Economics
America Next: Overseas Firms Invest in U.S. Cannabis Industry
In the absence of U.S.-based investors — scared away by federal prohibition, firms from countries such as Israel and Canada are stepping into the profit margins.
Despite impressive sales and stupendous room for growth — and the fact that it’s still very, very early in the marijuana legalization era — the American cannabis industry has been slow to attract interest from big domestic names.
Everyone is eager for a piece of what could be a $24 billion market in less than a decade — who wouldn’t be? — but with a cannabis-unfriendly administration in the White House and plenty of reform necessary even if the president was Willie Nelson, caution is the watchword among most big-time domestic investors and existing companies.
In the meantime, companies from overseas and across the borders are filling the gap — and quickly. Just a few months after production at its first medical-marijuana factory began in New Mexico, Israel-based Panaxia Pharmaceuticals has announced plans to open four more facilities across the country. And its partner on the venture is Canadian.
As business-news publication Globes English reported last week, Panaxia — a pharma firm with more than 300 products that entered the marijuana industry in 2010 — announced that additional factories producing smokeless cannabis-based products could be operational by the end of the year in Arizona, Massachusetts, Maryland, and Nevada. Its partner on the venture is Canadian Bioceutical Corporation, a publicly traded firm active in the U.S. market.
Israel has long been considered a global leader in the cannabis industry. Multiple research and development firms are at work in the country, which is also laying plans to start exporting cannabis to other countries (despite global prohibitions on such trade, usually enforced by the United States, Israel’s staunchest ally).
A global trade in cannabis is still years away, and even if it were to arrive today, federal law means that cannabis can’t and won’t cross state lines.
But global companies can get around this prohibition — in a way — by developing technology and methods overseas and only involving marijuana at the last moment, within state lines. This is how “about 10 to 15” Israelis are already busy in New Mexico, overseeing the production of “10,000 units a month” of sublingual tablets, oils, suppositories, and other products at that factory — and that’s how you form a global marijuana firm.
“We’re in effect exporting to the U.S. cannabis market, even though it is still illegal to import the cannabis itself to the U.S.,” Panaxia founder and chairman Dr. Dadi Segal told Globes. “We produce all the materials needed to manufacture the drug here; only the cannabis itself in mixed in the plant in the U.S.”
Panaxia has one U.S. partner, New Mexico-based Ultra Health, which has dispensaries in Albuquerque and in Bernalillo, New Mexico.
The company represents an effort to move away from traditional cannabis culture and towards products that would belong on the shelves of mainstream drugstores and pharmacies. This should give you an idea of where they believe marijuana-based medicines are heading.
Details of the deal were not announced, but marijuana firms in other states have attracted hefty prices.
Owing to the relaxed atmosphere around cannabis in both countries (especially when compared to the U.S.’s die-hard drug war attitudes), Israel’s main competitor as a worldwide leader in cannabis is Canada.
A Canadian firm with a federal license to produce cannabis was the industry’s first unicorn, and in July, a Canadian company, Toronto-based Liberty Health Sciences, paid $40 million for Chestnut Hill Tree Farm. Chestnut Hill is a Florida medical-marijuana operation with a state license to produce cannabis, but at the time of the acquisition, it had yet to produce a single plant.
Panaxia develops a broad range of “smokeless” medical cannabis products, including oils, tablets, patches, and suppositories. The company claims to have sold products in 25 countries since entering the cannabis sector in 2010.
Not that anything the president does or says should be trusted, but it’s fair to point out that Donald Trump’s noxious “America First” messaging — a gospel that preaches harmful nativism, like the decision Monday to start deporting English-speaking, American-educated children of undocumented migrants — is also failed policy. Trump’s failure to even suggest reform in the marijuana sector means American firms are being outflanked. Sad!
TELL US, should the American government encourage foreign investment in cannabis?
