Avinoam Sapir: Cannabis is like a medicine

Avinoam Sapir

The former Teva Israel CEO, now CEO of Tikun Olam Cannbit, talks about the business and therapeutic potential of medical cannabis.

In early 2020, TASE-listed medical cannabis Cannbit Pharmaceuticals Ltd. acquired Tikun Olam, which until last year was the frontrunner in the Israeli medical cannabis market. Last year, while dramatic changes were taking place in the domestic cannabis market and its opening up to competition, Tikun Olam's operations were frozen due to legal problems, and a temporary suspension was imposed on its cannabis products. The owner at the time, Yitzhak (Tzachi) Cohen, was forced by the court to sell the company’s Israeli activity, and Cannbit seized the opportunity. At the beginning of the negotiating process, Cohen was asking $100 million for the acquisition of Tikun Olam's activity in Israel, but in the end Cannbit paid only $23 million, in addition to 5% of its shares and other amounts subject to the company’s success.

It was easy to see the synergy: Cannbit, which wasn’t marketing its products at the time, received a product line that has great demand in both the domestic and global markets; a team of nurses that trains cannabis patients and doctors; and a database that contains data going back a decade on the effects these plants have had on patients.

In terms of tangible assets, Cannbit received a cultivation facility in Kfar Yehoshua and a processing plant in the Tsiporit Industrial Zone. Tikun Olam, for its part, received a legal permit to reopen its operations in Israel, and also a stock trading platform, with access to raise capital, which it has exploited. From the beginning of the year, Tikun Olam Cannbit (TASE: TKUN) has raised over NIS 50 million, and this week it announced plans to raise another NIS 12 million in a rights issue.

Nonetheless, since the beginning of the year, when the acquisition was completed, the merged company’s share value has fallen 40%, though it has recently seen a slight uptick in prices as Tikun Olam products return to the market and following signs that the cannabis market will soon be open for exports.

The company's market cap is NIS 178 million, and it has no official controlling shareholder. The most prominent shareholder in Tikun Olam Cannbit is real estate developer Barak Rosen (Israel Canada) who owns 21% of the company (through shares held in trust by Yaron Naor).

In the first half of 2020, even before it had brought its entire product line back to market, Tikun Olam Cannbit recorded NIS 10.8 million revenue (and losses of NIS 13 million), an increase of 9% compared with the corresponding period last year. This is, however, still far from the rosy forecasts it published in January, when it projected that it would reach NIS 43 million revenue in 2020 from the domestic market alone, and NIS 140 million in 2021, 60% of which would be from exports.

To meet these forecasts, the company will need to triple its revenue in the second half of the year compared with the first half, while competing with competitors that have gained domestic market share in its absence. In order to meet forecasts for 2021, it will need to begin exporting soon.

Tikun Olam Cannbit recently signed a three-year NIS 100 million distribution agreement with Super-Pharm, which will distribute company products through its own chain, as well as in private pharmacies. In addition, Tikun Olam Cannbit has begun production at its Tsiporit plant, and ten days ago it joined a Ministry of Health pilot program in which the prices of some products will be reduced, in exchange for the right to export batches of products.

Tikun Olam is taking center stage

As time goes by, Tikun Olam’s assets and reputation are moving to center stage and it is becoming the face of the merged entity. An example of this can be seen in their decision to open the company’s headquarters in Tel Aviv, and not at Cannbit’s headquarters.

Tikun Olam’s office/clinic was one of the first places in Israel where medical cannabis was commercially and legally consumed, and this holds great symbolic and historical significance for the industry.

Cannbit’s CEO (and former MK) Ifat Kariv, who oversaw the merger and stayed in the new company as VP Marketing & Government affairs, was replaced this past May by former Teva Israel CEO Avinoam Sapir, who brings with him experience in drug distribution, working relationships with pharmacies, an advocacy network for doctors, training for medical staff and a relationship with the Health Ministry with regards to the drug basket.

Sapir has now spoken for the first time about what attracted him to the company, and what his plans are for it. "As Teva Israel CEO, I also pushed for integrating cannabis activity into the company, and we’d signed a marketing agreement with Syqe Medical, which manufactures cannabis inhalers," Sapir explains. "When I arrived at my first meeting with Tikun Olam Cannbit and was shown the clinical trials done on their strains, I couldn’t believe that it was possible to achieve such good results.

