By Michael Berger, January 18th, 2019 —
In late December, the Israeli Parliament passed the 16th amendment to Dangerous Drugs Ordinance that concerns the governance and regulatory aspects of exporting medical cannabis from Israel. The legislation authorizes the Israeli Police to conduct supervision of cannabis farms, and grant approvals for cultivating, growing and exporting of cannabis and cannabis-related products.
This is a massive development for the Israeli cannabis industry and is a major step towards the legalization of recreational cannabis. While the amended bill allows provisions for future cannabis export, pending government authorization, recreational marijuana use is still illegal in Israel.
Last month, we highlighted Isracann which has been focused on the Israeli cannabis market and has been executing on this opportunity. The company represents a differentiated opportunity and is focused on becoming a premier, low-cost cannabis producer in Israel. The company has significant leverage to this attractive cannabis market and has secured three farms with cultivation licenses totaling 580,000 sq. ft.
A Fully Funded Israeli Cannabis Growth Story
Isracann is well capitalized and has fully funded the buildout of 232,900 sq. ft. of cultivation facilities that can produce approx. 23,500 kilograms of premium cannabis on an annual basis. The facility is planned to be IMC-GAP/GSP certified and will be constructed to meet all regulatory standards. In late 2019, the company expects to complete its first harvest and plans to ramp up from there.
The leverage to the Israeli cannabis market is significant and we are favorable on the growth prospects as a result of this. Climate conditions in Israel make the country an optimal site to cultivate cannabis and this is an important aspect of the story. The economics associated with cultivating cannabis are very attractive and producers are able to grow cannabis for approx. $0.40 per gram. This is significantly more attractive than the average economics in Canada, where cannabis producers are cultivating cannabis for approx. $1 to $2 per gram.
The cannabis producer plans to significantly increase the amount of cannabis it can produce and can scale its existing facilities to approx. 500,000 sq. ft. Once the expansion is complete, Isracann will be able to produce approx. 50,000 kilograms of premium cannabis on an annual basis. This would make the company one of the largest producers of medical cannabis in Israel and this is an opportunity to watch.
Secured Several Strategic Partners to Support Growth
One of the important aspects of the Isracann story is the relationships that the company has in place. Isracann has strategic relationships with the research, scientific and medical communities to identify opportunities and develop a pipeline of drugs and devices. The company is focused on addressing an undersupplied domestic market and anticipates near-term expansion to major European marketplaces
To assist with the construction of state-of-the-art cultivation facilities, Isracann has a strategic partnership with Yamko, a global construction leader with agricultural projects in more than 70 countries. This is a significant relationship that will help with the buildout of the company’s facilities and will support expansion plans. We are monitoring how the teams execute on the existing project and are favorable on their ability to deliver results.
Led by a Management Team with a Proven Track Record
Isracann is led by a management team with a proven track record of success and this is an important aspect of the story. The team is comprised of proven executives who have played key roles in the success of several leading Canadian cannabis producers. When it comes to looking at cannabis companies, it all starts with the management team and this is an area where Isracann excels.
Isracann President and CEO Daryl Jones has over 15 years of capital market experience and an established financial network. Prior to joining Isracann in 2018, he was an investment
advisor with PI Financial Corp Canada and Raymond James Ltd Canada. Jones took True Leaf Medicine public in early 2014 at $10MM valuation and exited in 2016 at $150MM market capitalization.
Brett Allan is a Director of Isracann and has over 10 years of investment and capital markets experience. He has assisted in raising $400MM in the cannabis sector as the VP of Corporate Development for Organigram (OGI:TSXV), founding member of Emblem Health (EMC:TSXV), and founding member of The Green Organic Dutchman (TGOD:TSX).
Israel Moseson serves as COO and has been involved in the Israeli cannabis sector for over 5 years and is responsible for in-country operations. Prior to entering the cannabis industry, he specialized in financing Israeli and African companies.
A Company Worth Watching
The Israeli cannabis market represents a significant opportunity and we have been targeting leading cannabis companies as governmental regulations have eased. Selectivity is key when it comes to the Israeli cannabis market and we are favorable on Isracann’s ability to execute and create value for shareholders. The company represents a differentiated opportunity and has an attractive valuation when compared to its peers.
The exportation opportunity is significant and could prove to be a massive value driver for Isracann. Once the government signs off the recently approved legislation, we expect to see the company make some significant announcements.