WHITEFISH, MT / August 11, 2014 / The market for legalized medical marijuana in Canada is expected to generate $1.3 billion in annual revenue over the next ten years, driven by a rapidly expanding patient population under the country’s new Marihuana for Medical Purposes Regulations ("MMPR"), which was introduced earlier this year to replace the old Medical Marihuana Access Program ("MMAR") regulations.
Under the new MMPR program, Canadian medical marijuana patients will be forced to purchase product from a limited number of Licensed Producers, which has created a "gold rush" of sorts among companies and investors in the space. In fact, public companies like Tweed Inc. (OTC: TWMJF) (TSX-V: TWD) have already achieved valuations greater than $100 million after obtaining a license from Health Canada.
In this article, we’ll take a look at Organigram’s upcoming public listing under the ticker symbol “OGI” following its reverse merger with Inform Exploration (TSX-V: IX), as well as what it means for investors in the space.
CannabisFN Executive Interview | Organigram / Denis Arsenault / CEO from TDM Financial on Vimeo.
Limited Options
Investors seeking exposure to Canada’s burgeoning medical marijuana industry have a limited number of options. In June, the Canadian Securities Administrators ("CSA") issued a warning to investors that have been bidding up the prices and market capitalizations of marijuana stocks to $50 million or more in some cases despite them having no "viable business" in place with a MMPR license.
Until Organigram is publicly listed, Tweed remains the only publicly traded marijuana company with a Licensed Producer status from Health Canada. Many investors have had to focus on other plays in the space including GW Pharmaceuticals plc (NASDAQ: GWPH) which has been putting its cannabinoid-based drugs through clinical trials for a variety of different indications, and Medical Marijuana, Inc (OTC: MJNA) which is offering award winning CBD-rich Hemp oil products.
Organigram represents one of just a handful of publicly traded companies with real exposure to Canada’s MMPR program given its existing Licensed Producer status. Currently, Inform Exploration’s stock has been halted pending the reverse merger, which is standard procedure for such transactions in Canada. When trading resumes the Company will trade under the symbol "OGI" on the TSX.V exchange, and anticipates a U.S. OTC ticker symbol to follow quickly.
Value Proposition
Organigram is unique among the 13 other MMPR Licensed Producers for a number of different reasons. Headquartered in Moncton, New Brunswick, Canada, the company caters to both English and Francophone patients throughout Canada with a bilingual staff and web presence. These factors are important given that about 22.3% of Canadians speak French as their primary language. Being the only Licensed Producer east of Ontario and over 700 miles from of any other LP’s could also prove beneficial.
Aside from its advantageous location strategy, the company produces high quality, organic, condition-specific marijuana strains that the company believes to be a better smelling and tasting product. Management runs a series of educational programs for doctors and patients to help them understand these differences and how they can translate to better efficacy and user experience versus the competition.
Lastly, the company has licensed an inhaler in Canada for use as a delivery system, which could further improve the patient experience. Many Canadian patients have to smoke the substance given Health Canada’s regulations, which could cause a host of problems associated with the lungs and respiratory system. By using an inhaler, many of these problems can be mitigated for sensitive patients.
Looking Ahead
Organigram has a competitive advantage due to its current status as a Licensed Producer under the MMPR, being one of only three LP’s that are or are slated to be publicly traded, its organic product that offers improved taste and smell, and as Francophones they also cater to roughly 20% of the population that may currently be underserved.
Moving forward, management aims to ramp up sales from 2,800 customers generating $10.7 million in revenue and $3.1 million in profit in 2015 to nearly 17,000 customers generating $63.2 million in revenue and $33 million in profit by 2018. These figures appear to be reasonable given that the patient population is expected to bloom to over 300,000 by 2024, according to Health Canada.
Investors interested in building exposure to Canada’s newly implemented MMPR program may want to take a closer look at the stock before it resumes trading. As one of the few publicly traded licensed producers with numerous upcoming catalysts, the stock could be well positioned within a market where Tweed and others have built up $100+ million market capitalizations.
More Information
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SOURCE: Emerging Growth LLC