LONDON — British American Tobacco Group (BAT) entered into a strategic collaboration agreement with Organigram Inc. to research and develop next-generation adult cannabis products, initially focusing on cannabidiol (CBD) items.
Through the collaboration, BAT will gain access to cutting-edge R&D technologies, product innovation and cannabis expertise, complementing its extensive plant-based expertise and development capabilities.
The agreement augments ongoing BAT activities to expand its portfolio "beyond nicotine" and follows the pilot launch of Vuse CBD Zone in Manchester, United Kingdom, earlier this year. The collaboration reinforces BAT's consumer-centric multi-category approach, which has seen continued momentum and growth as the company focuses on delivering on its purpose of building A Better Tomorrow, BAT stated.
"Today's announcement underscores our commitment to accelerating our transformation and building A Better Tomorrow. Our multi-category, consumer-centric approach, which is key to our transformation, aims to provide choice and meet the evolving needs of adult consumers," said BAT Director of Scientific Research Dr. David O'Reilly. "This choice provides reduced risk alternatives to combustible cigarettes, as well as going beyond tobacco and nicotine into new and exciting areas of product innovation.
"We believe this collaboration has significant potential to enhance our activities, allowing us to combine our world-class expertise while enabling scientists from both BAT and Organigram to work closely together and share information real-time. We know that in R&D this is how you make real breakthroughs and accelerate progress," he continued. "We have been impressed by the strong management team and culture at Organigram. This collaboration aligns with our long-term strategy and will enable us to work with Organigram at an R&D level, as well contributing to their wider operations."
Under terms of the deal, to operationalize the Product Development Collaboration Agreement, a Center of Excellence will be established to focus on developing the next generation of cannabis products with an initial focus on CBD. The Centre of Excellence will be located at Organigram's indoor facility in New Brunswick, Canada, which holds the Health Canada licenses required to conduct R&D activities with cannabis products.
Both BAT and Organigram will contribute scientists, researchers and product developers to the Center of Excellence, which will be governed and supervised by a steering committee consisting of an equal number of senior members from each of BAT and Organigram.
BAT and Organigram will also grant each other a license to certain intellectual property to enable the development of new and potentially disruptive, novel products. Both parties will have the ability to independently commercialize any products developed as a result of the collaboration under their own brands.
Additionally, a BAT subsidiary will acquire a 19.9-percent equity stake in Organigram Holdings Inc. to become the largest shareholder, with the ability to appoint two directors to Organigram's board of directors and representation on its investment committee. At closing, one BAT nominee, Jeyan Heper, was added to the board and another nominee is expected to be added in the near term.
"This is a tremendous milestone in the evolution of Organigram. It is instrumental in advancing our commitment to offering consumers innovative cannabis products and to furthering our long-term international strategy," said Organigram CDEO Greg Engel. "We have been extremely selective about aligning with a strategic partner and, in BAT, we’ve found a leading consumer goods business with innovative product platforms, an impressive dedication to research and development, deep consumer insights, regulatory expertise and a commitment to responsible stewardship and consumer safety."
Organigram Holdings Inc. is a NASDAQ Global Select and TSX listed company whose wholly owned subsidiary, Organigram Inc., is a licensed producer of cannabis and cannabis-derived products in Canada.
United Kingdom-based BAT has a target of increasing the number of its non-combustible product consumers to 50 million by 2030.