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The Ninth Circuit Court of Appeals is set to hear arguments in August in a closely watched case about whether terminally ill patients have the right to use the psychedelic drug psilocybin under federal and state “right-to-try” laws, Law360 reported.

The case, Advanced Integrative Medical Science Institute v. U.S. Drug Enforcement Administration, was brought by Dr. Sunil Aggarwal, a Seattle physician who’s seeking to provide psilocybin to his dying cancer patients to treat depression and anxiety.

Aggarwal and his clinic argue that laws aimed at allowing terminal patients to try experimental medications should permit the use of psilocybin in this context. The DEA and Justice Department counter that right-to-try statutes don’t override the federal prohibition on the substance.

Oral arguments in the case are scheduled for the morning of Aug. 19 in San Francisco, the Ninth Circuit announced Sunday.

The current appeal is part of a broader effort by Aggarwal to expand access to psilocybin for end-of-life care. The DEA has repeatedly rejected his proposals, arguing that providing the substance would be inconsistent with public health and safety and that Aggarwal must register as a researcher to obtain it.

Aggarwal sued the DEA in 2022, alleging its decisions were arbitrary and contradicted legal precedent allowing limited therapeutic use of other restricted drugs. The agency has insisted that Aggarwal hasn’t provided sufficient evidence and that it can’t fully assess his waiver request without more specifics.

In a separate case, the Ninth Circuit ordered the DEA to clarify its rationale for keeping psilocybin in Schedule I after rejecting a petition by Aggarwal to reclassify it.

Though currently illegal, psilocybin has received “breakthrough therapy” designation from the FDA twice and is now undergoing late-stage clinical trials. Any ruling by the Ninth Circuit in Aggarwal’s case could mean reverberations for its legal status and availability to patients.

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Scotts Miracle-Gro (NYSE: SMG) trimmed its financial expectations for the fiscal year on Thursday, but the company but reiterated its commitment to critical targets and signaled confidence in its strategy despite a more challenging environment.

The Marysville, Ohio-based company now anticipates adjusted EBITDA earnings of $530 million to $540 million, about 20% above the previous year but below its earlier forecast of $575 million, according to a news release. Scotts also dialed back its outlook for U.S. consumer segment sales growth to 5% to 7%, from a prior estimate of high-single digits.

“We are seeing year-over-year growth and feel good about our overall performance,” Chairman and CEO Jim Hagedorn said in a statement, noting the company’s confidence in its ability to drive long-term shareholder value despite the revised guidance.

Central to that effort is Scotts’ goal of generating $1 billion in free cash flow over two years. The company said it remains on track, with plans to deliver $560 million in the current fiscal year. Scotts also aims to pare its debt by at least $350 million and boost its full-year gross margin by a minimum of 250 basis points.

“Our decisive actions are contributing to sales growth, strong free cash flow generation, and significantly improved year-over-year adjusted EBITDA, putting us in position to exit 2024 with leverage below 5 times,” CFO Matt Garth said.

The lawn-and-garden giant has grappled with oversupply and a sharp downturn in its Hawthorne unit, which serves the cannabis growing industry. In April, Hawthorne surprised the company by outperforming internal profit forecasts for the first time, buoyed by strength in higher-margin proprietary brands.

The cannabis industry, while struggling, is showing some signs of life. Hawthorne stands to benefit from a potential merger involving one of its investments,  New York-based RIV Capital (CSE: RIV) (OTC: CNPOF), which is in late-stage talks to combine with Florida-based Cansortium Inc. (CSE: TIUM.U) (OTCQB: CNTMF). The deal would give Scotts a sizable stake in a new multistate operator with greater scale and reach.

Federal action to ease marijuana restrictions could also provide a lift, though Scotts has been measured in its optimism on that front.

The company previously said a restructuring effort, which included layoffs and facility closures, has better positioned Hawthorne to navigate a range of scenarios. Scotts still sees long-term value in the cannabis industry, Hagedorn told investors this year.

