Leading Companies from Emerging Industries
Join Forces to Efficiently Produce High-Purity Cannabinoids at
Scale
BOSTON and TORONTO,
Sept. 4, 2018 /CNW/ - Today, Cronos
Group Inc. (NASDAQ:CRON) (TSX: CRON) ("Cronos Group"), a
geographically diversified and vertically integrated cannabis
group, and Ginkgo Bioworks Inc. ("Ginkgo"), the organism
company, announced a landmark partnership to produce cultured
cannabinoids. Using its platform technology for organism design and
development, Ginkgo will complement Cronos Group's technologies for
producing a full spectrum of cannabinoids. As part of this
unprecedented deal, Cronos Group has agreed to issue a specific
number of common shares in tranches subject to Ginkgo's achievement
of certain production milestones.
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As two of the leading companies in their respective industries,
Cronos Group and Ginkgo believe that they are best-suited to unlock
the potential of innovation in the cannabis industry. Cronos Group
brings a deep understanding of the plant's biological structure and
function, while Ginkgo brings 10 years of experience designing
microorganisms for the production of cultured products across
pharmaceuticals, agriculture, flavors, fragrances, and more.
Cannabinoids span a range of molecules with different
properties, and ongoing research has demonstrated potential
medicinal uses for indications such as chronic pain, nervous
disorders, nausea, weight loss, and some mental illnesses. However,
many pharmaceutically relevant cannabinoids are present only at
very low quantities in the cannabis plant, making them economically
impractical, difficult or impossible to extract at high purity and
scale. The landmark partnership between Cronos Group and Ginkgo
will leverage the expertise of both organizations to solve this
challenge and make more accessible the benefits of cannabinoids in
an economically sustainable way.
"Cronos Group is building the world's most innovative
cannabinoid platform," said Mike
Gorenstein, CEO of Cronos Group. "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."
"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."
Partnership Details
Cronos Group's wide-ranging portfolio of cannabis products is
empowered by its deep expertise in plant genetics. With access to
an array of varietals and a diverse set of production
methodologies, Cronos Group has gathered extensive data on
cannabinoids and their properties, ultimately learning from and
using the plant to generate blueprints for best-in-class, full
spectrum cannabinoid recipes.
Ginkgo's platform for engineering biology is powered by
state-of-the-art automation and custom-built software used to
design and print DNA. With the world's largest library of designed
DNA sequences, Ginkgo has extensive expertise in the biology of
enzymes for the production of molecules used in industries from
flavor and fragrance to food to pharmaceuticals. By transferring
the DNA sequences for cannabinoid production into yeast, Ginkgo
expects to develop strains that produce cultured cannabinoids at
high quality and purity in a process similar to brewing beer in a
microbrewery. In addition to allowing for the efficient and
scalable production of cannabinoids, the use of Ginkgo's platform
is expected to unlock access to potentially medically-important and
valuable cannabinoids that are present only in low quantities in
the plant.
The partnership between Ginkgo and Cronos Group 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.
Partnership Transaction Terms
Under the exclusive partnership, Ginkgo will work with Cronos
Group on research and development of microorganisms capable of
producing certain target cannabinoids in a scalable and highly
efficient manner. Cronos Group will fund certain R&D and
foundry expenses expected to be approximately US$22 million subject to the achievement of
certain milestones. In addition, upon Ginkgo's demonstration that
the microorganisms are capable of producing the target cannabinoids
above a minimum productivity level, Cronos Group will issue up to
approximately 14.7 million common shares in the aggregate, in
accordance with the milestone allocations described below. The
common shares allocated were based on the 60-day VWAP for Cronos
Group common stock of US$6.81 as of
July 17, 2018, when the letter of
intent was executed by both parties. The transaction had an
aggregate value of US$100 million
assuming all milestones are met. Tranches of these common shares
will be issued once each of the target cannabinoids can be produced
for less than US$1,000 per kilogram
of pure cannabinoid at a scale of greater than 200 liters as
follows: THC(A), 20%; CBD(A), 15%; CBC(A), 10%; CBG(A), 10%;
THCV(A), 15%; CBGV(A), 10%; CBDV(A), 10%; CBCV(A), 10%.
