SEC Filing | Jazz Pharmaceuticals plc

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jazz-20220930

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 September 30, 2022


☐			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)


Ireland			98-1032470
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary shares, nominal value $0.0001 per share	JAZZ	The 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 filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller 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 November 2, 2022, 62,966,320 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 SEPTEMBER 30, 2022

INDEX


		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets – September 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Income (Loss) – Three and Nine Months Ended September 30, 2022 and 2021	4
	Condensed Consolidated Statements of Comprehensive Loss – Three and Nine Months Ended September 30, 2022 and 2021	5
	Condensed Consolidated Statements of Shareholders’ Equity – Three and Nine Months Ended September 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2022 and 2021	8
	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49

Item 4.	Controls and Procedures	49

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	50

Item 1A.	Risk Factors	50

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86



Item 6.	Exhibits	87

SIGNATURES		89

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, Xywav® (calcium, magnesium, potassium, and sodium oxybates) oral solution, Epidiolex® (cannabidiol) oral solution, Epidyolex® (the trade name in Europe for Epidiolex), Defitelio® (defibrotide sodium), Defitelio® (defibrotide), CombiPlex®, Vyxeos® (daunorubicin and cytarabine) liposome for injection, Vyxeos® liposomal 44 mg/100 mg powder for concentrate for solution for infusion, Zepzelca® (lurbinectedin), Rylaze® (asparaginase erwinia chrysanthemi (recombinant)-rywn) and Sativex® (nabiximols) oral solution. This Quarterly Report on Form 10-Q 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.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	839,358	$	591,448
Investments	60,000		—
Accounts receivable, net of allowances	601,179		563,360
Inventories	728,074		1,072,721
Prepaid expenses	92,877		131,413
Other current assets	250,016		252,392

Total current assets	2,571,504		2,611,334
Property, plant and equipment, net	216,339		256,837
Operating lease assets	73,728		86,586
Intangible assets, net	5,570,394		7,152,328
Goodwill	1,592,635		1,827,609
Deferred tax assets, net	314,965		311,103
Deferred financing costs	9,949		12,029
Other non-current assets	35,153		40,813
Total assets	$	10,384,667	$	12,298,639
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	102,249	$	100,298
Accrued liabilities	668,390		666,304
Current portion of long-term debt	31,000		31,000
Income taxes payable	10,444		9,608
Deferred revenue	871		2,093
Total current liabilities	812,954		809,303
Deferred revenue, non-current	116		463
Long-term debt, less current portion	5,695,814		6,018,943
Operating lease liabilities, less current portion	72,984		87,200
Deferred tax liabilities, net	933,670		1,300,541
Other non-current liabilities	123,935		116,998
Commitments and contingencies (Note 10)
Shareholders’ equity:

Ordinary shares	6		6
Non-voting euro deferred shares	55		55
Capital redemption reserve	472		472
Additional paid-in capital	3,387,997		3,534,792
Accumulated other comprehensive loss	(1,617,646)		(400,360)
Retained earnings	974,310		830,226


Total shareholders’ equity	2,745,194		3,965,191
Total liabilities and shareholders’ equity	$	10,384,667	$	12,298,639

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

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JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Product sales, net	$	935,766	$	834,247	$	2,673,903	$	2,186,118
Royalties and contract revenues	4,886		3,868		13,348		11,389
Total revenues	940,652		838,115		2,687,251		2,197,507
Operating expenses:
Cost of product sales (excluding amortization of acquired developed technologies)	133,661		145,224		373,153		304,607
Selling, general and administrative	358,478		363,682		1,033,764		1,053,221
Research and development	148,870		141,036		417,898		350,305
Intangible asset amortization	141,232		159,804		461,782		368,476
Acquired in-process research and development	—		—		69,148		—
Impairment charge	133,648		—		133,648		—
Total operating expenses	915,889		809,746		2,489,393		2,076,609
Income from operations	24,763		28,369		197,858		120,898
Interest expense, net	(80,244)		(93,372)		(214,117)		(190,168)
Foreign exchange gain (loss)	(4,649)		(2,631)		(16,532)		1,262


