Medivie signs $110m medical cannabis export deal

Cannabis

The agreement between the parties is contingent on due diligence and obtaining a license to export cannabis.

Medivie Therapeutic Ltd. (TASE:MDVU), which is seeking to operate in the cannabis sector, has announced the signing of a binding memorandum of understanding for cooperation with an international investor likely to give Medivie up to $110 million. Under the agreement, Medivie will supply 100 dunam (25 acres) in Israel or elsewhere for the purpose of growing, producing, and exporting medical cannabis. The company will supply the investor with half of the cannabis it grows, up to 50 tons a year.

Medivie is managed by CEO Menachem Cohen. The company's share price rose 20% today, boosting its market cap to NIS 33 million. Since the company announced its intention of merging cannabis activity into it in October, its share price has climbed 540%.

The agreement between the parties is contingent on due diligence and either obtaining a license to export cannabis from Israel or arranging all of the conditions for growing and exporting cannabis from another country to a market in which high prices can be obtained for the product. Medivie's lawyer Adv Ilan Gerzi of the Pearl Cohen Zedek Latzer Baratz Law firm, who merged the cannabis activity into Medivie, which was a stock exchange shell, said, "Our preference is for production in Israel." 

A question of an export license

Exporting cannabis from Israel is currently banned, but the question of a permit for this has been brought to the cabinet for a decision, and Medivie (and many other growers) are waiting for this in the expectation that one will be obtained within a few months. Most government ministries support cannabis exports, including the Ministry of Finance, the Ministry of Justice, the Ministry of Agriculture, and the Ministry of Health.

The Ministry of Public Security is currently responsible for delaying the decision. The ministry says that it does not oppose exporting cannabis, but wants additional time in order to consider the security preparations and additional budget in order to supervise actual cannabis exports. Failure to obtain authorization for cannabis exports will mean that the deal is called off if Medivie is unable to establish production activity elsewhere within a year.

Medivie believes that the agreement can be signed within 30 days; the company will receive $500,000 when the deal is signed. Medivie will receive another $29.5 million according to a timetable to be set in the framework of the agreement, based on meeting a number of milestones (the first payment of at least $3 million will be paid no later than 60 days after a binding agreement is signed by the parties, provided that the Israeli government has already made an announcement about medical cannabis exports by this time. Later, if all goes according to plan, the investor will pay Medivie $20 million annually for four years, starting in the second year after the deal is completed - a total of $80 million.

Under the agreement, if cannabis exports from Israel are not approved and conditions for producing cannabis in another location and selling it are not fulfilled, the contract will be canceled, and the company will have to repay any amounts it has already received from the investor.

Medivie provided no particulars about the investor, but Gerzi says that it is a concern with large-scale business activity in Europe, which does not, however, include cannabis activity. Under the agreement, the investor is responsible for marketing the produce, but Medivie will support marketing as much as possible. Medivie has non-binding marketing agreements with investors in Germany and the US.

Published by Globes [online], Israel Business News - www.globes-online.com - on March 4, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018a

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