Top medical marijuana companies across the country, including a handful of companies based in New York, reported significant losses last year, according to an analysis of filings by Green Market Report.
Two dozen of the top plant-touching publicly traded marijuana companies in the United States posted a cumulative financial loss of more than $4 billion in 2022 against nearly $9 billion in revenue, the analysis found.
The group of companies – a mixture of multistate operators and a few that are only in California – has a wide U.S. footprint, with licensed operations in 28 states, Washington D.C., and Puerto Rico. Many hold substantial market share in East Coast markets and the Midwest, including in Illinois, Michigan, Massachusetts, New York, New Jersey, and Ohio.
The largest swath of red ink in 2022 was posted by the Midtown East-based iAnthus Capital Holdings, which recorded a net loss of $449 million. This was followed by Columbia Care, which has locations in Union Square, Riverhead and Rochester and reported a $421 million net loss last year.
The New York-based companies included in the analysis—which included iAnthus, Columbia Care, Acreage Holdings and Ascend Wellness Holdings—reported losses of around $1 billion cumulatively. They reported a cumulative profit of around $1.3 billion, the analysis found.
Nationally, only three of the 24 companies—Green Thumb Industries, MariMed, and Vext Science—ended 2022 in the black, reporting a total of $36.5 million in profit. The other 21 companies posted a cumulative $4.1 billion in losses.
The smallest annual loss by any of the companies examined by Green Market Report was Medicine Man Technologies, which does business as Schwazze, with an $18 million net loss.
The two dozen companies at the end of 2022 also as a whole had:
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$1.3 billion in cash reserves.
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$12.5 billion in total liabilities.
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$21.6 billion in total assets.
“We’re having some big problems,” said Alan Brochstein, founder of New Cannabis Ventures and 420 Investor, when asked his opinion on the 2022 results. “We need real buyers to show up.”
More than $2 billion of the losses last year were in one-time writedowns by a dozen of the 24 businesses, noted GreenWave Advisors founder Matt Karnes. That includes $340 million in impairment charges by Columbia Care and $225 million by Curaleaf, as just two examples.
But even with those write-downs taken into account, both companies still would have posted multimillion dollar losses, Karnes said. That reality reflects the difficult path to profitability for marijuana businesses.
“It’s a big number, but it’s not surprising, given the headwinds,” Karnes said of the $4 billion loss. “Last year, we saw a lot more of these impairment charges, as the public markets started to tumble. All these acquisitions, the valuations had to be reconfigured, readjusted.”
What Happened?
Brochstein agreed with Karnes that, in hindsight, the numbers aren’t really surprising, particularly because of the artificial industry-wide sales bump created by the COVID-19 pandemic in early 2020. That boom—fueled by government subsidy checks, work from home mandates, and the “essential” designation granted to nearly all marijuana companies—lasted about a year and a half.
The high sales numbers from 2020 and early 2021—along with the victory of President Joe Biden and the Democratic Party in the 2020 elections—led to widespread industry optimism that federal cannabis reform wasn’t too far off, Brochstein said. That in turn caused some companies to overextend themselves with expensive expansion plans, the bills for which basically came due in 2022 and underpinned much of the toll taken on the sector’s bottom line.
“Coming into (2022), a lot of people – me included – saw how bad 2021 was, and we were thinking, ‘The world’s going to change.’ And no, it didn’t,” Brochstein said. “When you boom short-term, and nobody knows it’s short-term, and all of a sudden you make up for it, it looks terrible. That was one of the things that happened.”
And of course, the general costs associated with operating in a federally illegal industry, which range from immense federal tax bills under 280E to higher insurance and real estate costs, also contributed, Karnes noted. The Internal Revenue Service takes about 12% of cannabis revenues under 280E, Karnes said he once calculated.
All of that helps make profitability elusive for the sector.
“It’s not because these companies suck—I mean, some of them do—but the headwinds are insurmountable,” Karnes said. “If you factor all that in, of course you’re going to have a loss. So it’s really a testament to the guys who are making a profit.”
Yet another factor has been widespread cannabis price compression and oversupply, Brochstein noted, which has put more pressure on profit margins as the nationwide industry has grown.
“As the companies matured, it made their cost of production go down and their ability to sell go up, and it created pricing pressure. So weak demand and more supply, you don’t have to be an economics major like me to know, (that’s a) bad combo,” Brochstein said.
Case By Case
However, the cumulative bottom line figure doesn’t do justice to the reality that many of the companies are very different and need individual due diligence by investors to figure out if they’re poorly managed or well-run and simply weathering harsh market conditions, Brochstein said. Painting the entire sector with a broad brush regarding financial losses creates an inaccurate picture.
