About a decade ago, Tzachi Cohen discovered the benefits of medical marijuana, after treatment of pains from an infection in his teeth after surgery. The status of cannabis at the time was substantially different from it is today, in both cultural and regulatory terms, and Cohen identified the needs of dozens of patients for medical cannabis. While they are sent by the Health Ministry to “obtain” the substance independently, in effect by purchasing from drug dealers, Cohen turned to the ministry in order to organize the field, on his own.
“Let me grow the substance and distribute it to the patients entitled to a permit,” he asked of the ministry. After learning the secrets of raising the plant in Holland and the United States, Cohen began to raise medical cannabis in his mother’s home, in the community of Biria in the Upper Galilee. This activity, which Cohen considered philanthropic, was the basis for an unusual exit – in size and in the way it came about. Without raising money from funds or the public, Cohen and his mother are today worth about $500 million.
Tikun Olam is the name that Cohen chose for the non-profit organization that distributed medical cannabis to dozens of Israeli patients, most of them disabled IDF soldiers suffering from post-traumatic stress syndrome.
Tikun olam (literally, "repair of the world") is a concept in Judaism, interpreted as an aspiration to behave and act constructively and beneficially. The activity, which began as a small home-based operation, grew with the years along with the recognition of the medical benefits of cannabis.
In 2010 Tikun Olam treated hundreds of patients, and was no longer able to supply cannabis free of charge. The company started raising it in hothouses – charging patients about 360 shekels ($100) for any quantity they needed.
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The largest transaction ever in the cannabis market
With the continuing increase in demand, in 2012 the company went into partnership in Canada, and together with local partners started MedReleaf. At its founding, Tikun Olam held about 20% of MedReleaf shares, which later declined to 10 percent. Cohen and his mother own about 92 percent of the shares of Tikun Olam – and the two sensed how the cannabis they had grown for years was about to be translated into big money.
In light of the increasing interest, and the extraordinary growth of the commercial firms active in the field of cannabis, MedReleaf merged with the Canadian firm Aurora Cannabis in May. The 50-50 merger granted MedReleaf a value of about $2.5 billion, and was the largest transaction ever in the cannabis market. Tikun Olam was valued at about $250 million, most of which is held by Cohen (72%) and his mother (20%).
The merger created a huge company with a production capacity of 570 tons of cannabis a year. At present Aurora is traded at $9.5 billion, and is the world’s third largest in market terms. The holdings of Cohen and his mother, about 5% of the merged company, are worth almost half a billion dollars. In market terms Aurora is preceded by Canopy, worth $13.5 billion, and Tilray, worth $10.75 billion. Tilray was issued in July on Nasdaq, after raising about $150 million – and since then its value has increased more than eightfold.
>> Read more: Meet the King of Israel's Medical Marijuana Industry
Tikun Olam has been involved not only in growing medical cannabis, but in conducting studies in the field and accumulating data, at a time when in most countries clinical studies on human beings are not permitted. This enabled the company to gain a big advantage over possible competitors. The company’s data relates to the specific strains that are suited to each illness that can be treated with medical cannabis.
The company has developed a number of original strains, including Erez, Alaska and Avidekel. The Canadian firm MedReleaf sold the same strains, and sources in the field point out that this was one of the main reasons for the company’s high valuation. This followed Tikun Olam’s receiving considerable media coverage from many countries for years, thanks to its research activity.
While Tikun Olam reports low profit margins in Israel, it owns several branches in a number of other countries where profitability is high – as is true of the field of cannabis as a whole. The company operates nine hothouses in nine states in the United States, three facilities in Canada, one in Australia, and intends to begin operating in Europe next year. In each case it involved local partners in the startup.
A green investment
As a rule, investing in American cannabis shares has been especially profitable, due to the increasing popularity of cannabis for medical treatment as well as for plain enjoyment. In the past 12 months the Canadian share index in the sector soared by about 185%, and the North American index by about 175%. At the same time, the legitimacy of cannabis use is increasing throughout the world, as is its legalization. Last week Canada became the second country in the world to permit legal consumption of cannabis nationwide – for leisure use too – joining Uruguay.
Anyone who gambled on cannabis before it became trendy, and invested in the industry in early 2016, registered a phenomenal return of 575% on their shares. The Ayalon and IBI investment firms launched trust funds this year. The fund administered by Ayalon soared by 35% since its issue in June. The IBI fund jumped by 39% since its launch in April.
Company promises, “We’ll always sell at the lowest price in the world”
Tikun Olam maintains that its prices in Israel (along with those of seven additional companies that joined it to sell cannabis to those with a medical permit) will remain the lowest in the world market. The patients’ average consumption is 30 grams a month, at a price of about 12 shekels ($3.25) per gram. In addition, people close to the company say it gives bottles of cannabis oil (absent the substance THC, which gives the user a high) to over 1,500 children, at a cost of about 250,000 shekels a month.
Tikun Olam said: “Tikun Olam is very proud to be at the forefront of international knowledge in the field of medical cannabis, and to serve on behalf of Israel as a ‘light unto the nations’ in the field of providing relief, eliminating pain and reducing suffering for patients with very painful illnesses and to those suffering from post-trauma. Tikun Olam has been working for a long time in various formats the world over, together with its staff and advisers in the fields of agriculture, medicine and security.
“The international activity and its revenues will enable the company to maintain the lowest prices possible for customers in Israel, in addition to the company’s tax payments to the government authorities. This is an important and sensitive field which includes compassion, alleviation of suffering and pain, advanced agriculture and an expectation of high revenues for the State of Israel.”