Industry: Cannabis & Hemp
CEO Sher Butt has developed a method to manufacture cannabinoids that's 10 times more efficient than plants.
Using bioengineered microorganisms, CB Therapeutics can synthesize THC, CBD, and other cannabinoids in a lab instead of a grow house.
After studying biochemistry at UC Davis, Butt got his start in the cannabis industry in 2009 at Steep Hill's lab in Berkeley testing cannabis products. Back then, he found the high price of CBD a little astounding. "I couldn't even afford CBD," he says. "There's got to be a better way to do this than using plants."
After leaving Steep Hill in 2011, Butt moved into traditional pharma with Novartis and took two drugs through FDA testing, but returned to cannabis with a plan for a more efficient way to create cannabinoids. In 2014, he enrolled in the MBA program at UC, San Diego, and started CB Labs, a cannabis testing firm, that he sold in 2016.
"It's basically like changing the model. You look at Vitamin C, you look at insulin, all these biologically expensive products," says Butt. "Aspirin used to be extracted from willow tree bark. There's not enough willow trees to supply the world with aspirin." He calls CB Therapeutics' patent-pending methods "the next evolution of cannabis."
Butt and co-founder and Chief Scientific Officer Jacob Vogan originally started the company "in our garage," says Butt. "It took a couple of years to get the yeast working."
By working, that means excreting cannabinoids instead of alcohol after you feed them sugar. Vogan's background in bioengineering helped crack the code. "We had to go into the yeast and remove some genes so it wouldn't make alcohol. We had to insert genes that would make cannabinoids," says Butt. "They're genetically engineered to perfection for this type of role."
It takes five days for the process to produce cannabinoids and terpenes. The latter "have been shown to increase the effect of cannabis by 30 percent," says Butt. Then a two-day extraction makes for a seven-day process. "Once it's scaled up, it's going to be 10 times less expensive," touts Butt.
The company raised an undisclosed amount of "VC/angel investment money," says Butt, and acquired a 7,000-square-foot facility to launch production by spring 2019. "Now we have 14 employees -- six of them are PhDs," says Butt. "We'll be scaled up to 30 people when we're ready to start manufacturing. We're onboarding roughly two to three people a month."
Butt likens production to brewing beer. "There's a lot of fermentation and analytical testing equipment. It's like a high-tech brewery," he explains.
"We're looking at 50,000 liters of capacity," he adds. "We're looking at $30 million to $60 million our first year." A farm would need to be "hundreds of acres” to produce the same amount of cannabinoids, he notes.
The business model is to supply manufacturers in California with cannabinoids as ingredients for edibles and other products. "Right now, we're looking to sell to other manufacturers," says Butt. "We have a lot of letters of intent from many other companies."
Challenges: "One of the biggest challenges is just people getting their head around this idea," says Butt. "These are absolutely natural cannabinoids. There's no difference between them and the ones from a plant."
A second challenge relates to any scientific undertaking: "You don't know how things are going to pan out until they pan out."
Opportunities: "The big market we're looking at is California," says Butt, noting that the annual market for non-plant based cannabis is about $2 billion.
Licensing CB Therapeutics' IP to markets beyond California represents another opportunity. "We're talking to few people in Canada right now," says Butt. "Right now, things are so unclear, because we are a pre-revenue company. It's important to keep your focus. Some people say, 'We want the whole pie.' [California] is the market we know. . . . Why not focus on this market?"
Needs: Managerial talent. "The most important thing you can get is quality people on your team," says Butt. "The science side we've got covered. Now we're looking towards the business team."