Cronos Group Inc. CRON inked an agreement to acquire an 84,000-square-foot, state-of-the-art GMP compliant fermentation and manufacturing facility in Winnipeg, Canada, from Apotex Fermentation Inc. The facility will operate as Cronos Fermentation and include fully equipped laboratories covering microbiology, organic and analytical chemistry, quality control and method development.
Shares of the company have surged 45.8% year to date compared with the industry’s growth of 21.9%.
Previously, Cronos Group had entered a partnership with Ginkgo Bioworks to produce cultured cannabinoids. The new facility is expected to provide Cronos Group with the ability to produce cultured cannabinoids at commercial scale once the milestones under that partnership are achieved. Its products are expected to be pure and of good quality.
Cronos expects the acquisition to close in the third quarter, with Apotex Fermentation, the current owner of the facility, overseeing a wind-down that is expected to continue through the fall.
Commercial production at the facility will start once the equipment alignment for cannabinoid-based production is complete, the company receives appropriate licenses from Health Canada for the production of cultured cannabinoids under the Cannabis Act (Canada) and the achievement of milestones under the Ginkgo partnership.
However, the marijuana industry was slightly under pressure. Last week, CannTrust Holdings Inc. CTST announced that its greenhouse facility in Pelham, Ontario, was found non-compliant under certain regulations by Health Canada, as the facility was producing cannabis in five unlicensed rooms for a period of six months (October 2018 to March 2019). Its applications were under review by the regulatory body.
Licenses for each of these five rooms were issued in April this year. Moreover, the company’s employees provided inaccurate information to the regulator. Following the inspection, Health Canada placed a hold on approximately 5,200 kg of dried cannabis that was harvested in the unlicensed rooms.
The news comes as a major setback for investors as CannTrust can no longer supply the seized cannabis until it is declared safe by the regulators. Consequently, patients might experience a temporary shortage of products.
Apart from CannTrust, companies like GW Pharmaceuticals plc GWPH and Canopy Growth Corp. CGC are discovering, developing and manufacturing drugs from cannabis for various recreational and medicinal purposes.
Cronos currently is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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