Second “Jupiter” investment strengthens
Organigram’s European access, including to the high-growth market
of Germany
Highlights:
- Concurrent to the investment, Organigram and Sanity Group have
entered into a new supply agreement to include significantly higher
volumes and the intention to work together on the commercialization
of Organigram’s brands and intellectual property (IP) in
Germany.
- Investment in the form of an unsecured convertible note
combined with a minority equity stake in Sanity Group.
- Organigram entitled to appoint a representative to Sanity
Group’s Board of Directors.
Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), (the
"Company" or "Organigram"), a leading licensed producer of
cannabis, is pleased to announce its first significant strategic
investment aimed at expanding its presence in the European cannabis
market. Using proceeds from its Jupiter strategic investment pool,
the Company has agreed to invest €14 million (~ C$21 million)
initially comprised of €11.5 million via an unsecured convertible
note and €2.5 million to purchase equity interests from existing
Sanity Group founders and shareholders providing the Company with a
minority stake in Berlin-based cannabis company Sanity Group GmbH
(“Sanity” or “Sanity Group”). In addition, the Company may advance
another €3 million (~ C$4.5 million) as a second tranche of the
unsecured convertible note for future opportunities to be pursued
by Sanity subject to the satisfaction of certain conditions.
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Sanity has quickly established itself as a leader in the German
cannabis market where it maintains a robust distribution network
with over 2,000 pharmacies working with approximately 5,000
physicians in Germany. Sanity currently holds approximately a 10%
share of the German medical cannabis market where its medical
brand, avaay, is estimated to hold the number two position and has
shown impressive revenue growth since the recent legal reforms
regarding partial legalization of adult-use recreational cannabis
in Germany. Additionally, Sanity is currently participating in a
Swiss recreational cannabis pilot program in the Basel canton, with
one store operational and a plan to expand its retail footprint in
Switzerland. In the coming months, Sanity is expected to invest in
proprietary distribution channels providing it with what it
believes will be a competitive advantage that capitalizes on new
medical consumers entering the market.
The Company's investment also expands the previously announced
supply agreement between Organigram and Sanity Group. Until such
time as Organigram receives EU-GMP certification at its Moncton
production facility, Sanity Group has committed to purchase
significantly higher annual volumes of dried flower under the new
agreement as compared to the previous one. Once Organigram receives
EU-GMP certification in Moncton, Sanity Group will shift its annual
purchase commitment from Organigram to a percentage of its overall
assortment of flower offerings for the European market. Organigram
expects to complete its final EU-GMP audit before the end of the
calendar year. Additionally, the new commercial agreement
contemplates, subject to terms and conditions, avenues by which
Organigram can launch its industry-leading brands, products, and IP
in the German market.
“A meaningful presence in Germany and Europe are essential to
achieving our ambitions to be a global cannabis leader. We believe
that after Canada, Germany will emerge as one of the more promising
markets under a nationally legal model,” said Paolo De Luca, Chief
Strategy Officer of Organigram. “With its evolving program for
medical cannabis and recent limited legalization for recreational
consumption, Germany may eventually adopt a full adult-use cannabis
framework. This growth opportunity is magnified by positive
regulatory developments in several neighbouring European
jurisdictions where Sanity Group is expanding its presence,” he
concluded.
“Our investment in Sanity Group establishes a significant
European footprint for us. Organigram benefits from Sanity’s
expertise and insights in the German (and in the future) other
European cannabis markets. This has the potential to provide a
pathway for us to launch our own brands and industry-leading IP
through Sanity’s extensive distribution network. This relationship
also bolsters our European revenue generation through a
significantly expanded commercial agreement,” said Beena
Goldenberg, CEO of Organigram.
“We are extremely pleased to close this strategic financing with
Organigram who has consistently demonstrated itself to be a leader
in the highly competitive and regulated Canadian cannabis market,”
said Finn Hansel, co-founder and CEO of Sanity Group. “With its
commitment to responsible R&D, innovation and product
development, including through its relationship with BAT (British
American Tobacco), we feel that we have chosen a partner that will
support us in becoming a leader in the rapidly expanding legal
European markets,” he concluded.
The German and European Cannabis Market
The German cannabis industry is poised for significant expansion
following the recreational cannabis legal reforms enacted on April
1, 2024. According to BDSA estimates, Germany is expected to bring
in ~USD$1.5 billion in total sales in 2024, set to grow to ~USD$3.7
billion by 2027. This remarkable growth is driven by a 30-50%
increase in medical cannabis prescriptions since April 1, 2024, a
likely result of the regulatory framework changes that may have
accelerated the shift by consumers from the illicit market to the
legal market. Germany’s cannabis industry progress is also
anticipated to create a ‘ripple effect’, potentially shaping
economic, regulatory, public health, and cultural landscapes across
Europe. The success of Germany's cannabis industry could serve as a
catalyst for a more unified and progressive approach to cannabis
legalization and regulation across the continent.
