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$122 Million Deal Struck to Create Lab-grown Cannabis

By Leo Bear-McGuinness
Published: Sep 24, 2018   
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Ginkgo Bioworks, a Boston-based biotech company that genetically engineers bacteria for industrial applications, is partnering with medicinal cannabis producer Cronos to make lab-grown cannabis.

In a deal worth $122 million, Ginkgo will use Cronos’s Canadian facilities to manufacture several different cannabis compounds without the need for a farm.

This independence from agricultural constraints and the possibility of lab-made cannabinoids could have big applications in the pharmaceutical industry, which in recent years has heavily invested in cannabis-based drugs.

The Ginkgo and Cronos deal

Based out of Toronto, Canada, The Cronos Group operates two wholly-owned Canadian licensed producers regulated under Health Canada's Access to Cannabis for Medical Purposes Regulations.

With recreational cannabis due to become legal nationwide in Canada come October 17, the Cronos Group was just the kind of restriction-free and resourceful partner Jason Kelly, Ginkgo Biowork’s CEO, was looking for.

"They had green rooms, automated tracks to move plants around, A and B testing on various light configurations — everything. It was exactly what we'd been looking for," Kelly told Business Insider.

Lab-made cannabinoids would be produced by splicing the relevant CBD- and THC-encoding genes into substitute microorganisms, then manufacturing the compounds in a continuous batch process.

Ginkgo has already had great success in this kind of bioproduction by genetically engineering yeast to produce rose oil fragrances for the lucrative perfume market. Kelly’s ambition is to expand this type of genetic engineering into the cannabis industry.

Speaking on the company’s rose oil production, Kelly said to Bloomberg, “It’s cheaper, it’s not subject to weather conditions, the price isn’t all over the place, it’s not different if you grow it in Morocco or somewhere else, it’s just a much better product.”

Thus, by subtracting the costs of water, fertilizer, and other agricultural expenditures, this form of ‘artificial cannabis production’ has the potential to be far more cost effective than contemporary methods.

From farmer to pharma

While US federal laws and regulations still classify cannabis as a Schedule 1 substance alongside other drugs such as heroin and cocaine, recent events have given hope to those invested in the cannabis industry.

In June of this year, Epidiolex - a treatment for epileptic seizures that is based on CBD – became the first cannabis-derived drug to be approved by the US Food and Drug Administration. This landmark decision has been predicted by experts to create an ‘avalanche effect’ of reclassification in the United States. Indeed, the US Drug Enforcement Agency is now on its way to reclassifying CBD as a Schedule II or Schedule III drug.

Weakening restrictions on the study of CBD could allow biotech startups such as Ginkgo to produce cannabinoids through genetic engineering far more freely. Any yeast-generated products wouldn’t have a plant origin – a technicality which could lead to a greater likelihood of US government approval.

Thus, as a company that has previously partnered with major pharmaceutical firms like Bayer AG and Cargill Inc, any successful products from Ginkgo will undoubtedly interest pharmaceutical companies.

Talking to Business Insider, Kelly said “There’s so much new discovery work on the pharmaceutical side that’s possible using our approach. That's definitely an area that we’re excited about."

And it isn’t just well-known cannabinoids like THC and CBD that Ginkgo are looking to manufacture.

"Beyond THC and CBD, there's a whole class of rare cannabinoids in [the plant], but accessing them at a remotely reasonable cost hasn’t been feasible," says Kelly.

At the moment, drug companies still face high costs for investing in conventionally-grown cannabis. But the Gingko-Cronos collaboration may be one of the first signs that this high-cost boundary is coming to an end.

"Cronos had a view that what matters is ingredients and cost — and the technology to prove it."

DNA and custom-made cannabis

Aside from being more cost-effective and assisting deregulation, lab-grown cannabis products could also provide benefits to the consumer.

The vast scope of genetic engineering opens up the possibilities of new, ‘improved’ cannabis cultivars. For example, the compound tetrahydrocannabivarin, or THCV, acts as an appetite suppressant and can offset the famous ‘munchies’ effect of smoking cannabis. However, it only appears in very low concentrations within the natural cannabis plant, which leads its benefits to go unregistered.

Traditional cultivation methods aren’t effective in increasing THCV quantities. So, the great potential of the Ginkgo-Cronos deal is that it could lead to genetically engineered cannabis cultivars with a higher quantity of desirable compounds, like THCV, and lower quantities of any undesirable substances.

Of course, this level of engineering is yet to be demonstrated, but Ginkgo’s $122-million investment into the venture clearly states the company’s confidence in this endeavor.


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