Loss before income tax expense (benefit) and equity in loss (gain) of investees	(60,130)		(67,634)		(32,791)		(68,008)
Income tax expense (benefit)	(43,027)		(18,057)		(58,603)		228,583
Equity in loss (gain) of investees	2,545		3,256		9,148		(2,274)


Net income (loss)	$	(19,648)	$	(52,833)	$	16,664	$	(294,317)



Net income (loss) per ordinary share:
Basic	$	(0.31)	$	(0.86)	$	0.27	$	(4.98)
Diluted	$	(0.31)	$	(0.86)	$	0.26	$	(4.98)
Weighted-average ordinary shares used in per share calculations - basic	62,785		61,284		62,365		59,084
Weighted-average ordinary shares used in per share calculations - diluted	62,785		61,284		63,388		59,084

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 LOSS

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	(19,648)	$	(52,833)	$	16,664	$	(294,317)
Other comprehensive loss:
Foreign currency translation adjustments	(511,617)		(206,819)		(1,217,414)		(265,342)

Loss on fair value hedging activities reclassified from accumulated other comprehensive income (loss) to foreign exchange gain (loss), net of income tax benefit of $—, $—, $43 and $—, respectively	—		—		128		—
Loss on cash flow hedging activities reclassified from accumulated other comprehensive income (loss) to interest expense, net of income tax benefit of $—, $22, $— and $355, respectively	—		153		—		2,482
Unrealized loss on cash flow hedging activities, net of income tax benefit of $—, $—, $— and $2, respectively	—		—		—		(14)

Unrealized gain (loss) on fair value hedging activities, net of income tax provision (benefit) of $—, $28, $— and ($97), respectively	—		84		—		(291)
Other comprehensive loss	(511,617)		(206,582)		(1,217,286)		(263,165)
Total comprehensive loss	$	(531,265)	$	(259,415)	$	(1,200,622)	$	(557,482)

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 Shares			Non-voting Euro Deferred			Capital Redemption Reserve		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	61,633	$	6	4,000	$	55	$	472	$	3,534,792	$	(400,360)	$	830,226	$	3,965,191
Cumulative effect adjustment from adoption of ASU 2020-06	—	—		—	—		—		(333,524)		—		127,474		(206,050)
Issuance of ordinary shares in conjunction with exercise of share options	207	—		—	—		—		21,729		—		—		21,729

Issuance of ordinary shares in conjunction with vesting of restricted stock units	404	—		—	—		—		—		—		—		—
Shares withheld for payment of employee's withholding tax liability	—	—		—	—		—		(33,776)		—		—		(33,776)

Share-based compensation	—	—		—	—		—		50,106		—		—		50,106

Other comprehensive loss	—	—		—	—		—		—		(190,360)		—		(190,360)
Net income	—	—		—	—		—		—		—		1,647		1,647
Balance at March 31, 2022	62,244	$	6	4,000	$	55	$	472	$	3,239,327	$	(590,720)	$	959,347	$	3,608,487





Issuance of ordinary shares in conjunction with exercise of share options	194	—		—	—		—		16,640		—		—		16,640
Issuance of ordinary shares under employee stock purchase plan	81	—		—	—		—		8,234		—		—		8,234
Issuance of ordinary shares in conjunction with vesting of restricted stock units	104	—		—	—		—		—		—		—		—
Shares withheld for payment of employee's withholding tax liability	—	—		—	—		—		(6,289)		—		—		(6,289)

Share-based compensation	—	—		—	—		—		54,407		—		—		54,407
Shares repurchased	—	—		—	—		—		—		—		(54)		(54)
Other comprehensive loss	—	—		—	—		—		—		(515,309)		—		(515,309)
Net income	—	—		—	—		—		—		—		34,665		34,665
Balance at June 30, 2022	62,623	$	6	4,000	$	55	$	472	$	3,312,319	$	(1,106,029)	$	993,958	$	3,200,781


