Cannabis production company Cronos Group Inc is partnering with Ginkgo Bioworks in a $122 million deal
The focus point of this new partnership will be to manipulate the active compounds in marijuana using biotechnology.
The two companies will work to pinpoint the rare cannabinoids that emerge in small quantities in the cannabis plant, extract the DNA and attempt to reproduce them in the laboratory.
Ginkgo will be given $22 million to begin research and development, additionally, Canada based Cronos will also give the company $100 million worth of common shares in stages as Gingko achieves specific production milestones.
Plan of Action After Stocks Drop
Recently, Cronos shares tumbled 28 percent on Thursday after Citron Research questioned its valuation, distribution agreement, limited international sales and its lack of R&D spending in a report.
However, the report was disregarded by many analysts calling it unfounded and biased.
Chief executive officer of Toronto-based Cronos, Mike Gorenstein stated that their recnt investment is like going into “a foot race with a Formula One race car”.
Ginkgo, which is based in Boston in a 100,000-square-foot facility, began creating scents for the fragrance industry before it expanded.
It has a foothold in the beer industry, taking the DNA that makes a rose smell like a rose and creates a brewer’s yeast.
CEO of Ginkgo, Dr. Jason Kelly, a bio-engineer says this method of production is significantly cheaper.
“Now when you brew it up in that same brewery, instead of beer coming out, rose oil will come out. 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.”
Bioengineering in Cannabis
Mike Gorenstein believes that this technology is great in the cannabis industry like tetrahydrocannabivarin (THCV) can be used as an appetite suppressant.
It appears in small amounts in the plant, therefore without this technology, it would be very difficult and expensive to produce.
“Being able to consistently and efficiently produce high-purity cannabinoids, that’s the holy grail.”
The spokeswoman, Anna Shlimak, highlighted that the focus is creating long-term value
“We are in the early innings of a global paradigm shift and our focus is and will continue to be on our business and on creating long-term value, not on short term stock movements and volatility.”
Ginkgo chose Cronos Group as its partner in this venture because it has been known to treat marijuana as a technology venture instead of than an agricultural business.