Bloomfield Industries, one of the five companies licensed to sell medical marijuana in New York, is being acquired by MedMen, a California-based marijuana management and consulting firm.
The change in ownership comes just two days after New York State’s medical marijuana program marked its first year, amid cries from executives that the market is not viable and reassurances from the state Department of Health that the program remains on course.
Bloomfield had been facing “financial constraints” for at least the last six months, forcing the company to skip payments to some vendors and entertain offers from several investors, including MedMen, which has a $100 million venture capital arm.
A Department of Health spokeswoman stressed this is not a license transfer, which would be prohibited under state regulation. Instead, it is a change in ownership, which is permitted with health department approval. The new owners must adhere to Bloomfield’s original operating plan, according to the department. They must offer the same products, operate under the name “Bloomfield Industries” for the remainder of its two-year registration, operate at the same facilities and charge the same price for medical marijuana products. Bloomfield’s registration expires July 31.
Daniel Yi, a spokesman for MedMen, declined to comment on the specifics of any deal, saying “it is our policy not to comment on active investments.”
MedMen is partnered with Wicklow Capital, which is run by the Chicago-based family of Dan Tierney, the co-founder and former board member of GETCO. Wicklow Capital is already the primary investor in PharmaCann, another of the state’s five licensees.
“It’s very strange that [the state would] allow one group to have such a large market share,” said a person familiar with another licensee’s thinking, who asked for anonymity to speak candidly about the state’s process.
Teddy Scott, CEO of PharmaCann, did not respond to a request for comment.
All five registered organizations complained of too little demand for their products and urged the state to loosen some of its regulations.
In August, the state health department offered recommendations to improve the program, including: registering an additional five growers over the next two years, increasing the number of brands allowed under state law, allowing nurse practitioners to certify patients, allowing schools to administer medical marijuana, increasing the ability of manufacturers to advertise their product, studying whether medical marijuana might be used to treat conditions not currently listed as acceptable by the state and making it easier for providers to register with the program. Some of those recommendations have already been implemented and most were met with a sigh of relief but registering additional growers has concerned the remaining licensees who say the market is not yet mature enough to handle new competition.
“There are no issues of supply, there are only issues of demand,” said Ari Hoffnung, chief executive officer of Vireo Health, one of the five companies awarded a license. “I think [Bloomfield] is a reminder that we are dealing with a micro-market for medical marijuana and contemplating at this time the issuance of new licenses makes no sense whatsoever. All of the registered organizations are experiencing financial challenges. No one has made a profit and no one is at break even yet and this is a reminder that issuing new licenses is premature.”
Forty-three companies applied for a license in 2015 and five were awarded the chance to grow and distribute the drug beginning last January. Med-Men was not one of the original applicants.
The new owners were required to submit affidavits in support of their application for a change in ownership, according to the Department of Health, and those who will come into direct contact with marijuana also had to submit a background check.
Bloomfield was felled by a combination of questionable business decisions and bad luck. The company chose to grow its marijuana on Borden Avenue in Long Island City, where real estate prices are considerably higher than in other parts of the state, and rented far more space than it needed, its CEO told POLITICO in September. The other four licensees grow facilities are in Monroe, Warren, Orange and Fulton counties.
Bloomfield was one of four companies awarded a dispensary in New York City and one of two selected to open a dispensary in Manhattan. But the company was never able to open its Manhattan dispensary, which meant it could not capitalize on the highest density market in the state. Two of its other three dispensaries were open just three days a week.
Bloomfield did not respond to a request for comment.
The company’s 26-year-old founder, Richard Yost, started Bloomfield with a $4 million loan from his mother, whose electrical company has been accused of having ties to organized crime. On his application for the medical marijuana license, Yost said he has a bachelor’s degree in business administration from Northwood University. While Yost did attend the school, he never graduated nor earned a degree, according to Rachel Valdiserri, a spokeswoman for the school.
Several members listed on the Bloomfield Medical Advisory Board told POLITICO New York that they have had little or no contact with the company since operations began. The state health department said in a statement on Monday that, “any omission, false statement, or misrepresentation found to have induced the Department to approve of this change in ownership, may result in action against Bloomfield Industries Inc., including but not limited to suspension or termination of the registered organizations registration.”
By Dan Goldberg - Politico/Jan. 9, 2017
Photo: 1-New Cannabis Ventures; 2-inset-Island Stage
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