📈 $128M in July sales for IL, up 10.6% Month-over-Month

Epidiolex sales increased 32% to $155.9M in Q2. The Parent Company acquires dispensary in Ceres, CA. Hydrofarm acquires Canada’s Greenstar Plant Products.

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🌿Industry

West Hollywood Council tweaks cannabis map, allowing Fantom Flower a chance to bloom. West Hollywood City Council approved a controversial change to the buffer zone keeping cannabis businesses 600 feet away from West Hollywood Park. City zoning laws prohibit cannabis businesses from operating within 600 feet of so-called “sensitive-use areas” — daycare facilities, youth centers, or schools within a park property. Parks themselves are not considered sensitive-use areas, but Tiny Tots, a daycare center within the park, would. Developers of a new cannabis lounge, Fantom Flower, had proposed an onsite consumption area on the second floor of the historic commercial building at 8811 Santa Monica Blvd., formerly occupied by Flaming Saddles, where patrons could smoke, vape and ingest edible cannabis products, while a restaurant would occupy the first floor. Developer Alex Kardos’ fatigue was evident as he pleaded with the council to let the project get back on track. City staff crafted a workaround to the problem by altering the map, re-centering the park’s buffer zone on the only section of the park that they believed required it — the southern parcel, where the Tiny Tots day care program will operate when it re-opens. Supporters of Fantom Flower came out in droves.

Ernst & Young — Cannabis Sector Report. While the market has typically focused on CBD and THC — the two most common cannabinoids, which make up the cannabis plant’s active constituents — there are actually more than 100 cannabinoids and other
compounds to research and explore with potentially versatile applications. Cannabinoids may one day make their way into our daily health regimens, as well as different experimental and social settings such as bars and restaurants. The next generation of cannabis focused products will be substantiated by validated data and integrated into our daily lives and ubiquitously woven into the fabric of society, especially as new form factors, formats and new consumption occasions come to fruition.

Illinois adult use cannabis monthly sales figures.

Three Illinois Cannabis applicants sue to be included in license lottery. Three entities reportedly connected to marijuana multistate operator Justice Cannabis filed a federal lawsuit in Illinois claiming they have been wrongfully excluded from an Aug. 19 retail license lottery. JG IL, Emerald Coast and ReNu filed the lawsuit against state regulators in the Northern District of Illinois in efforts to be included in next month’s licensing round. In the lawsuit, JG IL claims it should have qualified for the lottery based on plans to employ the majority of its workforce from a disproportionately impacted area. Emerald Coast and ReNu claim they qualify as military veteran-owned businesses.

Illinois awards 70 adult-use cannabis business licenses for Cultivators, Processors, and Transporters. Illinois regulators on Monday issued 70 additional adult-use cannabis business licenses, including permits to an initial 32 craft cultivators, 28 to processors and 10 to transporters. More than 80% of the licenses issued fall under the category of social equity ownership as the state tries to make good on its pledge to diversify the industry and provide opportunities to individuals and communities most harmed by the war on drugs. More than two-thirds of the new licensees identify as nonwhite, according to a news release by the Illinois Department of Agriculture. A list of the licensees is available here.

Sri Lanka’s Cannabis-seekers Are Gathering On Facebook. Cannabis has a complicated history in the island nation. While native medicinal practitioners used cannabis to treat illnesses in the past, a law introduced in 1935 under British colonial rule criminalized cannabis. Though a 1967 government act permitted registered Ayurvedic doctors to use cannabis for medicinal purposes, today Sri Lanka still considers cannabis to be a “dangerous drug,” and recreational use can result in fines and years of prison time. Despite these laws, cannabis is the most-used illicit drug in Sri Lanka, with an estimated 600,000 users; natural scientist Wasantha Sena Weliange believes that number is much higher. In recent years, cannabis has become extremely popular with Gen Z.


💵Deals

The Parent Company — Acquires Dispensary in Ceres, CA (Modesto). Known for its advocacy for the veteran community and its support of families with children with disabilities, Jayden's has built a strong and loyal customer base in California's Central Valley. Located at 4030 Farm Supply Dr, Ceres, CA 95307, the Ceres Dispensary features large, open retail space to provide consumers with a unique and compelling shopping experience. 

Hydrofarm — Acquires Canada’s Greenstar Plant Products. Hydrofarm funded the purchase price of ~$83 million using a combination of cash and the Company’s existing credit facility, and under the terms of the transaction agreement, Greenstar will become a wholly owned indirect subsidiary of Hydrofarm. Hydrofarm expects Greenstar to generate approximately $26 million U.S. dollars in net sales in 2021, representing significant growth from the prior year. Hydrofarm has historically distributed Greenstar’s Grotek and Gaia brands, representing approximately 50% of Greenstar’s total net sales. The transaction is expected to be accretive to Hydrofarm, as the Company will now pick-up Greenstar’s manufacturing profit margin profile, in addition to the portion of Greenstar sales that it did not previously represent. The transaction represents an acquisition multiple of approximately 8x Greenstar’s estimated 2021 Adjusted EBITDA, excluding synergies but including the net present value of estimated tax benefits resulting from the transaction.

