My hope and dream is some day before I head to the horserace in the sky, cannabis may become legal in some respect right here in Kansas-the “heart of America.” I often contemplate just what we know that most of the others don’t.
At least we have sportsbook betting here!!
The Reschedule “Pivot”
Well, the rumors have been flying all over the place regarding “rescheduling” for the past 5-6 months or so. Predictions on timing ended up being pretty close. Now, that apparently Uncle Sam is prepared to knock cannabis from Schedule I to Schedule III, truly the eventual devil will indeed be in the details. Not sure we have answered the most critical questions and in fact, maybe we just got a whole lotta thorny, nebulous new ones.
OK, NOW WHAT???
There remains so, so many questions as to what the ultimate impacts will be from this dramatic shift along with continued confusion and uncertainty as to the potential ramifications:
- 280E gone in it’s entirety? What about the adult use/recreational market players?
- How will the FDA “police” medical marijuana? Just like the prescription drug regulatory oversight and restrictions?
- The industry, the state market players are largely not in compliance with FDA regulations over Schedule III substances. How will the individual state/local regulatory agencies respond? What of “conflict” between Federal and state regulatory compliance and over-sight?
- Will the industry profoundly shift to a prescription drug/healthcare product market for “medical” usage, and a separate adult use/rec model?
- Most industry players have their toes in both adult use/rec as well as “medical”. And, the most dramatic state market growth spurts have occurred upon adult/rec use legalization. Take Missouri for example. Meanwhile, “medical” sales as a % of total volume have declined in most state markets that have legalized adult/rec use. Adult use/rec remains Schedule I, it would appear.
- How will the healthcare providers enter the medical space? Training and education? Who will market/produce product to them? Big Pharma, perhaps?
- How will health insurers treat medical cannabis?
- Will the Walmart pharmacies, Walgreen’s, Target, etc. become the primary distribution players? To a significant extent, they’ve got the infrastructure, systems, processes to handle the medical side.
- What about mail order home delivery for “prescription” medical cannabis? How does that impact dispensary providers?
- Implications for, impact on state social equity license holders? Like the Missouri micro-license program?
- Does this open the door for banking and traditional financial market access? To the extent we’re talking prescription cannabis product, does this change encourage federally regulated institutions to open up their doors and lending to the industry? Seems pretty challenging given the size of the adult use market and apparent illegality at the Federal level.
- FDA restrictions on prescription drug claims are pretty tight. As a result, the advertising messages are pretty tightly controlled, and claims have to be supported by science. How will this be impacted by a Schedule III shift for medical use?
Volatility is the number one “enemy” of enterprise value as it increases uncertainty looking forward. And, uncertainty increases risk and required rates of return, which in turn impairs value. This is why traditional markets have been “on hold” and when coupled with federal illegality, state market regulatory complexities and compliance demands, and 280E burdens, the price to obtain 3rd party capital is sky high with very few provider options.
Does this dramatic development reduce complexity and uncertainty, or does it simply change and/or compound it?
My Monday morning QB take on it all??
Stay tuned as truly only time will tell. Meanwhile, we will continue to have to place our bets on the cannabis future very, very carefully.
Always Beside You
Value$Canna CFO LLC is a specialty cannabis CFO services/consulting firm that delivers accounting and financial reporting, risk management advisory, CFO contributions & cannabis value driver/KPI dashboards to cannabis business owners and their team members. Tony Wayne is an active member/committee contributor to numerous cannabis professional & trade associations, and he holds various cannabis & professional certifications including CPA, CVA, CFF, CIRA, CCCE & CSC. Tony is also President of IronHorse LLC. IronHorse LLC is a specialty consulting firm that specializes in distressed enterprise consulting, CRO engagements, receiverships & complex commercial litigation support.
https://www.valuecannacfo.com/
