It’s been a tough year for OrganiGram (OGI).  12 months ago OGI was trading over $7 per share but as the cannabis sector declined and the COVID-19 pandemic hit the market, the stock sank to lows of almost $1. Currently it trades at around $2 per share.

Yet, there are reasons to be optimistic about OGI.

This week OGI announced that it has entered into a multi-year agreement to supply up to 6 metric tons of cannabis to one of Israel’s largest and most established medical cannabis producers. The company is called Canndoc Ltd. which is a subsidiary of InterCure Ltd. (TASE: INCR).

Canndoc is one of the first pharmaceutical-grade cannabis producers in Israel and has been in business for more than 12 years. It currently sells GMP-approved medical cannabis products in pharmacies across Israel, and it holds international cultivation and distribution agreements in the European Union and Canada.

Stated in the terms of the supply agreement, OGI will provide a guaranteed 3,000 kg of high quality, indoor-grown dried flower product to Canndoc by December 31, 2021, for processing and distribution into the Israeli medical cannabis market. OGI may also provide an additional 3,000 kg during the same time period at Canndoc’s option, but subject to certain conditions. 

The supply agreement offers a tiered pricing scheme with the exact value depending on factors such as potency and product mix. This agreement also considers giving OGI an opportunity to launch branded medical cannabis products with Canndoc in the Israeli and EU markets. 

This agreement grants exclusivity and related rights to Canndoc in the Israel market for a period of approximately 7.5 years. These activities included in the agreement are however subject to compliance with all applicable laws. These laws include receipt of all requisite approvals from Health Canada, the Israeli Ministry of Health, and any other applicable regulatory authorities.

The CEO at OrganiGram, Greg Engel, said, “Success in international cannabis markets requires a disciplined assessment of opportunities and the identification of strong, world-class partners. For this reason, we are proud to work with Canndoc, a company that we believe shares both our focus on the production of high-quality products and deep commitment to helping patients around the world. While we have been one of the suppliers for the Australian medical cannabis market for more than two years, the agreement with Canndoc represents an important, significant leap into the global cannabis marketplace for OrganiGram, allowing us to support not only medical cannabis patients in Israel but also potentially in the other major international markets that Canndoc serves.”

Engel also said, “While we have been one of the suppliers for the Australian medical cannabis market for more than two years, the agreement with Canndoc represents an important, significant leap into the global cannabis marketplace for OrganiGram, allowing us to support not only medical cannabis patients in Israel but also potentially in the other major international markets that Canndoc serves.”

Ehud Barak, who is Chairman of the former Israeli Prime Minister and Chairman of the Canndoc Board of Directors, had some positive comments regarding this agreement as well, “Driven by the mission of meeting patients’ needs and improving their quality of life, we are pleased and proud to work with OrganiGram to help achieve better patient health and treatment outcomes in Israel, as well as other countries that recognize the value of these medicines for people in need.”

This is a big step for OGI as they continue to expand internationally. The company has been one of the few cannabis companies to be able to achieve profitability over the past few years. Despite the agreement, investors should also be excited about OGI’s emphasis on the Cannabis 2.0 market which should allow the company to grow revenues domestically in Canada.  We believe that OGI is making the right steps, in a challenging market, to continue their growth and we’re excited to see what the company can accomplish in the future.

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OGI shares were trading at $1.89 per share on Thursday afternoon, down $0.29 (-13.30%). Year-to-date, OGI has declined -22.86%, versus a -3.97% rise in the benchmark S&P 500 index during the same period.

About the Author: Aaron Missere

Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...

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