Israeli cannabis market heats up as elections approach

02.04.2019

“The cannabis industry is at a unique turning point, turning within a dramatically short time-frame from a pariah to a main-stage industry. Some 35 countries have already legalised cannabis to a certain extent, either medical or sometimes even recreational use.” former Israeli Prime Minister, Ehud Barak, said as he opened the two-day CannaTech Tel Aviv conference on Monday.

The conference takes place as Israel looks to stake a claim as a regional leader in the cannabis industry and only hours after the partial decriminalisation of cannabis was enforced. The new legislation, which went into effect at midnight on Sunday, March 31st, replaced criminal prosecutions of personal cannabis use with fines, in a less punitive system. Consumers without a criminal record caught in possession of a personal-use amount of cannabis will face fines worth US$276 for a first offence, while a second offence will warrant a fine worth US$551. Crucially, and in contrast to the majority of European countries, Israeli law does not specify what equates to a personal-use amount.

The new legislation and the potential for future reform are contributing to an increase in applications for the cultivation of medical cannabis. Over 500 farmers have now applied to the Health Ministry for permits to grow and distribute medical cannabis.

“So far, 565 farms have submitted requests to the Ministry of Health to obtain licenses to grow medical cannabis,” ministry spokesman Eyal Basson said. “Of these, 384 have already passed the first round of tests in the licensing process, and this was after they underwent police checks and land ownership verification.”

Initial approval covers only planning and construction.

 

Government backing

The Israeli industry is backed by leaders across the spectrum, from industry figureheads to political policymakers. In fact, with elections fast-approaching, all candidates have been outlining their positions on cannabis legislation.

While the country has been a clear innovator in the fields of medical and scientific cannabis research, the government is considering expanding the legislation to include an adult-use market. When asked about adult use legalisation earlier this month, current Prime Minister, Benjamin Netanyahu, said he was “looking into it and will have an answer soon”. This comes after polls showed that the country’s new Zehut party surged in popularity on the back of its promise to decriminalise cannabis.

(Benjamin Netanyahu, Source: Al Jazeera)

Industry Pioneers

Israel has a longstanding culture of cannabis research dating back to the pioneering works of Raphael Mechoulam, an organic chemist and professor, best known for his work in the isolation, structure elucidation and total synthesis of THC. However, while the country has been influential in terms of scientific research, the government has been slow to approve a cannabis export law, with a law finally being passed earlier this month.

(Raphael Mechoulam, Source: The Leaf)

The new export law proposed by Yoav Kisch (Likud Party), and unanimously approved by the Knesset, had been signed by Prime Minister Benjamin Netanyahu’s cabinet on 27th Jan 2019, making the export of cannabis legal as of mid-2019.

The Tel Aviv Stock Exchange (TASE) experienced significant gains after the announcement of the plan was made. Together Pharma Ltd. (TASE:TGTR) soared approximately 39%. Medivie Therapeutic Ltd. (TASE:MDVU) gained approximately 16% and Tefen (TASE: TEFN), followed a similar trend.

 

Dividing the conversation

Up to this point, the discussion surrounding Israel’s cannabis industry has been generally divided between the domestic medical market and the export market. The latter takes precedence in the international media, due to the enormous potential for investment.

Israel experienced domestic pressure to legalise the export of cannabis due to the fierce competition coming from abroad, particularly from Canada. One of the main arguments, which partially caused the passing of the export bill, asserted that if the ban was not removed shortly, Israel will lose its first-mover advantage in EMEA. The argument has intensified since Canada passed Bill C-46, legalising the use of cannabis at the federal level.

Prior to the passing of the bill, there was a fear that domestic companies would simply leave Israel and do business elsewhere. Cannabit, an Israeli cannabis company, stated that they were planning to open a farm in Portugal if the export ban was not lifted. Another Israeli cannabis grower, Together Pharma had already signed a deal to set up a 30,000m² facility in Europe dedicated to growing cannabis. It has also secured agreements to export up to 78 tonnes of cannabis product annually to Germany and Canada.

In Israel, it is markedly easier to receive a cannabis research licence, this has led to its success as a hotbed of scientific research and industrial innovation. Over 50 international companies now operate in the space.

Now that the export ban has been lifted, Israeli cannabis firms, who produce significantly more cannabis than the domestic population can consume, will soon be free to export high-quality, pharmaceutical-grade cannabis product into nascent European markets, filling a hole left by the lack of domestic production across the continent. With recreational conversations heating up in the approach to elections on April 9th, Israel could be ready to cement its position as a European leader in the cannabis industry.

Prohibition Partners is a proud sponsor of Cannatech Tel Aviv. If you would like to get in touch with our team, please contact info@prohibitionpartners.com to set up a meeting.

Israeli cannabis market heats up as elections approach

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