Yesterday Jazz Pharmaceutical (JAZZ.OQ) announced a £5.3B deal to takeover Cambridge based GW pharmaceuticals. Jazz currently has a wide portfolio of drugs focused on sleep, haematology and oncology therapies. This acquisition will add GW’s epilepsy drug Epidolex and MS drug to their portfolio but more excitingly it gives them access to the largest infrastructure for the production and processing of medical cannabis in the UK, one of the worlds largest exporters of cannabis-derived medicines

The medical cannabis market is expected to grow significantly over the next 5-10 years as more countries around the world start to legalise the use of cannabis or cannabis-derived products for medical purposes. The recent change in the US government is likely to expedite this growth as the new controlling party has a more liberal stance concerning marijuana and with the US being one of the major markets for medical cannabis, potential deregulation would in all likelihood benefit the industry.

The long term strategy behind this acquisition is to combine Jazz’s expertise in neuroscience, stemming from the development of their sleep therapies, with GW’s innovative approach to developing novel cannabinoid therapies to potentially create a new category of painkillers. These painkillers could provide a non-addictive alternative to opioids under for certain applications. 

While a promising field of study, a cannabinoid category of painkillers that would pass regulation is currently only theoretical. Considering the significant 50% premium on GW’s last market close they paid, Jazz’s stock is certainly not without significant risk however it could be justified by potential growth as cannabinoid therapies become more prolific.

Broker Consensus

Analysts who cover this security

Janney Montgomery Scott LLC – Kenneth Trbovich
Cowen and Company – Ken Cacciatore
Stifel Nicolaus and Company, Incorporated – Annabel Samimy
Jefferies – David Steinberg
RBC Capital Markets – Randall Stanicky
Piper Sandler Companies – David Amsellem
BMO Capital Markets – Gary Nachman
Truist Securities – Gregg Gilbert
SVB Leerink – Ami Fadia
BERNSTEIN – Ronny Gal
Wells Fargo Securities, LLC – Jacob Hughes
Goldman Sachs Research – Graig Suvannavejh
JPMorgan – Jessica Fye
Cantor Fitzgerald – Brandon Folkes
Wolfe Research – Akash Tewari
Barclays – Balaji Prasad, MD
EVERCORE ISI – Umer Raffat