Israel Poised to Legalize Cannabis, Make Inroads to European Markets

By Oliver Bennett, Special Contributor for New Frontier Data

Israel looks set to become the next nation to legalize recreational cannabis. Two related bills passing through the Knesset, the Israeli’s parliament, are stirring excitement in the global industry.

If all goes to plan, Israel should follow Uruguay and Canada – the latter, its role model in terms of rollout – to become the world’s third nation with federal legalization. It is expected in nine months’ time, when adults aged 21-plus will be allowed to buy cannabis at licensed premises as proscribed by a public safety apparatus that limits marketing and advertising, bans sales to minors, and mandates health warnings on product packages. The initiative is designed to capture the country’s estimated 1 million recreational users and undermine an illicit market (estimated as worth more than NIS 6 billion ($1.79 billion) per year –  while bringing job creation and an estimated NIS 2 billion ($597,288,551 billion) annually in taxation. The legalized, regulated industry is also expected to encompass and energise the various consumer lifestyle products associated with CBD in areas such as wellness and beauty.

Israel already has a thriving domestic market for medical cannabis – this year it surpassed Germany as the world’s key importer of medical cannabis flower, joining Germany as the two largest import markets outside North America, the other being Germany. It also has a highly developed medical cannabis manufacturing sector, with companies including Intelicanna, the Seah Medical Group, Tikun Olam, BOL Pharma, Pharmocann, and Panaxia. The sector also enjoys backing from influential figures including former prime minister Ehud Barak, who chairs InterCure.

Cannabis production facilities nationwide supply  to more than 60,000 medical patients, and demand is such that Israel this year became the largest global importer of cannabis, with market demand estimated at 25 tonnes per year, 30% of it being met by overseas suppliers including Tilray and EMMAC in Portugal, and Linneo  in Spain.

Following governmental approval in May, Israel will export to Europe, hoping to generate revenues following an economic downturn caused by the pandemic, and a patchy year for the domestic sector in 2019. Would-be exporters of medical cannabis must be licensed by the Health Ministry, with the bulk of licenses expected to go to Germany, with Panaxia the first Israeli company to gain a permit in Germany alongside its European partner Neuraxpharm for Panaxol, expected in Europe by the end of the year. Denmark and Italy have been noted as further potential markets, and other business linkages are being forged. In the U.K., Astral Health has a partnership with BOL Pharma – striking a trading first for the two countries.

Despite its location in the Middle East, Israel has strong links with the continent across the Mediterranean, as framed in the European Neighbourhood Policy (ENP), the Euro-Mediterranean Partnership, the Union for the Mediterranean, and shared Mutual Recognition Agreements (or MRA) with the EU. Geographically and culturally, it is a good fit, as Israel benefits from a strong biotech sector as well as an historic reputation for innovation and R&D in cannabis, (going back to the early 1960s when Raphael Mechoulam from the Weizmann Institute studied the properties of cannabis sativa).

The first Israeli domestic production licences were given in 2006, and by 2017 approval was given for doctors to prescribe medical cannabis, overseen by the Israeli Medical Cannabis Agency (IMCA). And with production facilities limited in small Israel, there are moves to use offshore production hubs, including some in sub-Saharan Africa, to manufacture for the European market. For example, Israeli cannabis company Together Pharma is farming in Uganda with the goal of EU-GMP certification, while its fellow Israeli company iCAN has acquired cannabis company Southern Sun Pharma to grow in South Africa.

The country’s interest in R&D and biotech continues apace;, in July, Syqe Medical conducted trials to demonstrate that microdosing inhaled THC – the principal psychoactive constituent of cannabis – can effectively relieve pain, with the Syqe Selective-Dose Inhaler being bought to market. Meanwhile, Israeli-based Kanabo Research has developed Liquid9 (L-9), a medically certified inhalation device that is expected to become part of the EU’s medical platform. Israeli start-up CanBreed has used gene-editing technology to make the cannabis plant resistant to mildew, and the Israel Institute of Technology is researching the use of terpenes – aromatic plant compounds ­– as anti-inflammatory agents to help ameliorate the worst effects of COVID-19. There is more innovation in the works, with Tikun Olam and Carmit Confectionery Industries linking up to make cannabis-infused pastries, with similar drinks and candy edibles to follow. If COVID-19 abates in 2021 as most lately expected, then Israel’s cannabis industry – and its European partners – are likely to have a busy year ahead.