The LSU AgCenter is projecting an $11.3 million private investment will be needed to grow medical marijuana by turning a 15,000-square-foot warehouse into a greenhouse, lab and production facility and operating it for at least five years.


Although seven companies have submitted proposals to handle medical marijuana operations for the LSU Agricultural Center, some bidders question whether the program can prosper under the limitations of the current state law. Others are less pessimistic.

It could take years but it would be possible to push through changes needed to treat more patients and make the business viable, said Jacob Irving, who has supported the use of medical marijuana since he learned chemical compounds in the plants could help relieve the jerky movements and muscle stiffness caused by his cerebral palsy.

The LSU law student is such a staunch advocate that he testified before the Legislature about the medication's importance — and he is now behind a company bidding for LSU's medical marijuana business despite his concerns about its viability.

"Under our current regulations, there really isn't any way that this is profitable. It’s not the big cash cow that everyone thinks it is, and a lot of it has to do with different regulatory requirements," said Irving, who helped form Southern Roots Therapeutics.

LSU is requiring bidders to bear the entire cost for a secure greenhouse and processing facility needed to produce the medication — none of which will be smokable.

The AgCenter estimates the program will cost $11.3 million and will need anywhere from four to nine years before revenue outstrips expenses.

One bidding firm, though also concerned about the limitations, said it looks upon the relationship with the LSU AgCenter as a research opportunity and a long-term venture, citing the firm's financial backing and own medical experience as a recipe for success.

A second firm said it has patented a number of compounds and developed techniques for growing medical marijuana and that it will put its experience to work at LSU.

Another said the AgCenter overestimated costs and underestimated the number of potential patients; he said he can turn a profit within three years.

Irving said the 100 investors backing Baton Rouge-based Southern Roots, which has secured institutional financing to fill in any funding gaps, are interested in helping people. The program is important because it's going to help people, and that by itself justifies the cost, Irving said.

Among Irving's and others' concerns are the limited number of ailments that state law says can be treated: cancer, HIV and AIDS, cachexia or wasting syndrome, seizure disorders, epilepsy, spasticity, Crohn's disease, muscular dystrophy and multiple sclerosis.

There also are restrictions that limit doctors to 100 medical marijuana patients, require patient visits every 90 days and make patients first try a federally approved form of medical marijuana.

In addition, health insurers don't cover the cost of medical marijuana treatment that isn't approved by the U.S. Food and Drug Administration. The AgCenter estimates the average monthly cost for medical marijuana at about $400.

Similar limitations in New York's law and medical costs have helped make medical marijuana there "a bust," according to the Buffalo News. Like Louisiana, New York initially limited treatment to 10 diseases. Even so, Columbia Care, which opened the first dispensary in New York City and is bidding for the LSU business, said 200,000 to 400,000 New Yorkers could qualify for treatment.

In 2016, 14,000 people enrolled in New York's medical marijuana program, but only 7,000 were regular users, according to the Buffalo News. The high cost of the medication, which isn't covered by insurance, was a major factor. The five companies that New York chose to produce medical marijuana are struggling financially.    

Only LSU and Southern University are licensed to produce medical marijuana in Louisiana. Tom Adams, managing director of BDS Analytics, which specializes in cannabis business information, said that approach may make Louisiana unique. All other states allow private companies to grow marijuana for commercial distribution through medical dispensaries.

In addition to Southern Roots and Columbia Care Louisiana LLC, of New Roads, CB Medical LLC, of Alexandria; Citiva LA LLC, of Mandeville; Fourrier House LLC, of New Iberia; GB Sciences Louisiana LLC, of New Orleans; and Terah Holdings LLC, of Shreveport, have submitted offers to run LSU's medical marijuana business.

Liz Kenigsberg, a spokeswoman for Columbia Care, said the company could not comment. Terah Holdings manager Daryl R. Fultz declined to comment. Fourrier House is not incorporated in Louisiana, according to Secretary of State's Office records, and could not be reached. 

