New Jersey Medical Cannabis Market Will Provide Opportunity to Publicly Traded Companies

New Jersey’s medical cannabis program remains in its infancy due to a very slow start, but the state, with a population of 8.9 million, has recently added additional licenses and has improved its program dramatically under the leadership of Governor Phil Murphy. In this review, we take a look at the history of the medical cannabis program, the existing marketplace and the potential for future growth.

History and Program Rules

The New Jersey program, which is run by the Department of Health, was passed into law in 2010 when the New Jersey Compassionate Use Medical Marijuana Act was approved by the legislature and signed by then-governor Jon Corzine. Under Governor Chris Christie, the implementation was delayed significantly, with the initial rules adopted in late 2011. It wasn’t until the summer of 2012 that the first patient registrations were accepted. Originally, six not-for-profits received licenses to operate Alternative Treatment Centers (ATCs). The state no longer requires ATCs to be non-profit entities.

The rules were amended in 2019. Oil-based formulations, like vape cartridges, were added. Additionally, seven “debilitating medical conditions”, including PTSD, anxiety, chronic pain of visceral origin, chronic pain related to musculoskeletal disorders, migraines, Tourette syndrome, and Opioid Use Disorder were added. The current list of debilitating conditions includes:

  • Amyotrophic lateral sclerosis
  • Anxiety
  • Cancer
  • Chronic Pain
  • Dysmenorrhea
  • Glaucoma
  • Inflammatory bowel disease, including Crohn’s disease
  • Intractable skeletal spasticity
  • Migraine
  • Multiple sclerosis
  • Muscular dystrophy
  • Opioid Use Disorder
  • Positive status for Human Immunodeficiency Virus (HIV) and Acquired Deficiency Syndrome (AIDS)
  • Post-Traumatic Stress Disorder (PTSD)
  • Seizure disorder, including epilepsy
  • Terminal illness with prognosis of less than 12 months to live
  • Tourette Syndrome

In July 2019, Governor Murphy signed the Jake Honig Compassionate Use Medical Cannabis Act into law, which increased limitations on the amount of medication, extended authorization periods, added edibles for adults (previously limited to minors) and permitted physician assistants and advanced practice nurses to authorize medical cannabis. It also offered patients employment protections, permitted multiple caregivers per patient and allowed for reciprocity with other states’ programs. Finally, it allowed for the creation of the Cannabis Regulatory Commission, a panel to regulate the industry. Once it is fully appointed to five members, it will take control of the program from the Department of Health.

Six ATCs were originally selected, and, in 2018, the state gave initial approval to an additional six ATC operators, three of which have opened dispensaries to date. The state accepted applications again in 2019 but hasn’t yet issued additional approvals. The goal is to add up to 24, including eight in the northern region, eight in the central region, seven in the southern region and one “at-large”. Of these ATCs, five will be limited to cultivation, fifteen will be limited to dispensary operations and four will be vertically integrated, which includes a cultivation, manufacturing and dispensing.

Existing Market

Publicly traded multi-state operators (MSOs) play a big role aleready in the New Jersey medical cannabis market. Last month, the state added 2 permits, bringing the total number of Alternative Treatment Centers to 11 with the additions of Zen Leaf (Verano New Jersey) in Elizabeth and Columbia Care (NEO: CCHW) (CSE: CCHW) (OTC: CCHWF) in Vineland.

The other nine centers include:

  • Breakwater Alternative Treatment Center – Cranbury
  • Compassionate Care Foundation (The Botanist) – Atlantic City
  • Compassionate Care Foundation (The Botanist) – Egg Harbor
  • Curaleaf NJ, Inc – Bellmawr
  • Greenleaf Compassion Center – Montclair
  • Garden State Dispensary – Woodbridge
  • Garden State Dispensary – Union
  • Harmony Dispensary – Secaucus
  • Rise – Paterson

Of the eleven dispensaries, seven are operated by MSOs, four of which are publicly traded, with Compassionate Care Foundation operated by Acreage Holdings (CSE: ACRG.U) (OTC: ACRGF), Curaleaf NJ operated by Curaleaf (CSE: CURA) (OTC: CURLF) and Rise operated by Green Thumb Industries (CSE: GTII) (OTC: GTBIF). Zen Leaf is part of private MSO Verano Holdings. Additionally, Greenleaf recently agreed to be acquired by private MSO Ascend Wellness Holdings.

Harmony CEO Shaya Brodchandel

Three other operators are building out cultivation facilities after being approved in 2018, with TerrAscend (CSE: TER) (OTC: TRSSF) approved to cultivate in January, MPX NJ, which is owned by iAnthus (CSE: IAN) (OTC: ITHUF), approved to cultivate in February and Justice Grown approved to cultivate in April. Of all of the twelve operators approved to cultivate, then, six are publicly traded.

Last July, the state reported that the patient count had tripled in the first 15 months that Governor Murphy had taken office to 51K, with the number of participating increasing to 1000. The state doesn’t release data regularly. Instead, it has shared information every two years, with the most recent update provided in April 2019, which indicated 44K patients as of the end of March 2019.

The medical program will be expanding as the three remaining operators, all approved to cultivate, open their dispensaries. Existing operators are in the process of adding dispensaries as well. While the state has delayed reviewing the 2019 applications to significantly expand the program due to litigation related to the 2018 process, this could happen later this year. Additionally, while the state doesn’t permit delivery, it is likely that it will do so, as the state has stated this a near-term goal. During the pandemic, curbside delivery has been implemented on a temporary basis, and it could be made a permanent feature.

Legalization for Adult-Use

The state came close to legalizing via the legislature in 2019 after Governor Murphy included legalization in his election platform. In the final minutes, the legislature wasn’t able to agree. Voters will now have the opportunity to approve legalization via the ballot in November. The New Jersey Marijuana Legalization Amendment qualified in December. It would allow adult-use (21 and up) and allow the Cannabis Regulatory Commission to oversee commercial activities. Taxes could limited to state (6.625%) taxes as well up to 2% for local governments.

Conclusion

After a very slow start, New Jersey’s medical cannabis program is rapidly expanding. Governor Murphy has moved quickly to strengthen it and is an ardent supporter of adult-use, which will be on the ballot in November. Several publicly traded companies are operating in the state, and two large private MSOs are in the market as well. New Jersey joining Massachusetts as legal for adult-use could hasten additional state legalization on the East Coast.

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Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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