Second of two parts about companies seeking to get licenses to operate medical marijuana dispensaries in New Jersey.
If previous success is any indication of how an applicant will fare in New Jersey’s current alternative treatment center application process, PharmaCann need not worry.
According to the company, it scored the highest in New York’s medical marijuana application process and was awarded more licenses than any other applicant in Illinois.
And it is well-capitalized: Earlier this month, California-based cannabis provider MedMen submitted a binding letter of intent to purchase PharmaCann for $682 million in stock, marking the largest cannabis-related acquisition ever in the U.S.
Now, PharmaCann has applied to move into New Jersey, and Jeremy Unruh, its director of regulatory and external affairs, sees its record as one if its best assets.
When Teddy Scott applied for medical marijuana license in Illinois, the molecular biologist-turned-patent lawyer didn’t tell anyone he’d raised $20 million until after he submitted his application. Then he brought in his co-worker Unruh and five months later, they were granted a license.
Three weeks later, on March 1, 2015, PharmaCann was born. Since then, the company has grown to 250 employees and acquired licenses in six more states.
Walk into its 130,000-square-foot facility in Montgomery, N.Y., and it feels like a weed-tech wonderland. One sophisticated gadget — referred to by Unruh as Machine 0001 because PharmaCann’s team worked with the manufacturer for a custom build — fills vape pens with cannabidiol oils used by medical cannabis patients. The machine can fill 10,000 pens per day, much faster than the teams of six employees that used to do it by hand with syringes.
Another tests how well cannabis capsules dissolve in different pH levels.
These were not in the company’s toolbox back in 2015. They have been developed over time, just like its catalog of medical cannabis products.
“When you get into a business, you start with Generation One products that do the job, but are a little clunky — you haven’t had time to develop them, push the technology, make them better, cheaper, more effective,” according to Director of Research and Development Chris Diorio, a New York State-certified pharmacist and 20-year Pfizer Inc. veteran in dosage development R&D, who got into cannabis by shooting CEO Scott an email inviting him to talk shop over beers.
For years, Diorio ate, slept, and breathed pharma. Now his background allows him to see all the possibilities that exist in New Jersey for cannabis, given its pharmaceutical infrastructure.
“I could see opportunities in New Jersey like partnering with drug delivery companies, which have technologies to deliver. There’s a lot of pharmaceutical companies in New Jersey, clinical research facilities in New Jersey,” he said.
“I see that as a big opportunity to partner with folks who aren’t pharmaceutical companies but have technologies or facilities that are in close proximity to each other,” Diorio continued. “A lot of the equipment and raw materials we acquire are from New Jersey because they’re all set up to feed the pharmaceutical industry that is there.”
The jump from pharmaceutical to medical cannabis is intuitive, he explained.
“When you think about it, making a finished product — especially in the medical market like a capsule or a tincture — is no different than taking an active drug in the pharmaceutical industry and putting it into a tablet or capsule to do what you want it to do,” Diorio said. “We’re using the same techniques, the same equipment when you see our manufacturing space. It looks like a pharmaceutical manufacturing facility.”
Except, of course, for the grow rooms filled with 2-foot-tall cannabis plants under purple lights and the photos of cannabis leaves and flowers adorning the office spaces. Still, he said, the entire R&D team at PharmaCann’s New York facility are refugees from the pharmaceutical industry. In New Jersey, it would be drawing from a similar talent pool.
If awarded licensure in New Jersey, their facility here won’t be quite as large. The footprint they’re looking at is about 65,000 square feet, and Unruh said the company applied for licensure in each of New Jersey’s three main regions.
The company applied for one of six New Jersey ATC licenses with $25 million, putting $10 million of that in a small South Jersey bank — he wouldn’t say on the record which one — that was willing to do business with a company in the cannabis industry. It’s one of only about 400 financial institutions nationwide that bank with marijuana-related businesses, according to Unruh.
For small banks, “$5,000 to $10,000 a month over the course of a year, that makes a difference at the end of the year,” he said. “Whereas with other bigger banks, $100,000 doesn’t move the needle.”
Imagine then what $10 million could do for small banks. To protect its reserves, it has to keep its cannabis-related money separate. That prevents the bank from lending out any of the money.
“What does a bank do with deposits? It lends it out, and it makes money lending it out,” Unruh said. “They’d love to be able to put some of this to work. They’d love the opportunity to bring in $10 million worth of deposits and lend out $10 million of deposits. If you fixed banking, that would go about 80 percent of the way toward normalizing our industry and our business.”
Unruh has spent many hours meeting with community banking associations in Washington, D.C. Diorio’s time has primarily been spent in support of the research side, including recent meetings in Israel to discuss opportunities for research collaboration.
The PharmaCann team is large and well-connected. The one thing it doesn’t have going for it is New Jersey roots. Its executive team resides mostly in Chicago. Although there was no residency requirement on the ATC application, Unruh said the company deployed its team to go out and establish relationships here, which is how it came upon local approval and the right properties for the job.
Still, Unruh hopes that PharmaCann’s sophistication will convince the state it deserves one of the six available licenses. The Board of Health announced Oct. 13 that due to the volume of applications it received it would not meet its original Nov. 1 deadline to announce the licensees.
“Lessons that we learned in Illinois, some were relevant in New York. Lessons we learned in New York, we’ve used some for Maryland,” he said. Now all of that intelligence is available for the process in New Jersey.