Central Florida medical-marijuana grower takes new competition in …

Knox Medical spent two years jumping through legal, political and regulatory hoops before it opened its first medical-marijuana store in Orlando on June 2.

A week later, the state Legislature agreed to expand the number of medical-marijuana operations from seven to 17 by Oct. 3 and allow each to open up to 25 retail centers. That means more competition for Knox, which grows and manufactures its product in Winter Garden.

Knox Medical founder and Chief Executive Officer José Hidalgo says he’s not worried.

“One of the positive things is it’s going to expand the access for a group of patients that were neglected in the previous regulations,” Hidalgo said from corporate headquarters Miami.

The fledgling Florida medical-marijuana market has an estimated value of $151 million this year, according to The Arcview Group, an Oakland, Calif.-based firm for investors in the legal marijuana industry. The group projects that figure will grow to $380 million in 2018, $769 million in 2019, $1 billion in 2020 and $1.38 billion in 2021.

“Certainly, more licenses is good for the growth of the market,” Arcview CEO Troy Dayton said. “It’s good for consumers, and it’s good for entrepreneurs.”

But it’s not necessarily good for companies like Knox, which earned the highest score in state rankings for the coveted licenses and played by the rules, only to find them changing.

“In a lot of cases, companies spent a lot of money and had to wait a long time,” Dayton said. “New businesses won’t.”

In November, 71 percent of Florida voters approved a constitutional amendment expanding the conditions eligible for treatment with marijuana. On June 9, the Legislature in a special session agreed to codify the voters’ wishes.

Assuming Gov. Rick Scott signs off on the bill — and he has said he will — patients with cancer, epilepsy, glaucoma, HIV, AIDS, post-traumatic stress disorder, Lou Gehrig’s disease, Crohn’s disease, Parkinson’s disease, multiple sclerosis, terminal illnesses and chronic pain could seek treatment with medical cannabis.

Industry analyst John Kagia says that could increase the potential number of consumers from the current 16,614 registered with the state to 260,000 by 2020. Florida is one of the nation’s ripest markets because it has one of the highest percentages of residents 65 and older, who are more likely to suffer from one of the qualifying conditions, he said.

The registry also contains the names of 819 doctors authorized to recommend the drug to patients.

Archive, March 2017: See list of medical marijuana physicians »

More dispensaries “may mean that each license holder may get a smaller share of the pie, but this is still a fairly large pie,” said Kagia, executive vice president of with New Frontier Data, a Washington, D.C., firm that — unlike some others — takes no position on the legalization of marijuana.

The drug remains illegal in the eyes of the federal government, so doctors cannot write prescriptions and marijuana cannot be sold in a traditional pharmacy. Florida requires medical cannabis producers to control and track the supply chain from seed to sale.

Knox Medical opened its first dispensary in May in Gainesville. Its second is in the Lake Ivanhoe neighborhood in Orlando, about half a mile south of Florida Hospital Orlando. On the first day, more than 100 patients visited the store, which is nestled between a cafe and a home-design store on a block with several bars, an art gallery, a swimwear shop and a tattoo parlor.

The company plans to expand soon to Tallahassee, Jacksonville, Lake Worth and St. Petersburg and to Texas, Puerto Rico and Canada.

Tallahassee already is home to two dispensaries, including the state’s first retail medical marijuana outlet, which opened in July and is operated by Trulieve. CEO Kim Rivers said she expects the demand to grow now that voters and the Legislature have given their blessings, and competition won’t affect her business model.

“We look at it as a natural progression of the market maturing in the state and we welcome it,” said Rivers, whose company’s seventh dispensary opened Tuesday in The Villages.

Arcview predicts Florida could become the largest medical-only marijuana market in the U.S. by 2021, and another expert, Poseidon Asset Management, says Knox has a leg up in it.

“They are a well-capitalized group, so they can muscle through,” said Morgan Paxhia, managing partner at Poseidon, a San Francisco company that invests solely in the cannabis industry. Poseidon does not work with Knox, he said.

Four medical marijuana producers have shown interest in setting up shop in Orlando. Trulieve is going through the permitting process for a location on Orange Blossom Trail near Lee Road, Rivers said.

A year ago, before the city instituted a moratorium — which was lifted June 5 — it gave Trulieve and Surterra approval to open low-THC cannabis dispensaries, but neither did.

Monica Russell, a spokeswoman for Surterra, wouldn’t say whether the company is still interested in a site on Edgewater Drive in College Park.

“We want to inform neighbors first,” she said. “We only want to go places where people want us to be.”

Hidalgo says that while he thinks the current patient base doesn’t warrant additional licenses, he’s concentrating on executing his business plan, not on what other companies are doing.

“Our focus is on patient access and creating the best possible product,” he said. “We have a very long-term vision of this.”

sjacobson@orlandosentinel.com or 407-540-5981

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