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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2021
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from              to             
Commission File Number: 001-33500
JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter) 
Ireland98-1032470
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Fifth Floor, Waterloo Exchange,
Waterloo Road, Dublin 4, Ireland D04 E5W7
011-353-1-634-7800
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary shares, nominal value $0.0001 per shareJAZZThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.






Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No 
As of April 27, 2021, 56,895,944 ordinary shares of the registrant, nominal value $0.0001 per share, were outstanding.


Table of Contents
JAZZ PHARMACEUTICALS PLC
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2021

INDEX
 
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

We own or have rights to various copyrights, trademarks, and trade names used in our business in the U.S. and/or other countries, including the following: Jazz Pharmaceuticals®, Xyrem® (sodium oxybate) oral solution, Sunosi® (solriamfetol), Defitelio® (defibrotide sodium), Defitelio® (defibrotide), Erwinaze® (asparaginase Erwinia chrysanthemi), Erwinase®, CombiPlex®, Vyxeos® (daunorubicin and cytarabine) liposome for injection, Vyxeos® liposomal 44 mg/100 mg powder for concentrate for solution for infusion, Zepzelca™ (lurbinectedin), and Xywav™ (calcium, magnesium, potassium, and sodium oxybates) oral solution. This report also includes trademarks, service marks and trade names of other companies. Trademarks, service marks and trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.





2

Table of Contents
PART I – FINANCIAL INFORMATION
 
Item 1.Financial Statements

JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$2,097,533 $1,057,769 
Investments335,000 1,075,000 
Accounts receivable, net of allowances413,976 396,490 
Inventories115,475 95,396 
Prepaid expenses57,185 62,422 
Other current assets147,727 152,491 
Total current assets3,166,896 2,839,568 
Property, plant and equipment, net123,863 127,935 
Operating lease assets125,738 129,169 
Intangible assets, net2,108,046 2,195,051 
Goodwill938,398 958,303 
Deferred tax assets, net258,454 254,916 
Deferred financing costs4,724 5,238 
Other non-current assets30,351 25,721 
Total assets$6,756,470 $6,535,901 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$77,738 $26,945 
Accrued liabilities374,035 352,732 
Current portion of long-term debt248,613 246,322 
Income taxes payable49,334 25,200 
Deferred revenue2,373 2,546 
Total current liabilities752,093 653,745 
Deferred revenue, non-current1,852 2,315 
Long-term debt, less current portion1,853,033 1,848,516 
Operating lease liabilities, less current portion136,020 140,035 
Deferred tax liabilities, net109,915 130,397 
Other non-current liabilities105,868 101,148 
Commitments and contingencies (Note 11)
Shareholders’ equity:
Ordinary shares6 6 
Non-voting euro deferred shares55 55 
Capital redemption reserve472 472 
Additional paid-in capital2,694,858 2,633,670 
Accumulated other comprehensive loss(179,428)(134,352)
Retained earnings1,281,726 1,159,894 
Total shareholders’ equity3,797,689 3,659,745 
Total liabilities and shareholders’ equity$6,756,470 $6,535,901 



The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Table of Contents

JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share amounts)
(Unaudited)
 
 Three Months Ended
March 31,
 20212020
Revenues:
Product sales, net$603,531 $530,205 
Royalties and contract revenues4,050 4,521 
Total revenues607,581 534,726 
Operating expenses:
Cost of product sales (excluding amortization of acquired developed technologies)40,189 28,657 
Selling, general and administrative260,508 208,400 
Research and development76,573 86,107 
Intangible asset amortization68,192 62,847 
Acquired in-process research and development 202,250 
Impairment charge 136,139 
Total operating expenses445,462 724,400 
Income (loss) from operations162,119 (189,674)
Interest expense, net(27,376)(18,496)
Foreign exchange gain (loss)943 (1,132)
Income (loss) before income tax provision (benefit) and equity in gain of investees135,686 (209,302)
Income tax provision (benefit)18,019 (51,287)
Equity in gain of investees(4,165)(182)
Net income (loss)$121,832 $(157,833)
Net income (loss) per ordinary share:
Basic$2.16 $(2.82)
Diluted$2.09 $(2.82)
Weighted-average ordinary shares used in per share calculations - basic56,468 55,956 
Weighted-average ordinary shares used in per share calculations - diluted58,393 55,956 














