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Three former Aurora Cannabis Inc. insiders are betting on a U.S. biotech company that’s developing patents for water soluble cannabinoid production and genetically engineered bacteria – a move that highlights how smart cannabis money is moving increasingly to research and development plays.

Joseph del Moral, Hannan Fleiman and Ronan Levy – the team that sold CanvasRX to Aurora in 2016, and went on to advise Aurora on merger and acquisition strategy – are now focusing their efforts on Trait Biosciences Inc. Mr. del Moral has become the company’s CEO, Mr. Fleiman the president, and Mr. Levy the chief strategy officer.

Trait is a spinoff of New Mexico-based Pebble Labs Inc., with a science team led by prominent plant genetics researcher Dr. Richard Sayre. The company, which just raised $12.3-million in seed funding, is working on a method of deriving water-soluble cannabinoids through a yeast-based fermentation process, as well as genetically engineering bacteria and cannabis plants to fight pests and mould and increase crop yields.

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"Everyone was excited a couple years ago by the growth of the growing industry, but almost every commentator or thoughtful entrepreneur or business person or investor, all knew that it would eventually go from just being production… into higher value chain products and R&D,” Mr. Levy said.

Mr. Levy and his partners collectively invested around $6-million in Trait’s seed round, alongside investments from funds such as Green Acre Capital, which is backed by industry bigwigs like Vic Neufeld of Aphria and Lorne Gertner of Tokyo Smoke.

Trait is far from the only company trying to crack the water solubility problem. As it stands, THC or CBD molecules have to bond with a fat in order to be ingested in a beverage or edible. That means it takes considerably longer for the cannabinoid to be absorbed into the body, making it difficult to dose and use in social situations.

Finding a way to get edible cannabis into the bloodstream faster has become a major research goal for an industry increasingly looking to beverages and pharmaceutical-grade medicines as higher-margin products.

In Trait, Mr. Levy thinks he’s found a winner: "Anyone going down the path of water solubility is going to run into our patents, because we've been focusing very heavily on ensuring we have a strong portfolio of offensive and defensive patents."

The company itself is early stage, appearing to be little more than a research hub and set of patents. But it does have plans to expand aggressively into Canada, Mr. Levy said.

"A lot of the research to date has been done in the U.S., which means they’ve been doing a lot of the work through surrogate plants, like tobacco,” he said. Trait is aiming to open a research lab in Toronto in the coming months to speed up their research into cannabis plants themselves.

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