Valley Agriceuticals LLC, a Purchase-based company that has conditional approval for a New York medical marijuana license, will be acquired by a New York and Toronto-based cannabis company that already operates in multiple states.
iAnthus Capital Holdings Inc. on Monday announced the signing of a letter of intent for the $17 million deal. The acquisition will expand iAnthus’ portfolio into five regulated cannabis states in the U.S., which the company said is the largest footprint among public companies focused on licensed cannabis operations.
iAnthus will acquire Gloucester Street Capital LLC and its wholly owned subsidiaries, Valley Agriceuticals LLC and Valley Agriceuticals Real Estate LLC. The deal includes $2.3 million in cash and $15 million in iAnthus shares, priced at $2 per share.
Valley Agriceuticals has already broken ground on a cultivation campus in Wallkill, a 136-acre property zoned to allow a 6,500-square-foot plant cultivation and processing facility. Upon final approval from the state Department of Health, Valley Ag will be licensed for one cultivation and processing facility and four dispensaries. The company said it expects to supplement its cultivation facility with a 14,500-square-foot hybrid greenhouse.
Valley Ag was not awarded one of the first five medical marijuana licenses from the state in 2015, but the Department of Health announced in February that the program would expand to 10 licenses. The state will use a phased-in approach to license the companies that scored sixth through 10th in the initial application process. Valley Ag scored 8th.
The company received conditional approval in May for the state license and expects be fully approved this summer. Valley Ag anticipates that it can plant its first crop by the end of this year.
The company plans to produce pharmaceutical-grade standardized medical marijuana deliverable through oils, pills, inhaler pens and other delivery mechanisms. It can sell those products through its dispensaries, branded as Origin Health Centers. The dispensaries are expected to open early next year, according to the company’s press release.
New York’s medical marijuana program began registering patients in 2015 and was up to 21,000 patients as of June 6.
iAnthus said New York’s accelerated patient growth since March, when the state approved chronic pain as a qualifying condition for treatment with medical marijuana, made it an especially attractive market. The state Senate is also considering a bill that would add posttraumatic stress disorder as a qualifying condition.
“With a population of nearly 20 million residents, a rapidly growing patient base and only 10 medical cannabis licenses, New York is an ideal market for iAnthus to enter,” said Randy Maslow, president of iAnthus, in a press release. “The state’s move to eliminate some of the program’s initial limitations has created an incredibly potent opportunity for accelerating patient growth.”
iAnthus also operates in or has partnered with marijuana license holders in Massachusetts, Vermont, Colorado and New Mexico. The company lists offices in both Toronto and Manhattan and trades on the Canadian Securities Exchange under the symbol IAN.
iAnthus officials noted that patient growth in the first 500 days of New York’s program outpaced the growth of Canada’s medical marijuana program in its first 500 days.
“Having watched the development of the Canadian cannabis market up close, we are seeing striking similarities between where New York is today and where Canada was a year ago, with comparable patient numbers and a limited number of competitors,” said Julius Kalcevich, CFO of iAnthus.
The main difference, according to Valley Ag CFO Philip Green, is that “New York is experiencing significantly faster patient growth, indicating that New York state could potentially be one of the largest medical marijuana markets in the U.S.”
The acquisition is subject to approval by the state Health Department and Canadian Securities Exchange. It is expected to close in the third quarter this year.