Issuance of ordinary shares in conjunction with exercise of share options	207	—		—	—		—		21,260		—		—		21,260

Issuance of ordinary shares in conjunction with vesting of restricted stock units	60	—		—	—		—		—		—		—		—
Shares withheld for payment of employee's withholding tax liability	—	—		—	—		—		(2,567)		—		—		(2,567)

Share-based compensation	—	—		—	—		—		56,985		—		—		56,985

Other comprehensive loss	—	—		—	—		—		—		(511,617)		—		(511,617)
Net loss	—	—		—	—		—		—		—		(19,648)		(19,648)
Balance at September 30, 2022	62,890	$	6	4,000	$	55	$	472	$	3,387,997	$	(1,617,646)	$	974,310	$	2,745,194

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JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Ordinary Shares			Non-voting Euro Deferred			Capital Redemption Reserve		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	56,171	$	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 options	408	—		—	—		—		50,407		—		—		50,407

Issuance of ordinary shares in conjunction with vesting of restricted stock units	294	—		—	—		—		—		—		—		—
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, 2021	56,873	$	6	4,000	$	55	$	472	$	2,694,858	$	(179,428)	$	1,281,726	$	3,797,689
Issuance of ordinary shares in connection with the acquisition of GW Pharmaceuticals plc	3,798	—		—	—		—		608,456		—		—		608,456
Share-based payment - precombination service in connection with the acquisition of GW Pharmaceuticals plc	—	—		—	—		—		3,555		—		—		3,555
Issuance of ordinary shares in conjunction with exercise of share options	328	—		—	—		—		43,600		—		—		43,600
Issuance of ordinary shares under employee stock purchase plan	79	—		—	—		—		8,282		—		—		8,282
Issuance of ordinary shares in conjunction with vesting of restricted stock units	37	—		—	—		—		—		—		—		—
Shares withheld for payment of employee's withholding tax liability	—	—		—	—		—		(3,388)		—		—		(3,388)
Share-based compensation	—	—		—	—		—		48,119		—		—		48,119

Other comprehensive loss	—	—		—	—		—		—		(11,507)		—		(11,507)
Net loss	—	—		—	—		—		—		—		(363,316)		(363,316)
Balance at June 30, 2021	61,115	$	6	4,000	$	55	$	472	$	3,403,482	$	(190,935)	$	918,410	$	4,131,490

Issuance of ordinary shares in conjunction with exercise of share options	202	—		—	—		—		14,822		—		—		14,822

Issuance of ordinary shares in conjunction with vesting of restricted stock units	63	—		—	—		—		—		—		—		—
Shares withheld for payment of employee's withholding tax liability	—	—		—	—		—		(2,431)		—		—		(2,431)
Share-based compensation	—	—		—	—		—		54,011		—		—		54,011

Other comprehensive loss	—	—		—	—		—		—		(206,582)		—		(206,582)
Net loss	—	—		—	—		—		—		—		(52,833)		(52,833)
Balance at September 30, 2021	61,380	$	6	4,000	$	55	$	472	$	3,469,884	$	(397,517)	$	865,577	$	3,938,477

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)


	Nine Months Ended September 30,
	2022		2021
Operating activities
Net income (loss)	$	16,664	$	(294,317)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Intangible asset amortization	461,782		368,476
Acquisition accounting inventory fair value step-up adjustment	203,189		148,637
Share-based compensation	160,438		135,887
Deferred tax expense (benefit)	(146,874)		96,593
Impairment charge	133,648		—
Acquired in-process research and development	69,148		—
Loss on disposal of a business	39,258		—
Non-cash interest expense	32,002		66,055
Depreciation	22,958		19,387
Provision for losses on accounts receivable and inventory	13,066		13,444



