Cannabis Professional’s daily roundup of industry news. View archive here.
Organigram pre-announces lower Q4 revenues
Shares in Organigram Holdings Inc. fell as much as 11 per cent in overnight trading after the company said late Monday that it will fall far short of its revenue targets for the fourth quarter of 2019. The Moncton-based licensed producer said net revenue (after excise taxes) for the fourth quarter of 2019 is expected to be approximately $16.3-million, which reflects about $20-million of shipments in the quarter and about $3.7-million in provisions for product returns and pricing adjustments. That compared to third-quarter net revenue of approximately $24.8-million. The company says it expects negative adjusted EBITDA for Q4 2019. Organigram added that it expects to report year-over-year growth in net revenue of approximately 547 per cent to about $80.4-million as well as positive adjusted EBITDA for the year. Analysts had been expected fouth-quater revenue closer to $27.9-milion.
The news brought a downgrade from BMO analysts Tamy Chen and Peter Sklar, who not rate the stock as 'market perform (speculative) from Outperform (speculative). “We previously considered the company to be a relatively stronger operator given the strong top-line growth and positive EBITDA. Following the FQ4/19 pre-release, we now believe OrganiGram is also experiencing the challenges that have impacted some of its peers, and which could take a number of quarters to resolve,” the BMO note said.
The Company is scheduled to report its fourth-quarter and full-year earnings results for its fiscal year ended Aug. 31, 2019, on Nov. 25, before markets open.
– Rob Gilroy
U.S. and Canadian cannabis sectors poised to accelerate, Cowen says
The cannabis sector is poised to accelerate in Canada and the United States due to dispensary growth, delivery methods and demographics that are approaching inflection points, Cowen Equity Research said in a report.
Cowen pegged Canada’s illicit cannabis market at 83 per cent of pot sales in the country and forecast this falling to 67.5 per cent by 2020 and 12 per cent by 2025, due to plans announced by provinces to increase licensed retail store numbers. Ontario and Quebec, for example, represent roughly 60 per cent of Canada’s population but have only 9 per cent of its dispensaries.
“We see physical door growth of dispensaries, the proliferation of new form factors, and rising prevalence/incidence as three critical growth drivers for cannabis,” Cowen said, referring to both Canada and the United States.
“Our analysis is strongly supported by long term, multi-decade historical data and trends of tangential CPG [Consumer Packaged Goods] categories, namely alcohol and nicotine.”
Cowen raised its U.S. cannabis market estimate to a total addressable market (TAM) of US$85-billion by 2030, up from its prior forecast of US$80-billion. This is expected to be driven by higher incidence levels among older consumers, greater public support for legalization at the national level and incremental actions at the state level.
In Canada, Cowen pegged the 2020 total addressable market at $5.2-billion in sales, up from a prior estimate of $4.8-billion, as the country is poised to deliver improved consumer choice through the newly legalized cannabis products. This is estimated to reach $12-billion by 2025.
“Looking ahead, the long-anticipated ‘Cannabis 2.0’ launch provides a meaningful catalyst to category growth, as the products offered today only represent 55 per cent of sales in the U.S., according to data from our proprietary relationship with Headset, which we estimate could provide an incremental C$2.3-billion in annualized sales by December 2020,” Cowen said.
- Marcy Nicholson
Valens buys Ontario cider maker
Cannabis extractor Valens GroWorks Corp. said it bought Ontario-based beverage company Pommies Cider Co., which will bolster its white label product offerings in beverages and edibles.
The $6 million purchase – $3.5 million in cash and $2.5 million in shares of Southern Cliffe Brands Inc., which does business as Pommies – expands Kelowna, British Columbia-based Valens’ extraction capabilities and operations to Ontario.
Valens said it expects cannabis-infused beverages to be one of the most profitable product lines. The company said it could pay an additional $500,000 in cash and $1 million in common shares if certain “earn-out milestones” are achieved.
Pommie applied for its Health Canada micro-processing licence in December 2018.
Valens already has pilot-scale capacity for cannabis-infused beverages and expects to produce mass-scale beverages in the first half of 2020. Valens has allocated roughly $10 million of capital expenditures at Pommies’ facility over the next 12 months, after which the location is expected to have a beverage capacity of 40 million units.
- Marcy Nicholson
VIVO receives conditional approval to list on TSX
VIVO Cannabis Inc. said Tuesday it has received conditional approval from the Toronto Stock Exchange to graduate from the TSX Venture Exchange and list its common shares on the TSX.
“The TSX is a premier destination for publicy traded companies and this listing represents a significant milestone for VIVO,” said Barry Fishman, CEO. “It also demonstrates our long-term commitment to increasing investor awarness and generating shareholder value as we continue to drive sales in our family of brands." Final approval of the listing is subject to the Napanee, Ont.-based company meeting certain conditions required by the TSX on or before Feb. 6, 2020.
- Staff