Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2018	Feb. 19, 2019	Jun. 30, 2018
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Entity Registrant Name	Jazz Pharmaceuticals plc
Entity Central Index Key	0001232524
Trading Symbol	jazz
Entity Filer Category	Large Accelerated Filer
Current Fiscal Year End Date	--12-31
Smaller Reporting Company	false
Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		57,055,731
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Well-known Seasoned Issuer	Yes
Entity Public Float			$ 7,515,311,963

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 309,622	$ 386,035
Investments	515,000	215,000
Accounts receivable, net of allowances of $534 and $4,162 at December 31, 2018 and 2017, respectively	263,838	224,129
Inventories	52,956	43,245
Prepaid expenses	25,017	23,182
Other current assets	67,572	76,686
Total current assets	1,234,005	968,277
Property, plant and equipment, net	200,358	170,080
Intangible assets, net	2,731,334	2,979,127
Goodwill	927,630	947,537
Deferred tax assets, net	57,879	34,559
Deferred financing costs	9,589	7,673
Other non-current assets	42,696	16,419
Total assets	5,203,491	5,123,672
Current liabilities:
Accounts payable	40,602	24,368
Accrued liabilities	264,887	198,779
Current portion of long-term debt	33,387	40,605
Income taxes payable	1,197	21,577
Deferred revenue	5,414	8,618
Total current liabilities	345,487	293,947
Deferred revenue, non-current	9,581	16,115
Long-term debt, less current portion	1,563,025	1,540,433
Deferred tax liabilities, net	309,097	383,472
Other non-current liabilities	218,879	176,608
Commitments and contingencies (Note 12)
Shareholders’ equity:
Ordinary shares, nominal value $0.0001 per share; 300,000 shares authorized; 57,504 and 59,898 shares issued and outstanding at December 31, 2018 and 2017, respectively	6	6
Non-voting euro deferred shares, €0.01 par value per share; 4,000 shares authorized, issued and outstanding at both December 31, 2018 and 2017	55	55
Capital redemption reserve	472	472
Additional paid-in capital	2,113,630	1,935,486
Accumulated other comprehensive loss	(197,791)	(140,878)
Retained earnings	841,050	917,956
Total shareholders’ equity	2,757,422	2,713,097
Total liabilities and shareholders’ equity	$ 5,203,491	$ 5,123,672

Consolidated Balance Sheets (Parenthetical) $ in Thousands	Dec. 31, 2018 USD ($) $ / shares shares	Dec. 31, 2018 € / shares	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2017 € / shares
Current assets:
Accounts receivable, allowances \| $	$ 534		$ 4,162
Shareholders’ equity:
Ordinary shares, nominal value (in dollars per share) \| $ / shares	$ 0.0001		$ 0.0001
Ordinary shares, authorized (in shares)	300,000,000		300,000,000
Ordinary shares, issued (in shares)	57,504,000		58,898,000
Ordinary shares, outstanding (in shares)	57,504,000		58,898,000
Nonvoting Euro Deferred shares, par value (in euros per share) \| € / shares		€ 0.01		€ 0.01
Nonvoting Euro Deferred shares, authorized (in shares)	4,000,000		4,000,000
Nonvoting Euro Deferred shares, issued (in shares)	4,000,000		4,000,000
Nonvoting Euro Deferred shares, outstanding (in shares)	4,000,000		4,000,000

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Revenues:
Total revenues	$ 1,890,922	$ 1,618,693	$ 1,487,973
Operating expenses:
Cost of product sales (excluding amortization of intangible assets)	121,544	110,188	105,386
Selling, general and administrative	683,530	544,156	502,892
Research and development	226,616	198,442	162,297
Intangible asset amortization	201,498	152,065	101,994
Impairment charges	42,896	0	0
Acquired in-process research and development	0	85,000	23,750
Total operating expenses	1,276,084	1,089,851	896,319
Income from operations	614,838	528,842	591,654
Interest expense, net	(77,075)	(77,756)	(61,942)
Foreign exchange gain (loss)	(6,875)	(9,969)	3,372
Loss on extinguishment and modification of debt	(1,425)	0	(638)
Income before income tax provision (benefit) and equity in loss of investees	529,463	441,117	532,446
Income tax provision (benefit)	80,162	(47,740)	135,236
Equity in loss of investees	2,203	1,009	379
Net income	$ 447,098	$ 487,848	$ 396,831
Net income per ordinary share:
Basic (in dollars per share)	$ 7.45	$ 8.13	$ 6.56
Diluted (in dollars per share)	$ 7.30	$ 7.96	$ 6.41
Weighted-average ordinary shares used in per share calculations - basic (in shares)	59,976	60,018	60,500
Weighted-average ordinary shares used in per share calculations - diluted (in shares)	61,221	61,317	61,870
Product sales, net
Revenues:
Total revenues	$ 1,869,473	$ 1,601,399	$ 1,477,261
Royalties and contract revenues
Revenues:
Total revenues	$ 21,449	$ 17,294	$ 10,712

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 447,098	$ 487,848	$ 396,831
Other comprehensive income (loss):
Foreign currency translation adjustments	(58,988)	174,973	(49,861)
Unrealized gain on hedging activities, net of income tax provision of $289, $212 and $0, respectively	2,022	1,482	0
Other comprehensive income (loss)	(56,966)	176,455	(49,861)
Comprehensive income attributable to Jazz Pharmaceuticals plc	$ 390,132	$ 664,303	$ 346,970

