Producers Having a Hard Time Keeping Up with Demands for Medical Marijuana in Some States

LOS ANGELES, April 10, 2019 /CNW/ -- USA News Group – It seems that the move toward legalizing marijuana for medical use in new jurisdictions is creating a shortfall of supply in some states: a case in point is Rhode Island, which is falling behind in its ability to supply the stuff.

Rhode Island offers a clear example of why the cannabis industry, which is already seeing major demand, is experiencing huge growth and the addition of a whole new infrastructure sprouting up to service the new markets.

Legal cannabis companies impacted in the grower and producer category with a view to supplying medical marijuana include Aphria (NYSE: APHA) (TSX: APHA), AmeriCann, Inc. (OTC: ACAN), and Aurora Cannabis (TSX: ACB) (NYSE: ACB).

And while state lawmakers in Rhode Island consider legalizing recreational weed, sales of medical marijuana have gone through the ceiling – surpassing all expectations.

Based on the shifting attitudes towards legalization and growth in medical demand, marijuana focused companies have been realizing a significant lift. Over the last year, and particularly since Canada's wholesale legalization of pot, the demand has translated into a number of areas. Medical marijuana accounts for a significant portion of that growth.

Several of the cannabis Licensed Producers (or LPs) are in the grower end of the business and combining their efforts with product development, sales and distribution. MYM Nutraceuticals Inc. is a developer of three sizeable growing operations that is broadly diversified into multi-brand development and product distribution. MYM Nutraceuticals Inc. (CSE: MYM) (OTC: MYMMF), is also an example of an early mover now shifting its focus toward the medical end of the business.

Rhode Island's Medical Use Example

According to published figures, RI's three medical marijuana dispensaries are on pace to sell about $56 million worth of medicinal pot in fiscal 2019. That comes directly from the state's top marijuana regulator. In actual sales, that represents $17.8 million, or roughly 46.6 percent more medical marijuana sales in 2019 than in fiscal year of 2018 – a significant increase.

This new figure follows what was a record-breaking year in 2018 that amounted to about $38.2 million worth of marijuana sold. That was another significant increase over the previous year, accounting for one third more than was sold in in fiscal 2017. It's a clear trend that is picking up steam in Rhode Island, similar to other states where the legalization has become reality.

It's also been a tax wind fall for the state; they collected about $2.75 million in various taxes during fiscal 2018 and are predicted to collect nearly twice that in fiscal 2019 or about $5.4 million.

Although recreational cannabis has been legalized in just 10 states and Washington, DC, patients can use marijuana medicinally in 33 states and Washington, DC. And that number is only expected to rise in 2019 as many states look to adopt new legislation. Many states have existing bills in their legislatures and are going through the process.

Producers and Distributors Moving into Medical

The gap created by the demand for medical cannabis is seeing a rise in new companies, many from Canada where medical pot has been legal for 11 years. Canadian based MYM Nutraceuticals is an example of the efforts to move towards the medical market; MYM is making waves as a junior company moving up the ranks of the legal producers in Canada and expanding to the US along with other regions.

MYM through its various joint ventures is currently building three large-scale production facilities in both Canada and Australia. Upon completion of these three projects, the total amount of greenhouse growing space is expected to exceed 2.7 million square feet.

MYM Nutraceuticals is also diversifying; it has large grows in Canada and abroad, which they produce flower for and have the capability of doing extraction down to oil for an additional revenue stream. They also have a manufacturing facility in its final stages of completion that will allow the company to produce final consumables in the forms of transdermal patches, pills, tinctures and products of that nature for humans.

Through subsidiaries develop and sell a variety of cannabis based natural products including custom-made cannabis products. MYM is focusing their business model to be in the medical segment, which they feel is a longer-term play, as opposed to a recreational pot. 

Why the Big Increases?

Regulators explain that the list of qualifying conditions to enter the medical marijuana program in RI is pretty short but, but it covers a wide range of ailments such as severe pain, muscle spasms, nausea and other maladies. They also claim that some doctors over the border in nearby areas have been willing to write medicinal marijuana scripts for a large segment of Rhode Island's 18,200 registered patients with as they put it "few questions asked."

The Governor tried and failed on an attempt to restrict certain doctors from participating in the medical pot program last year.

Business is apparently brisk at a dispensary in Providence, where on some days patients can wait up to 25 minutes to make a transaction at one of 17 check-out stations. And the situation is similar at other centers around the state.

According to a lead regulator, "People do not live close enough to these three centers," "and there's not enough competition in terms of pricing and offerings. So, when you look at the state's need, it's just not being met by the three existing compassion centers."

 "We do not have enough distribution or patient access right now," he said, explaining that the state's current three dispensaries were created in 2009. Back then, Rhode Island had fewer than 2,000 patients seeking medical pot.

It Just Keeps Getting Bigger

Nationwide, cannabis sales are expected to reach $3.8 billion in 2018, and up to $6.6 billion by 2025, according to projections from New Frontier Data. Using that benchmark, sales of the plant could reach up to $24.1 billion by 2025.

Rhode Island's legalization proposal includes plans to triple the number of medical marijuana dispensaries to nine in order to meet the growing demand in that state. According to published data, Rhode Island is a good model since it leads the nation in per-capita marijuana consumption. Their new proposal would create six additional retail-only stores, but none of them would grow pot or manufacture any marijuana products. They are leaving that to the existing suppliers and manufacturers like MYM Nutraceuticals.

Legislators have indicated that the nine dispensaries in the state could apply for licenses to sell recreational marijuana at a later date if the General Assembly approves recreational use. That could well happen during this session.

For now, it appears that the nation's medical marijuana supplies, like Rhode Island's, will lag behind the demand, which is expected to ultimately plateau and gain a balance. But that may be for some years to come.

Companies benefiting from the move towards legalization of medical marijuana and increased use of hemp products include:

Aphria (NYSE: APHA) (TSX: APHA) bills itself as one of Canada's lowest cost producers, that produces, supplies and sells medical cannabis. Located in the greenhouse capital of Canada, Leamington, Ontario, Aphria provides pharma-grade medical cannabis, and quality patient care.

AmeriCann, Inc. (OTC: ACAN) develops, owns and supports advanced medical cannabis cultivation and processing facilities nationwide. The Company has a multi-market portfolio of over 1,000,000 square feet of sustainable cannabis production infrastructure in various stages of development.

Aurora Cannabis (TSX: ACB) (NYSE: ACB) has funded capacity in excess of 430,000 kg per year and operations across Canada and in Europe, making it is one of the world's largest cannabis companies. The Company is vertically integrated and horizontally diversified across every key segment of the value chain.

For a more in-depth look into MYM you can view the in-depth report at USA News Group: http://usanewsgroup.com/2018/04/12/sector-diversification-is-the-key-to-a-happy-trading-portfolio/

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