The accompanying notes are an integral part of these condensed consolidated financial statements.
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JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
 Three Months Ended
March 31,
 20212020
Net income (loss)$121,832 $(157,833)
Other comprehensive loss:
Foreign currency translation adjustments(46,220)(29,990)
Unrealized gain (loss) on hedging activities, net of income tax provision (benefit) of $163 and ($579), respectively
1,144 (4,053)
Other comprehensive loss(45,076)(34,043)
Total comprehensive income (loss)$76,756 $(191,876)

























The accompanying notes are an integral part of these condensed consolidated financial statements.
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JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
 Ordinary SharesNon-voting Euro DeferredCapital
Redemption
Reserve
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Equity
SharesAmountSharesAmount
Balance at December 31, 202056,171 $6 4,000 $55 $472 $2,633,670 $(134,352)$1,159,894 $3,659,745 
Issuance of ordinary shares in conjunction with exercise of share options408 — — — — 50,407 — — 50,407 
Issuance of ordinary shares in conjunction with vesting of restricted stock units294 — — — — — — — — 
Shares withheld for payment of employee's withholding tax liability— — — — — (23,784)— — (23,784)
Share-based compensation— — — — — 34,565 — — 34,565 
Other comprehensive loss— — — — — — (45,076)— (45,076)
Net income— — — — — — — 121,832 121,832 
Balance at March 31, 202156,873 $6 4,000 $55 $472 $2,694,858 $(179,428)$1,281,726 $3,797,689 

 Ordinary SharesNon-voting Euro DeferredCapital
Redemption
Reserve
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Equity
SharesAmountSharesAmount
Balance at December 31, 201956,140 $6 4,000 $55 $472 $2,266,026 $(223,393)$1,067,815 $3,110,981 
Issuance of ordinary shares in conjunction with exercise of share options145 — — — — 13,264 — — 13,264 
Issuance of ordinary shares in conjunction with vesting of restricted stock units214 — — — — — — — — 
Shares withheld for payment of employee's withholding tax liability— — — — — (13,547)— — (13,547)
Share-based compensation— — — — — 28,731 — — 28,731 
Shares repurchased(1,131)— — — — — — (139,053)(139,053)
Other comprehensive loss— — — — — — (34,043)— (34,043)
Net loss— — — — — — — (157,833)(157,833)
Balance at March 31, 202055,368 $6 4,000 $55 $472 $2,294,474 $(257,436)$770,929 $2,808,500 

















The accompanying notes are an integral part of these condensed consolidated financial statements.
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JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) 
 Three Months Ended
March 31,
 20212020
Operating activities
Net income (loss)$121,832 $(157,833)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Intangible asset amortization68,192 62,847 
Share-based compensation 34,485 28,654 
Impairment charge 136,139 
Depreciation4,779 4,527 
Acquired in-process research and development 202,250 
Deferred tax benefit(19,110)(63,976)
Provision for losses on accounts receivable and inventory1,083 2,620 
Amortization of debt discount and deferred financing costs15,688 12,000 
Other non-cash transactions7,766 1,793 
Changes in assets and liabilities:
Accounts receivable(18,245)37,861 
Inventories(22,014)(10,235)
Prepaid expenses and other current assets(2,897)(17,843)
Other non-current assets157 505 
Operating lease assets3,690 3,195 
Accounts payable51,292 19,604 
Accrued liabilities13,719 (12,198)
Income taxes payable24,625 20,829 
Deferred revenue(637)(1,180)
Other non-current liabilities4,774 7,316 
Operating lease liabilities, less current portion(4,182)(3,906)
Net cash provided by operating activities284,997 272,969 
Investing activities
Proceeds from maturity of investments760,000 345,000 
Purchases of property, plant and equipment(2,168)(4,830)
Acquired in-process research and development (202,250)
Acquisition of intangible assets (13,000)
Acquisition of investments(20,700)(185,000)
Net cash provided by (used in) investing activities737,132 (60,080)
Financing activities
Proceeds from employee equity incentive and purchase plans50,407 13,264 
Payment of employee withholding taxes related to share-based awards(23,784)(13,547)
Repayments of long-term debt(8,347)(8,347)
Share repurchases (139,053)
Net cash provided by (used in) financing activities18,276 (147,683)
Effect of exchange rates on cash and cash equivalents(641)(948)
Net increase in cash and cash equivalents1,039,764 64,258 
Cash and cash equivalents, at beginning of period1,057,769 637,344 
Cash and cash equivalents, at end of period$2,097,533 $701,602 







