From the moment you enter the security-controlled reception area at MedReleaf, you notice there’s something different about the place.

Perhaps it’s the aroma in the air, reminiscent of marijuana plants, which happen to be growing in the thousands just metres away. Or maybe it’s the smell of money, as in the revenue generated by Canada’s largest medical marijuana producer. It might also be the aroma of Israel’s agri-tech sector, since the Markham, Ont. company is a partner with Tikun Olam, an Israeli firm that’s a pioneer in the development of medical grade marijuana to treat a variety of illnesses.

When it comes to the links between Canada and Israel in the pot industry, nobody is bogarting that joint. Israel and Canada are world leaders in this newish technology and co-operation between the two is growing.

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Canada was one of the first jurisdictions to permit licensed companies to develop and sell marijuana extracts for medical purposes. Israel, for its part, is known around the world for its innovation in many high-tech industries, not the least of which is agri-tech, where research into marijuana’s active ingredients is decades old.

‘The whole world is looking at how Israel medicalizes marijuana’

It was an Israeli scientist, Prof. Raphael Mechoulam, who first investigated the therapeutic properties of cannabis. Around 50 years ago, when it was still illegal to do so, he acquired some hashish that had been seized by Israeli police. From that, he and his colleagues at the Weizmann Institute of Science revealed the structure of cannabidiol (CBD), a key therapeutic ingredient in cannabis. Later they isolated and synthesized THC, the main psychoactive compound in cannabis plants.

Last June, researchers at Ben-Gurion University of the Negev announced their findings into the efficacy of medical marijuana. They reported that medical marijuana users experienced significant pain relief and function with only minor side effects.

According to BGU, the use of medical marijuana has grown substantially in Israel, with about 20,000 people now registered as users.

In Israel, as in other countries, there have been moves to decriminalize marijuana’s use, if not legalize it entirely.

Last year, Australia legalized the growth of cannabis for medicinal purposes. Several U.S. states have done so, though not the federal government. In late January, Israel’s public security minister, Gilad Erdan, announced a “shift to decriminalization with responsibility,” away from the current law that criminalizes possession and sale of the drug.

Likud MK Sharren Haskel trumpeted the announcement on Facebook: “We won! The continuous struggle that we lead brought results,” she said.

Haskel, who was born in Toronto and returns regularly to visit her parents, said she’s been campaigning to remove the criminal sanctions and stigma attached to marijuana use for some time. Cannabis is not a gateway drug, she said, and Israel expends a huge amount of resources to investigate and prosecute simple possession.

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That makes no sense, given its widespread use and harmlessness. In fact, she continued, marijuana possesses tremendous medical benefits that Israel is developing.

“Israel is leading in research in medical marijuana,” she said. “The whole world is looking at how Israel medicalizes marijuana.”

As Haskel sees it, marijuana should be looked at like any other new medication, with research into its efficacy and the development of ways to deliver it to patients.

“The government has funded and opened a course to train 100 doctors in how to use medical marijuana for treatment,” she said.

As marijuana becomes normalized, Haskel expects it to become a key agricultural export. Right now, plants are cultivated by six farms, but about 40 more have applied for permits to grow it legally, she said. In Canada, too, medical marijuana has captured the attention of investors and financial advisers.

Cannacord Genuity, a firm that provides Canadian equity research, studied the investment opportunities in a report released last fall. “Forget the puns, this is a serious business,” it stated.

“The Canadian cannabis industry has experienced significant growth, fuelled in part by the near-term prospect of a legalized recreational market in Canada, which is expected to benefit current medical marijuana producers, and a growing level of acceptance of marijuana use internationally,” the report said.

‘Canada has the capital markets to fund developments and Israel is doing the research, which costs a lot of money, so we’ll see more investments’

“We believe the global landscape of cannabis is currently in the midst of transformational change. In response to increasing social acceptance, many large countries, such as the United States, Australia and Canada are in the process of enacting regulations that will permit legal access to marijuana to millions of individuals.”

Demand for medical cannabis in Canada is growing quickly, with more than 100,000 registered patients, a “significant uptake” over the numbers a few years ago. Cannacord believes “patients in Canada will consume more than 150,000 kg of cannabis per year by 2021, which could equate to $1.8 billion in retail sales.”

Recreational use could be a game changer, with a vast illegal market replaced by legal sales worth as much as $6 billion by 2021. Companies with current licenses are well positioned to take advantage of the change, Cannacord concludes.

Saul Kaye, founder and CEO of iCan:Israel-Cannabis, an Israeli company that identifies, invests in and showcases start-ups and innovators in the medical marijuana space, said capital markets are becoming increasingly interested in investment opportunities.

Not only is there potential for good returns, but there is an expectation that more and more jurisdictions will permit recreational use of the drug.

“We’re all very early in this industry,” he said by phone from Israel. His firm has access to capital and connections worldwide, including Canada, putting it in a favourable place to ride the growing wave of marijuana use, he said.

