Until recently, the cannabis industry was one of small productions, high prices and wide margins. However, as an increasing number of states in the United States and countries around the world continue to legalize marijuana, wholesale prices are inevitably tumbling, forcing growers to evolve toward economies of scale.
Of course, scaling up brings benefits and challenges. As the size of grow operations increases, so does the difficulty to control every single plant to ensure its health and quality consistency among batches. Furthermore, keeping diseases and plagues at bay becomes more important than ever, as an outbreak could result in millions in lost product. For reference, a single outbreak in a medium-sized cultivator can generate damages of more than $500,000.
In this context of tumbling prices and margins, and surging scale, space for error is thinner than ever. Fortunately, Front Range Biosciences, a CanopyBoulder graduate, offers a solution to this issue: Tissue culture cloning.
Tissue culture is used in a variety of industries, from foods and pharma to plain-old agriculture. When it comes to plants, “it’s basically growing baby plants in a sterile environment,” Front Range’s CEO Jon Vaught told Benzinga during a recent conversation. “So, they are not grown with any pathogens ... This allows you to grow clean, healthy plants, and to do it at a much higher scale than when grown using traditional methods.
“We wanted to bring cannabis out of the prohibition era with agricultural technology. The idea was to help growers be more efficient, to give them the tools that so many other farmers have access to,” he added.
As it turns out, tissue culture is a platform that offers plenty of potential for the creation of intellectual property. However, its largest promise lies in solving many of the problems that cannabis cultivators face nowadays, including disease and the inability to use pesticides, as well as efficiency issues.
“It was one thing in the early days of the industry, when people were growing a few thousand plants at a time; but now, we’ve got companies that look more like traditional agricultural production companies that are producing millions of plants on an annual basis,” Vaught explained. In such a framework, tissue culture provides predictability and risk mitigation. “We work with farmers to provide them with clean, healthy plants on a production schedule that meets their needs ... Being able to start on time and rely on that, and being able to know they are going to get only healthy plants that are ready to go into the field is critical for farmers' operations.”
In addition to working on commercial scale tissue culture propagation, Front Range is developing its own varieties of cannabis plants for high-value crops. “However, this is the R&D part of our business right now,” Vaught said.
The Team And Financials
As we have become accustomed by now in the cannabis industry, this company is run by people who migrated from successful careers at other industries. Vaught holds a Ph.D. in organic chemistry and, prior to Front Range, he worked at Somalogic, where he helped build the world’s largest proteomic based biomarker discovery assay; served as a Senior Product Development Scientist at Beacon Biotechnology, where he focused on the development of a foodborne pathogen detection platform; and then returned to assay technologies development at Velocity Sciences.
Nick Hofmeister, Front Range’s Chief Operating Officer, holds an MBA from MIT and has raised more than a quarter of a billion dollars for the four tech and biotech startups he founded before starting his cannabis company.
From a financial standpoint, Front Range has raised $1.5 million since inception. Vaught expects to close another round, which he says was oversubscribed, before the end of the year.
“This means a lot for us to continue our strong, aggressive trajectory of growth,” he told Benzinga, adding that they might do yet another round with institutional investors at the end of 2017 or early 2018. Some of these proceeds are likely to be allocated to expansion into the East coast.
Even though Front Range is generating some revenue, the figures are not particularly significant, and cash flow remains negative.
“Right now, our main goal is to continue to expand our footprint and grow the company: getting the right people in place, the right infrastructure, so that we can support these pretty large-scale activities in Colorado, California and potential some other location ... Over time we want to be an international company. We are particularly interested in Canada, and Central and South America [Mexico, Costa Rica, Uruguay, etc.],” Vaught said.
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