Millions of dollars, hundreds of applicants, five state licenses
When the political pundits tossed around numbers and aliments, there were very few “experts” to consult. Denver Westword marijuana critic, William Breathes who got the job after responding to a “Marijuana Critic Wanted” ad he found on Craigslist, Kyle Kushman, who was featured in the High Times’ January 2011 issue, which “coincidentally it was High Times’ 420th issue ever,” and Mark Kleiman, a 61-year-old professor of public policy at UCLA and active tweeter—are a few found from Google-ing “marijuana experts.”
However, the counseling voices during the bill’s negotiations were the people with the deep pockets.
“When the bill was drafted, we lobbied on the bill to make sure we had a bill that would develop a strong industry in New York because you have to have an industry to sustain itself,” Bolton-St. Johns lobbyist, Ed Draves said.
Draves represents members of the Retail, Wholesale and Department Store Union and founded the Medical Cannabis Industry Alliance of New York with fellow lobbyists Patrick McCarthy and Lisa Reid of Mercury Public Affairs less than two weeks after Cuomo signed the bill.
Lobbyists spent years alongside state officials putting their commentary
into the pot.
The restrictive bill only allows for no more than five manufactures of which can open a mere four dispensaries each. Thus meaning, 20 dispensaries are expected to satiate the fourth largest populated state, according to the 2014 United States Census Bureau.
Draves expects to see at least 30 companies vying for licenses issued by the DOH. Among those companies are KannaLife, Terra Tech and Strains of Hope. Simply to enter the running, each of these companies will have to put up what Green Rush Consulting totals as state’s fees to be $220,483 alone.
“The startup cost is the part that’s going to stop a lot of people from getting into the business,” Carmine Morano, former founder and CEO of consulting group, PerfectGrow Consulting, and Staten Island resident, commented.
“Everybody’s talking about [startup] numbers? I’ll give you a number—$30 million to be the kind of producer a marketplace needs for pharm-a-ceu-tical grade product,” CEO of KannaLife, Dean Petkanas said with a heavy New York accent while sautéing a sausage in his Lloyd Harbor bachelor pad.
The former CFO for Stratton Oakmont firm, the infamous trading company behind the Wolf of Wall Street film, has found his new endeavor into what has been dubbed as the new gold rush. However, Petkanas was reluctant to wheel his wagon into unchartered territory and it took his partner, Thoma Kikis, several months of persistent pitches to convince him.
“Look if we’re going into this this, we’re taking this route of science, pharmaceutical, medicine—treating the plant the way it needs to be treated not by some harebrained scheme of half-wits and bandits that want to get into a gold rush or activates that are still pounding their placards and signs on D.C.,” he said to Kikis when he finally agreed to launch KannaLife in 2010.
Petkanas’ smirk quickly shrank into pursed lips and a deep scowl. His sardonic, amiable, “Hello?” graduated into an aggressive tone, shouting, “Get to the point,” while the two discussed upcoming meetings with investors over the phone.
The five-year-old company will be competing against some of the more experienced companies from Colorado like Terra Tech for licenses.
Kikis noted, “For any startup, it’s hard to get funding.”
Gusciora attributes New Jersey’s sole running dispensary, Garden State Dispensary in Woodbridge, success with their prior experience in Colorado.
“They were the ones purely by experience in Colorado were able to open up their doors in a timely matter, deliver product and still deliver product.”
“If [companies] have prior experience, it can be facilitated a lot quicker than somebody who’s opening up such a center for the first time. Unless you have the entity coming from a state that already has this in place, you’re by in large coming up with a lot theory and trail and error.”
Statistically, each of these companies’ stock portfolios reads risky to any stockholder. There are big expenditures with little profit margin when most of the business has been based on speculation.
While KannaLife rests on an elevated sense of quality and standardization, Strains of Hope offers “education, not activism” and Terra Tech markets itself as a technology based agricultural company opening their doors in 2015 out of Nevada.
“There’s all sorts of different risks: the investment banking side, market risk, competition risk, state regulatory risk, federal regulatory risk. You have a very potent risk out there that nobody is looking at,” Petkanas said petting his longhaired tabby under his kitchen table. “At a point and time in the future, the government steps out of the way and declassifies it from Schedule I to Schedule II or III. The doorways may open for interstate commerce.”
What does this foresight have to do for the new industry?
The biggest providers are going to be those that have the higher quality control and assurance standards.
Take California’s free-for-all medical legislation—where one walks into a Venice Beach clinic, consultants wear bright green scrubs in front of signs advertising, “The Doctor is in!” and “$30 Medical Marijuana Evaluation,” and they talk about treating a migraine. The doctor directs the patient to a shelf of indicia strains by local growers to sedate the pain with a “head high.”
Producers aren’t just looking at the closed market in New York, according to a NerdWallet study, the marijuana market could create a $1,057,109,824 size value singlehandedly, only surpassed by California on a state-by-state comparison.
Which is why Petkanas noted, “If the five in New York are up to the task—and we might be one of those—anybody in any other state that’s competing in a design that operates with lower quality control and assurance standards in the body of regulation will get wiped out in the role of interstate commerce.”
The Canadian company, Affinor Growers, Inc. predicts a similar market expansion down the road. CEO and founder, Nick Brusatore said, “The marijuana market is going to get crushed, because the production is going to increase ten folds just within our own North America,” where medical marijuana has been legal since 2000.
On March 18, 2015, Affinor announced that it’s testing laboratory, Herbal Analytics signed an exclusive service agreement with MediGrow to operate in Arlington, Washington. Their 10,000 square foot commercial building on 35 acres has the expandable capacity to 30,000 square foot in 2016 using greenhouse grow technology.
State financial Requirements to Open a Dispensary in New York
“Our ability to mass produce any plant is a phenomenal,” he stated over a phone interview. “We will be able to do it in a mass form so that the tissue that we grow is completely filled with chlorophyll or whatever the requirement is, in order to achieve any conversion into fruit or whatever.”
In contrast to his enthusiasm in Washington, which voted to legalize recreational use in 2012, Brusatore partnered with the Iroquois Group in Allegany, N.Y., and he urged them not to put up millions of dollars to build a marijuana facility until there was some alteration in federal laws. Nevertheless, the partnership is somewhat strategic for laying groundwork into federal funding as Brusatore hopes to eventually filing patents under sovereign Indian law “that will stick.”
KannaLife’s own, Commercialization of U.S. Patent #6630507, “Cannabinoids as Antioxidants and Neuroprotectants,” was passed down from Adams Roger’s original “Isolation of cannabidiol” in 1942. Now, the company is developing a bio-pharmaceutical candidate to treat oxidative stress related diseases, which lead to many chronic illnesses.
“The biggest providers are going to be those that have the higher quality control and assurance standards,” Petkanas said matter-of-factly.
Even under the highly criticized, restrictive bill, the one thing New York may have done right by the stakeholders was to look at a long road ahead for the industry.
Restricting license to five applicants, the DOH will have to pick those capable of growing, transporting, extracting, producing and dispensing the product.
“When the five are chosen, I would demand a consortium meet once a month for standards, practices, how to establish a long range goal of how to make New York the best producer of product when it becomes a national, interstate commerce regulated business and recognized as an industry,” Petkanas said with a deep sense of responsibility for establishing the industry. “We can only get to out producing everyone else in the country with solidarity.”