By Ankur Banerjee and Shariq Khan
(Reuters) – Jazz Pharmaceuticals Plc said on Wednesday it would buy GW Pharmaceuticals plc in a $7.2 billion cash-and-stock deal to bolster its neuroscience business by adding a cannabis-based epilepsy treatment.
GW Pharma’s Epidiolex is the first marijuana-derived drug that was approved in the United States more than two years and generated sales of more than $500 million for the U.K.-based company last year. Analysts expect sales to breach $1 billion soon.
The drug is approved for use in patients aged two years and older with Dravet Syndrome and Lennox-Gastaut Syndrome, rare childhood-onset forms of epilepsy that are among the most resistant to treatment.
The deal took some cannabis-focused exchange-traded funds (ETFs) by surprise, while many saw it as a seal of approval for the medical marijuana industry by traditional pharma companies.
“We’re surprised at the news…but not at all surprised by opportunity or the price,” said Dan Ahrens, chief operating officer and portfolio manager, AdvisorShares, which manages the pot ETF.
“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.”
For Jazz, the deal will allow the drugmaker to move beyond sleep disorders and cancer treatments by beefing up its neuroscience unit, which has been its growth engine.
Analysts expect more such deals going ahead. “Today could be a notable turning point as a more traditional pharma company (Jazz pharma) has agreed to purchase GW Pharma,” said Nawan Butt, portfolio manager of the Medical Cannabis and Wellness UCITS ETF.
Jazz will acquire GW for $220 per American depositary share – $200 in cash and $20 in Jazz shares. The offer represents a 50% premium to GW’s Tuesday closing price.
GW shares were hovering around $214, while Jazz shares fell 2%.
(Reporting by Ankur Banerjee and Shariq Khan in Bengaluru; Editing by Shailesh Kuber and Arun Koyyur)
