Another Look At OrganiGram Holdings Inc (OTCMKTS:OGRMF)

Like the rest of the Canadian cannabis space, OrganiGram Holdings Inc (OTCMKTS:OGRMF) has pulled back on profit taking. This has created a discount entry opportunity for investors that are looking for long-term exposure to the Canadian market. Canada is the hottest country right now for cannabis investors as it has the most favorable regulatory environment for cannabis in the world. With the election in the US of President-elect Donald Trump and his appointment of marijuana opponent Senator Jeff Sessions as Attorney General, investors are looking towards the Great White North for a more certain future.By 2024, Health Canada projects that the medical cannabis market in Canada will have ~450,000 patients out of a population of 35 million. Prime Minister Justin Trudeau was elected after including legalization of recreational marijuana. On April 20th, 2016, the Canadian Health Minister Jane Philpott announced that Canada would introduce legislation to decriminalize and regulate cannabis in spring of 2017. The recreational market in Canada is estimated to be worth as much as C$7 to C$10 billion.Last month, we saw the Canadian Federal Task Force issues its recommendations on how to legalize recreational marijuana use. The proposals include a minimum purchase age of 18, federal oversight on production, provincial governments charged with retail distribution and maintaining criminal offenses for illicit production and trafficking. The Task Force was lead by Canada’s former attorney general and offered more than 80 recommendations on how Canada could become the largest developed-world country to legalize marijuana.The Canadian government’s goal is to root out the criminal elements that have trafficked in marijuana and made a fortune doing so. Getting marijuana out from the black market and into a regulated environment would make Canada the first developed country to do so and provide a model for other governments worldwide. The Task Force’s report estimates the Canadian black market for marijuana to be worth C$7 billion annually. This potential is what makes Canadian cannabis players like OrganiGram Holdings Inc so exciting for investors.For those not familiar with OrganiGram, it's a TSX Venture Exchange listed company whose wholly owned subsidiary, OrganiGram Inc., is a licensed producer of medical marijuana in Canada. OrganiGram is focused on producing the highest quality, condition specific medical marijuana for patients in Canada. OrganiGram’s facility is located in Moncton, New Brunswick and the Company is regulated by the Access to Cannabis for Medical Purposes Regulations (ACMPR).For FY2016, which ended August 31, OrganiGram sold 732,022 grams versus 132,099 grams sold in FY2015. Net sales were C$6.1 million versus just C$986k in the prior year. The company was able to boost its gross margins to 54% and recorded a net profit of C$846k. In October, OrganiGram generated over C$1 million in net sales.OrganiGram is also getting ready for the recreational market after being chosen as the exclusive Canadian cannabis producer, business partner and brand developer for Nova Scotia-based Trailer Park Boys. OrganiGram will work with the team at TPB Productions Ltd. to develop branding, packaging, and a competitive product portfolio targeted towards recreational marijuana consumers and distributed exclusively by OrganiGram. The agreement, which has an initial term of five years, includes a combination of cash royalties and other non-monetary consideration.To keep up with demand, OrganiGram acquired the industrial property adjacent to the Company’s existing facility in Moncton, N.B. The acquisition, which includes a 136,000 square foot building situated on 10 acres of industrial land, facilitates the Company’s phased expansion initiatives related to cannabis production and extracts processing. The Board of Directors approved the initial buildout of approximately 70,000 square feet. This phase of construction will bring Organigram’s annual production capacity to approximately 16,000 kg of flower, and approximately 6,400 kg of fan and sweet leaf. The planned expansion also includes a state of the art 20,000 square foot commercial scale oils and extracts manufacturing facility.Currently trading with a market cap of C$292 million, OrganiGram was dealt some bad news last week after it instituted a voluntary recall of certain lots of medical marijuana which were supplied between August and December 2016 due to the detection of amounts of an unapproved pesticide not registered for use on marijuana under the Pest Control Products Act. Since OrganiGram is a certified organic grower, the nature of this substance is unknown. However, the good news is that the company is taking action and working to remedy the problem by directly notifying all patients possibly affected. We will be updating our subscribers as the story progresses. For the latest updates on OGRMF, sign up below!Disclosure: We have no position in OGRMF and have not been compensated for this article.