Agritech Arcadia Biosciences Rallies On Entry Into Cannabis Sector

Agritech company Arcadia Biosciences Inc RKDA announced Thursday that it's launching a cannabis business unit, sending the company's shares to an eight-month high. 

What Happened

Davis, California-based Arcadia announced that it is planning to leverage its strength in breeding techniques aimed at improving the quality and nutritional content of agricultural commodities to cannabis via the Arcadia Specialty Genomics, or ASG, unit. 

The business unit will work toward optimization and standardization of cannabis plant content, quality, climate, resiliency and yield, Arcadia said. It will operate only in federal and state markets where cannabis is legal.

Arcadia CFO Matt Plavan is being appointed as ASG's president. 

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Why It's Important

Following the federal legalization of hemp through the passage of the Farm Bill of 2018, hemp, or non-psychoactive cannabis containing less than 0.3-percent tetrahydrocannabinol, or THC, can be cultivated, transported and sold legally.

Arcadia said that due to the previous ban on hemp, it was not adequately researched and studied and therefore suffers from suboptimal genetics, highly fragmented germplasm and rampant inconsistencies.

"Within the rapidly growing legal cannabis industry, we see enormous opportunity in — and demand for — improved plant quality, productivity, consistency and resilience," Arcadia CEO Raj Ketkar said in a statement. 

Arcadia said the hemp CBD market totaled $190 million in 2018, citing data from the Hemp Business Journal. Cannabis and CBD market research firm Brightfield estimates that sales will soar to $22 billion by 2022, according to Arcadia. 

What's Next

In the near-term, Arcadia said it will focus on acquiring federal and state licenses in key markets to launch its research and pilot programs. It expects to begin operations this year. 

The agritech company said it is evaluating key partnerships for vertically integrating its business in order to maximize shareholder value.

Arcadia shares, which lost about 42 percent of their value in 2018, have been seeing some upward momentum since the start of February.

The stock was rallying 36.3 percent to $7.36 at the time of publication Thursday. 

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