Cluster Analysis of Israel’s Cannabis Industry
© Asbjorn Osland
(Please do not cite or quote without permission as this is a draft)
Israel is an international center for research into pharmaceutical applications based on cannabis as well as its cul
government was supportive of medical marijuana and recreational use was decriminalized (Kubovich, 2017). It wa
medical marijuana, not an exporter of a recreational drug (Mitzner, 2015).
FDA approved clinical trials of pharmaceutical research into the medicinal qualities of cannabis are critical and lac
would enable medical marijuana to advance from its very crude state where the botanical plant is smoked or inge
could be refined to medicine that is focused on a particular illness where specific molecular attributes of cannabis
effective. Without such research, people are largely getting high from “medical” marijuana (California Police Chief
Anecdotal reports, from ingesting botanical marijuana, of pain relief, nausea reduction and the like are of course i
follow:
How can the U.S. move beyond its seemingly primitive approach to R&D relating to cannabis?
For now, while the U.S. legal framework remains in place to stymie R&D in cannabis, how can U.S. companies en
Israeli firms to discover, test and seek FDA approval for pharmaceutical products based on cannabis?
What can the U.S. do to create an effective cannabis cluster within the U.S.?
What partners in Israeli would be best for clinical trials?
A cluster analysis of the cannabis industry in the U.S. would be lacking this critical R&D component, without whic
to get high. Therefore we will focus on Israel.
Cluster analysis of cannabis industry in Israel
A small, arid nation like Israel, without vast reserves of natural resources, depends on its human capital to create
Human capital also includes relationships to supporters of Israel abroad, such as the Jewish community in the U.S
Innovation depends on world class universities for knowledge, access to financial resources to fund start-ups, gov
business culture of risk taking, among other attributes.
The primary business scholar associated with cluster analysis has been Michael E. Porter, University Professor a
to business strategy are among the more enduring contributions of all scholars. Clusters are geographic concentr
Israel, of interconnected companies and institutions in a field. The focus here is cannabis. The elements of cluste
are specialized suppliers, complementary products, supportive governmental institutions, associations that promo
support, R&D, and regulated dispensaries for medical marijuana. Other elements vary from industry to industry, d
analysis done.
Clusters include partners but also rivals that spur competition, a critical element of commercial success in a capita
be viewed as a value chain for a particular industry. Enhanced productivity results from technological innovation a
university research. Growing and monitoring techniques in agriculture, since cannabis is a crop, also contribute.
Government support is critical in Israel while it is one of the primary road blocks to progress in the U.S. U.S. laws
discourage research and even proper banking. Where legal, in terms of recreational and/or medical marijuana, m
U.S. find themselves reduced to primitive and dangerous cash transactions due to federal banking restrictions. M
are legal in various states cannot take normal business deductions when filing federal income tax either. Looming
risk of federal police action, which can occur. During the Obama administration and continued thus far with Trump
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has left marijuana businesses that are legally constituted in their states to function without federal police intervent
intervention at the state level remains a risk.
Clusters facilitate access to information, technology, supportive institutions, and ways to measure improvement. C
personnel essential to the human capital needed to support innovation. This cuts transaction costs in the search p
for local sourcing of supplies.
The following are examples; the list is not exhaustive. Some work outside of Israel as well, given the international
industry.
Specialized suppliers
Breath of Life is an Israeli company that will open one of the largest growing and R&D centers in the world accord
Advisers. It’s counting on a large and growing market for medical cannabis, valued globally at $11 billion in 2015,
Research (Schwartz, 2017). Breath of Life Pharma provides cannabinoid-active pharmaceutical ingredients (APIs
clinical trials on intestinal, neurological, and brain diseases and skin conditions (Gedo, 2017).
Pharmocann produces medical cannabis on a farm in the valley of Jezreel, the Galilee. It focuses on manufacturi
standardized and validated products (i.e., oil, ointments, tablets, inhalers, rectal and vaginal suppositories, and cig
THC/CBD strains). It serves around 3,000 people each month and produces around two tons of medical cannabis
CanOmix enhances the accuracy and efficiency of cannabis cultivation by focusing on genetic markers that enabl
medical potential. This improves breeding technology. The firm collaborates internationally.
