The race is on to sell med­i­cal mar­i­juana in Mary­land.

Un­ex­pected play­ers get­ting in at the ground level

The Washington Post Sunday - - BUSINESS - BY AARON GREGG aaron.gregg@wash­post.com

A 152,000-square-foot ware­house in Cum­ber­land, Md., could soon be the home of some of Mary­land’s first le­gally pro­duced med­i­cal mar­i­juana. To ad­dress se­cu­rity con­cerns, Peak Har­vest Health says it will in­stall bul­let­proof glass and reti­nal scan­ners to iden­tify those en­ter­ing the build­ing. Em­ploy­ees will wear color-coded uni­forms con­firm­ing where they are al­lowed to be.

By late 2016, if ap­proved by state reg­u­la­tors, the win­dow­less build­ing next door to a po­lice sta­tion could be churn­ing out up to 18 pounds of mar­i­juana a day, enough to treat thou­sands of pa­tients a month.

A year af­ter Mary­land le­gal­ized mar­i­juana for medic­i­nal use, the seeds of an industry are be­gin­ning to form. Ex­pe­ri­enced mar­i­juana grow­ers from across the coun­try have be­gun pil­ing into the state to com­pete for $165,000 a year in state-is­sued li­censes to grow med­i­cal-grade pot.

The Mary­land Med­i­cal Can­ni­bas Com­mis­sion, which reg­u­lates grow­ers, said it expects to give out up to 15 li­censes by late 2015 or early 2016. But at least 60 com­pa­nies are likely to ap­ply for a li­cense, ac­cord­ing to the Mary­land Cannabis Industry As­so­ci­a­tion. The mar­ket could quickly be­come over­sat­u­rated, industry in­sid­ers say.

“Some of the most suc­cess­ful en­trepreneurs in Mary­land have their eye on this op­por­tu­nity,” said Rachelle Ye­ung, gov­ern­ment af­fairs man­ager at Den­ver-based Vi­cente Seder­berg, which is help­ing some com­pa­nies wade through Mary­land’s ap­proval process. “And med­i­cal cannabis providers from other very com­pet­i­tive states are look­ing to op­er­ate [in Mary­land] as well.”

Gaithers­burg-based Green Leaf Med­i­cal has signed a lease for a 42,000 square-foot ware­house in Fred­er­ick County af­ter col­lect­ing nearly $1 mil­lion from in­vestors. The com­pany has packed its board with PhDs, in­clud­ing phar­ma­col­o­gist Vin­cent Njar and agronomist Marla McIn­tosh of the Univer­sity of Mary­land. Fred­er­ick Po­lice Depart­ment vet­eran Tom Chase will ad­vise the com­pany on se­cu­rity is­sues.

But lo­cally based firms will face stiff com­pe­ti­tion from out-of-state grow­ers.

At least two New York-based com­pa­nies — Ci­tiva Med­i­cal and Al­ter­na­tive Medicine As­so­ci­ates, which has es­tab­lished a Mary­land sub­sidiary — were not ap­proved to set up op­er­a­tions in their home state and are vy­ing for a li­cense in Mary­land.

“If you look at the state of Mary­land, you’re not sup­posed to know how to grow mar­i­juana on a mas­sive scale, so you have to look out­side the state for peo­ple with the right cre­den­tials,” said John Pica, a former state sen­a­tor from Bal­ti­more who is help­ing Al­ter­na­tive Medicine As­so­ci­ates with its ap­pli­ca­tion.

Green Thumb In­dus­tries, a Chicago-based com­pany that won three cul­ti­va­tion li­censes in its home state, is also ap­ply­ing for a Mary­land li­cense. The com­pany said it re­ceived county com­mis­sion­ers’ en­dorse­ment to pro­duce med­i­cal mar­i­juana in Hager­stown.

Reg­u­la­tors will con­sider whether the com­pa­nies have Mary­land res­i­dents in their ex­ec­u­tive ranks or among their in­vestors dur­ing the ap­proval process.

Cum­ber­land-based Peak Har­vest Health, which has raised $12 mil­lion from in­vestors, is fill­ing its ranks with well-known lo­cal ex­ec­u­tives and is ag­gres­sively court­ing Mary­land-based in­vestors.

