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Illustration: Sarah Grillo/Axios

Startups are competing to use biosynthesis to produce the cannabinoids found in different strains of cannabis.

Why it matters: The market for various types of CBD — a non-psychoactive component in cannabis — for medical and nutraceutical purposes is growing rapidly, and biosynthesis promises a cheaper and more controllable method of production than growing plants.

By the numbers: According to a recent research note from Raymond James, the present size of the global cannabinoid biosynthesis market opportunity is around $40 billion.

  • A number of startups are moving into the biosynthesized cannabinoid space, which Raymond James analyst Rahul Sarugaser has written is "synthetic biology's next killer app."

Background: The conventional method of obtaining cannabinoids like CBD involves cultivating cannabis plants that contain the strain wanted, and then extracting the desired chemicals.

  • Because some of the most in-demand cannabinoids occur in very low concentrations in nature, a lot of plant matter is needed, which means production costs can be higher than $50,000/kg.
  • Growing cannabis can be "backbreaking work," notes Dennis O'Neill, the chief investment officer of the biosynthesis startup Biomedican, and regulatory issues mean that whole cannabis crops need to be destroyed if levels of THC — the psychoactive ingredient in marijuana — are too high.

How it works: In biosynthesis, microbes like yeast and bacteria are engineered to produce large quantities of a single cannabinoid in a fermentation process that works similarly to beer brewing.

  • As a result, biosynthesis companies will be able to produce expensive cannabinoids at a much lower price and without fears of contamination.
  • "We can harvest every day, as opposed to a plant that requires 55 days to grow," says O'Neill.

Flashback: A number of the companies involved in biosynthesis got their start years ago trying to use a similar process to produce advanced biofuels.

  • Those efforts never really bore fruit, in large part because it was far too difficult to compete on price with cheap oil.
  • That looks to be less of a problem with expensive cannabinoids.

What to watch: Whether biosynthesis companies are able to successfully move from demo-scale efforts, like the one announced last week by Berkeley-based Demetrix, to full-scale production.

Go deeper

Dan Primack, author of Pro Rata
Nov 5, 2020 - Economy & Business

Cannabis company makes first-ever purchase of a beer brewer

Photo illustration: Rafael Henrique/SOPA Images/LightRocket via Getty

Aphria (TSX: APHA), a Canadian cannabis company, has agreed to buy Atlanta-based craft brewer SweetWater Brewing Co. for $300 million. Sellers include TSG Consumer Partners.

Why it's the BFD: This is the first time a marijuana company has bought a brewer, rather than the other way around. It also comes the same week that five more states legalized cannabis in some form, meaning that legalization will now cover around one-third of the U.S. adult population.

Dion Rabouin, author of Markets
37 mins ago - Economy & Business

Biden's inflation danger

Illustration: Sarah Grillo/Axios

President-elect Joe Biden's $1.9 trillion stimulus proposal has economists and bullish market analysts revising their U.S. growth expectations higher, predicting a reflation of the economy in 2021 and possibly more booming returns for risk assets.

Yes, but: Others are warning that what's expected to be reflation could actually show up as inflation, a much less welcome phenomenon.

Ina Fried, author of Login
2 hours ago - Technology

CES was largely irrelevant this year

Illustration: Sarah Grillo/Axios

Forced online by the pandemic and overshadowed by the attack on the Capitol, the 2021 edition of CES was mostly an afterthought as media's attention focused elsewhere.

Why it matters: The consumer electronics trade show is the cornerstone event for the Consumer Technology Association and Las Vegas has been the traditional early-January gathering place for the tech industry.