The accompanying notes are an integral part of these condensed consolidated financial statements.
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JAZZ PHARMACEUTICALS PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. The Company and Summary of Significant Accounting Policies
Jazz Pharmaceuticals plc is a global biopharmaceutical company dedicated to developing and commercializing life-changing medicines that transform the lives of patients with serious diseases – often with limited or no options. We have a diverse portfolio of marketed medicines and novel product candidates, from early- to late-stage development, in key therapeutic areas. Our focus is in neuroscience, including sleep medicine and movement disorders, and in oncology, including hematologic malignancies and solid tumors. We actively explore new options for patients including novel compounds, small molecules, biologics and innovative delivery technologies.
Our lead marketed products are:
Xyrem® (sodium oxybate) oral solution, a 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 narcolepsy patients seven years of age and older;
Xywav™ (calcium, magnesium, potassium, and sodium oxybates) oral solution, a product that contains 92% less sodium than Xyrem, approved by FDA and launched in the U.S. in November 2020 for the treatment of cataplexy or EDS in narcolepsy patients seven years of age and older;
Sunosi® (solriamfetol), a product approved by FDA and marketed in the U.S. and in Europe to improve wakefulness in adult patients with EDS associated with narcolepsy or obstructive sleep apnea;
Zepzelca™ (lurbinectedin), a product approved by FDA in June 2020 and launched in the U.S. in July 2020 for the treatment of adult patients with metastatic small cell lung cancer, or SCLC, with disease progression on or after platinum-based chemotherapy;
Vyxeos® (daunorubicin and cytarabine) liposome for injection, a product approved in the U.S. and in Europe (where it is marketed as Vyxeos® liposomal 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 AML, or AML with myelodysplasia-related changes;
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
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, or ALL, who have developed hypersensitivity to E. coli-derived asparaginase.
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.
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared following the requirements of the U.S. Securities and Exchange Commission for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by U.S. generally accepted accounting principles, or U.S. GAAP, can be condensed or omitted. The information included in this Quarterly Report on Form 10‑Q should be read in conjunction with our annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020.
In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of our financial position and operating results. The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021, for any other interim period or for any future period.
Our significant accounting policies have not changed substantially from those previously described in our Annual Report on Form 10-K for the year ended December 31, 2020.
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These condensed consolidated financial statements include the accounts of Jazz Pharmaceuticals plc and our subsidiaries, and intercompany transactions and balances have been eliminated.
Our operating segment is reported in a manner consistent with the internal reporting provided to the chief operating decision maker, or CODM. Our CODM has been identified as our chief executive officer. We have determined that we operate in one business segment, which is the identification, development and commercialization of meaningful pharmaceutical products that address unmet medical needs.
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 condensed 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 December 2019, the Financial Accounting Standards Board, or FASB, issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes", which simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance for income taxes and making other minor improvements. We adopted this standard on January 1, 2021 and adoption did not have a material impact on our consolidated financial statements.
Variable Interest Entity
In the three months ended March 31, 2021, we invested in a cell of a protected cell company, or the protected cell, as part of our directors’ and officers’ liability risk financing strategy. Based on our control and the structure of the protected cell, we concluded that Jazz is the primary beneficiary of the protected cell and is required to consolidate the protected cell. The insurance premium payable to the protected cell for the three months ended March 31, 2021 and the protected cell’s assets and liabilities as of March 31, 2021 were immaterial.
Significant Risks and Uncertainties
