Organigram (V.OGI) and the Massive Deal Everyone Missed
Right?
Organigram (TSX:V.OGI, Stock Forum) essentially secured an LOI for an off-take deal with a chain of ‘healing centres’ that would see them moving up to 4500 kilograms of medical marijuana through 2016, with a 20{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} increase each year beyond that for ten years, for use in the treatment of Post-Traumatic Stress Disorder (PTSD) by veterans, the military, and first-responders.
The math on this is simple: Organigram, even if they sell at a conservative $5 per gram, could sell 3 million grams just in 2016 alone, for $15m in revenue.
In 2015? $7.5 million.
This on top of its ongoing business.
Make no mistake, this is a big deal for two reasons.
- It locks in the first seven-digit revenue agreement in Canadian medical marijuana history, at a time when other companies are struggling to do six figures per quarter across the board.
- I’m led to believe this is an INSURANCE BACKED deal. That is, the healing centres are going to be treating the ill with medical marijuana and processing the costs through the patient’s federal insurance.That second point is potentially massive. It locks in ongoing revenues, allows patients to get access to plenty of medicine, and mainstreams the treatment to a point where insurance companies can become quickly conditioned to green-lighting medical marijuana for other conditions.
When insurance becomes part of the MMJ landscape, the profit party begins.
In addition, by moving into this space, Organigram can begin looking south, at a market where PTSD is so prevalent that a large segment of the population is either affected by it, or is close to someone who is.
Also part of the deal: THC will conduct research on medical marijuana and PTSD going forward to help mainstream the treatment.
Organigram, with this deal, graduates, leads and delivers on its promise.
Every other marijuana company out there is looking to grow their patient list, and Organigram just grew theirs by potentially thousands.
Trauma Healing Centers will open 13 centers across Canada as part of their phase one rollout. The first four centers will be in Edmonton, Ottawa, Quebec and the Halifax Region in January, with nine more opening across Canada by June 2015.
Why not open in Vancouver? Because Vancouver has a dispensary on every corner right now, most of which are moving gang-grown product and staffed by guys with neck tattoos and Affliction t-shirts. I’m told there’ll be city wide push to close most of those down in the New Year, which will open the market for real companies that have background checks and follow Health Canada rules to emerge. Good for patients, good for LPs.
I know other companies were talking to Trauma (AKA: THC – did you miss that?) about doing a deal, but Organigram CEO Denis Arsenault told me last week, “They were just treating it like a business opportunity. This is veterans. This is important. We’re going to make money on the deal but we’re not turning the screws, we want the product out there and there’s no greater need than those who’ve served and have PTSD coming home. So we’re working closely with Trauma and we couldn’t be prouder to have got their okay. Every one of us at Organigram considers it an honour to be able to help.”
Not a bad lead-in to Remembrance Day but, oddly, the market pretty much missed the significance of the news.
Organigram stock has been pushing in the green direction for a week or so but, to me, this deal is a company maker. It’s the first nuggets of the gold rush. Yet, the market barely nudged.
Why was that? Well, it’s what wasn’t in the press release: Dollar signs. We don’t know what margin OGI will make on the deal because we don’t have an agreed upon price. In addition, you always have to beware of the words ‘up to’ in any press release.
Organigram’s agreement binds it to supplying ‘up to’ 4500 kilograms through 2016. If THC fails to open its centres, or fails to attracts patients, that ‘up to’ figure could be zero.
Arsenault is convinced that’s not likely. “They’re already hiring, those centres are opening up.”
A casual search would indicate he’s right: Trauma Healing Centres are indeed hiring in Edmonton right now, though there’s no website yet (that I can find anyway). Still, nobody’s taking 3000 kilos of weed for a while yet.
There will be more deals like this, and each one from this point should be fiercely battled for by every licensed producer out there because forging one customer relationship at a time is a fool’s errand. Having reams of new patients handed to you every week is where it’s at.
When I talked to Arsenault, I asked him if this was the tip of the iceberg. He didn’t answer directly, but let’s just say, if you ever get a chance to play poker against him, take that chance.
