VIDEO: OrganiGram Holdings Inc (CVE:OGI) and Hyasynth Biologicals Inc Extraction Partnership

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OrganiGram Holdings Inc (CVE:OGI) (OTCMKTS:OGRMF) (FRA:0OG) CEO Greg Engel and Hyasynth Biologicals Inc CEO Kevin Chen explain OrganiGram’s recent $5 million investment in Hyasynth. Hyasynth has developed the technology and procedures to produce cannabinoids from yeast, which would be beneficial to both recreational and medical production. Hyasynth will use the OrganiGram investment to transition from research and development scale to large-scale production; however, Chen believes Hyasynth is 12-18 months away from producing quantities of specific micro-CBDs and THC isolates. Engel believes Hyasynth has developed a disruptive technology, which is infinitely scalable and incredibly affordable. Engel is excited about Hyasynth’s pure form extraction process because current extraction methodologies only yield between 60 and 80 percent for THC and CBD.

Transcript:

James West:   Hey, welcome back. My guest in this segment is going to be a bit different – I have Greg Engel, who is the CEO from OrganiGram Holdings, OGI on the TSX Venture; and I have Kevin Chen, who’s the CEO of Hyasynth Biologicals Inc., who is recipient of an investment from OrganiGram. So Greg, let’s start with you: what is the nature of the investment, and what’s the strategy behind it?

Greg Engel:   Yeah, so we’ve been interested in Hyasynth for over a year, and certainly met Kevin and his team, and have visited each other’s sites, and really looked at the technology that they’re bringing. So at the end of the day, this is a technology that’s really disruptive in terms of the impact it could have in the marketplace, because it’s infinitely scalable. And Kevin could certainly go into more details, but allows Hyasynth to produce cannabinoids using yeast and then converting a precursor molecule using proprietary enzymes, and ultimately gets a pure THC or CBD at the end of the process.

And so, from an OrganiGram perspective, we’re excited about investing in Hyasynth for two reasons. One is, we see this as the future of cannabinoid production, and while we’re a major indoor producer, we feel there’s always going to be a place for large, premium, indoor-grown flower, but we know that on the other side, as we move into vaporizable products and edibles and beverages and pharmaceuticals, you know, this will provide us access and provide us an investment in a company that can provide that pure cannabinoid.

And so the second part, though, is we see this as, you know, not only the future of the cannabinoid industry, but, you know, in terms of the major cannabinoids, but we’ll be developing as well kind of minor cannabinoids. So, from a pharmaceutical-medical perspective, as they develop minor cannabinoids as well, can come up with unique formulations and mixtures from the medical perspective.

So it’s really exciting for us, and so we’ve invested $5 million with a commitment to invest up to $10 million. So the initial tranche is $5 million, and then the next two tranches of two and a half are both milestone related.

James West:   Okay, so let me ask you, Kevin: how far are you away from producing at commercial scale, quantities of specific micro-CBDs and THC isolates?

Kevin Chen:   Yeah, we’re looking at 12-18 months, and most of this, like, tranche of funding is going to go towards those facilities and towards quantum manufacturing, and really transitioning us from, like, the R&D kind of scale that we’re at now, into some large-scale production that we can control, and then we grow it from there.

James West:   What kind of numbers do you think you’ll be producing at the outset in terms of volume of milligrams of CBDs, or how would you categorize that?

Kevin Chen:   Yeah. We’d be kind of in the range of a few kilograms per month starting out, but that could vary depending on how the next, like, few months and year play out for us. If we get – and this is out of, you know, what we’re looking for now is, you know, attracting more people towards this mission of, let’s find new ways to produce these cannabinoids and these pretty scalable solutions – and the more that we can gather around us, the bigger kind of facility we’ll build. And the quicker we’ll scale up.

James West:   So I assume you’re a bio-scientist by background?

Kevin Chen:   I am.

James West:   Okay. Tell me about how you came up with this process, this idea? Like, how did this – how did we spend so much time building greenhouses if this was here all along?

Kevin Chen:   Yeah, and it’s coming from, like, myself and my co-founder’s passion for genetic engineering and for biotechnology, where we’re always thinking of, you know, new ways to use our scientific skills to solve problems in the world. And so, for a period of time, we were all starting at the time, I guess, when we first met, and started thinking about startups and ideas and problems that exist out there, and we all had this kind of skill set of engineering yeasts to make stuff.

And then the question is, what do we make? And we had a whole list of different kinds of things, ranging from, like, flavours to fragrances to pharmaceuticals, including cannabinoids. And that’s when we saw, like, the opportunity come out and take form. And you know, the industry itself has taken form a lot over the past four years since we started, and so I think we made the right kind of choice earlier on, even though the industry was kind of in its nascent stages when we first had the idea.

And yeah, that’s kind of how it all came about.

James West:   Interesting. And so, at what stage did you become interested in this? Like, how did you hear about it, and how did you come to be, like, what strikes me as a pretty quick move to get positioned in there?

Greg Engel:   Yeah, I mean, so certainly, you know, for myself, prior to joining the pharmaceutical industry, I’ve got biotech experience and pharmaceutical experience and consumer packaged goods experience. So you know, before I came into the cannabis industry, that was my background. So as soon as one of our team members saw Kevin present, and we started talking to a couple members of his team, I could see what potential this had, right? This is really disruptive technology where, you know, when Kevin mentions, you know, producing initially kind of a few kilos per month, that’s kilos of pure cannabinoid, right? So, and they can do it on pennies on the dollar versus what it’s going to cost, you know, for plant-based, extract-based products.