Scotts plans to share additional details on its outlook at the William Blair growth-stock conference Thursday in Chicago. The company reaffirmed its commitment to its strategy and key financial targets.

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After rumors raced through the industry, Ben Kovler, CEO of Chicago-based Green Thumb Industries (GTI) (CSE: GTII) (OTCQX: GTBIF), officially confirmed that he sent a letter to the chairman of  The Boston Beer Company (NYSE: SAMS), Jim Koch, outlining the potential benefits of joining forces.

In the letter, which was made public on X Wednesday, Kovler pitched a vision for the combined company to create a “powerhouse of brands” that would cater to evolving consumer preferences, particularly as younger consumers drink less alcohol. He also noted that the merger would allow GTI to trade on a major U.S. stock exchange; the company currently trades on the U.S. Over-the-Counter markets and the Canadian Securities Exchange.

Kovler proposed that the combined entity would be well-positioned to innovate in established cannabis product formats and pursue further mergers and acquisitions. He also suggested that GTI could make a superior offer to Boston Beer shareholders that other rumored proposals.

The situation wasn’t entirely clear up until now, with a representative for GTI earlier this week stating that the company does not comment on market rumors. Boston Beer It has not publicly commented on the proposal, nor has it responded to Green Market Report’s requests for comment.

Stock prices for Green Thumb Industries posted steady gains since the letter was leaked, going from $11.59 on Tuesday morning to a peak of $12.40 Wednesday morning. Boston Beer’s stock initially declined, however, it reset to just above the price it traded at at close on Tuesday.

As of Wednesday, GTI had a market capitalization of approximately $2.89 billion, while Boston Beer’s market capitalization was around $3.52 billion.

Alcohol companies have already been investing in the cannabis industry, such as Constellation Brands (NYSE: STZ), which made a $4 billion investment in Canadian grower Canopy Growth (NASDAQ: CGC). However, Constellation has recently taken steps to distance itself from the deal after incurring financial losses, which highlights the continued challenges for the cannabis industry.

GTI reported revenue of $1.05 billion in 2023, according to the letter. The company currently operates in 15 U.S. markets, including Illinois, Pennsylvania, and Florida.

Despite growing legalization of marijuana at the state level, cannabis remains illegal under federal law, which restricts the ability of U.S. cannabis companies to list on major exchanges like the New York Stock Exchange and Nasdaq. Many are convinced rescheduling wouldn’t even give up-listing to a major exchange a fighting chance.

A merger between GTI and Boston Beer would likely face significant regulatory challenges, given the patchwork landscape of state and federal laws governing the cannabis and alcohol industries. The deal would also require approval from both companies’ shareholders. Additionally, Boston Beer already has a presence in the cannabis industry with its THC-infused brand TeaPot.

Kovler’s letter touted growth of the U.S. cannabis market and suggested federal legalization is inevitable. He also compared the situation to the end of alcohol prohibition, which fueled the rise of brands like Jim Beam and Jack Daniel’s.

GTIletterreadable

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Canopy Growth Corp. (TSX: WEED) (NASDAQ: CGC) said Tuesday that it has exercised its option to acquire New York-based Acreage Holdings Inc. (CSE: ACRG.A.U, ACRG.B.U) (OTCQX: ACRHF, ACRDF) through Canopy’s U.S. subsidiary, Canopy USA.

The move comes less than a week after Canopy reported its financial results for fiscal year 2024, which ended on March 31 and showed that despite a decline in revenue, the company managed to significantly reduce its net loss versus the previous fiscal year.

The acquisition is part of Canopy’s long-boiling strategy to expand its presence in the U.S. as more states legalize recreational and rescheduling talks move forward. Canopy USA has also recently completed the acquisition of California-based cannabis brand Jetty and two out of three business units of Colorado-based Wana Brands, it said.