“Every company is going to be different,” Brochstein pointed out, adding that the list of 24 companies includes several companies on which he’s quite bullish, next to others that he said are “piles of poo.”
“Statehouse comes to mind,” Brochstein said derisively of the California-based MSO that lost more than $240 million last year. “iAnthus. Disaster. MedMen. Disaster.”
But Brochstein also praised Nevada-based Planet 13 Holdings and Florida-based Trulieve.
Operational cash flow for each company is also another important factor for investors to consider, said Karnes, who pointed to both Trulieve and Illinois-based Green Thumb Industries as having posted solid performances in that regard.
The same individuality also applies to each U.S. state market, given how they’re all structured independently of each other. That makes every company’s market dynamics different.
But one of the biggest issues undergirding the 2022 financials, Brochstein said, is a lack of interest by serious investors.
“The problem is that the retail investor that has supported the cannabis industry has put too much money into it and wants out, period. And we have no way right now to get new investors, especially institutional investors. That is the big problem. Falling estimates are part of that, because they lead to, nobody wants to buy,” Brochstein said.
Will It Turn Around?
Karnes believes companies will improve on their 2022 performance this year, if only because it would be hard for the 24 companies to fare worse. And, he noted, the writedowns were one-time charges.
Many of the public companies also have been cutting costs, laying off employees, and implementing new efficiencies—trying to wipe out the red ink.
“I have to believe we’ll see more companies turn a corner” in 2023, Karnes said.
Still, he’s not impressed by the performances of companies that have so far released their financials for Q1 2023.
“This year, it’s going to be tough. I think there’ll be some clear winners. But the guidance for this year hasn’t been all that significant for growth,” he said. “But clearly, when prohibition ends, that will change the game dramatically.
Brochstein was more circumspect about when or how the sector may see a widespread turnaround. He said if cannabis companies are able to uplist to exchanges such as the Nasdaq, that would attract more investors, which will be a much more long-term solution for the sector.
“A lot of the pricing pressure was very short-term, and absent any changes, there should be better profitability. I do hope that,” he said, but added, “Do I think it matters? Probably not. … We need more investors to show up and buy stocks. And being on the Nasdaq would help, and getting rid of 280E I know would help.” —John Schroyer
Attorney General reaches $103M settlement with opioid treatment drugmaker Indivior
State Attorney General Letitia James and 41 other attorneys general have reached a $102.5 million settlement with Indivior Inc., the manufacturer of an opioid use treatment called Suboxone, for monopolistic practices that the generals say suppressed the market for generic versions of the drug.
The agreement was submitted to the court in the Eastern District of Pennsylvania for approval, James’ office announced Friday. Indivior will pay New York almost $6 million, and the company is also required to inform all of the states involved of all Citizens Petitions it submits to the Food and Drug Administration. The firm must also give notice about new products and any changes in its corporate control, in an effort to ensure Indivio doesn’t repeat the suppressive practices.
“Indivior’s drug was supposed to help many, but its monopolistic practices helped fuel the opioid epidemic and impede efforts to confront it,” James said in a release.
The agreement resolves a lawsuit James filed against Indivio back in 2016, which alleged that the firm used illegal methods to switch patients from Suboxone tablets to new Suboxone film while trying to deplete the tablet market.
The suit dug into Indivior’s alleged history of anticompetitive conduct from 2008 onward. Suboxone tablets were first approved by the FDA in 2002 and the agency designated the drug as an “orphan drug,” meaning it could have no competitors for seven years because Indivior was not expected to recoup its research and development costs.
As a result, according to the suit, Indivior tried to prevent competition from lower-cost genetics from 2008 to 2013. Its exclusive right to sell Suboxone expired in 2009 and generic entry into the market happened in 2013.
James has recovered about $2.6 billion for New York’s opioid settlement fund so far and the money is meant to be used for opioid abatement, treatment and prevention efforts throughout the state. In 2022, Mayor Eric Adams announced the city would spend an initial $150 million from the fund over five years, and so far there are “serious gaps” in Staten Island’s share of the funding, despite the borough having the second-highest overdose rate in the city.
Indivior is headquartered in Richmond, Virginia and reported revenues of $901 million in 2022. —Jacqueline Neber
Northwell’s operating margin moves further into the red for Q1
Northwell Health reported a negative 0.56% operating margin for the first quarter of 2023, according to its most recent financial filings.
The documents, released last week, show that the system’s total revenues increased by about 10% from the first quarter of 2022, to just over $4 billion. Total patient service revenue grew by 11% to just over $3.5 billion, while other revenue saw an 18% jump to $383 million. The system did not receive any federal Coronavirus Aid, Relief and Economic Security Act funding this quarter, compared to $51 million at this time last year.
