[Intro music]
James West: Rahul Sarugaser joins me now.
He is the analyst with, sorry -
Rahul Sarugaser: Paradigm.
James West: Paradigm Capital.
I had to give my head a shake there – we’ve
had so many analysts in the few days.
Rahul, welcome.
Rahul Sarugaser: Thank you, thank you very
much for having me.
James West: Rahul, the thing that generated
my first interest in reaching out to you was,
I received an invitation to a biosynthetics
conference as it pertains to cannabis, and
I thought, wow, this is what I call first
mover!
That’s the first time I’ve seen that.
So what – how did you become the first sort
of institutional name that was actually promoting
a group of biosynthetic producers?
Rahul Sarugaser: Yeah, that’s a great question.
So basically, myself and my associate, Michael
Friedman, we’re both engineers, and we’re
both biopharma guys.
And we’ve been focusing on the development
of clinical assets, both in cancer, but also
in the cannabis space.
And we wanted to understand what are the technologies
that are going to be the future of this industry.
And because we’re biopharma guys, pharma
makes their drugs in e.coli and in yeast,
and this is a clean, crisp way of making drugs.
And so we wrote a white paper back in January;
we’ve really been talking about this for
the last year, but we wrote a whitepaper in
January talking about how biosynthesis, the
use of yeast or e.coli or some other microorganism,
can be used to make THC or CBD or what we
call APIs – active pharmaceutical ingredients.
And by using this modality to manufacture
APIs, we can bring down the cost of goods
significantly – probably 10 to 100 times
what can be produced in the plant.
It can be consistent, and it’s very, very
scalable.
And so for example, a room this size could
probably replace thousands of square feet
of grow space of plants.
James West: Yeah, so there’s so many interesting
aspects to the biosynthetic sourcing of cannabinoids.
At this time, there is nobody producing cannabinoids
on a commercial scale, correct?
Rahul Sarugaser: That’s correct.
James West: And yet there are several companies
that are through the laboratory phase and
sort of starting to experiment with commercial
phases.
Rahul Sarugaser: Right.
James West: And for me, now, you can correct
me if I’m wrong, I’m watching seven companies
right now.
They’re in, some are trying with genetically
modified yeasts, some are trying with genetically
modified bacteria, and some are trying with
genetically modified algae.
And is there – my first question with that
setup is, are there additional mediums being
experimented with, that you know of?
Rahul Sarugaser: Those are the primary three
media that are being used, and there are some
non-traditional microorganisms that are being
investigated by a company like Celibre.
So Ginkgo, for example, that did the deal
with Cronos, they’re looking at using yeast,
or effectively, baker’s yeast.
And then you have companies like InMed in
Vancouver, who are using e.coli.
And you know, Ameris, who just did the $300
million deal with Leveon, are likely to be
using baker’s yeast as well.
So we see the majority of the companies using
yeast; a few of them using e.coli, and a small
number using algae.
And as we look at these companies, really
are finding there are three primary criteria
that we’re looking at to evaluate the strength
of these companies, and that is one of three,
which is, what is the microorganism, or the
industry term is chassis, that is being used.
But just as importantly is, what is the strength
of the team that is looking to develop this
particular chassis for the manufacturing of
cannabinoids, whether it’s THC, CBD or some
other cannabinoid?
And biosynthesis has really been around for
more than 40 years.
You know, we’ve been making insulin for,
you know, for 30 years using biosynthesis.
We’ve been using biosynthesis to make most
of our cancer drugs, which are antibodies.
And so this technology is not new; it’s
just application of it into a new space.
And as a result, there are teams out there,
for example, that have come from Synthetic
Genomics or Intrexon or other places like
that, and even Ameris, that have expertise
in being able to do this.
And so we’re looking for the companies that
have teams that have kind of spun out of these
first in class companies.
And then of course, finally, and just as important,
is the intellectual property.
And again, because yeast and e.coli have been
used as chassis for such a long time, they’re
fantastically malleable, and they’re great
tools in order to engineer them.
But as a result, there’s also quite a lot
of IP that’s been filed in the space over
many, many years.
And so the companies that we see positioning
themselves best are also looking to file IP
and/or secure IP that’ll give them the freedom
to operate in the space.
So really, those three criteria are kind of
symbiotic, and they all have to work together.
James West: Sure.
So you used the term chassis; how do you spell
that?
Rahul Sarugaser: Oh, boy.
Chassis.
James West: Okay.
So is it like, is it chassis on the car that
carries everything else, kind of thing?
Rahul Sarugaser: Exactly, it’s like a vehicle.
James West: Okay, that makes sense.
Interesting terminology.
So, out of the three main media or chassis
types, you’ve got your bacteria, your algae
and your yeast that we’ve both been hearing
about.
