Savvy investors looking for real growth opportunity in the now-crowded North American cannabis market may want to consider exploring companies with a budding global reach.
Aura Health Inc. (CSE: BUZZ, Forum) is one of the newest and most innovative names among publicly listed medical cannabis companies, commencing trading on the CSE on August 15, 2018.
And, their focus for market penetration is a relatively untouched retail cannabis marketplace, teeming with over 600 million potential consumers.
Aura Health’s mission statement is “to build an international network of vertically integrated businesses in the medical cannabis industry.” Their mid-term goal is to grow high-quality and low-cost flower in Israel to process into extracts and other end products in Europe for the purpose of distributing to medical cannabis jurisdictions throughout the continent.
In conversation with Stockhouse Editorial, Aura Health’s Chairman David Posner – a cannabis industry veteran and former CEO of Nutritional High International Inc – describes Aura as part of diversified portfolio of seed-to-sales companies where they “control everything from the growth and distribution to retail dispensaries”. He went on to say that the Company’s long-term strategy is to “create and build an international, vertically-integrated medical marijuana business.”
As for mid-term acceleration, Mr. Posner said that their approach is “to grow high-quality, low-cost marijuana in Israel, export it to an extraction facility, and produce pharmaceutical-grade (cannabis products) at factory for distribution into Europe.”
When investors take a closer look at Aura Health, they will see a leadership team of industry professionals with nearly 75 years combined experience in capital markets, investment banking, regulatory compliance, and the medical and recreational cannabis sector.
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It’s important to note that when the Aura management team speaks of “High Quality & Low-cost Production”, they are talking about their strategic partnership with Israeli cultivation licensee, HolyCanna. The majority acquisition of CannabiSendak – founded by iconic Israeli cannabis activist Shlomi Sendak – will soon provide the most extensive cultivation, distribution, and retail partnership in Israel, with a long-term vision toward market dispersion throughout Germany and eventually the entire European continent.
Daniel Cohen, CEO of Aura, commented, “We are very pleased to announce this exciting transaction and look forward to working with Shlomi and his team to develop our retail footprint throughout Israel. We believe our cannabis retail strategy will provide significant value creation for our shareholders because of its holistic focus and partnership with industry icon Shlomi Sendak. As a company, we seek to acquire and develop differentiated, value-added cannabis businesses and we believe CannabiSendak further bolsters this objective.”
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HolyCanna: Medical Cannabis in Israel
So why Israel and what’s the history behind these companies?
First, HolyCanna is an Israeli-based cannabis enterprise that is currently in the process of building a farm in Israel with an initial 50,000 square foot canopy site in the fertile central region of the country (42,000 square feet of which will be a massive greenhouse), with an additional 325,000 square feet available for expansion. The Company says it is striving to bring the best Israeli medicinal cannabis and related products to the global market.
Growing medical cannabis in Israel requires a license issued by the Israeli Medical Cannabis Agency of the Ministry of Health, and HolyCanna has one of the very few issued by the government of Israel to date.
HolyCanna plans to grow, manufacture, and distribute all of our products in accordance with the Israeli regulatory permits – IMC-GAP, IMC-GMP, IMC-GDP and IMC-GSP.
The new cannabis distribution and retail regulations in Israel are strict, but the Company states that this ensures “the final products will be of high quality and will comply with the rest of the world's regulations”.
And according to Mr. Posner, “HolyCanna, right now, has a high-quality farm and the licences for an indoor nursery for cultivation…and not all farms have an indoor facility…in fact, it’s not easy to get an indoor-outdoor licence (in Israel) to build an indoor facility on an area that’s designated as a farm. So that’s a real strategic advantage for us.”
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CannabiSendak LTD
On September 5, 2018, Aura Health entered into a binding term sheet to acquire 57% of the outstanding equity of CannabiSendak, an Israeli cannabis company founded by iconic Israeli cannabis activist Shlomi Sendak. This is exciting news for investors as CannabiSendak will use HolyCanna as its primary provider of branded cannabis products. From seed to sale, this means complete control and scaling of the entire cannabis cultivation, extraction, distribution, and retail operation – a win-win for investors looking for total vertical integration of the product.
