Harvest Health’s $850 million acquisition of Verano positions the company as one of the preeminent multi-state operators

Harvest Health & Recreation is set to acquire Verano Holdings for the jaw-dropping price tag of $850 million, the largest single acquisition in cannabis history and the next step in Harvest’s vision of becoming the most valuable cannabis company in the world.

In March, the two companies entered into a binding agreement that, once finalized, will make Harvest a dominant force in the industry, with licenses to operate 200 cannabis cultivation, manufacturing and retail facilities in 16 states and territories across North America.

Harvest CEO Steve White calmly described the Verano acquisition as “just part of the evolution of the industry,” but experts and analysts said the blockbuster, all-stock deal is emblematic of the increasing competition to acquire licenses and expand retail footprints before federal policy changes open the floodgates for institutional investors.

“There is absolutely a race to beat the end of prohibition,” said Tom Zuber, managing partner of the law firm Zuber Lawler, which serves the global cannabis community.

Zuber said Harvest is taking advantage of the federal prohibition of marijuana, which has prevented major corporations from entering the U.S. cannabis industry.

Included in the acquisition is Verano’s potential cultivation canopy of 900,000 square feet. Photo courtesy Verano.

“When prohibition ends, a lot of deep pockets are going to enter the market — pharmaceutical companies, alcohol companies and so forth,” he added. “In that context, it will be much harder for smaller companies, and cannabis companies today are smaller companies. It’s going to be harder for them to compete.”

White said that scenario is exactly what Harvest is ready for.

“When large financial partners are prepared to come into the U.S. cannabis arena, we want to be their first choice,” White told Marijuana Venture.

After a flurry of acquisition deals, Harvest Health & Recreation has become one of the largest cannabis companies in the world, with licenses to operate in 16 states. Photo courtesy Harvest Health.

Dena Jalbert, the founder and CEO of Align Business Advisory Services, said mergers and acquisitions are the fastest vehicle for multi-state operators to expand. Most cannabis companies require a huge up-front investment to get licenses and build out facilities before an operation can generate revenue — a process that can take a significant amount of time and burn through a substantial amount of capital.

“An acquisition like this allows an organization to bypass all of that and immediately get access to all of the market,” Jalbert said of the Harvest-Verano deal.

Harvest and Verano set a deadline of April 9, 2019 to sign a definitive agreement and finalize the acquisition.

Harvest is “looking forward to integrating Verano’s people and assets as quickly as we can,” White said.

The companies agreed to a mutual termination fee of $20 million should either entity fail to enter the agreement.

“This (termination fee) is probably just doing due diligence on each other seeing if there are any undisclosed liabilities,” said attorney William Gay, a partner at Wilson Elser who has extensive experience in mergers and acquisitions. “In this case, Harvest is the publicly traded company and Verano is private, so Harvest would be looking very closely at Verano because they haven’t been a recording company.”

Gay said the “stock-for-stock deal” is typical for publicly traded cannabis companies since federal laws in the U.S. prohibit both businesses from domestic banking transactions.

The $850 million price tag was based on Harvest’s share price of CAN $8.79. The acquisition is believed to be the largest to date in the U.S. cannabis industry, surpassing MedMen Enterprises’ acquisition of PharmaCann in an all-stock deal valued at $682 million.

Since going public in November 2018, Harvest (CSE: HARV; OTCQX: HRVSF) has made several high-profile acquisitions and expanded rapidly.

“Our pace is unlike any you’ve seen in this industry,” White said.

Within the past five months, Harvest acquired San Felasco Nurseries, a vertically integrated company in Florida, CBx Enterprises, a Colorado-based extraction and manufacturing company, and Falcon International, a California cannabis producer, processor and distributor.

The Verano acquisition will make Harvest the largest multi-state operator in the industry, based on the number of licenses held, according to the company. Harvest was already one of the biggest cannabis companies in the U.S., with more than 600 employees and licenses for 140 cannabis facilities. The company has grown steadily since opening its first dispensary in Arizona in 2011.

Verano Holdings was one of the largest privately owned cannabis companies in the U.S.

“This is a natural match between like-minded entrepreneurs who have built our companies from the initial facilities into two of the largest MSOs (multi-state operators) in the U.S., with an unwavering focus on operational excellence, superior quality products and service and delivering value to customers and shareholders,” Verano co-founder and CEO George Archos said in a press release announcing the deal. “Our growth and unique positioning in key markets allowed us to evaluate some of the largest players in the space, but we only had one unanimous choice for a major transaction and that was Harvest.”

Post-acquisition, Harvest plans to hire an additional 300 employees, which would bring the combined companies up to about 1,200. Harvest expects to have a total of 13 cultivation facilities, 13 manufacturing facilities and 70 dispensaries operational by the end of 2019. White said the company will continue acquiring other businesses as it moves forward with construction. Harvest has accrued enough capital to fund current and further expansions through 2020.

Since Harvest and Verano both have branded cannabis products in similar categories, it’s unclear what will happen to Verano’s brand identities, but White said he’s found the two companies’ assets to be complementary. For example, Verano has had more success with edibles and branding its flower, while Harvest has a wider range of vape pen lines.

“We anticipate being overly inclusive and really utilizing the distribution channels to push more brands in more places. … We think there is a place for almost everything under the umbrella,” White said.

Changes in Harvest’s executive leadership have not been announced, but White said the company plans to utilize acquired infrastructure as an East Coast hub for Harvest and continue operation of Verano’s nine Zen Leaf locations.

“Harvest is very smart in how it’s going about acquiring licenses,” Zuber said, pointing out that both Harvest and Verano appear to be very profitable. “That’s a sign of discipline.”