With the global impact of the COVID-19 pandemic, we have developed a comprehensive response strategy including establishing cross-functional response teams and implementing business continuity plans to manage the impact of the COVID-19 pandemic on our employees, patients and our business. Since the second quarter of 2020, we have been experiencing financial and other impacts of the pandemic, and given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, we expect that our business, financial condition, results of operations and growth prospects will continue to be adversely affected in future quarters. With respect to our commercialization activities, the evolving effects of the COVID-19 pandemic continue to have a negative impact on demand, new patient starts and treatments for our products, primarily due to the inherent limitations of telemedicine and a reprioritization of healthcare resources toward COVID-19. The extent of the impact on our ability to generate sales of and revenues from our approved products, execute on new product launches, our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our ordinary shares, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration and severity of the pandemic, governmental “stay-at-home” orders and travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Ireland and other countries, and the effectiveness of vaccination programs and other actions taken globally to contain and treat the disease.
Our business has been substantially dependent on Xyrem and while we expect that our business will continue to be substantially dependent on oxybate product sales from both Xyrem and Xywav, there is no guarantee that we can maintain oxybate sales at or near historical levels, or that oxybate sales will continue to grow. Our ability to maintain or increase oxybate sales is subject to a number of risks and uncertainties including, without limitation, those related to the introduction of authorized generic and generic versions of sodium oxybate and/or new products for treatment of cataplexy and/or EDS in narcolepsy in the U.S. market, the current and potential impacts of the ongoing COVID-19 pandemic, including the current and expected future negative impact on demand for our products and the uncertainty with respect to our ability to meet commercial demand in the future, increased pricing pressure from, changes in policies by, or restrictions on reimbursement imposed by, third party payers, including our ability to obtain and maintain adequate coverage and reimbursement for Xywav, challenges to our intellectual property around Xyrem and Xywav, and continued acceptance of Xyrem by physicians and patients and acceptance of Xywav by payers, physicians and patients.
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In addition to risks related specifically to Xyrem and Xywav, we are subject to other challenges and risks related to successfully commercializing a portfolio of oncology products and other neuroscience products, including Sunosi, Defitelio, Erwinaze, Vyxeos and Zepzelca, and other 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: obtaining regulatory approval of our late-stage product candidates; effectively commercializing our recently approved products such as Sunosi, Zepzelca and Xywav; 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; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; 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. In addition, the pending acquisition of GW Pharmaceuticals plc, or GW, may not be completed on the currently contemplated timeline or terms, or at all, and even if consummated, the anticipated benefits of the pending acquisition to us may not be realized fully within the expected timeframe or at all or may take longer to realize or cost more than expected, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. Moreover, to the extent the COVID-19 pandemic continues to adversely affect our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above. We discuss many of these risks, uncertainties and other risk factors in greater detail under Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2020.
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 March 31, 2021, we had foreign exchange forward contracts with notional amounts totaling $425.1 million. As of March 31, 2021, the outstanding foreign exchange forward contracts had a net liability fair value of $10.7 million. As of March 31, 2021, we had interest rate swap contracts with notional amounts totaling $300.0 million. These outstanding interest rate swap contracts had a net liability fair value of $1.5 million as of March 31, 2021. 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 and as of March 31, 2021 and December 31, 2020, allowances on receivables were not material. As of March 31, 2021, two customers accounted for 81% of gross accounts receivable, Express Scripts Specialty Distribution Services, Inc. and its affiliates, or ESSDS, which accounted for 67% of gross accounts receivable, and McKesson Corporation and affiliates, or McKesson, which accounted for 14% of gross accounts receivable. As of December 31, 2020, two customers accounted for 80% of gross accounts receivable, ESSDS, which accounted for 68% of gross accounts receivable, and McKesson, which accounted for 12% 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.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, which simplifies the accounting for convertible instruments by
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eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. By removing the separation model, a convertible debt instrument will be reported as a single liability instrument with no separate accounting for embedded conversion features. This new standard also removes certain settlement conditions that are required for contracts to qualify for equity classification and eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. This new standard will be effective for us for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than the fiscal year beginning after December 15, 2020. We may elect to apply the amendments on a retrospective or modified retrospective basis. We are currently evaluating the timing, method of adoption and overall impact of this standard on our consolidated financial statements.

