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Surterra Wellness Enters Into $100 Mln Cannabinoid Licensing Deal With Intrexon

Biotech company Intrexon Corp. (XON) and cannabis company Surterra Wellness on Tuesday announced an exclusive $100 million global licensing agreement aimed at biosynthetic cannabinoid production.

The companies will partner to increase Surterra's cannabinoid production by utilizing Intrexon's proprietary yeast fermentation platform, which provides advantages over conventional plant-based extraction.

Shares of Intrexon gained more than 13 percent in Tuesday's regular trading session following the announcement.

Intrexon's proprietary yeast strain engineering enables fermentative production of cannabinoids as well as other cannabinoids not found in the plant itself. Cannabinoids are the compounds in cannabis plants that produce various health and wellness effects.

The process introduces plant genes into yeast, screens for best cannabinoid strains for productivity and purity, and isolates those with significant health benefits.

The $100 million deal, including milestones and royalties, will leverage each company's expertise to bring new cannabis products to market in an efficient and cost effective way, the companies said.

Under the terms of the deal, Intrexon will be entitled to cash and equity payments in exchange for exclusive access to its technology. Intrexon will receive a $25 million technology access fee - $10 million in cash upfront and $15 million in Surterra common shares.

In addition, Intrexon expects to receive about $20 million in R&D expense reimbursement over the next five years, developmental milestones on each cannabinoid developed, and royalties on each cannabinoid commercialized.

This is the second strategic deal between Surterra and Intrexon in three months. The first partnership focused on Intrexon's Botticelli plant propagation technology to improve Surterra's cannabis plant production yield and quality for Surterra's specific cannabis cultivars in Florida.

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