According to management notes for the quarter, increased volume, payment rates and pharmacy sales drove the higher operating revenues, as did continued growth of Northwell’s ambulatory and physician networks (the system just opened a new $4 million multidisciplinary specialty practice in Astoria). Volume for many services is at or above prepandemic levels, Northwell reports.
The volumes for discharges excluding the nursery, ambulatory surgery, emergency room visits, home care admissions and other outpatient services all rose, while health center visits dropped.
However, total expenses also rose by more than 9%; Northwell spent a total of just over $4 billion for the quarter. Wage expenses grew by 11% to slightly more than $2 billion, while benefits and supplies expenses increased by about 10% and 6%, respectively, to $478 million and $1.2 billion.
Management attributes the inflated costs to cost of living adjustments, inflation’s impact on supply costs, and invests in facilities and programs to grow Northwell’s capacity, patient safety initiatives, ambulatory and physician network expansion, and information technology, including electronic health records.
Barbara Osborn, Northwell’s vice president of public relations, told Crain’s staffing challenges to the labor market are also pressing on the system’s margins.
Going forward, she said, Northwell will focus on operational efficiency and strategic growth plans to get its margins back to prepandemic levels.
Northwell Health is New York’s largest health system and largest private employer. It runs 21 hospitals and more than 900 outpatient facilities and employs more than 84,000 people. —J.N.
Racial disparities persist in spite of New York’s progress on infant mortality
Although infant deaths in New York state have declined in recent years, Black babies continue to die at a higher rate, data released by the state Department of Health last week show.
The number of infant deaths in New York state dropped by 12% between 2016 and 2019, from 4.36 to 3.85 deaths per 1,000 live births. New York’s decline surpassed a 5% decrease nationally during that time period.
But despite this progress, the health department reported significant racial disparities in infant mortality across New York state. The mortality rate among Black infants was nearly three times that of white and Hispanic infants, the report found.
Between 2016 and 2019, the infant mortality rate declined for all racial and ethnic groups except non-Hispanic Black babies. The infant death rate among Black babies rose slightly from 8.4 to 8.5 deaths per 1,000 live births during this time period, data show.
Acting State Health Commissioner Dr. James McDonald said in a statement that despite overall progress, he remains concerned about the persistent increase in the mortality rate among non-Hispanic Black infants, “which is indicative of long standing health disparities.”
Social and economic factors—including employment status, housing, access to healthy food, income, stress and health insurance coverage—could be driving racial disparities in the infant mortality rate, the report said. The health department also said that racism and discrimination continue to widen these gaps.
Last July, New York state launched the Perinatal and Infant Community Health Collaborative Initiative, a five-year, $14 million annual fund that provides financial support to 26 programs across the state to improve pregnancy and infant health outcomes. The state has also attempted to update regulations for birthing hospitals that are overseen by regional perinatal centers, and expanded Medicaid coverage to a full year postpartum to improve health outcomes.
The report recommended that the Department of Health work with birthing hospitals to provide education, training and quality improvement initiatives in their facilities, as well as partner with institutions such as the State University of New York to reduce the provider shortage. —Amanda D’Ambrosio
AT A GLANCE
TOWN HALL: Gov. Kathy Hochul, the state Department of Health and the Office for the Aging will host a town hall this week to discuss the New York Master Plan for Aging, which aims to improve the lives of older New Yorkers and people with disabilities. The town hall will take place Wednesday, June 7 from 10 a.m. to 12 p.m. at Hunter College’s Silberman campus. Register here.
LOCAL PRODUCE: New York City’s Department of Education received an $8.4 million grant from the state to purchase locally grown foods for schools, Mayor Eric Adams and DOE Chancellor David Banks announced Friday. The funding, allocated through the Local Food for Schools grant, will support local producers and small businesses, as well as historically disadvantaged farmers, the city said. The Local Food for Schools Cooperative Agreement program is a partnership between the state’s education department and the U.S. Department of Agriculture.
TOBACCO CONTROL: Tobacco use rates, including the use of e-cigarettes, has declined among youth and adults in New York state, according to reports released by the Department of Health last week. E-cigarette use among high school students dropped from a peak of 27.4% in 2018 to 18.7% in 2022—a 32% decrease, data shows. Declines in cigarette use and vaping among both youth and adults indicates that tobacco control policies, such as ending the sale of tobacco products in pharmacies and banning flavored e-cigarettes, are effective, the department said.
WHO’S NEWS: The “Who’s News” portion of “At a Glance” is available online at this link and in the Health Pulse newsletter. “Who’s News” is a daily update of career transitions in the local health care industry. For more information on submitting a listing, reach out to Debora Stein: [email protected].
CONTACT US: Have a tip about news happening in the local health care industry? Want to provide feedback about our coverage? Contact the Health Pulse team at [email protected]
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