On Wednesday, February 3, Jazz Pharmaceuticals Plc. announced that it had agreed to purchase GW Pharmaceuticals plc in a cash-and-stock deal valued at $7.2 billion. 

The goal of this deal is to incorporate GW Pharma’s Epidiolex – a cannabis-based epilepsy treatment – into Jazz’s neuroscience business. The acquisition, which will close in the second quarter of 2022, is anticipated to help boost Jazz Pharma’s neuroscience unit.

Epidiolex is a cannabidiol (CBD) formulation that blends a number of inactive ingredients like dehydrated alcohol, sesame seed oil, sucralose and strawberry flavor. The product is designed to relieve seizures in patients aged two years and older who suffer from Dravet syndrome and Lennox-Gastaut syndrome — two treatment-resistant types of epilepsy. 

In 2020, Epidiolex generated more than $500 million in sales revenue for the British drugs company, which went down in history in June 2018 after its epilepsy treatment became the first in the U.S. to gain approval from the Food and Drug Administration (FDA). Since its FDA-approval, the medical cannabis product has also been approved for use in children aged one and older.

CEO of British drugs company is thrilled with Jazz Pharma’s’ acquisition of GW Pharma

Based on the terms of Jazz Pharma’s acquisition of GW Pharma, the Ireland-headquartered company will purchase GW for $220 per American depositary share. Of that amount, $200 will be paid in cash and $20 in Jazz shares. The arrangement represents a 50 percent premium to GW’s closing price on Tuesday, February 2.

“Over the last two decades, GW has built an unparalleled global leadership position in cannabinoid science, including the successful launch of Epidiolex, a breakthrough product within the field of epilepsy, and a diverse and robust neuroscience pipeline,” says the CEO of GW, Justin Gover. “We believe that Jazz is an ideal growth partner that is committed to supporting our commercial efforts, as well as ongoing clinical and research programs.”

According to an official press release announcing the acquisition, investment banking advisory firms Evercore and Guggenheim counseled Jazz on the deal. Conversely, GW received guidance from both Goldman Sachs & Co LLC and Centerview Partners LLC.

“We are excited to add GW’s industry-leading cannabinoid platform, innovative pipeline and products, which will strengthen and broaden our neuroscience portfolio, further diversify our revenue and drive sustainable, long-term value creation opportunities,” says chairman and CEO of Jazz, Bruce Cozadd.

He added that his company is bagging “a near-term blockbuster product in Epidiolex and a really exciting scientific platform around cannabinoid medicines, with early-to-late-stage clinical programs already in place.”

Sales of Epidiolex are on the rise, despite the coronavirus pandemic 

GW pharma – which has seen its shares rise in excess of 49 percent over the last year – is acknowledged as the biggest player in the pharmaceutical scope of cannabis. The company boasts a market cap of $3.9 billion, which positions the pioneering drugs giant as the sixth-largest cannabis focused stock in the world.

The company continues to thrive, despite the COVID-19 pandemic. In fact, sales of Epidiolex inflated by more than 70 percent last year amid coronavirus-related disruptions. Analysts predict that sales of Epidiolex will exceed $1 billion in the near future. 

“Today could be a notable turning point as a more traditional pharma company has agreed to purchase GW Pharma,” said portfolio manager of the Medical Cannabis and Wellness UCITS ETF, Nawan Butt, following news of the deal.

Butt’s cannabis-focused exchange-traded fund (ETF) wasn’t the only one to acknowledge the sheer value linked to Jazz Pharma’s acquisition of GW Pharma.

“We’re surprised at the news, but not at all surprised by opportunity or the price,” said the chief operating officer and portfolio manager at Advisor Shares, Dan Ahrens. 

“More and more companies are learning the benefits of cannabinoid products, and cannabis and cannabinoids products are rapidly gaining acceptance in the public eye and at a federal government level,” added Ahrens, whose company manages the Pure Cannabis ETF.

After the announcement of Jazz Pharma’s acquisition of GW Pharma, shares of GW settled at around $214, whereas Jazz shares sank two percent.