Israeli businesses involved in medical marijuana huffed and puffed this week against the government’s reluctance to approve Israeli medical marijuana for export as Canada prepares on Wednesday to become the second country to legalize recreational marijuana use.
The top 12 Canadian marijuana companies are now worth nearly 55 billion Canadian dollars, or $42 billion, and investors are snapping up the stock.
Profits, though, are a dream of the future. At Tweed, for example, sales last year from the medical marijuana business were just 77 million Canadian dollars. The company lost 70 million dollars.
Some investors may be sorry. Not every marijuana producer now taking stock markets by storm will profit and survive, many experts believe.
There are 120 businesses licensed to grow medical marijuana, which has been legal in Canada since 2001. They are now poised to serve people who simply want to get high. In provinces where the private sector will handle retail sales, companies are scrambling for licenses to open stores.
Shoppers Drug Mart, the country’s largest pharmacy chain, has taken out a medical cannabis producer license.
Most big alcohol players appear to be sitting back for now, except for some investments, but analysts expect they will eventually get more involved.
Tel Aviv is currently hosting the CannX conference, an international medical marijuana conference.
“Israel is a model for cannabis innovation because of our high-tech and ag-tech sectors,” said Saul Kaye, the founder and CEO of iCAN, a cannabis development company. “Israel has so much experience in agriculture. And this is an agricultural product that at end of the day is selling for $100,000 per kilo.
We haven’t exactly had that kind of capital for tomatoes and cucumbers.”
In the past year, approximately 1,000 people and businesses have applied for permits to work in Israel’s cannabis export industry.
They are frustrated that Israel’s lawmakers are stubbing out their attempts to bring Israel’s medical marijuana to an international audience.
In February, Prime Minister Benjamin Netanyahu froze discussions over exports, reportedly to avoid upsetting US President Donald Trump.
A joint committee estimated the Israeli export market could be valued at NIS 1 to 4 billion ($275 million to over $1 billion), and that exports be carried out under the regulation of the Health Ministry.
Canada will legalize cannabis for recreational use on Wednesday, after 95 years of prohibition. Canada is the second country in the world to legalize cannabis after Uruguay. [Cannabis is technically illegal, though tolerated, in Holland.]
According to a 2013 study, almost one third of Canadians 15 to 24 had smoked marijuana in the past three months, one of the highest rates among youth in the world.
Medical cannabis first became available to Canadians in 2001.
The recreational cannabis market in Canada is expected to reach $5 billion by 2020, with beverage companies like Coors creating a cannabis-infused beer, among other products.
Canada’s legalization has had a ripple effect in surprising ways.
Around 300 businesses have applied for government permits to cultivate, manufacture, or transport marijuana in Canada, according to Noam Goodman, a partner with the law firm DLA Piper who is an expert in cannabis law.
For marijuana cultivation over 50 square meters, there are “tremendous” security requirements that require fortress-like buildings with 24-hour surveillance, Goodman said.
The regulations have created hundreds of jobs in completely new industries, such as cannabis security consultation companies and secure cannabis transportation.
It has also breathed new life into depressed industrial towns in the outskirts of Canada’s
Marijuana cultivation companies have revamped shuttered factories like a Hershey factory and Heinz factory and hired 800 people in one go to staff their greenhouses.
“Some companies have facilities that are a million square feet and will produce thousands of kilos of cannabis,” said Goodman.
A million square feet is the equivalent of about 20 football fields.
However, experts warned that cannabis grown in indoor facilities in freezing climates will have difficulty competing with cannabis grown outdoors in warm climates, like Israel.
“Growing cannabis indoors is very difficult,” said Kaye. “We don’t grow pineapples in Israel because the climate isn’t good for it. It should be the same for cannabis.”
The country’s 300-plus days of sunshine per year coupled with a mild winter make Israel a good candidate for large marijuana fields. There are currently eight licensed marijuana-growing companies in Israel for local medical marijuana consumption.
Israel is considered a leader in the medical marijuana field for the consistency of the product. Because cannabis is a plant, it is difficult to ensure that each harvest has the same ratios of active ingredients.