The sound economics of this approach is spelled out in clear detail below:
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Shlomi Sendak began the struggle for the recognition of the medicinal qualities of cannabis as far back as August 1994, when he wrote and published a booklet called "Esev Hasadeh: Marijuana, the 21st Century Miracle Drug."
Following the publication of the booklet, Mr. Sendak was interviewed on a prime-time Israeli television show while rolling and lightening a joint – that moment is considered the official starting signal for the strive for the legalization of cannabis in Israel.
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As per Company Chairman David Posner, Aura Health has big plans for the international expansion of CannabiSendak into Germany and Europe.
“We’ve done a deal to open a chain of dispensaries in Israel with a branding line, as well. We’ve done a deal with the icon of medical cannabis in Israel and we’re going to be opening a flagship dispensary followed by a chain of dispensaries and will also be developing an actual branded, high-end medicinal product under the name Shlomi Sendak…his name and his brand is recognized in Germany and the medicinal market throughout Europe.”
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This unique approach means Aura Health doesn’t need to copy what other cannabis companies have done before. Instead, the Company’s focus is to see where it can improve its business model from others in the same space.
The primary means in which Aura is initially separating itself from its North American peers is through its unique international business model. However, even before getting its Israeli cultivation model in place, CEO Cohen had a higher priority – creating a foothold in the burgeoning European market:
“We want to be the most centralized form for distribution, for manufacturing, and for retail [in Europe]. There hasn’t been a pure play marijuana company that’s gone public in Canada to actually do this. Our operations and management team, and our master extractors have the experience…they’ve been able to create these products before.”
Israel: The "Silicon Valley of Medical Marijuana”
Many cannabis investors may already think that they know how this process works. But they may want to think again, as the Israeli business model is a reboot of the existing North American version.
First, in Israel, a would-be cannabis cultivator obtains a parcel of land and constructs (or acquires) an agricultural facility suitable for cannabis cultivation. Then, the cannabis company begins the regulatory process to obtain a cannabis cultivation license. In the case of HolyCanna, this is already a fait accompli.
Recently, on July 19th 2018, the Israeli Knesset finally approved the bill for decriminalization od cannabis. The law will go into place on April 1st, 2019. Interestingly, a survey in 2017 found that 27% of Israelis between the ages of 18 and 65 had consumed cannabis in the last year, the highest rates of annual cannabis usage in the world.
Thus, not surprisingly, Israel is at the forefront of the science and cultivation of cannabis, producing some of the purest strains of medical marijuana in the world.
And a recent article in The Jerusalem Post suggests that Israel and Canada are a natural partnering fit in the blossoming international export cannabis space.
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Export Market in Israel
In April 2017, with global demand growing, the government of Israel gave medical cannabis companies the green light to start exporting their products, with analyses estimating that the measure could generate Israel some US$267 million per year.
An inter-ministerial report said in August 2017 that exports could add 4 billion shekels to the Israeli economy.
As an added bonus, North-Central Israel is considered to have an ideal climate for growing and cultivating cannabis, with the perfect level of humidity.
In closing remarks with Stockhouse Editorial, Aura Health Chairman David Posner spoke of the overall commercial advantages of cannabis cultivation in Israel:
“Israel is a global leader in agricultural technology and they are a real force in pharmaceuticals, biopharma, biotech, so you put all those things together and Israel is just a natural place for development of intellectual property for cannabis.”
He went on to say:
“The culture specifically for cannabis has already begun. I think Israel is the first country to have medicinal cannabis. (Many companies) have already gone to Israel to look for the highest quality strains of medicinal cannabis that were already being grown.”
Investors looking for a unique venture opportunity in the exploding cannabis sector, with a forward-looking view towards the international cannabis marketplace, may want to give a long hard look at this emerging company.
FULL DISCLOSURE:Aura Health Inc.is a paid client of Stockhouse Publishing.