Organigram Holdings Inc. (TSXV:OGI), one of the Canadian marijuana stocks, announced that it has signed a LOI to supply the Société Québécoise du Cannabis
SmallCapPower | February 27, 2019: Organigram Holdings Inc. (TSXV:OGI), one of the Canadian cannabis stocks, Tuesday announced that it has signed a letter of intent with the Société Québécoise du Cannabis (SQDC) to supply recreational cannabis. With this agreement in place, Organigram’s products will now be available in all 10 Canadian provinces. According to publicly-available data, Organigram is one of the only three Canadian LPs to have secured distribution agreements with every province, with Canopy Growth Corporation (TSX:WEED) and Aphria Inc (TSX:APHA) being the other two LPs to have done so.
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Canadian cannabis companies are heavily concentrated in Ontario. Since supply agreements, a critical factor in generating stable and reliable cash flows, are determined by provincial governments, some provinces, such as Quebec, offer preferential treatment to those companies that are bilingual. Organigram is headquartered in Moncton, New Brunswick. New Brunswick is the only province to have voluntarily chosen to become officially bilingual.
HEXO Corp. (TSX:HEXO) is one of two Quebec-based cannabis companies with a Health Canada sales license. It was awarded the largest supply agreements out of the six companies that secure agreements. HEXO agreed to supply the SQDC with as much as 100,000 kg over three years (Year 1: 20,000 kg, Year 2: 35,000 kg, Year 3: 45,000 kg). Terranueva Corporation (CSE:TEQ) is the only other Canadian LP headquartered in Quebec (Laval) to have a Health Canada sales license, recently awarded on February 22, 2019, and will likely be awarded a supply deal once its production ramps up.
Quebec is Canada’s second-largest province by population and is likely expected to have the second highest dollar value of recreational sales. The final details of the agreement and the first shipping date are subject to completion of the Autorité des Marchés Publics process.
Shares of Organigram ended Tuesday $0.70 higher at $8.53, and up 8.9%, closing at an all-time-high. Organigram stock trades at a market cap of C$1.1 billion.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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