SAN DIEGO -- Scientists are hustling on behalf of the marijuana industry to find new ways to produce the most valuable compounds in marijuana, ditching greenhouses in favor of big steel vats of yeast that can "brew" cannabis like Budweiser brews beer.
The science, once it hits the market, would be a gold mine for those who perfect it, giving two separate industries -- pharmaceutical and legal cannabis -- stable, potent and cheap sources of the ingredients they need.
Right now, the industry's two most in-demand ingredients are THC, the compound in marijuana that causes intoxication, and CBD, a compound used for its medicinal effect. Today, we get those compounds by growing marijuana plants in large greenhouses, then extracting and isolating the active ingredients. It's an expensive process.
A recent boom in the cannabis industry, however, has driven a need to find cheaper and faster ways of getting THC and CBD.
Legal marijuana, in particular, has increased demand for products that will appeal to nonsmokers. Instead of the traditional lump of dried green "flower," marijuana dispensaries are selling everything from oils, foods and drinks infused with THC and CBD.
The food and drink items (called "edibles") have seen significant growth in recent years, now making up 40 percent of dispensaries' marijuana sales, according to some estimates. Growers can't grow cannabis fast enough, which is why scientists are trying to produce it in labs.
Instead of growing plants, researchers have found a way to put yeast to work. In the simplest terms, scientists insert the genes of a cannabis plant into the DNA of yeast. These mutant strains of yeast then manufacture cannabinoids like THC and CBD, needing only copious amounts of sugar to do it.
This type of bioreactor isn't new. Yeast and other organisms have long been used to create and isolate drugs and substances. But using yeast to produce specific cannabinoids is a new branch of the science, and those in the field are still sorting out how to manufacture it on an industrial scale. Whoever figures it out first will have a valuable commodity.
San Diego has two startups hard at work. Librede got started in 2013 and has two issued patents and one pending. CB Therapeutics is a rising star in the startup world, landing among finalists in a recent TechCrunch pitch competition and has patents pending.
The two companies have faced naysayers from the start, they say, and have struggled to get investors to understand the value of cannabinoid biofactory.
"I was pitching this idea in San Diego a few years ago, and it's funny how things change," said 31-year-old Sher Ali Butt, co-founder and chief executive at CB Therapeutics. "Before legalization in California, nobody wanted to even take my phone call. I would go places, and people would laugh me out of the room."
Librede's founder Jason Poulos, 35, said fundraising was exhausting for that very reason. "Everyone just laughs and makes a stoner joke about the yeast getting high or something," he said.
But the laughs have died down. The idea of yeast making cannabinoids is now out of the bag, and biotech companies across the nation are racing to patent yeast strains and the manufacturing methods. Whoever figures it out first stands to snag a big slice of the $10 billion cannabis industry's pie.
Librede and CB Therapeutics are joined by several other companies, including the latest entrant: Intrexon, a Maryland company with a $2.4 billion market cap. The synthetic biology company announced in late September that it had engineered a yeast strain for cannabinoid production, boosting the company's stock 27 percent overnight.
Intrexon officials declined to share details about its research, but said they've been working on it for quite some time.
This year has been pivotal in the cannabis industry.
The Food and Drug Administration approved the first CBD drug in history this year with GW Pharmaceuticals' seizure drug Epidiolex. The approval will likely prompt follow-up research by other drugmakers, including those studying the more than 100 cannabinoids in cannabis other than CBD that could have therapeutic effects.
The recreational marijuana market has also boomed. In the past two years, five more states have legalized recreational use: Maine, Massachusetts, Nevada, California and Vermont. They join legal marijuana early adopters: Colorado, Washington, Alaska and Oregon.
Startup investors have suddenly changed their tune, Butt said. Now, he's turning away investors on a regular basis. "I don't have enough room to accommodate them," he said.
Poulos said interest has certainly spiked, but he thinks investors are still cautious.
"It's a nonstop cannabis bubble going on, so there's tons of money," Poulos said. "And this is a hot new tech in a hot new market. More people are into it. They're eyeballing the market."
Despite the upside, attorney John Cleary said he still advises his clients to avoid these sort of investments for now.
"Anything that relates to the growth or cultivation process of a product containing THC is a federal crime," Cleary said.
In 2017, Poulos raised several hundred thousand dollars in private money to add to his $1.5 million grant from the National Institutes of Health. Butt said he's also raised money from his time at Y Combinator and TechCrunch, but he wouldn't disclose the specifics.
CB Therapeutics is poised to commercialize its cannabinoids within two months, Butt said, tackling the nutraceutical and pet markets first. All he's waiting on is getting his manufacturing facility up and running. He's secured a space near San Diego, but still needs to get the process up to speed.
As for Librede, Poulos said he's still raising money to get commercialization off the ground. He hopes to secure new investment capital in the next few months.
SundayMonday Business on 10/14/2018