"For example, in the study conducted by Dr. Vered Hermush, from Laniado Hospital, involving patients with dementia and behavioral disorders who were receiving high doses of sedatives, a treatment that is known as "chemical binding" because it actually prevents function, 20 patients received a placebo, and 40 patients were given Avidekel cannabis oil, which is one of Tikun Olam’s leading strains of medical cannabis. The goal was to stop the patients from hitting the medical staff. What actually happened in the end, though, was that some of the patients were able to recognize family members again."

How were the two companies merged?

"We completely merged the management and the medical staff. We have a farm in Kfar Yehoshua that had belonged to Tikun Olam, and a farm in Neot Hakikar that had belonged to Cannbit, which we decided to triple in size. The cultivation techniques used at the two farms are very similar, and both are based mostly on Tikun Olam’s expertise. We also produce Tikun Olam’s proprietary strains, including Avidekel, Alaska and Midnight, as well as strains Cannbit purchased prior to the merger."

Why were Tikun Olam’s strains unavailable for such a long time, even after the legal situation was cleared up and activity was no longer suspended?

"Some of the strains were unavailable because we had limited production capacity at Kfar Yehoshua after Tikun Olam’s main facility in Biriya was closed, since it only complied with the prior regulations. But now we are once again producing and marketing all of the strains and oils to keep up with the demands of this expanding market."

As a leading company under the previous regulations, to what degree are you bound by the Israel Supreme Court decision that requires companies to comply with the old regulations to continue supplying patients with cannabis at a price of NIS 360 for any quantity they can use?

"The patients who have remained under the old regulations are people who consume large amounts of raw materials and products that are very expensive to produce. These are people who are suffering from the most severe diseases. Sales to this group are continuously declining, and the court ruled that it would not extend our commitment to these subsidized prices past October. I do hope, however, that the State of Israel will take responsibility for these patients. It purchases conventional drugs for them at much higher prices."

We’ve been told that some of the Tikun Olam strains that were considered to be THC-rich (the substance in cannabis that makes a person feel high), and are therefore in high demand, were found under the supervision of the new regulations to contain less THC. Is this accurate?

"Well, we actually do have THC-rich products, and we make sure for each category to add the highest amount of active ingredients allowed, while remaining within range. I believe that in time, consumers will see that it is not only the THC that is affecting them. Nowadays, people think to themselves, ‘it’s working’ when they feel the high. Unfortunately, these products also have unwanted effects on our bodies, which could be prevented if people would be satisfied with the less powerful psychoactive effect, while retaining the same medical benefits."

As someone who comes from the pharmaceutical industry, do you believe that cannabis, with the differences between strains and types, could ever really be considered medicine? Are you planning to carry out clinical trials that are similar to those used for drugs?

"We’ve been gathering knowledge since the company was created about which plants affect various diseases. I don’t know yet if we’ll decide to apply for FDA approval, since this would add considerable expense, but I do believe that this wonderful plant should be treated as medicine."

In the agreement with Tikun Olam, you are authorized to market Tikun Olam strains under the Tikun Olam brand only in a number of countries - France and Poland. Moreover, your plant in Tsiporit has only Israeli approval and not European GMP approval, which is required for European countries to import your products. What are your plans regarding exporting?

"Although we can only market the company’s strains in the countries named in the agreement, we are allowed to operate in every country using Tikun Olam knowhow. In these countries, we will offer Cannbit products only. For example, in the UK, we recently signed a memorandum of understanding leading up to a distribution agreement. At the moment, the plant in Tsiporit does not have approval for Europe, and therefore neither Germany nor the UK can receive goods from there. So, for now, in these countries we’re only marketing products that were purchased in other countries so that we can build up brand recognition and create a distribution system. In the future, we hope to find a solution for obtaining approval for the Tsiporit plant. I believe that we’ll be sending our first shipment from Israel by next quarter or the one after that."

Published by Globes, Israel business news - en.globes.co.il - on October 14, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Avinoam Sapir
Avinoam Sapir
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