Complementary products
BreedIT developed agro-breeding solutions for plant breeders and researchers. It developed the Intelligent Decis
that provided advanced solutions to plan, manage and analyze breeding data. BreedIT had worked on vegetables
on cannabis in 2014 when it partnered with Sheifa Le’Haim, a cannabis grow company. The two are to create uniq
BreedIT also partnered with Seach to create KanaboSeed. INVITA Pharma invested in BreedIT in 2014. INVITA P
Colorado and also invested in One World Cannabis in addition to Canadian producers (Adams, 2014).
Seedo offers an appliance and system for growing vegetables and also cannabis in doors (Arrington, 2017). It’s th
refrigerator.
DryGair Energies, established in 2010, offers an “efficient and environment friendly dehumidification solution for th
greenhouses,” for use with vegetables, flowers and cannabis. Israel’s Volcani Center – ARO (Israel’s Agriculture R
contributed to the product development.
Syqe Medical produces a cannabis inhaler. Botanical cannabis is inserted into cartridges that are loaded into an i
administers appropriate dosages to achieve the balance between desired symptom relief and getting high.
Cannabi-Tech “verifies both the composition and potency of a cannabis flower.” Its technology is both non-destruc
SipNose is a nasal delivery device focuses on nose-to-brain medical applications.
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GRiN Systems sell smart sensors for cannabis grown at home. They improve yield and quality.
Corsica Innovations produces and sells an automated cannabis growing system called LEAF.
Growee Technologies sells smartphone-based hydroponic monitoring for urban farming for vegetables, herbs and
Supportive governmental institutions
Israel’s regulatory attitude welcomes advances in the cannabis industry. In contrast to the U.S., the Israeli Ministry
Medical Cannabis Agency (IMCA).
Associations that promote cannabis
The America Israel Cannabis Association (AICA) could spur investment between American and Israeli companies
Financial
Viridian Capital was founded by former Wall Street analysts and bankers who saw a demand for their capital mark
cannabis industry. It serves Israeli customers in addition to others in the cannabis industry. It’s based in New York
R&D
One World Cannabis (OWC) “conducts medical research and clinical trials to develop cannabis-based pharmaceu
conditions including multiple myeloma, psoriasis, fibromyalgia, PTSD, and migraines.” It has a research division d
clinical trials and also a consulting division that works with governments and companies to work within complex in
regulatory frameworks. OWC requested a patent (Patent Application Number: 15/639,230) for its proprietary activ
topical cream for psoriasis management. Psoriasis is an autoimmune disease. Lesions can grow quickly and caus
burning and itching. It is sometimes associated with other diseases such as diabetes, heart disease and depressi
role. The National Psoriasis Foundation reported that in the U.S. there were roughly 7.5 million sufferers of psoria
people worldwide. The global market was $6.6 billion in 2014 and it’s expected to grow to over $13.3 billion by 20
with mediq Innovation Partners (mediq) of Germany to introduce its psoriasis cream to the German market. Germ
cannabis that is not smoked. The intent is to use the large German market to demonstrate the efficacy of the crea
other European countries.
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Cannabics Pharmaceuticals, based in Bethesda, Maryland, established its R&D division in Israel where it is duly l
Health for scientific and clinical research. The company is focused on personalized anti-cancer and palliative trea
biotechnological tools such as “delivery systems for cannabinoids, personalized medicine therapies and procedur
originated compounds and bioinformatics tools” (10K, 2016). It developed and filed a patent for “Cannabics SR.” I
cannabis capsule that provided 10-12 hours of relief to cancer patients. The competitive advantage is convenient
cancer patients.
Universities are prominent in R&D as well. Medical marijuana research is actively supported by the government in
Netherlands. Israel’s 86-year-old chemist Raphael Mechoulam (Hebrew University) is a pioneer cannabis researc
tetrahydrocannabinol (THC) in 1964. Another important element of marijuana is cannabidiol (CBD), which has ant
The US National Institutes of Health awarded a NIDA (National Institute of Drug Abuse) Discovery Award in 2011
Mechoulam also found that the brain produces its own cannabinoids. Scientists at the U.S. National Institutes of H
compounds could prove beneficial for mental illnesses, diabetes, cancer and multiple sclerosis. Israel currently ha
trials of medical marijuana. Foreign governments (e.g., the U.S., Canada, Australia, and Germany) provide most o
their own countries marijuana research is complicated by legal restrictions. The U.S. NIH has reportedly funded M
50 years, at an average of $100,000 annually. Some U.S. companies have also outsourced research to Israel.
