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Cronos Group stock jumps after partnering with Boston biotech Ginkgo Bioworks in a US$122mln deal to develop cultured cannabinoids

The biotech will genetically engineer cannabinoids so that Cronos can bring cannabinoid-based products to market with reliability and scalability
Cannabis and a vial
The Canadian cannabis company currently has several international production and distribution platforms including in Germany, Poland, Israel and Australia

Shares of Cronos Group Inc (NASDAQ:CRON, TSX:Cron) soared Thursday after the Canadian cannabis company announced it was partnering with Boston-based biotech Gingko Bioworks Inc to produce cultured cannabinoids or genetically engineer the active compounds in marijuana.

Ginko will use its platform technology to identify relevant cannabinoids, with medicinal use that appear in tiny quantities in the cannabis plant and extract the DNA to culture them in a lab.

According to a company statement, Cronos will give Ginkgo about US$22mln to fund research and development and will issue up to 14.7 million shares valued at US$100mln in tranches as it achieves production milestones.

The news sent Cronos stock flying 12.25% to US$11.09 on the tech-laden Nasdaq, while it gained as much as 16% on the Toronto Stock Exchange.

"Cronos Group is building the world's most innovative cannabinoid platform," Cronos Group CEO Mike Gorenstein said in a statement.

"The potential uses of cannabinoids are vast, but the key to successfully bringing cannabinoid-based products to market is in creating reliable, consistent, and scalable production of a full spectrum of cannabinoids, not just THC and CBD. We are thrilled to partner with Ginkgo; their biological engineering capabilities and disruptive technology platform are unrivaled. Together we can revolutionize the cannabis industry."

READ: Are marijuana stocks too high for an investor tempted to join the party? Or do they have room to run?

Ginkgo, which has a 100,000-square-foot lab in Boston, got its start creating scents for the fragrance industry. By transferring the DNA sequences for cannabinoid production into yeast, Ginkgo expects to develop strains that produce cultured cannabinoids at high purity in a process similar to brewing beer in a microbrewery. 

"Legal cannabis is a multibillion-dollar industry with no signs of slowing down, but providers will need to innovate to keep up with demand for better products, including those taking advantage of rare and difficult to extract cannabinoids," said Jason Kelly, CEO and co-founder of Ginkgo Bioworks.

"Engineering strains of yeast that can produce these cannabinoids via fermentation is a perfect fit for our organism design platform and we are excited to be working with Cronos Group as they lead the way to high-quality cannabinoid treatments," added Kelly.

Ginkgo’s technology may translate well in the cannabis industry. Bloomberg threw up an example, saying a compound called tetrahydrocannabivarin, or THCV, acts as an appetite suppressant and appears in very small quantities in the cannabis plant, making it “difficult and expensive” to produce at scale. “Using Ginkgo’s technology, pure THCV can be produced in a lab,” noted Bloomberg.

The partnership between Ginkgo and Cronos will focus on the scalable and consistent production of a wide range of cannabinoids, including THC, CBD and a variety of other lesser known and rarer products. These cultured cannabinoid molecules are identical to those extracted from the plants grown with traditional methods, but are created by leveraging the power of biological manufacturing via fermentation.

Cronos will have exclusive rights to use and commercialize the key patented intellectual property related to the production of the target cannabinoids globally.

Contact Uttara Choudhury at [email protected]

Follow her on Twitter@UttaraProactive 

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