2. Acquisition Agreement
GW Transaction Agreement
On February 3, 2021, we announced that we have entered into a definitive transaction agreement, or the GW Transaction Agreement, with GW under which a wholly-owned subsidiary of ours, Jazz Pharmaceuticals UK Holdings Limited, or Acquisition Sub, agreed to acquire GW. The GW Transaction Agreement provides, among other things, that subject to the satisfaction or waiver of the conditions set forth in the GW Transaction Agreement, Acquisition Sub will acquire the entire issued share capital of GW pursuant to a scheme of arrangement under Part 26 of the United Kingdom Companies Act 2006, or Scheme of Arrangement, which we refer to as the GW Acquisition.
Under the GW Transaction Agreement, at the effective time of the Scheme of Arrangement, all GW ordinary shares issued and outstanding will be transferred to Acquisition Sub, and the holders of GW ordinary shares will have the right to receive, for each such share, (a) $16.6623 in cash and (b) an amount of our ordinary shares determined based on the exchange ratio, which exchange ratio will be determined as follows:
If the volume-weighted weighted average sales price of our ordinary shares, as determined in accordance with the GW Transaction Agreement, or the Defined VWAP, is greater than $139.72 but less than $170.76, the exchange ratio will be an amount equal to the quotient obtained by dividing (x) $1.6623 by (y) the Defined VWAP;
If the Defined VWAP is equal to or less than $139.72, the exchange ratio will be 0.011929; or
If the Defined VWAP is an amount equal to or greater than $170.76, the exchange ratio will be 0.009760.
Because each American Depositary Share in GW, or GW ADSs, represents a beneficial interest in 12 GW ordinary shares, holders of GW ADSs will be entitled to receive 12 times the foregoing cash and share amounts, or (1) $200.00 in cash and (2) $20.00 in the form of our ordinary shares with the actual number of our ordinary shares being determined based on the exchange ratio set out above. The total consideration to be paid by us for the entire issued share capital of GW is approximately $7.2 billion.
The GW Transaction Agreement contains customary representations and warranties given by GW and us, covenants regarding the conduct of GW’s business prior to the consummation of the GW Acquisition, termination rights and other customary provisions. The GW Acquisition is expected to close in the first half of May 2021, subject to the satisfaction or waiver of the conditions set forth in the GW Transaction Agreement.