Since marijuana is a plant, chemicals extracted from it for use in medicine may be less consistent than those prod
Therefore Therapix and other pharmaceutical companies work with synthetic THC. Therapix Biosciences Ltd., an
listed on NASDAQ, develops cannabinoid technologies to treat central nervous system disorders. It has two deve
repurpose an FDA approved synthetic cannabinoid (dronabinol). “Synthetic” is the key word in that research did n
cannabis, still a Schedule I drug. The firm is also developing unique cannabinoid delivery systems.
Other entities include:
In the future, milk producers would conceivably add CBD to milk. Cannabics Pharmaceuticals, an Israeli company
for cancer sufferers, with a market potential of $3.6 billion in the US by 2019. But clinical trials leading to products
governmental agencies such as the U.S.F.D.A. are critical to market growth (Lidman & Solomon, 2016).
Kalytera Therapeutics, a clinical-stage pharmaceutical company, is developing the cannabinoid therapeutics. It fo
Host Disease (“GvHD”).
iCAN- Israel Cannabis works in a global network for the cannabis industry to market products to a legal, global ma
The name of the Israeli firm was not divulged other than to state that it was a Contract Research Organization. Ax
based firm. U.S. companies need to conduct such research abroad because the U.S. legal framework makes it di
(News Bites US OTC, 2017).
Steep Hill Labs, an American company devoted to cannabis testing, agreed to work with iCAN Israel to establish
(PRNewswire, 2017).
CURE Pharmaceutical and Therapix Biosciences, headquartered in Israel, signed an MOU with Assuta Medical C
to collaborate on cannabis-related products.
ICD Pharma develops products for medical marijuana use, in the short run, as well as FDA approved drugs. The
Friedman, has 70 patents.
eSense-Lab reverse engineers plants so that the THC is removed and the scientists can focus on the medicinal a
elements.
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Incubator
iCAN- Israel Cannabis and Breath of Life Pharma established a partnership to create Israel’s first private cannabi
(iCAN Team, 2016). It will work with companies from abroad as well as Israel. iCan- Israel Cannabis holds confere
cannabis industry (PRNewswire, 2016).
Regulated marijuana dispensaries for medical marijuana
Tikun Olam, the principal cannabis dispensary in Israel, has 15 marijuana plant strains. It has created the Avideke
compared to just 0.8% THC, making it safe for children with epilepsy. It’s the largest supplier of medical cannabis
as one of the leading medical cannabis companies internationally. It’s privately held and has operated under licen
of Health since 2007. It offers patients information regarding cannabis strains. It differs from pharmaceutical comp
with proven molecular purity. Medical marijuana, in the case of Tikun Olam and others, offer botanical marijuana.
in Canada and Australia. It also established a subsidiary in the U.S. It has an analytical laboratory of cannabinoid
and an extraction laboratory for isolating active ingredients. Another innovation is its nurse clinic that guides patie
Cannabliss produces medical cannabis (e.g., oil and cookies) for non-smokers. It is licensed by the Ministry of He
Hadassah University Hospital and other hospitals in Israel.
“Protekzia” – personal relations and the creation of a cannabis business
“Protekzia” “connotes the importance of connections, of having friends in the right places (Kordova, 2012). In crea
research cluster focused on cannabis, social relations between the various actors spur progress. Social networks
relationships allow information sharing, facilitate access to needed resources, and remove roadblocks to progress
Israeli medical marijuana research to progress faster than in the U.S. (Lidman & Solomon, 2016).
U.S. lags in R&D
For decades, the U.S. aggressively criminalized marijuana use (Downs, 2016). Through referenda, the public vote
marijuana use in 29 states and the District of Columbia (ProCon.org, 2017).
The U.S. grows and consumes a great deal of cannabis but research is discouraged because cannabis continues
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dangerous drug, what’s called Schedule I, along with heroin and ecstasy.
The federal government also complicates financial transactions in the U.S. marijuana industry, where legal under
national banks to service the industry; cash transactions add risk to the marijuana trade where legal.
Although the medical marijuana business in U.S. believes, based on anecdotal evidence and personal testimonie
example, that marijuana is useful for a wide range of conditions, the FDA has only approved of one use of botanic
after references). However, it approved two drugs based on synthetic versions of marijuana-like substances. The
research into drugs based on botanical marijuana but the approval process requires the additional approvals of th
Administration (DEA) and the National Institute on Drug Abuse (NIDA). The FDA has engaged in discussions with
research (FDA, 2017). As indicated above, the NIH has funded research in Israel for over 50 years.
