2019 might have been a bad year for most of the cannabis companies in the industry, but this year, many of those companies are making a comeback. One of those is Organigram Holdings (TSX:OGI) (NASDAQ:OGI), and on Tuesday, the company made a major announcement.
Organigram announced that it had signed a new supply agreement with Canndoc, which is one of the biggest medical cannabis producers in Israel. The two companies have signed an agreement that is going to last for two years, and under the terms, Organigram will have to supply Canndoc with dried cannabis flower.
The company did not reveal the financial details of the deal but did point out that it will have supply a total of 3000 kilos of dried cannabis flower to Canndoc by December 31, 2021. However, Canndoc will have the option to order up to an extra 3000 kilos of the product during the stipulated period.
One of the more important things to keep in mind with regards to the agreement is that it will allow Organigram to use Canndoc as a conduit to launch its products in Israel and in the broader European market. Canndoc has been awarded those rights for seven and a half years.
The company released its earnings report for the fiscal second quarter in April, and it had proven to be a disappointment. Revenues plunged by as much as 13.7% year on year to plunge to C$23.2 million, and on top of that, the losses widened to C$6.8 million from C$6.4 million a year ago. One of the main positives from the second quarter was that the company’s cannabis 2.0 products made up as much as 13% of the revenues.
On top of that, wholesale cannabis revenue made up 24%. Both those revenues streams were non-existent a year ago. Organigram blamed the lower volume of cannabis oil and flower production for the drop in sales. That indicates that the company wasn’t doing particularly well even before the onset of the coronavirus pandemic. Moreover, it reported C$41.1 million in cash and cash equivalents as of February 29. Considering the fact that it burned through C$25 million in the six month period prior to that, the cash balance doesn’t seem nearly enough.