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Consolidated Statements of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Ordinary Shares	Non-voting Euro Deferred	Capital Redemption Reserve	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Cumulative effect adjustment from adoption of new accounting standards	$ 107,687				$ 0		$ 107,687
Beginning balance (in shares) at Dec. 31, 2015		61,305	4,000
Beginning balance at Dec. 31, 2015	1,598,646	$ 6	$ 55	$ 471	1,562,900	$ (267,472)	302,686
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Issuance of ordinary shares in conjunction with exercise of share options (in shares)		399
Issuance of ordinary shares in conjunction with exercise of share options	16,880				16,880
Issuance of ordinary shares under employee stock purchase plan (in shares)		70
Issuance of ordinary shares under employee stock purchase plan	7,294				7,294
Issuance of ordinary shares in conjunction with vesting of restricted stock units (in shares)		289
Shares withheld for payment of employee's withholding tax liability	(21,234)				(21,234)
Share-based compensation	99,392				99,392
Shares repurchased (in shares)		(2,243)
Shares repurchased	(278,296)			1			(278,297)
Other comprehensive loss	(49,861)					(49,861)
Net income	396,831						396,831
Ending balance (in shares) at Dec. 31, 2016		59,820	4,000
Ending balance at Dec. 31, 2016	1,877,339	$ 6	$ 55	472	1,665,232	(317,333)	528,907
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Issuance of Exchangeable Senior Notes	149,767				149,767
Issuance of ordinary shares in conjunction with exercise of share options (in shares)		428
Issuance of ordinary shares in conjunction with exercise of share options	22,683				22,683
Issuance of ordinary shares under employee stock purchase plan (in shares)		104
Issuance of ordinary shares under employee stock purchase plan	9,141				9,141
Issuance of ordinary shares in conjunction with vesting of restricted stock units (in shares)		250
Shares withheld for payment of employee's withholding tax liability	(18,589)				(18,589)
Share-based compensation	107,252				107,252
Shares repurchased (in shares)		(704)
Shares repurchased	(98,799)						(98,799)
Other comprehensive loss	176,455					176,455
Net income	487,848						487,848
Ending balance (in shares) at Dec. 31, 2017		59,898	4,000
Ending balance at Dec. 31, 2017	2,713,097	$ 6	$ 55	472	1,935,486	(140,878)	917,956
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Cumulative effect adjustment from adoption of new accounting standards	(279)					53	(332)
Issuance of ordinary shares in conjunction with exercise of share options (in shares)		772
Issuance of ordinary shares in conjunction with exercise of share options	82,918				82,918
Issuance of ordinary shares under employee stock purchase plan (in shares)		111
Issuance of ordinary shares under employee stock purchase plan	10,419				10,419
Issuance of ordinary shares in conjunction with vesting of restricted stock units (in shares)		253
Shares withheld for payment of employee's withholding tax liability	(17,925)				(17,925)
Share-based compensation	102,732				102,732
Shares repurchased (in shares)		(3,530)
Shares repurchased	(523,672)						(523,672)
Other comprehensive loss	(56,966)					(56,966)
Net income	447,098						447,098
Ending balance (in shares) at Dec. 31, 2018		57,504	4,000
Ending balance at Dec. 31, 2018	$ 2,757,422	$ 6	$ 55	$ 472	$ 2,113,630	$ (197,791)	$ 841,050

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Operating activities
Net income	$ 447,098	$ 487,848	$ 396,831
Adjustments to reconcile net income to net cash provided by operating activities:
Intangible asset amortization	201,498	152,065	101,994
Share-based compensation	102,441	106,900	98,771
Impairment charges	42,896	0	0
Depreciation	15,233	13,089	11,786
Acquired in-process research and development	0	85,000	23,750
Loss on disposal of assets	655	473	47
Deferred tax benefit	(88,815)	(225,591)	(41,163)
Provision for losses on accounts receivable and inventory	4,728	2,190	2,209
Loss on extinguishment and modification of debt	1,425	0	638
Amortization of debt discount and deferred financing costs	43,960	30,026	22,133
Other non-cash transactions	4,499	14,321	(3,741)
Changes in assets and liabilities:
Accounts receivable	(40,132)	12,278	(25,603)
Inventories	(18,512)	(8,667)	(17,024)
Prepaid expenses and other current assets	6,697	(26,874)	(15,700)
Other non-current assets	(320)	119	267
Accounts payable	17,040	214	361
Accrued liabilities	71,208	(6,578)	11,989
Income taxes payable	(19,735)	16,331	2,962
Deferred revenue	(7,497)	21,009	(1,315)
Other non-current liabilities	14,537	18,934	23,199
Net cash provided by operating activities	798,904	693,087	592,391
Investing activities
Acquisition of investments	(1,165,915)	(385,000)	(132,181)
Proceeds from maturity of investments	855,000	230,000	66,906
Acquired in-process research and development	0	(85,000)	(23,750)
Purchases of property, plant and equipment	(20,370)	(28,950)	(9,687)
Acquisitions, net of cash acquired	0	0	(1,502,443)
Acquisition of intangible assets	(111,100)	0	(150,000)
Net proceeds from sale of assets	47,898	0	0
Net cash used in investing activities	(394,487)	(268,950)	(1,751,155)
Financing activities
Net proceeds from issuance of debt	0	559,393	994,647
Proceeds from employee equity incentive and purchase plans	93,337	31,824	24,174
Share repurchases	(523,672)	(98,799)	(278,296)
Payment of employee withholding taxes related to share-based awards	(17,925)	(18,589)	(21,234)
Repayments of long-term debt	(25,717)	(36,094)	(28,304)
Payment of debt modification costs	(6,406)	0	0
Repayments under revolving credit facility	0	(850,000)	(150,000)
Proceeds from tenant improvement allowance on build-to-suit lease	1,253	3,154	0
Net cash provided by (used in) financing activities	(479,130)	(409,111)	540,987
Effect of exchange rates on cash and cash equivalents	(1,700)	5,046	(5,045)
Net increase (decrease) in cash and cash equivalents	(76,413)	20,072	(622,822)
Cash and cash equivalents, at beginning of period	386,035	365,963	988,785
Cash and cash equivalents, at end of period	309,622	386,035	365,963
Supplemental disclosure of cash flow information:
Cash paid for interest	42,706	44,609	39,898
Cash paid for income taxes	164,217	174,124	160,306
Non-cash investing activities:
Amounts capitalized in connection with facility lease obligations	$ 27,747	$ 40,970	$ 23,799

Organization and Description of Business

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Description of Business

Jazz Pharmaceuticals plc is a global biopharmaceutical company dedicated to developing life-changing medicines for people with limited or no options. As a leader in sleep medicine and with a growing hematology/oncology portfolio, we have a diverse portfolio of products and product candidates in development.

Our lead marketed products are:


•	Xyrem^® (sodium oxybate) oral solution, the only product approved by the U.S. Food and Drug Administration, or FDA, and marketed in the U.S. for the treatment of both cataplexy and excessive daytime sleepiness, or EDS, in adult and pediatric patients with narcolepsy;


•	Erwinaze^® (asparaginase Erwinia chrysanthemi), a treatment approved in the U.S. and in certain markets in Europe (where it is marketed as Erwinase^®) for patients with acute lymphoblastic leukemia who have developed hypersensitivity to E. coli-derived asparaginase;

•

Defitelio^®(defibrotide sodium), a product approved in the U.S. for the treatment of adult and pediatric patients with hepatic veno-occlusive disease, or VOD, also known as sinusoidal obstruction syndrome, with renal or pulmonary dysfunction following hematopoietic stem cell transplantation, or HSCT, and in Europe (where it is marketed as Defitelio^®(defibrotide)) for the treatment of severe VOD in adults and children undergoing HSCT therapy; and


•	Vyxeos^®(daunorubicin and cytarabine) liposome for injection, a product approved in the U.S. and in Europe (where it is marketed as Vyxeos^® 44 mg/100 mg powder for concentrate for solution for infusion) for the treatment of adults with newly-diagnosed therapy-related acute myeloid leukemia or acute myeloid leukemia with myelodysplasia-related changes.

We are also seeking approval in the U.S. and Europe for solriamfetol as a treatment to improve wakefulness and reduce EDS in adult patients with narcolepsy or obstructive sleep apnea.

We are developing JZP-258, an oxybate product candidate that contains 90% less sodium than Xyrem, for the treatment of both cataplexy and EDS in narcolepsy as well as for other conditions.

