A Jazzy Bet On The Future Of Medicine

Yesterday Jazz Pharmaceuticals announced a deal to acquire cannabis-focused drugmaker GW Pharmaceuticals for $6.7 billion.

At first blush, investors thought they paid a high price. At least it’s a growing industry.

Don’t Sleep On Them

The transaction will tie-up two of the most prominent names in neuroscience.

While Jazz has developed a number of oncology therapies, it is best known for Xyrem, a treatment for narcolepsy which raked in over $1.6 billion in 2019. With Xyrem expected to lose marketing exclusivity soon, Jazz is looking to pad its pipeline with innovative therapies.

U.K.-based GW Pharma is best known for Epidiolex, the first cannabis-derived drug to be approved by the FDA:

  • Epidiolex went on sale in the U.S. in 2018 and is used in patients with rare and severe forms of epilepsy.
  • The drug’s active compound, cannabidiol, produces an anticonvulsant effect through its interaction with the nervous system. The plants used to make the drug are bred to be low in THC, the chemical associated with getting high.

Last year, sales of Epidiolex of the drug totaled $510 million. The yearly cost for users is $32,500.

Big Goals: Jazz CEO Bruce Cozadd told the WSJ they consider Epidiolex a “blockbuster product” and GW is working on other applications to treat conditions such as multiple sclerosis, autis,m and schizophrenia.

The Takeaway:

GW shares rose 44% on the day, but Jazz’s stock actually . Jazz’s stock actually dropped 4% with some analysts believing the Dublin-based company overpaid.

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