“I think one of the big opportunities here is that (Harvest is) picking up a proven team that has operational experience, grow experience and, on top of that, retail experience,” Jalbert said. “The thought leadership that you are acquiring — you can’t find people with this kind of institutional knowledge.”

Harvest CEO Steve White says Verano’s Illinois office will act as an East Coast hub for the multi-state operation. Photos courtesy Harvest.

Jalbert also said she believes a driving factor of the acquisition for Harvest was gaining access to Verano’s research and development and retail analytics, which could prove to be an invaluable resource in forecasting product trends and desired deliverables to consumers.

Gay said the organic R&D assets, such as genetics or any cannabis material, is much more limited in potential, because federally illegality forbids cannabis from being transferred across state lines.

“If Verano has technology in breeding or whatever it is that is of interest to Harvest, they are going to have to figure out how to do that without transferring any clones or seeds,” he said.

Although the cannabis industry remains a mine field of risks and uncertainty, experts agree the pace of consolidation is likely to accelerate.

“The mergers and the acquisitions that are happening right now are a sign that the cannabis industry is growing up,” Zuber said. “In some sense that will be good for consumers because there will be a sophistication of corporate leadership entering the market. It may ultimately reduce options for consumers, but overall I think that it’s a sign of good health in the sense that the cannabis industry is moving in the right direction. It’s maturing toward legalization and I find that to be a very good thing.”

The American cannabis chain Harvest Health & Recreation announced an acquisition today that could make it the industry’s largest retail license holder—with the right to open 123 retail dispensaries across 16 states and territories. Its Canada-listed stock jumped 18% on the morning’s news, to 10.15 Canadian dollars (US $7.57) on the Canadian Securities Exchange.

As cannabis restrictions fall in one state after another, a half dozen companies are racing to become the Starbucks of legal weed. Like Harvest, they must list their stocks in Canada, or with the OTC Markets Group , because the NYSE and Nasdaq won’t accept them as long as cannabis remains federally illegal.

The Phoenix-based Harvest (OTC ticker: HRVSF) will buy the privately held operator Verano, which is headquartered in Chicago, for stock that the companies valued at $850 million. Verano brings with it licenses for 37 retail locations and seven cultivation facilities. The acquisition announcement said that Verano is cash-flow positive.

“It’s a real big deal,” Harvest chief executive Steve White told Barron’s, “particularly if you’re concerned about profitability.”

The merger will add retail outlets in states where Harvest or Verano already have cultivation facilities, thereby enhancing the group’s margins.“We were profitable in Arizona. Then we became profitable in Nevada. Then we became profitable in Maryland and Pennsylvania,” said White. “So far, there hasn’t been a state where we haven’t been able to turn profitable quickly.

Verano also has a proprietary technology for extracting cannabis ingredients at pharmaceutical grade levels, said the companies.

“The combination with Verano fits perfectly with our vision of creating the world’s most valuable cannabis company,” said Jason Vedadi, Harvest’s executive chairman, in the release. Verano executives said they’d considered some of the largest players in the industry, before choosing Harvest as their acquirer.

The companies plan to discuss the deal in a conference call this afternoon.

March 11, 2019 09:28 AM Eastern Daylight Time

PHOENIX & CHICAGO--(BUSINESS WIRE)--Harvest Health & Recreation, Inc. (CSE: HARVOTCQX: HRVSF) (“Harvest”), a vertically integrated cannabis company with one of the largest footprints in the U.S., is pleased to announce that it has entered into a binding agreement to acquire Verano Holdings, LLC (“Verano”), an arm’s length third party, one of the largest privately held multi-state, vertically integrated licensed operator of cannabis facilities, in an all-stock transaction for an estimated purchase price of approximately USD $850,000,000 based on a share price of CND $8.79. The combined company will be one of the largest multi-state operators (“MSO”) in the U.S., as measured by licenses held and facilities permitted. Upon completion of the transaction and regulatory approval, Harvest will hold licenses that will allow it to operate up to 200 facilities in 16 states and territories across the country, including 123 retail dispensaries.

“Our growth and unique positioning in key markets allowed us to evaluate some of the largest players in the space, but we only had one unanimous choice for a major transaction and that was Harvest.”

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Harvest’s planned acquisition of Verano will include:

Following completion of the transaction, the combined company is expected to be operating 30 dispensaries, eight cultivation facilities and seven manufacturing facilities, with expected further aggressive operational expansion. By the end of 2019, Harvest expects to have over 70 dispensaries, 13 cultivation facilities and 13 manufacturing facilities in operation. The company expects continued growth in 2020.

“The combination with Verano fits perfectly with our vision of creating the world’s most valuable cannabis company,” said Jason Vedadi, Executive Chairman of Harvest. “We are confident that this is an opportunity to continue to leverage each of our company’s strengths and drive continued shareholder value, while at the same time achieving the scale we know will give us a leadership position in one of the largest cannabis markets in the world.”

“This is a natural match between like-minded entrepreneurs who have built our companies from the initial facilities into two of the largest MSOs in the U.S., with an unwavering focus on operational excellence, superior quality products and service, and delivering value to customers and shareholders,” said George Archos, Verano Co-founder and CEO. “Our growth and unique positioning in key markets allowed us to evaluate some of the largest players in the space, but we only had one unanimous choice for a major transaction and that was Harvest.”

“Verano has been creating a brighter way for cannabis production, products and health and wellness by assembling a stellar team of experts drawn from the cannabis industry and the top echelons of Fortune 500 corporations,” noted Sam Dorf, Verano Co-founder and Chief Growth Officer. “We are excited to join forces with Harvest to leverage each of our strengths to share the benefits of cannabis in innovative new ways with an ever increasing customer base. Verano and Harvest independently have always focused on business fundamentals to drive year over year growth in both revenue and EBITDA. Together, we expect to accelerate that momentum and raise the bar even higher for the industry.”

