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OrganiGram Stock Rises on New Canada Supply Deal

By Eric Volkman - Jan 16, 2020 at 3:28PM

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The company's products will be sold through the Medical Cannabis by Shoppers e-shop.

OrganiGram Holdings' (OGI -3.20%) stock is up notably in late-afternoon trading Thursday following the announcement of a new supply deal in its native Canada.

The deal was signed between the company and Medical Cannabis by Shoppers, the specialty e-shop run by Shoppers Drug Mart, a Toronto-based pharmacy chain operator. The agreement is in force for three years and can be renewed for another two. It obligates OrganiGram to supply the retailer with a variety of medical cannabis goods such as dried flower, oils, and derivative products.

OrganiGram did not provide the financial terms of the new arrangement. Loblaw Companies, the parent of Shoppers Drug Mart and by extension Medical Cannabis by Shoppers, has not issued an official statement on the deal.

Cannabis leaf on PC keyboard.

Image source: Getty Images

In a press release, OrganiGram said this "complementary approach to the medical cannabis market will offer the full strength of our combined national networks to Canadian patients."

OrganiGram is currently riding a wave of investor optimism about marijuana stocks. OrganiGram's Q1 2020 results, published earlier this week, revealed significant quarter-over-quarter revenue improvement, and what some analysts are considering smart and prudent cash management -- currently a key concern with companies in this always capital-hungry business.

Since medical cannabis has higher margins than the recreational variety, some investors believe companies that concentrate on that segment -- such as OrganiGram -- have better potential.  

In the wake of its announcement, the marijuana stock was trading more than 7% higher. So far this year, OrganiGram's shares have risen by nearly 40%.

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