Shares of GW Pharmaceuticals (NASDAQ:GWPH) were skyrocketing 46.3% as of 10:45 a.m. EST on Wednesday. The huge gain came after Jazz Pharmaceuticals (NASDAQ:JAZZ) announced plans to acquire GW for $7.2 billion.
It's certainly not surprising in the least that GW Pharmaceuticals' shares took off today. Jazz's offer of $220 per share for GW represents a 50% premium to the closing price of the cannabinoid-focused biotech stock on Tuesday.
While the overall price tag for the deal is $7.2 billion, the actual amount Jazz will fork over is less than that. Net of GW's cash, the transaction value is pegged at $6.7 billion. Jazz offered $200 in cash plus $20 in its stock for every American depositary share (ADS) of GW.
Why did Jazz choose to buy GW? Jazz Pharmaceuticals CEO Bruce Cozadd stated that GW's cannabinoid platform and pipeline "will strengthen and broaden our neuroscience portfolio, further diversify our revenue and drive sustainable, long-term value creation opportunities."
GW Pharmaceuticals' crown jewel is Epidiolex. It was the first plant-derived cannabis drug approved by the U.S. Food and Drug Administration (FDA). Epidiolex's first FDA approvals were for Dravet syndrome and Lennox-Gastaut syndrome. It later obtained FDA approval for tuberous sclerosis complex. All three are rare diseases linked to early onset epilepsy.
Jazz expects the transaction will accelerate its revenue growth. It also looks for the acquisition of GW to be accretive to earnings in the first full year of combined operations.
It's not a done deal just yet. Both companies' boards of directors have unanimously approved the acquisition. However, GW' shareholders must also vote in favor of the buyout. In addition, Jazz and GW will have to obtain regulatory approvals. However, the companies expect the transaction will close in the second quarter of 2021.