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Willow Biosciences poised to be the first company to commercially produce CBG, the "mother of all cannabinoids"

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  • Canadian biotechnology company that produces high purity, plant-derived compounds for the global pharmaceutical, health and wellness, and consumer packaged goods industries
  • Developed a proprietary biosynthetic process to manufacture CBG in commercial quantities
  • Strong global demand from prospective partners for CBG samples from all segments of consumer packaged goods industry
  • Commercial production is expected in the first half of 2021

What Willow Biosciences does:

Willow Biosciences Inc (TSE:WLLW) (OTCQX:CANSF) is aiming to become the first company to biosynthetically produce a rare cannabinoid compound known as cannabigerol, or CBG.

Referred to as the “mother of all cannabinoids” because it naturally evolves into other cannabinoids like THC and CBD, CBG is a non-psychoactive compound that could have antimicrobial and anti-oxidant functions in humans. But the cannabinoid occurs in very small concentrations in the plant, making it difficult to manufacture economically at high purity levels.

The Canadian company has developed a proprietary biosynthetic process to manufacture the cannabis compound in commercial quantities. Essentially, Willow transfers the genetic information of the plant into yeast, creating a miniature factory that increases cannabinoid production and allows for efficient large-scale manufacturing. The process results in higher purity product, at lower cost, with significantly less environmental impact.

With Raymond James putting the estimated present value of the biosynthetic market at C$40 billion, Willow is sitting comfortably in a growing market space. The firm is seeing strong global demand from prospective partners for CBG samples from all segments of consumer packaged goods industry, including nutraceuticals, food and beverage, personal care and over-the-counter medicine.

Led by a diverse team that co-founded five companies with successful exits, the group ended its fourth quarter with strong liquidity, including around $16 million in cash.

All told, Willow is in a solid financial position to fund commercial production in the first half of 2021.

How it is doing:

Willow began shipping its first commercial samples of the biosynthetically produced high-purity CBG to prospective customers in the latter part of 2020.

The company also beefed up its commercialization timeline by selecting a leading contract manufacturing organization to produce commercial quantities of CBG in Europe.

Big news came from the company in January when it announced plans to commercialize the proprietary THC-producing yeast strain after it successfully launches its CBG-producing strain. In December, Willow told shareholders it expects its first sales of CBG in the second quarter of 2021 -  six months ahead of expectations.

Willow is planning to scale up the process to get the THC strain to a point where it is commercially ready by the end of 2021, and potentially even start manufacturing.

The firm said it is planning to target the adult-use market in Canada first, but is keeping a close eye on the regulatory environment in the US in case legalization should occur with the new presidential administration.

Financially, Willow is on strong footing in 2021. After closing a C$28.75 million bought deal and an additional warrant exercise, the firm’s liquidity is at a healthy C$47.3 million as of the end of March.

Inflection points:

  • Commercialization is expected in the first half of 2021
  • Customer sampling and sales for research and development in 2021
  • Scale-up development and expansion into other cannabinoids
  • Entry into the pharmaceutical sector anticipated in 2022
  • Potential global CPG market for biosynthetically produced at an estimated $8 billion by 2025 and $27 billion by 2030, according to Raymond James

What the broker says:

ATB Capital Markets has a Speculative Buy rating on Willow’s shares and a 12-month price target of C$2.75.

“Considering Willow’s large potential addressable market and its steady progress towards commercialization in 2021, we believe the company is trading at an attractive valuation,” analyst David Kideckel wrote in July. “We view Willow to be a potential acquisition target for companies looking to develop cannabinoids through biosynthesis, given Willow’s scientific progress to date, its management’s expertise, and its strong intellectual property with multiple patent applications covering more than 200 novel genes to increase cannabinoid production.”

What the CEO says:

“Looking back on the year we shortened our timelines to commercialization, moved beyond proof of concept with multiple pilot production runs, provided samples of our first cannabinoid to prospective customers, strengthened our balance sheet, and identified a partner and assets to commercialize our first cannabinoid,” CEO Trevor Peters said recently.

“Ultra-pure, sustainably made, biosynthesized cannabinoids are the future of manufacturing consumer products with cannabinoids as a core ingredient. Commercializing our first cannabinoid this year will not only be a significant milestone for Willow, it will be significant for our industry.”

Contact Angela at [email protected]

Follow her on Twitter @AHarmantas

Story by ProactiveInvestors


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