His poker face is crap.
“We all know it’s going to go recreational legal,” says Arsenault. “When the dust settles, the people with the best product are going to capture a big part of the market.”
Aside from this deal, Organigram’s differentiators are its bilingualism (good for a hard push through the Quebec market, and nearly 30{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} of the country’s population), and it has certified organic status, which no other company can boast. The organic thing could be a big help in getting access to doctors. Other producers claim they’re organic too because Health Canada says no pesticides can be used, but certification matters.
The stock, right now, is undervalued, as are almost all the LPs out there (the exception being Mettrum which has held well from its RTO), and a couple that appear to be near term MMPR candidates; Matica (CSE:C.GRF, Stock forum) and Supreme (CSE:C.SL, Stock Forum), for example.
The Canadian weedco marketplace is starting to become a place where real companies do business and, for mine, the rising tide of Organigram just lifted all boats.
Full disclosure: I invested in the last Organigram financing and still hold that investment. They’re also a Stockhouse marketing client, and I’ve also consulted with them on marketing strategy, so it’s safe to say I like OGI. You should be aware of that and take it into consideration before you make any purchasing decision based on this story, but you should also understand those three things happened because I believe the company is doing all the right things.
Read more at CEO.CA: Licensed organic grower vies for Canada’s pot prize.
–Chris Parry
http://www.twitter.com/chrisparry
Read more at http://www.stockhouse.com/news/newswire/2014/11/12/organigram-v-ogi-and-massive-deal-everyone-missed#IgIXv2cpjmp2ttXr.99
- Published in Blog, Medical Marijuana
Dundee Sustainable Technologies – Making big moves in South America
Dundee Sustainable Technologies (C:DST) is this relatively new company trading on the Canadian Securities Exchange. Over the course of it’s history this small cap company has developed several highly efficient and patented technologies, with efforts being put into licensing out their technologies in exchange for royalties.
On Oct. 31, 2014, Jose Louis Gioja issued a decree in San Juan in view of implementing DST’s proprietary cyanide-free technologies. San Juan Mining has committedto raising an estimated $100 million in order to set up a processing plant with a capacity of 200 tons of concentrate (6000 tons of ore) a day. In turn, DST would receive a 3{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} Net Smelter Return (“NSR”) on all precious and base metals thus produced. This is a major step forward for DST – this will be the 3rd plant for processing, and the second country to endorse their technologies.
Argentina (among other countries) has had many issues in the past over cyanide heap extraction. With blanket issues over heap leaching and the effects that these tailing ponds have on the environment, several provinces have banned the use of cyanide in mining. Without a viable extraction method, many projects in Argentina have simply stagnated. This is where DST comes in, with their new chlorination method.
Chlorination extraction has several distinct advantages over traditional methods. With high yields (90{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}+), low contact time (avg. Several hours vs. Several days) and lower capital costs of about 10-15{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}, this method is economically competitive. The most distinctive aspect though, is in it’s tailings – It only leaves behind Salt and Potash. No mecury. No cyanide.
Between the plant being set up in January and this, DST is looking about a provisional $60 Million in revenue stream. Considering they have been trading since April, they have made some great strides. And just think – this is simply one technology.
We might be seeing the tipping point on Dundee Sustainable Technologies.
Shanghai/Hong Kong Connect set to launch November 17th!
November 17th is going to be an exciting day for Canadian investors – The Shanghai/Hong Kong Connect is set to launch! This will integrate two previously unconnected exchanges. This is no paltry moment- here is the creation of potentially the second largest exchange in the world, with a combined market capitalization of US $7 trillion dollars and an annual turnover of US $9 trillion. International investors will be able to invest in 568 companies on the Shanghai Stock Exchange.
First thing to note though, is there are 3 types of shares on the SSE – A-shares, H-shares and B-shares. B-shares listed on mainland Chinese exchanges in foreign currencies, and are often less important. He important ones to note are A-shares, which are domestically traded shares in Shenzhen and Shanghai, and H-shares, which are Chinese companies listed in Hong Kong. Many companies have more then one kind of share. It is important to note, that it is common to see shares trading at different prices. For example, airlines H-shares are about 25{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} lower.