Our strategy to create shareholder value is focused on:


•	Strong financial execution through growth in sales of our current lead marketed products;


•	Building a diversified product portfolio and development pipeline through a combination of our internal research and development efforts and obtaining rights to clinically meaningful and differentiated on- or near-market products and early- to late-stage product candidates through acquisitions, collaborations, licensing arrangements, partnerships and venture investments; and


•	Maximizing the value of our products and product candidates by continuing to implement our comprehensive global development plans, including through generating additional clinical data and seeking regulatory approval for new indications.

Throughout this report, unless otherwise indicated or the context otherwise requires, all references to “Jazz Pharmaceuticals,” “the registrant,” “we,” “us,” and “our” refer to Jazz Pharmaceuticals plc and its consolidated subsidiaries. Throughout this report, all references to “ordinary shares” refer to Jazz Pharmaceuticals plc’s ordinary shares.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, and include the accounts of Jazz Pharmaceuticals plc and our subsidiaries and intercompany transactions and balances have been eliminated. Our consolidated financial statements include the results of operations of businesses we have acquired from the date of each acquisition for the applicable reporting periods.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures in the consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.

Adoption of New Accounting Standards

In May 2014, the Financial Accounting Standards Board, or FASB, issued ASU No. 2014-09. The standard states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this, an entity will need to identify the contract with a customer; identify the separate performance obligations in the contract; determine the transaction price; allocate the transaction price to the separate performance obligations in the contract; and recognize revenue when (or as) the entity satisfies each performance obligation. We adopted ASU No. 2014-09 on January 1, 2018 on a modified retrospective basis and applied the standard to all contracts as of this date. The adoption of ASU No. 2014-09 did not have a material impact on our results of operations and financial position as the timing of revenue recognition for product sales, net, which is our primary revenue stream, did not change. Refer to Note 17, Revenues, for revenue-related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” which addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. We adopted this standard on January 1, 2018 and adoption did not have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” which requires an entity to recognize the income tax consequences of an intra-entity asset transfer, other than an intra-entity asset transfer of inventory, when the transfer occurs. We adopted this standard on January 1, 2018 on a modified retrospective basis and adoption did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” which provides clarification on the definition of a business and adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. We adopted this standard on January 1, 2018. In the second quarter of 2018, we entered into an asset purchase agreement, or APA, with TerSera Therapeutics LLC, or TerSera, whereby TerSera agreed to purchase substantially all of our assets related to the manufacture, marketing and sale of Prialt^®(ziconotide) intrathecal infusion. We entered into an amendment to the APA, and the transaction closed on September 27, 2018. We determined that the disposal group did not constitute a business under the new guidance. Refer to Note 3, Business Combination, Asset Acquisitions and Disposition, for further information on the sale of our rights to Prialt.

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in their financial statements. ASU No. 2017-12 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We elected to early adopt this standard on January 1, 2018 on a modified retrospective basis. Adoption of this standard did not have a material impact on our consolidated financial statements.

The cumulative effect of the changes made to our consolidated balance sheet as of January 1, 2018 for the adoption of the above accounting standards was as follows (in thousands):



	Balance at December 31, 2017			Transition Adjustments			Balance at January 1, 2018
Assets:
Deferred tax assets, net	$	34,559		$	595		$	35,154
Liabilities:
Deferred revenue	8,618			(1,120		)	7,498
Deferred revenue, non-current	16,115			(1,120		)	14,995
Deferred tax liabilities, net	383,472			3,114			386,586
Shareholders' Equity:
Accumulated other comprehensive loss	(140,878		)	53			(140,825		)
Retained earnings	917,956			(332		)	917,624

Significant Risks and Uncertainties

Our financial results are significantly influenced by sales of Xyrem. Our ability to maintain or increase Xyrem product sales is subject to a number of risks and uncertainties, including, without limitation, the introduction of new products in the U.S. market that compete with, or otherwise disrupt the market for, Xyrem in the treatment of cataplexy and/or EDS in narcolepsy; the introduction of a generic version of Xyrem in the U.S. market before the entry dates specified in our settlements with the abbreviated new drug application, or ANDA, filers or on terms that are different from those contemplated by the settlement agreements; increased pricing pressure from, changes in policies by, or restrictions on reimbursement imposed by, third party payors, including pressure to agree to discounts, rebates or other restrictive pricing terms for Xyrem; changes in healthcare laws and policy, including changes in requirements for patient assistance programs, rebates, reimbursement and coverage by federal healthcare programs, and changes resulting from increased scrutiny on pharmaceutical pricing and risk evaluation and mitigation strategy, or REMS, programs by government entities; changes to or uncertainties around our Xyrem REMS, or any failure to comply with our REMS obligations to the satisfaction of the FDA; challenges to our intellectual property around Xyrem, including the possibility of new ANDA or new drug application, or NDA, filers or new post-grant patent review proceedings; operational disruptions at the Xyrem central pharmacy; any supply or manufacturing problems, including any problems with our sole source Xyrem active pharmaceutical ingredient, or API, provider; continued acceptance of Xyrem by physicians and patients, including as a result of negative publicity that surfaces from time to time; and changes to our label, including new safety warnings or changes to our boxed warning, that further restrict how we market and sell Xyrem.

In addition to risks related specifically to Xyrem, we are subject to other challenges and risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: effectively commercializing our other products; competition; obtaining and maintaining adequate coverage and reimbursement for our products; increasing scrutiny of pharmaceutical product pricing and resulting changes in healthcare laws and policy; market acceptance; delays or problems in the supply of our products, loss of single source suppliers or failure to comply with manufacturing regulations; regulatory approval and successful launch of our late-stage product candidates; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; the regulatory approval process; the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements; and possible restrictions on our ability and flexibility to pursue certain future opportunities as a result of our substantial outstanding debt obligations.

Concentrations of Risk

Financial instruments that potentially subject us to concentrations of credit risk consist of cash, cash equivalents, investments and derivative contracts. Our investment policy permits investments in U.S. federal government and federal agency securities, corporate bonds or commercial paper issued by U.S. corporations, money market instruments, certain qualifying money market mutual funds, certain repurchase agreements, and tax-exempt obligations of U.S. states, agencies and municipalities and places restrictions on credit ratings, maturities, and concentration by type and issuer. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and investments to the extent recorded on the balance sheet.

We manage our foreign currency transaction risk and interest rate risk within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes. As of December 31, 2018 and 2017, we had foreign exchange forward contracts with notional amounts totaling $271.5 million and $511.4 million, respectively. As of December 31, 2018 and 2017, the outstanding foreign exchange forward contracts had a net liability fair value of $0.3 million and a net asset fair value of $10.5 million, respectively. As of December 31, 2018 and 2017, we had interest rate swap contracts with notional amounts totaling $300.0 million. These outstanding interest rate swap contracts had a net asset fair value of $4.1 million and $1.7 million as of December 31, 2018 and 2017, respectively. The counterparties to these contracts are large multinational commercial banks, and we believe the risk of nonperformance is not significant.