Innovative Industrial Properties — Acquires Illinois Property and Expands Real Estate Partnership with 4Front. The purchase price for the property was $6.5 million (excluding transaction costs). 4Front is expected to construct approximately 250,000 square feet of industrial space at the property, for which IIP has agreed to provide reimbursement of up to $43.75 million. Assuming full reimbursement for the construction, IIP’s total investment in the property is expected to be $50.25 million (excluding transaction costs). 4Front intends to operate the property upon completion of construction as a licensed cannabis cultivation and processing facility. IIP also owns and leases to subsidiaries of 4Front a regulated cannabis cultivation, processing and dispensing facility in Massachusetts and a managed regulated cannabis cultivation and processing facility in Washington. Assuming full reimbursement for tenant improvements under the Illinois lease, IIP’s total investment in properties leased to 4Front is expected to be $83.25 million, encompassing ~431,000 square feet.

Petalfast x Nabis — Partners to Exclusively Service its Complete Portfolio of Brands. By leveraging Nabis' statewide network and technology, Petalfast's portfolio of brands will enjoy rapid fulfillment, low-cost financing, efficient order management and sophisticated data analytics, allowing them to scale more effectively. The partnership will propel Petalfast's entire portfolio of brands, manufacturers, and cultivation partners by providing access to Nabis Marketplace, Nabis Capital and Nabis Analytics.


📄Company Updates / Earnings

Glass House Brands — Provides Update on Timing of Planned Southern California Greenhouse Acquisition. The company has agreed to amended closing terms (the "Agreement") with the sellers of the Company's planned approximate 5.5 million square foot greenhouse located in Southern California. Under the terms of the Agreement, Glass House will close escrow on the SoCal Facility following receipt from Ventura County that the final building permit issue at the SoCal Facility has been signed off. Previously, the Company had expected to close the acquisition following the issuance of the cannabis cultivation license from Ventura County. The sellers of the SoCal Facility have further agreed to carry a $30 million note through the issuance of the California state cannabis licenses or end of FY 2021, whichever is sooner. The Company now expects to complete the acquisition of the SoCal Facility in Q3 2021 using cash on hand, subject to local regulatory approval. The Company expects to immediately commence the first phase of its conversion of the agricultural greenhouses to cannabis cultivation, which will result in the upgrade and retrofit of approximately 1.7 million square feet of the SoCal Facility.

Jazz Pharmaceuticals — Second Quarter 2021 Financial Results

  • Epidiolex/Epidyolex (cannabidiol) net product sales were $109.5 million in the second quarter of 2021. This includes sales from May 5, 2021, the closing date of the GW Acquisition

  • On an unaudited pro forma basis, net product sales in the second quarter of 2021 increased by 32% to $155.9 million compared to the same period in 2020

  • The Company expects to initiate a Phase 3 pivotal trial of Epidiolex for Epilepsy with Myoclonic-Atonic Seizures (EMAS), also known as Doose syndrome, in the first half of 2022. EMAS represents the fourth target indication for Epidiolex


💻Hiring

Weedmaps — Head of Corporate Social Impact (LA)

Abaca — Associate General Counsel (Little Rock, AR)

Fyllo — Director of Product Marketing, Data & Media Solutions (Remote)


🎙️Interviews

Canaccord Genuity Cannabis Panel

What cannabis can learn from craft beer: Q&A with the man behind Dale’s Pale Ale

Serving Cannabis: Q&A with Old Pal CEO, Rusty Wilenkin

The cannabis space has filled up very quickly, and anytime you see that type of rapid growth it can evolve into a mad rush to be releasing the next big thing. Of course innovation is hugely important, but I’m also a big believer in staying true to the vision that you have for what you’re creating. If there’s a unique perspective and passion behind a particular brand or product, that always shines through in the end. Again, this brings me back to the enormous emphasis that we put on team, and on a “we” attitude above all else. As a founder it can be easy to forget that, but ultimately, from my perspective, you are only as successful as the team around you.

Cannabis Packaged Goods — Graham Farrar from Glass House Brands

Greenberg Glusker The Grass is Always Greenberg, which takes a dive into cannabis legalization, business, politics, and pop culture—offering insights and perspectives, while guests from across the industry share their unique experiences in shaping the future of cannabis.

MATTIO High Priority Podcast, a new podcast that examines the lasting impact of cannabis prohibition and how public and private social equity measures are shaping the future of the industry.

EATER — How Edible Cannabis Went From ‘Mulchy’ Brownies to a Booming Industry

NCV — Cansativa GmbH Has a Competitive Advantage in the German Medical Cannabis Market


👋 Highly Objective is curated by Dai Truong. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment.  The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party.  The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.