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OrganiGram Receives Expansion License from Health Canada

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On Monday, OrganiGram Holdings (NASDAQ:OGI) announced that it received a license from Health Canada to expand its Phase 5. The federal health agency will also renew the company’s licenses for the cultivation, processing, and cannabis sales for medical purposes. The license approved the construction of a two-floor production facility. Notably, the license supports all processing activities. There will be dedicated space for packaging flowers, pre-rolls, vape pens, and powdered beverages. Powdered beverages allow customers to mix the cannabis powder with a beverage of their choice to make it a cannabis-infused drink.

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Meanwhile, OrganiGram’s Phase 5 expansion includes the addition of a new extraction facility and winterization. The expansion also supports future product development. There were some amendments that allow the company to build harvest and drying rooms. The amendments also allow provisions for support areas like quality assurance, maintenance, and sanitation. The licenses are valid for three years.

Coronavirus impacts OrganiGram

Amid the spreading coronavirus, OrganiGram’s management announced a reduction in the company’s workforce at its Moncton facility. The reduction is done through voluntary and company-imposed temporary layoffs. Also, management added that the decision would facilitate adequate social distancing and protect the health of its employees and the community. The company expects the changes to reduce production and packaging. Management added that they weren’t able to quantify the impact of these changes yet. Right now, the situation is still evolving. However, the company plans to utilize its most efficient and automated lines of production to bridge the supply gap. The company plans to reallocate its excess workforce according to requirements.

Recently, many cannabis companies announced a cut in their workforce. In February, Aurora Cannabis announced that it would reduce its staff by 10% to move towards profitability. In October 2019, HEXO laid off 200 employees to reduce its expenses.

Stock performance

On Monday, OrganiGram’s announcement didn’t boost investors’ confidence. Notably, the stock fell by 3.6%. Weakness in the broader equity market due to the coronavirus outbreak could have dragged the stock down. The company has lost 32.3% of its stock value YTD (year-to-date). However, OrganiGram has outperformed its peers and cannabis ETFs this year. Aphria (NYSE:APHA), Canopy Growth (TSE:WEED), and Aurora Cannabis (NYSE:ACB) have fallen by 45.1%, 33.6%, and 64.2% YTD, respectively. Meanwhile, the ETFMG Alternative Harvest ETF (NYSE:MJ) has fallen by 43.9%. In January, OrganiGram reported strong first-quarter earnings for fiscal 2020. Last week, Bank of America upgraded the stock from “underperform” to “neutral.” All of these factors appear to have mitigated some of the effects of the weakness in the broader equity market. Overall, I’m optimistic about OrganiGram. To learn more about the company’s Cannabis 2.0 products, read Analyzing OrganiGram’s Cannabis 2.0 Products.

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