3. Cash and Available-for-Sale Securities
Cash, cash equivalents and investments consisted of the following (in thousands): 
March 31, 2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cash and
Cash
Equivalents
Investments
Cash$851,856 $ $ $851,856 $851,856 $ 
Time deposits1,295,000   1,295,000 960,000 335,000 
Money market funds285,677   285,677 285,677  
Totals$2,432,533 $ $ $2,432,533 $2,097,533 $335,000 
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December 31, 2020
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cash and
Cash
Equivalents
Investments
Cash$517,117 $ $ $517,117 $517,117 $ 
Time deposits1,360,000   1,360,000 285,000 1,075,000 
Money market funds255,652   255,652 255,652  
Totals$2,132,769 $ $ $2,132,769 $1,057,769 $1,075,000 
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 condensed consolidated statements of income (loss). Our investment balances represent time deposits with original maturities of greater than three months and less than one year. Interest income from available-for-sale securities was $1.2 million and $4.4 million in the three months ended March 31, 2021 and 2020, respectively.

4. Fair Value Measurement
The following table summarizes, by major security type, our available-for-sale securities and derivative contracts as of March 31, 2021 and December 31, 2020 that were measured at fair value on a recurring basis and were categorized using the fair value hierarchy (in thousands): 
March 31, 2021December 31, 2020
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$ $1,295,000 $1,295,000 $ $1,360,000 $1,360,000 
Money market funds285,677  285,677 255,652  255,652 
Foreign exchange forward contracts 488 488  11,907 11,907 
Totals$285,677 $1,295,488 $1,581,165 $255,652 $1,371,907 $1,627,559 
Liabilities:
Interest rate contracts$ $1,527 $1,527 $ $2,835 $2,835 
Foreign exchange forward contracts 11,149 11,149  790 790 
Totals$ $12,676 $12,676 $ $3,625 $3,625 
As of March 31, 2021, 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 2021 or 2020.
As of March 31, 2021, 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.
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As of March 31, 2021, the estimated fair values of our 1.875% exchangeable senior notes due 2021, or the 2021 Notes, our 1.50% exchangeable senior notes due 2024, or the 2024 Notes, and our 2.00% exchangeable senior notes due 2026, or the 2026 Notes, were approximately $224 million, $625 million and $1.3 billion, respectively. The fair values of the 2021 Notes, the 2024 Notes and the 2026 Notes, which we refer to collectively as the Exchangeable Senior Notes, were estimated using quoted market prices obtained from brokers (Level 2). The estimated fair value of our borrowing under our term loan was approximately equal to its book value based on the borrowing rates currently available for variable rate loans (Level 2).

5. 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 March 31, 2021 and December 31, 2020, the interest rate swap agreements had a notional amount of $300.0 million. As a result of these agreements, the interest rate on a portion of our term loan borrowings was fixed at 1.895%, plus the borrowing spread, until July 12, 2021.
The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The impact on accumulated other comprehensive income (loss) and earnings from derivative instruments that qualified as cash flow hedges for the three months ended March 31, 2021 and 2020 was as follows (in thousands):
Three Months Ended
March 31,
Interest Rate Contracts:20212020
Loss recognized in accumulated other comprehensive loss, net of tax$(16)$(4,200)
Loss reclassified from accumulated other comprehensive loss to interest expense, net of tax1,160 147 
Assuming no change in London Inter-Bank Offered Rate, or LIBOR, based interest rates from market rates as of March 31, 2021, $1.3 million of losses, net of tax, 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 March 31, 2021 and December 31, 2020, the notional amount of foreign exchange contracts where hedge accounting is not applied was $425.1 million and $357.4 million, respectively.
The foreign exchange gain (loss) in our condensed consolidated statements of income (loss) included the following losses associated with foreign exchange contracts not designated as hedging instruments (in thousands):
Three Months Ended
March 31,
Foreign Exchange Forward Contracts:20212020
Loss recognized in foreign exchange gain (loss)$(13,050)$(6,139)
The cash flow effects of our derivative contracts for the three months ended March 31, 2021 and 2020 are included within net cash provided by operating activities in the condensed consolidated statements of cash flows.
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The following tables summarize the fair value of outstanding derivatives (in thousands):
March 31, 2021
Asset DerivativesLiability Derivatives
Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as hedging instruments:
Interest rate contractsOther current assets$ Accrued liabilities$1,527 
Derivatives not designated as hedging instruments:
Foreign exchange forward contractsOther current assets488 Accrued liabilities11,149 
Total fair value of derivative instruments$488 $12,676 
December 31, 2020
Asset DerivativesLiability Derivatives
Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as hedging instruments:
Interest rate contractsOther current assets$ Accrued liabilities$2,835 
Derivatives not designated as hedging instruments:
Foreign exchange forward contractsOther current assets11,907 Accrued liabilities790 
Total fair value of derivative instruments$11,907 $3,625 
Although we do not offset derivative assets and liabilities within our condensed 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 tables summarize the potential effect on our condensed consolidated balance sheets of offsetting our interest rate contracts and foreign exchange forward contracts subject to such provisions (in thousands):
March 31, 2021
Gross Amounts of Recognized Assets/ LiabilitiesGross Amounts Offset in the Consolidated Balance SheetNet Amounts of Assets/ Liabilities Presented in the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance Sheet
DescriptionDerivative Financial InstrumentsCash Collateral Received (Pledged)Net Amount
Derivative assets$488 $ $488 $(488)$ $ 
Derivative liabilities(12,676) (12,676)488  (12,188)
December 31, 2020
Gross Amounts of Recognized Assets/ LiabilitiesGross Amounts Offset in the Consolidated Balance SheetNet Amounts of Assets/ Liabilities Presented in the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance Sheet
DescriptionDerivative Financial InstrumentsCash Collateral Received (Pledged)Net Amount
Derivative assets$11,907 $ $11,907 $(2,207)$ $9,700 
Derivative liabilities(3,625) (3,625)2,207  (1,418)