So again, it’s infinitely scalable, and you know, we know globally, you know, more than 50 percent of the world’s insulin is produced this way; a number of vitamins are produced this way. So you know, it’s a credible opportunity, and you know, meeting with Kevin and the other founders as well as their scientific advisory team members, you know, they have a strong background and a commitment to make this happen. And what they’ve proven to date is really, you know, they’ve been producing THC and CBD and CBG to date, and it’s all about now scaling up and optimizing that process.

So you know, this is such a great potential for us as a company and as an investment, and also to partner with an incredible group of scientists that have basically cracked the nut on this, and they’re ready to go to commercial production.

James West:   I guess it’s safe to say that the greater future for the medical side of these micro-CBDs and their as yet somewhat unknown medical properties is that with all the research that will now pour into them, there’s going to be…I mean, I just look at what happened with the Epileptrol drug that was approved by the FDA, and if that’s just the first of an avalanche, I mean, that’s going to be incredible.

Greg Engel:   Yeah, I mean, the potential is really unlimited here, and I think that’s one of the challenges in terms of going to a pharmaceutical-like product with an API, or active pharmaceutical ingredient, is that, coming up with a pure form of THC-B or other minor cannabinoids is challenging from plant-based, but if you’re doing it in an isolate-based situation in here where you’re able to, you know, create it from scratch and create a pure form, I think that’s where Kevin and his team can really help, you know, not only develop those products, but we can partner to develop some of the indications for use of those products.

So it really is kind of two buckets here, right? The pharmaceutical use and the recreational use.

James West:   Interesting. Okay, so is it your intention to eventually become a publicly traded company, or is it far too early to have that conversation?

Kevin Chen:   I mean, it’s a conversation that we’ve, since we started the company, it’s like, where do we go after this all shakes out? And definitely becoming a public company is one of the options on the table, but there is plenty of other stuff happening in the industry, you know, as we’ve seen, that, you know, we’ll see where we end up.

But, I mean, from our perspective, my perspective, it’s like, you know, we’re a bunch of scientists focusing on making this product. We’re going to be, like, laser-targeted on that for the next six to twelve months, and then we’ll go from there.

James West:   All right, that’s very interesting. So Greg, does this have any sort of implications for your thinking in terms of building out the multi-level, incredibly productive greenhouse space that you have?

Greg Engel:   Yeah, so our indoor production facility, and you’ve seen in our last MDA and I spoke about it last time I was on, was, you know, we’re already with a premium indoor-grown product, we’re one of the lowest cost producers in the space, which is unique because that goes against the grain of what people have thought. So we know there’s always going to a place for premium indoor high quality flower, right? So where I think this is a disruptive technology to displace is, as you talk about, you know, some of that lower-quality product that would be produced and turned into extracts.

And you know, I think for us, it positions us very well for, you know, working with a potential strategic partner in terms of, you know, beverage development or other areas or pharmaceutical development, because now we have an access to, you know, part of the offtake from Hyasynth, and we’ve invested in them. So it’s a kind of a very unique partnership that really allows us to leverage it into kind of what’s next for the company. But there’s always going to be a place for premium indoor grown product, and that’s, you know, we’re committed to doing that. Because, you know, even this will displace, you know, derivative-based growth, but at the end of the day, it’s never going to replace for the cannabis connoisseur who’s looking for that, you know, high-end product.

James West:   And so is there much of a premium on being able to produce these, you know, 100 percent potency ingredients – is there going to be a price premium for having those ingredients in different products like beverages and candies and whatnot?

Kevin Chen:   Not necessarily an overall – fermentation is kind of this well-established, scalable technology, so efficiency-wise, like, we’ll get down to cost points that are going to be lower than what it costs to grow plants. But premium-wise, there’s also opportunities, you know, within – that starts to show up when you start thinking about the pharmaceutical industry, where there is, like, super high quality GMP stuff that they have to make, and there’s going to be consistency requirements there. And that’s where you see some different kind of price ranges that we would be selling a product for.

So, while we’ll be able to make the efficiency of competing with, like, if you were to extract purified cannabinoids from a plant, we’re still going to be also looking for opportunities where we can make that much bigger premium in like pharmaceuticals kind of thing, right?

Greg Engel:   Yeah, I think I’d maybe add to that, James. When you look at, you know, the recreational market, having a pure form as a starting place to develop your platform of products is a very unique position. Because even with the most optimal conditions through the current extraction methodologies, you know, you’re getting somewhere between a 60 and 80 percent, you know, with THC or CBD. So you’ve got a minor number. Now, some of those may be beneficial, but you’ve also got other byproducts that are in there of the process.

So having a pure form does allow you to deliver and create a pure product at the end of the day, which I think is critical, whatever that mechanism of delivery is, whether or not it’s for adult recreational use or for pharmaceutical use.

James West:   Right, but especially for pharmaceutical-grade product. Okay, well, that’s really fascinating, guys. Let’s leave it there for now; we’ll come back to you. I want to see some of this product in a vial or a vessel so I can touch it and feel it, but it sounds very intriguing, and Greg, of course we’re going to continue to follow the OrganiGram story. Thanks for joining me today.

Greg Engel:   Great, thanks for having us, James.

Kevin Chen:   Yeah.

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