We are also subject to credit risk from our accounts receivable related to our product sales. We monitor our exposure within accounts receivable and record a reserve against uncollectible accounts receivable as necessary. We extend credit to pharmaceutical wholesale distributors and specialty pharmaceutical distribution companies, primarily in the U.S., and to other international distributors and hospitals. Customer creditworthiness is monitored and collateral is not required. We monitor deteriorating economic conditions in certain European countries which may result in variability of the timing of cash receipts and an increase in the average length of time that it takes to collect accounts receivable outstanding. Historically, we have not experienced significant credit losses on our accounts receivable. As of December 31, 2018, two customers accounted for 89% of gross accounts receivable, Express Scripts Specialty Distribution Services, Inc. and its affiliates, or Express Scripts, which accounted for 74% of gross accounts receivable, and McKesson Corporation and affiliates, or McKesson, which accounted for 15% of gross accounts receivable. As of December 31, 2017, two customers accounted for 86% of gross accounts receivable, Express Scripts, which accounted for 71% of gross accounts receivable, and McKesson, which accounted for 15% of gross accounts receivable.

We depend on single source suppliers for most of our products, product candidates and their active pharmaceutical ingredients, or APIs. With respect to Xyrem, the API is manufactured for us by a single source supplier and the finished product is manufactured both by us in our facility in Athlone, Ireland and by our U.S.-based Xyrem supplier.

Business Acquisitions

Our consolidated financial statements include the results of operations of an acquired business from the date of acquisition. We account for acquired businesses using the acquisition method of accounting. The acquisition method of accounting for acquired businesses requires, among other things, that assets acquired, liabilities assumed and any noncontrolling interests in the acquired business be recognized at their estimated fair values as of the acquisition date, with limited exceptions, and that the fair value of acquired in-process research and development, or IPR&D, be recorded on the balance sheet. Also, transaction costs are expensed as incurred. Any excess of the acquisition consideration over the assigned values of the net assets acquired is recorded as goodwill. Contingent consideration is included within the acquisition cost and is recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved and changes in fair value are recognized in earnings.

Cash Equivalents and Investments

We consider all highly liquid investments, readily convertible to cash, that mature within three months or less from date of purchase to be cash equivalents.

Investments consist of time deposits with initial maturities of greater than three months. Collectively, cash equivalents and investments are considered available-for-sale and are recorded at fair value. Unrealized gains and losses, net of tax, are recorded in accumulated other comprehensive loss in shareholders’ equity. We use the specific-identification method for calculating realized gains and losses on securities sold. Realized gains and losses and declines in value judged to be other than temporary on investments are included in interest expense, net in the consolidated statements of income.

Derivative Instruments and Hedging Activities

We record the fair value of derivative instruments as either assets or liabilities on the consolidated balance sheets. Changes in the fair value of derivative instruments are recorded each period in current earnings or other comprehensive income (loss), depending on whether a derivative instrument is designated as part of a hedging transaction and, if it is, the type of hedging transaction. For a derivative to qualify as a hedge at inception and throughout the hedged period, we formally document the nature and relationships between the hedging instruments and hedged item. We assess, both at inception and on an on-going basis, whether the derivative instruments that are used in cash flow hedging transactions are highly effective in offsetting the changes in cash flows of hedged items. Gains or losses on cash flow hedges are reclassified from other comprehensive income (loss) to earnings when the hedged transaction occurs. If we determine that a forecasted transaction is no longer probable of occurring, we discontinue hedge accounting and any related unrealized gain or loss on the derivative instrument is recognized in current earnings. Derivatives that are not designated and do not qualify as hedges are adjusted to fair value through current earnings.

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method for all inventories. Our policy is to write down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value and inventory in excess of expected requirements. The estimate of excess quantities is subjective and primarily dependent on our estimates of future demand for a particular product. If our estimate of future demand changes, we consider the impact on the reserve for excess inventory and adjust the reserve as required. Increases in the reserve are recorded as charges in cost of product sales.

We capitalize inventory costs associated with our products prior to regulatory approval when, based on management's judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are expensed as research and development. The determination to capitalize inventory costs is based on various factors, including status and expectations of the regulatory approval process, any known safety or efficacy concerns, potential labeling restrictions, and any other impediments to obtaining regulatory approval. We had no pre-approval inventory on our consolidated balance sheet as of December 31, 2018 or 2017.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are as follows:



Buildings	40 years
Manufacturing equipment and machinery	5-10 years
Computer software and equipment	3 years
Furniture and fixtures	5 years

Leasehold improvements and the build-to-suit facility are amortized over the shorter of the noncancelable term of our leases or their economic useful lives. Maintenance and repairs are expensed as incurred.

Operating Leases and Financing Obligations

We recognize rent expense under operating leases on a straight-line basis over the term of the lease with the difference between the expense and cash payments recorded as deferred rent on the consolidated balance sheets.

For certain build-to-suit lease arrangements where we have concluded that we are the “deemed owner” of the building, for accounting purposes only, during the construction period, we are required to record an asset with a corresponding financing obligation for the construction costs incurred by the landlord. The financing obligation is recorded within accrued liabilities and other non-current liabilities in the consolidated balance sheets. We increase the asset and financing obligation as additional building costs are incurred by the landlord during the construction period. Once construction is complete, we evaluate whether the asset qualifies for sale-leaseback accounting treatment. If the lease meets the sale-leaseback criteria, we remove the asset and the related liability from the consolidated balance sheets and treat the lease as either an operating or capital lease based on an assessment of the accounting guidance. If the arrangement does not qualify for sale-leaseback treatment, we reduce the financing obligation over the lease term as payments are made and depreciate the asset over its estimated useful life or lease term, whichever is shorter. Future lease payments associated with build-to-suit leases where we are the deemed owner are allocated between the land and building components. The portion of the lease payments allocated to the land is treated for accounting purposes as operating lease payments, and therefore is recorded as rent expense in the consolidated statements of income. The portion of the lease payments allocated to the building is further bifurcated into a portion allocated to interest expense and a portion allocated to reduce the build-to-suit financing obligation.

Goodwill

Goodwill represents the excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed. We have determined that we operate in a single segment and have a single reporting unit associated with the development and commercialization of pharmaceutical products. The annual test for goodwill impairment is a two-step process. The first step is a comparison of the fair value of the reporting unit with its carrying amount, including goodwill. If this step indicates impairment, then, in the second step, the loss is measured as the excess of recorded goodwill over its implied fair value. Implied fair value is the excess of the fair value of the reporting unit over the fair value of all identified assets and liabilities. We test goodwill for impairment annually in October and when events or changes in circumstances indicate that the carrying value may not be recoverable.

Acquired In-Process Research and Development

The initial costs of rights to IPR&D projects acquired in an asset acquisition are expensed as IPR&D unless the project has an alternative future use. The fair value of IPR&D projects acquired in a business combination are capitalized and accounted for as indefinite-lived intangible assets until the underlying project receives regulatory approval, at which point the intangible asset will be accounted for as a finite-lived intangible asset, or discontinued, at which point the intangible asset will be written off. Development costs incurred after an acquisition are expensed as incurred.

