What’s the Scoop on Organigram?

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Organigram Holdings Inc. (OGI.V) (OGRMF) remained under pressure yesterday and this comes after the Canadian licensed marijuana producer reported third quarter financial and operating results that did not impress investors.

Although Organigram was pleased with its progress from an operational perspective and is confident that these actions are setting the company up for long-term success, the market was less pleased.

During the quarter, Organigram recorded a $2.3 million net loss on $1.9 million in revenue. When compared to the same period last year, the net loss increased by more than $2.6 million and revenue was marginally higher.

What Caused Numbers to Drop?

The reason for the less-than-attractive results is a result of the issues associated with last year’s product contamination.

Organigram is focused on improving its image and this has come at a cost. The company is only introducing the highest quality product to the market and removes any product from inventory if it does not meet its standards.

This program resulted in $1.1 million of indirect production expenses related to inventory destruction and a $1.6 million loss due to the reduction in inventory.

Organigram recorded $1.1 million of cash outflows during the quarter but the company still has a strong balance sheet with more than $48 million of cash and short-term investment as of May 31st.

A Cautiously Optimistic Outlook

While we are favorable on Organigram’s opportunity within Canada’s marijuana industry, the company faces several headwinds. These concerns are related to the issues associated with the product contamination and we will keep you updated on any important developments regarding this.

Although the quarter seemed to be very rough, there were some bright spots. The biggest positive for Organigram was the 25% increase in the number of registered patients when compared to the prior quarter.

Organigram also made significant strides with its onsite expansion initiatives. The company is focused on increasing production capacity by an additional 10,000 kg’s annually by the end of the year to satisfy an expected increase in demand.

We expect to see Organigram face some pressure over the near-term and continue to prefer companies like Canopy Growth (WEED.TO) (TWMJF), Emblem Corp. (EMC.V) (EMMBF) and Aurora Cannabis (ACB.TO) (ACBFF).

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