Jazz Pharma to acquire GW Pharma for $7.2 billion, adding CBD-based treatment for severe epilepsy

Jazz Pharmaceuticals said Wednesday that it is acquiring GW Pharma, adding an approved childhood epilepsy medicine derived from marijuana to its stable of neuroscience products.

Under terms of the deal, Jazz has agreed to buy GW Pharma for $220 per American Depositary Share, which represents a 50% premium to the stock’s close on Tuesday. The transaction, to be paid using a mix of cash and Jazz stock, values GW at $7.2 billion, or $6.7 billion excluding GW’s cash on hand.

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A biotech known for its sleep and brain drugs just made a $7.2 billion bet that medical cannabis is crucial to its neuroscience ambitions

Summary List PlacementJazz Pharmaceuticals is making a $7.2 billion bet on the future of medical cannabis. 
The drugmaker said on Wednesday it will acquire GW Pharma, the maker of CBD-based epilepsy treatment Epidiolex, in a cash-and-stock deal. It’s the largest cannabis-industry deal so far. 
The deal, in which Jazz Pharmaceuticals will pay $200 in cash and $20 in Jazz shares for each GW share, represents a 50% premium on GW’s Tuesday closing price — a strong signal that the pharmaceutical giant is bullish on the future of cannabis-based medicines. 
The news sent stocks in the cannabis sector soaring on Wednesday morning, with GW shares surging over 46%. The deal is expected to close in the second quarter of this year. 
Analysts from the investment bank Stifel called the deal an “outstanding outcome” for GW Pharma in a Wednesday morning note. 
In 2018, GW was the first company to receive FDA approval for a cannabis-based drug, Epidiolex. The drug, which is essentially an ultra-high dose of cannabidiol, or CBD, is designed to treat seizures linked with two rare forms of childhood epilepsy, Lennox-Gastaut syndrome and Dravet syndrome.
Cannabis is considered a Schedule I drug by the US federal government, a class of drugs reserved for those with no accepted medical use and a high potential for abuse. Regulators moved Epidiolex to Schedule 5, similar to codeine-containing cough syrup. 
While CBD has since become a widely used consumer product, appearing in everything from lattes to skincare products, Epidiolex is so far the only FDA-approved cannabis-derived drug. 
A ‘new era’ for cannabis-based drugs
Jazz CEO Bruce Cozadd said Epidiolex has “near-term blockbuster potential” on a Wednesday morning call with investors, adding that neuroscience is a key focus area for the company.
“We think this is just the beginning for Epidiolex,” GW Pharma CEO Justin Gover said on the call. He added that what GW Pharma has been able to demonstrate over its 20-year history is that cannabinoids — the active compounds in the cannabis plant — are “real and compelling science.”
“We have potential first-in-class candidates across disease states such as autism, schizophrenia, and other neuropsychiatry targets,” Gover said. 
Getting a cannabis-based drug approved in the US was an uphill battle, GW Pharma CEO Justin Gover told Insider in an interview in 2019. He called Epidiolex’s approval the start of a “new era” for medical marijuana.
“If one applies the same rigorous standards to cannabis as they do to other drugs, they should be able to get a drug approved,” Gover said.

GW is also conducting Phase III trials for Nabiximols, a potential multiple sclerosis drug containing both THC, the main psychoactive component in cannabis, as well as CBD. The company said in the Wednesday investor call that it expects to submit a new drug application (NDA) to the FDA in the next one or two years. Nabiximols is already approved as Sativex in countries outside the US. 
The FDA has approved another THC-containing drug, AbbVie’s Marinol, which treats nausea, vomiting, and lack of appetite associated with chemotherapy and AIDs treatment. That drug contains a synthetic version of THC.
Analysts from the investment bank SVB Leerink said the deal is an “interesting strategic fit” with Jazz’s neurosciences focus, and “adds a platform of innovative cannabinoid product candidates.” 
Goldman Sachsand Centerview Partners served as financial advisors to GW, and Cravath, Swaine & Moore LLP and Slaughter and May provided legal advice. Evercore and Guggenheim served as lead financial advisors to Jazz Pharmaceuticals, which also received advice from BofA Securities and J.P. Morgan Securities LLC. 
Wachtell, Lipton, Rosen & Katz, Macfarlanes LLP and Arthur Cox LLP served as Jazz’s legal advisors. 
The cannabis industry is on a dealmaking tear, a stark reversal from last year 
The GW Pharma deal is the latest blockbuster tie-up for the rejuvenated cannabis industry, which has been buoyed by hopes that a Democratically-controlled Senate and White House will lead to relaxed regulations, and perhaps in the most optimistic scenarios, full-scale federal decriminalization or legalization.
To be sure, much of the US cannabis industry exists in a legal gray area, because many of its products are federally illegal. That isn’t the case for GW Pharma.
Many cannabis investors, analysts and other experts told Insider they predicted rapid consolidation in 2021, in a bid for scale as investors return to the industry after a horrid 2020. 
In December, Canadian cannabis heavyweights Tilray and Aphria agreed to merge in a deal that would give the combined companies a near $4 billion valuation. And the biggest US cannabis companies, like Curaleaf, TerrAscend, and Cresco Labs, among others, raised nearly $1 billion in January to fuel dealmaking. 
Nawan Butt, the portfolio manager of the European Medical Cannabis and Wellness UCITS ETF said he expects dealmaking on the medical side of the cannabis industry to ramp up.
“Today’s events should draw attention to other companies doing work in this sector and the opportunities they are exploring,” he added in an email.Join the conversation about this story » NOW WATCH: A top economist explains how weighted voting could change democracy