LSU released the names of the bidders but won’t make any other details public until the school makes its choice sometime in June, according to Sally McKechnie, LSU assistant vice president of procurement and property management.

Dr. Kenneth Perego, head of CB Medical, said he and the other health care professionals in the organization see the LSU program as a research opportunity rather than a business one. The company's members have years of experience in medical research, including clinical trials, as well as production management.

Despite that expertise, Perego said it's entirely possible that CB Medical will never recover its investment, and members are fine with that.

"If you're getting into this because you're thinking about some of these other states where you see all of these big dollars, that's not happening," Perego said.

CB Medical sees the program as a long-term venture. Louisiana will be one of the first states, if not the first, to do good, basic science research on medical marijuana.

"That's phenomenal," he said.

Marijuana is classified as a Schedule I controlled substance, like heroin or LSD, and U.S. research has been restricted.

Perego said CB Medical began evaluating medical marijuana two years ago and has been working with American Cannabis Co., a publicly traded consulting firm whose services include patented growth techniques.

The cost to develop a medication is enormous, Perego said. But by working with LSU and other partners, CB Medical believes it eventually will be able to identify medical benefits and put together a cost-effective product. Any rewards lie well down the road, he added.

The other companies that responded to The Advocate's inquiries are considerably more optimistic about medical marijuana's financial prospects.

John Barry, the head of Citiva Louisiana, is a retired New York City policeman who runs a Mandeville construction company. He said he believes the AgCenter overestimated construction costs and underestimated the initial patient count at 1,441 people.

"We're looking at maybe a two-, 2½-year turnaround before investors start seeing a return on their investment," Barry said.

Barry said the shorter timeline is mainly due to the resources and physician education available because of his alliance with Citiva, a global cannabis research and drug development firm based in New York.

Citiva Louisiana's investors, who include Barry, doctors, pharmacists and one venture capitalist, are putting up all the money for the venture. But Barry will rely on "the mother company" for education and research advice. Citiva was founded in 2015 by a group of New York health care professionals. Citiva has a research and development hub in Jamaica, which allows people to participate in cannabis clinical trials.

"A lot of people can grow cannabis well," Barry said. "But if they don't train the doctors and the pharmacists, how do they even recommend this product?" 

John Poss, CEO of GB Sciences, said his firm's proposal sets aside $300,000 a year for continuing medical education.

Once patients and doctors can learn about the medically beneficial chemical compounds in cannabis, patient numbers will rise, along with revenue, he said.

"The real reason that we’re excited about this is to participate with LSU in research," Poss said.

GB Sciences has patented a number of compounds and developed techniques for growing medical marijuana. The company expects to benefit from the AgCenter's expertise in bringing scientific discoveries to market. GB Sciences also hopes to begin phase I clinical trials on some of its compounds within a year, testing them for patient safety, dosages and side effects. University Medical Center New Orleans is perfect for that, Poss said. 

He brushed aside questions about financial losses the company has suffered.

The company has a $10 million commitment from its investment bankers and will harvest its first crop in Nevada and record its first revenue in May, Poss said. By the end of the year, GB will be on pace for $5 million in annual revenue. By the end of 2018, planned expansions in Texas and California should take the company close to $20 million in revenue.

"We think the most important thing is rapid startup, making cannabis available to patients as soon as possible," Poss said. "The plan is to start delivering cannabis to patients first quarter of 2018."

The company would first build a modular facility, adding units of growing capacity as needed, Poss said. Eventually, GB would replace the first facility with a larger, permanent and more technologically sophisticated structure.

The company wants to partner with a university because GB Sciences is research-oriented.

"We’re trying to be one of those companies that helps cannabis make the transition from pot to medicine. We want to make medicine. We don’t want to grow weed," Poss said.

Follow Ted Griggs on Twitter, @tedgriggsbr.