“We’re excited to see this advancing as more of Canopy USA’s priority markets come online for adult use across the Midwest and Northeast,” said David Klein, CEO of Canopy Growth and a board member of Canopy USA, in a statement.

However, the acquisition of Acreage comes with its risks. Financial filings show that Acreage had a mere $7.3 million in cash and a staggering $365.2 million in total liabilities as of March 31. The company also warned of its potential inability to continue operations through the next year, with multiple notices of default on debts and accumulated deficit of $775 million.

Despite the red flags, Klein remains confident that Acreage’s financial woes will be resolved once it is fully integrated into Canopy USA.

“We anticipate that these actions will drive growth and the realization of commercial synergies across Canopy USA’s operational platform,” Klein added.

Still, analysts have mixed opinions on Canopy’s acquisition of Acreage.

Matt Karnes, founder of GreenWave Advisors, recently told Green Market Report that Canopy might be “stuck” with the deal and must “make lemonades out of lemons.” While acknowledging some potential bright spots for Acreage, such as the launch of Ohio’s recreational marijuana market and ongoing developments in New York and New Jersey, Karnes criticized Acreage’s management for “poor choices” that likely contributed to its current predicament.

The lead-up

Canopy has been after Acreage since 2019, when the two companies first entered into an arrangement agreement. The initial deal was contingent upon federal legalization of cannabis in the country.

Under the terms of the original agreement, Canopy would acquire 100% of Acreage’s shares for a total value of approximately $3.4 billion, pending U.S. federal legalization. The deal also included an upfront cash payment of $300 million by Canopy to Acreage shareholders.

By the summer of 2020, the two companies amended the agreement to provide Canopy with more flexibility to pursue other opportunities in the U.S. market. The amended deal reduced the upfront cash payment to $37.5 million and allowed Canopy Growth to acquire 70% of Acreage’s shares upon U.S. legalization, with an option to acquire the remaining 30% later.

Now, with the recent announcement, Canopy has exercised its option to acquire Acreage fully, nearly five years after the initial agreement was made.

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The city of Pittsfield, Massachusetts, agreed to pay $786,625 to settle lawsuits brought by three cannabis retailers over community impact fees.

The settlements with Temescal Wellness, Berkshire Roots, and Bloom Brothers were approved by the Pittsfield City Council in a 10-1 vote, according to the Berkshire Eagle. Under the deals, Temescal will receive $360,375, Berkshire Roots $341,000, and Bloom Brothers $85,250.

The legal disputes centered on the municipality’s authority to impose fees on cannabis businesses under Massachusetts law. Pittsfield Mayor Peter Marchetti said that the settlement amounts were less than what the companies paid the city, but avoided potentially larger losses at trial.

“If we were to go to trial and lose, the conditions of that would be far greater than the monies that they owed us,” Marchetti told the Eagle.

The lawsuits alleged Pittsfield failed to justify the community impact fees it charged the cannabis companies under host community agreements. A 2022 state clarification also limited the fees municipalities could impose.

The settlements follow similar legal actions brought against other Massachusetts towns and cities by cannabis companies seeking refunds of previously paid fees. Boston at one point returned nearly $3 million in fees to local cannabis businesses, while the town of Uxbridge paid $1.2 million to settle with one retailer.

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Cansortium Inc. (CSE: TIUM.U) (OTCQB: CNTMF) reported stronger sales and a smaller loss for the first quarter ending March 31, as the multistate cannabis company benefited from continued growth in Florida’s medical marijuana market.

The Miami-based company booked revenue of $25.2 million for the period, up 14% from a year earlier, fueled by a 16% sales increase to $21.1 million in its home state of Florida. Net loss narrowed to $4.2 million from $7.4 million in the year-ago quarter.

“We delivered another quarter of year-over-year revenue growth and positive cash flow generation during the first quarter as we continued to execute on our growth objectives,” said CEO Robert Beasley in a statement.

