Wana Brands launched their products in Oregon’s market in July 2016, about a year ago. Since then, their brand presence has grown considerably and their products are now in 240 of Oregon’s 375 dispensaries, according to a press release issued this morning.
Wana Brands is an infused products company; they make sour gummies, hard candies and caramels. The business originally launched in Colorado back in 2010 and as of 2016, they own 23% of the market share and had the most sales revenue of any edibles company in Colorado, according to BDS Analytics. The next closest competitor owns 12% of the market share.
According to Nancy Whiteman, co-founder and co-owner of Wana Brands, becoming a market leader in Oregon is a result of their product’s consistency and taste. At the end of last year they launched in Nevada and this year they will launch in Arizona and Illinois. In 2018, they expect to make a big East Coast push, expanding into Massachusetts and Maryland as well.
Election Day last year legalized recreational cannabis in a number of states, including Massachusetts, Maine and Nevada. About a week before Election Day, we interviewed Whiteman about those states coming online and her drive to expand. She said she saw a lot of potential in those markets and she was right. Nevada witnessed a massive surge in demand with the opening of recreational sales in the beginning of July and Massachusetts is expected to be another huge market potential.
In that interview, she explained a bit of their growth model: “The model we are pursuing is a licensing agreement where we partner with existing or new license holders in their state,” says Whiteman. “In many ways they are doing the heavy lifting, but we are providing an enormous lift by licensing our intellectual property to them.”
Now that her company has found enormous success in established markets like Oregon, Nevada and Colorado, they want to make a big push in those fledgling markets on the East Coast. “In both markets [Massachusetts and Maryland], we will be working with a partner who will be licensing our products,” says Whitman. “I think the East Coast is a huge opportunity. There are major population centers in New England, New York and Florida and the markets are almost completely undeveloped at this point.” Wana Brands is also currently entering talks with partners in California, Florida and Maine.
Pennsylvania Medical Solutions, LLC (PAMS), won a license to grow medical cannabis in Pennsylvania, but some think the Pennsylvania Department of Health (PA DOH) should reconsider awarding that license. PAMS is a subsidiary of Vireo Health, which has medical cannabis licenses in New York and Minnesota, as well as quite the blemish on their business record. In December 2015, two former employees were accused of breaking state and federal laws by transporting cannabis oil from Minnesota to New York. Because of that history, some are questioning why exactly they were awarded the PA medical cannabis license.
In that school of thought is Chris Goldstein, a Philadelphia-based cannabis advocate and author of an article on Philly.com, which calls PAMS’ license into question. According to Goldstein, Vireo Health could lose their licenses in New York and Minnesota, and those former employees involved might even face federal prosecution. “On the surface it would seem that Vireo broke every rule in the book,” says Goldstein. “Not only could the company lose its permits in both of those states, but employees could face federal prosecution for interstate transport and distribution.” But does that previous wrongdoing by two former employees have any bearing on their application in PA? In Maryland, it did. According to The Baltimore Sun, concerns surrounding MaryMed’s parent company, Vireo Health, is the main reason why their permit to grow medical cannabis was revoked.
In response to some of those concerns about their PA license, Andrew Mangini, spokesman for Vireo Health, issued the following statement, which appeared in Goldstein’s article: “While we’re aware of allegations against two former employees of an affiliate, those individuals have never had a role in our application or in the management of PAMS,” says Mangini. “It’s also important to note that our Minnesota affiliate and our parent company Vireo Health have not been accused of any wrongdoing in connection with those allegations.”
Below is a timeline of events leading up to the PA DOH defending their decision to give PAMS a license:
December 2015: Two former employees of Minnesota Medical Solutions, a subsidiary of Vireo Health, transported a half-million dollars worth of cannabis oil from Minnesota to New York, violating state and federal laws.
February 9th, 2017: The two former employees were formally charged with crimes in Minnesota for illegally transporting cannabis across state lines.
February 20th-March 20th, 2017: PAMS submitted a license application to the PA DOH between these dates, listing their business state as Minnesota on the application.
May 2017: Maryland DOH suspended the licenses of MaryMed LLC, a subsidiary of Vireo Health, over concerns that the company did not provide information related to the Minnesota and New York licenses on their application, according to the Washington Post.
June 20th, 2017: PA DOH releases a list of license winners; PAMS was listed among winners for a cultivation license in Scranton.
June 26th, 2017: PA DOH officials defend their decision to award PAMS a license, according to a Philly.com article. That same day, The Baltimore Sun reported the Maryland Medical Cannabis Commission revoked MaryMed, LLC their license, citing concerns about Vireo Health.
April Hutcheson, spokeswoman for the PA DOH, told Philly.com in June, “Remember, the permits are given to business entities, not people.” The point she is making refers to the charges being filed against former employees, not any of the businesses who hold medical cannabis licenses.