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6. Inventories
Inventories consisted of the following (in thousands): 
March 31,
2021
December 31,
2020
Raw materials$23,415 $16,003 
Work in process52,117 45,758 
Finished goods39,943 33,635 
Total inventories$115,475 $95,396 

7. Goodwill and Intangible Assets
The gross carrying amount of goodwill was as follows (in thousands):
Balance at December 31, 2020$958,303 
Foreign exchange(19,905)
Balance at March 31, 2021$938,398 
The gross carrying amounts and net book values of our intangible assets were as follows (in thousands): 
 March 31, 2021December 31, 2020
 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 technologies12.5$3,326,448 $(1,218,402)$2,108,046 $3,379,162 $(1,184,111)$2,195,051 
Manufacturing contracts12,551 (12,551) 13,135 (13,135) 
Trademarks2,903 (2,903) 2,917 (2,917) 
Total intangible assets$3,341,902 $(1,233,856)$2,108,046 $3,395,214 $(1,200,163)$2,195,051 
The decrease in the gross carrying amount of intangible assets as of March 31, 2021 compared to December 31, 2020 reflects the negative impact of foreign currency translation adjustments due to the weakening of the euro against the U.S. dollar.
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.
Based on finite-lived intangible assets recorded as of March 31, 2021, and assuming the underlying assets will not be impaired and that we will not change the expected lives of the assets, future amortization expenses were estimated as follows (in thousands): 
Year Ending December 31,Estimated Amortization Expense
2021 (remainder)$152,570 
2022172,486 
2023172,486 
2024172,486 
2025172,486 
Thereafter1,265,532 
Total$2,108,046 

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8. Certain Balance Sheet Items
Property, plant and equipment consisted of the following (in thousands):
March 31,
2021
December 31,
2020
Leasehold improvements$54,155 $54,113 
Land and buildings47,440 47,555 
Manufacturing equipment and machinery33,096 33,465 
Computer software24,479 22,781 
Computer equipment16,785 18,749 
Furniture and fixtures11,641 11,598 
Construction-in-progress6,256 7,262 
Subtotal193,852 195,523 
Less accumulated depreciation and amortization(69,989)(67,588)
Property, plant and equipment, net$123,863 $127,935 
Accrued liabilities consisted of the following (in thousands):
March 31,
2021
December 31,
2020
Rebates and other sales deductions$137,337 $127,534 
Employee compensation and benefits81,155 102,601 
Sales returns reserve20,278 18,368 
Royalties17,824 15,230 
Consulting and professional services14,201 6,660 
Current portion of operating lease liabilities14,048 14,457 
Derivative instrument liabilities12,676 3,625 
Inventory-related accruals11,199 9,809 
Clinical trial accruals10,722 9,108 
Accrued interest7,539 5,722 
Selling and marketing accruals7,304 6,742 
Accrued collaboration expenses4,918 444 
Accrued construction-in-progress835 1,119 
Other33,999 31,313 
Total accrued liabilities$374,035 $352,732 

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9. Debt
The following table summarizes the carrying amount of our indebtedness (in thousands):