The Current State of Weed in Israel
It’s a well-known fact that Israel is the unofficial startup capital of the world. There are nearly 6,000 startups in a country of about 8.5 million people, roughly the same population as New York City. What you may not know is that Israel is also the unofficial capital of cannabis research on the planet and is the undisputed leader in medical marijuana applications. Thanks to a liberal government attitude toward medical marijuana research, a thriving agtech sector, and a chemist named Raphael Mechoulam, Israel has gone from the Promised Land to the Land of Milk and Honey Boo Boo.
Boasting more than 300 days of sunshine, Israel also has some of the largest cultivation facilities in the world. One of the biggest, Breath of Life Pharma, recently built a state-of-the-art cannabis production plant, with plans to ramp up production to 80 tons of cannabis per year. It is one of eight cannabis cultivators currently authorized by the government to grow and sell medical-grade marijuana products. However, there are only about 25,000 Israelis who are licensed to use the drug. And while the country recently decriminalized pot possession, there is not a recreational marijuana industry as of yet, even though a reported 27 percent of the population aged 18-65 have used marijuana.
So what to do with all that weed? One word: Export.
At least that was the plan. Last month, the government backtracked on promises to approve legislation that would allow its cannabis industry to export marijuana legally to other countries. The move was expected to generate up to $1 billion for the local economy. Everything seemed fine last year when the legislation was being pushed through the usual gauntlet of red tape. Reportedly more than 500 Israeli companies were rushing to join the Green Revolution. Suddenly everyone from Rolling Stone magazine to Bill Nye the Science Guy (see the video above) was reporting about Israeli medical marijuana research and the country’s budding export industry.
Don’t Bogart That Law, My Friend
And then came the buzz kill before anyone could even light up. It’s unclear why the government suddenly got paranoid. Some blamed pressure from the U.S government, while there are multiple reports that the Israel’s law enforcement community put the kibosh on the kibbutzim. Right now the issue appears to be in limbo.
As you might imagine, that hasn’t gone over too well with the Israeli cannabis industry. Aside from the fact that growers are overly flush with flower but have nowhere to sell it, the industry has a lot more to lose. An Israeli cannabis R&D firm called iCAN estimates that Israeli companies and startups received more than $250 million in investments in 2016 alone, predicting that the figure could climb to $1 billion in the short term. At least 50 American cannabis companies, if not more, have established R&D operations in Israel, according to a story in Rolling Stone. And, as you might imagine, the medical marijuana export business isn’t exactly a crowded marketplace. Only Uruguay, Canada, and the Netherlands allow its export, with Australia considering joining the crowd. In other words, there’s a lot of money to be made, and Israel already has strong connections to the North American market.
At least one Israeli startup is promising to play hardball unless the government changes its mind. Medivie Therapeutic (TLV:MDVI), which until recently sold oral medical devices for pain and migraine relief until it pivoted to pot, just announced a $110 million deal to grow medical marijuana for an undisclosed party. But with the current government stalemate, that deal looks to be in jeopardy. In response, Medivie threatened it would sell its knowledge and expertise rather than the cannabis itself, according to the Times of Israel.
So, what is the state of weed in Israel? It’s complicated.
Medical Marijuana Still a Mainstay
What’s not complicated is that the country is unlikely to lose its status as the premiere R&D capital of cannabis.
It all started in the 1960s when a chemist named Raphael Mechoulam scored 11 pounds of Lebanese hash from a friend at a police station in Tel Aviv for “research”. No, really: Over the next several decades, Mechoulam and his teams identified and synthesized THC, the psychoactive substance that makes you wacky on weed. He also did groundbreaking work on understanding CBD and figured out the brain chemistry behind why we get high in the first place. His work has been so highly regarded that the National Institutes of Health in the United States has given him about $100,000 a year in grant money for decades.
The research has led medical marijuana to be widely accepted in Israel for use with patients suffering from all sorts of conditions, from chronic pain and Crohn’s disease to patients undergoing chemotherapy. Therapies are also more mature. As one Israeli official in the Ministry of Health was reported saying: “In the United States, for example, they use recreational marijuana for medical use—that’s like making chicken soup when you have a cold. We’re the ones making the antibiotics”.
One of the biggest cultivators and R&D cannabis companies in Israel, Tikun Olam (“repair the world” in Hebrew), also runs what might be the world’s oldest medical marijuana clinic. The company has treated more than 10,000 patients since 2010, and some of its CBD products are now sold in the United States through affiliates. The North America-Israel relationship works both ways. For instance, a Massachusetts company traded on a Canadian stock exchange called Kalytera Therapeutics (CVE:KALY) performs some of its clinical trials in Israel. The Grandfather of Medical Marijuana, Mechoulam, sits on the company’s scientific advisory board.
Finishing with Some Startups
It’s not all about cultivation and cannabinoids in Israel. There are reportedly nearly 70 weed startups, with about two-thirds of them being early-stage companies. Below we wrap up our Current State of Weed in Israel by highlighting a few interesting startups.
Founded in 2015, Corsica Innovations has an office in Colorado. The Israeli startup has raised $4.5 million for what looks like a mini-fridge for weed. Corsica manufactures the Leaf, a $3,000 growth chamber for marijuana—or any other kind of cash crop you would spend that kind of coin on to own:
The whole unit is automated and run from the comfort of your smartphone. “Think of it as a beautiful mini-fridge that stocks itself with cannabis,” says co-founder and CEO Yoni Ofir, according to a company profile on Inc.com. That vision must certainly be compelling as Corsica has reportedly sold 1,500 units to would-be urban farmers.
Another startup founded in 2015, GemmaCert has taken in about $3.3 million, including about $2.3 million in a Series A last month. In this case, they’ve designed what looks like a tall salad spinner that can slice, dice and analyze weed—well, mostly the analyzing part. The company uses machine learning and other technologies to analyze the potency of pot without destroying the sample, which seems like a serious bonus. It provides stats on THC and other characteristics in less than a minute. Obviously, standardizing potency would help the industry go a long way toward legitimacy in both medical and recreational uses.
Founded in 2016, Indorz is developing a greenhouse growing system that constantly monitors and assesses each strain. Reputedly powered by artificial intelligence, the Indorz platform is supposed to be a farmer’s best friend, even helping predict system failures before they happen. It works something like this:
Indorz claims that one year after using the system, the greenhouse can add one additional grow cycle every 12 months thanks to system optimizations.
This seems to be the year that will make or break the Israeli medical marijuana export market. There could be some serious casualties for those who banked on promised government legislation, but the corps of the country’s research companies will probably weather the storm. We’re reminded of a similar situation in Canada, which is expected to legalize recreational marijuana this year—but it hasn’t happened yet. There is a lot of speculation that accompanies these major shifts in policy, but it could all go up in smoke if the bureaucrats don’t get on the bus.
If you're going to invest in cannabis stocks, there are only a handful you should hold. Become a Nanalyze Premium subscriber and we'll tell you which ones. Sign up, then send us an email and we'll point you to the appropriate research pieces.