Steve Schain, Esq., an attorney with Hoban Law Group in Pennsylvania, has seen no objective evidence of anything wrongful in either PAMS’ application or the DOH’s processing of it. “Marijuana related businesses often have distinct, affiliated components and the Department of Health faces two critical issues,” says Schain.
“First, whether grow applicant PA Medical Solutions, LLC (PAMS) had a duty to disclose alleged wrongdoing on its application, failed to fulfill this duty and, if so, whether PAMS’ application should be amended, re-scored or disqualified. Second, as part of its ongoing license reporting requirements, whether grow licensee PAMS has any duty to disclose the alleged wrongdoing. The answer to much of this hinges on whether criminal or administrative charges were leveled against just Vireo Health’s former employees or also included the entity and whether these individuals or enterprise fell within Pennsylvania Medical Marijuana Organization Permit Application definition of an “Applicant” (“individual or business applying for the permit”) or applicant’s “Principals, Financial Backers, Operators or Employees” of PAMS. Either way, it does not presently appear that the [PA] DOH missed anything.”
This does raise the question of whether or not Vireo Health is under investigation, which is yet to be determined. According to Goldstein in his Philly.com article, the Minnesota DOH declined to comment on Vireo Health and the New York DOH says the department’s investigation is ongoing. “The selection of a Vireo Health affiliate to grow and process medical cannabis in Pennsylvania has cast a serious shadow over the integrity of the program even before it has started,” says Goldstein.
In Maryland, the DOH revoked their license as a direct result of those former employees in Minnesota committing crimes, according to The Baltimore Sun. Commissioner Eric Sterling said there is “a reasonable likelihood of diversion of medical cannabis by the applicant.” So should Pennsylvania do the same? Do those crimes by former employees have any bearing on their application? This story raises a number of questions regarding applications for state licenses that are largely left unanswered. One thing we know for certain: each state handles applications very differently.
Even though half of U.S. states and the District of Colombia now permit the possession of medical or recreational cannabis, state regulatory bodies differ greatly in their approaches to managing our industry. In Washington, anyone over the age of 21 can legally possess one ounce of usable cannabis and/or seven grams of concentrate. In Minnesota, patients are only allowed to purchase non-smokable cannabis in pill, liquid or oil form.
Given these substantial differences, it is no surprise that the application process to open a dispensary or cultivation facility also varies from state to state. The question I am most often asked (and catch myself mulling over late at night) is what can applicants do to ensure their success, regardless of where they are applying?
Recently we helped a client secure one of the first 15 licenses issued to grow medical cannabis in Maryland. The Maryland application process was particularly unique because most of the applicants had political or law-enforcement ties, or were connected to successful out-of-state growers. That experience, along with our work in places like Arizona, Colorado and Florida, has shown me the importance of teamwork, diversity and security in developing a winning application.
So here are my suggestions for ensuring a successful submission, regardless of which state you are operating in:
Build the Right Team. My dad likes to say, “Use the right tool for the right job.” I think the same is true about creating the team for your application. Do not assume one or two people will be able to fill all of the required roles. You will need experts in a range of different areas including medicine, pharmacology, capital investment, cultivation, real estate, security and law.
Focus on Diversity. I think one of the reasons we have been successful in helping clients secure applications (we are six for six, in six different states) is our commitment to gender, racial and even geographic diversity. For example, we recently helped a client secure a license in an economically underdeveloped area. I think our choice to headquarter the new business outside of the metropolitan corridor was at least partially responsible for our success.
The Devil is in the Details. According to ArcView Market Research, the cannabis industry is expected to be worth $23 billion by 2020. If you want to be one of the organizations selected by your state to sell cannabis, you need to have your act together. Most applications ask incredibly detailed questions. Therefore it is essential that you answer them thoroughly and accurately. All answers should be in compliance with your state’s regulations.
Put Safety First. You will need a comprehensive plan that takes all aspects of security into account. This includes everything from hiring security guards to purchasing cameras, and implementing internal anti-theft procedures. Regardless of the size of your operation, safety should be a primary consideration.
Secure Funding. Successful cannabis businesses require capital. It’s important to be realistic about the amount of money you will need to have on hand. Application costs typically range from $500,000 to $1 million. This will cover things like hiring an architect or leasing land. Ideally, your organization will have another $5 to $10 million or more available to start your project once you’ve been approved so that you can quickly become operational.
Connect With Your Community. It is essential to consider the impact of your business on the community. Being a good corporate citizen means being transparent and engaging in a two-way dialogue with neighbors, government officials and patients. I strongly recommend that my clients develop a comprehensive community outreach plan that designates which organizations they plan to work with, (hospitals or universities, for example) and what the nature of those partnerships will be.
