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

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 C$46 million in cash. All told, Willow is in a solid financial position to fund commercial production in the first half of 2021. How is it doing: Willow began shipping its first commercial samples of the biosynthetically produced high-purity CBG to prospective customers in the latter part of 2020 and has been continuing to make progress so far in 2021. At the end of March, Willow revealed that it had completed the first commercial-scale fermentation run of CBG. The news came after Willow had already executed successful pilot production runs to optimize its process and provide samples of CBG to customers.  Production from the first commercial fermentation run is being allocated for sale to prospective customers, Willow said. The company is in the process of finalizing agreements with multiple parties, it added. In January the company had announced plans to commercialize its 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 said it 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. Then in April this year, Willow announced new scientific data related to the efficacy of its biosynthetically-derived CBG on human skin. The company said that studies demonstrated that Willow’s CBG is safe when applied to skin and eye areas, and can act as a more potent antioxidant and anti-inflammatory for other skin applications compared to plant-derived cannabidiol, or CBD.  Willow told shareholders that its CBG demonstrated a “robust” safety profile, with no signs of skin or eye irritation, or phototoxicity. A Human Repeat Insult Patch Test clinical trial was performed on more than 100 volunteers where Willow CBG was demonstrated to be safe for sensitive skin. The results pave the way for the use of CBG in skincare, the company said 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$46 million as of the end of March. Inflection points: Commercialization 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 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 boss says: "The first quarter represented another significant move forward for us, as we completed our first commercial-scale fermentation run and strengthened our balance sheet for success," Willow CEO Trevor Peters said in a statement accompanying its 1Q 2021 results. "We are entering the next phase for the company, which is creating new markets for our ultra-pure, sustainably made, cannabinoids, and our world-class team has allowed us to be at the forefront of the industry. As the industry continues to move towards increased regulation from a health and safety perspective, there is a need now more than ever for Willow's consistent and safe manufacturing process.” Contact Angela at angela@proactiveinvestors.com Follow her on Twitter @AHarmantas