Shares of GW Pharmaceuticals (Nasdaq: GWPH) climbed over 46 per cent after the cannabinoid drugmaker said Wednesday it will be bought by global pharma firm Jazz Pharmaceuticals (Nasdaq: JAZZ) for US$7.2 billion in cash and stock.
The proposed deal is set to be the largest acquisition in the cannabis industry to date and demonstrates how pharma companies are recognizing the long-term potential of cannabinoid-based medicines.
United Kingdom-based GW sells Epidiolex, a medication made for children with severe epilepsy that was the first cannabis-based drug approved by the U.S. Food and Drug Administration in June 2018. The drug sells for US$1,235 per 100-millilitre bottle and the company said last month that it expects to report roughly US$510 million in 2020 sales of Epidiolex.
“What we’ve been able to demonstrate at GW over the last 20 years is that the cannabinoid platform is a real and compelling science,” GW CEO Justin Gover said during a conference call with analysts. “There is very significant growth potential within the approved indications.”
When GW started most global pharma companies were hesitant to work with cannabis, ignoring centuries of evidence of the plant’s health benefits, says Nawan Butt, portfolio manager of The Medical Cannabis and Wellness ETF UCITS.
But as times and attitudes are adjusting, more larger companies are getting involved in the sector.
“Today could be a notable turning point as a more traditional pharma company, JAZZ pharma, has agreed to purchase GW Pharma,” Butt said in an email statement. “We don’t think this is the last deal we will see in the sector.”
Dublin-based Jazz sells a variety of medications for cancer and other conditions, and is best known for its expensive sleep disorder drug Xyrem, which the company said generated sales of US$1.64 billion in 2019.
On Wednesday, the drugmaker said GW’s rigorous approach to producing its products decreases regulatory risk, and will allow the companies better access to European markets.
Jazz is bullish on GW’s future pipeline of cannabinoid drug candidates, which includes Phase 3 trials for multiple-sclerosis and spinal-cord-injury treatments on the path toward approval from the U.S. Food and Drug Administration. GW is also in earlier-stage development of drug candidates for autism and schizophrenia.
“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,” Jazz CEO Bruce Cozadd said in a statement.
Under the terms of the proposed deal, the companies say Jazz will pay US$220 per GW American depositary receipt, in the form of US$200 in cash and US$20 in Jazz common stock.
GW’s intellectual-property portfolio includes 767 issued patents outside the U.S. and 57 issued patents in America, according to the firm’s regulatory filings.
In December, Canadian cannabis giant Canopy Growth (TSX: WEED) filed a lawsuit against GW in U.S. federal court, alleging the U.K.-based company infringed on its patented cannabis extraction method.
Shares of GW climbed to US$213.98 Thursday on the Nasdaq.
Top image via GW Pharmaceuticals