Why Intrexon Corporation Is Skyrocketing Today

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What happened

Shares of Intrexon Corporation (NYSE: XON) were up 28.5% as of 11:19 a.m. on Monday. The biotech announced what it said were "advances in production of medical cannabis." In particular, Intrexon stated that its scientists had engineered a yeast strain that could be used in a microbial fermentation process to produce cannabinoids at low cost.

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So what

Is the big jump in Intrexon's share price just another case of investors flocking to anything and everything marijuana related? Maybe, but there could be more to the story here.

Interest in using cannabinoids to treat diseases is higher than ever, especially after GW Pharmaceuticals won FDA approval earlier this year for Epidiolex in treating two rare forms of epilepsy. Epidiolex is the first plant-based cannabinoid drug to win regulatory approval in the U.S.

Intrexon certainly has a solid pedigree in developing synthetic biology solutions to address specific problems. The company's research includes using genetics for breeding cattle, improving natural gas bioconversion, and developing gene therapies to treat cancer.

Intrexon thinks that its microbial fermentation process will enable the production of pure cannabinoids at costs of less than $1,000 per kilogram. If this can truly be achieved, Intrexon could be onto a new source to generate significant revenue down the road. Extracting medical-grade cannabinoids from cannabis plants using current methods is a costly process.

Now what

Announcements are one thing; showing a process that can actually produce high-quality medical cannabinoids is another. It might take a while for Intrexon to prove its technology. Chris Savile, the company's executive director of commercial operations, said [italics added], "Through our capabilities and experience, we expect to optimize strains to produce specific cannabinoids that may be commercialized in the coming years."

Intrexon isn't the only company working to develop a low-cost approach for producing cannabinoids. Cronos Group is partnering with Gingko Bioworks to produce high-purity cannabinoids from engineered strains of yeast, too. Hyasynth Bio is another player in this area.

My view is that investors should wait and see what happens before jumping aboard the Intrexon train. The company has a lot of interesting developments in the works, but it's probably better to hold off until something tangible materializes from Intrexon's efforts.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.