In the first big-dollar deal in Florida’s budding marijuana industry, a Canadian company paid $40 million for one of seven firms allowed to grow and sell cannabis in the state.
Liberty Health Sciences of Toronto this month bought Chestnut Hill Tree Farm of Alachua County, an operation that’s still very much in start-up mode. Chestnut Hill has yet to open a retail outlet, and Liberty Health Sciences Chief Executive George Scorsis acknowledges that the company remains in a “pre-revenue” phase.
Chestnut Hill’s most valuable asset is its state license to produce medical marijuana. However, state officials have said they’ll issue more licenses for cannabis cultivation as more patients join Florida’s medical marijuana registry, so even the license could prove a depreciating asset.
“It’s possible there could be some devaluation as the state issues more licenses, but we thought it was important for us to be one of the first entrants in the market,” Scorsis said Friday in an interview.
Pot proponents pushed medical marijuana as a safe treatment for cancer, chronic pain and other ailments. The large sum paid for Chestnut Hill stoked concerns that the nascent industry quickly has shifted into a speculative mode.
“This is a completely immature company, and it’s going at a big dollar value,” said Ben Pollara, who led the campaign to legalize medical marijuana in Florida.
Florida voters in November overwhelmingly approved Amendment 2, which makes marijuana available to people with cancer, epilepsy, HIV, post-traumatic stress disorder and other ailments. They must get a doctor’s permission to buy cannabis.
The Canadian company’s arrival underscores just how hotly contested Florida’s marijuana market could become. Most industry players expected half a million Floridians to sign up for the medical marijuana program, but Scorsis says the number could be higher.
“We always saw Florida as a tremendous opportunity because of the sheer population size,” Scorsis said.
Before he took over Liberty Health Sciences, Scorsis ran Mettrum Health Corp., a cannabis cultivator in Canada. That company sold earlier this year for more than $400 million.
Liberty Health Services is an offshoot of another Canadian cannabis company, and Scorsis said its hallmark is growing marijuana cheaply compared to its competitors.
“We are the lowest-cost producer in Canada, and we also will be the lowest-cost producer in Florida,” Scorsis said. “We need to ensure that the product we produce is affordable.”
So Liberty Health Services could bring price competition to Florida, where prices have proven higher than in California and Colorado.
“Right now, there’s not much competition, and there aren’t many patients to compete for,” Pollara said.
As of July 12, there were 23,350 patients on the state’s cannabis rolls, according to the Florida Department of Health.
Now that Scorsis has taken over Chestnut Hill’s operations, he aims to begin opening dispensaries. Scorsis said he’s negotiating three leases in South Florida and one in Central Florida.
He said the stores will focus on explaining the effects of cannabis to patients.
“Our retail outlets will be a combination of education centers and retail outlets,” Scorsis said.
While Liberty Health Services paid a hefty sum to get into Florida’s marijuana market, Scorsis stressed the company’s altruistic bent.
“Medical cannabis is there because patients need it,” he said, “and we need to work backward from there.”
Gov. Rick Scott on June 23 signed a bill that eliminated a 90-day waiting period for pot patients and removed sales taxes from cannabis transactions.
One caveat: Patients can’t buy pot in the leafy green buds most commonly associated with the drug. Instead, cannabis is delivered through vaporizers, oral drops and nasal sprays.
Cannabis companies are allowed to deliver products to customers, so Floridians still can get marijuana in spite of the lack of storefronts.