Other non-cash transactions	(26,352)		9,622
Changes in assets and liabilities:
Accounts receivable	(43,868)		(27,956)
Inventories	(50,458)		(33,891)
Prepaid expenses and other current assets	23,801		(34,722)
Operating lease assets	10,672		12,054
Other non-current assets	(4,006)		(1,837)
Accounts payable	4,188		19,167
Accrued liabilities	17,864		93,534
Income taxes payable	(172)		9,171
Deferred revenue	(1,570)		(1,608)
Operating lease liabilities, less current portion	(12,139)		(13,423)
Other non-current liabilities	6,767		16,479
Net cash provided by operating activities	930,006		600,752
Investing activities
Proceeds from sale of a business	53,000		—
Purchases of property, plant and equipment	(19,668)		(17,674)
Acquisition of intangible assets	(25,000)		(17,891)
Acquisition of investments	(61,036)		(26,694)
Acquired in-process research and development	(69,148)		—
Proceeds from maturity of investments	—		1,095,000
Acquisition of a business, net of cash acquired	—		(6,234,792)

Net cash used in investing activities	(121,852)		(5,202,051)
Financing activities
Proceeds from employee equity incentive and purchase plans	67,863		117,111
Share repurchases	(54)		—
Payment of employee withholding taxes related to share-based awards	(42,632)		(29,603)
Repayments of long-term debt	(574,264)		(843,028)
Net proceeds from issuance of borrowings under credit agreement	—		3,719,930
Net proceeds from issuance of Senior Secured Notes, due 2029	—		1,471,533



Payments for repurchase of Exchangeable Senior Notes, due 2021	—		(218,812)


Net cash (used in) provided by financing activities	(549,087)		4,217,131
Effect of exchange rates on cash and cash equivalents	(11,157)		(1,821)
Net increase (decrease) in cash and cash equivalents	247,910		(385,989)
Cash and cash equivalents, at beginning of period	591,448		1,057,769
Cash and cash equivalents, at end of period	$	839,358	$	671,780

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 whose purpose is to innovate to transform the lives of patients and their families. We are dedicated to developing life-changing medicines for people with serious diseases - often with limited or no therapeutic options. We have a diverse portfolio of marketed medicines and novel product candidates, from early- to late-stage development, in neuroscience and oncology. Within these therapeutic areas, we strive to identify new options for patients by actively exploring small molecules and biologics, and through innovative delivery technologies and cannabinoid science.

Our lead marketed products are:

Neuroscience

•Xywav® (calcium, magnesium, potassium, and sodium oxybates) oral solution, a product approved by the U.S. Food and Drug Administration, or FDA, in July 2020 and launched in the U.S. in November 2020 for the treatment of cataplexy or excessive daytime sleepiness, or EDS, in patients with narcolepsy aged seven years of age and older, and also approved by FDA in August 2021 for the treatment of idiopathic hypersomnia, or IH, in adults and launched in the U.S. in November 2021. Xywav contains 92% less sodium than Xyrem®;

•Xyrem® (sodium oxybate) oral solution, a product approved by FDA and distributed in the U.S. for the treatment of cataplexy or EDS in patients seven years of age and older with narcolepsy; Jazz also markets Xyrem in Canada for the treatment of cataplexy in patients with narcolepsy. Xyrem is also approved and distributed in the EU, Great Britain and other markets through a licensing agreement;

•Epidiolex® (cannabidiol) oral solution, a product approved by FDA and launched in the U.S. in 2018 by GW Pharmaceuticals plc, or GW, and currently indicated for the treatment of seizures associated with Lennox-Gastaut syndrome, or LGS, Dravet syndrome, or DS, or tuberous sclerosis complex, or TSC, in patients one year of age or older; in the EU (where it is marketed as Epidyolex®) and other markets, it is approved for adjunctive treatment of seizures associated with LGS or DS, in conjunction with clobazam (EU and Great Britain only), in patients 2 years of age and older and for adjunctive treatment of seizures associated with TSC in patients 2 years of age and older; and

•Sativex® (nabiximols) oral solution, a product approved and commercialized in 29 countries outside the U.S. as treatment for symptom improvement in adult patients with moderate to severe spasticity due to multiple sclerosis, or MS, who have not responded adequately to other anti-spasticity medication and who demonstrate clinically significant improvement in spasticity-related symptoms during an initial trial of therapy.

