Pubdate: Sun, 25 Oct 2015
Source: Washington Post (DC)
Copyright: 2015 The Washington Post Company
Author: Aaron Gregg


Unexpected Players Getting in at the Ground Level

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."
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MAP posted-by: Jay Bergstrom