Last week, Steep Hill Labs, Inc. announced plans to expand on the East Coast, including licensing for laboratories in Washington, D.C. and Pennsylvania. The cannabis testing company now is operating or developing in seven states, the District of Columbia along with an official arrangement with a research university in Jamaica, according to Cathie Bennett Warner, director of public relations at Steep Hill.
The same team of physicians that oversees the Steep Hill laboratory in Maryland will operate the Pennsylvania and D.C. labs. Heading that team is chief executive officer Dr. Andrew Rosenstein, chief of the division of Gastroenterology at University of Maryland Saint Joseph Medical Center and assistant clinical professor of Gastroenterology and Hepatology at the University of Maryland Medical Center. Dr. Rosenstein has been recognized by Baltimore Magazine as a top doctor in the Baltimore area, according to a press release.
According to Dr. Rosenstein, they want to provide accurate clinical results for trials with patients using cannabis. “All clinical trials will require a competent, credible and reliable lab partner and that is what we are bringing to the field- and that is why we are working with Steep Hill,” says Dr. Rosenstein. With team members having backgrounds in pathology, molecular diagnostics, clinical chemistry, microbiology and genetics, it should come as no surprise that they plan to participate in clinical research.
Dr. Rosenstein’s vested interest in cannabis safety stems from prior experience with his patients using cannabis. “Over the past five years, we have seen an increased number of patients using cannabis, particularly for managing the side effects of Crohn’s disease and cancer treatment,” says Dr. Rosenstein. “They would bring it up to us and at the time I didn’t know much about it, but anecdotally it’s really clear that a lot of patients have great responses to it.” Not knowing much about the preparation or safety of cannabis at the time led Dr. Rosenstein to advise patients to be very careful if they are immunocompromised.
“When a patient is immunocompromised, a bacterial or fungal infection can be lethal, so because we had patients using cannabis, we wanted to make sure it was safe,” says Dr. Rosenstein. So when Maryland legalized medical cannabis, Dr. Rosenstein and his team saw the need to protect patient safety and Steep Hill was a perfect fit. “We really didn’t want to reinvent the wheel so we looked for someone to partner with,” says Dr. Rosenstein. “Steep Hill has the best technology and the best credibility and we didn’t want to compromise on quality and safety issues. They felt the same way so we partnered with them and culturally it has been a great fit.”
The new laboratories plan to offer a similar range of services that are offered at other Steep Hill labs, such as rapid potency testing for THC-A, ∆-9-THC, CBD, CBD-A and moisture. But Dr. Rosenstein sees clinical opportunities in the East Coast medical hubs. “We want to provide the testing component for studies, providing clinical reproducibility and consistency, and those are the things as a top-notch lab that we are interested in doing.”
With a physician-led group that has experience in molecular diagnostics, partnering with Steep Hill is about being medically focused, according to Dr. Rosenstein. “First and foremost, this is about patient safety.” Because of that, he emphasizes the need for required microbiological contaminant testing, particularly because of his experience with patients. “If you’re a cancer patient and you get a toxic dose of salmonella or E. coli, that can kill you, so testing for microbiologic contamination is of the highest priority.”
According to Warner, bridging the medical cannabis science gap with Steep Hill’s professionalism and experienced doctors practicing medicine is a big deal. “We are working very closely with their medical team to make sure these standards are medically superior,” says Warner. “To have these doctors with such a high level of knowledge in medicine working with us in cannabis analytics is a breakthrough.”
With 2015 coming to a close, to understand and start strategizing for the next year, we must look back on the year and gauge the industry’s progress. A lot has happened this year and there is a lot to look forward to in 2016.
Nic Easley, founder and CEO of Comprehensive Cannabis Consulting (3C), gave a presentation at the High Times Business Summit last week, reviewing the cannabis industry’s progress in 2015, and providing some insights on what to look for in 2016. 3C is a national cannabis and hemp consulting firm dedicated to ensuring the highest standards in large-scale, sustainable organic production and product manufacturing. Over the past eight years in Colorado and nationwide, Easley has helped more than 60 clients design, build, start up, and optimize their operations. Easley is an active participant on multiple committees in various industries, non-profit groups, and rule making organizations that are setting the standards and regulations guiding this industry. Through his involvement he is able to promote sustainable, sensible practices and policies that drive cannabis cultivation and industry best practices into new realms of productivity, profitability, and professionalism.
We were able to sit down with Nic Easley after the conference to get some better insights for how the industry performed in 2015 and what is in store for 2016.
CannabisIndustryJournal: How do you think Colorado’s year of pesticide recalls will help shape the industry’s future?
