Virginia’s Board of Pharmacy awarded five cannabis processing licenses in late 2018, and three of the recipients are expected to begin dispensing cannabis products to patients within the next two months. The program remains rather narrow at the onset, even after several big improvements, but, like many other states, it should expand in the years ahead. In this review, we discuss the history and rules of the program, review the licensed operators and assess the likelihood of growth.
History and Program Rules
In early 2016, the Virginia, which has a population of 8.5 million, legalized CBD and THCA for the treatment of intractable epilepsy when former Governor Terry McAulliffe signed HB 1445/SB 1235 into law and then passed additional legislation signed by Governor Ralph Northam in 2018, HB 1251, expanding it to any medical condition. The Board of Pharmacy fielded 51 applications in 2018 after dividing the state into five regions, awarding one pharmaceutical processing license within each region, which is calls Health Service Areas (HSAs). Each processor will be able to open up to five additional dispensaries in 2021. The initial winners included Columbia Care (CSE: CCHW) (NEO: CCHW) (OTC: CCHWF), Dalitso, Dharma Pharmaceuticals, Green Leaf Medical and PharmaCann.
The state initially defined practitioners as doctors or osteopaths, but it allowed physician assistants and nurse practitioners to begin issuing written certifications on July 1, 2019 when it passed SB 1557.
The process for becoming a patient is simple, with a $50 initial fee and a $50 annual renewal. The state initially permitted CBD oil and THC-A oil, which limited THC to no more than 5%. NOw, all cannabis oils are included, though dosing is limited to 10mg of THC (with no limit on the number of doses taken at a time). The product set was limited initially but now, following the passage of SB 1557, includes a wide variety, including edibles, patches and vape pens.
According to the Board of Pharmacy, 3 operators that are already cultivating will be ready to begin dispensing by late summer, while a fourth will complete construction in July. Virginia permits wholesale activities between its processors.
Review of the Operators
Pharmacann, which received the processing license for HSA I, an area that includes Charlottesville, transferred it to MedMen (CSE: MMEN) (OTC: MMNFF). In June, the Board of Pharmacy rescinded the approval due to MedMen not developing its operations in a timely manner. It plans to open a Request for Application later this year.
HSA II in Northern Virgina (the counties of Arlington, Fairfax and Prince William) will be served by Jushi Holdings (CSE: JUSH) (OTC: JUSHF), which acquired 62% of Dalitso for $16 Million in cash and stock. The company operates the Beyond/Hello brand of dispensaries and will open its first in Manassas. CEO Jim Cacioppo considers the state one of Jushi’s top three markets. In a recent New Cannabis interview, he predicted that his company could reach at least 25% share across the state.
Locally owned Dharma Pharmaceuticals, which built its processing center in a vacant portion of the Bristol Mall, is serving HSA III in Southwestern Virginia.
Green Leaf Medical has built an 82,000 sq ft facility in Manchester, adjacent to the capital city of Richmond, where it will serve patients in 27 counties that comprise HSA IV. Based in Maryland, with operations in Pennsylvania and Ohio as well, the company expects to begin serving patients in October. The privately held MSO was able to borrow $10 million from Chicago Atlantic Group in April to fund the Virginia build out. New Cannabis Ventures interviewed CEO Phil Goldberg earlier this year, and he suggested that Virginia’s contribution could help the company boost revenue from a projected $90 million in 2020 to $160 million next year.
Columbia Care will serve HSA V, which includes several of the state’s largest cities, including Virginia Beach, Norfolk, Chesapeake, Newport News, Hampton and Portsmouth. The company has built a 65,000 sq. ft. facility in Portsmouth. CEO Nicholas Vita discussed the operations in a recent New Cannabis Ventures interview.
Many states start low and go slow, as Virginia has done with its limited program in its early days. No longer restricting medical conditions is a major positive, and it seems likely the state will further expand the program over time, as has been the case in other states. The recent addition of a broad array of form factors should boost strong initial uptake, and hopefully the state will add flower and remove the THC caps over time. The state could also legalize for adult-use within two years. In March, the House and Senate approved legislation that created the Joint Legislative Audit and Review Commission that will report later this year on recommendations for “how Virginia should go about legalizing and regulating the growth, sale, and possession of marijuana by July 1, 2022, and address the impacts of marijuana prohibition.”