When Mary­land le­gal­ized med­i­cal mar­i­juana, Ethan Ruby, a former pri­vate-eq­uity trader and the com­pany’s co-founder, part­nered with Kevin Gibbs, a Dis­trict na­tive who spent 10 years with the L.A. Dodgers and the New York Yan­kees, and Pe­ter Kirsch, a lo­cal real es­tate ex­ec­u­tive.

Ruby be­came a med­i­cal mar­i­juana ac­tivist af­ter a car ran a red light while he was cross­ing a Man­hat­tan street and slammed into an­other ve­hi­cle, col­lid­ing with Ruby and leav­ing him par­a­lyzed from the waist down.

Years later the in­jury was still painful, Ruby said, and a friend sug­gested he try med­i­cal mar­i­juana.

“Most peo­ple’s ex­pe­ri­ence is just recre­ational in col­lege, but I thought this could be re­ally ben­e­fi­cial,” he said.

Ruby said he spent the bet­ter part of the next decade learn­ing every­thing he could about the mar­i­juana industry, mov­ing his fam­ily in 2010 to Colorado, where he se­cured an ap­pren­tice­ship at a dis­tri­bu­tion cen­ter and learned the me­chan­ics of grow­ing and pro­cess­ing med­i­cal mar­i­juana prod­ucts.

By 2014, he had set up a 64,000 square-foot pro­duc­tion fa­cil­ity in Watertown, Conn. He also co­founded LeafLine Labs, which operates a 42,000 square-foot fa­cil­ity in Cot­tage Grove, Minn.

Last year, Ruby and his team ap­proached mem­bers of the Cum­ber­land City Coun­cil and brought two city of­fi­cials to Con­necti­cut to tour a Ther­a­plant fa­cil­ity there. Eigh­teen months later, Cum­ber­land’s City Coun­cil passed a res­o­lu­tion ex­press­ing its “ex­clu­sive sup­port” for the com­pany’s ap­pli­ca­tion.

If the com­pany’s li­cense is ap­proved by state reg­u­la­tors, a team of 30 to 35 em­ploy­ees would grow the plants in a River­side In­dus­trial Park ware­house and in­fuse the cannabis into the pills, sy­ringes and patches that are be­com­ing be­come the norm for the industry. Peak Har­vest Health says it will ini­tially use only about a third of the 152,000 square-foot fa­cil­ity.

It’s un­clear how large the mar­i­juana mar­ket in Mary­land could be­come or how quickly it could ma­te­ri­al­ize. But Hannah By­ron, ex­ec­u­tive di­rec­tor of the Mary­land Med­i­cal Cannabis Com­mis­sion, said that Ari­zona may be a model for what may hap­pen here; the two states have sim­i­lar pop­u­la­tion sizes. Mar­ket re­search firm Ar­cview es­ti­mates that Ari­zona’s med­i­cal mar­i­juana mar­ket grew from $35 mil­lion in 2013 to $155 mil­lion in 2014, the fastest growth of any state.

But some say in­vestors and grow­ers are jump­ing the gun in Mary­land.

“There are too many peo­ple play­ing in the mar­ket at the be­gin­ning,” said Doug But­dorf, chief ex­ec­u­tive of North Coun­try Roots, a com­pany that failed to win a grower’s li­cense in New York. “I think Mary­land is try­ing to bite off more than it can chew in the short term.”

Mary­land “is seen as a mar­ket that’s ex­cit­ing and there’s op­por­tu­nity there, but it’s go­ing to be costly and you’ll see peo­ple drop off pretty quickly,” he said.

Mary­land’s cap of 15 grower li­censes is more re­stric­tive than places such as Colorado — which has no limit — but looser than Min­nesota and New York, which limit the num­ber of grow­ers to two and five, re­spec­tively.

But­dorf said his com­pany is pass­ing on Mary­land, at least for now, be­cause he thinks there will be too many sup­pli­ers at the out­set.

“There will be a lot of peo­ple los­ing money,” he said, “a lot of peo­ple go­ing out of busi­ness in the first year.”

COUR­TESY OF PEAK HAR­VEST HEALTH

Peak Har­vest Health has se­lected a 152,000-square-foot ware­house at River­side In­dus­trial Park in Cum­ber­land, Md., as a po­ten­tial site to grow and process med­i­cal mar­i­juana prod­ucts.

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