The firm has been trying to expand its retail footprint and enhance its cultivation operations in Florida, where it sells medical cannabis products under the Fluent brand. The company opened several new dispensaries in the state over the past year and now operates 35 retail locations. It plans to add three more by the end of 2024.

Cansortium has also been upgrading its Florida cultivation facilities to produce a wider variety of high-THC flower strains and cannabis extracts, it said, which typically carry higher price points than lower-potency products.

“Our flower quality seeing further improvement and our average THC percentage now exceeding 27% with many of our strains routinely exceeding 35%,” Beasley said on a company earnings call. “Our improved product quality has enabled us to sustain higher pricing across virtually all product categories, including flower and baked cartridges.”

These efforts helped boost the company’s adjusted EBITDA to $6.8 million from $5.8 million a year earlier.

Beasley also acknowledged the potential for adult-use legalization in Florida, saying “We remain focused on operating our business under the current regulatory framework, and we look forward to doing our part to help this measure pass the referendum.”

CFO Jeff Batliner provided details on Cansortium’s restatement of its first three quarters of 2023, stemming from issues in its biological asset reporting, depreciation and an employee retention tax credit. The largest impact was $6.7 million related to the biological asset adjustment, split across the first quarter through the third quarter.

Cansortium also struck a deal to acquire cannabis investment firm RIV Capital (CSE: RIV) (OTC: CNPOF) in an all-stock transaction. The deal will give it a presence in New York, Pennsylvania and Texas in addition to Florida upon closing later this year.

“We are excited about the business combination with RIV Capital…laying the groundwork for a presence in four of the five largest population states in the country upon closing,” Beasley said.

Under the deal terms, RIV Capital shareholders will receive 1.245 Cansortium shares for each share held. Upon closing, existing Cansortium investors will own about 51% of the combined company, while RIV Capital and affiliated firm The Hawthorne Collective will control around 49%.

Management believes the deal will accelerate Cansortium’s growth by establishing a foothold in states that have attractive regulatory structures and limited competition.

However, Cansortium is still losing money as it spends heavily to grow its business. According to filings, the company in April raised $10 million through a private placement of convertible debt and expects to secure another $6 million in the coming weeks.

At the end of March, Cansortium had $8.5 million of cash and cash equivalents, with total debt of $62.9 million.

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Glass House Brands Inc. (CBOE: GLAS.A.U) (OTC: GLASF) is seeking approval that could allow it to raise more than half a billion dollars from stock sales to investors north of the border over the next two years.

The Long Beach, California-based firm announced Wednesday that it filed a shelf prospectus with Canadian regulators to allow for the issuance of up to C$782 million (US$576 million) in new equity shares through April 2026.

While Glass House said it has no immediate plans to sell shares, the filing gives it a quick path to raise capital from equity offerings if opportunities arise.

“With our strong operating performance, long-term growth prospects, and increase in share price over the past 18 months, having a base shelf will provide additional flexibility to add growth capital and lower our cost of capital when we judge the time to be right,” Chairman and CEO Kyle Kazan said in a statement. “At that time, we will consider all available options including debt, equity, and preferred equity or any combination.”

California cannabis businesses have limited access to traditional financing sources like bank loans because marijuana remains illegal at the federal level. That’s led some to look to investor-friendly Canada as an alternative funding path while uncertainties remain around federal enforcement and legalization efforts.

Glass House closed out 2023 with $271 million in revenue, a 56% increase from the previous year. The new Canadian shelf prospectus filing did not show any material ongoing litigation or going concern issues for the unprofitable cannabis producer, which was at a net loss and had an accumulated deficit of $209 million as of March 31.

Glass House on Tuesday dropped defamation claims against Catalyst defendants who alleged the company is the “largest black marketeer” of cannabis. This came after a California court in March entered a $2.865 million judgment against Element 7 and its owners in favor of Glass House’s subsidiary GH Group over claims of fraud and breach of contract.

