Friday, November 24, 2017

Meet Florida's legal drug cartels


While Florida voters have overwhelmingly voted to make medical marijuana legal, it's up to the Legislature to translate how it will work. There's a lot at stake. It may seem like a basic humanitarian issue for patients who want simple and affordable access to medical marijuana. But it's not. Why? For one, medical marijuana is projected to become a $1 billion industry in Florida within the next three years.

So far, only seven companies have been licensed by the state to produce, cultivate and sell it. They are responsible for providing patients who suffer from debilitating conditions with a medicinal alternative to prescription drugs. Often described as the "cartels," Florida's seven licensed cannabis companies have millions in investment behind them. They donated more than a half-million dollars in campaign contributions and employ well-known lobbyists in Tallahassee. Some have started to open dispensaries while others are just getting their production facilities up and running. But none has made any significant profit yet, nor have they since the start in 2014, as the state's burgeoning patient population is only just starting to grow.

While those who defend the cartel system say it will ensure tight state control, others argue that it will keep prices needlessly high for some patients. When I visited a handful of dispensaries around the state, prices ranged from $50 to $250 for monthly supplies of some products.

"Florida is very different than other states' medical marijuana programs. The argument is that having only seven companies gives the state more control, but it also creates a quasi monopoly — all the production is concentrated and you lose variety and quality that way," said Peter Sessa, co-founder of the Tampa-based Florida Cannabis Coalition. "Without an open market, prices will be high for patients who can't use their insurance to pay for it."

Midway through the legislative session, the two chambers are still working out how the system will work — laws that would take effect this summer. This much is known. Seven companies will have much of the action, maybe all of it. Here are the seven CEOs behind the state's currently approved medical marijuana companies.

On page 5P, read more about each company.

The Tampa Bay Times analyzed campaign contributions and interviewed executives behind the state's legal cannabis companies. Here are their backgrounds.

CHT Medical

Nursery partner: Chestnut Hill Tree Farm, Alachua

CEO: Robert D. Wallace

Company history: The company opened for business in January after receiving its license to cultivate from the state in 2016. Earlier this month CHT Medical agreed to sell off most or all of its assets to a private company affiliated with Aphria, one of the largest publicly traded Canadian medical marijuana ventures. That means Aphria is spending up to $60 million for a piece of the growing Florida medical cannabis industry.

Executive team: Deborah Gaw, CFO, owner of Chestnut Hill; Susan Baumgartner, COO, formerly with Xhale Inc., a breath-based medical technology company; Jay Odom, real estate developer and investor.

Lobbyist: Scott Dick, SKD Consulting

Legislative campaign contributions, 2016 and 2018 election cycles: $12,000.

Dispensaries: No dispensaries currently, but statewide delivery offered.

Outlook: Did not respond to requests for an interview.

The Green Solution

Nursery partner: San Felasco Nurseries, Gainesville

CEO: Marc Meisel, formerly of Prime Ventures, an entertainment company

Company history: Meisel is the CEO and franchise owner of the Green Solution Florida company. The Green Solution is a Colorado-based cannabis company with dozens of recreational dispensaries there and a franchise operation rolling out in other states. The Florida franchise received its license to begin cultivation in February. The plan is to invest $10 million to $15 million into production and dispensary operations over the next year, but executives said they are waiting to open retail locations until there are more registered patients to meet the demand.

Executive team: Alan C. Shapiro, owner of San Felasco Nurseries.

Lobbyists: Dean Cannon, Capitol Insight, Speaker of the House in 2011-12; Chris Carmody, GrayRobinson shareholder; Adam B. Corey, campaign consultant and restaurant owner; Nikki Fried, attorney and consultant.

Legislative campaign contributions, 2016 and 2018 election cycles: $109,000.

Dispensaries: No dispensaries currently.

Outlook: Slow rollout of dispensaries across the state over the next two to three years once laws and regulations are firmly set in place.


Nursery partner: McCrory's Sunny Hill Nursery, Eustis

CEO: Don Clifford, former IBM executive, founded and eventually sold a sales-outsourcing company called MarketSource

Company history: Don Clifford came out of retirement to get into the medical marijuana business in Florida. GrowHealthy was formed when he and a business partner bought a 200,000-square-foot production facility in Lake Wales in 2014 and spent $2 million renovating it. He hired a horticulturist from Colorado and began bringing on investors. GrowHealthy lost by four one-thousandths of a point to be among the five original licensed companies in Florida, but challenged the decision and a year later was awarded a license.