Intangible Assets

Intangible assets with finite useful lives consist primarily of purchased developed technology and are amortized on a straight-line basis over their estimated useful lives, which range from two to 18 years. The estimated useful lives associated with finite-lived intangible assets are consistent with the estimated lives of the associated products and may be modified when circumstances warrant. Such assets are reviewed for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount. The amount of any impairment is measured as the difference between the carrying amount and the fair value of the impaired asset.

Intangible assets with finite useful lives also includes a Priority Review Voucher, or PRV, which we can use to obtain priority review by the FDA for one of our future regulatory submissions or may sell or transfer to a third party. The PRV is measured at cost and reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable. At the time we commit to using the PRV to accelerate the review of a drug application, the cost of the PRV will be expensed to the consolidated statement of income. Alternatively, if the PRV is sold, the asset would be derecognized from the consolidated balance sheet.

Revenue Recognition

Our revenue comprises product sales, net and royalty and contract revenues. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Prior to recognizing revenue, we make estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Product Sales, Net

Product sales revenue is recognized when control has transferred to the customer, which occurs at a point in time, which is typically on delivery to the customer or, in the case of products that are subject to consignment agreements, when the customer removes product from our consigned inventory location for shipment directly to a patient.

Reserves for Variable Consideration

Revenues from sales of products are recorded at the net sales price, which includes estimates of variable consideration for which reserves are established and which relate to returns, specialty distributor fees, wholesaler fees, prompt payment discounts, government rebates, government chargebacks, coupon programs and rebates under managed care plans. Calculating certain of these reserves involves estimates and judgments and we determine their expected value based on sales or invoice data, contractual terms, historical utilization rates, new information regarding changes in these programs’ regulations and guidelines that would impact the amount of the actual rebates, our expectations regarding future utilization rates for these programs and channel inventory data. These reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. We reassess our reserves for variable consideration at each reporting date. Historically, adjustments to estimates for these reserves have not been material.

Reserves for returns, specialty distributor fees, wholesaler fees, government rebates, coupon programs and rebates under managed care plans are included within current liabilities in our consolidated balance sheets. Reserves for government chargebacks and prompt payment discounts are shown as a reduction in accounts receivable.

Royalties and Contract Revenues

We enter into out-licensing agreements under which we license certain rights to our products or product candidates to third parties. If a licensing arrangement includes multiple goods or services, we consider whether the license is distinct. If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. If the license to our intellectual property is determined not to be distinct, it is combined with other goods or services into a combined performance obligation. We consider whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of progress each reporting date and, if necessary, adjust the measure of performance and related revenue recognition.

At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or that of the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price.

For arrangements that include sales-based royalties and milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties and sales-based milestones relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty or sales-based milestone has been allocated has been satisfied (or partially satisfied).

Cost of Product Sales

Cost of product sales includes manufacturing and distribution costs, the cost of drug substance, royalties due to third parties on product sales, product liability and cargo insurance, FDA user fees, freight, shipping, handling and storage costs and salaries and related costs of employees involved with production. Excluded from cost of product sales shown on the consolidated statements of income is amortization of acquired developed technology of $201.3 million, $149.1 million and $99.0 million in 2018, 2017 and 2016, respectively.

Research and Development

Research and development expenses consist primarily of costs related to clinical studies and outside services, personnel expenses and other research and development costs, including milestone payments incurred prior to regulatory approval of products. Clinical study and outside services costs relate primarily to services performed by clinical research organizations, clinical studies performed at clinical sites, materials and supplies, and other third party fees. Personnel expenses relate primarily to salaries, benefits and share-based compensation. Other research and development expenses primarily include overhead allocations consisting of various support and facilities-related costs. Research and development costs are expensed as incurred. For product candidates that have not been approved by the FDA, inventory used in clinical trials is expensed at the time of production and recorded as research and development expense. For products that have been approved by the FDA, inventory used in clinical trials is expensed at the time the inventory is packaged for the trial.

Advertising Expenses

We expense the costs of advertising, including promotional expenses, as incurred. Advertising expenses were $37.4 million, $36.6 million and $29.5 million in 2018, 2017 and 2016, respectively.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement carrying amount and the tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized. We recognize the benefits of a tax position if it is “more-likely-than-not” of being sustained. A recognized tax benefit is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are included in the income tax provision and classified with the related liability on the consolidated balance sheets.

Foreign Currency

Our functional and reporting currency is the U.S. dollar. The assets and liabilities of our subsidiaries that have a functional currency other than the U.S. dollar are translated into U.S. dollars at the exchange rate prevailing at the balance sheet date with the results of operations of subsidiaries translated at the average exchange rate for the reporting period. The cumulative foreign currency translation adjustment is recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity.

Transactions in foreign currencies are translated into the functional currency of the relevant subsidiary at the rate of exchange prevailing at the date of the transaction. Any monetary assets and liabilities arising from these transactions are translated into the relevant functional currency at exchange rates prevailing at the balance sheet date or on settlement. Resulting gains and losses are recorded in foreign exchange gain (loss) in our consolidated statements of income.

Deferred Financing Costs

Deferred financing costs are reported at cost, less accumulated amortization and are presented in the consolidated balance sheets as a direct deduction from the carrying value of the associated debt, with the exception of deferred financing costs associated with revolving-debt arrangements which are presented as assets. The related amortization expense is included in interest expense, net in our consolidated statements of income.

Contingencies

From time to time, we may become involved in claims and other legal matters arising in the ordinary course of business. We record accruals for loss contingencies to the extent that we conclude that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. Legal fees and other expenses related to litigation are expensed as incurred and included in selling, general and administrative expenses.

Share-Based Compensation

We account for compensation cost for all share-based awards at fair value on the date of grant. The fair value is recognized as expense over the service period, net of estimated forfeitures, using the straight-line method. The estimation of share-based awards that will ultimately vest requires judgment, and, to the extent actual results or updated estimates differ from current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We primarily consider historical experience when estimating expected forfeitures.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for us beginning January 1, 2020 and early adoption is permitted. The new guidance is not expected to have a material impact on our results of operations and financial position.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” which simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test. Goodwill impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying value of the goodwill. The standard is effective for us beginning January 1, 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. The new guidance is not expected to have a material impact on our results of operations and financial position.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, or ASU No. 2016-02. Under the new guidance, lessees will be required to recognize a right-of-use asset, which represents the lessee’s right to use, or control the use of, a specified asset for the lease term, and a corresponding lease liability, which represents the lessee’s obligation to make lease payments under a lease, measured on a discounted basis. ASU No. 2016-02 is effective beginning January 1, 2019 and early adoption is permitted. We will adopt ASU No. 2016-02 on a modified retrospective basis at the adoption date of January 1, 2019. The adoption of ASU No. 2016-02 will result in the recognition of right-of-use assets and lease liabilities of approximately $150 million and $170 million, respectively, on the consolidated balance sheet as of January 1, 2019, and the de-recognition of the build-to-suit assets and related financing obligations on the consolidated balance sheet as of December 31, 2018 of $95 million and $110 million, respectively, with the balance impacting retained earnings and deferred rent. The right-of-use assets and lease liabilities primarily relate to real estate leases. We will provide additional lease-related disclosures in the notes to the consolidated financial statements commencing with our consolidated financial statements for the quarter ending March 31, 2019.

