Exclusive Interview with PharmaCann CEO Brett Novey
Private multi-state operator PharmaCann relies on a formula supported by its people, its foundational assets and financial discipline. CEO Brett Novey last spoke with New Cannabis Ventures in the spring of 2020. Since then, the company has weathered the challenge presented by the ongoing COVID-19 pandemic and continued its growth. Novey checked in to discuss growth within the current PharmaCann footprint, looking to the West Coast and the company’s expectations for the future. The audio of the entire conversation is available at the end of this written summary
From Startup to Mature Organization
As PharmaCann, and the industry in general, transitions from its startup phase to a more process-driven, mature organization, it has looked to add depth to its team, according to Novey. Over the past 12 months, the company has worked to placed subject matter experts in leading positions within each of its functional areas. The company is aiming to increase the flow-through of each incremental dollar of revenue to EBITDA.
The PharmaCann Footprint
PharmaCann has been preparing for the eventuality of adult-use New York since it won its first license in the state in 2016. Now, that transition is on the horizon. The company is currently expanding its cultivation footprint in the state, preparing for both adult use and the expansion of the medical market. It is yet uncertain whether or not regulations in the state will put a cap on canopy, but PharmaCann is targeting capacity that will give it a 12 to 15 percent market share in a mature market over the long term, according to Novey.
The company has built a largely contiguous footprint, allowing it to easily move people and IP across state lines to implement best practices quickly each time a new facility opens. PharmaCann is primarily in limited license markets, and as of July, it is fully integrated in all six of its states.
In addition to New York, PharmaCann has a presence in Massachusetts, Maryland, Pennsylvania, Illinois and Ohio. All of its cultivation facilities are currently open. Of the company’s 31 dispensaries, 25 are open, five more are planned before the end of 2021 and the last retail location will open in the first half of next year, according to Novey.
PharmaCann has also bolstered its footprint through M&A. It added two dispensaries in Ohio, as well as two dispensaries and a grow/processor in Maryland.
Novey last spoke with New Cannabis Ventures on the eve of the COVID-19 pandemic. PharmaCann was faced with the same challenges as the rest of the industry, like supplying team members with PPE and rapidly scaling up curbside pickup and online ordering. Ultimately, being deemed an essential business in most markets and stepping up to navigate those challenges was a net positive for the company and the industry, according to Novey.
While the pandemic continues, the PharmaCann team is considering its growth prospects. M&A will be on the company’s radar, but it will take a thoughtful, deliberate approach to its expansion. The company is considering expansion to the West Coast, with markets like California, Nevada, Arizona and Colorado being of interest. Novey expects PharmaCann to move beyond its current footprint within the next 12 to 18 months.
Cronos Group has made a strategic investment in PharmaCann, paying $110.4 million for the option to acquire 10.5 percent of PharmaCann. Novey sees this investment and partnership as validation of PharmaCann’s hard work. He is also excited about Cronos Group’s work with biosynthetic cannabinoid production and the potential that has for the future of the industry.
Over the course of its history, PharmaCann has taken a balanced approach to raising capital, according to Novey. To date, the company has raised approximately $175 million in equity capital, $170 million in sale-leaseback transactions and $165 million in debt.
Today, Novey is pleased with the company’s liquidity and cash position. The PharmaCann team will continue to look for opportunities to raise capital, if necessary, for accretive M&A.
PharmaCann has operated with the intention of being public company-ready, and the team has evaluated the possibility of going public for years, according to Novey. A recent Reuters report pointed to a potential upcoming IPO, but Novey did not want to address the timeline of a possible go-public transaction.
The company did $75 million in revenue in 2019 and more than doubled that number in 2020. PharmaCann has doubled its revenue over the past several years. The goal is to do the same in 2021, but Novey expects the company to be a little short of doubling revenue in 2021.
As the company has become a more mature institution, its metrics have evolved. For example, the PharmaCann team has been taking a close look at net promoter score (NPS) metrics to better understand consumer, patient and employee engagement. On the operational side, the company tracks traditional retail-focused metrics, as well as key cultivation KPIs.
Challenges like 280E and banking remain prevalent in the industry, but more markets are poised to adopt cannabis legalization, either medical programs or transitioning to adult use. As more markets come online, the PharmaCann team is looking for ways to attract consumers who have not historically used cannabis.
The PharmaCann team is also thinking about federal legalization. While it waits for that regulatory shift, the company will focus on its growth, its people and its brands.
To learn more, visit the PharmaCann website. Listen to the entire interview: