Medical marijuana winners and losers are already starting to emerge as potential bidder drops out
By Caroline Lewis for Crain’s New York Business
Applications for one of five medical-marijuana licenses in New York will roll into the state Department of Health through a May 29 deadline, but winners and losers already are emerging. And at least one aspiring marijuana grower has decided to take his business elsewhere.
Adam Kurtz, a professional photographer who has grown flowers for 27 years, has been preparing to launch NY Herbal Fusion since September. Now, faced with hesitant investors and stiff competition from established biotech companies, Mr. Kurtz has decided to sell his farm and other properties in Orange County and move his family to Oregon. When Oregon opens itself up to recreational marijuana businesses in January, Mr. Kurtz will need little more than the $4,000 fee to apply. In New York, he was looking to raise $400,000 in his first investment round. But even if he could cover his application and startup costs, Mr. Kurtz said the chances of a mom-and-pop business winning a New York license are slim.
“The competition is fierce,” Mr. Kurtz said. “Part of me wonders if the five licenses have already been picked out.”
Some companies are certainly acting that way.
Valley Agriceuticals, a company that will work with veteran growers from California and Israel, already has purchased 100 acres of land in Wallkill, N.Y., in the same county where Mr. Kurtz was planning to build his site. The Purchase, N.Y., company has received approval from the town supervisor and plans to begin construction on its cannabis production facility in the next few weeks, before the license recipients are even announced.
Asked if that seems premature, President Erik Holling said no. “We want to be ready so that when we get that license we can get started right away.”
Being ready means not only having the support of scientists, doctors, growers, politicians and townsfolk, but also a security expert. In the case of Valley Agriceuticals, thats John Cutter, who until October 2004 wasdeputy chief in the NYPD’s criminal intelligence section, responsible for counterterrorism initiatives.For someone with a strictly agricultural background like Mr. Kurtz, New York’s security requirements alone have been overwhelming. He was hoping they would be less stringent for the state’s hemp trial program, slated to begin next year. That isn’t the case.
“Even to grow hemp, they want an 8-foot fence with barbed wire and security cameras surrounding the field,” said Mr. Kurtz. “It’s mind-boggling to me.”
Mr. Holling, on the other hand, is in favor of the state’s uniquely restrictive law. “We would prefer [that state regulations] were even more strict,” he said.
Like many of the more aggressive applicants, Valley Agriceuticals played a significant role in lobbying for and shaping the Compassionate Care Act in New York. It claims it is among the companies that can produce the purity of product and standardized dosages that the New York law hopes to achieve.
PalliaTech, based in Sea Cliff, L.I., also is hoping to gain a license in New York. The company is already licensed in Illinois and was successful in securing one of New Jersey’s six medical marijuana licenses a few years ago.
“For a number of years before the law was passed, we were the sole industry representative advocating for this model of care—metered dosing, no smoking, etc.,” said Andrei Bogolubov, PalliaTech’s executive vice president.
An old-timer in the medical-marijuana industry—around since 2009—PalliaTech has designed a high-tech medical vaporizer that is patented in Canada. The company hopes to get FDA approval once the federal marijuana law changes.
Citiva Medical, another likely candidate, is well known for founder Josh Stanley’s development of a cannabis strain called Charlotte’s Web, which has become widely used to treat children with epilepsy. That company is eyeing a former Army base for its production site. Other established marijuana companies, such as TerraTech’s GrowOp, have talked about vying for a New York license as well.
But some of the most confident applicants are new to the industry. A Wayne County, N.Y., farming family has brought in industry experts to build its new marijuana company, Butler Evergreen. The company has recently purchased a recently closed Electromark sign-making facility in Wolcott, N.Y., and has gained town support by promising to bring back some of the jobs lost when the factory shuttered.