Do any of those strike you, at this time in
the evolution of your career, as way out in
front of the others in terms of functionality
or limitations?
Rahul Sarugaser: That’s a fantastic question;
it was a question that we’ve been wrestling
with.
In our whitepaper, we had sort of taken the
position around a yeast or some form of yeast,
but as we dug into the space and met most,
if not all, of the companies that are doing
this, we’re learning that it’s really
symbiotic between the chassis, the team and
the IP.
Because if you’re developing a mechanism
of manufacturing in e.coli, you have to have
the IP to be able to do it there; or, if you’re
doing it in yeast, you have to have the IP
to do it there.
So I wouldn’t say that one is necessarily
the best; we are not yet, the technology has
not evolved yet that we’ve been able to
identify which is the best by far.
But it’s important to recognize that this
is not a zero sum game.
It’s not just going to be one biosynthesis
company that’s going to win; there’s probably
going to be five, maybe even ten.
And that’s why we see this space similar
to the large cannabis companies.
We don’t have – investors don’t have
to be scared and say ‘Oh, which one, did
I pick the wrong one?’
It’s about trying to pick one of those top
five or one of those top ten.
And herein lies the opportunity, which is
why we’re hosting this conference on April
15th, to present to investors and to present
to the large growers who are looking to, you
know, take a hedge in this space.
you know, aggregating the best companies that
we’ve seen.
And this is really the first time, to our
knowledge, that there’s been a critical
mass of biosynthesis companies that have come
together.
And even some of the CEOs of these companies
have been quite impressed with the other companies
that have, you know, have agreed to participate.
So we’re quite excited about it.
James West: Sure.
So then, has any one company emerged as being
far out ahead of the pack, at this point?
Rahul Sarugaser: That’s a tough one.
So I’ll mention sort of what we think are
some of the best five, recognizing that this
is a dynamic list and things are changing.
James West: Sure.
Rahul Sarugaser: So, you know, near the top
of that list, of course, is Gingko, that did
the deal with Cronos, and Cronos made a very
savvy bet, there.
Celibre, which is a start-up company out of
San Diego, which is using a non-traditional
chassis, and have a team out of Synthetic
Genomics, which is essentially the brain trust
of synthetic biology.
There is, of course, Intrexon, that have years
and years of expertise doing this.
Ameris, of course, who did a $300 million
deal with Leveon in the space; and then the
last one is actually a still in stealth mode,
but they will be having their IP published
really in the next couple of weeks, and they’ll
be presenting at our conference as well.
James West: Is that the algae one?
Rahul Sarugaser: No, not the algae one.
James West: Okay. [laughter] I’m trying
to squeeze out any little tidbit that I could
get that might give me a hint as to who it
is.
Okay, so your conference on April 15th, I’m
excited about that.
I hate conferences, I almost never go to them,
but this is intriguing because it’s kind
of like, right out there at the cutting edge
in an area that a lot of people aren’t even
aware of, yet.
Rahul Sarugaser: And that’s the key reason
that we’re having this conference, is that,
you know, we’ve been talking about this
space for a year.
Gingko and Cronos did the deal almost, you
know, almost about a year ago, or six months
ago, and most investors in the cannabis space
tend to be intimidated by - when they hear
biosynthesis, they see a chemical cascade.
You know, they’re more comfortable with
grow space or square footage or, you know,
grams per square foot.
But the fact is, with the advent of differentiated
products coming online in October, the APIs
that are going to be included in these differentiated
products are, you know, sourcing them is going
to be very, very important.
So this freight train is coming, and investors
can hide as long as they want, but if they
don’t want to get left behind, it’s really
important that they learn about where this
next generation of APIs are going to be produced.
And for example, when Walmart and General
Mills and Pepsi and Coke get into the space,
you know, it’s going to be difficult for
them to source APIs from plants, where it
can be relatively inconsistent, where pricing
is going to be a significant issue, and they’re
going to want high quality, low cost, consistent
and very scalable production.
James West: You bet.
Okay, so where is the conference, who qualifies,
and how do you get to go?
Rahul Sarugaser: So, it’s invitation-only
at the moment, so you have an invitation.
We are planning it at our offices on York
Street, however, we’ve had such an overwhelming
response that we’re now looking for a larger
space.
So stay tuned on the exact location; it’s
going to be an afternoon event on April 15th,
and then of course we’ll have a networking
session, something that’s very important
for all of these companies because we only
had 10 slots, and there’s at least, probably
20 companies coming.
And so we’re providing for a lot of networking
opportunities during the conference, for both
investors and the companies to get to know
each other.
James West: Wow, very exciting.
Rahul, I’m so glad to have had you today,
and we’re going to look forward to the conference,
and we’ll have you back afterwards to get
an update on what you saw that you liked.
But thank you for joining me today.
Rahul Sarugaser: Cheers.