Clifford said he hopes to start growing plants this month and sell medicine by November. But he's not in a rush.

"We have a team of people looking for potential sites for dispensaries, but we're on hold to see how the laws will be written," Clifford said in a phone interview with the Times.

By the end of 2017, Clifford said GrowHealthy will have about $20 million invested in its operations.

Executive team: Dolores McCrory, owner of McCrory's Sunny Hill Nursery; Craig Roberts, co-founder; Frankie Shroyer, executive director; Brian Brescia, Global Trust investment advisers; Darrin Potter, chief horticultural officer; Selim Ramin Benbadis, medical director.

Lobbyist: Fred W. Baggett, Greenberg Traurig

Legislative campaign contributions, 2016 and 2018 election cycles: $15,000.

Dispensaries: Two or three dispensaries planned to open in 2017. Clifford declined to say where. Statewide delivery offered.

Outlook: Clifford says he wants to expand his Florida GrowHealthy brand into other states.

"I don't see us going to Colorado or California where recreational is legal and the markets are saturated, but (to) the Southern states, which will adapt slowly," he said. "Our belief is if we can demonstrate to lawmakers that our process works and that it's controllable and manageable, we'll be able to help patients in need."

Knox Medical

Nursery partner: Knox Nursery, Winter Garden

CEO: José Hidalgo, background in real estate and banking

Company history: Hidalgo got started in the marijuana industry in Canada. An opportunity came up to do some consulting work for one of the first licensed medical cannabis companies in Canada, and Hidalgo saw it as a way to learn more about tut the business.

"We realized there was tremendous opportunity in the highly regulated cannabis space," Hidalgo told the Times during a phone interview.

Hidalgo said his vision from the beginning was the bigger picture.

"We want to scale this to be a national brand on the medical front. We're not looking at recreational at this junction," he said.

Knox Medical was formed in 2014 through the partnership between the cannabis company and Knox Nursery. Both companies now operate under a parent company called Cansortium Holdings LLC. Cansortium oversees various medical marijuana ventures in different states and regions, including Florida and Puerto Rico. In addition, Cansortium oversees a residential redevelopment firm called Habitribe.

Hidalgo says that "several million dollars" have been invested in Knox so far but declined to elaborate. He did say that Knox is investing to be in Florida for the long run, knowing well that it could take several years before the company is profitable.

"We plan to operate in multiple states and are committed to be here as long as it takes," Hidalgo said

Executive team: Henry Batievsky, CFO, co-founder, real estate developer; Bruce Knox, COO and president of Knox Nursery; Jeffrey Reath, executive vice president of finance and investor relations; Orlando Florete, medical director; Alexander Karol, lead chemical engineer.

Lobbyists: Jorge Chamizo, Charles Dudley, Cory Guzzo, Floridian Partners

Legislative campaign contributions, 2016 and 2018 election cycles: $21,700.

Dispensaries: Winter Garden and Gainesville. Coming soon: Lake Worth, St. Petersburg and Jacksonville.

Outlook: Knox Medical operates in Florida and Puerto Rico but plans to expand into new states. The goal is to have dispensaries across Florida in the next year.

Modern Health Concepts

Nursery Partner: Costa Nursery, Miami

CEO: Richard Young, background in private equity, banking and finance, health care

Company history: Modern Health Concepts launched on Nov. 23, 2015, when the license was awarded for Costa Farms in Miami. Modern Health Concepts was one of the five original licensees in the state. The company received its authorization to begin cultivation on March 9 last year and began to process medicine by August 2016, Young said in an interview with the Times.

"It's been a journey building a business from scratch," Young said.

Modern Health Concepts is the exclusive provider of Haleigh's Hope in Florida, a CBD-oil cannabis product from Colorado named after a 4-year-old with cerebral palsy and epilepsy. The company also teamed up with Palliatech, a manufacturer of medical marijuana vaporizers, earlier this year. Young declined to comment on how much has been invested in the company since it launched.

"There is a significant investment required but right now the market is very small," he said. "We're in the very early stages. Depending on what happens in Tallahassee over the next 45 days will determine the future of our industry."

Executive team: Jose Costa, manager and nursery owner; Dr. Carlos Smith, medical director; Eddy Blanco, director of product research and development; Michael Costa, patient advocate.

