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why cronos group\'s partnership to produce cultured cannabinoids could be a big deal

by:Kenwei      2019-08-19
Earlier this month, the vertically integrated Canadian cannabis company Cronos Group established a partnership with Boston
A biotechnology-based start-up to develop cannabinoids using biological design and development techniques.
Cannabinoids are active ingredients that give medicinal and recreational properties to cannabis plants and may be one of the most profitable areas in the new cannabis market.
Let\'s take a look at what this deal means to the company.
We have created an interactive dashboard analysis on the valuation drivers of the Cronos Group, allowing users to modify any of our predictions and drivers to derive their own valuation estimates for the company.
Currently, Cronos expects revenue of $2019, with a trading volume of about 17x.
Cultivated cannabinoids can reduce costs, increase the volume of cannabinoids to account for less than 1% of the dry weight of cannabis plants, and production on commercial scale through traditional planting is not feasible.
With this partnership, however, the two companies are looking to produce cannabinoids using fermentation processes without having to extract cannabinoids from plants.
Ginkgo has expertise in modifying yeast and other organisms using synthetic DNA to produce a large number of expensive ingredients, including spices and spices.
Now, the two companies are looking to extend the fermentation process to produce a wide range of cannabinoids, including psychoactive THC and non-cannabinoids
Active CBD
THC can be used to produce edible products and vaporizer boxes, and more broadly cannabinoids can be used for recreational and medical purposes.
If Cronos can produce high
Grading cannabinoids in an economically viable way (
The company\'s target cost is less than $1,000 per kilogram)
It can gain a significant competitive advantage in the market.
While Cronos will fund research and development costs and production costs of about $22 million, it will compensate for the ginkgo in stock (up to 14.
7 million shares in Cronos stock)
When certain milestones are reached, in exchange for their expertise.
Cronos will have the right to use and commercialize the intellectual property rights involved.
While this will dilute existing Cronos shareholders with the achievement of the target, we believe that the structure of the transaction makes sense for the company because it limits costs and reduces some downside risks,Like our chart?
Browse the example interactive dashboard and create your own.
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