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The Alaska legislature passed a bill to establish a task force that will help prepare the state for potential federal legalization of psychedelic therapies, officials said.

The task force won’t take a stance on whether psychedelic treatments are beneficial, said Rep. Jennie Armstrong, an Anchorage Democrat who introduced the House version of the bill that passed on May 10, but it aims to ensure the state is ready if the U.S. Food and Drug Administration approves such therapies, she said.

The FDA is expected to decide this fall on whether to approve MDMA, sometimes known as ecstasy, as a treatment for post-traumatic stress disorder. Veterans, first responders, and Alaska Native people experience PTSD at higher rates than the general population, according to Alaska Public Media.

Rep. Armstrong said the task force’s main focus will be ensuring that any federally approved psychedelic therapies are covered by insurance, including Medicaid, so that all Alaskans have access. The group will purportedly include advocates for the health care needs of Alaska Native people, veterans, and survivors of domestic violence and sexual assault.

“When you look at the rates of trauma, and harm and mental health issues and addiction issues, and suicide rates in our state…you can just imagine how profound that is going to be on the state of Alaska, if we can ensure that those who qualify and need this medicine can get access to it,” Armstrong said.

While some other states have moved to decriminalize psychedelics, Armstrong said Alaska’s approach is different because the task force recommendations will align with any FDA approvals rather than advancing state-level legalization.

What the task force will do is develop recommendations on licensing, insurance coverage, and regulations for psychedelic treatments. Under the measure’s guidelines, the task force It will operate for one year. The bill now awaits a signature from Gov. Mike Dunleavy, a Republican.

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Seelos Therapeutics Inc. (Nasdaq: SEEL) has raised approximately $1.1 million through a combined registered direct offering and private placement, according to a news release Thursday.

The New York-based biotech, which is focused on developing treatments for central nervous system disorders and rare diseases, sold 380,968 shares of common stock at $2.46 per share to institutional investors through the direct offering. It also issued pre-funded warrants for the purchase of up to 81,239 additional shares.

Seelos said it expects around $1.1 million in gross proceeds from the registered direct portion before fees and expenses. Concurrently, it agreed to issue unregistered warrants to the same investors for the private placement purchase of up to 924,414 shares at $2.21 per share.

The transactions, undertaken with Roth Capital Partners acting as the placement agent, are anticipated to close around May 21, subject to customary conditions.

For Seelos, the $1.1 million cash infusion provides a modest financial lifeline as the company looks to pivot following a string of clinical trial disappointments over the past year.

In March, Seelos reported that its drug candidate SLS-005 failed a study evaluating its potential to treat amyotrophic lateral sclerosis (ALS), causing the company’s shares to plunge from around 93 cents to 37 cents on the day before partially recovering.

Seelos had been hopeful the low molecular weight disaccharide drug could help slow the progression of the incurable neurodegenerative disease, which impacts motor neurons and results in progressive muscle wasting and paralysis. However, the study missed its primary and secondary endpoints, despite some potential efficacy signals in a subgroup analysis.

The ALS trial failure came on the heels of another setback last September, when Seelos’ investigational ketamine nasal spray therapy SLS-002 aimed at treating acute suicidal ideation in depression patients failed to achieve its primary endpoint in a Phase 2 study.

Citing financial constraints that prevented the company from reaching its planned enrollment target, analysts at Cantor Fitzgerald subsequently downgraded Seelos stock over doubts about its ability to effectively conduct and complete future clinical trials.

Despite the high-profile study failures, Seelos has pushed forward with SLS-002’s development path. That following November, it announced the drug’s inclusion in a Department of Defense-funded adaptive platform trial evaluating potential treatments for post-traumatic stress disorder in military personnel.

Seelos said at the time that the larger DoD study, if successful, could potentially support pursuing regulatory approval for SLS-002 to treat PTSD based on its data — positioning the drug as a potential path to profits if it can prove effective across a bigger trial population than Seelos’ prior studies.