Oncology

•Zepzelca® (lurbinectedin), a product approved by FDA in June 2020 under FDA's accelerated approval pathway 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; in Canada, Zepzelca received conditional approval in September 2021 for the treatment of adults with Stage III or metastatic SCLC, who have progressed on or after platinum-containing therapy;

•Rylaze® (asparaginase erwinia chrysanthemi (recombinant)-rywn), a product approved by FDA in June 2021 and launched in the U.S. in July 2021 for use as a component of a multi-agent chemotherapeutic regimen for the treatment of acute lymphoblastic leukemia, or ALL, or lymphoblastic lymphoma, or LBL, in adults and pediatric patients one month or older who have developed hypersensitivity to E. coli-derived asparaginase;

•Vyxeos® (daunorubicin and cytarabine) liposome for injection, a product approved in the U.S., Canada, EU, Great Britain, Switzerland, Israel and Australia (marketed as Vyxeos® liposomal in the EU, Great Britain, Switzerland and Israel) for the treatment of adults with newly-diagnosed therapy-related acute myeloid leukemia, or t-AML, or AML with myelodysplasia-related changes, or AML-MRC. An expanded indication was granted in the U.S. for the treatment of newly diagnosed t-AML or AML-MRC in pediatric patients aged 1 year and older; and

•Defitelio® (defibrotide sodium), a product approved in the U.S. and Brazil for the treatment of hepatic veno-occlusive disease, or VOD, with renal or pulmonary dysfunction following hematopoietic stem cell transplantation, or HSCT, and in Japan for the treatment of hepatic sinusoidal obstruction syndrome (hepatic veno-occlusive disease). It is currently approved in the EU, Great Britain and other markets for the treatment of severe hepatic VOD, also known as sinusoidal obstructive syndrome, or SOS, in HSCT therapy. It is indicated in adults and pediatric patients over 1 month of age.

Table of Contents

Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated or the context otherwise requires, all references to “Jazz Pharmaceuticals,” “the registrant,” "the Company", “we,” “us,” and “our” refer to Jazz Pharmaceuticals plc and its consolidated subsidiaries. Throughout this Quarterly Report on Form 10-Q, 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, 2021.

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 and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, 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, 2021, other than as described below.

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 August 2020, the Financial Accounting Standards Board, or 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”, or ASU 2020-06. ASU 2020-06 simplifies the accounting for convertible instruments by 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. The Company adopted ASU 2020-06 on January 1, 2022, on a modified retrospective basis. This impacted the accounting for 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, collectively known as the Exchangeable Senior Notes. As a result of the adoption of ASU 2020-06, the Exchangeable Senior Notes are now accounted for entirely as liabilities measured at amortized cost. ASU 2020-06 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.

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The adoption of ASU 2020-06 resulted in the following adjustments to the condensed consolidated balance sheet (in thousands):


Balance Sheet Item:	December 31, 2021		Adoption of ASU 2020-06		January 1, 2022
Deferred tax assets, net	$	311,103	$	109	$	311,212
Long-term debt, less current portion	6,018,943		206,159		6,225,102
Retained earnings	830,226		127,474		957,700
Additional paid-in capital	3,534,792		(333,524)		3,201,268

Interest expense on the Exchangeable Senior Notes is lower as a result of adoption of this guidance. During the three and nine months ended September 30, 2022 the effect of adoption reduced interest expense, net and increased net income by approximately $12 million and $36 million, respectively, and increased basic and diluted EPS by approximately $0.20 per share and $0.57 per share, respectively. The Exchangeable Senior Notes were determined to be anti-dilutive for the three and nine months ended September 30, 2022. The adoption of ASU 2020-06 did not impact our cash flows or compliance with debt covenants.

