InterCure Ltd. (TASE: INCR-L), which recently acquired the activity of Canndoc, a decade-old Israeli medical cannabis company, yesterday held an investors conference at the Tel Aviv Stock Exchange (TASE) at which it announced a financing round with participation from GMF Capital founder billionaire Gary Fegel.
The company also disclosed at the conference financial data on its cannabis activity, its ambitious plans, and especially its new chairperson, former prime minister Ehud Barak, making his first public appearance in his new position. Following the financing round and Barak's appearance at the conference, InterCure's share price skyrocketed 32%, boosting its market cap to NIS 353 million.
The company's announcement said that it had raised $12 million (NIS 45 million) at a 37% premium on the market price. The investment was divided evenly between current InterCure controlling shareholder Alex Rabinovich and Fegel.
Fegel, whose wealth was estimated by "Forbes Magazine" at $1.5 billion, made his money in commodities trading. He previously invested in several companies in which Barak was involved, and was dubbed "Barak's billionaire" by the media. It is therefore no wonder that InterCure COO and Canndoc CEO Roei Zerahia referred to Barark today at the conference as "employee of the month" following the closing of the investment deal.
InterCure wants to hold an offering on Nasdaq as soon as possible, probably in early 2019. The company hopes that Fegel's name and connections will help it push an offering through. Since InterCure's announcement of its intention to enter the cannabis field, its share price has soared 900%, and it has doubled its value since Barak was appointed chairperson a month ago.
The options on 5% of InterCure's shares granted to Barak are now well in the money, with InterCure's share trading at almost 300% of the strike price for the options. Barak is also being paid $10,000 a month in his position as executive chairperson, in which his work hours will not be less than 40 hours a month.
Barak: I was impressed by the synergy between the owner and the CEO
Barak said at the conference, "I was previously involved in hedge funds and investment companies, and I have never encountered such great interest and such a big dream, which seems to have behind it both science and broad movement by the world's countries to regulate the activity.
"No one knows whether there will be 100, or 600, or even 1,000 molecules in a plant that will affect different people different ways and in different combinations. We know that THC (the molecule responsible for the narcotic effect of cannabis, G.W.) and CBD (the anti-inflammatory effects, G.W.) differ from each other by only four hydrogen atoms, but one of them makes people high and the other calms them down. We don't completely understand the mechanics of these materials' effects on the brain or the body, but it is emerging that in contrast to the idea that prevailed for years that it is addictive, the material actually has potential."
Concerning InterCure itself, Barak said, "I may be the oldest person in this hall. We're at an age at which we joke that if we wake up in the morning and nothing aches, we may have gone over to the other side. The price that we'll be willing to pay to improve the quality of life with a minimum of side effects, or even with side effects, is high.
"Even at my age, I'm still curious and still learning. I have a background in science, and I know that I have a lot to learn, and I know what I won't achieve, but I want to learn more and go as far as I can. I'll do everything I can to help the company, in financing rounds for InterCure and Canndoc and in development activity and production in Israel and abroad."
Reports from Canndoc, plans by InterCure
InterCure disclosed Canndoc's financial statements today for the first time. The company reported NIS 3.1 million revenue in the first half of 2018, compared with NIS 6.1 million in all of 2017. The company's gross profit margin in the first half of 2018 was 57%.
Canndoc currently sells mainly cannabis inflorescence for medical needs directly to the consumer, but may prefer to produce oils or tablets in the future, which will incur higher production costs. As of now, Canndoc has no cannabis processing plant in Israel; it has contracted with an Israeli partner for this purpose. The partner will obviously be entitled to a share of the profit.
Canndoc's first half operating profit was NIS 923,000 and its net profit was NIS 660,000. The company ended the first half of 2018 with NIS 484,000 in cash and an inventory with an estimated value of NIS 7.8 million.
It is evident that the Canndoc's current volume of activity in Israel does not justify InterCure's current market cap (over NIS 300 million); the primarily explanation is the company's ambitions plans. Zerahia announced today that the company would enter 10 new territories in 2019, where it would grow and market products locally, and possible also export from them. The amount now raised will be enough to start this process, but the company plans to finance most of it with a bond issue in the US.
The company's target is to produce 100 tons of its product a year in the coming years, and it believes that it will be able to reach maximum production of 200 tons of cannabis inflorescence a year. It costs $1 to produce one gram of product, compared with $2-3 per gram for most of the Canadian companies whose product meets the standard for medical cannabis (although there are also some companies with lower production costs).
Published by Globes, Israel business news - en.globes.co.il - on November 1, 2018
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