Right now, he added, the focus is on medical use, and the plant’s active ingredients have proven beneficial in treating a wide variety of maladies, including epilepsy, cancer, Parkinson’s, Crohn’s, glaucoma, restless leg syndrome, and even tinnitus (ringing in the ears).

Every year, iCan hosts a conference in Israel called CannaTech, which brings together scientists, businesspeople, researchers and investors to discuss developments in the industry while seeking potential collaborations.

Canadians feature prominently in the event, both as speakers and guests, said Daniel Goldstein, iCan’s senior vice-president for strategic investments.

“Last year, we had representatives from Canadian companies at CannaTech, including a couple of licensed producers,” he said.

“Some are looking at investing and doing business relations with Israel because of Israel’s position as one of the leaders in the R & D of medical cannabis in the world,” he said.

Since it’s still a young industry, the opportunity exists for early entrants to get in ahead of big pharma, Goldstein added.

Of course, big pharma is not exactly asleep at the switch. In late 2016, Teva Pharmaceutical Industries announced it had partnered with Tel Aviv-based Syqe Medical to market medical cannabis in an inhaler.

Meanwhile, in another development demonstrating the growth in the medical application of marijuana, Kalytera Therapeutics, a company listed on the TSX Venture exchange, announced it had entered into a letter of intent to acquire Talent Biotechs Ltd., a privately held Israeli developer of cannabidiol (CBD) therapeutics.

Talent is currently advancing a clinical program investigating the use of CBD to prevent and treat host disease, which can arise after stem-cell or bone-marrow transplants.

For Goldstein, these developments suggest that “Canada is a big player, but there is definitely more room for collaboration.” Israel, for its part, encourages research, and the government even funds some of it.

The Israeli approach, Goldstein added, focuses on medical, not recreational, use of marijuana. That could mean the export of the plant’s flowers, as well as finished products such as oils or capsules.

Shimmy Posen is intimately familiar with the budding industry and the Israeli scene. The Toronto lawyer has participated in trade missions to Israel and will address CannaTech 2017 on taking companies public in Canada.

Israel’s “start-up nation” brand extends to agri-tech, where it has a substantial head start on other countries in researching and applying cannabis for medical purposes, he said.

“I would suggest that since Canada is at the forefront of financing these deals, I would expect that companies in Israel would look to Canada to take them to the next level,” Posen said.

“There are some companies out there trying to position themselves as the Starbucks of marijuana once it becomes legal,” he said.

What’s more, Posen suggests, there are Israel-based companies interested in listing on the TSX Venture Exchange or the Canadian Securities Exchange to raise capital to fund their growth.

Sidney Himmel, an independent financial adviser with a specialty in science-based industries, said Canada is one of the world’s most advanced countries when it comes to delivering the medicinal benefits of marijuana on a controlled, standardized basis and in terms of financing, research and distribution.

He credits Canada’s advanced state of legalization and destigimatization, making the industry more acceptable for stockbrokers and banks.

Meanwhile, Israeli companies are looking at marijuana “in terms of classic drug development.”

Such approaches and the ability to provide medicine in accurate doses and strengths is necessary before most doctors will be comfortable prescribing medication derived from botanicals such as cannabis, Himmel said.

All that should lead to more collaboration.

“I believe there will be more ties between Canadian and Israeli companies,” Himmel said. “Canada has the capital markets to fund such developments and Israel is doing the research, which costs a lot of money, so we’ll see more investments.”

Those links will likely be magnified as more and more Canadian investors see the potential for expanding medical marijuana into the broader recreational sphere, he added.

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Over at MedReleaf, ties between Canada and Israel are well established. The privately held company has more than a dozen products in its lineup, with more than one-third based on “Israeli genetics” whose seeds originated in Israel, said CEO Neil Closner.

Some even bear their Israeli names, which in turn were based on their original patients. Eran Almog is one. Avi Dekel is another strain, which provides anti-inflammatory benefits without side effects associated with marijuana, like getting high.

Closner said one of the challenges for companies like his is convincing doctors that marijuana is a legitimate treatment option. More and more physicians are choosing it, and for some, the fact the meds originate in Israel adds a layer of credibility. “Israelis are known as innovators and thought-leaders, so doctors are amenable to accepting that it’s a good innovation,” Closner said.

Like other new medical marijuana producers, MedReleaf “started at zero,” Closner said. Today, he reckons it’s Canada’s largest company in the sector, based on revenue.

Growth prospects are apparent. In addition to the company’s 55,000-square- foot headquarters, of which 30,000 square feet are reserved for plants, a 210,000-square-foot plant-growing facility is currently under construction.

Closner credits MedReleafs’ ties with Tikun Olam for helping spur growth, which he said is running at 10 per cent per month.

International expansion is on Closner’s radar.

“Canada has the opportunity to become the leader of medical research into medical marijuana,” he said.

With its know-how and financial resources, the potential is sky-high.

“If we do it properly, we have the opportunity to be global leaders,” Closner said.

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