Organigram stock remains high despite recalls

People are still heavily investing in Organigram Holdings Inc. in spite of a massive recent recall of its medical cannabis products.

In January, the New Brunswick-based license producer expanded a Dec. 28 recall of a small amount of product to include almost all of its cannabis buds and oils products from 2016.

The latest results showed positive cash flow and significant year over year growth in sales of both dried flower and cannabis oils. For the quarter ending November 2016, Organigram generated over C$2.23 million in sales for the quarter on 260,291 grams of dried bud and 77,200 ml of cannabis oil sold.

Organigram claims it is now working closely with Health Canada to determine the origin of the prohibited ingredients. Since the voluntary product recall, Organigram says it has successfully harvested and tested new batches of organic as well as non-organic medical cannabis and has maintained inventory in its online store to ensure patients do not go without medication.

As a result of the recall, the unrealized fair value adjustment of inventory includes a loss of C$499,857 for the three-month period ended November 30, 2016.

The company has seen great progress with its phase 3 expansion, which is now expected to be completed and operational by December 2017. The expansion infrastructure is expected to increase the company’s production capacity to 17,000 kg per year by the early 2018.

“Our onsite expansion project positions Organigram to have one of the highest production levels in the industry at a time when we anticipate a very significant increase in consumer demand associated with recreational legalization,” said COO Larry Rogers in a press release. “There are no additional licenses required, there is no additional capital required for the expansion, and we don’t have additional locations to manage.”

Organigram has enhanced its testing protocol beyond the required regulatory testing to ensure that all products will be tested for possible contaminants, including Bifenazate and Myclobutanil. Since the recall dates, says it has identified seven key initiatives a to ensure this issue can not reoccur, including steps to test each input received from outside suppliers, a comprehensive screening process for existing and new suppliers, pesticide testing of every lot of final product prior to packaging, installation of cameras within mixing areas and a full training program for all employees.

Currently trading with a market cap of C$262 million, Organigram remains one of the top cannabis plays for investors. In December, the company priced 11,339,000 common shares at C$3.55 per Share, for aggregate gross proceeds of $40,253,450.