Cronos Group will have the exclusive right to use and
commercialize the key patented intellectual property related to the
production of the target cannabinoids globally. All R&D work
undertaken by Ginkgo will be conducted in compliance with all U.S.
federal laws regarding controlled substances and Ginkgo is
coordinating activities closely with both Federal and State
agencies. Cronos Group intends to produce and distribute the target
cannabinoids globally and has received confirmation that this
method of production is permitted under the Cannabis Act
(Canada) – the legal framework
that will regulate cannabis in Canada.
This landmark deal will bring the power of biological
manufacturing to the cannabis industry, allowing for cannabinoid
production at large scale and with greater efficiency than is
currently possible with traditional growing and extracting
methods.
Analyst/Investor Conference Call and Webcast
Cronos Group and Ginkgo Bioworks will host a conference call and
live webcast on Tuesday, September 4,
2018 at 8:30 a.m. EST to
discuss the landmark partnership. Instruction for the conference
call are provided below:
Live Webcast:
https://thecronosgroup.com/investor-relations
Toll-free dial-in number: (888) 231-8191
International dial-in number: (647) 427-7450
Conference ID: 9537928
Additionally, an audio replay of the conference call will be
available two hours after the call's completion and until
11:59 p.m. EST on September 18, 2018. Instructions for the audio
replay are provided below:
Toll-free dial-in number: (855) 859-2056
Passcode: 9537928
About Ginkgo Bioworks:
Ginkgo Bioworks is the organism company, using the power of biology
to build sustainable products in food, pharma, manufacturing, and
more. Using sophisticated software and state of the art
automation,
Ginkgo's powerful platform for genetic engineering is making
biology easier to engineer, enabling new products to be renewably
manufactured with biology. For more information, visit
www.ginkgobioworks.com.
About Cronos Group:
Cronos Group is a globally
diversified and vertically integrated cannabis company with a
presence across four continents. Cronos Group operates two
wholly-owned Canadian licensed producers regulated under Health
Canada's Access to Cannabis for Medical Purposes Regulations: Peace
Naturals Project Inc., which was the first non-incumbent medical
cannabis license granted by Health Canada, and Original BC Ltd.,
which is based in the Okanagan Valley, British Columbia. Cronos Group has multiple
international production and distribution platforms across five
continents. Cronos Group intends to continue to rapidly expand its
global footprint as it focuses on building an international iconic
brand portfolio and develop disruptive intellectual
property. Cronos Group is committed to building industry
leading companies that transform the perception of cannabis and
responsibly elevate the consumer experience.
Forward-looking statements
This news release contains
"forward-looking information" and "forward-looking statements"
within the meaning of applicable Canadian and U.S. securities
laws. All information contained herein that is not clearly
historical in nature may constitute forward-looking
information. In some cases, forward-looking statements can be
identified by words or phrases such as "may", "will", "expect",
"plan", "anticipate", "intend", "potential", "estimate", "believe"
or the negative of these terms, or other similar expressions
intended to identify forward-looking statements. Some of the
forward-looking statements contained in this press release include
Cronos Group's expectations regarding the potential success of, and
the costs and benefits associated with, its partnership with
Ginkgo, expectations about the development of the cannabis industry
and potential demand for cultured cannabinoids, expectations of the
regulatory framework for cultured cannabinoids as well as the
Cronos Group's intention to continue to rapidly expand its global
footprint, build an international iconic brand portfolio and
develop disruptive intellectual property. Forward-looking
statements are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by management, are
inherently subject to significant business, economic and
competitive risks, uncertainties and contingencies that may cause
actual financial results, performance or achievements to be
materially different from the estimated future results, performance
or achievements expressed or implied by those forward-looking
statements and the forward-looking statements are not guarantees of
future performance. A discussion of some of the material risks
applicable to Cronos Group can be found in its current MD&A and
Annual Information Form, both of which have been filed on SEDAR and
can be accessed at www.sedar.com. The forward-looking information
included in this news release is made as of the date of this news
release and, except as required by law, Cronos Group disclaims any
obligation to update or revise any forward-looking statements.
Readers are cautioned not to put undue reliance on these
forward-looking statements.
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SOURCE Cronos Group Inc.