The Largest Acquisition In Cannabis Sector History Has Closed

Last week, marked another milestone of the legal cannabis industry after Jazz Pharmaceuticals (Nasdaq: JAZZ) completed the acquisition of GW Pharmaceuticals plc., a leader in the science, development and commercialization of cannabinoid-based prescription medicines.

Although the acquisition did receive as much attention as the merger between Aphria and Tilray, Inc. (TLRY.TO) (TLRY), we believe the transaction represents an inflection point for the biotech side of the cannabis industry. 

Jazz’s management team is executing on a strategy that is focused on creating an innovative, high-growth, global biopharma leader in neuroscience that has a global footprint. The addition of GW further diversifies Jazz’s commercial portfolio pipeline with therapies that are complementary to its existing business.

For Jazz, the most attractive asset from GW is Epidiolex, a high-growth commercial product that has near-term blockbuster potential. Both companies have a proven track record of developing differentiated therapies that advance science and improve daily life for patients who are suffering from diseases that are often-overlooked.

Epidiolex is a transformative treatment for childhood-onset epilepsy that provides a critical therapeutic option for refractory seizures. In 2020, Epidiolex generated more than $500 million of net sales. This amount of revenue was derived from the US market and GW’s recent expansion in Europe should serve as a near-term growth driver. 

The completion of the acquisitions further diversifies Jazz’s pipeline and this is expected to drive sustainable growth. With the inclusion of GW, the company’s pipeline now includes clinical-stage development programs that address significant unmet patient needs across neuroscience and oncology.

In the first full calendar year of combined operations, Jazz’s acquisition of GW is expected accelerate growth and prove to be immediately accretive. Jazz’s cash flow profile provides the capability to rapidly de-leverage to a target net leverage of less than 3.5x by the end of 2022. Within the next 45 days, the company plans to issue financial guidance for the combined company for 2021.

We believe the completion of the acquisition is an important development for the entire cannabis industry. We consider the sum of the parts of Jazz and GW to be more attractive than each business as a standalone entity. 

If you are interested in learning more about GW and Jazz Pharmaceuticals, please send an email to support@technical420.com with the subject “GW and Jazz Pharmaceuticals” to be added to our distribution list. 

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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