For Lib­erty Health Sciences, real cannabis prize is U.S. mar­ket

Florida-based com­pany views po­ten­tial to pivot into other sec­tors as tan­ta­liz­ing

Calgary Herald - - FINANCIAL POST - ANNA SHARRATT

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.”

PETER J. THOMP­SON

Ge­orge Scor­sis, CEO of Florida-based Lib­erty Health Sciences, is bullish on the com­pany’s growth am­bi­tions in the pot mar­ket.

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