22nd Century Group Inc (XXII)

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Extract from New Cannabis Ventures... does XXII have a role here?:

This week, also in Toronto, Paradigm Capital hosted a truly spectacular event focused on a topic we have been sharing with our readers for quite some time, biosynthesis. We learned that many in the industry prefer to call it "cellular agriculture". The event was well-attended by investors as well as the industry, with many Canadian LPs in the crowd, including some who have made investments already and others who appear to be quite interested. Most of the companies were private, though two, which are reincarnated biofuels developers, are public. Only two of the dozen or so companies were pursuing cannabinoid biosynthesis just two years ago. Many appear to be well-funded with ties to Silicon Valley and other sources of biotech capital.

For those not paying attention, this is a technology that appears to be getting closer to disrupting the cannabis industry. The premise is that natural cannabinoids will soon be able to be produced more cost-effectively and with greater standardization than through the processing of cannabis or hemp. Most of the players are using yeast, but there were a couple of presenting companies that are pursuing microalgae as well.

Scaling up is quite difficult and not assured, and there are some challenges that must be overcome, like the creation of potentially harmful by-products in the yeast fermentation process, but we see tremendous opportunity for companies selling products with cannabinoids to benefit from biosynthesis as they substitute for flower-derived extract inputs. There will always be a place for flower, and surely many companies will market premium products (non-GMO!) that are extracted from flower, but there is a potential risk to companies building large-scale cultivation and extraction infrastructure should this technology become feasible.