The medical and recreational marijuana businesses in the U.S. do well in terms of sales. Colorado has experienc
Nevada had trouble supplying its dispensaries. California should see high sales levels when recreational marijuan
Users attribute benefits to medical marijuana that are difficult to substantiate due to the anecdotal nature of the in
and research have not been permitted by the federal government. A cluster analysis of the U.S. would show lots o
categories mentioned above for Israel with the absence of R&D.
This glaring deficiency makes cannabis just a way to get high for all too many Americans. U.S. leadership in phar
be unleashed.
References
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deadliest drugs ignores decades of scientific and medical data. But attempts to delist it have met with decades of
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political distortion. Scientific American. Retrieved from: https://www.scientificamerican.com/article/the-science-beh
on-marijuana/ (Links to an external site.)
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an external site.)
Fulbright, A. (March 5, 2017). Government approves measure to decriminalize marijuana – Netanyahu says ‘we a
also understand the dangers’; critics say new proposal watered. Times of Israel. http://www.timesofisrael.com/gov
measure-to-decriminalize-marijuana/ (Links to an external site.)
Gedo, T. (March 16, 2017). Why Israel leads the US in medical cannabis research.The Jerusalem Post. Retrieved
http://www.jpost.com/Opinion/Why-Israel-leads-the-US-in-medical-cannabis-research-484416 (Links to an externa
Haines, G. (20 April 2017). Mapped: The countries that smoke the most cannabis. Telegraph. Retrieved from:
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Kubovich, Y. (March 5, 2017). Israel Officially Decriminalizes Marijuana Use. haaretz.com. Retrieved from: http://w
news/1.775331
Lidman, M. & Solomon, S. (September 12, 2016). In Israel, booming medical marijuana looks to conquer new hig
health benefits of cannabis has zipped along thanks in part to the local culture of ‘protekzia,’ a pioneer in the field
the plant are waiting to be discovered, and a marketer wants to slip it into milk so everyone can have a daily dose
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Mitzner, D. (September 4, 2015). Israel Could Grow into a Global Cannabis Startup Superpower. Techcrunch.com
News Bites US OTC. (July 27, 2017). Medical Marijuana Inc Major Investment AXIM Biotech Enters Agreement W
Begin Clinical POC Study For Treatment of Restless Leg Syndrome. News Bits US OTC.
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Develop First-in-Class Therapeutic Products in Fields of Personalized Medicine & Cannabinoids. Therapix Bioscie
Websites
The following list is representative but not exhaustive. See https://finder.startupnationcentral.org/startups?tag=can
site.) for up-to-date listings.
Agriculture Research Organization): http://www.agri.gov.il/en/home/default.aspx (Links to an external site.)
Assuta Medical Center: http://en.assuta.co.il/ (Links to an external site.)
America Israel Cannabis Association (AICA): https://aicannabis.org/
Breath of Life: http://www.bolpharma.com/ (Links to an external site.)
BreedIT: http://ibreedit.com/
Cannabics Pharmaceuticals: http://cannabics.com/
Cannabi-Tech: https://cannabi-tech.com/ (Links to an external site.)
Cannablis: https://www.en.cannabliss.co.il
CanOmiox.com: http://www.canomix.com/
Corsica Innovations: http://www.getleaf.co/
DryGair Energies: https://www.drygair.com/ (Links to an external site.)
eSense Lab: https://www.esense-lab.com/
GRiN Systems: http://www.grin-systems.com/
Growee Technologies: http://www.getgrowee.com
Kalytera: https://kalytera.co/about/
Hebrew University: http://new.huji.ac.il/en (Links to an external site.)
ICD Pharma.com: http://www.icdphrama.com
iCan: https://israel-cannabis.com/
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Medical Cannabis Agency: https://www.health.gov.il/English/MinistryUnits/HealthDivision/cannabis/Pages/default.
site.)
One World Cannabis: http://www.owcpharma.com/ (Links to an external site.)
Pharmocann.com: http://pharmocann.com/
Raphael Mechoulam: https://kalytera.co/dr-raphael-mechoulam/ (Links to an external site.)
Seedo: https://www.seedolab.com/ (Links to an external site.)
SipNose: http://www.sipnose.com/
Syqe Medical: http://www.syqemedical.com/ (Links to an external site.)
Therapix Biosciences Ltd.: http://therapixbio.com/ (Links to an external site.)
Tikun Olam: http://www.tikun-olam.info/ (Links to an external site.)
Viridian Capital: https://www.viridianca.com/ (Links to an external site.)