Lobbyist: Brian Bautista, Impact GR; Paul Bradshaw et al., the Southern Strategy Group

Legislative campaign contributions, 2016 and 2018 election cycles: $347,000.

Dispensaries: One in Miami, delivery offered statewide.

Outlook: Modern Health Concepts plans to open dispensaries in major markets across the state this year. Young did not disclose a specific number of stores.

Surterra Therapeutics

Region: Miami-Dade and Hillsborough counties

Nursery Partner: Alpha Foliage, Homestead

CEO: Jake Bergmann, former investment banker

Company history: In late 2013, Jake Bergmann was approached by a few investors about getting into the cannabis industry on the West Coast.

"Like most people who hear about it, I thought it was crazy and just for a bunch of a stoners," Bergmann said.

But as he started to do some research, he saw an opportunity to be among the first in a new highly regulated pharmaceutical industry.

Surterra Holdings LLC launched with the intention of becoming a national medical marijuana business. The Atlanta-based company plans to grow state-by-state, starting with Florida.

"We're building a national footprint, but starting in the Southeast first," he said. "Florida was the first state to pass the law and offer us a license. We're now working in California and applying to be licensed in Pennsylvania next."

Bergmann said it was difficult in the beginning to raise the initial investment dollars needed to get started, so he poured his own life savings into the business. Surterra has raised nearly $30 million in investment since.

"Every state has a different way of doing things. In order to be successful, we have to adapt to these laws. The business is very much day-to-day as the laws can change every year," Bergmann said.

Executive team: Susan Driscoll, president, former Coca-Cola executive; Alexander Havenick, officer, also vice president and general counsel for Southwest Florida Enterprises; John DeMott, owner of Alpha Foliage.

Lobbyists: Ron Book, Michael Corcoran, the Rubin Group.

Legislative campaign contributions, 2016 and 2018 election cycles: $104,000.

Dispensaries: One wellness center at 2558 E. Fowler Ave. Tampa. Opening soon: Tallahassee.

Outlook: The goal is to provide broad, statewide access, which means a dispensary in every metro area of Florida. Surterra plans to open 7-10 retail locations in cities by the end of the year. The company is adding an additional 100,000 square feet of production space to its existing facilities to meet the growing demand. Surterra plans to be a medical-based cannabis company across the country.


Nursery Partner: George Hackney Nursery, Quincy

CEO: Kim Rivers, background in investments, acquisitions, real estate development and law

Company history: Kim Rivers began her career as an attorney and decided to try her hand in real estate just as the housing market started to crash. She never dreamed she would be working for a company that sold cannabis products. But here she is, three years into running a medical marijuana start-up as its CEO.

"I saw an opportunity to be part of an emerging market," Rivers said from a conference room inside Trulieve's Tallahassee dispensary. "It's incredibly fast-paced and a highly political environment. I think my job is just as much about sharing the stories of our patients and destigmatizing cannabis as it is running the company."

Trulieve opened its production facility in Quincy near Tallahassee in July. Unlike other licensees, Trulieve is a partnership between the company and two local nurseries. Trulieve has been aggressive about opening dispensaries, being the first to open one in the state earlier this year, and expanding its cannabis product line. It has three retail locations open now and five more in the works. It's also among the first in Florida to sell a flower-based cannabis product, which patients can smoke through a vaporizer.

Trulieve has invested north of $15 million in the business since 2014, Rivers said. Delivery makes up about 60 percent of the company's business so far.

Executive team: Jason Pernell, COO, experience with medical marijuana in California and Oregon; George Hackney, nursery owner; Thad Beshears, of Simpson Nurseries, stakeholder of Hackney Nursery.

Lobbyist: Brian Ballard, Ballard Partners; Nick Iarossi, Capital City Partners; Sean Pittman, Pittman Law Group

Legislative campaign contributions, 2016 and 2018 election cycles: $70,300.

Dispensaries: Tallahassee, Clearwater (24761 U.S. Hwy 19 N. #630), Tampa (8701 N. Dale Mabry Hwy.). Coming soon: St. Petersburg (8435 4th St. N.), Bradenton, Pensacola, Orlando, Jacksonville, Miami.

Outlook: To open dispensaries in every major city in Florida, including nine in the state over the next year and expand its delivery operations.

Contact Justine Griffin at [email protected] or (727) 893-8467. Follow @SunBizGriffin.

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