Dixie Brands Inc. Completes Reverse Takeover Transaction

Iowa’s five licensed medical cannabis dispensaries are set to open Dec. 1, and MedPharm, the state’s only operational manufacturer, has been busy supplying the retailers for opening day.

MedPharm’s journey in the state began several years ago. The company has kept a watchful eye on Iowa, which passed a very limited law in 2014 that allowed epileptic patients to possess certain cannabis oils for treatment. Although manufacturers and dispensaries were not permitted and there was no way for patients to access the oil within the state, MedPharm anticipated change.

“We have been paying attention pretty closely to the political winds in the state, and pushed hard in 2017 when it looked like there was a chance that a new bill could actually make it out of the legislature,” General Manager Lucas Nelson tells Cannabis Dispensary.

Chris Nelson, MedPharm’s owner (and Lucas’s uncle) also owns Kemin, a global nutritional ingredient company headquartered in Des Moines. Kemin’s knowledge of developing products from plants transferred over to the cannabis industry and the founding of MedPharm, Nelson says.

“What we really founded our company on was bringing that scientific element to the medical cannabis space, which … is all over the place as far as how many people are truly paying attention to scientific principles,” he says. “It was important to us to get the state set off on the right foot.”

MedPharm applied for and won one of the state’s two manufacturing licenses, and in Iowa, manufacturing includes growing, processing, packaging, labeling and distributing products to the state’s five licensed dispensaries. The company was also awarded two of the dispensary licenses and is thus vertically integrated in the state.

MedPharm’s Iowa grow room. The company is vertically integrated in the state, holding two of the five available dispensary licenses.

Once licensed, the company had until Dec. 1, 2018 to distribute products to dispensaries for the launch of medical marijuana sales.

“The Department of Public Health, which is the state agency responsible for administering this program, told us that it was the fastest turnaround that they’re aware of from the time the bill was signed until launch of the program with products on shelves,” Nelson says. “It has certainly felt very, very fast.”

MedPharm wasted no time bringing the plans in its licensing application to life. On the day it received its manufacturing license, the company had construction crews in its space to build the facility, Nelson says.

“We really staged a lot of our construction,” he adds. “We made sure all of our grow areas were done so that we could start plants in time for when their first life cycle had completed, and then our labs would be up and going with equipment and all the initial testing we needed for all of that equipment to be ready, so we could basically start harvesting and extracting right away.”

Iowa prohibits flower and smokable products, so MedPharm will produce creams, tinctures and capsules for the state’s medical marijuana patients, Nelson says. In addition, the state placed a three-percent THC cap on all cannabis products, which also limits MedPharm’s formulations.

“Our capsules, for instance—each individual capsule can’t be more than three-percent THC,” Nelson says. “Tinctures, they kind of judge it for the whole bottle—the whole bottle can’t be more than three percent—and the same is true for creams. That presents a huge formulation issue for us. It also, more importantly, presents a cost issue for our patients.”

If a patient needs a daily dose of 60 mg of THC, for example, they must buy and consume more individual capsules or tinctures to achieve that dose.

MedPharm is rolling out four varieties of tinctures, six varieties of creams and two varieties of capsules for Iowa’s first day of legal medical cannabis sales.

Iowa has nine approved qualifying conditions in its medical marijuana program and is in the process of approving two more, but Nelson says major conditions are still missing from the list, such as PTSD.

“Our pain category is very confusing, and the definition has left a lot of doctors not understanding how to interpret it, which means they have chosen to not certify patients under this pain category,” he adds. “So, we’ve got more work to do there because we know for a fact that more people … can benefit, but they’re just being locked out of the program right now.”

Iowa’s legislative session runs from January through early May, and although the 2018 session saw several bills to address some of the issues with the program, none passed.

“On a bipartisan basis, the Iowa Senate is very supportive of this program,” Nelson says. “In the Iowa House, we’ve got some lawmakers who are simply waiting to see what happens with this. I don’t think they have any good reason to do that. … Our argument—and patients’ arguments—have been we’ve waited long enough for this, and here you are giving us a program that is still not perfect, and therefore is going to leave people out in the dark.”

Despite the challenges, MedPharm is determined to succeed in this market. “There were certainly suggestions that maybe this program was put in place to fail from the very beginning,” Nelson says. “MedPharm has made sure that we defied those expectations.”

MedPharm’s hope is that once products hit the market and the legislature and medical community see that patients are relieving their symptoms through cannabis, the fear will dissipate and the restrictions will loosen.

“I think once we get there and that fear falls away a little bit, you’re going to see an expanded market, you’re going to see more patients qualify, you’re going to see a wider variety of products being able to be offered, and that’s really exciting for us because I think we have a lot we can bring to the table, whether that’s new products [or] new formulations with different cannabinoids than you may typically find in most states,” Nelson says.

In the meantime, the company is wrapping up its final preparations for opening day, which includes transporting products to each of the five dispensaries.

“It’s pretty much round-the-clock work right now to make sure everything is labeled correctly, packaged correctly [and] that we have the right amounts going to the dispensaries around the state,” Nelson says.

It’s a balancing act, he adds, as the company doesn’t want too much supply in places where it will sit on shelves for an extended period, but it also doesn’t want shortages.

“We’ve got to thread that needle very, very closely,” he says. “We don’t have a full inventory of everything that we’d probably want if we had more time available, but given that we’ve got some of every product ready to be sold, I think that’s still a pretty big accomplishment.”

MedPharm will be assessing the market continuously to see what patients are looking for and which products benefit them most, Nelson adds.

And although MedPharm is currently the only operational manufacturer in the state, Iowa Relief LLC, a subsidiary of Acreage Holdings, was awarded the state’s other manufacturing license in July and is required to start distributing products by July 1, 2019, according to a local news report.

Once MedPharm gets up and running this weekend, it will look ahead to developing specific products to treat specific conditions, Nelson says.

“I think this is a small step, but a big one nonetheless, and one that will really be a catapult for our future,” he says.

Photos courtesy of MedPharm Iowa