Business Combination, Asset Acquisitions, and Disposition

12 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Business Combination, Asset Acquisitions, and Disposition

Business Combination, Asset Acquisitions and Disposition

Celator Acquisition

On May 27, 2016, we entered into a definitive merger agreement with Celator Pharmaceuticals Inc., or Celator, pursuant to which we made a cash tender offer of $30.25 per share for all of the outstanding shares of Celator’s common stock. As of the expiration of the offer period on July 12, 2016, 36,516,173 shares, which represented approximately 81% of Celator’s then outstanding common stock, were properly tendered and not withdrawn in the tender offer. The condition to the tender offer that more than 50% of Celator’s outstanding common stock be validly tendered and not withdrawn prior to the expiration of the tender offer was satisfied. In addition, notices of guaranteed delivery were delivered with respect to 2,016,237 additional shares, representing approximately 4% of Celator’s outstanding common stock as of the expiration of the tender offer. On July 12, 2016, we completed the acquisition of Celator, or the Celator Acquisition, under the terms of the merger agreement, pursuant to which Celator became an indirect wholly owned subsidiary of Jazz Pharmaceuticals plc and each share of Celator common stock then outstanding (other than shares owned by us or Celator) was converted into the right to receive $30.25, the same price per share offered in the tender offer. The aggregate cash consideration for the Celator Acquisition was $1.5 billion.

On July 12, 2016, we entered into the amended credit agreement that provides for a revolving credit facility of $1.25 billion, which replaced our prior revolving credit facility of $750.0 million, and a $750.0 million term loan facility. Please see Note 11, Debt, for further information regarding the 2015 credit agreement and the amended credit agreement. We used the proceeds of $1.0 billion of loans under the revolving credit facility, together with cash on hand, to fund the Celator Acquisition.

Celator was an oncology-focused biopharmaceutical company seeking to transform the science of combination therapy and develop products to improve patient outcomes in cancer. The Celator Acquisition broadened our hematology/oncology portfolio with the acquisition of worldwide development and commercialization rights to Vyxeos. In addition, the Celator Acquisition provided us with Celator’s proprietary technology platform, CombiPlex, which enables the rational design and rapid evaluation of optimized combinations of additional anti-cancer drugs.

The Celator Acquisition was accounted for as a business combination using the acquisition method under which assets and liabilities of Celator were recorded at their respective estimated fair values as of the closing date of the Celator Acquisition and added to the assets and liabilities of Jazz Pharmaceuticals plc, including an amount for goodwill representing the difference between the acquisition consideration and the estimated fair value of the identifiable net assets. The results of operations of Celator and the estimated fair values of the assets acquired and liabilities assumed have been included in our consolidated financial statements since the closing date of the Celator Acquisition.

In 2016, we incurred $10.0 million in acquisition-related costs related to the Celator Acquisition, which primarily consisted of banking, legal, accounting and valuation-related expenses. These expenses were recorded in selling, general and administrative expense in the accompanying consolidated statements of income. We did not recognize any revenues from the acquired Celator business in 2016. The portion of total expenses and net loss associated with the acquired Celator business was not separately identifiable due to the integration with our operations.

The fair values of assets acquired and liabilities assumed at the closing date of the Celator Acquisition are summarized below (in thousands):



Cash and cash equivalents	$	26,137
Other receivables	386
Prepaid expenses and deposits	151
Property, plant and equipment	767
Intangible assets	1,811,250
Goodwill	252,825
Other non-current assets	43
Accrued liabilities	(19,076		)
Deferred tax liability, net, non-current	(542,901		)
Other non-current liabilities	(1,002		)
Total acquisition consideration - cash paid	$	1,528,580

Identifiable intangible assets acquired comprised IPR&D, which represented incomplete research and development projects at Celator related to Vyxeos. Management estimated the fair value of Vyxeos IPR&D to be approximately $1.8 billion. The fair value of acquired IPR&D was determined using the income approach, including the application of probability factors related to the likelihood of success of Vyxeos reaching final development and commercialization. This approach also took into consideration information and certain program-related documents and forecasts prepared by management. The fair value of acquired IPR&D was capitalized as of the closing date of the Celator Acquisition. After receiving FDA approval of our new drug application, or NDA, for Vyxeos in August 2017, we reclassified the IPR&D balance of $1.8 billion from an indefinite-lived intangible asset to an acquired developed technology finite-lived intangible asset. This acquired developed technology asset is being amortized over its estimated useful life of 18 years.

The excess of the total acquisition consideration over the fair value amounts assigned to the assets acquired and the liabilities assumed represents the goodwill amount resulting from the Celator Acquisition. We believe that the factors that contributed to goodwill included the Celator workforce, which will complement our clinical experience in hematology/oncology and our expertise in reaching targeted physicians who treat serious medical conditions, and the deferred tax consequences of intangible assets recorded for financial statement purposes. We do not expect any portion of this goodwill to be deductible for tax purposes.

Pro Forma Financial Information (Unaudited)

The following unaudited supplemental pro forma information presents our combined historical results of operations with pro forma adjustments as if the Celator Acquisition had been completed on January 1, 2015. The primary pro forma adjustments include:


•	The exclusion of acquisition-related and integration expenses of $13.6 million in 2016.


•	An increase in interest expense of $13.7 million in 2016 incurred on additional borrowings made to partially fund the Celator Acquisition as if the borrowings had occurred on January 1, 2015.

The unaudited pro forma results do not assume any operating efficiencies as a result of the consolidation of operations and are as follows (in thousands, except per share data):



	Year Ended December 31, 2016
Revenues	$	1,488,118
Net income attributable to Jazz Pharmaceuticals plc	$	386,342
Net income attributable to Jazz Pharmaceuticals plc per ordinary share - basic	$	6.39
Net income attributable to Jazz Pharmaceuticals plc per ordinary share - diluted	$	6.24

Disposition

On June 29, 2018, we entered into an APA with TerSera, pursuant to which TerSera agreed to purchase substantially all of our assets related to the manufacture, marketing and sale of Prialt, but excluding accounts receivable, and to assume certain related liabilities as set forth in the APA. We entered into an amendment to the APA, and the transaction closed, on September 27, 2018. The total sales price was $80.0 million, of which we received $50.0 million at closing, and, subject to certain conditions, we are entitled to receive $15.0 million payable on December 31, 2019 and $15.0 million payable on December 31, 2020, or earlier under certain circumstances.

