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New Cannabis Partnership Features ‘Biosynthesis Breakthrough’

Jeff Nielson Jeff Nielson, Stockhouse
0 Comments| April 29, 2019

Click to enlargeAs the cannabis industry develops, competition is heating up among the companies dueling for market share in the various niches and markets within this sector. Along with product innovation and quality, the key to winning this competition will be reducing costs.

On April 29, 2019; Zenabis Global Inc. released an announcement which it believes delivers an important competitive advantage in the cannabis space. The Company announced a binding two-way three-year supply agreement with Farmako GmbH, a research-based pharmaceutical company based in Frankfurt, Germany.

Under the agreement, Farmako will supply Zenabis with a supply of biosynthetically produced, pure CBD isolate oil (99.9%), totaling 36,000 kilograms over the term of the agreement, with deliveries commencing in Q4 2019. In reciprocation, Zenabis contracts to supply Farmako with (EU) GMP-certified cannabis, cultivated in Zenabis’s indoor facilities in Canada, for sale by Farmako in the German medicinal market.

Zenabis has agreed to pay Farmako an amount equal to Farmako’s marginal cost of production for the CBD isolate oil. The two parties will then split the profits from the sale of the product, with 50-60% of the profits going to Farmaco (dependent upon the total profits generated).

Beyond the obvious synergies for the two companies, the key takeaway here for Zenabis investors is that this Company is obtaining pure CBD isolate oil produced via a unique biosynthetic process.

What is biosynthesis? Think “insulin”. Insulin was originally produced from the pancreas of pigs when it was first discovered. Not only was this an expensive process, it would have been logistically impossible to produce this natural insulin in quantities large enough for mass-distribution.

Producing insulin via “biosynthesis” solved this problem, enabling cost-effective large-scale production that revolutionized the treatment of diabetes. Simply, biosynthesis involves (in this case) “growing” cannabinoids in a petri dish – via the use of a biological catalyst – instead of growing and then extracting the cannabinoids from the cannabis plant.

As with the production of biosynthetic insulin, one of the enormous advantages in bringing this process to the commercial production of cannabinoids is cost reduction. Andrew Grieve, CEO of Zenabis summarized this news for investors.

“While Zenabis is committed to producing both hemp- and cannabis-derived CBD products, we are thrilled to have signed the very first commercial agreement globally of its kind for the purchase of biosynthetic cannabinoids.  We are purchasing the CBD isolates from Farmako at an incredibly low cost, which will allow us to tap into the rapidly growing Canadian CBD market by supplying products that will be priced much more competitively than current market offerings.  This partnership will also enable Zenabis to supply high-quality medical cannabis into Germany, one of the largest medical cannabis markets in the world, thereby establishing our position in the European cannabis market.” [emphasis mine]

The Company doesn’t see biosynthetic CBD eliminating the market for cannabis-derived CBD. However, especially as an input for value-added cannabis products, this low-cost CBD produced via biosynthesis is viewed by Zenabis as a key market advantage.

This isn’t the first time that cannabinoids have been produced via biosynthesis. What is new and unique, however, is that Farmako’s Continuous Bacterial Cannabinoid Biosynthesis (CBCB) method uses a biological catalyst patented by Farmako (Bacterium Zynmomonas Cannabinoides®). This is a genetically modified “tequila bacterium” that Farmako states can produce CBD or other cannabinoids on a large-scale, with a high level of purity, and at dramatically reduced costs versus existing market prices.

Subject to Zenabis obtaining EU GMP-certification, Zenabis will supply Farmako with up to 5,000 kilograms per year of indoor-grown, GMP-certified cannabis for the European medicinal market. Shipments are expected to commence in Q4 2019. The deal includes (but is not limited to) dry flower, cannabis soft gels and sublingual sprays.

For investors new to Zenabis Global, this Company was formed in January 2019, coming into existence via a reverse take-over (RTO) of Bevo Agro Inc. by Sun Pharm Investments Ltd. Bevo Agro was a successful British Columbia-based agricultural company, with 30+ years of experience in the propagation of hundreds of unique crops – at an industrial scale.

Click to enlarge

Sun Pharm Investments was founded in 2014, quickly becoming Canada’s largest privately held licensed cannabis producer. With 100+ years of combined experience in pharmaceuticals and agricultural consumer-packaged goods, it was Sun Pharm that pioneered the “Zenabis” brand of cannabis products for the Canadian medicinal cannabis market.

With a total of 6 facilities either already in production or under construction (spread across British Columbia and Atlantic Canada), the Company is forecasting total annual “run-rate” production capacity of 131,300 kilograms of dried cannabis by Q3 2019.

Zenabis Global remains a Canadian cannabis cultivation powerhouse. What has changed with the Company’s new announcement is that Zenabis is now poised to assume a dominant position in the Canadian CBD market.
FULL DISCLOSURE: This is a paid article of Stockhouse Publishing.

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