The newly combined company plans to continue hubs of operation in both Arizona and Illinois and merge key leadership talent to create a team of the most professional operators in cannabis. Both companies have recently attracted management expertise across consumer-packaged-goods, beverage, spirits, logistics, branding, horticulture, and extraction technologies from some of the largest most influential companies in the world, all supporting the companies’ explosive growth. Similarly, the combined company expects to grow new and existing brands throughout its expanded territory.

“From day one, we have operated as a fundamentally sound business focused on consistent revenue and profit growth. We are excited to bring Verano’s premium brands and operations into Harvest,” said Steve White, CEO of Harvest. “We have the unique opportunity to create truly national brands by deploying these products within the future combined footprint of states and dispensaries. Most importantly, we share the same mission as one new company to improve people’s lives through the goodness of cannabis.”

Pursuant to the binding agreement entered into between Harvest and Verano on March 10, 2019, the parties agreed to enter into a definitive agreement within the next 30 days (the “Definitive Agreement).

Upon closing, Verano shareholders will receive, in the aggregate, a combination of Harvest subordinate voting shares and Harvest multiple voting shares as mutually agreed between the parties, acting reasonably, for a total estimated purchase price of USD $850,000,000 based on a CSE share price of CND $8.79. It is anticipated that the acquisition will close in the first half of 2019.

Closing is subject to the negotiation and execution of a Definitive Agreement, applicable shareholder or unitholder approval, approval of the Canadian Securities Exchange, as well as any other approvals for that are customary for a transaction of this nature. There can be no assurances that the transaction will be completed as proposed or at all. Harvest and Verano have agreed to a mutual termination fee in the amount of US $20 million in the event either party fails to enter into the Definitive Agreement within 30 days from the date of this agreement (other than as a result of an uncured breach by the other party). The transaction was negotiated entirely at arms-length. Verano has approximately US$3.2 million in long term debt which will remain in place following completion of the transaction. Further, completion of the transaction will not result in a change of control of Harvest.

Eight Capital is acting as Harvest’s financial advisor in connection with the transaction and INFOR Financial Inc. is acting as financial advisor to the special committee of Harvest’s board of directors. In addition, Eight Capital and INFOR Financial Inc. have each provided an opinion to the board of directors of Harvest that, as of the date of the opinion and subject to the assumptions, limitations and qualifications on which the opinions were based, the consideration being paid by Harvest in connection with the Transaction is fair, from a financial point of view to Harvest.

New Jersey cannabis supporters received good news this week: adult-use legalization passed another hurdle.

Sen. Nicholas Scutari, author of Senate Bill 2703, said on Feb. 15 that legislative leaders and Gov. Phil Murphy agreed to impose a $42 per ounce tax rate on recreational marijuana. Senate President Steve Sweeney had wanted a 12% levy while Murphy supported a 25% rate.

“We’re closer than we’ve ever been before,” Scutari stated. “However, if I thought we were all done, I’d be the first person calling a press conference.

This was a major topic of discussion at Accelerate Cannabis four days later on February 19 at the New Jersey Performing Arts Center (NJPAC) in Newark. About 150 business people, officials, activists, lawyers and service providers gathered to share ideas about legalized pot in the Garden State. Speakers on a series of panels discussed a wide range of topics from dealing with municipalities to developing new products.

The tax issue had become a stumbling block after the bill passed in two committees and went to the full House and Senate for debate in November.

DASHEEDA DAWSON: “The face of cannabis has changed and no one on Main Street knows that yet. People need to be re-educated because in some ways we’ve been hoodwinked.”

The state is also working on expanding its existing medical program. After a competitive process wrapped up last year, the Department of Health awarded six new licenses, doubling the number in the state to 12.

New Jersey currently has 41,000 pot patients, more than double the 17,000 when Murphy took office in 2108. The health department has also reduced the fees to participate in the medical program from $200 to $100 and now offers discounts to seniors.

“I want to see those fees continue to come down,” noted assistant health commissioner Jeff Brown, who’s responsible for oversight of the cannabis program. “We’d like the industry to bear the brunt of running the program instead of the patients… We need to get rid of the sales tax on medical cannabis and the rule that patients have to go back to their doctor every 90 days. It should be once a year to check in.” The tax is 7%.

Troy Kaplan, director of new markets for new state licensee, the Chicago-based Verano Holdings, believes New Jersey is an attractive market for businesses, especially for bigger integrated cannabis companies. “Most of these larger companies want to plant their flag in every state,” he commented. “In New Jersey, with the new governor and enhancements in the program, it just made sense to be here.”

The message that cannabis is an effective medicine for many aliments such as arthritis, Lupus and anemia has been lost in all the noise, Dasheeda Dawson, founder and CEO of MJM Strategy, contended. “The face of cannabis has changed and no one on Main Street knows that yet,” she noted. “People need to be re-educated because in some ways we’ve been hoodwinked by Big Tobacco, Big Paper and Big Medicine.”

DEBRA BORCHARDT: “If you’re a female-led company, you have to work twice as hard and twice as many hours to get half the money the guys are going to get.”

Dianna Houenou, policy counsel for the ACLU of New Jersey, has been working with lawmakers to push for criminal-justice reform in the legislation, including expunging records for people convicted of marijuana infractions. “We want to see meaningful access to jobs and business opportunities,” she stated. “Advocacy groups have been shouting at the top of their lungs explaining the injustice. You cannot do this work without affirmatively addressing the War on Drugs was created with racist intent.”