The related assets met the assets held for sale criteria and were reclassified to assets held for sale as of June 30, 2018. We adjusted the carrying value of the assets held for sale to fair value less costs to sell, which resulted in an impairment charge of $42.9 million in our consolidated statements of income in 2018, primarily related to the carrying balances of intangible assets. Upon closing, we recognized a loss on disposal of $0.5 million within selling, general and administrative expenses in our consolidated statements of income in 2018.

We determined that the disposal of these assets does not qualify for reporting as a discontinued operation since it does not represent a strategic shift that has or will have a major effect on our operations and financial results.

Collaboration and Option Agreement

In August 2017, we entered into a collaboration and option agreement with ImmunoGen, Inc., or ImmunoGen, granting us rights to opt into exclusive, worldwide licenses to develop and commercialize two hematology-related antibody-drug conjugate, or ADC, programs, as well as an additional program to be designated during the term of the agreement. The programs covered under the agreement include IMGN779, a CD33-targeted ADC for the treatment of AML in Phase 1 testing, and IMGN632, a CD123-targeted ADC for hematological malignancies expected to enter clinical testing before the end of 2017.

Under the terms of the agreement, ImmunoGen will be responsible for the development of the three ADC programs prior to any potential opt-in by us. Following any opt-in, we would be responsible for any further development as well as for potential regulatory submissions and commercialization.

As part of the agreement, we paid ImmunoGen a non-refundable upfront payment of $75.0 million, which was charged to acquired IPR&D expense upon closing of the transaction. Additionally, we will pay ImmunoGen up to $100 million in development funding over seven years to support the three ADC programs. For each program, we may exercise our opt-in right at any time prior to a pivotal study or any time prior to a biologics license application upon payment of an option exercise fee. The option exercise fee depends on the timing of exercise and certain other conditions. For each program to which we elect to opt-in, ImmunoGen would be eligible to receive milestone payments based on receiving regulatory approval of the applicable product, plus tiered royalties as a percentage of commercial sales. After opt-in, we will share with ImmunoGen the costs associated with developing and obtaining regulatory approvals of the applicable product in the U.S. and the European Union, or EU. ImmunoGen has the right to co-commercialize one product (or two products, under certain limited circumstances) with us in the U.S. with U.S. profit-sharing in lieu of our payment of applicable U.S. milestone and royalties to ImmunoGen.

License and Option Agreement

In July 2016, we entered into an agreement with Pfenex Inc., or Pfenex, that granted us worldwide rights to develop and commercialize multiple early-stage hematology product candidates and an option for us to negotiate a license for a recombinant pegaspargase product candidate. This agreement was amended in December 2017. Under the amended agreement, Pfenex received upfront, option and development milestone payments totaling $35.3 million and may be eligible to receive additional payments of up to $189 million based on the achievement of certain development, regulatory and sales milestones. In 2017, we recognized expense of $19.5 million within research and development expenses. In 2016, we recognized expenses of $15.8 million, of which $15.0 million was charged to acquired IPR&D expense upon closing of the transaction and $0.8 million was charged to research and development expenses.

Acquisition of Alizé Pharma II S.A.S.

In March 2016, we acquired all of the outstanding shares of Alizé Pharma II S.A.S., a privately held biotechnology company, for an upfront payment of $8.8 million. In connection with the acquisition, we obtained intellectual property and know-how related to recombinant crisantaspase. The transaction includes contingent regulatory milestone payments of up to €10 million. The transaction was accounted for as an asset acquisition and the upfront payment was charged to acquired IPR&D expense upon closing of the transaction.

Cash and Available-for-Sale Securities

12 Months Ended

Dec. 31, 2018

Cash and Cash Equivalents [Abstract]

Cash and Available-for-Sale Securities

Cash and cash equivalents and investments consisted of the following (in thousands):



	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Investments
Cash	$	215,606	$	—	$	—	$	215,606	$	215,606	$	—
Time deposits	515,000		—		—		515,000		—		515,000
Money market funds	94,016		—		—		94,016		94,016		—
Totals	$	824,622	$	—	$	—	$	824,622	$	309,622	$	515,000



	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Investments
Cash	$	225,235	$	—	$	—	$	225,235	$	225,235	$	—
Time deposits	235,000		—		—		235,000		20,000		215,000
Money market funds	140,800		—		—		140,800		140,800		—
Totals	$	601,035	$	—	$	—	$	601,035	$	386,035	$	215,000

Cash equivalents and investments are considered available-for-sale securities. We use the specific-identification method for calculating realized gains and losses on securities sold and include them in interest expense, net in the consolidated statements of income. Our investment balances represent time deposits with original maturities of greater than three months and less than one year.

Fair Value Measurement

12 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurement

The following table summarizes, by major security type, our available-for-sale securities and derivative contracts that were measured at fair value on a recurring basis and were categorized using the fair value hierarchy (in thousands):



	December 31, 2018						December 31, 2017
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total Estimated Fair Value
Assets:
Available-for-sale securities:
Time deposits	$	—	$	515,000	$	515,000	$	—	$	235,000	$	235,000
Money market funds	94,016		—		94,016		140,800		—		140,800
Interest rate contracts	—		4,070		4,070		—		2,138		2,138
Foreign exchange forward contracts	—		1,194		1,194		—		15,495		15,495
Totals	$	94,016	$	520,264	$	614,280	$	140,800	$	252,633	$	393,433
Liabilities:
Interest rate contracts	$	—	$	—	$	—	$	—	$	392	$	392
Foreign exchange forward contracts	—		1,460		1,460		—		5,017		5,017
Totals	$	—	$	1,460	$	1,460	$	—	$	5,409	$	5,409

As of December 31, 2018, our available-for-sale securities included time deposits and money market funds and their carrying values were approximately equal to their fair values. Time deposits were measured at fair value using Level 2 inputs and money market funds were measured using quoted prices in active markets, which represent Level 1 inputs. Level 2 inputs, obtained from various third party data providers, represent quoted prices for similar assets in active markets, or these inputs were derived from observable market data, or if not directly observable, were derived from or corroborated by other observable market data.

Our derivative assets and liabilities include interest rate and foreign exchange derivatives that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk as well as an evaluation of our counterparties’ credit risks. Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the fair value hierarchy.

There were no transfers between the different levels of the fair value hierarchy in 2018 or in 2017.

As of December 31, 2018, the carrying amount of investments measured using the measurement alternative for equity investments without a readily determinable fair value was $4.5 million. The carrying amount, which is recorded within other non-current assets, represents the purchase price paid in 2018.

As of December 31, 2018, the estimated fair values of our 1.875% exchangeable senior notes due 2021, or the 2021 Notes, and our 1.50% exchangeable senior notes due 2024, or the 2024 Notes, were approximately $558 million and $521 million, respectively. The fair values of the Exchangeable Senior Notes were estimated using quoted market prices obtained from brokers (Level 2). The estimated fair value of our borrowings under our term loan was approximately equal to its book value based on the borrowing rates currently available for variable rate loans (Level 2).