Historically A-shares were known for their discounts, but no longer. Since the announcement of the Stock Connect April10, the Shanghai market has gone up 15{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}, and the Hong Kong about 5{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}. Shenzhen’s market has gone up by about 20{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}, though they are set to join later.
Having been known for censorship and inaccessible internationally, this will open new opportunities and investment for short and long traders alike.
- Published in Blog
Organigram (TSXV:OGI) has entered into a binding letter of intent with Trauma Healing Centers!
Organigram (TSXV:OGI) Has continued to show its innovation in the marketplace with its latest expansion.
Today, November 11th, Organigram entered into a binding LOI with Trauma Healing Centers. By June 2015 Organigram will cater to 13 new locations, including Edmonton, Ottawa, Quebec and Halifax. Medical marijuana has long been known to aid PTSD users, and this is a major step in bringing it to the public. This collaboration will bring about new research into PTSD and the use of marijuana as treatment. Organigram’s dedication the highest level of quality can easily be seen in its recent internationally recognized organic certifcation.
The current medical marijuana space has seen many turns. The recent changes in Oregon, Alaska and DC joining the legalized world of marijuana shows how new this industry is, and how quickly things are changing. We are only at the beginning of this North American emerging market! With over 1000 applications to Health Canada for licenses, Organigram’s early acceptance will allow them a strong foothold on the growing marketplace.
- Published in Blog
Upcoming Montreal Event – IIROC’s “Tips for Traders Montreal”
MomentumPR strives to provide you the best tools to tackle Canadian small caps today. In this investing environment, staying ahead of the curve is the only way to increase your portfolio. Need to brush up the latest compliance issues? Come check out Investment Industry Regulatory Organization of Canada (IIROC)’s “Tips for Traders Montreal”! Attending will also provide you with 1.5 hours of IIROC Continuing Education Compliance Credits.
The event will cover a variety of subjects, mostly in English. Some topics include
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electronic Trading Rules
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Overview
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TCC Observations
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Third-Party Electronic Access
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Odd-Lot Order Rulings
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Single-Stock Circuit Breakers
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Marketplace Thresholds
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Debt Reporting Update
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Best Execution
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Identification of Trading Groups
Day? Thursday, November 13, 2014
Time? 4:30-6:00pm
Where? Centre Mont-Royal, “Cartier 1”, 3rd Floor, 2200, rue Mansfield, Montreal
Organigram (TSXV:OGI) Supporting Five-city Cross-Canada Program to Provide Cannabinoid Education
OTTAWA, Nov. 4, 2014 /CNW/ – The Board of Directors of the Canadian Medical Cannabis Industry Association (CMCIA) today announced a partnership with the Canadian Consortium for the Investigation of Cannabinoids (CCIC) to support, through an unrestricted grant, a 5-City Continuing Medical Education (CME) program to be held in February-March 2015.
This educational initiative aims to provide balanced and evidence based cannabinoid education to Canadian healthcare practitioners (physicians and nurse practitioners). The program builds on the portfolio of successful and respected educational sessions led by the CCIC since 2007. The program objectives and contents are developed by a national steering committee and are totally independent from funding sources.
Regulatory changes by Health Canada’s Marihuana for Medical Purposes Regulations (MMPR) that took effect last April made physicians directly responsible for deciding who should legally have access to marijuana for medical purposes.
“As physicians our number one priority is to help patients. It is imperative that physicians have sufficient knowledge about cannabis and cannabinoids in order to engage in informed discussions with patients about the therapeutic use of these drugs” said Dr. Mark Ware, Executive Director of the CCIC. “The CMCIA sponsored education program will build greater awareness of the risks and benefits of cannabinoids among Canadian physicians. We are encouraged to see the industry supporting this important work. We hope this is the beginning of an important partnership between physicians, researchers and the medical cannabis industry” Ware continued.