Discrimination also extends to women seeking venture capital funding for cannabis businesses, Green Market Report’s Debra Borchardt CEO and co-founder related. “If you’re a female and thinking of raising money, you should know that men just want to invest with other men,” she observed. “The amount of money that women-owned companies raise is far, far lower. I’ve seen men with less experience raising money with just an idea. Then you’ll see a woman-led company with profits and doing everything right and they’ll be like, ‘Well, I don’t know.’ I’m just being honest. If you’re a female-led company, you have to work twice as hard and twice as many hours to get half the money the guys are going to get.”

Panel host Ellie Siegel, CEO of Longview Strategic, which produced the event, recommended that future retail store owners begin early and build a team of service providers, such as security specialists and financial planners. “Now is the time to be situating yourself,” she expounded. “You can’t go in there without a plan. You need to put things in place by deriving what information you can from data points and start to put one foot in front of the other.”

Summing up the general feeling of excitement in the building, Tara Sargente, executive director of the New Jersey Cannabis Industry Association, said it’s about time that adult-use legislation passes in her state. “I don’t believe the sky will fall,” she told Freedom Leaf.  “The sky hasn’t fallen in other states. In fact, it’s been a significant fiscal boom.”

Partnership Receives Investment from Greenfield Global CEO

CHICAGO, IL and COACHELLA, CA – February 27, 2019 –Verano Holdings, (Verano™), a national, vertically integrated private operator of licensed cannabis cultivation, manufacturing and retail facilities dedicated to improving lives, today announced it has created an exclusive and controlling partnership with D9 Manufacturing, including a strategic multi-million dollar private investment by Howard Field, President and CEO of Greenfield Global.

D9 is a licensed developer of integrated high capacity, commercial grade cannabis extraction systems for legal cannabis processors. Greenfield Global is a leading producer of high-purity alcohols, solvents and biochemicals.  Greenfield’s extensive portfolio includes premium products, regulatory expertise and industry-leading services.

The D9  transaction is a cash and stock deal valued at more than $20 million.  Verano expects to use D9’s extraction systems across the country to increase extraction capacity, with the ability to produce over 3000 kilograms monthly per facility.  The system also includes formulating special and unique botanical infused super oils for medicinal purposes that are third-party tested, and certified pesticide-free.

“This partnership exemplifies our shared vision of creating a brighter way for cannabis extraction and production of the highest quality products,” stated Ron Goodson, Verano’s President and COO.  “The D9 technology will be a transformative addition to Verano by facilitating entry to the California market, producing multiple new revenue streams, expanding brand categories for both CBD and THC products and creating jobs.  In an industry where there is a shortage of current FDA and Goods Manufacturing Practices (cGMP) extractors, we plan to license D9 systems to a network of cannabis producer partners to provide white-label production for branded cannabis-infused products. Extraction capacity is critically important, especiallyin infused products,which is the fastest growing segment of the cannabis market. This partnership of combined talents, resources and technology allows for dramatic scaling.”

D9 was the first to develop an integrated, turnkey self-contained, ethanol full-loop cannabis extraction system in California, designed for easy deployment and setup for legal cannabis facilities.  Taking a pharmaceutical/food manufacturing approach for operating excellence, D9 instills best Standard Operating Procedures (SOPs) across all levels of current FDA and cGMP in manufacturing operations and safety.  D9’s new proprietary system is designed to process 400 pounds of cannabis flower or trim per hour, including full pesticide removal at the molecular level. The system and its technology are designed to meet or exceed today’s pharmaceutical standards.  D9’s manufacturing operations will be housed in a newly constructed facility in Coachella Valley, California.

“Verano has a reputation for producing superior, ultra-pure cannabis products at its indoor grow facilities,” stated Ferrel Raskin, D9 CEO.  “We’re excited to join forces with this dynamic team and expand D9’s technology enabling Verano to expand into outdoor grow environments where pesticides are pervasive in the soil and air, yet still maintain the highest levels of quality and purity in extracts from all usable plant parts at extremely high production levels.  Verano opens the door for us to expand immediately into numerous additional markets, while our systems offer the ability to anticipate and preemptively adapt to regulatory changes with no down time. As federal oversight continues to enter the cannabis industry, manufacturing processes will come under more intense scrutiny, increasing the necessity and value of D9’s processes, services and the brain trust of this partnership.”

Unique to D9, the newly designed, high-sensitivity system can be programmed to isolate individual phytocannabinoids, enabling the automated preparation of custom cannabinoid ratios for specific products.  This can allow the branding of oils with unique name and numbering conventions to illustrate purity and trusted performance. These and other custom formulations open the doors to numerous business industry verticals, including: alcohol & spirits; pharmaceutical medicine, new and expanding biotech research of the endocannabinoid system, cosmetics and foods.

“Greenfield Global is a company built on innovation. This opportunity opens the door to developing new products and entering new industries, helping us meet the diverse and demanding requirements of our customers today and tomorrow,” stated Howard Field, President and CEO of Greenfield Global.  “We work with partners to develop custom solutions while meeting the highest regulatory standards.  The cannabis and hemp market opportunities show immense potential. This partnership puts us on the ground floor with companies like Verano and D9 to ensure we learn, contribute and are well  positioned for the future.”

Verano intends to deploy D9’s cannabis extraction systems to increase extraction capacity and throughput across the four production facilities it operates in Illinois, Nevada, Florida, Maryland in addition to facilities currently under development in Massachusetts, New Jersey, Ohio, Oklahoma, Pennsylvania and other areas.

Chicago-based, multistate marijuana operator Verano Holdings announced it is moving into another state through the acquisition of a Massachusetts marijuana business.

Verano said in a news release it has acquired 100% of Four Daughters Compassionate Care of Sharon, subject to review by Massachusetts regulators. Verano would not disclose the exact purchase price but said the transaction is valued north of $30 million.

