Over 100 people attended a conference of TASE-listed cannabis companies at the Tel Aviv Stock Exchange (TASE) conducted by Israeli investor relations and public relations firm "The Investor." The audience included carefully selected institutions, investors in Yeter shares, farmers, and the media, as well as representatives of the TASE, who were delighted about the boom in a new sector on the TASE.
Together (TASE: TGDR) CEO Nissim Bracha said, "By the end of 2018 or in 2019 to be cautious, we will already be able to produce cannabis on our farm in Africa." He noted that the process of obtaining approvals and setting up the farm in Africa was relatively short and that the cost of production was lower than in Israel. He estimated the cost of producing a gram of cannabis in Israel at $0.50 (although some of the audience questioned this figure as overly optimistic).
Bracha did not disclose in which African country the farm is located but said that it was a country from which cannabis exporting was allowed and that cannabis had already been exported from there to Canada in the past. At the same time, he noted that not all of the Canadian companies were aware of this possibility, which was why he was not disclosing which country was being used for growing. "I don’t want other growers, not necessarily Israelis, turning to the same country," he said. "As of now, we have the only approval granted to a foreign company to grow cannabis in the country. My competitors will find out about this by themselves, but it could take them a lot of time."
Together is planning to establish another farm closer to the European market.
As for doing business in Israel, Bracha said, "The seedlings will be visible in three months. We also have approval to establish a GMP plant and a commercial distribution house."
Bracha is aware of the skepticism about cannabis in the market and the status of Together as a relative latecomer there. "We're making progress, building the infrastructure, and signing more and more marketing agreements. Up until now, we have presented a series of negotiation, memorandum of understanding, and contract. We have kept our promises up until now. You'll gradually lose your skepticism. Look at the Canadian market, and there you can see the future of the Israeli companies." He added that although the Canadian companies were more advanced, they could supply only 15% of the expected demand in the country after cannabis was legalized in Canada two weeks ago.
He said that the Israeli advantage was in the price. "We have good weather conditions, such as sun, temperature, and humidity. We have expert growers who know how to grow the plant so that its quality will not be affected by the climate or disease.
Bracha predicted that exports from Israel would be permitted only for cannabis oil but said that the company would export inflorescence from the African country from which other companies could produce oi in their conditions. For example, Together signed an agreement with Premier Dead Sea to develop a line of joint cosmetic products containing the CBD active ingredient produced from cannabis together with salt minerals.
Bracha insisted that the company was meeting the guidance it had provided when it first announced its intention of merging cannabis activity into Together. This guidance was perceived at the time as very ambitious: NIS 50 million revenue in 2019, $150-300 million in 2020, and $300-600 million annually starting in 2021.
Nir Peles, chairperson of Cannassure, which is due to merge into stock exchange shell Direct Capital, began with an analogy: "In 1996-1997, you read the economic news in "Globes," "Haaretz," and "Yedioth Ahronoth." After that, there was the Internet bubble, and today you read news in "Globes," "TheMarker" from the "Haaretz" group, and "Calcalist" from the "Yedioth Ahronoth" group." He meant to say that markets that begin as a bubbles and attracting many new players will eventually be controlled by players with basic knowledge in the field.
Cannassure sees itself as one of those. It was founded as a spinoff of Solbar, which is already able to manufacture various raw materials from soybeans, and also obtained an existing plant from Solbar.
In Peles's opinion, processing cannabis is not essentially different than processing soybeans. "We have an existing plant, knowledge in the field of food additives and food, and knowledge in development a new category of health food" (Peles and his partner, Shimon Bar-Kama, converted the Eshbal plant to gluten-free flour and baked goods and made it a leading company in the field).
As Bracha said, cannabis factories need GMP approval in order to operate in Israel. "What is GMP approval? It's not a document that you get once and are finished. Obtaining GMP standard approval is difficult; losing it is easy. In the past, I took part in the acquisition of a company that previously lost its GMP standard approval, which was why we could acquire it. We got the standard approval back after two months." Peles says that the plant that belonged to Solbar is suitable for GMP licensing and the company is capable of holding onto it.
Cannassure does not grow cannabis. It intends to process cannabis it buys from other farmers. Production in its plant has not yet begun.
In contrast to most TASE-listed cannabis companies, Peles does not believe that there will competition on a basic price in the cannabis market. "Israel is a country in which everything is expensive. I don't believe that there will be production of anything cheap from this country. It's therefore necessary to differentiate our products, branding, and added value. Israel's advantage in cannabis isn't the sun. The advantage is its pioneering regulation, and great thanks to the country for leading in this a decade ago and again renewing the regulation within two years. We can't compete with farming in California or Mexico unless we bring to market high-quality products with a lot of pharmaceutical added value. Will we succeed in competing in large quantities? There are companies that have done it. Keter Plastic did it, but it seems that this is not the advantage in Israel."
This is one of the reasons why Cannasure signed a cooperation agreement with Hadassah Medical Organization giving the company the right to use its name when Cannassure markets cannabis in Israel. Hadassah and Cannassure will also cooperate in research and development in Cannassure's cannabis plants. "Through our ability to produce high-quality raw material and their research knowledge, we'll bring a differentiated product into the world," he predicts.
An investor from the audience asked Peles how the company would cope if cannabis exports from Israel are not allowed, since it has no overseas factory. Peles stated that a plant is first built with production capabilities on a small scale, but with a scale-up option.
It appears that the companies persuaded the audience. At this time, the share price of Together is up 4.5%, pushing its market cap up to NIS 410 million. The share price of Direct Capital, which is merging Cannassure into it, rose 10%, raising its market cap to NIS 19 million.
Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2018
© Copyright of Globes Publisher Itonut (1983) Ltd. 2018