Strategic Rationale and Potential Opportunities
- Establishes a significant European footprint for Organigram
through a leading regional cannabis company with a presence in
multiple markets.
- Organigram benefits from Sanity’s expertise and insights in the
German (and in future) other European cannabis markets.
- Provides a pathway for Organigram to launch its own brands and
industry-leading IP in Europe through Sanity’s extensive
distribution network.
- Bolsters Organigram’s European revenue generation through an
expanded commercial agreement with improved terms and
commitments.
- Further investment opportunities may allow Organigram to
increase its unsecured convertible note and ownership position in
Sanity Group.
Investment Details
- €14 million initial investment consists of €11.5 million
structured as an unsecured convertible note (the “Note”) issued by
Sanity Group to the Company as lender and €2.5 million of already
issued equity interests purchased from existing shareholders.
- The Note yields 10% annual paid-in-kind (PIK) interest for a
minimum of three years and is convertible at a discount to the
price established by Sanity Group’s next qualified financing into
the most senior class of shares (currently Series B).
- Organigram has an option, subject to certain terms and
conditions, to invest an additional €3 million on substantially the
same terms as the Note which would bring its total investment to
€17 million.
- Sanity’s use of proceeds includes investments in various
initiatives that are expected to give it access to over 100,000
patients, and aid in recreational cannabis pilot project expansion
in applicable regions.
- Notable previous investors in Sanity Group include BAT, Casa
Verde Capital (Snoop Dog), Will.i.am (Black Eyed Peas), Navy
Capital, Scooter Braun and Alyssa Milano amongst others.
About Organigram Holdings Inc.
Organigram Holdings Inc. is a NASDAQ Global Select Market and
TSX listed company whose wholly owned subsidiary Organigram Inc. is
a licensed producer of cannabis, cannabis-derived products and
cannabis infused edibles in Canada.
Organigram is focused on producing high-quality cannabis for
adult recreational consumers, as well as developing international
business partnerships to expand the Company’s global footprint.
Organigram has also developed and acquired a portfolio of adult-use
recreational cannabis brands, including Edison, Holy Mountain, Big
Bag O’ Buds, SHRED, SHRED’ems, Monjour, Laurentian, Tremblant
Cannabis and Trailblazer. Organigram operates production facilities
in Moncton, New Brunswick and Lac-Supérieur, Quebec, with a
dedicated edibles manufacturing facility in Winnipeg, Manitoba. The
Company is regulated by Health Canada under the Cannabis Act and
the Cannabis Regulations (Canada).
About Sanity Group
Berlin-based Sanity Group aims to improve people’s quality of
life through the use of cannabinoids and the endocannabinoid
system. In addition to pharmaceuticals, the focus is also on
wellbeing and cosmetic products that utilize cannabinoids. Sanity
Group, founded in Berlin in 2018 by Finn Age Hänsel, includes
Vayamed and AVAAY Medical (medicinal cannabis), Endosane
Pharmaceuticals (minority investment in finished pharmaceuticals),
and VAAY (wellbeing). Close to Frankfurt, Sanity Group also
operates a storage facility for cannabis extracts and flower. More
information can be found on sanitygroup.com/press.
Forward-Looking Information
This news release contains forward-looking information. Often,
but not always, forward-looking information can be identified by
the use of words such as “plans”, “expects”, “estimates”,
“intends”, “anticipates”, “believes” or variations of such words
and phrases or state that certain actions, events, or results
“may”, “could”, “would”, “might” or “will” be taken, occur or be
achieved. Forward-looking information involves known and unknown
risks, uncertainties and other factors that may cause actual
results, events, performance or achievements of Organigram and
Sanity Group to differ materially from current expectations or
future results, performance or achievements expressed or implied by
the forward-looking information contained in this news release.
Risks, uncertainties and other factors involved with
forward-looking information could cause actual events, results,
performance, prospects and opportunities to differ materially from
those expressed or implied by such forward-looking information
include applicable regulatory and market conditions in Germany and
other European markets in future, the ability to conclude terms
related to any future licensing and brand opportunities in Germany,
the receipt of any required regulatory and shareholder approvals
and consents from time to time and factors and risks disclosed in
the Company’s most recent annual information form, management’s
discussion and analysis and other Company documents filed from time
to time on SEDAR+ (see www.sedarplus.ca) and filed or furnished to
the Securities and Exchange Commission on EDGAR (see www.sec.gov).
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release. Although the Company believes that the assumptions
and factors used in preparing the forward-looking information in
this news release are reasonable, undue reliance should not be
placed on such information and no assurance can be given that such
events will occur in the disclosed time frames or at all. The
forward-looking information included in this news release are made
as of the date of this news release and the Company disclaims any
intention or obligation, except to the extent required by law, to
update or revise any forward-looking information, whether as a
result of new information, future events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240624359101/en/
For Investor Relations enquiries: Max Schwartz, Director
of Investor Relations investors@organigram.ca
For Media enquiries: Megan McCrae, Senior Vice President
– Global Brands and Corporate Affairs
megan.mccrae@organigram.ca
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