The acquisition includes:

Verano has stakes in 10 operating facilities in Florida, Illinois, Maryland and Nevada, plus more than 45 licenses under development in Florida, Maryland, Michigan, Ohio and Puerto Rico.

Opioid prescriptions can now be used for medical marijuana instead, in a bold move to prevent increased addiction to the deadly pharmaceuticals

A new program allows patients who are eligible for opioid prescriptions to get medical marijuana instead.

Sue Ogrocki/AP/REX/Shutterstock; Seth Perlman/AP/REX/Shutterstock

In August, Illinois Governor Bruce Rauner signed the Alternative to Opioids Bill, making it possible for patients in the state who had been prescribed opioids to opt for medical marijuana instead. The Opioid Alternative Pilot Program (OAPP), which is the first of its kind in the U.S., officially began accepting patients at 8:30 on Thursday morning.

“Just half way through the first day of the launch and we’ve already seen a lot of interest and patients and physicians have successfully registered for the Opioid Alternative Pilot Program,” Illinois Department Public Health OAPP Director Conny Meuller-Moody told Rolling Stone in an email. “We’re optimistic the program will benefit many Illinois residents and offer them an alternative for managing their pain.”

Interested patients who are over the age of 21 can enroll in the program using their state ID and written certification from a physician saying that they’ve either been prescribed opioids or have a condition for which they could be. Dispensaries will validate patients’ enrollment using an online verification database, and can then provide them with medical marijuana.

The state has an existing medical marijuana program, which was established in 2014, but it’s one of the most restrictive in the country, with long wait times and a complicated, bureaucratic application process. The idea is for this new system to be a quicker and easier way for patients who need it to access medical marijuana. Enrollment in the program gives patients 90-day temporary access to the medical marijuana program, and during that time they can apply to join long-term. And for those who are uncertain about whether marijuana will be sufficient to ease their pain, enrollment will not invalidate their opioid prescription, so they will still have access to their usual medication and use marijuana to supplement — and then decide if they want to replace opioids altogether.

Opioid overdose deaths are on the rise, with Americans now more likely to die of accidental overdose than in a car accident, and the prevalence even lowering the overall average life expectancy in this country. Politicians and healthcare providers are scrambling to find ways to curb this deadly trend. In the past, marijuana was seen as a “gateway drug” that would lead to the use of more dangerous street drugs, but now it’s often used as a safer alternative to some of the most dangerous drugs out there — the ones that come from pharmacies — or an “exit drug,” as Sam Dorf, the Chief Growth Officer of Chicago-based cannabis cultivation, manufacturing and retail company Verano Holdings calls it.

“The implementation of Illinois’ Opioid Bill aptly illustrates how attitudes about cannabis are changing for the better,” Dorf told Rolling Stone in an email. “With the Opioid Bill, Illinois is at the forefront of recognizing the benefits of cannabis for health and wellness and combatting opioid abuse. It will serve as a great pilot program for other states to watch and as they develop their programs.”

“This has given a lot of patients access to an alternative, and that’s what people are looking for,” says Anthony Marsico, Verano Holdings’ Chief Retail Operating Officer. “Patients are excited. We’ve been getting tons and tons of phone calls with people asking how they can get enrolled.”

With medical or recreational marijuana now available to more than half of the U.S. population and more states’ leaders talking about legalization, 2019 is set to be a very big year for the cannabis industry.

Growth is expected to continue at a rapid pace, big brands are eyeing the industry’s revenue potential, and acquisitions are happening more frequently than ever. With all of this change, cannabis industry executives are bracing for a big year in 2019.

Cannabis stocks will rebound.

“I think the recent fourth quarter downturn in the cannabis markets is a temporary phenomenon,” says Steve Gormley, CEO of International Cannabrands. “I think the marijuana industry, and in particular Canadian cannabis stocks, is poised for a robust rebound in the first two quarters of 2019. I believe as 2019 progresses, we will see a shift in focus with savvy investors looking for companies that have strong fundamentals.”

CBD, CBG, CBN and CBC will dominate.

"It's not all about CBD,” predicts Peter Vogel, CEO of Leafwire. 2019 will be all about CBG, CBN, and CBC in addition to the huge growth in CBD. Since the Farm Bill has been signed, there will be an increased amount of research conducted on all the other 400 cannabinoids in hemp, like CBN, CBG, CBC, because it will finally be allowed. These specific cannabinoids all have healing qualities that can be used to treat specific conditions and ailments. Once more research is completed, farmers will start to develop clones rich in a specific cannabinoid, prices will drop for these alternative cannabinoids, and we'll start to harness the power of the whole plant."

Big Pharma will evaluate cannabinoids.

“In 2019, I predict an increasing number of major pharmaceutical companies will be evaluating cannabinoid-based drug development programs,” says Sid Taubenfeld, CEO of Jay Pharma. “A growing body of research suggests the use of cannabinoids and the manipulation of the endocannabinoid system could offer new therapeutic options for many serious diseases, including certain cancers. At Jay Pharma, we plan to evaluate CBD and other cannabinoids in combination with existing pharmacologic interventions in hard-to-treat conditions that may include glioblastoma multiforme and triple-negative breast cancer. The launch of clinical trials to evaluate the efficacy of these cannabinoid combination therapies may represent an important step towards improving clinical outcomes in a population of patients with few other effective therapeutic options.”

The cannabis industry will disrupt established industries.