As the national association representing the majority of licensed producers regulated by Health Canada under the MMPR, the CMCIA is pleased to support unbiased independent research presented directly to physicians by physicians.
“A key area of focus for the CMCIA is to address the identified need for physician education on both the therapeutic risks and benefits of medical marijuana” said Marc Wayne, Chair of CMCIA.
“The time has come to address these gaps head on and work collectively to support members of the medical community so they can provide the best treatment for their patients. I am very pleased to see members of our industry leading this effort and working collaboratively to support these important initiatives. This program will help to reduce the stigma associated with the use of medical cannabis.”
The 5-city tour is expected to travel to Halifax, Montreal, Ottawa, Calgary and Vancouver.
The CMCIA would like to thank the following members who are supporting this important CME Education tour:
ABcann, Agrima, Bedrocan Canada, CannMedica Pharma, MedCannAccess, MedReleaf, Mettrum, OrganiGram, and Tweed.
About the CMCIA
The Canadian Medical Cannabis Industry Association (CMCIA) is Canada’s leading member-driven association for Licensed Producers (LPs) of medical cannabis. We represent the majority of producers currently licensed under the Health Canada’s Marijuana for Medical Purposes Regulations (MMPR), in force as of June 19, 2013.
The CMCIA’s mission is to promote national standards and best practices by supporting the development, growth and integrity of the medical cannabis industry. The association acts as a national voice for our members, and serves as a credible and trusted resource on issues related to medical cannabis industry.
The group shares a philosophy of patient-centered care and improved public health, and is committed to product safety and quality, secure and reliable access for qualified patients, and promotion of the safe and effective use of cannabis for medical purposes.
About the CCIC
The CCIC is a federally registered Canadian nonprofit organization of basic and clinical researchers and health care professionals established to promote evidence-based research and education concerning the endocannabinoid system and therapeutic applications of endocannabinoid and cannabinoid agents.
- Published in Blog
Skin Care and Cosmetics Industries: Asia/Pacific Locked in sight.
The Skin Care Industry is an ever-improving, competitive and very technological environment ruled by well-established giants such as Avon, L’Oreal andProcter & Gamble’s Olay. They are not, however the only players around. There is always room for technology-focused companies to improve existing products and introduce ground-breaking innovations to the market; in fact this is an industry that attracts brilliant minds, as pointed out by Sabine Louët.
Market opportunity? Trend?
The U.S. represents $54.89 Billion in sales, but it is not considered the fastest growing market, or the biggest. Brandon Gaille presents a visual report titled 26 Cosmetic Industry Statistics and Trend, in which Asia/Pacific holds the 1st spot for “Top regions in global beauty sales” while China holds the 2nd spot for “Growing prestige beauty markets.” Gaille also mentions how active the industry is, in 2011 there were 35 strategic acquisitions in the beauty industry, 13 of them from the Skin Care Industry. It is not surprising to see large companies buying their way into these attractive and growing eastern markets. These industries seem to be able to survive even the worst of crisis.
But why have the Skin Care and Cosmetic industries carried on practically unscathed after the latest Global Economic crisis? By 2011 in the U.S., sales on “Total Beauty” products reached $9.5 Billion, a growth of over 11{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} from 2010. This may be the direct cause of the “Emotional Attachment” experienced by the users. In Gaille’s report, it is stated that 82{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} of surveyed women believe that wearing make-up boosts their self-confidence, while 86{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} of women find that wearing make-up improves their image. This result represent a mentality shared by most consumes, and it is reflected on the numbers: on average, women spend $144 a year on beauty products. In Brazil, consumers spend $240 a year on the same products, while in Britain, a woman will spend around $13,000 on similar products in her lifetime.
But as discussed above, Asia/Pacific has the fastest growing market for these products, and many believe this is only the beginning. Heng Shao is only one of the many analysts to cover the Chinese “Second Generation Rich” phenomena. In an article for Forbes, she gives an example of an average Chinese over-seas student that talks about the ‘new purchasing power’ of their generation. The numbers are considerable. So what other trends should we be monitoring?