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Derivatives Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Derivative Instruments and Hedging Activities

We are exposed to certain risks arising from operating internationally, including fluctuations in interest rates on our outstanding term loan borrowings and fluctuations in foreign exchange rates primarily related to the translation of euro-denominated net monetary liabilities, including intercompany balances, held by subsidiaries with a U.S. dollar functional currency. We manage these exposures within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes.

To achieve a desired mix of floating and fixed interest rates on our variable rate debt, we entered into interest rate swap agreements in March 2017 which are effective until July 2021. These agreements hedge contractual term loan interest rates. As of December 31, 2018 and 2017, the interest rate swap agreements had a notional amount of $300.0 million. As a result of these agreements, the interest rate on a portion of our term loan borrowings was fixed at 1.895%, plus the borrowing spread, until July 12, 2021.

The effective portion of changes in the fair value of derivatives designated as and that qualify as cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The impact on accumulated other comprehensive loss and earnings from derivative instruments that qualified as cash flow hedges was as follows (in thousands):



	Year Ended December 31,
Interest Rate Contracts:	2018			2017
Gain (loss) recognized in accumulated other comprehensive loss, net of tax	$	2,274		$	(213	)
Loss (gain) reclassified from accumulated other comprehensive loss to interest expense, net of tax	$	(252	)	$	1,695

Assuming no change in LIBOR-based interest rates from market rates as of December 31, 2018, $1.7 million of gains recognized in accumulated other comprehensive loss will be reclassified to earnings over the next 12 months.

We enter into foreign exchange forward contracts, with durations of up to 12 months, designed to limit the exposure to fluctuations in foreign exchange rates related to the translation of certain non-U.S. dollar denominated liabilities, including intercompany balances. Hedge accounting is not applied to these derivative instruments as gains and losses on these hedge transactions are designed to offset gains and losses on underlying balance sheet exposures. As of December 31, 2018 and 2017, the notional amount of foreign exchange contracts where hedge accounting was not applied was $271.5 million and $511.4 million, respectively.

The foreign exchange gain (loss) in our consolidated statements of income included the following gains and losses associated with foreign exchange contracts not designated as hedging instruments (in thousands):



	Year Ended December 31,
Foreign Exchange Forward Contracts:	2018			2017
Gain (loss) recognized in foreign exchange gain (loss)	$	(14,648	)	$	17,902

We did not enter into foreign exchange forward contracts in 2016.

The cash flow effects of our derivative contracts are included within net cash provided by operating activities in the consolidated statements of cash flows.

The following table summarizes the fair value of outstanding derivatives (in thousands):



	December 31, 2018
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Other current assets	$	1,929	Accrued liabilities	$	—
	Other non-current assets	2,141
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	1,194		Accrued liabilities	1,460
Total fair value of derivative instruments		$	5,264		$	1,460



	December 31, 2017
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Other non-current assets	$	2,138	Accrued liabilities	$	392
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	15,495		Accrued liabilities	5,017
Total fair value of derivative instruments		$	17,633		$	5,409

Although we do not offset derivative assets and liabilities within our consolidated balance sheets, our International Swap and Derivatives Association agreements provide for net settlement of transactions that are due to or from the same counterparty upon early termination of the agreement due to an event of default or other termination event. The following table summarizes the potential effect on our consolidated balance sheets of offsetting our interest rate contracts and foreign exchange forward contracts subject to such provisions (in thousands):



	December 31, 2018
	Gross Amounts of Recognized Assets/ Liabilities			Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet			Gross Amounts Not Offset in the Consolidated Balance Sheet
Description	Gross Amounts of Recognized Assets/ Liabilities			Gross Amounts Offset in the Consolidated Balance Sheet					Derivative Financial Instruments			Cash Collateral Received (Pledged)		Net Amount
Derivative assets	$	5,264		$	—	$	5,264		$	(935	)	$	—	$	4,329
Derivative liabilities	$	(1,460	)	$	—	$	(1,460	)	$	935		$	—	$	(525	)



	December 31, 2017
	Gross Amounts of Recognized Assets/ Liabilities			Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet			Gross Amounts Not Offset in the Consolidated Balance Sheet
Description	Gross Amounts of Recognized Assets/ Liabilities			Gross Amounts Offset in the Consolidated Balance Sheet					Derivative Financial Instruments			Cash Collateral Received (Pledged)		Net Amount
Derivative assets	$	17,633		$	—	$	17,633		$	(5,409	)	$	—	$	12,224
Derivative liabilities	$	(5,409	)	$	—	$	(5,409	)	$	5,409		$	—	$	—

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

The gross carrying amount of goodwill was as follows (in thousands):



Balance at December 31, 2017	$	947,537
Foreign exchange	(19,907		)
Balance at December 31, 2018	$	927,630

The gross carrying amounts and net book values of our intangible assets were as follows (in thousands):



	December 31, 2018								December 31, 2017
	Remaining Weighted- Average Useful Life (In years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Acquired developed technologies	13.9	$	3,110,641	$	(632,413	)	$	2,478,228	$	3,392,832	$	(562,473	)	$	2,830,359
Priority review voucher		111,101		—			111,101		—		—			—
Manufacturing contracts	—	12,256		(12,256		)	—		12,824		(12,634		)	190
Trademarks	—	2,896		(2,896		)	—		2,910		(2,910		)	—
Total finite-lived intangible assets		3,236,894		(647,565		)	2,589,329		3,408,566		(578,017		)	2,830,549
Acquired IPR&D assets		142,005		—			142,005		148,578		—			148,578
Total intangible assets		$	3,378,899	$	(647,565	)	$	2,731,334	$	3,557,144	$	(578,017	)	$	2,979,127

The decrease in the gross carrying amount of intangible assets as of December 31, 2018 compared to December 31, 2017 reflects the sale of the Prialt acquired developed technology asset to TerSera in September 2018 and the negative impact of foreign currency translation adjustments, which was due to the weakening of the euro against the U.S. dollar, partially offset by our purchase of a rare pediatric disease PRV from Spark Therapeutics, Inc. As we may use the PRV to obtain priority review by the FDA for one of our future regulatory submissions or may sell or transfer the PRV to a third party, we capitalized the acquisition cost, including direct transaction costs, as a finite-lived intangible asset upon closing of the transaction in May 2018.

The assumptions and estimates used to determine future cash flows and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by various factors, including external factors, such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for specific product lines. We reduced the estimated remaining useful life of the Erwinaze intangible asset due to the receipt of a contract termination notice from Porton Biopharma Limited in February 2019.

Based on finite-lived intangible assets recorded as of December 31, 2018, and assuming the underlying assets will not be impaired and that we will not change the expected lives of any other assets, future amortization expenses were estimated as follows (in thousands):



Year Ending December 31,	Estimated Amortization Expense
2019	242,953
2020	246,870
2021	198,956
2022	153,105
2023	153,105
Thereafter	1,483,239
Total	$	2,478,228