“2019 will be the year that the cannabis industry arrives at the grown ups’ table,” says Mark Grindeland, Co-founder and CEO of Coda Signature. “After operating on the fringes for several years, in 2018, big business began to recognize that cannabis had potential to disrupt established industries from pharma to spirits to consumer packaged goods. In 2019, the disruption will go from potential to reality and the industry will explode. As the momentum grows, I am optimistic that by 2020, we will see new laws that enable our industry to operate on a level playing field with the Canadian marketplace and provide us with the ability to partner with public companies.”

Brand competition kicks into high gear.

"2019 will be the year of the brand,” predicts Carles Jones, founder and CEO of LucidMood. “Up until this point, having a cannabis product was enough to make money. This is just not the case anymore. As competition has intensified, undifferentiated staples like flower and concentrates have been commoditized, resulting in declining margins. In parallel, consumers have become more sophisticated and now demand products that deliver consistent and predictable experiences. It's no longer enough to provide products that simply get you "high" -- dispensaries must provide products that fulfill a differentiated brand promise.”

The U.S. will get closer to descheduling cannabis.

“In 2019, cannabis companies will increasingly focus on building their brands and investing in their technology pursuant to establishing global intellectual property portfolios,” says Tom Zuber, partner and founder of Zuber Lawler & Del Duca. “Furthermore, the federal government in the United States will increasingly embrace the notion of removing cannabis from the Schedule I of Control Substances Act, perhaps pursuant even to potential removal prior to the end of the current presidential administration.”

CBD will take center stage.

Hemp CBD products are going to be the big story for 2019 with the passage of the 2018 Farm Bill that legalizes hemp,” says Charlie Finnie, Chief Strategy Officer of MariMed. “This opens the doors for CBD research, nationwide distribution, and broad-based retail sales. Hemp CBD research, coupled with consumers experiencing CBD’s health benefits firsthand, will dramatically impact attitudes about cannabinoids in general and strengthen the pressure for federal reclassification of cannabis.

Expect a hemp-based CBD products shortage.

“The passing of the Farm Bill in the US will put a spotlight on hemp-based CBD products” says Khurram Malik, CEO of Biome Grow. “However, we expect a global shortage of supply in 2019 to meet much of this demand because it is much harder to harvest and process hemp than other crops. New farms will have a tough time being first-timers. We also expect legislation at the federal level in Congress to be introduced regarding the legalization of medical cannabis.”

There will be too many cannabis licenses.

“I'll put myself on a limb -- I think that in 2019 cannabis will be federally legal,” predicts Carly Bodmer, Director of Sales and Communications of GrowFlow Inc. “This is the year to do it. Canada and several states are seeing the benefits from it. It's too tempting not to, and it’s increasingly popular and a non-partisan issue as children, vets, and communities are benefiting from the plant. I also think we will see an oversaturation of licenses in each state unless the federal program is smarter than what we have seen in each legal state so far."

California’s cannabis business climate will improve.

“We anticipate a number of exciting developments for 2019,” says Sam Dorf, Chief Strategy Officer of Verano. “First, the number of cannabis companies listing on public exchanges and consolidating will continue at a breathtaking pace. Second, there will be rapid movement to legalize recreational cannabis due to the pro-cannabis stance of newly elected and key officials in states such as Illinois, New York, and New Jersey. Other states will follow their lead. Key drivers are recognition that cannabis prosecution disproportionately impacts minorities, legalization can reduce opioid addiction and deaths, and the desire for cannabis tax revenue.

“Third, California’s tighter regulations and policing of non-compliant operators creates a better business climate for professional, national operators who have been waiting on the sidelines to tap into the world’s largest cannabis market and operate like they do in other states. Fourth, we will see the beginning of real national brands with state-to-state licensing deals.”

Change remains the norm.

Based on the predictions from these executives, 2019 will be an exciting year in the cannabis industry, but change will still be the norm. It remains to be seen whether the legalization of industrial hemp will negatively affect legal cannabis sales or if it will have a positive effect on the pro-cannabis movement. In addition, it will be interesting to see which brands rise to the top and stay relevant in 2019 and beyond.

The Green Market Report asked some cannabis industry leaders what they think 2019 will bring for their companies and for the landscape in general.

Sam Dorf, Chief Strategy Officer, Verano Holdings

It will be another year of tremendous growth and opportunity for the cannabis industry with the following:

  1. We will see a tidal wave of states following the lead of legalized states and Illinois, New York and New Jersey, whose newly elected and key officials support legalization. Key drivers are recognition that cannabis prosecution disproportionately impacts minorities; awareness that cannabis is not a gateway drug; studies showing legalization can help reduce opioid addiction and deaths; and cannabis-derived tax revenue.
  2. We expect the pace of cannabis companies listing on public exchanges will accelerate even more in their quest to access capital.   This, in turn, will fuel rampant consolidation and growth.
  3. With consolidation, we will see the beginnings of the first real national cannabis brands.
  4. California’s tighter regulations and policing of non-compliant operators presents an opportunity for national operators, like Verano, who have been waiting on the sidelines, to tap into the world’s largest cannabis market and operate like they do in other states

Mitch Baruchowitz, Managing Partner, Merida Capital Partners

We see 2019 in 2 distinct ways: The Rise of the Consumer, and the Rise of the Product. With a more developed consumer data landscape, companies will start focusing on the type of products offered.  This will drive and be driven by segmentation of patients/consumers into more defined verticals.  As that occurs, blurry lines on why people are consuming cannabis will become more clear, which will allow research and data to accelerate and further product specification to occur.  When that happens, we will see the Rise of the Brand as companies compete in the defined segment-this might be more a 2020 phenomenon.

Erik Blakkestad, Client Relations, Electrum Partners, LLC

Capital raised by cannabis-related companies will triple from $13.8 billion to over $40 billion in 2019. The primary driver will be a dramatic increase in funding of ancillary businesses supporting the industry coming from perennial venture capital epicenters Silicon Valley and New York. 

