Organigram announced a 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 (about $15 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.
As part of the deal, Organigram will receive a minority stake in Berlin-based cannabis company Sanity Group. In addition, it may advance another €3 million (about $3.2 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.
In Germany, Sanity maintains a distribution network with more than 2,000 pharmacies working with approximately 5,000 physicians. The company said 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 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.