Medicinal marijuana requires patients to receive a specific strain of the cannabis plant that is tailored to their needs.
Over the years, Israeli researchers have found ways to extract and isolate the active cannabinoid compounds in the plant, including ways to separate the cannabidiol (CBD) from the tetrahydrocannabinol (THC). THC is the primary psychoactive compound in marijuana that gives users a “high.” CBD is the more medicinal, healing part of the plant that does not produce the high feeling associated with marijuana.
There are over 600 strains of marijuana plants. Each plant has a different chemical composition of active compounds, which can make specific plants more effective than others for treating certain diseases.
For example, the strain used for children’s epilepsy medication has almost no THC.
“Many countries are waiting for Israel because you get product which is consistent medical grade,” said Itai Melchior, the director for Export Policy at the Ministry of Economy and Industry’s Foreign Trade Administration. “If you buy a tablet of aspirin you know amount of active ingredient, and it’s the same with marijuana medicine.”
There is enormous market potential for medical cannabis, both in Israel and abroad. Cannabics Pharmaceuticals, an Israeli company that developed a marijuana capsule for cancer sufferers, estimates that the medical marijuana market has the potential to reach $3.6 billion in the US alone by 2019.
This would make it larger than the organic food market. Some estimate that the global cannabis market could reach $50 billion by 2025.
Public Security Minister Gilad Erdan has opposed cannabis exports because, he says, the economic benefits that it would bring do not justify “the harm that could be done by transforming Israel into the flagship country for cannabis exports,” according to the Ynet news site.
One of Erdan’s foremost concerns is that the police do not have the manpower or budget to ensure that there is not substantial leakage of cannabis from legal growers. all of whom must have a clean criminal record and promise to enact strict security measures around their farms, to criminals who will almost certainly sell cannabis to minors.
There are about 38,000 patients who have medical marijuana prescriptions in Israel, up from 10,000 in 2012. Currently, cannabis is approved to treat cancer, chronic neuropathic pain, post-traumatic stress disorder, colitis, Parkinson’s, epilepsy, HIV/AIDS, Crohn’s disease, multiple sclerosis, Tourette’s syndrome, and terminal illness. Soon, cannabis is expected to be approved for autism and fibromyalgia, said Kaye. The Health Ministry receives 300 applications per day for medical marijuana use, and there is a huge backlog for approvals.
Currently there is approximately 10-12 tons of cannabis grown for medical community, and 120 tons grown for the illegal market, Kaye said.
“I can order weed on my phone and have it delivered quicker than pizza,” said Kaye. “The fear of medical products leaking into the black market is a misnomer.”
“The Health Ministry wants to promote this, the Finance Ministry wants to promote this; we have done the economic checks and believe we can be a powerhouse,” said Melchior, of the Foreign Trade Administration. “On the other hand, the [Public Security Ministry] says no all the time, they don’t want criminal activity or any leaks, they’re being very ‘anti.’”
But Melchior said an inter-ministerial meeting six weeks ago was successful, and that Erdan gave the go-ahead to expedite the process. “We are in final phases of preparing a new government resolution,” he said.
The biggest issue that still needs to be resolved is background checks. The Israel Police, which handles background checks, has the ability to investigate individuals. But it is unclear how police should investigate international corporations to ensure companies don’t have ties to drug cartels or organized crime.
Smaller issues also remain, including taxation for medical marijuana exports, and secure storage at Ben Gurion Airport. The highly sensitive drug-sniffing dogs could incur serious injury if they suddenly came across a few tons of marijuana in the corner of the cargo port.
When Israel does approve export, it will only be to hospitals and medical facilities that have received approval from their local governments. Additionally, Israel will only export pre-packaged doses of medicine, not loose bud, Melchior explained.
If the government goes to early elections, as is widely speculated, there will be a delay of at least six months on any cannabis export regulation. If not, Melchior said he is optimistic that regulations could be hammered out under the current administration.
“We’re all waiting for [export regulations], it is going to happen, but no one is going to scale up yet,” said Kaye. “When it happens there will be a massive amount of money ready to be thrown” at Israel.