Significant Risks and Uncertainties

We have implemented a comprehensive response strategy designed to manage the ongoing impact of the COVID-19 pandemic on our employees, patients and our business. The prolonged nature of the pandemic is negatively impacting our business in a varied manner due to the emergence of variants with increased transmissibility, even in vaccinated people, including with respect to limited access to health care provider offices and institutions and the willingness of patients or parents of patients to seek treatment. We believe these dynamics have negatively impacted new patient starts in the U.S. and Europe. We expect that our business, financial condition, results of operations and growth prospects may continue to be negatively impacted by the pandemic on a limited basis that may vary depending on the context. However, we have begun to observe, and expect to continue to observe, a gradual normalization in patient and health care provider practices, as providers and patients have adapted their behaviors and procedures to the evolving circumstances and as COVID-19 vaccines continue to be administered. With respect to our commercialization activities, while there continues to be some negative impact on demand, new patient starts and treatments for our products arising from the pandemic, primarily due to the inherent limitations of telemedicine and a reprioritization of healthcare resources toward COVID-19, we have seen improvements as healthcare systems have adapted to cope with the ongoing situation. The extent of the impact on our ability to generate sales of 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.

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 revenues at or near current levels, or that oxybate revenues will continue to grow. Our ability to maintain or increase oxybate revenues and realize the anticipated benefits from our investment in Xywav are subject to a number of risks and uncertainties including, without limitation, those related to the launch of Xywav for the treatment of IH in adults and adoption in that indication; competition from the near-term introduction of authorized generic versions of sodium oxybate and from generic versions of sodium oxybate and new products for treatment of cataplexy and/or EDS in narcolepsy in the U.S. market and from other competitors; the current and potential impacts of the COVID-19 pandemic, including the current and expected future negative impact on demand for our products; increased pricing pressure from, changes in policies by, or restrictions on reimbursement imposed by, third party payors, including our ability to maintain adequate coverage and reimbursement for Xywav and Xyrem; increased rebates required to maintain access to our products; challenges to our intellectual property around Xywav and/or Xyrem, including pending antitrust and intellectual property litigation; and continued acceptance of Xywav and Xyrem by physicians and patients.

In addition to risks related specifically to Xywav and Xyrem, we are subject to other challenges and risks related to successfully commercializing a portfolio of oncology products and other neuroscience products, 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: ongoing clinical research activity and related outcomes, obtaining regulatory approval of our late-stage product candidates; effectively commercializing our approved or acquired products such as Epidiolex, Zepzelca and Rylaze; obtaining and maintaining adequate coverage and reimbursement for our products; contracting and rebates to pharmacy benefit managers that reduces our net revenue; increasing scrutiny of pharmaceutical product pricing and resulting changes in healthcare laws and policy; market acceptance; regulatory concerns with controlled substances generally and the potential for abuse; future legislation, action by the U.S. Drug Enforcement Administration, or DEA, or FDA action authorizing the sale, distribution, use,

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and insurance reimbursement of non-FDA approved cannabinoid products; delays or problems in the supply of our products, loss of single source suppliers or failure to comply with manufacturing regulations; delays or problems with third parties that are part of our manufacturing and supply chain; 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 May 2021, we acquired GW. The total consideration paid by us for the entire issued share capital of GW was $7.2 billion. We refer to the acquisition of GW as the GW Acquisition. The success of the GW Acquisition will depend, in part, on our ability to realize the anticipated benefits from our and GW's historical businesses. The anticipated benefits to us of the GW Acquisition 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.

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 September 30, 2022, we had foreign exchange forward contracts with notional amounts totaling $608.6 million. As of September 30, 2022, the outstanding foreign exchange forward contracts had a net liability fair value of $34.4 million. 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 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 September 30, 2022 and December 31, 2021, allowances on receivables were not material. As of September 30, 2022, three customers accounted for 75% of gross accounts receivable, Express Scripts Specialty Distribution Services, Inc. and its affiliates, or ESSDS, which accounted for