Two years have passed since Louisiana legalized the use of marijuana for medicinal purposes but contracting a company to grow the plants is proving more difficult than expected.
Southern University Board of Supervisors was expected to review the three finalists for operating the school’s medical marijuana business. Instead, they delayed action Friday to give the finalists another change to tweak their proposals to address concerns about minority ownership, guaranteed payments to the school and the location of grow facilities.
The law only allows the Agricultural Centers at LSU and Southern to handle a plant that is otherwise illegal to possess in Louisiana.
In south Baton Rouge, LSU is a little further along. GB Sciences, a Las Vegas firm, has been approved by the LSU Board of Supervisors, but the contract still hasn’t been signed.
LSU Vice President of Agriculture Bill Richardson, who will oversee the program for LSU, had hoped to get a contract signed and get started by August.
Lawmakers will need to see if this idea for using marijuana to make medicine is going to work. The law sunsets on Jan. 1, 2020 and will have to be renewed by the Legislature to continue. That gives LSU 27 months to perfect the system from seeds in the ground to medicines in the hands of Louisiana patients.
Jason Droddy, interim vice president for strategic communications at LSU, said Friday LSU President F. King Alexander is poised to sign the agreement as soon as it clears the legal department.
“As you might imagine, this is a complex procurement and just takes a little longer to iron out the details,” Droddy said.
Under the general outline of the contract, GB Sciences would pay the LSU AgCenter $3.4 million or, if greater, a commission of 10 percent of gross receipts for an initial five-year term. The contract could be renewed for additional five-year terms.
What LSU Board members were talking about Friday, at least among themselves, was the second letter this week questioning the financial viability of GB Sciences.
Kenneth L. Perego II chairs CB Medical LLC, the runner-up in bidding. He wrote the 16-member board earlier in the week. His lawyers followed up with a “private letter” delivered Friday.
Perego said the letters were not meant to threaten LSU with a lawsuit.
“Our intent is to make them (the LSU Board) do what they are supposed to do, which is due diligence,” Perego told The Advocate Friday. “I bet you no one from LSU has even gone out there to look at their (GB Sciences’) grow facility.”
Friday’s six-page letter details “red flags” in GB’s filings with the U.S. Securities & Exchange Commission. Independent auditors also have raised concerns about the company’s inadequate financial controls and other facts that ‘raise substantial doubt about the Company’s ability to continue as a going concern’,” according to the letter.
On the bluffs in north Baton Rouge, Southern University’s Board of Supervisors voted unanimously Friday to have Ag Center Chancellor Bobby Phills negotiate with the companies, who will have until Sept. 18 to send in their best and final offers. The board meets again Sept. 22 and plans to select the operator at that meeting.
The Ag Center's review committee had recommended Lafayette-based Med Louisiana as the operator of the medical marijuana business. Janana Snowden, director of the Southern Institute for Medicinal Plants and head of the review committee, said Med Louisiana's financial strength, expertise in cultivation and processing medical marijuana, and proprietary patents made it the top choice.
Advanced Biomedics' offer was a close second, but Southern Roots' projections were unrealistic, Snowden said. Southern Roots plans to nab 55 percent of the market by being quickest to market with the lowest-cost medicine. But that model depends on using vinyl-walled greenhouses, which didn't meet the enclosed structure needed to protect the plants' purity, she said.
However, a handful of board members questioned the lack of African Americans among Med Louisiana's owners and the processing and cultivation facility's proposed location, the former Fruit of the Loom plant in Port Barre.
Domoine Rutledge said Southern University serves as the anchor for north Baton Rouge, and there have been a lot of conversations about how to reinvent the community and restart its economy.
"This is a wonderful opportunity. This is probably one of the largest economic developments and shots to the arm to this community that (we) are going to have," Rutledge said. "And I do struggle, Dr. Phills, with locating it 50 miles away. I do struggle with locating it somewhere other than north Baton Rouge because we desperately need the reinvestment."
Phills said Med Louisiana officials have said they are open to a different location for the facility.
Rutledge said even though Med Louisiana's projections show a higher projected rate of return to the university, those figures are projections and depend on a number of factors, including market conditions and increases in patient counts. Meanwhile, the company is guaranteeing less than $2 million in payments over the five-year contract.
By contrast, the second-rated proposal by Lafayette-based Advanced Biomedics has guaranteed $6 million, and the third-rated proposal by Baton Rouge-based Southern Roots Therapeutics guaranteed $3.5 million.