Say Shalom to Israel’s Cannabis Industry

Israel’s cannabis industry has a long history of innovation and revolutionary research, and that history will be the country’s biggest advantage in the emerging international cannabis market.

Medical cannabis users in legal jurisdictions everywhere owe a lot more to the nation of Israel than many realize. The country has very quietly been a world leading hub of medical cannabis industry research and development (R&D) long before Canada stole the show by legalizing the plant for recreational use.

While the United States is still putting arduous restraints on even the study of cannabis, effectively keeping it out of the hands of researchers, Israel has been embracing cannabis research for decades. It is thanks to the work of Israeli cannabis researchers that the plant has gained the legitimacy necessary for legalization in Canada, numerous US states and elsewhere.

Now, with recreational cannabis legal in Canada and medical cannabis legal in a growing number of countries and states, Israel is set to become a global leader in the cannabis business.

Israel’s unprecedented readiness for a global wave of cannabis legalization is paying off in foreign investment in its cannabis sector. A growing number of American companies and investors in particular are seeing advantages in Israel not found in their domestic market. In 2016 alone, more than US$250 million was invested in Israeli cannabis companies, with funds coming primarily from North America. North American cannabis companies are increasingly establishing R&D in Israel, with at least 15 US companies now conducting R&D in the country. One reason for American and Canadian interest in Israel is the country’s few barriers to cannabis research and business compared to the US. While several states that have legalized the product, cannabis is still viewed as a schedule one drug at the federal level.

Israel’s cannabis industry history and culture
Israel is a cannabis-friendly country with an established cannabis culture that goes back decades. While non-medical cannabis remains illegal in Israel as of now, support for legalization is widespread and bipartisan. In March 2018, the Israeli parliament unanimously passed decriminalization legislation that significantly reduced the penalties for cannabis use, an event that was largely seen as a step in the direction towards legalization. Israel’s Anti-Drug Authority suggests that as many as 27 percent of Israeli adults have used cannabis, which gives the country the highest proportion of cannabis users in the world. The country is home to 30,000 registered medical users, using approximately 14 tons of cannabis each year.

Israel’s comparative acceptance of cannabis could be seen as a result of the country’s greater understanding of the plant and its effects, which comes from being one of the very few countries that has been willing to allow comprehensive unbiased study of cannabis. In the early 1960s, while the United States and other western nations effectively prohibited researchers from taking any sort of serious look at cannabis, Israeli researchers were allowed access to the plant.

In 1964, Dr. Raphael Mechoulam of the Hebrew University of Jerusalem set the stage for the discovery of cannabis’ medical potential. His team was the first to isolate THC and later identified the endocannabinoid system, discovering the means in which cannabinoids work with the human body. Israel would continue this research over the following decades while other countries disregarded cannabis as having no medical value. In 1996, Israel was the first country to develop a national program focused on medical marijuana, and it wasn’t long after that the nation turned into one of the first countries to allow medical use of cannabis. Israel quickly became the world’s prime destination for medical cannabis R&D as result of the open regulatory environment.

As medicinal cannabis is increasingly accepted around the globe, this leadership trend continues for Israel.

Israeli medical cannabis industry
Israel has a reputation for fostering a favourable ecosystem for start-ups. Strong support from the state through public and private partnerships, grants, as well as tax breaks have made the country a hotbed of innovation complete with one of the deepest talent pools in the world. This innovation has long been apparent in agri-tech and life sciences, fields that are naturally compatible with medical cannabis production. Israel has the favourable regulatory climate, talent and experience in cannabis research and production to build a world-class industry. Various forms of start up support from the government and a speedy permitting process with few roadblocks make Israel very attractive to cannabis companies both foreign and domestic.

A recurring theme seen in jurisdictions legalizing cannabis medically and recreationally has been supply issues, as the industry struggles to keep up with demand. Enter Israel. The Israeli government has recognized the opportunity in becoming the world’s growhouse and has been working on legislation for the past year that will allow for the legal export of cannabis product to other legal medical cannabis countries. In November 2018, an Israeli government committee approved the first draft of the nation’s medical cannabis export law, a large step towards opening the global market up for Israeli cannabis. While the Israeli domestic cannabis market is worth US$150 million, the legal global market is expected to be larger than US$145 billion by 2025.

International interest in Israel’s cannabis industry
Israel’s cannabis industry is attracting interest from around the world and Canadian cannabis company Aura Health (CSE:BUZZ) is pure play on the Israeli market. Aura has acquired 54 percent of HolyCanna Ltd., an Israeli company with a cultivation and sales license.

Aura has also entered into a binding letter of intent in with Israeli cannabis company CannabiSendak Ltd. to acquire a 57 percent interest in the company. CannabiSendak is a company with deep roots in the Israeli cannabis culture, having been founded by iconic Israeli cannabis activist Shlomi Sendak. With this acquisition, Aura plans to establish itself in the Israeli cannabis market with licensed medical dispensaries throughout the country.

American companies Cannabics Pharmaceuticals (OTCMKTS:CNBX) and World Cannabis Pharmaceuticals have also entered Israel to conduct R&D. Canadian company FSD Pharma (CSE:HUGE) also acquired Israeli company Therapix Biosciences ADR in October 2018.

Takeaway
Israel has been developing their medical cannabis industry for longer than any other country in the world. As the era of legalized cannabis dawns and spreads globally, Israel’s cannabis industry is preparing to become one of the premier global suppliers with the ability to produce high-quality and low-cost flower.

As originally published in Investing News Network – December 25th, 2018