Cronos Group Inc. (TSXV: MJN) announced recently a strategic joint venture for the production and distribution of medical cannabis in Israel
SmallCapPower | September 11, 2017: Cronos Group Inc. (TSXV: MJN) Wednesday announced that it has entered into a strategic joint venture with Kibbutz Gan Shmuel for the production, manufacture and global distribution of medical cannabis. Gan Shmuel is one of the largest and most sophisticated kibbutzim in Israel, producing and exporting a variety of products to 35 countries throughout Europe and Asia.
Israel has an ideal climate for growing cannabis with abundant light to support year-round greenhouse cultivation without the need for supplemental flower lighting. The Israeli climate, combined with Gan Shmuel’s existing manufacturing infrastructure and skilled labor force, will enable Cronos Israel to produce high-quality medical cannabis at an expected cost of between $0.40 and $0.50 per gram.
Phase One of Cronos Israel involves the construction of a 45,000-sq. ft. greenhouse that is expected to produce up to 5,000 KG annually. This will be paired with a separate 11,000-sq. ft., extraction laboratory that will be utilized for analytics, formulation development, and research. In Phase Two, Cronos Israel plans to increase production capacity to 24,000 KG annually. Gan Shmuel is situated on 4,939 acres of mixed-use agricultural/industrial land, which gives Cronos Israel the ability to expand production capacity well beyond 100,000 KG annually with its anticipated future build-outs.
Mike Gorenstein CEO of Cronos said, “This isn’t just about becoming the lowest cost producer in the world. Establishing a major operation in Israel gives us frontline exposure to leading medical cannabis research and innovation. Cronos Israel is a significant step in raising the standard of medical cannabis globally.”
Israel’s government has been promoting cannabis research since the 1960s. In 2016, the Israeli government said it will expand the number of doctors trained and authorized to prescribe medical marijuana. Earlier this year, its government announced plans to decriminalize personal marijuana use, and in February a government committee approved cannabis export.
Shares of Cronos Group have been one of the best-performing Canadian marijuana stocks so far in 2017, gaining about 50%.
Cronos Group currently trades at TTM price to sales value of 65.61x, price to book value of 5.81x and forward PE of 111.50x.
Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own shares in the company mentioned above.
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