By Anthony Varrell, June 12th, 2019 —
During the last year, we have seen a significant increase in the number of countries that have legalized some form of medical cannabis. From Europe to Australia, this trend is taking place all over the world and we are bullish on the growth prospects associated with the opening of new cannabis markets.
When looking at the countries that represent burgeoning medical cannabis markets, we are very excited about the opportunity in Israel and believe that this is a market to be monitoring. Israel has a rich history when it comes to medical cannabis research and has been studying the plant for more than 50 years.
Israeli researchers have made considerable strides to better understand the medical benefits associated with cannabis and has been a leader in this space. From using cannabis to kill cancer cells, to applying micro-dosing techniques to heal brain damage, the Israeli government continues to be very supportive in regard to researching cannabis and we are favorable on this.
Earlier this year, the Israeli government announced that it would invest a total of $2.13 million in 13 research projects, making it one of three countries with a government-sponsored cannabis program. During the last year, we have seen a significant increase in the number of investors focused on this market and we find this to be significant.
Israel’s Export Market is a Multi-Billion Opportunity
In late 2018, 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 was a major catalyst for businesses that are levered to this market and represents a significant milestone for the industry.
We recently came across an article that covers the Israel medical cannabis export market and found this publication to be intriguing. According to the article, experts are forecasting Israel’s medical cannabis export market to generate more than $1 billion of revenue on an annual basis and we believe that this represents a massive opportunity for the companies that are levered to this market.
One of the reasons we are excited about the Israeli medical cannabis market is due to the number of companies that are focused on this opportunity. The country has strict standards for companies that are working to attain a license, and this makes the opportunity for the companies that are granted a license that much more significant.
Isracann Bioscience: An Emerging Israeli Opportunity
We have conducted significant research on the companies that are levered to this market and want to highlight an opportunity that caught our attention. The company, Isracann Bioscience has been focused on the Israeli cannabis market and is working on becoming a premier, low-cost cannabis producer. Isracann has significant leverage to the Israeli cannabis market and has secured three farms with cultivation licenses totaling 580,000 sq. ft.
During the last year, Isracann has been able to strengthen its balance sheet through a private placement and is well capitalized, having 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. One of the important aspects of this opportunity pertains to this facility and how it get licensed. The company’s will build its facility to IMC-GAP/GSP certified specifications and to meet all regulatory standards.
In Q1 2020, Isracann expects to complete its first harvest and plans to ramp up from there. The facility offers the company significant room to expand and we are favorable on this aspect of the story. Over the coming years, we expect to see increasing demand for Israeli medical cannabis products and believe that the focus on increasing production capacity is important for the long-term growth potential.
One of the reasons we are excited about Isracann is due to the relationships that are in place. During the last year, the company has secured strategic relationships with the research, scientific and medical communities to identify opportunities and develop a pipeline of drugs and devices. Isracann is focused on addressing an undersupplied domestic market and anticipates near-term expansion to major European marketplaces. We are favorable on the expansion opportunity and will monitor how the team executes on this.
An Emerging Opportunity to be Aware of
During the last year, we have noticed an increase in the number of companies that are focused on the Israeli medical cannabis market. We are not surprised by this trend due to the attractive operating characteristics associated with this market. We have been bullish on the Israeli market for several years and find this to be an exciting opportunity for the following reasons:
- Israel’s climate is ideal for cultivating cannabis and producers can grow cannabis for approx. $0.40 per gram.
- The country has an early mover advantage on the medical cannabis opportunity and there is significant demand for Israeli medical cannabis products
- Government regulations have been easing and this will create massive opportunities for companies that are levered to this market
- The medical cannabis export market is estimated to generated more than $1 billion in revenue on an annual basis and this is a significant opportunity
- The valuations associated with companies that are levered to this market are much more attractive when compared to North American cannabis operators
When looking at Isracann, we see a company that has a visible growth strategy and has significant catalysts for growth. The management team has a proven track record of success working with leading Canadian cannabis operators and we are favorable on this aspect of the story. Isracann has done a great job when it comes to making strategic additions to the team and we are favorable on this.