Dylan Summers, Director of Government Affairs, Lazarus Naturals

“If the recent explosion in popularity of hemp-derived CBD is any indication, the zeitgeist of cannabis seems to be trending beyond mere tolerance to overall acceptance. Being championed by Senators Ron Wyden (D-OR), Mitch McConnell (R-KY) and Rand Paul (R-KY), the language legalizing hemp in the 2018 Farm Bill has something which seems to be a rarity in today’s political climate: nearly unanimous bipartisan support. The fact that cannabis is being realized for its potential is resolutely a step toward lending practical and legal credence to the plant. As hemp and its products becomes continually more accessible it is only a matter of time before the optics of cannabis overall is changed from back-alley-indulgence to a serious resource for supplementing a health-forward lifestyle.” 

By Tom Schuba

Cannabis is becoming big business in Illinois, with some local pot companies emerging as national leaders after inking record-setting deals and starting to trade publicly in Canada, where marijuana was recently legalized. Meanwhile, Democratic lawmakers are moving again to legalize recreational cannabis statewide — this time with the support of pro-pot Gov.-elect J.B. Pritzker and powerful House Speaker Mike Madigan.

Many of those involved in these expanding efforts make up the Sun-Times’ list of the 10 most influential people in Illinois cannabis for 2018.ADVERTISING

Charlie Bachtell

CEO and Co-Founder, Cresco Labs

Cresco Labs CEO Charlie Bachtell | Cresco Labs

Charlie Bachtell developed his “entrepreneurial spirit” while serving as general counsel at Guaranteed Rate.

Bachtell and two other Guaranteed Rate alums started Cresco Labs in 2015 after reviewing Illinois’ recently-passed medical cannabis law.

“How often does it come across your desk where you could develop something that changes the way that people think about medicine, changes the way that people think about criminal justice and criminal justice reform and then also it creates an interesting business opportunity not only for yourself but for the state and the community that you live in,” said Bachtell, a Berwyn native.

The River North-based pot firm now has operations in six states, with plans to expand to New York and Massachusetts. In October, Cresco began trading on the Canadian Securities Exchange after carrying out a reverse takeover of an existing company. The public offering comes on the heels of a $100 million private funding round, the second-largest for an American pot company.

Bachtell — who was recently appointed to the restorative justice and safe communities committee of Pritzker’s transition team — now hopes to grow the burgeoning brand into a national presence.

Ben Kovler

CEO and Founder, Green Thumb Industries

GTI founder and CEO Ben Kovler | GTI

Ben Kovler has been a pot proponent since attending Pomona College in Claremont, Calif. In 1996, Kovler voted for Proposition 215, a ballot initiative that legalized medical marijuana in the state.

Almost two decades later, Kovler started Green Thumb Industries. Headquartered in River North, the rapidly-expanding cannabis company now has eight manufacturing facilities and 60 dispensaries spread across eight states. Earlier this year, GTI raised $67 million after the company was listed on the Canadian Securities Exchange. According to Kovler, the company’s growth has happened “one step at a time.”

Kovler was drawn to the cannabis industry based on “how interesting of a puzzle and of a problem it is [to find] how and where the value is going to be created.”

“At the end of the day this is the entire full circle of an industry, which is really about improving people’s lives and offering them a choice, medically in the program in Illinois and broadly,” Kovler added.

Teddy Scott

CEO and Founder, Pharmacann

Pharmacann CEO Teddy Scott | Provided by PharmaCann

Teddy Scott recently brokered the largest acquisition in the history of the marijuana industry, selling Oak Park-based PharmaCann to touted California pot brand MedMen for $682 million in October.

Scott, a native Texan with a Ph.D in molecular physics, worked as an attorney for pharmaceutical and biotechnology companies before building PharmaCann into a top player in the pot business. In 2014, Scott started the company after a friend told him that Illinois lawmakers had voted to legalize medical weed.

After obtaining licenses to grow and sell the drug in the state, PharmaCann has since expanded to seven others. The decision to sell the company to MedMen, Scott said, “was all about creating the leading company in the entire United States.”

“PharmaCann had quickly grown to over 250 employees with licenses in 8 states, but we needed to continue growing and at an even faster rate,” Scott said. “By doing the deal with MedMen, we are able to immediately grow and capture the next round of markets that we value the most – Florida, California and Nevada.”

George Archos

CEO and Co-Founder, Verano Holdings

Verano Holdings CEO and chairman George Archos | Verano Holdings

George Archos was encouraged to get into the medical cannabis industry after seeing the drug’s healing effects on a cousin with multiple sclerosis.

“I went into cannabis because it’s an opportunity that we saw to give relief to thousands of our citizens in Illinois,” said Archos, who grew up in the northwest suburbs.

After Illinois lawmakers made medical pot legal, Archos toured cannabis facilities in Colorado before applying for licenses to grow and sell pot in his home state. Archos noted that he was impressed with what he saw, but thought his team could do better.

He soon started Ataraxia, which now operates a cultivation facility in Albion and three dispensaries across the state.

In October, Ataraxia and several other existing cannabis operations were consolidated into Archos’ newly-minted pot firm Verano Holdings, which has also acquired another weed company. Verano, which recently raised $120 million in private funding, now licenses or controls four cultivation centers and six dispensaries in Illinois, Florida, Maryland and Nevada and has plans to expand to Puerto Rico and four other states.

“This transformative investment will fast-track our long-term goal to dominate the most important growth industry in the United States,” Archos said in an announcement.

Mark de Souza

CEO, Revolution Enterprises

Revolution Enterprises CEO Mark de Souza | Mark de Souza

Unlike other “ganjapreneurs” in the state, Mark de Souza didn’t start the company that he now runs.