Nic Easley: As a member of the Pesticide Advisory Committee with the Colorado Department of Agriculture, I think there is a tangible need for better, more comprehensive regulatory guidance. If we come out with strict pesticide regulations, it will be better for everyone in the industry and consumers, but more importantly it will benefit patients gaining access to safe, laboratory-tested medicine. The regulators will need our help to write the rules. Harder laws are good for us though, because the ethical businesses will always take the route of integrity, as opposed to the businesses that cut corners. Those companies not playing above board will be weeded out and reprimanded in due time. A lot of it comes with the responsibility as a grower and producer to facilitate medical needs, that is a responsibility that requires great integrity. As for the testing regulations, there are too many conflicts of interest and we need to look toward third party testing and accreditation to prevent laboratory shopping, skewed results and other inconsistencies. We need to not allow producers to provide their own samples, sampling and sample preparation needs to be controlled through third party laboratories working above board, as opposed to labs wanting to keep clients instead of providing accurate and consistent test results. Looking forward to 2016, we will continue to see the pesticide issue shape the industry, for better or worse, this is a problem we need to find the right solutions for and that comes through working with regulators, like the Colorado Marijuana Enforcement Division, to write the required regulatory framework.
CIJ: Looking nationally, what major trends were highlighted in 2015 and what would you like to see change for 2016?
Nic: With Oregon going online October 1st, and Maryland’s license application process opening up, we are recognizing some diminishing barriers to entry in markets previously difficult to tap due to things like residency requirements and where the capital came from. Maryland’s infused product and processing licenses are much more readily available as opposed to the cultivation licenses due to stipulations. States like Oregon and Alaska that dragged their feet a little with regard to their regulatory model, are just releasing a lot of barriers to entry for licensing applications. Oregon may have missed some tax revenue in the initial launch of the program, but they are doing it right through diligent research instead of using their citizens as guinea pigs. For businesses looking to get started, you can avoid poor decision making by knowing the rules. New and established businesses alike need to take the responsibility to write the rules to be socially, environmentally and economically responsible. If we want to make money in this industry to help the government’s role in keeping us safe, then doing business in the most socially responsible way possible will lead to profitability. What I would like to see change for 2016 is the expanding list of qualifying conditions. As a military veteran, I would like to see Colorado stop looking at the tax revenue of adult use cannabis, and make PTSD a qualifying condition for medical marijuana. The Bob Hoban lawsuit suggests that Colorado is marginalizing medicine because they will make more tax revenue by blurring the lines of adult use and medicine. All of the studies out there, including Dr. Sue Sisley’s work, suggests PTSD can be treated with medical marijuana. That highlights another trend I would like to see change in 2016: We need clinical research on these conditions, because observational research just is not credible enough. We [businesses in the industry] need to actively promote the need for clinical research to help propel social change and get the information and knowledge out there. With the right information, this industry can make informed decisions that will help all stakeholders.
CIJ: What advice can you offer to cannabis businesses for 2016?
Nic: I tell my clients that, because cannabis is still federally illegal, you must understand the present risk associated with the work you are doing. We need to ask questions like how can we do this responsibly and set a good example so when the time comes, the federal government will look to us as a legitimate industry, working with regulators to write the rules for safety. For new businesses, produce the safest, highest quality, and affordable medicine and work with other businesses and regulators to keep innovating in the area of safety. Focus on the structure of your business: build your foundations and using expert advice, you can avoid major pitfalls and become the leaders in this brand new industry. Look for environmentally sustainable solutions, climate change issues need to be addressed in this industry. Use appropriate technology instead of burning coal to grow marijuana, which increases our carbon footprint. This includes both environmentally sound standard operating procedures and the right technologies, but also social justice. We are presented with a terrific economic opportunity to work on climate change issues, so work to address inefficient practices and innovate to be as sustainable as possible.
CIJ: For the entire cannabis industry in 2016 , what kind of growth do you expect?
Nic: We have reached a point where I foresee a holding pattern beginning to take shape. In 2016, the industry will continue to grow and demand will not be satiated by supply. August of 2015 was the first month when Colorado saw over $100 million in sales. We will increasingly see more price fluctuations as bigger projects come online. Many states in 2016 will focus on problems with their regulatory models and devising solutions for them. Businesses will continue their strategic growth planning, with key states potentially coming online for adult use such as Nevada and California. Nevada is one of the most up and coming markets in America with a 68% approval rating, and they have the ability to grandfather in businesses and previous rules associated with their medical marijuana program. Knowing licensing applications can take eight to eighteen months before you can become operational, we have to place our bets wisely. There is a lot happening in all these states and from the big November votes on, chaos will ensue as regulators tackle big problems with the overhaul. In 2016, the cannabis industry will make a big impact on the United States, and the exciting part is that progress is made through business as usual for us.