David George-Cosh

Reporter

Follow|Archive

Organigram Holdings Inc. said Monday that Greg Engel is stepping down from his role as chief executive officer of the pot producer, effectively immediately.

The company didn't provide a reason why Engel, who held the top position at the Moncton, N.B.-based company since 2017, resigned two months after he secured an investment from a major tobacco company.

In the interim, Organigram Chairman Peter Amirault will serve as executive chair until a permanent CEO is appointed. Engel will work as a special advisor to Organigram's board until his successor is found.

"Greg has brought innovative leadership as the company created new structures around operations and increased capacity to serve the growing marketplace, while ensuring our successful launch into the adult recreational cannabis space and bringing leading innovative new platforms and edible products to the marketplace," said Geoff Machum, who was appointed Monday as an independent lead director on Organigram's board, in a statement.

In March, Organigram announced a $221-million investment from British American Tobacco PLC (BAT) in exchange for a 19.9 per cent stake in the company. In addition to the ownership stake, BAT will work with Organigram to develop CBD and other cannabis-related products. As part of the deal, one BAT representative will join Organigram's board and another is expected to be added this year.

However, Organigram's revenue has slid in recent quarters as increased competition in Canada's recreational cannabis market and COVID-related lockdowns have impacted sales across the entire industry. Organigram said its second-quarter revenue fell 37 per cent to $14.6 million from the prior quarter, while Jefferies expects the company's 2021 full-year sales to decline about 10 per cent to $77.3 million.

"We are not surprised by the development considering the number of other [licensed producers] that have announced CEO changes over the past two years," said BMO Capital Markets Analyst Tamy Chen in a note on Monday. "The trend has been the appointment of new executives with big [consumer-packaged-goods] experience as LPs seek to establish brands in the emerging cannabis sector."

However, there are early signs that Organigram's revenue was in line for a potential bounce-back. Raymond James Analyst Rahul Sarugaser said in a report Monday that based on early channel checks with retailers, Organigram is poised to have its largest month of adult-use sales in April.