- Jazz Pharmaceuticals will acquire GW Pharmaceuticals, the U.K.-based maker of the first prescription cannabinoid medicine approved by the Food and Drug Administration, in a cash-and-stock deal worth $7.2 billion, the companies announced Wednesday.
- Per deal terms, Jazz will pay $220 per American depositary share of GW Pharma, a premium of 50% over the stock’s closing price on Tuesday and 60% over the 30-day volume-weighted average price. Jazz’s payment will consist of $200 in cash and $20 in Jazz shares.
- GW Pharma’s chief drug is Epidiolex, an oral solution of cannabidiol derived from the cannabis plant. In 2018, the FDA approved use of the medicine to treat Lennox-Gastaut syndrome and Dravet syndrome, two severe early-onset epilepsies. The drug has since been cleared for Tuberous Sclerosis complex as well.
Since winning U.S. approval for Epidiolex in 2018, GW Pharma has steadily built the drug into a successful business — no small task for a first-of-its-kind medicine targeted at uncommon seizure disorders. As a cannabis-derived drug, Epidiolex also needed to be reclassified by the Drug Enforcement Administration before GW Pharma could legally market it in the U.S.
Earlier this month, GW Pharma estimated 2020 sales of Epidiolex would total $510 million, an increase of more than 70% over 2019’s total. While the company has steadily expanded the number of patients treated with its drug, the high sales are also due in part to the drug’s cost, which GW Pharma set at about $32,500 per year before rebates and discounts.
The drug’s commercial performance, as well as GW Pharma’s progress with another cannabis-derived medicine, drew the attention of Jazz, which agreed to pay a sizable premium in negotiating the acquisition. Worth $6.7 billion net of GW Pharma’s cash, the deal is the largest biotech buyout so far in 2021, more than double the size of Horizon Pharma’s recent takeover of Viela Bio.
Including biotech and pharma dealmaking in 2020, Jazz’s acquisition ranks as fourth largest in the past 14 months, after buyouts of Alexion Pharmaceuticals, Immunomedics and Myokardia.
In buying GW Pharma, Jazz pitched the deal as expanding its neuroscience research, adding to a pipeline that includes four clinical-stage medicines for a chronic sleep disorder, essential tremor and post-traumatic stress disorder.
Along with Epidiolex, GW Pharma is in late-stage testing of nabiximols for spasticity related to multiple sclerosis and spinal cord injuries. That drug is sold as Sativex outside the U.S.
Most of Jazz’s current revenue comes from the narcolepsy drug Xyrem, sales of which totaled $1.3 billion through Sept. 30 of last year. But the company is attempting to build an oncology business as well, having licensed a now-approved lung cancer drug from PharmaMar in 2019.
Jazz expects the acquisition of GW Pharma will be accretive in the first full year following closing, and result in double-digit revenue growth.
While the deal price requires Jazz take out loans to fund the acquisition, the company plans to pay down debt quickly using existing cash flow.
The boards of directors for both companies have approved the deal, which is expected to close in the second quarter.
Shares in GW Pharma quickly rose to match the price promised in the deal, while Jazz stock traded flat. Shares in Zogenix, a biotech developing a competing treatment to Epidiolex for Dravet syndrome, rose by nearly 10%.