De Souza, a Lane Tech graduate, spent over 30 years working at the Chicago Board of Trade and the Chicago Mercantile Exchange before more recently turning his focus to business acquisitions and hard asset investments.

The course of his career shifted when he was introduced in 2015 to Oleg Movchan, who was at the time raising capital to start Revolution Enterprises and now serves as the company’s deputy CEO and chief strategist. Later that year, de Souza made his first investment in Revolution before being tapped to serve as the company’s chief executive in 2016.

Revolution now runs the state’s two largest cultivation centers in Barry and Delavan. The facility in Delavan is currently undergoing a massive expansion as the company prepares to ramp up production to meet an expected increase in demand related to the recently-passed Alternatives to Opioids Act. The law, which gives opioid users temporary access to medical cannabis, is set to go into effect early next year.

Pritzker recently named de Souza to his transition team’s agricultural economy committee.

Dina Rollman

Chief Compliance Counsel, GTI and Founder, Illinois Women in Cannabis

Dina Rollman is founder and president of Illinois Women in Cannabis. | Provided photo

Dina Rollman first grew interested in cannabis after reading a Sun-Times article about medical pot being legalized in Illinois in 2014.

“I pulled up the statute that had passed online and read it and my jaw pretty much dropped to the floor because Illinois had already mapped out what this industry was going to look like,” said Rollman, then a commercial litigator who had briefly worked in the Office of Executive Inspector General under incarcerated former Gov. Rod Blagojevich.

A law partner then introduced Rollman to her brother, who was starting up GTI alongside his childhood friend Ben Kovler. Rollman helped Kovler and his team write applications for medical cannabis licenses in Illinois, and the fledgling company was initially selected in 2015 to operate three cultivation facilities and a dispensary.

After attending a series of meetings with GTI’s leadership team, Rollman founded Illinois Women in Cannabis when she realized she was often the only woman in the room. The nonprofit, which has about 150 active members, now holds networking and educational events that are designed to make women more aware of opportunities in the space.

Around the same time Rollman founded Illinois Women in Cannabis, the north suburban native started her own firm dedicated to cannabis law. She was eventually hired last year to serve as GTI’s chief compliance counsel, bringing her work with the company full circle.

Dan Linn

Executive Director, Illinois NORML and General Manager, Maribis

Illinois NORML director Dan Linn | Dan Linn

Dan Linn has spent over a decade advocating for cannabis legalization by lobbying lawmakers in Springfield and giving speeches across the state.

During his time working with the National Organization for the Reform of Marijuana Laws and the Marijuana Policy Project — the country’s most powerful pot advocacy groups —  state lawmakers have legalized medical marijuana and started pushing recreational cannabis legislation.

After Illinois’ medical cannabis law was passed, Linn started a consulting firm to help prospective business owners obtain licenses, and he now manages a pair of Maribis dispensaries in Chicago and Springfield.

While the shift has made him “a target for people’s criticisms” — some of whom insist that his dual roles present a conflict of interest — Linn plans to continue lobbying for full-on legalization while also working for Maribis.

Donte Townsend

Founder, Chicago NORML

Chicago NORML founder Donte Townsend | Chicago NORML

Donte Townsend started the Chicago chapter of NORML last year as a way to push for equity in the state’s predominantly-white pot industry.

Illinois currently has no black-owned medical dispensaries or cultivation centers. Townsend hopes cannabis legalization can both embolden black and brown entrepreneurs and spark reforms to the criminal justice system.

Aside from meeting with lawmakers, the nonprofit also offers services to communities that have been ravaged by the drug war, including dispensary and cultivation training and expungement seminars.

Townsend previously worked as a budtender at a Windy City Cannabis dispensary in south suburban Posen. He is now putting together an ownership group and finding investors to build and license a cultivation center in Illinois. He ultimately hopes to use some of the money from the endeavor to “help fix the city.”

“We just want our cut so we can revitalize our communities,” said Townsend.

Kelly Cassidy

Illinois State Representative (D-Chicago)

State Rep. Kelly Cassidy | Rich Hein/Sun-Times

Kelly Cassidy was raised on Anna Maria Island on Florida’s Gulf Coast in a “politically aware family.”

Cassidy’s father was an Irish immigrant and her mother was one of the first women admitted to the Coast Guard during World War II. Both parents encouraged her to vote and stay involved in politics.

Since moving to Illinois, Cassidy has lobbied on behalf of the National Organization for Women, worked for Senate President John Culluerton and served in the Cook County State’s Attorney’s Office.

Cassidy and state Sen. Heather Steans have worked in tandem on a series of cannabis reform measures. The duo led the push to decriminalize pot in Illinois in 2016 and more recently introduced legislation last year to legalize the drug for adult use. Although their initial legalization efforts fell short, the pair will introduce new bills as early as January.

Heather Steans

Illinois State Senator (D-Chicago)

State Sen. Heather Steans | State Sen. Heather Steans’ office

Heather Steans wasn’t immediately sold on medical marijuana legalization when it was first being debated in Springfield.

“As I started paying attention to that as an issue and really delved into what I thought about it, I just ended up thinking it was the right public policy, primarily because I think prohibition has been such a non-workable solution,” Steans said. “I just don’t think prohibition serves anybody very well and it just doesn’t work.”

Steans has since become one of the state’s leading cannabis advocates, co-sponsoring legislation to decriminalize the drug and pushing again for full-on legalization with Rep. Kelly Cassidy.

Raised in River Woods and Bannockburn, Steans views as a “positive step” toward improving Illinois’ dire fiscal condition.

“I’m hoping that by the time I leave, we’re in much better fiscal shape,” Steans said. “That’s what I really care about.”

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