This bud’s for you: Amyris’s $255M cannabinoids project is dope

In California, we reported that Amyris signed a binding term sheet for a planned cannabinoid development, licensing and commercialization partnership valued at up to $255M (not including royalties once the products are commercialized) with a confidential partner.

No, Amyris is not exactly transforming into an Industrial Budtender. Let’s look at this announce in depth.

The Amyris deal in detail

The $255 million in payments include an upfront payment and the remainder are linked to milestones that are expected over the next 12-36 months following the signing of a definitive final agreement. In addition to lab-based milestone payments, this agreement also provides for significant milestone payments for commercially scaling each product. Commercialization of products expected within the next 18-24 months assuming appropriate regulatory approvals.

The partner is expected to provide initially lab-based and later commercial scale milestone cash payments in tranches for the development and scaling of technology to produce CBD. In return, the partner will be granted a license to commercialize these products.

In addition to the milestone payments and assuming commercialization is achieved, Amyris will be eligible to receive substantial ongoing royalty payments. These payments are expected to be significant given the size of the global cannabinoid market.

The technology drivers

Hitherto, the cannabis plant has been the source the products of interest known as the cannabinoids, which include THC, CBD other compounds that have both medical and (um, well-documented) recreational applications.

To simplify the story line, let’s clarify that recreational markets chase THC while medical markets chase CBD. CBDs are not psychoactive , though they are found in marijuana and, in fact, in hemp, too. CBD is used in a variety of treatments and epilepsy is among them.

One of the problems of CBD is that, during the decades where people were chasing Highs instead of Cures and Treatments, planters were trying to breed the CBD out.  of marijuana that is used to treat a number of diseases, including epilepsy and autism. Now, it’s comeback time.

Enter, industrial biotechnology. With cannabis, we’re still in the medieval era that aspirin traveled through, when headache sufferers would chew targeted barks and such. To the extent that cannabis has been optimized, it’s been through hybridization of the plant for yield, hardiness and varietal products. Since the products have had a “barely legal” status around the world until recently, there’s been little work in the lab on synthetics, grown in the fermenter instead of the field.

That Amyris is in the mix is of little surprise, although the deal size and speed are shockers. A cannabinoid isn’t actually all that far in structure from monoterpenoids such as camphor, and if someone were to come up with an efficient metabolic pathway for cannabinoid production, going through the terpenes and terpenoids makes a certain amount of sense and that’s Amyris Country — whose signature products for many years, artemisinin and farnesene, are both sesquiterpenes.

The need drivers: The 6 What’s and Whyfores

Bottom line, Amyris could use cannabinoids and vice-versa — now that legality is spreading and applications ware growing, cost, purity, sustainability and certainty are going to be major factors for the big players who are moving into the field now. They’re looking for a competitive edge for those markets that are established, and that’s the Amyris promise, summed up in its No Compromise brand line, and in this case, you get:

Consistent purity and dosage depending on formulation due to highly controlled fermentation-based production without the variability resulting from plant-based ingredients

Fermentation high purity, which should support lower regulatory risk

Significantly reduced cost over traditional production methods

Improved yield of economically difficult-to-source compounds with sufficient purity and efficacy

100% free from pesticides, as ingredients are not farm or grow operation sourced

Sustainably-sourced products derived from rainfall-hydrated, natural sugarcane feedstock that results in less water and land usage relative to growing cannabinoids

And, they’re looking for a window into new applications and uses, and, there, Amyris’ entrepreneurial savvy and deep experience in the turbulent process of bringing forth something new, desirable and affordable — also known as Mr. Biotechnology’s Wild Ride — is a distinct core competency and a reason that so many who choose to innovate, choose Amyris.

A bigger step forward: The Undiscovered Country

In the recreational market, there’s been quite a lot of amateur and plant-based work in blends. For example, using pinene to mellow some of the side-effects associated with THC. There’s been some combining of alkaloids such as cocaine or heroin with marijuana.

You don’t need to have smoked a bowl of Atom bomb, Woo-woo, Fry Daddy or Jim Jones, as some of these powerful combos are known, to see that a big step forward will be an exploration of combinatory options that sweeten flavor, alter the experience, and reduce side effects such as reward-cycle addictive aspects.  None of that is in the current deal, but someone’s going to venture into The Brave New World.

Why not this, why not now? For now, the players dread the consequences in cost and controversy and the risks of failure more than they desire the windfalls of breakthrough discovery. Often, industrial biotechnology finds itself in a halfway house, science contained by infrastructure, customs, trepidation, attitudes, fears, and the ignorance that leads to cost overrun and uncertain adoption. We usually are found trampling out the vintage where the Grapes of Easy Cash are found.

As Shakespeare’s Hamlet observed, ‘Who would choose to grunt and sweat through an exhaustions and insufferabilities of conventional life, unless they were afraid of something dreadful after death, the undiscovered country from which no visitor returns, which we wonder about without getting any answers from. Hamlet’s questions were more existential in nature than those of industrial players, who worry over the 2021 financials slightly more than the mysteries of the Hereafter, but for many, the “native hue of resolution Is sicklied o’er with the pale cast of thought, And enterprises of great pith and moment, With this regard their currents turn awry,, And lose the name of action.”

Reaction from Planet Amyris

“We are pleased to have been recognized by a well-capitalized partner as the company best suited to leverage fermentation-based technology in the production of the best quality and lowest cost and sustainably-produced cannabinoids,” said John Melo, Amyris President & CEO. “The dollar value of this agreement and our roster of partners who are leaders in global markets combines to be a strong endorsement of our technology platform and ability to bring No Compromise™, sustainably-produced products to market. We share the mission of our partners to become the leader in sustainably-sourced CBD products in the near term as we focus on enabling the global beverage and skin care markets, including our own brands, to support the health and wellness of people and our planet.”

The Bottom Line

At the same time, Amyris could use a target market which is going to be fast-growing, with no dominant players, and where the economics are much better than the commodities it once targeted. Fuel economics proved impossible once sugar soared and fuel dove; commodity chemicals that are not granted a price on carbon are worse, if anything; and the beauty market is crowded.

We placed cannabis among out Top 10 Trends for 2019 for exactly the reasons that collaborators are turning to AMyris, it’s a great product for the advanced bioeconomy and industrial biotechnology, especially since the presence of a recreational market creates opportunities for scale that don’t exist for most pharma applications, and where the cost factors are even more critical, as they always are in the commodity markets where Amyris has long travelled.

We’d sure like to know the name of the Amyris’ mystery date, but that’s a story for another time. For now, questions will abound from financial markets over the timing of collaboration funding and the future structure of royalties: in a perfect world, this is the transition point for Amyris to live off cash flows and reach profitability — we’ll see about that soon enough.