’ve accessed cannabis from the Ontario Cannabis Store, but I find that the medical experience is, you know, it’s so much more mature, A), and therefore so much more reliable at this point that I find myself using my medical access more so than my recreational access.
But obviously that’s part and parcel to do with a new sort of supply chain that’s just coming out of a previously non-existent era. So tell me about the European stuff that you guys were doing? How is your buildout into Europe going?
Greg Engel: Yeah, so again, we participated with our partner in Germany, Alpha Cannabis, in terms of making an application under the tender process, which we now don’t expect to see for a few months now in terms of how those are received. Working closely again with our Serbian partner, Eviana, which is traded here on the CSE as well. They’re going through the process, they’ve been cultivating CBD from hemp last year and they’re just going through the process of producing CBD. Ad I was in Europe for a significant period of time at the end of last year and really saw that, you know, there’s a big opportunity on the CBD side. There’s a big gap in terms of what’s available on the market and the companies that are currently selling CBD are having difficulty getting enough supply to meet the demand that’s out there.
It’s amazing to see in a lot of jurisdictions where yes, it’s a medical product, but it’s also a nutraceutical, and there’s a lot of self-treatment that happens, and you see CBD routinely in not only natural health food stores but also a lot of pharmacies are doing in different countries white label product as well, right? So there’s just that growth that’s happening in CBD which I think is really exciting, which is part of our partnership, not only with Eviana, but as we’ve talked about before, with Hysynth here in Canada, as well.
James West: Sure. So that was going to be my next question: how is it going with Hyasynth and biosynthesis using yeast?
Greg Engel: Yeah, so Hyasynth, again, they’re at the stage right now where they’re, you know, looking to finalize their facility and move forward on that side on a larger scale, finalizing things within the near future with a contract manufacturer. The interesting part of some of the work they’ve been doing as well is, now they’re, in addition to CBG, CBD, THC, they’re also, which they’ve got a proven path for, they’re looking to synthesize minor cannabinoids, which I think is really interesting, because in the future that allows you both in the pharmaceutical world to produce a very unique, complex mixture of both major and minor cannabinoids.
And you have to remember, many of these minor cannabinoids are, you know, only present in such small numbers in the plant, if you can produce them in a pure form through biosynthesis presents a huge opportunity, but it also has a huge implication on the rec market, right? I think some of these products can have an impact in the rec market, and some combination products can be developed there.
So exciting times for them, continue to move against progress, and really excited to see what’s going to come out of them. We expect to see product from them, you know, 12 to 14 months from now.
James West: On a commercial scale?
Greg Engel: On a commercial scale.
James West: Interesting, because I always thought with your background in biopharma you would be one of the guys who was going to be very much be at the cutting edge of that and certainly the investment in Hyasynth seems to support that. Do you, at this point, have any kind of partnerships with any clinical or any university level sort of exploratory pure CBD or pure cannabinoid ingredient as a biopharma -?
Greg Engel: Not yet. As of yet, I think that’s, you know, something we’re talking about in terms of the future, is there a way, when you produce these pure forms that are more pharma-like, to actually go through the R&D process with some of them? We do have a really interesting partnership with the University – U de M, in New Brunswick, in the University of Moncton, looking at a lot of things in terms of plant development, right, and trying to extrapolate some of the learnings that they’ve had with other plants into the cannabis plant. So we’ve got some space set up from an R&D perspective within our facility for their PhD team to do research, you know, and that’s ranging across a whole area including, you know, not only kind of genetic tracking of products, but also doing things like non-GMO plant modification. There’s a lot of techniques that are used in other agricultural types of industries where, you know, you can do bacterial infusion into the soil and that can have a huge impact on yields and areas like that. So that’s an exciting partnership we’re working on right now.
James West: Wow, okay, great, Greg. So then, is it your intention at Organigram, then, to you know, sort of divide the company? Like, last time we visited the facility, you had a very clear distinction between your recreational products and more your medical line. Is that something that we’re going to see continue in 2019 and beyond, or are you leaning more towards a recreational or a biomedical?
Greg Engel: No, we’ve done a separation and distinction. Organigram is the brand and kind of how we name our medical products; we want to make sure that we build off and retain that brand. And then, you know, Edison Cannabis Company, our anchor organics lines, we got our organic certification last October, so we wanted to build up enough inventory; we’ll be launching that into the adult recreational market in the not-too-distant future. And then our trailblazer line.
So we do treat them very different and distinct, and we have some very different products, so even in our oils, for example, we have a different line of products in our medical population versus our adult rec population. So we wanted to make sure that we had a, you know, an entry level oil for people to try that were kind of new cannabis users in the adult recreational market, and we’ve had good success with the response from it.
James West: Sure. What is the most popular product at Organigram?
Greg Engel: Our Rio Bravo, I would say, in the Edison line. I’m not sure which products you’ve tried, you mentioned you ordered some products.
James West: Yeah, I was actually just looking at the available strains and I can’t remember which one I tried, and I think it was Low Tide or High Tide – no, it would have been High Tide, because it was very potent in THC, we remember. But yeah, no, it was really good. In fact, it was quite funny, because we had it stashed in a drawer here and everybody kept coming in and taking a little bit and smoking it and it was like, it was down to nothing in no time.
Greg Engel: There you go. Well, you’ll have to replenish those products.
James West: Exactly. Well, I’ve actually got a process, I think I’m just become an Organigram medical patient.
Greg Engel: Oh wow, thanks for your support.
James West: Of course. All right, Greg, well, let’s leave it there for now. We’ll come back to you again in due course, and thanks very much for the update.
Greg Engel: Excellent. Great, thanks again for having me, James.
James West: You bet.
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