Pennsylvania

insights

June 28, 2022
Notable Players

A Deeper Look At This State

Regulatory Framework

Pennsylvania is the second-largest medical market with over 500,000 cardholders. In a surprise move in February 2022, the Pennsylvania Department of Health, Office of Medical Marijuana banned the use of products that contain additives not approved by the FDA - affecting the sale of over 600 products. The Pennsylvania Cannabis Coalition is urging the department to reconsider the ban.

In positive news, the bi-partisan bill SB1024 crafted by Sens. Dan Laughlin (R) and Sharif Street (D) to allow medical patients to cultivate cannabis plants for personal use has been introduced. Moreover, a group of bi-partisan lawmakers is also taking the first serious steps to legalize recreational cannabis in the state with Gov. Tom Wolf’s support.

Pennsylvania has awarded 50 licenses that allow for three dispensaries per license and 25 processors, five of which can be vertically integrated. Operators are allowed up to five retail licenses for a total of 15 dispensaries. The state also implemented a Clinical Research ("CR") license program. Program guidelines note that eight CR licenses will be issued to operators partnered with one of Pennsylvania's major university health institutions. Each of the eight license holders can operate up to six dispensaries and one cultivation site.

In July 2021, the law was amended to allow patients to increase their basket size to a three-month supply and permanently allow curbside dispensing.


Notable Market Activity

May 2022 | IPR announced acquisition of TILT's White Haven cultivation and production facility for $15MM

February 2022 | FarmaceuticalRX received $34MM from Chicago Atlantic in a senior secured term loan

September 2021 | Cresco announces plan to acquire Cure Pennsylvania's three dispensaries for $90MM

September 2021 | AYR announces plans to acquire PA Natural Medicine's three dispensaries for $80MM

May 2021 | GTI acquires NSE , The Healing Center & TerraVida

November 2020 | Trulieve acquires PurePenn & Solevo

August 2020 | Ayr reaches an agreement to acquire and develop six retail dispensaries and a significant cultivation and production footprint in a limited license state for total consideration of $57MM


What's the Play?

The play in the Quaker State is to build out infrastructure in anticipation of adult-use. Through the new Clinical Research program, 200 dispensaries will ultimately be allowed in this market. That said, no single operator can own more than 15 dispensaries, which should allow for relatively broad market participation.

Dispensaries should look to maximize earnings in advance of selling by partnering with one of the 25 cultivators in need of retail presence. Cultivators currently hold power in this market, with wholesale flower prices in the $4K per pound range. We don't anticipate an oversupply to impact pricing in the near term, but the market will need adult-use to avoid such a fate. Expect the recently-seen flurry of acquisitions here to continue for the foreseeable future.


Market Snapshot

This Data Point

58,380

This Data Point

58,380

This Data Point

58,380

This Data Point

58,380

This Data Point

58,380

This Data Point

58,380

This Data Point

58,380

This Data Point

594/273

By The Numbers

Population

~12.8MM

21+ Population

~8.84MM

Annual Tourists

~
MM

Medicinal Legalization

2016

Adult-Use Legalization

N/A

First Adult-Use Sales

N/A

MMJ Patients

~575K

Monthly Revenue

~$133MM

Cultivation Cap

No Limit

Cultivation Licenses

33/33 (Operational/Limit)

Retail Licenses

166/No Limit (Operational/Limit)*

Retail License Cap per Operator

5

Vertical Integration

Allowed

Delivery

Allowed

MMJ Qualifications

Less Restrictive

Adult Population/ # Retail Licenses

Accepts Out of State MMJ

No

MMJ Patients / # Retail Licenses

~3.6K

*Each retail license can open three dispensaries for a total of 157 dispensaries across the state.

Top Cultivators

Notable Market Activity

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Proprietary Sharp Capital Advisors data - compiled using various sources including state and local government data

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