Cannabit to sell cannabis to Panaxia if it can

Cannabis plant Photo: Shutterstock

Assuming it obtains all of the necessary permits, Cannabit's revenue from the agreement will be NIS 30 million.

Two local cannabis companies, Panaxia (scheduled to merge into stock exchange shell Herodium) and Cannabit (already listed on the Tel Aviv Stock Exchange at a market cap of NIS 195 million), today announced the signing of an agreement in which Panaxia will buy six tonnes of raw material for export from Cannabit.

Panaxia is one of three cannabis-processing plants currently operating in Israel. It provides processing services to almost all of the existing growers in Israel. In most cases, however, Panaxia processes the material owned by the grower, who is responsible for marketing it. Panaxia itself is responsible for only one brand marketed in Israel - Axiban, based on raw material purchased from Seach and marketed in cooperation with drug company Rafa.

Under the current agreement, Panaxia will buy raw material from Cannabit and retain ownership of it. Panaxia will use the material to produce cannabis oil for export to Europe. Cannabit's cannabis activity is in the final set-up stages. The agreement obviously depends on Cannabit obtaining the necessary permits to supply the material by the target date.

Under the agreement, Cannabit will supply the six tons over three years: 750 kilograms starting in the second quarter of 2020, two tonnes in 2021, three tonnes in 2022, and 250 kilograms in the first quarter of 2023. Cannabit announced that it would sell the product to Panaxia at NIS 5 per gram, meaning that its revenue from the agreement will reach NIS 30 million.

Confidence in Cannabit's supply capacity

The cannabis market in Israeli currently suffers from a shortage of raw material. Safeguarding raw material for export is therefore significant for a company like Panaxia. Nevertheless, most of the companies operating in the sector are now expanding their production capacity, and new companies are slated to begin this activity by the end of the year, so it is possible that by the official date on which the agreement begins, the shortage will already be filled.

In any case, with the signing of a contract with potential overseas buyers for its final product, it will be easier for Panaxia to show that it has reserved high-quality raw material. For Cannabit, in addition to the cash flow, the agreement indicates that an active player in the sector believes that Cannabit will be able to supply the raw material.

Published by Globes, Israel business news - en.globes.co.il - on May 12, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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Cannabis plant Photo: Shutterstock
Cannabis plant Photo: Shutterstock
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