Digital Therapeutics Report: Latest DTx market trends and companies in growing digital health sector

Summary List PlacementAs pandemic anxiety and depression continue to harm people’s mental health, digital therapeutics (DTx) is more important  than ever before. This, combined with the $18.5 billion Teladoc-Livongo merger, has heated up competition in the virtual care space and catapulted the global DTx market to reach $56 billion over the next five years.

What is Digital Therapeutics?
DTx delivers evidence-based therapies via software, like mobile health apps, that replace or complement the existing treatment of a disease. They diverge from the broader digital health market in that they must be approved by regulatory bodies—and displaying proof-of-concept is at the core of their model. 
Digital Therapeutics Market
DTx vendors leverage their tech to treat chronic conditions, which gobble up the lion’s share of the US’ healthcare spending. The surging prevalence of chronic conditions combined with long term effects of the pandemic is fueling growth in the global DTx market.

Last year, Insider Intelligence expected the DTx space to hit nearly $9 billion by 2025, but its new forecasts expect DTx to be a $56 billion global opportunity by 2025.
Over the next five years, there will likely be an uptick in merger and acquisition (M&A) activity and closures among DTx companies. Pharmaceutical companies will likely also become active acquirers of DTx providers, and large M&As are a key sign of market maturity and future growth. 
Those that choose not to get on the DTx bandwagon might miss out on a massive opportunity—and drug companies and medical device makers that don’t jump at the chance of linking up with DTx providers  risk losing market share to emerging competitors. 
Digital Therapeutic Regulations
There has been an increase in regulatory acceptance and venture capital (VC) funding for the DTx market, as investors place their bets on consumers’ heightened interest in DTx platforms.
The FDA has been paving the way for swift DTx development—empowering DTx vendors to launch their platforms quicker than ever before. In April, the FDA loosened regulations surrounding approval of digital mental health tools to hasten their time to market.
Digital Therapeutics Trends
The Teladoc-Livongo megamerger put a spotlight on the power of digital therapies and the virtual care market. As a result, other telehealth players are eyeing DTx platforms to enhance the value of their services.

Pharma companies have been strategically pouring cash into DTx firms to capture a slice of the growing DTx market. And with the FDA greenlighting multiple DTx treatments, pharma companies can invest in DTx solutions with more confidence that they’ll see a return on investment (ROI).
Telehealth vendors have been charting unprecedented growth amid the pandemic, and are now more financially stable and able to expand their portfolios. As the DTx market swells alongside the digital health boom, more cash-rich telehealth vendors may purchase DTx startups, or develop their own DTx solutions in-house
Top Digital Therapeutics Companies
In the Digital Therapeutics Report, Insider Intelligence details the top DTx providers making waves in the digital health space, diving into what each company offers, recent funding, investors, FDA clearance, and significant partnerships. The companies mentioned in the report include: 

Omada
Virta Health
Biofourmis
Akili Interactive
Pear Therapeutics
One Drop
Lark Health
Propeller health
Cognoa
Kaia Health
Happify Health

Future of DTx and Digital Health
The emergence of digital medicine threatens to reshape the entire healthcare value chain—and because drugs interact with nearly every healthcare stakeholder, DTx solutions are leading a variety of players to carve out room for digital solutions.
The US mental health crisis is only getting worse amid the pandemic, so DTx players that want to remain most attractive to their payer and employer partners should branch out into behavioral healthcare. 
And while we expect to see heightened activity in the space over the next several years, a few hurdles to growth remain:

Government-based insurers like Medicare have been slower to cover DTx, likely due to outdated regulatory framework.
DTx vendors need to ensure their platforms are integrated within the electronic health record (EHR) or software that physicians’ already work in.

 
Want to learn more?
In the Digital Therapeutics Report, Insider Intelligence unpacks the state of the digital therapeutics (DTx) market. The report explores how the Teladoc-Livongo megamerger and the pandemic have catapulted the global DTx market into the spotlight. It outlines the top DTx startups that are ripe for tie-ups, and provides examples of how payers, pharma, and telehealth vendors should benefit from partnering with or acquiring a DTx firm. 
Interested in getting the full report? Here’s how you can gain access:

Join other Insider Intelligence clients who receive this report, along with thousands of other Digital Health forecasts, briefings, charts, and research reports to their inboxes. > > Become a Client

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