As investors look forward to the next round of financial reports from the cannabis sector, one company has reported some mixed news. Organigram Holdings (NASDAQ: OGI) said on Monday that its net revenues were up 631 percent in the quarter, an impressive increase.
However, the company also said that it’s overall costs for growing marijuana have gone up more than 50 percent after failing to develop a new, more efficient growing technique.
Cash and all-in costs of cultivation for Organigram have gone up from C$0.95 to C$1.29 per gram of dried flower, in comparison to the C$0.65 and C$0.95 per gram seen in the previous quarter. This increase came from the fact that Organigram tried to develop a revolutionary new technique to plant fresh cannabis that worked for the first few strains but ended up being a failure when it came large scale cultivation.
Many cannabis growers trim bits off an already growing plant and use that material to grow a new plant rather than planting a seed. This process, called cloning, usually requires taking material from the so-called “mother” plant to ensure genetic consistency. However, Organigram decided to try something different and take material from plants when they were very young.
“We did an experiment where we take early flower, which you’re going to trim the bottom leaves all off anyway, and use those to clone from. In the early experiment, we had really positive results, then we went to a broader group and it was variable by strain and the results were inconsistent. That had a significant impact on yield,” said Organigram CEO Greg Engel in an interview with MarketWatch. “This one was of interest to us for two reasons. It would allow us to not have to grow out those vegetative plants a little longer, so it would free up space. And it would make the process of trimming off the plants that were in flower more effective because you’re going to use that material. It was kind of a double efficiency.”
While the Organigram staff realized after a couple of weeks that the new method of trimming wasn’t working out, reverting back to their previous system took several weeks and ended up impacting the company’s quarter. Nor was Organigram the first cannabis company to try such a system, as a number of Californian based growers have made similar attempts. Farmers say that using clippings from younger plants could work hypothetically with certain types of strains, although it’s far from consistent and it’s much harder than the normal techniques used by most cultivators today.
In response to the news, shares of Organigram were up just under five percent on Monday. For the past few months, the stock has seen a mild increase, shooting up almost 60 percent at one point before giving back much of those gains. Shares are still up around 25 percent since the beginning of 2019.
Organigram Company Profile
Organigram Inc. is a Canadian licensed producer of cannabis products. Organigram focuses on producing exceptional, indoor-grown cannabis for patients and adult recreational consumers, as well as developing global business partnerships. – Warrior Trading News