Medical marijuana sales sizzle in Pennsylvania, and the M&A market has been busy

James Thomas’ hips began to bother him three or four years after he had joint replacement surgery. He turned to medical marijuana and is still testing out the right formulation.

“I haven’t found the right marijuana yet,” the 69-year-old retired heavy equipment operator from Wilkinsburg said. He has tried a spray and smoking flowers, a consumer preference.

“Let’s just say it was kind of mellow, and the spray was about the same,” he said. “It made me a lot friendlier, smiling, cracking jokes, maybe even talking more than I usually do. It always lifted me up.”

It also eased his hip pain, he said.

Since marijuana was legalized in Pennsylvania for treatment of serious medical conditions in 2016, 633,557 patients and caregivers have signed up to date, as purchase requires a doctor’s prescription.

And if recreational marijuana gets legalized in Pennsylvania, sales could quickly more than double, if Illinois' experience is any guide.

Cantor Fitzgerald analyst Pablo Zuanic doesn’t think that’ll happen before the first quarter of 2025 because the state’s Republican-controlled legislature has not shown much interest. But the legalization of recreational use in nearby states — New Jersey and possibly Maryland — could force the legislature’s hand, Mr. Zuanic wrote to investors. 

The bad news is without legal recreational use, the increasing number of dispensaries in Pennsylvania — 131 are open now — will dampen overall sales, Mr. Zuanic wrote. However, the silver lining for consumers of having more stores is lower prices, said John Collins, director of the state Office of Medical Marijuana.

“More outlets are creating more competition,” he said at Tuesday’s board meeting. “You would expect that to happen.”

For instance, as sales have boomed, the retail price of a gram of medical marijuana fell to $14.53 in July, down from $15.67 per gram in January 2020.

Illinois’ experience may be a glimpse of the future for Pennsylvania. In Illinois, the total cannabis market more than doubled in the first month after recreational use was legalized in January 2020, Cantor Fitzgerald’s Mr. Zuanic said. Factors that can cloud medical to recreational sales projections include product access, affordability and assortment, along with availability in nearby states.

Gov. Tom Wolf and Lt. Gov. John Fetterman support legalization of recreational marijuana, which may help explain Pennsylvania’s attraction to pot investors. This year has been especially busy for mergers and acquisitions in the state.

Between March and April alone, there were a half-dozen deals worth $438 million to acquire cultivation facilities and retail rights, with Chicago-based Verano Holdings Corp. and Trulieve Cannabis Corp. as the top players, according to Marijuana Business Daily, a trade publication based in Denver, Colo.

Verano picked up three dispensaries in Cranberry Township, Washington and Monroeville in a $110.3 million deal, then acquired Agri-Kind’s cultivation and processing facility in Chester, Pa. Verano also acquired Agronomed Biologics for $60 million, which included cultivation, processing and retail rights.

During the same three-month period, Tallahassee, Fla.-based Trulieve, which operates Solevo dispensaries in Squirrel Hill, Washington and Zelienople, paid $60 million for a dispensary license under Keystone Shops. Keystone has three locations in the Philadelphia area.

And in July, West Palm Beach, Fla.-based Parallel opened its first dispensary in the Pittsburgh neighborhood of Friendship under the company’s Goodblend banner, with plans for another store in Erie. Parallel is also developing a 124,000-square-foot cultivation facility on the North Side.

There is no difference between marijuana that’s used for medical or recreational purposes today, but that’s going to change as the young industry matures, said Nushin Rashidian, co-founder and editor of Cannabis Wire, a news service with offices in Brooklyn, N.Y. In years to come, there will be products tailored to therapeutic and recreational uses.

“Currently, there’s a lot of overlap,” she said, with the same regulators for both uses, the same marijuana suppliers, “but that’s not permanent.”

“In 10, 20 years, bifurcation will happen,” she said. “There’s going to be much more sophisticated formulations on both sides. It’s a huge, huge, huge field, and I think we’re at the very beginning of it.”