Jazz Pharma Inks Biggest-Ever Acquisition Deal in Cannabis Space with GW Pharma

Ireland-based biopharmaceutical company Jazz Pharmaceuticals announced the biggest acquisition in the cannabis space to date after it agreed to buy the global leader in developing cannabinoid-based medicines, GW Pharmaceuticals for $7.2 billion last week.

Following this announcement, GW Pharmaceuticals shares, which rose over 10% in 2020, jumped 49% to a record high of $217.5 on Wednesday. On the other hand, Jazz Pharmaceuticals shares seen its biggest intraday volatility since August 2015.

According to the agreement, Jazz to acquire GW for $220.00 per American Depositary Share (ADS), in the form of $200.00 in cash and $20.00 in Jazz ordinary shares, for a total consideration of $7.2 billion, or $6.7 billion net of GW cash. The deal is expected to close in the second quarter of 2021.

“Cannabis has the potential to cause significant disruption to the traditional medical market, and as more Pharma companies get involved, such as Jazz, we expect to see continued innovation and product development,” said Owen Bennett, equity analyst at Jefferies.

“Second, it raises the possibility of more M&A, with other big Pharma bidding for cannabis companies. Here we would be careful assuming most cannabis players could be subject to an offer.”

GW Pharma‘s Epidiolex, the first plant-derived cannabinoid medicine ever approved by the U.S. Food and Drug Administration, registered sales of over $500 million for the U.K.-based company in 2020. Market experts forecasts sales to hit $1 billion over the coming months, Reuters reported.

GW Pharma Stock Price Forecast

Ten analysts who offered stock ratings for GW Pharma in the last three months forecast the average price in 12 months at $216.71 with a high forecast of $234.00 and a low forecast of $183.00.

The average price target represents a 1.00% increase from the last price of $214.57. From those 10 analysts, three rated “Buy”, seven rated “Hold”, and none rate “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $220 with a high of $320 under a bull scenario and $75 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the biopharmaceutical company’s stock.

“GW is the market leader in the medical application of cannabis-related interventions, with Sativex approved in the EU and Epidiolex approved by the FDA in the U.S. and transferred to Schedule V by the DEA,” said David Lebowitz, equity analyst at Morgan Stanley.

“In June of 2018, the Food & Drug Administration approved Epidiolex (cannabidiol) [CBD] oral solution for the treatment of seizures for two rare and severe forms of epilepsy: Lennox-Gastaut syndrome and Dravet syndrome. Positive PhIII data could lead to tuberous sclerosis complex (TSC) being added to the label in 2020. We believe Epidiolex would be widely used for the treatment of refractory epilepsies (both on-label and off-label).”