Canadian CANNAINVESTOR Magazine October 2017 - Page 190

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So what do these deals mean? Well for one, its guaranteed revenue for both Canopy and Organigram, representing a much larger share of Organigram’s total production capacity than it does for Canopy, at 25%. At a reasonable $2.25 per gram estimated production cost and guesstimate of $5 per gram wholesale price, this translates into approximately $11 million in annual revenue for Canopy and around $14 million for Organigram. On the surface, it still looks like a good deal, despite being shaved down by using wholesale prices. But it is important to note that it is expected that demand will be higher than supply as a whole when recreational use is legalized. Although this guaranteed revenue is great, it may quite possibly mean that Organigram is potentially forgoing about $5 per gram revenue* at a retail level price of $10 per gram if the market analysis is correct in projecting that current production capacity by LP’s will not meet demand.

*Note: $5 per gram inclusive of HST, GST or other provincial taxes.