With its latest $1.1 million raise, the company said it intends to use the net proceeds for general corporate purposes, funding development of its pipeline candidates like SLS-002, and servicing its outstanding convertible debt obligations.

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North Carolina-based cbdMD Inc. (NYSE: YCBD) reported a wider loss for its fiscal second quarter ending March 31, as sales slumped and the company recorded certain one-time charges.

The company posted a net loss of $4 million, or $1.35 per share, versus a loss of $2.3 million, or $1.74 a share, a year earlier. The latest results included a $1.4 million non-cash charge related to the potential convertibility of notes issued during the quarter.

Revenue fell 30% to $4.4 million from $6.2 million a year ago. Direct-to-consumer sales declined 26% while wholesale revenue tumbled 44%.

cbdMD said it issued a $439,926 credit to a wholesale customer related to a $1 million order from March 2022. Gross margin contracted to 59% from 64% a year ago, primarily due to that credit.

Despite the disappointing results, management signaled optimism that recently enacted cost cuts will generate $2.4 million in annualized savings by August. The reductions include layoffs, vendor renegotiations and consolidation of offices.

cbdMD launched its ATRx functional mushroom brand into about 1,500 GNC stores nationwide during the quarter. Kennedy said third-quarter revenue is currently pacing ahead of the March period.

“Transformation is not always linear, and while our second fiscal quarter 2024 results fell short of our ambitions, we believe the operational changes we’ve enacted are set to propel us forward,”  CEO and CFO Ronan Kennedy said in a statement. “We’re particularly excited about our ATRx Platinum line national rollout at GNC, which not only broadens our market presence but also validates our expansion into functional mushrooms.”

cbdMD’s primary revenue driver is its direct-to-consumer online sales channels for its CBD products like tinctures, gummies, topicals and other consumer CBD goods across its cbdMD, Paw CBD and new ATRx functional mushroom brands. Wholesale sales to retailers make up a smaller portion of the company’s overall sales.

The CBD company had $2.1 million in cash remaining at the end of March, down slightly from $1.8 million in September 2023.

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Canadian cannabis producer Rubicon Organics Inc. (TSXV: ROMJ) (OTCQX: ROMJF) reported flat revenue and a swing to a loss in the first quarter, citing seasonal weakness and lingering consumer pessimism as dampening factors. Still, the company was up 50% trading at $0.40 cents a share after the close Wednesday afternoon.

For the period ending March 31, Rubicon posted net revenue of C$8.9 million, a 1% uptick from the first quarter of 2023. But adjusted EBITDA fell to a loss of C$400,000 versus a C$1.7 million profit in the year-ago period. The company did not immediately provide bottom-line net profit/loss figures for the quarter.

“We anticipated a challenging first quarter due to typical seasonality and the overhang of weak consumer sentiment from 2023,” CEO Margaret Brodie said in a statement. “I expect to recover from this temporary dip from our streak of positive adjusted EBITDA in the second quarter.”

A key part of Rubicon’s optimism lies in the launch of its new full-spectrum extract vape products under the 1964 Supply Co. brand. The release said the company received initial purchase orders for these vapes from Alberta, British Columbia and Ontario provincial distributors.

“The vape market has demonstrated robust growth over recent years and trends in Canada and the U.S. demonstrate indicating the vape category’s increasing prominence, rivaling or surpassing traditional flower products,” the company said, framing the launch as a way to capitalize on the segment’s upside.

Brodie added, “With a focus on quality, we are confident that our vape launch will not only drive revenue growth but also solidify our position as a leader in the Canadian cannabis market.”

Rubicon did log a 28% year-over-year decline in first quarter gross profit to C$2.2 million, which Brodie attributed to an unfavorable product mix shift during the quarter.

