Organigram invests in firm that can produce cannabis' active ingredients in lab

Growing flowers of cannabis intended for the medical marijuana market are shown at OrganiGram in Moncton, N.B., on April 14, 2016. THE CANADIAN PRESS/Ron Ward

TORONTO -- The parent company of marijuana producer Organigram Inc. has closed a $10-million investment deal with Hyasynth Biologicals, boosting its access to biotechnology that can produce cannabis' active chemical ingredients in a lab without needing a costly grow-op.

Organigram says Hyasynth's proprietary technology can produce active ingredients that occur naturally in the cannabis plant, called phytocannabinoids, using genetically engineered strains of yeast in a technique known as biofermentation.

The Montreal-based biotech's enzymes and yeast strains have enabled them to produce cannabinoids such as cannabidiol, known as CBD, which can be used for cannabis-based products such as beverages or pharmaceutical products.

The CEO of Moncton-based Organigram, Greg Engel, said the technology is a game-changer, and the investment is aimed at helping Hyasynth scale up to commercial production in the coming months.

"There's always going to be a place for that premium grown product," he said in an interview. "But when you start to look at how cannabinoids are going to be produced in the future for various edibles, vapourizable products, etc. This is infinitely scalable at a fraction of the cost."

Engel says the technology involves inserting a gene into yeast, and growing it over three to five days into a precursor molecule for cannabinoids. Hyasynth then uses proprietary enzymes to convert that molecule into various cannabinoids.

Organigram's investment comes as Canada prepares for the legalization of recreational cannabis on Oct. 17. While fresh or dried cannabis, cannabis oil and plants and seeds will be available this fall, edibles, beverages and topical products using cannabinoids such as CBD and THC won't be legal until 2019. Still, many cannabis companies are preparing to produce these more sophisticated value-added cannabis-based products, which will likely command higher profit margins than dried bud.

Organigram's has already purchased $5 million in convertible secured debentures of Hyasynth, and will purchase an additional $5 million in two other tranches, pending the company meeting certain milestones and funding conditions.

The closing of the Hyasynth deal comes just days after marijuana producer Cronos Group Inc. announced a partnership with Boston-based Ginkgo Bioworks Inc., focusing on producing cannabinoids using biological manufacturing via fermentation in a deal worth roughly US$122 million.