For Liberty Health Sciences, real cannabis prize is U.S. market
Florida-based company views potential to pivot into other sectors as tantalizing
The pending legalization of recreational cannabis in Canada may be attracting all the attention these days, but for Liberty Health Sciences Inc. chief executive George Scorsis, it’s the opportunities that lie south of the border that are allconsuming.
Florida-based Liberty, which until this month counted cannabis giant Aphria among its largest shareholders, has been building a foothold in a rapidly growing U.S. medical cannabis market that is expected to have sales of US$13.3 billion by 2020.
So far, that foothold includes 250,000 square feet of greenhouse space, a handful of dispensaries and a rapidly growing patient base.
But it’s the potential to eventually pivot into other sectors, from health and wellness to the adultuse market, should the latter ever be legalized federally in the U.S., that may be the most tantalizing.
“(Health and wellness) is the segment in which we need to control the supply chain before it goes mainstream,” says Scorsis, a former president of Red Bull Canada who now splits his time between Canada and Florida. “We are going to create new brands. My job is to commercialize businesses.”
Among the pending developments that could accelerate that process for Liberty are proposed changes to U.S. hemp laws.
The U.S. Hemp Farming Act of 2018, a proposed law to remove hemp from Schedule I controlled substances, received Senate approval in early July and could be passed as early as this fall. Should this happen, it will open the door to the development of hemp health and wellness products, such as body care items and vitamins.
That’s because cannabidiol (CBD), a component of hemp, will be able to be grown cheaply and allowed to cross state lines — and firms like Liberty will be able to sell products outside the state in which they produce it.
“For the first time, cannabinoids will be able to be transferred — and products will be developed,” Scorsis says, adding that he’s already been asked to develop sunscreens or supplements with CBD by a number of firms.
While the opportunities are plentiful, Scorsis is frank about the challenges the company faces. He realizes the cannabis market is teeming with new entrants. Competition will be stiff — and financing all these campaigns will be expensive as Liberty jockeys for position.
It will also have to get there seemingly without direct support from Aphria, which last week announced it was divesting its remaining 20-per-cent stake in Liberty in order to comply with Toronto Stock Exchange requirements regarding U.S. holdings.
But Aphria is not backing away entirely: It has an option to buy those shares back within five years, should U.S. laws change, something that led the market to see the deal as a win for both companies.
(On Monday afternoon, Liberty shares were trading as much as 30 per cent above their Wednesday close, while Aphria’s were up 18 per cent.)
“We view this decision as only a temporary departure from investment in the U.S. cannabis industry until such time as U.S. federal cannabis laws are reformed,” Aphria CEO Vic Neufeld said in a release on Thursday. “We look forward to watching our strategic partner Liberty continue to execute on the many opportunities emerging today.”
In the meantime, Scorsis is bullish on Liberty’s position in the medical marijuana space, where he notes they own “cultivation, distribution and sale.”
The LP is headquartered in Gainesville — where it has greenhouses as well as processing facilities and dispensaries — and expects its production capacity will be approximately 14,600 kilograms annually by early next year.
This month, it announced that its revenues, though still modest, had nearly doubled quarter-overquarter in the period ended Aug. 31, to $2.2 million. Its patient numbers also doubled, to 10,000.
“It’s one of the fastest-growing markets in the U.S.,” Scorsis says.
He says Liberty’s edge comes down to education. Each dispensary — the company is opening its fifth and hopes to eventually grow the network to 30 — bills itself as a cannabis education centre where information is easily accessible to patients, most of whom are over 50 and have never used medical marijuana.
To that end, Liberty has physician-trained counsellors within its dispensaries who help explain how cannabis can assist with each patient’s specific medical condition.
If Scorsis has his way, every senior in Florida with a chronic condition requiring cannabis will soon be buying his products.
While Liberty is planting its flag in Florida, its ambitions stretch much farther.
It has a cultivation licence and dispensary in Massachusetts, where it completed a $16-million acquisition, and it also now has a dispensary in Ohio.
Other states that Liberty is targeting for expansion include Pennsylvania, Maryland, Michigan, Connecticut, New Jersey, and New York.
There’s no doubt Scorsis has a tall order to fill.
“I don’t sleep,” he says, downing a coffee before an investor call.
“We have a strategy for adult use. We have a strategy for medical. We believe that we want to be the largest players in the U.S. space.”