Today, the sale of marijuana for medical purposes is legal in the state of Pennsylvania, but the cannabis industry is far from stable. In the last four years, the industry has grown by about 84 percent, from $7.8 million in 2012 to about $14.7 million in 2016 (according to the Pennsylvania Department of Health). This is great news for companies involved in both growing and processing cannabis, but it also means that many of the old players are giving way to new ones. The industry is also brimming with M&A activity. In fact, the first quarter of 2017 saw almost as many M&A deals as all of 2016, according to data compiled by Thomson Reuters. In the last four quarters, there

The legal cannabis industry has been booming in Pennsylvania, with nearly $120 million in sales in 2018 and a nearly 300% growth in the number of medical marijuana dispensaries, according to data from the state’s Department of Health. That’s a trend that is expected to continue as Pennsylvania moves closer to legalization at the state and federal level.

 

 

 

 

Three or four years after having joint replacement surgery, James Thomas’ hips started to trouble him. He switched to medicinal marijuana and is currently looking for the perfect strain.

“I haven’t discovered the perfect weed yet,” said the 69-year-old Wilkinsburg former heavy equipment operator. He’s used a spray and smoked flowers, both of which are popular with customers.

“Let’s just say it was mellow,” he added, adding that the spray was similar. “I became a lot nicer as a result of it, laughing, making jokes, and maybe even chatting more than normal. It always made me feel better.”

He also said that it helped him with his hip discomfort.

In 2018, the Wolf administration endorsed cannabis as a treatment for opioid use disorder, despite an absence of research and concerns from experts that it could give patients false hope — or actively harm them.

Pennsylvania’s marijuana business is booming, thanks to customers like Mr. Thomas and the possibility of recreational marijuana legalization in the state. According to the state’s Medical Marijuana Advisory Board, total sales have surpassed $3.4 billion since 2018. $2 billion of those sales have come from dispensaries.

Since the legalization of marijuana for the treatment of severe medical illnesses in Pennsylvania in 2016, 633,557 patients and caregivers have signed up, with the purchase requiring a doctor’s prescription.

And, if Illinois’ history is any indication, if recreational marijuana is allowed in Pennsylvania, sales may rapidly more than double.

Because the state’s Republican-controlled legislature has showed little interest, Cantor Fitzgerald analyst Pablo Zuanic does not believe it will happen until the first quarter of 2025. Mr. Zuanic wrote to investors that the legalization of recreational usage in neighboring states — New Jersey and perhaps Maryland — might push the legislature’s actions. 

Mr. Zuanic argued that without authorized recreational use, the growing number of clinics in Pennsylvania — 131 are already operating — would reduce total sales. The silver lining for customers, according to John Collins, head of the state Office of Medical Marijuana, is reduced costs.

“More stores mean more competition,” he remarked at the board meeting on Tuesday. “You’d think that would happen.”

For example, the selling price of a gram of medicinal marijuana dropped to $14.53 in July, down from $15.67 in January 2020, as sales increased.

 

Cannabis businesses are merging. 

Illinois’ experience may be a sign of things to come in Pennsylvania. According to Mr. Zuanic of Cantor Fitzgerald, the entire cannabis market in Illinois more than quadrupled in the first month after recreational use was authorized in January 2020. Product accessibility, price, and variety, as well as availability in neighboring states, are all factors that may obscure medicinal to recreational sales estimates.

Gov. Tom Wolf and Lt. Gov. John Fetterman both favor recreational marijuana legalization, which may explain Pennsylvania’s appeal to marijuana investors. Mergers and acquisitions have been particularly active in the state this year.

According to Marijuana Business Daily, a trade magazine headquartered in Denver, Colorado, there were a half-dozen transactions totaling $438 million between March and April to buy growing facilities and retail licenses, with Chicago-based Verano Holdings Corp. and Trulieve Cannabis Corp. as the main participants.

In a $110.3 million transaction, Verano purchased three dispensaries in Cranberry Township, Washington, and Monroeville, as well as Agri-cultivation Kind’s and processing facilities in Chester, Pa. Verano also paid $60 million for Agronomed Biologics, which comprised cultivation, processing, and retail rights.

Trulieve, headquartered in Tallahassee, Fla., which owns Solevo dispensaries in Squirrel Hill, Washington, and Zelienople, spent $60 million for a dispensary license under Keystone Shops over the same three-month period. In the Philadelphia region, Keystone has three sites.

Parallel, headquartered in West Palm Beach, Fla., launched its first dispensary in the Friendship area of Pittsburgh in July under the Goodblend brand, with plans for a second location in Erie. On the North Side, Parallel is also building a 124,000-square-foot growing plant.

Today, there is no distinction between marijuana used for medicinal or recreational reasons, but that will change as the business develops, according to Nushin Rashidian, co-founder and editor of Cannabis Wire, a news service based in Brooklyn, N.Y. There will be medicinal and recreational goods available in the future.

“There’s a lot of overlap right now,” she added, citing the same regulators for both purposes as well as the same marijuana suppliers, “but that won’t last.”

“Bifurcation will happen in 10, 20 years,” she said. “Both sides are likely to have far more complex formulations. It’s a massive, massive, massive field, and I believe we’re just getting started.”

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