“In the first quarter, a changing product mix reduced our gross margin, but this spring we’ve shifted focus to higher-margin products, expecting improved results in the second quarter and beyond,” she said.

The company also highlighted its strong market positions, citing Hifyre data showing it was the top premium licensed producer across all cannabis product categories in Canada during the first quarter.

When it comes to cash flow, Rubicon recorded negative operating cash flow of C$900,000 for the first quarter. At the end of March, its working capital included C$10.7 million in current loans and borrowings.

CFO Janis Risbin said, “With the expected re-financing of our debt later this year, we remain focused on strengthening our already solid foundation and continuing to invest opportunistically for growth in 2024 and beyond.”

Looking ahead, Rubicon projected year-over-year revenue growth for full-year 2024, though also anticipating lower gross margins as it uses more external cultivation capacity for branded products. Pricing pressures were also expected to persist industry-wide, according to the release.

Despite the headwinds, management struck an upbeat tone about 2024 overall, forecasting continued positive operating cash flow and positioning Rubicon “as one of the premier cannabis companies in Canada.”

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With Ohio poised to begin issuing the first of its adult-use licenses next month, several cannabis operators are preparing to become an early player in the new state market. However, one of the largest multistate cannabis operators is warning that the accelerated timeline could lead to supply shortages out of the gate.

During its first quarter earnings call on Wednesday, executives from Chicago-based Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) addressed the double-edged sword of an earlier-than-expected start for Ohio’s new recreational cannabis market next month.

Cresco CEO Charles Bachtell acknowledged the positive surprise of adult-use licenses coming out in June, calling it “great news” for the industry, but he also raised a yellow flag about the development.

“That comes with its own potential challenges too,” Bachtell told investors. “The ability to service the significant increase in expected volume in the state of Ohio, just realistically, the CapEx and the expansion plans needed to go from medical to adult use in the doubling, tripling, whatever it may be, it’s going to take more time than nine months to 10 months.”

Most operators, including Cresco, had been making plans based on previous projections that Ohio’s adult-use market wouldn’t kick off until later in 2024. That timeline shifted after state regulators announced this week that dual-use applications – which would provide existing medical operators with the opportunity to sell adult-use products as well – would be ready by June 7.

To ready for the transition, Cresco said it has steadily invested in incremental capital expenditures to expand cultivation capacity at its production facility in Ohio. CFO Dennis Olis said the company expects “a slight increase” in inventory levels in the second quarter as it builds up supply for the new adult-use market.

However, Olis noted most of Cresco’s major production site investments have already been made, and some remaining funds will be needed to expand certain retail dispensaries to handle increased foot traffic and volume.

Cresco took “a phased approach” to capital allocation in Ohio given the uncertainty around how exactly the program would unfold, Bachtell explained. He said there was “quite a bit of risk” from opposition when the adult-use law was approved by voters in November.

For cultivation and retail, the compressed timeline was a curveball. Cannabis companies raised concerns that they might not be able to adequately boost supplies and staffing if sales opened up to all adults so soon after the ballot initiative passed.

While acknowledging potential short-term bottlenecks, Cresco still struck an optimistic tone about navigating the challenges and capitalizing on the lucrative Ohio market opportunity. President Greg Butler projected an initial spike in cannabis pricing before the market stabilizes as more supply comes online.

Medical marijuana dispensaries that had been operating in the state for at least five years as of Dec. 7, 2023, will receive first crack at adult-use licenses to convert to the new market. The state’s new Division of Cannabis Control will also issue up to 50 additional new stand-alone adult-use dispensary licenses, with licensing preference given to social equity applicants.

For multistate operators like Cresco that already have cultivation and retail assets in Ohio’s medical program, the adult-use transition represents a hotly anticipated growth catalyst – supply constraints or not. Other established cannabis companies in the state are also investing heavily to scale up operations.

“We’re all very happy that it looks like a good guy all around where it moved forward faster than expectations,” Bachtell said.

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