New York's Medical Marijuana Market Continues To Grow Rapidly

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New York’s medical marijuana market has been growing at rapid rates and this is a trend that investors need to watch.

After the New York State Department of Health added chronic pain to the list of approved indications, the number of certified patients has increased by more than 70%.

Although the medical marijuana market is still small (25,726 certified patients as of August 1st), the state recently passed legislation to add post-traumatic stress disorder (PTSD) to the list of qualifying conditions and is currently awaiting a final decision by the governor.

If PTSD is approved as a qualifying condition, it will be a catalyst for patient numbers.

iAnthus Plants its Flag in New York

Over the last few months, we have seen several Canadian medical marijuana firms deploy capital and make acquisitions in the United States market.

Today, iAnthus Capital Holdings (IAN.CN) (ITHUF) announced that its proposed acquisition of Valley Agriceuticals was approved by the New York State Department of Health.

In June, iAnthus agreed to acquire Gloucester Street Capital and its wholly owned subsidiaries, Valley Agriceuticals and Valley Agriceuticals Real Estate, LLC for $17.3 million ($2.3 million in cash and $15.0 million in stock). Up to an additional 5 million shares may be issued if Valley Agriceuticals reaches 15,000 active patient registrations by December 31, 2020.

The proposed acquisition provides iAnthus with significant infrastructure and includes Valley Agriceuticals’ cultivation campus in Wallkill, NY. The property includes 136 acres of land that is currently zoned for cannabis cultivation as well as a 6,500-square foot custom-built cultivation and processing facility.

A Strategic Location and Opportunity

Valley Agriceuticals was officially granted a license as a registered organization under New York state’s medical marijuana program. With this approval, iAnthus expects the acquisition to be completed in the third quarter of 2017.

Under the license, Valley Agriceuticals has been granted dispensary locations in Brooklyn, Dutchess County, Oneida County and Suffolk County, as well as approval for cultivation and manufacturing operations in its facility in Wallkill, NY.

With the dispensary location in Brooklyn, Valley Agriceuticals will have a presence in the second most densely populated county in the United States (estimated 2.6 million residents). The Suffolk County location is also significant and has approximately 1.5 million residents.

An Attractive Opportunity

We are favorable on iAnthus’ leverage to the New York State medical marijuana market and expect this acquisition to be beneficial for the company’s long-term outlook.

Although New York’s medical marijuana market got off to a slow start, we expect the industry to record strong growth if PTSD is added as a qualifying condition. Over the next year, we expect to see several new conditions included in the state’s program and believe this is a story to watch.