Other Trends
TechNavio (a leading technology research and advisory company) analyzed a report from Market and Research’s “Global Skin Care Market 2010 – 2014” and one of the key findings reported was that there is a “Demand for whitening products globally.” This comes to no surprise as this particular trend continues its steady growth in popularity and acceptance throughout the eastern hemisphere. As mentioned by Andrew McDougall, “Skin lightening has long been a trend in Asia and is set to continue to boost the global market in the next five years, according to Global Industry Analysts.” The report also mentions how this specific market alone could reach an estimated value of $19.8 Billion by 2018. This trend is cultural and social, fueled by the idea that lighter skin represents beauty and wealth. The images of western models are synonyms of “beauty,” and this idea encourages young consumers to look for products that can help them achieve the “perfect look.” This trend can be seen no only in China, but in India and other Asian countries as well.
Ecological responsibility seems to be a growing factor in the Chinese/Asian consumer’s mind. A study conducted by Dr. Chan in 2001 revealed that the average Chinese consumer has positive feelings for Eco-friendly products and organization, scoring on average 5.28 in a 1 – 7 point base system (1 being negative and 7 being positive). Their actions however show that they only actively purchase green products when they can, scoring 2.04 on frequency and 1.89 on amount of money spent on these green products. The current situation is likely to change, since environmental issues are becoming a pressing matter in the eyes of both the Chinese government and the world. An article by Beina Xu for the Council on Foreign Relations shows how both the Chinese public and their government have started moving towards more environmentally friendly methods and industries. This is mentality is sure to spread and become a cultural characteristic of not only the Chinese people, but of the world.
- Published in Blog
A Guide to the Canadian Securities Exchange
The Canadian Securities Exchange (CSE) was established in 2003 and is governed by CNSX Markets Incorporated. The CSE obtained stock exchange status in 2004, and was created to provide companies with a resourceful and contemporary alternative to access public capital markets in Canada. Furthermore, the CSE currently provides over 200 different structured IPs, and government bonds and equities, and continues to expand at an exponential rate in order to meet the discerning needs of its investors.
In addition, the CSE launched the first unremitting auction market in September, 2007. It was established for investors and companies who were looking to trade securities that were listed on alternative Canadian stock exchanges. Interestingly, the newly introduced auction market provides many benefits vis-à-vis other stock exchanges; including an inviting fee configuration; a low-latency environment for trading stocks, and a high capacity milieu that allows investors to use proprietary and state-of-the-art trading technologies that maximise ROI. As a result, the Canadian marketplaces’ competiveness on the worldwide marketing spectrum has risen exponentially. Moreover, it is important to note that CSE listed stocks and symbols on alternative Canadian exchanges have now been conglomerated since “Project One” was completed on December 2, 2013.
In sum, the CSE provides many benefits when compared to other stock exchanges. In addition to being an approved market maker system that boasts streamlined regulation and cost effective measures, the CSE is also a centralized auction marketplace than ensures augmented disclosure. For instance, if we were to compare the initial listing fees of the CSE to the TSX or TSX-V, one would notice that the fees incurred via the CSE are significantly lower than those of the aforementioned stock exchanges (e.g., $12,500 versus $40, 750 & $30,000). Arguably just as important, if not more so, is that the CSE does not use a transaction based modus operandi. In other words, the CSE charges a flat monthly fee of only $500, allowing investors to perform an unlimited amount of transactions at their discretion. In fact, investors can expect to spend only $18,000 worth of annual fees for listing on the CSE during the first year, followed by only $6,000 in annual fees in perpetuity afterwards. Interestingly, if one were to tabulate the initial, sustaining, and additional listing fees of the TSX-V-, TSX, and CSE, the clear advantage that the CSE provides becomes increasingly evident (e.g., $51,000/$58,950/$18,500). That is, CSE total fees are 65{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} lower than those of the TSX and 69{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} lower than the fees incurred by the TSX Venture. Ergo, the CSE is the quintessential choice for innovative companies that are looking to go public in Canada.
For more detailed information on the CSE please visit their official website.
Written by: Prakash Mylvaganam
- Published in Blog
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